B.A. ECONOMICS (HONOURS)
GARGI COLLEGE
UNIVERSITY OF DELHI
III year
SEMESTER VI
TERM PAPER:
WTO and the major agreements.
SUBMITTED TO:
Dr Jyoti Mavi
SUBMITTED BY:
SHWETA SHEKHAR 130936
TANYA JAIN 130704
AKNOWLEDGEMENT
We would like to express gratitude towards our International Economics Lecturer. Without her sincere guidance, this term paperwould not have been possible.
Table of Contents
Introduction
Why WTO replaced GATT?
Negotiations before Uruguay round
GATT Rounds.
Principles of trading system-WTO
Major WTO agreements
Doha Round
Nairobi Round
Current Issues
Is WTO India's friend or foe?
Conclusion
Reference
Introduction
World Trade Organization, as an institution was established in 1995. It replaced General Agreement on Trade and Tariffs (GATT) which was in place since 1946. In pursuance of World War II, western countries came out with their version of development, which is moored in promotion of free trade and homogenization of world economy on western lines. This version claims that development will take place only if there is seamless trade among all the countries and there are minimal tariff and non- tariff barriers. That time along with two Bretton wood institutions – IMF and World Bank, an International Trade Organization (ITO) was conceived. ITO was successfully negotiated and agreed upon by almost all countries. It was supposed to work as a specialized arm of United Nation, towards promotion of free trade. However, United States along with many other major countries failed to get this treaty ratified in their respective legislatures and hence it became a dead letter.
Consequently, GATT became de-facto platform for issues related to international trade. It has to its credit some major successes in reduction of tariffs (custom duty) among the member countries. Measures against dumping of goods like imposition of Anti-Dumping Duty in victim countries, had also been agreed upon. It was signed in Geneva by only 23 countries and by 1986, when Uruguay round started (which was concluded in 1995 and led to creation of WTO in Marrakesh, Morocco), 123 countries were already its member. India has been member of GATT since 1948; hence it was party to Uruguay Round and a founding member of WTO. China joined WTO only in 2001 and Russia had to wait till 2012.
GATT to WTO
While WTO came in existence in 1995, GATT didn't cease to exist. It continues as WTO's umbrella treaty for trade in goods.
There were certain limitations of GATT. Like –
It lacked institutional structure. GATT by itself was only the set of rules and multilateral agreements.
It didn't cover trade in services, Intellectual Property Rights etc. It's main focus was on Textiles and agriculture sector.
A strong Dispute Resolution Mechanism was absent.
By developing countries it was seen as a body meant for promoting interests of wests. This was because Geneva Treaty of 1946, where GATT was signed had no representation from newly independent states and socialist states.
Under GATT countries failed to curb quantitative restrictions on trade. (Non-Tariff barriers)
Accordingly WTO seeks to give more weightage to interests of global south in framing of multilateral treaties. Here, a number of other aspects have been brought into, such as Intellectual property under Trade related aspects of Intellectual Property (TRIPS), Services by General Agreement on Trade in Service (GATS), Investments under Trade related Investment Measures (TRIMS).
Negotiations before Uruguay round
The 1982 Ministerial Declaration identified problems including structural deficiencies, spill-over impacts of certain countries' policies on world trade GATT could not manage. To address these issues, the eighth GATT round (known as the Uruguay Round) was launched in September 1986, in Punta del Este, Uruguay. It was the biggest negotiating mandate on trade ever agreed: the talks were going to extend the trading system into several new areas, notably trade in services and intellectual property, and to reform trade in the sensitive sectors of agriculture and textiles; all the original GATT articles were up for review.
The round was supposed to end in December 1990, but the US and EU disagreed on how to reform agricultural trade and decided to extend the talks. Finally, In November 1992, the US and EU settled most of their differences in a deal known informally as "the Blair House accord", and on April 15, 1994, the deal was signed by ministers from most of the 123 participating governments at a meeting in Marrakesh, Morocco. The agreement established the World Trade Organization, which came into being upon its entry into force on January 1, 1995, to replace the GATT system.[2] It is widely regarded as the most profound institutional reform of the world trading system since the GATT's establishment.
