WTO

WTO and
and its
its Impact
Impact on
on India
India

Dr. (Mrs.) Vijaya Katti

Dean
Indian Institute of Foreign Trade
New Delhi
Session Date: 1st June 2019
CPEIM on Campus (2019)
General Agreement on Tariffs and Trade
(GATT) Objective

 Prohibits actions of Govt/ Organisation that distort

normal trade; discrimination between member nations
and discrimination between domestic and lawfully
imported foreign goods.
 Sets guidelines for implementation and settlement of 
disputes.
Impact on Indian Policy/Laws
 India started reforms during GATT negotiation period
(86-94). Import Duties down from peak 300% to 50%.
 Committed to remove all QRs (Quantitative restrictions)
by 2001.
 Committed to create free trade regime as per GATT
agreement.
Business Implications

 Impact of entire gamut of trade in Goods. Competition to

intensify as more imported products find easy access.
Around three quarters of the products reserved for Small
Industries in OGL, rest to be allowed by 2001. Removal of
QRs set to further accelerate import of all products.
W.T.O led external liberalization speedily done.
 Without corresponding internal liberalization of domestic
policies, much of benefits of W.T.O may remain a mirage.

 Reassessment of comparative advantage required. Many

will have to chance businesses; rigid legislations and rules
may be big stumbling in the way. 
 Only those businesses whether producing for domestic
market or for foreign, which have international vision will
survive and grow.
Significance of WTO
 At its centre are the WTO agreements,
negotiated and signed by the bulk of the
world’s trading nations and ratified in their
parliaments.
 The WTO provides a forum for negotiating
agreements aimed at reducing obstacles to
international trade and ensuring a level
 playing field for all, thus supposedly
contributing to economic growth and
development.
Questions raised
 How important are Enterprises for the Indian
economy, what if they come under threat, will it
threaten other businesses?
 Should Free Trade Agreements matter to Micro,
Small and Medium Enterprises, will it make an
impact?
 How will Micro, Small and Medium Enterprises
cope with this complete liberalization of trade, will
they be able to survive the onslaught or will they
be wiped out.
 Will it be an opportunity or a threat to businesses
in India as we see them today?
The World Trade Organization and Its
Impact on Indian Businesses
 The World Trade Organization (WTO) is the only
Global International Organization dealing with the
rules of trade between nations.
 The goal is to help producers of goods and
services, exporters, and importers conduct their
business.
 For a structure that has been provided for
countries to conduct negotiations and formalize
trade agreements; it does not specify or define
outcomes.
 It has not only affected India’s international trade
but also its internal economy.
 Increase In Export Earnings: Increase in  Export
Earnings can be experienced through the growth
in Merchandise exports and growth in Service
exports.
1.Growth In Merchandise Exports: The activation
of The WTO has enhanced the exports of the
Developing Countries due to its impact on the tariff
and non-tariff trade barriers, reducing them as a
result of its intervention.
 India’s merchandise exports have increased from
32 Billion USD (1995) to 185 Billion USD (2008-
09).
2.Growth In Service Exports: For countries like
India the WTO established the General Agreement
on Trade In Services (GATS). India’s
 Agricultural Exports: Curbing of trade barriers
and domestic subsidies elevated the cost of
agricultural products in the international market. 
 Textile and Clothing: The dissolution of MFA
(Multi-Fiber Arrangements) has largely  benefited
the textiles sector as the quotas limiting its trade
are now eradicated. As a result developing
countries like India can have unhindered export of
textile and clothing.
 Foreign Direct Investment: In accordance with the
agreement on TRIMs (Trade Related Investment
Measures) which lay down the rules that restrict the
preference of domestic firms and thus allow foreign firms
to operate more easily in international markets, have
compelled the member nations to withdraw the
restrictions on foreign investment.
 Negative Impacts:  
 TRIPS: Protection of intellectual property rights has been
one of the major concerns of the WTO. As a member of
the WTO, India has to comply with the TRIPs standards.
However, the agreement on TRIPs goes against the
Indian patent act, 1970, in the following ways:
 1. Pharmaceutical Sector: Under the Indian Patent
Act 1970, only process patents are granted to
chemical, drugs and medicines. Thus, a company can
legally manufacture once it has the respective product
patent. The companies could sell good quality
products at low prices. But, according to the TRIPs
agreement, product patents will also be granted which
will raise the prices of the products as a result the
product in now not within the reach of the poor people,
fortunately most drugs manufactured in India are off-
patents so people will be less affected.  
 2.Agriculture: The TRIPs agreement covers
agriculture as well so the Indian agriculture will also be
affected considerably. Since a large majority of the
Indian Population depends on agriculture for their
livelihood, these developments will have serious
consequences.
 3. Micro-Organisms: Under the TRIPs patenting has been
extended to micro-organisms as well. This will largely benefit
the MNCs but not developing nations like India. 
 TRIMs: Under the agreement on TRIMs the developed
nations are favored as there are no rules in the agreement to
formulate international trade practices by foreign investors.
Also, by complying with the agreement TRIMs we will
contradict our objective of self-reliant growth based on locally
available technology and resources.
 GATS: The General Agreement on Trade in Services (GATS)
favors the developed nations more than the developing
nations. The service sector in India will now have to compete
with gigantic foreign firms. Moreover since foreign firms are
allowed to transfer their profits, dividends and royalties to their
present companies they will offer a foreign exchange burden
to the Indian Economy.
 LDC Exports: Many member nations have agreed
to allow duty-free and quota-free market access to
all products originating from  Least Developed
Countries (LDC).
 India will now have to face the problem of
competition arising due to other cheap  LDC
exports internationally.
 Even more troublesome is the fact that the LDC
exports will also come to Indian markets and
therefore provide competition to the locally
 produced goods.
 The WTO provides a forum for negotiating
agreements aimed at reducing obstacles to
international trade and ensuring a level playing
field for all, thus contributing to economic growth
and development.
Agreement of Sanitary and Phytosanitary
Measures (SPS)
 Objective : Same as above except that MNF
rule-countries can deny Import from certain
region/countries due to fear of spread of
pests/disease.
 Impact on Indian Policy/Laws
 Most of the India's standard are at par with the
Intl. Standards (Implementation to improve).
……..contd.
 Business Implications
 Companies exporting fresh/processed
fruits/vegetables, juices, meat, dairy products
etc. should understand the mandatory
standards. They should follow the developments
taking place at various Intl Organisations as
FAO, Codex Alimantarius etc. which has serious
implications for their business in Agri/processed
food and dairy  products.
Rules applicable on Exports

