Chapter, WORLD TRAD; ORGANISATION AN} INDIAN AGRICULTUR; World Trade Organisation was formed to promote free trade among its member nations. is i objective is to promote multilateral trade (trade among many nations) in goods and services by elimina. tariff and non-tariff barriers. Eliminating tariff barriers means removing import duties and eliminat,. non-tariff barriers means removing import quotas (quantitative restrictions), import licensing, ec; eighth round of General Agreement on Tariffs and Trade (GATT), popularly known as Uruguay Rou: member nations of GATT decided to set up a new organisation, ‘World Trade Organisation’ in lace GATT. WTO was formed on Ist January, 1995. It took over GATT. = 1. Meaning and Establishment o(WTO} _ At the time of its establishment on Ist January, 1995, World Trade Organisation (WTO) ta membership of 124 nations. In August 2016, its membership increased to 164 nations. India sone oft founder members of WTO. Some areas like trade in services, promoting foreign investment, protecting Patents, dispute settlement, trade in textiles and clothing, etc. were given special emphasis in WTO. Th developing countries will benefit from the increased exports, foreign investment, technical assistance. ex which will help to promote their economic development. WTO is an international trade organisation having set of rules and principles, mutually designe: and agreed upon to promote international trade in general and reduction of tariff barriers and removalc import restrictions in particular. Itis a new world trade order or system. WTO took GATT to implementth: agreement reached at the Eighth Round of GATT negotiations (also known as the Uruguay Round) whic! were concluded on December 15, 1993. In short, WTO is a new globally recognised trad: organisation with the new name succeeding GATT on renewed agreements and having anes vision and strong enforcement power to promote international trade. WTO along with Wot! Bank and the IMF will greatly influence global trade Policy. So far ten ministerial meets of WTO have be held. The tenth ministerial meet of WTO was held in Nairobi (Kenya) from 15th December to 1%: December, 2015. The main theme of this ministerial meet was promoting multilateral trade, boost development in least developed nations and ensuring food security, ™@ 2. Features of WTO (i) Itis an international organisation to promote. multilateral trade, (ii) It has replaced GATT, ae — (iii) It promotes free trade by removing tariff and non-tariff barriers in international trade. (iv) It has fixed set of rules and regulations and it has a legal status. Its rules and regulations" mutually designed and agreed upon by member nations.World Trade Organisation and Indian Agriculture 79 (v) Agreements agreed by member-countries are binding on all members of WTO and if any member does not follow such agreements, then its complaint can be lodged with the Dispute Settlement Body of WTO. occa (vi) Itincludes trade in goods, trade in services, protection of intellectual property rights, foreign investment, etc. mee (vil) Unlike IMF and World Bank, there is no weighted voting (on the basis of capital). Rather all the WTO members have equal voting rights (One Country, One Vote) m 3. Objectives of WTO (i) To promote multilateral trade, i.e., trade among many nations. (ii) To promote free trade by abolishing tariff and non-tariff barriers. (ii) To promote world trade in a manner that benefits every member country. (iv) To ensure that developing countries get a better share in the advantages resulting from the expansion of international trade corresponding to their developmental needs. (v) To enhance competitiveness among all trading partners so as to benefit consumers. (vi) To expand and utilise world resources in the most optimum manner, (vi) To improve the standard of living of the global population and speed up economic development of the member nations. @ 4. Functions of WTO (i) Laying down code of conduct aiming at reducing tariff and non-tariff barriers in international trade. (ii) Implementing WTO agreements and administering the international trade. (ii) Cooperating with IMF and World Bank and its associates for establishing coordination in Global Trade Policy Making. (iv) Settling trade related disputes among member nations with the help of its Dispute Settlement Body (DSB). (~) Reviewing trade related economic policies of member countries with the help of its Trade Policy Review Body (TPRB). (vi) Providing technical assistance and guidance related to management of foreign trade and fiscal policy to its member nations. (vii) Acting as forum for trade liberalisation "5. Scope of WTO GATT was mainly concemed with Promotion of trade in goods. Trade in services was not given "uch emphasis; while in WTO trade in services has also been promoted, WTO has following main areas: (i) Trade in Goods (ii) Trade Related Intellectual Property Rights (TRIPs) ii) Trade Related Investment Measures (TRIMs) (iv) General Agreement on Trade in Services (GATS).80 Indian Econom, WTO has stronger