GATT ROUNDS
Between 1947 and 1995 there were 8 rounds of negotiations between the participating countries. The first 6 rounds were related to curtailing tariff rates, 7th round included the non-tariff obstacles.
The 8th round was entirely different from the previous rounds because it included a number of new subjects for consideration. This 8th round known as "Uruguay Round" became most controversial. The discussions at this round only gave birth to World Trade Organization (WTO).
Geneva, Switzerland (1947): One of the purposes of this UN Conference on Trade and Employment was to set up an International Trade Organization as a third world economic pillar alongside the World Bank and International Monetary Fund. The attempt failed, but the negotiated trade rules, the General Agreement on Tariffs and Trade (GATT), did take effect from 1 January 1948. The first round, with 23 countries meeting in Geneva in 1947, led to the establishment of GATT itself, as well as some 45,000 reductions in participants' customs duties. It was held in preparation for the Havana conference. In this second round, participants agreed to exchange some 5,000 tariff concessions, and 10 more countries signed the General Agreement.
Result: Signature on first GATT agreement and 45,000 reductions in bilateral tariffs covering 20% of world trade.
Second round of multilateral trade negotiations Annecy, France, 1949: Annecy is in the French Alps not far from Geneva. Here, French delegate André Philip speaks in the plenary session of the second GATT round. The duration of this round is of 5 months. Resulted in tariff reductions on specific products i.e., 5,000 reductions in bilateral tariffs.
Result: Countries exchanged some 5,000 tariff concessions.
The third round, Torquay, UK, 1950: A year later, the negotiations moved to England. This third round focused again on tariff reductions. The number of participants rose to 38.
Here, the mayor of Torquay welcomes the delegates. On his left is the conference chairman, L Dana Wilgress (Canada); on his right, Harold Wilson, president of the Board of Trade, and future UK prime minister. The duration of this round is of 8 months. Resulted in Countries exchanged some 8,700 tariff concessions, cutting the 1948 tariff levels by 25%
Result: exchanged some 8,700 tariff concessions, cutting the 1948 tariff levels by 25%
The Dillon Round, Geneva, 1960-61: Move on a decade, skip one round. By the time they reached their fifth tariff negotiation, GATT signatories decided to give the talks a name.
The negotiations launched in Geneva on 1 September 1960 were to become known as the Dillon Round, after C Douglas Dillon, US undersecretary of state under President Eisenhower, and Treasury Secretary under President Kennedy (who took office during the round in January 1961). By then the European Community had been set up and was beginning to match the United States' economic clout. This round continues for a period of 5 months.
It resulted in $2.5 billion in tariff reductions.
Result: $ 2.5 billion in tariff reductions.
The Kennedy Round, Geneva, 1964-1967: GATT trade rounds were getting longer and more complicated. In the sixth, the Kennedy Round, participation surged to more than 60 countries - 66 nations attended the opening ceremony, pictured here, on 4 May 1964 in Geneva.
The subjects discussed also expanded, from the traditional tariff cuts to new trade rules, such as those on the use of anti-dumping measures.
The Kennedy Round was named after the US president who had died the previous year. This was partly in his memory and partly because President Kennedy had secured the 1962 US Trade Expansion Act which authorized the US government to negotiate tariff cuts of up to 50%, a key factor allowing the talks to take place.
Result: Tariff concessions worth $40 billion of world trade.
The Tokyo Round, 1973-79: Another decade, and GATT negotiations moved outside Europe for the first time. The seventh round was launched at a ministerial meeting in Tokyo, 12-14 September 1973, seen here.
After the inauguration, the hard bargaining returned to Geneva.
The Tokyo Round took a broader look at the trade rules than its predecessor, the Kennedy Round, with mixed results. Participation swelled again to 102 countries. The tariff negotiations led to further substantial reductions in customs duties. A series of agreements were reached on various non-tariff barriers, but they were only signed by some participants - they became known as the Tokyo Round "codes".