 Allows export product to be relieved of indirect

taxes (e.g.exice), prohibits direct tax benefits
(e.g. Income Tax Waivers on export earnings).
 Also allows countries to levy duties on exports
for controlling it, if situation so demands, but
prohibits other restrictions (except in few cases).
Impact on Indian Policy/Laws
 EXIM Policy provides schemes to neutralize the
incidence of indirect taxes e.g. DEPB, Adv. Licence, Spl
Imp. Licence etc. & Draw Back.
 Government provides IT waiver on export earnings (80
HHC of IT Act). Customs duty on import contents used in
export product, excise, sales tax/Vat etc. Few countries
have launched complaint terming it as 'subsidy'.
Prohibited as per GATT.
Business Implications
 Exporting companies have right to demand from
government such schemes that neutralize the incidence
of indirect taxes on the export product. In absence of
such schemes Indian products will be at serious
disadvantage internationally as all countries have such
schemes in place.
 According to an EXIM Bank Study, Indian exports suffer
from cost disability of 16.3% over their overseas
counterparts due to absence of VAT inadequate
financing and infrastructure bottlenecks.
Agreement on Subsidies and Countervailing
Measures. (SCM)

Objective :
 Prohibits 'export subsidies'; allows 'permissible
subsidies'.
 Requires developing countries to phase them
out by 2003 (with some exceptions) and to
freeze their level and coverage during
transitional period.
Impact on Indian 
Policy/Laws

 EXIM Policy following the GATT directives cautiously in

introducing the Duty Exemption schemes & modifying
them to make them WTO compatible.
 Requisite Directorate established in Ministry of
commerce.
Business Implications
 Businesses to understand what is permissible and what
is not e.g. subsidies given by governments to small
businesses are usually permissible (non-actionable) or
given for R&D or for adaptation to new environment
requirements.
 Even during transition period (upto 2003), importing
countries can countervail 'subsidies' by increasing
duties. 
 Export subsidies on import sensitive products (textiles
leather products etc.) can be maintained by importing
countries.
Agreement on Safeguard Measures

Objective :
 Allows countries to take action against undue
import surge injurious to domestic manufacturers
during the transition period.
Impact on Indian Policy/Laws :
 Directorate of safeguards established in Ministry
of Finance.
Business Implications
 If there is undue spurt in imports causing 'injury'
to domestic manufacturers, measures can be
taken during the transition period (initially for 4
years extendable upto 10 years, from 1st Jan
'95) through raising duties (beyond bound rates)
or by imposing QRs; both for new and existing
industries.
Agreement on Anti-dumping Measures
(ADP)
 Objective : Allows countries to take measures
against imported goods benefiting from 'unfair
trade practices'.
Impact on Indian Policy/Laws :
 Directorate of Anti-Dumping established in
Commerce Ministry and Anti-dumping rules
notified. Anti-dumping duties already been
imposed in more than 30 cases and provisional
duties on few.
Business Implications
 Most important for domestic manufacturers. A
number of sectors have been hurt by 'unfair
import'.
 Actions have been taken against such import in
many cases. Mostly large units have been
operating in these sectors. No action so far for
those affected sectors in which small business
are predominant because of there ignorance.
Market Access Negotiations
Objective :
 By 1st Jan 2000, Developed countries to cut tariffs by
40% developing by 30% in five equal investments. 
 More Tariff lines are 'bound' (developed countries 99%,
developing 73%).
Impact on Indian Policy/Laws :
 Reduced duties on most tariff lines successively to
comply with the agreement.
 Peak rate of duty is down from 300% to 50%; finished
goods from 150% to 30%.
Business Implications
 Massive increase in competition for domestic
manufacturers.
 Even after reduction the peak tariffs in
developed countries range from 12-30% for
items exported by developing countries.
Agreement on Textiles & Clothing