implementation power and wider acceptance for the implementation of 4, agreements as compared to GATT. Its principal agreements are as under: ™@ 6. World Trade Organisation—Some Agreements @ 6.1 Trade in Agricultur WTO imposes following disciplines on agriculture: Y (1) Reduction in Domestic Subsidies: WTO urged the member countries to reduce subsidig to agriculture sector. Agricultural subsidies are of two types: _ - Pas (i) Subsidy on Agricultural inputs ice subsidy on seeds, fertilizers, pesticides, ete. , Ss \ (ii) Subsidy on Agricultural output. It refers to fixing support price in the interest of ee farmers. Support price here means minimum guaranteed price for crops fixed by government. : a WTO urged the member nations to reduce both these types of domestic subsidies. Howeve, LY developing countries can give maximum 10% of the market price of crop as agriculture subsidy. (2) Reduction in Export Subsidies: Some countries provide export subsidies for promoting agricultural exports. WTO agreements urged the member countries to abolish these export subsidies in phased manner. In 2005, member nations of WTO agreed to phase out agricultural export subsidies by 2013. In 2013, time limit for abolishing export subsidies on * agricultural goods for least developed nations and food importing developing nations was extended upto year 2023. (3) Hfaprovement in Market Access: To improve matket access for international trade, following suggestions were made by WTO: (i) Reduction in tariff on agricultural products. WTO has put tariff limit for different products. Member countries cannot impose tariff (custom duty on imports) beyond that limit, GA) although they can fix tariff below this limit. (i ii) Non-tariff barriers will be abolished, i.e. barriers on foreign trade in the form of quotas, licensing etc, will be removed. (iii) Developing and least developed countries are given some concessions regarding removal Of tariff and non-tariff barriers, It means these countries can impose tariff and non-taif barriers on imports of food grains if their balance of payments is unfavourable. @)paiic Distribution System (PDS): PDS refers to the arrangement under which foodgrains are distributed by government at concessional rates to the people living below the Poverty line through government regulated depots. WTO urged the developed member nations to abolish subsidy on foodgrains in their PDS, but. developing countries are not prohibited from providing subsidy on foodgrains in public distribution system, in order to provide food secuti¥ to poor people. XLuumping practices. ™ 7. Disadvantages of WTO Agreements for Indian Agriculture Critics are of the opinion that agreements on the provisions of WTO will be beneficial to developed countries alone and underdeveloped countries like India will stand to lose. Following are the main disadvantages of WTO for Indian agriculture: (1) Increased Dependence on Multinational Corporations: It is apprehended that by including agriculture in WTO, Indian farmers will become dependent on multinational companies for improved seeds and agricultural technology. Farmers will have to pay huge amount to MNCs for branded seeds, fertilizers and pesticides.ono} , _ oid Tide Organisation and Indian Agriculture etl rates) (2) Loss to Small Farmers: Only rich and big farmers can take advantage of costly farm technology, branded costly seeds, improved plant varieties, fertilizers, pesticides, etc. The small farmers who are large in number cannot afford these costly inputs. They will not be able to vices survive and will be forced to sell their land. em| ng fs ° (3) Increase in Rural Unemployment: The small farmers will be forced to sell their land and ea will have to search for alternative employment. Moreover, new farm technology is capital home, intensive in nature which will further reduce the demand for agriculture labour and render the fa farmers/agriculture labourers unemployed. 1 wit ervice (4) Reduction in Subsidy: Critics are of the opinion that in consequence to WTO agreements, subsidy to agricultural sector will be slashed. It will adversely affect the poor farmers. (5) Import of Foodgrains: It is apprehended that by entering into WTO agreements, surplus a foodgrains of developed countries will be imported on a large-scale. The domestic farmers : will face competition from imported foodgrains. ediator jispute (6) Plant Breeding Protection: According to WTO, protection of plant breeding has been ‘panel determined by Sui-Generis System. Indian farmers will have to spend large amount of ced to money to get new and improved variety of plants and their dependence on multinational ieved companies will further increase. in 90 (7) Patent of Indian Herbs by Foreign Companies: Some foreign companies have taken patent of Indian herbs / foodgrains like Haldi, Neem, Tulsi, Basmati Rice, etc. An American company had taken patent of haldi in 1995. India challenged it, then WTO cancelled the n the patent of haldi to American company. Another American company has already been given — the patent of Basmati