IMPACT OF WTO ON INDIAN INDUSTRY AND SERVICES

GROUP MEMBERS
Mihir Goradia Mayank Rajyagor Harshit Shah Roshni Shah Shradha Dandekar Nirav Parikh Mandar Patkar Gaurav Shah 6054 6138 6154 6163 IN0618 IN0645 IN0647 IN0655

History Behind WTO?

Fact File
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Location: Geneva, Switzerland. Established:1st Jan, 1995. Created by: Uruguay Round Negotiation(1986-1994) Membership: 151countries. Secretarial Staff: 635. Head: Pascal Lamy

Functions of WTO
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Administering WTO trade agreements. Forum for trade negotiation Handling trade disputes Monitoring national trade policies. Technical assistance & training for developing countries. Cooperation with other international Organization.

Important Agreements under WTO

General Agreement on trade in Services Trade Related Intellectual Property Rights Trade Related Investment Measures Agreement on Anti-Dumping

GATS & its Existence

Services were considered to offer less potential for trade expansion than goods Development of new transmission technologies facilitating the supply of services Opening of monopolies in many countries Gradual liberalization of regulated sectors like transport, banking and insurance combined with changes in consumer preferences, enhanced the “tradability” of services Developments increased international services flows and created a similar need for multilateral disciplines

Main purpose of GATS was to create a credible and reliable system of international trade rules, which ensured fair and equitable treatment of all countries on the principles of non-discrimination

It aims at stimulating trade and development by seeking to create a predictable policy environment wherein the member countries voluntarily undertake to bind their policy regimes relating to trade in services

Existence of GATS

GATS came into existence as a result of the Uruguay Round of negotiations and entered into force on 1 January 1995, with the establishment of the WTO The multilateral legal instruments resulting from the Uruguay Round were treated as a single undertaking India also signed all the WTO agreements under the single undertaking rule and GATS is a part of this whole package

Importance of services sector to the Economy

Economic performance Development Employment Opportunities Consumer Choice Technology transfer

Services covered & excluded under GATS

GATS covers all internationally traded services with two exceptions : Services provided to the public in the exercise of governmental authority, and In the air transport sector, traffic rights and all services directly related to the exercise of traffic rights

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1. Business services (including professional and computer services) 2. Communication services 3. Construction and Engineering services 4. Distribution services (e.g. . . Commission agents, wholesal & retail trade ) 5. Education services 6. Environment services 7. Finance (including insurance and banking) services 8. Health services 9. Tourism and Travel services 10. Recreation, Cultural and Sporting Services 11.Transportation Services, and 12. Other services not elsewhere classified.

Supply of services categorized under GATS

Mode 1: Cross-border supply Mode 2: Consumption abroad Mode 3: Commercial presence Mode 4: Presence or movement of natural persons

Obligations in GATS

General obligation
• MFN • Transparency • Other obligations (Appeal, procedure etc.)

Conditional obligation
• Market access • National treatment

Modification

Impact on financial services

Insurance :
• Indian party Indian insurance company • 26% foreign equity • Auxiliary services:- JV 51% FP with FIPB approval

Banking:
• Applicability of mode 3 (Opening of branch) • Max 20 license per year

• No license if asset (on& off B/s) >15% of total • FB participation for IPO, FPO up to 74% • Venture capital:- no cap • Restriction on PSE for surplus fund • FB investment in PVT SEC Bank (49%) • Financial information & data processing:- full commitment • Asset mngt, trust services, pension fund, invest mngt 26 % cap

Architectural services
• Mode 1 & 2 • Mode 3:- partnership firm allowed • Mode 4:- horizontal section

Construction & engineering services
• Mode 1 & 2 • Mode 4:- horizontal section

Telecommunication
• Licensing requirement • Wired communication:- 25% • Mode 2:- full commitment • Mode 3:- FDI 49% • Mode 4:- horizontal section

IMPACT OF DUMPING ON INDIAN INDUSTRY

DEFINATION
Dumping is defined – “As the practice of selling a good in other country at a lower price than in the domestic market or for a lower price than its cost of production.”

TOY INDUSTRY

Chinese manufacturers 80 per cent of the toys Indian manufacturers have been selling the Chinese toys

A Big toy car Chinese Toy - Rs 80 Indian Toy - Rs 250

Advantage for Chinese Manufacturers

Price sensitive Competitive Prices

Impact

Two million workers are in serious trouble Indian manufacturers have already closed their units

Mr. Vishnu Swaroop Agarwal says, “ More than 50 per cent of Indian toy manufacturers have now turned into importers and distributors of imported toys.”

ELECTRONICS INDUSTRY

Chinese dry batteries Exported to India below its normal value 5.37 mn pieces in 1997-98 to 36.60 mn pieces in 1998-99 Chinese batteries - Rs 1.5 to Rs 2 In Indian batteries - Rs 8 – Rs 10

Impact

The damage was not permanent Quality problems Imposition of Anti-dumping duty

WTO Initiatives on Anti-Dumping

Agreement on Implementation of Article VI of GATT Agreement on Subsidies and Countervailing Measures Agreements on Safeguards

Agreement on Implementation of Article VI of GATT

Imposition of a specific anti-dumping duty on imports from a particular source Pre-requisites –
• determine the extent of the ‘dumping margin’ • show that dumping is causing material injury in the domestic market

Detailed procedural rules for the initiation and conduct Duties imposed are subject to reviews every 5 years

Agreement on Subsidies and Countervailing Measures

Subsidies which directly or indirectly affect trade flows 2 Types of subsidies
• Prohibited subsidies • Actionable subsidies

More concerned with Agricultural trade

Agreements on Safeguards

“Emergency” actions with respect to unexpected increased imports of particular products measures can consist of
• quantitative import restrictions or • duty increases

costly for the country applying them

TRIMS Agreement

Agreement in 1995 Applicable to goods only Prohibition of inconsistent TRIMS
Article III (National treatment), or Article XI (General elimination of quantitative restrictions

TRIMS Agreement

Notification of inconsistency Transition period Extension Illustrative list

Illustrative list

Local Content regulation Trade Balancing requirements. Foreign Exchange balancing requirements.

Illustrative list (Contd..)

Domestic sales requirements. Technology transfer requirements. Local Equity requirement.

Impact

Industrialization. Encourages domestic investment. Conservation of foreign exchange reserve.

Criticism

No self reliant growth Restrictive business practices

Agreement on T.R.I.P.S

Came into effect from 1st April,2005 Sets Minimum standard for I.P regulation Deals with Copyright & related rights, Patents, Trademarks, Industrial designs Most Comprehensive agreement on I.P.R

T.R.I.P.S Agreement
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Copyrights and related rights Trademarks Geographical Indications Industrial Designs Patents Lay out designs of integrated circuits Protection of undisclosed information (trade secrets)

T.R.I.P.S Impact
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Closure of industries on large scale Indian firms concentration on generic products Opening research and development by foreign Multi national company Standardization of product

Current Issues
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International organization and traties Mashlekar committee Modernization of IP offices Modernization of IP administration

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