Objective :Multi Fiber Agreements and other QRs

usually imposed by developed countries to be
phased out by year 2005 (in 4 phases).
Impact on Indian Policy/Laws : (Impact to
Textiles/Garments Export)
 Business Implications
 Opportunity : Important development for
Textiles/Garment Exports from India. Quotas will
be phased out. Real benefit accrued from 2002
onwards. Threat : The level of competition will
be manifold.
 Competition from various countries.
General Agreement on Trade in Services

 Mandated negotiations since 2000

 Request offer Approach
 India’s offers finalised
TRIPS & India

 India to become WTO compatible

 Patent Amendment Act 2005
 Cover Agri, Chemicals Pharmaceuticals
Ministerial conferences

First Ministerial – Singapore (9-13 December 1996)

Second Ministerial – Geneva (18-20 May 1998)
Third Ministerial – Seattle (November 30 – December 3, 1999)
Fourth Ministerial – Doha (9-13 November 2001)
Fifth Ministerial – Cancun (10-14 September 2003)
Geneva Framework – Mexico (July 2004)
Sixth Ministerial – Hong Kong (13-18 December 2005)
Seventh Ministerial –Geneva (30 November - 2 December 2009)
Eighth Ministerial – Geneva (15-17 December 2011)
Ninth Ministerial – Bali, Indonesia (3-6 December 2013)
Tenth Ministerial– Nairobi, Kenya (15 to 18 December 2015)
Eleventh Ministerial - Buenos Aires (10 to 13 December 2017)
Twelfth Nur-Sultan, Kazakhstan, 8-11 June 2020 (to be held)
Singapore Ministerial Conference:
The Main Issues

 Implementation of Uruguay Round Agreement

 Trade and Environment
 Services
 Information Technology Agreement
 “Singapore Issues”
 Trade and Investment
 Trade and Competition Policy
 Transparency in Government Procurement
 Trade Facilitation
Doha Ministerial Conference: Main Issues

 Comprehensive negotiations covering all the

Agreements for deepening the process of
trade liberalisation
 Expansion of the mandate of the WTO
 Review of implementation of the covered
Agreements
 Ministerial Declaration on TRIPS Agreement
and Public Health aimed at facilitating access
to medicines
 Post-Doha Work Programme (cont.)

 Singapore Issues
Trade and Investment
Trade and Competition Policy
Trade Facilitation
Transparency in Government Procurement
 Negotiations to take place after the Fifth Session of
the Ministerial Conference (Cancun Ministerial
Conference) on the basis of a decision to be taken,
by explicit consensus, at that Session on
modalities of negotiations
 The main facts related to the Buenos
Aires Ministerial Conference (MC)
• The MC ended without progress on substantive issues
• The main issue of public stockholding of food grains
• No to new issues
• US questioning the centrality of the development agenda
within WTO
• Strange emergence of pressure groups that may thwart
multilateralism within WTO
• Positives from the Buenos Aires MC

http://www.indianeconomy.net/splclassroom/437/buenos-aires-ministerial-conference-a-fact-file/
Indian position about the Buenos Aires
outcome
 India was disappointed about the failure of the MC. The country
expected a final solution for the food buffer stock issue, but
opposition from the US blocked it.
 The country sternly resisted the developed block agenda of bringing
ecommerce under the trade agenda.
 India stood for the defence of the multilateral trade system and
opposed attempts to reduce its significance by engaging in pressure
group formations within the WTO.

http://www.indianeconomy.net/splclassroom/437/buenos-aires-ministerial-conference-a-fact-file/
Ministerial ends with decisions on fish
subsidies, e-commerce duties; ongoing
work continues

 Under the ministerial decision on fisheries subsidies,

members agreed to continue to engage constructively in
the fisheries subsidies negotiations with a view to
adopting an agreement by the next Ministerial
Conference in 2019 on comprehensive and effective
disciplines that prohibit certain forms of fisheries
subsidies that contribute to overcapacity and overfishing,
and eliminate subsidies that contribute to illegal,
unreported and unregulated (IUU) fishing. 
Contd…
 The creation of fisheries subsidies disciplines
received new impetus after the adoption by
world leaders in September 2015 of the UN
Sustainable Development Goals (SDGs).
 SDG target 14.6 sets a deadline of 2020 for
eliminating IUU subsidies and for prohibiting
certain forms of fisheries subsidies that
contribute to overcapacity and overfishing,
with special and differential treatment for
developing and least-developed countries.
Thank
You