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WTO and India

India is one of the founder member of WTO India has most of her foreign trade with those countries, that are members of WTO Will India gain or lose by becoming a member of WTO has been a great issue of debate over the years

Advantages of WTO for India

Increase in foreign trade
Being member of WTO India has trade relations with 152 nations Removing of tariff & non tariff barriers has opened various new markets for India Indias trade in goods and services is increasing at a fast rate

Increase in Agricultural Exports

Due to reduction on subsidies in developed nations Indias agricultural exports have increased considerably WTO has recommended a cut in customs duty and reduction in import restrictions on agricultural goods. This will help India to increase its agricultural exports In year 2009-2010 Indias agricultural exports were 17,963 million USD and it is expected to double in next five years

Increase in Inflow of Foreign Investment

As per TRIMs India has removed certain barriers to foreign investment as a result many MNCs have invested money in India Such investments are bound to boost employment Domestic companies compete with MNCs hence they have improved themselves

Improvement in Services
MNCs have establishes service organisations in India Outsourcing, IT, banking, insurance, transport, hotel etc Better quality services will be available to Indians It have generated ample employment opportunities It will check immigration of young men for jobs

Benefit for clothing and textile industry

Due to Multi-fiber arrangement (MFA) our exports were subject to quota restrictions Now all these restrictions have been removed It has helped in increase in exports from India Indias exports to America and European countries have increased considerably due to removal of quota system

Inflow of better technology

Foreign trade and Investment will bring in better technology and better products These will improve standard of living of Indian masses It will promote industrial growth and employment

Benefits of multilateral trade system

WTO promotes trade between member nations Agreement signed is applicable to all member nations (153) WTO has opened up Indias trade to 152 nations otherwise India would have to enter into separate agreements with these countries

Promotion of R & D
Research has been increased due to patents Increased investment in R & D Researchers get benefit in the form of royalty on patents It has improved variety of seeds, fertilizers, pesticides, medicines and other products

Benefit to farmers
By paying one time farmer will get better quality of seeds It will improve production Farmer can retain a part of their production as seed This seed can be used for the next crop

Restricts dumping
Dumping is done to damage domestic business Affected country can lodge a complaint with WTO WTOs dispute settlement body takes action against such nations

Arguments against WTO

Critics believes that developed nations will benefit more because of WTO Developing countries will lose due to WTO MNCs will adversely affect our culture Some people even believe that foreign trade will take us back to colonial period

Disadvantage to agriculture sector

Indian farmers will become dependent on MNCs for seed and agricultural technology Farmers will have to pay huge amount for branded seeds and agricultural technology Big farmers will be benefitted more Small farmers will be forced to sell their land This will result in unemployment in rural sector

Reduction in subsidy
Subsidy (on inputs and outputs) in agricultural sector will be removed in phased manner Developing countries like India will be adversely affected by this Poor farmers will be the ultimate sufferers

Import of foodgrains
Surplus foodgrains of developed countries will be imported This import will be on large scale Domestic farmers will face competition due to this import Farmers will have to sell their land

Plant breeding protection

Farmers will have to spend large amount on new and improved variety of seed Their dependence on MNCs will increase Farmers can retain the seed for further crops but they cant sell it

Loss to domestic industries

India will not impose any restriction on foreign investment MNCs will have free entry in Indian market There will be strong competition This will adversely affect domestic industries Small scale sector will be worse hit Problem of unemployment

Patent of Indian herbs by foreign companies

MNCs have made efforts for the patent of Indian herbs and foodgrains like Haldi, Neem, Tulsi, Basmati rice etc One American company has got the patent of basmati rice in the name of Kasmati and Texamati India will have to pay heavy royalty for using these products

Effect on prices
If patents on common products are approved countries like India will have to give huge royalty to the patent holders This will adversely affect prices of these products Pharmaceutical industry will be hard hit because of patents

Increased litigation cost

MNC can file claim against Indian company for copying patent before WTO They will have to waste their time and money to prove their innocence Legal services in America are expensive Foreign courts award high compensation

Issue of social costs, environment costs and labour costs

Developed countries are trying to link these factors with trade They argue that social costs, environment costs and labour costs are high in developed countries as compared to developing nations So developed countries should be allowed to impose tariff on imports to neutralize this effect If developed countries impose tariff this will be of great disadvantage to the developing countries

Loss to regional groupings

Multilateral trade has left regional groupings like SAARC, ASEAN and NAFTA less significant These groups promoted regional trade WTO promoted multilateral trade The role of regional groupings have reduced as far as trade is concerened

Disadvantage to service sector

It is feared that WTO will adversely affect our service sector Banking, insurance, transport, education, and hotel services will not be able to compete with MNCs Domestic services organizations will have to wind up their business

Increase in unemployment
WTO promotes free trade It means free flow of goods and services MNCs use capital intensive and better technology Domestic companies will not be able to compete with MNCs Domestic companies will have to wind up their businesses leading to unemployment

False apprehensions about WTO

Compulsory reduction in agricultural subsidy
Presently subsidy given to farmers in India is 3% This can be given up to 10%

Disturbance to PDS
WTO critics argue that WTO will adversely affect our PDS WTO has no objection for PDS to people living below poverty line in developing countries

Compulsory import of foodgrains

Import of foodgrains is not compulsory for countries facing balance of payment problems India can impose quantitative restrictions on import of foodgrains

Increase in prices of medicines

It is believed that patents will increase prices of medicines in India Hardly 10 % of medicines are covered by patents WHO has kept the life saving drugs outside WTO Indian Pharmaceutical companies have already filed patents for various medicines

Reduction in export subsidy

Export subsidies are to be eliminated by year 2013 Developing nations can give export subsidy till 2018 These conditions are applicable to countries having 3.25% of world trade share Indias share in world trade is only 1.78%

Indias Commitment to WTO

Reduction in tariff and non tariff barriers
India has reduced various tariff and non tariff barriers Liberal imports are allowed by India

Amendments in Patents Act

India has amended its patent act in 2005 As a result there has been a steep rise from 1911 in 2004-05 to 16061 in 2008-09

Protection of plant breeders

Sui-Generis system

TRIPs (Trade related intellectual property rights)

India has amended Copyrights Act 1957 Trade and Merchandise Marks Act 1958 Designs Act was formulated in 2000 Trade marks registration in India has gone up from 11190 in 2002-03 to 101300 in 2007-08

Geographical Indications
India has passed The Geographical Indications of Goods (Registration and Protection) Act in 1999 Under this act correct geographical origin of the product is to be given so that other company or country can not get the patent For example Darjeeling Tea, Chanderi Sarees, Mysore Aggarbatti, Kullu Shawls, Kancheepuram and banarsi Silk etc

TRIMs (Trade Related Investment Measures)

India has allowed 100% foreign investment in advertising, tea, power, oil refining, coal processing, hotels resorts, ports, airports, drugs and real estate Foreign investment is treated at par with domestic investment in these industries

GATS (General Agreement on Trade in Service)

India has allowed foreign service providers to set up business in India Many foreign banks, insurance companies. Airlines, tours and travel agencies have started their businesses in India

Role of WTO in International Trade

Shift from bilateral trade to multilateral trade Increase in volume of world trade
Reduction in tariff and non tariff barriers

Change in composition of world trade

Only goods to services

Settlement of dispute

Increase in agricultural exports Expansion in trade in textile and clothing Restrictions on dumping