Rice in the name of Kasmati and Texmati and has also got the patent of dies; neem. So, there is risk of Indian herbs/grains being patented by foreign companies. So, an Indians will have to make heavy payments as royalty to patentholders for using these herbs/ foodgrains. (8) Effect on Prices: If patents for common products like seeds, foodgrains, pesticides, ete. are i recognised, then developing countties like India will have to pay huge royalty to the 2the patentholders. Itwill result in price rise. Small farmers will be hithard by patent agreements. ping (9) Increased Litigation Cost: Multinational companies may file a claim against Indian ut if farmers for copying of any patent before World Trade Organisation. Indian farmers will have that | to face difficulties in proving their non-involvement in copying case. They will have to waste it of their time and money to prove their innocence. eck (10) Issue of Social Cost, Environment Cost and Labour Cost: Developed countries are trying to link these costs with trade matters. Developed countries argue that social cost, labour cost and environment cost are high in developed countries in comparison to developing countries. They argue that cost of production in developed counties is high se because of high labour cost and high social costs; while labour cost and social costs are low in ! developing countries. So developed countries should be allowed to impose tariff on imports ey to neutralise the difference in such costs. If this decision is taken, then developing countries nal will be at disadvantage as they will find it difficult to export their products to developed in countries, because of tariff barriers imposed by developed countries.X bone) Indian Fog, & 8. Advantages of WTO Agreements for Indian Agriculture Above arquments have been advanced against WTO, whereas reality is quite different. 4, cay study reveals that these arguments present only one-sided assessment of the WTO agreements Somes the main advantages likely to accrue to Indian agriculture by WTO. agreements are as follows: (1) Increase in Agricultural Exports: As a result of reduction in subsidies on agricultural given by developed countries, demand for variety of Indian foodgrains will rise in internation, market. It will provide opportunity to India to increase export of agricultural products, WTO} recommended a cut in custom duties and reduction in import restrictions on agricultural coos | {twill also promote agricultural exports from India considerably, In the year 2014-15, India agriculture exports were US $ 39,357 million and these are expected to double in the next fy) years, | (2) Promotion to Research because of Patents: Patentisation will promote research a researchers get benefit in the form of royalty on patents. Patenting will improve researc! activities in the economy. There will be increased investment on research and development. i will result in improved variety of seeds, fertilizers, pesticides and other products. (3) Benefits of Using Quality Seeds and New Varieties of Plants: By paying one time, our| farmers can purchase quality seeds and new varieties of plants. Itwill improve the agricultural Production and productivity and will benefit our farmers. Moreover, farmers ae allowed to retain a part oftheir output as seeds for the subsequent crops, i.., for subsequent crops th will not have to purchase seeds and they are allowed to use their farm saved seeds (4) Restricts Dumping: Ifa country dumps its excess production in the other nation so asto damage its domestic agriculture”industry, then the affected country can lodge a complaint with WTO in this regard. WTO's dispute settlement body takes action against such nation, Thus, WTO agreements help to curb dumping activities in the world rade. j (5) Increase in Inflow of Foreign inflow of foreign investmient. It growth in India. (6) Increase in Ag: (7) False Apprehensions Against WTO: Followi : | 3 g & s 5 g S z 8 3 g Ea z < . (ii) No Disturbance to Public Distrionomy areful Me of Goods tional Ohas Oods, ndia’s Xtfive rch as search pent. It 2, our tural ed to they as to laint ion, waid Trade Organization and Indian Agricuture 85 ee ees A tay bbe mentioned here that PDS refers to the system of ares tron eens and other esenial ites tothe poor person atthe subsidised eee rua government resisted depots But the realty is that WTO agreements ae ere it vation system. WTO has no objection to pubilc distribution sgetem 2t concessional rates in case of developing nations, Thus, India can continue to supplies at concessional rates to population living below poverty line under public distribution system, (i) No Need of Increase in Imports of Foodgrains: On account of WTO agreement, i wil not be necessary for India to increase import of foodgrains.Itis because import of rodgrains need not be liberalised by such countries as are facing balance of payments difficulties. Due to unfavourable balance of payments on current account, India will be free to check imports of foodgrains or impose quantitative restrictions thereon. Thus, argument of critics that WTO agreement will increase import of foodgrains and harm the domestic farmers is wrong. (iv) No Compulsory Reduction in Export Subsidies: Although export subsidies were tobe eliminated by 2013, yet under WTO agreement, a developing countrys allowed to give export subsidies, for 10 vears after the cut off year of elimination of export subsidies provided its share in world trade is less than 3. .25 per cent. India's share in world trade is just 2.28 per cent, so on this criteria, India can give export subsidies to its exports upto year 2023. After analyzing various arguments ‘for’ and ‘against’ the effects of WTO agreements on Indian agriculture, it can be concluded that WTO agreements will help India in promoting its agricultural exports. Inflow of foreign investment, foreign technology, improved seeds will benefit our economy in increasing the rate of growth in agriculture sector. Moreover, 164 countries of the world have joined the membership of WTO, so we cannot remain cut-off from the large part of the world by not joining the membership of WTO. The WTO agreements may harm the interests of small farmers. So, government should take effective safequard measures to protect the interests of small farmers. So, the need of the hour is that we should improve our efficiency to avoid disadvantages of WTO. In short, itcan be concluded that WTO will, definitely be of advantage to Indian agriculture. Most of the arguments against WTO are exaggerated and. baseless. Moreover, all agreements cannot bein favour of one county, as these are formulated keepingin view the interest ofall member nations. So, India should try to make maximum advantages of WTO agreements and continue as its member. © 9. WTO and Agricultural Subsidies In WTO terminology, agricultural subsidies are known as ‘boxes’. These boxes are named on the basis of colours of traffic lights— green box (permitted), amber (slow down, i.e. subsidies to be reduced), red (forbidden). In agriculture, there are no red box subsidies. The green box and amber box subsidies are discussed below: (1) Green Box: Subsidies which have no or minimal trade distorting effects are known as green box subsidies. These subsidies are allowed and are exempt from reduction commitments of WTO. But these subsidies must be government funded and should not be targeted at a particular product. These should be general in nature, These include subsidies in the areas like agricultural research, plant disease control, agricultural infrastructure, food security, etc. These also include assistance given to farmers for restructuring agriculture, payments under environmental and regional assistance programmes. Green box subsidies are allowedee 86 Indian Econony without limits. Some developing countries argue that certain green box subsidies do hay, significant trade distorting effects, as huge green box subsidies are granted by developed nations to their farmers. These subsidies are matter of dispute between developed and developing nations. The developing countries argue that developed countries should reduc. the green box subsidies to their farmers as these create hindrance in the free flow a agricultural goods across different nations. For example, if country A (developed nation) i Providing green box subsidies to its farmers then it will reduce its production cost. Now say country B (developing nation) is not giving these subsidies to its farmers, so their cost of production will be higher, so farmers of country B will not be able to compete with farmers of country A in international market. Hence, the dispute among various nations with regard to these subsidies must be resolved for growth of world trade. (2) Amber Box: Alll agricultural subsidies which are considered to distort trade and production fall under Amber Box. These subsidies must be reduced. These include subsidies in the form of support prices on agriculture inputs and outputs. If amber box subsidies are within “de-minimis” limits, i.e. amount of subsidy is small, then these subsidies are allowed. The “de-minimis” limit for developed countries is fixed at 5 per cent of total value of agricultural product or products supported and for developing countries itis fixed at 10 per cent. The developed countries agreed to reduce these subsidies by 20 per cent over six years starting from 1995, developing countries agreed to reduce these subsidies by 13 per cent over 10 years starting from 1995, Least developed nations are exempted from making any cutin these subsidies. There is another type of subsidy that is Blue Box subsidy. This is the Amber Box with conditions. These conditions are designed to reduce trade distortions among different nations. At ‘present, there are no limits on government's spendings on blue box subsidies. Some nations are in favour of blue box subsidy while other nations are against it. Least developed countries are exempted from reducing tariffs and subsidies. Till date the matter of reduction in agricultural subsidies is a disputed matter between developed and developing nations.