However, the talks failed to come to grips with fundamental reforms in agricultural trade, and stopped short of providing a new agreement on "safeguards" (emergency import measures). The first steps in that direction were to take place in the next round. Result: Tariff reductions worth more than $300 billion achieved.
The Uruguay Round, 1986-94: the last and biggest GATT round: In 1986, a GATT round was launched in a developing country for the first time. By now developing countries had become the majority in the GATT system, and in this round they were to play an unprecedented active role in the talks, alongside their more powerful fellow-participants.
In September 1986, trade ministers met in the Uruguay resort of Punta del Este (the meeting is pictured here). After a week of tough talking, they agreed to launch new negotiations. As in previous rounds, these took place mainly in Geneva.
The Uruguay Round turned out to be the longest, most complicated, and the last of the GATT rounds. It took seven and a half years to complete, and it led to the most fundamental reform of world trade rules since GATT itself was created in 1948.
It was not until 15 December 1993 that the negotiations finally came to an end. GATT Director General Peter Sutherland, seen here, brought the gavel down on a deal that would transform world trade.
Some talking did continue, however, in the weeks leading up to the final signing ceremony, including some last-minute bargaining on tariffs. By the end, the number of participants in the Uruguay Round had reached 123. Almost all were represented in Marrakesh.
Here, King Hassan II, accompanied by the Crown Prince of Morocco, presides over the closing ceremony at his Marrakesh palace after the signing.
Result: The round led to the creation of WTO, and extended the range of trade negotiations, leading to major reductions in tariffs (about 40%) and agricultural subsidies, an agreement to allow full access fortextiles and clothing from developing countries, and an extension of intellectual property rights.
Principle of the Trading System – WTO
1) Non Discrimination
Treating other nations equally- Under the WTO agreements, countries cannot normally discriminate between their trading partners. If they grant some country a special favour (such as a lower customs duty rate for one of their products), then they'll have to do the same for all other WTO members.
Some exceptions are allowed.
For example, Countries can set up a free trade agreement that applies only to goods traded within the group — discriminating against goods from outside.
Or they can give developing countries special access to their markets.
Or a country can raise barriers against products that are considered to be traded unfairly from specific countries. And in services, countries are allowed, in limited circumstances, to discriminate.
b) National Treatment:Treating foreigners and locals equally.
National treatment only applies once a product, service or item of intellectual property has entered the market. Therefore, charging customs duty on an import is not a violation of national treatment even if locally-produced products are not charged an equivalent tax.(As this happens before entry into domestic market)
2) Freer Trade: Gradually through negotiations
Lowering trade barriers is one of the most obvious means of encouraging trade. The barriers concerned include customs duties (or tariffs) and measures such as import bans or quotas that restrict quantities selectively. From time to time other issues such as red tape and exchange rate policies have also been discussed
3) Predictability: Through binding and Transparency
With stability and predictability, investment is encouraged, jobs are created and consumers can fully enjoy the benefits of competition — choice and lower prices. The multilateral trading system is an attempt by governments to make the business environment stable and predictable.
In the WTO, when countries agree to open their markets for goods or services, they "bind" their commitments. For goods, these bindings amount to ceilings on customs tariff rates. Sometimes countries tax imports at rates that are lower than the bound rates. Frequently this is the case in developing countries. In developed countries the rates actually charged and the bound rates tend to be the same.
4) Promoting fair competition
The WTO is sometimes described as a "free trade" institution, but that is not entirely accurate. The system does allow tariffs and, in limited circumstances, other forms of protection. More accurately, it is a system of rules dedicated to open, fair and undistorted competition.
5) Encouraging Development and Economic Reforms
The WTO system contributes to development. On the other hand, developing countries need flexibility in the time they take to implement the system's agreements. And the agreements themselves inherit the earlier provisions of GATT that allow for special assistance and trade concessions for developing countries.
Over three quarters of WTO members are developing countries and countries in transition to market economies. During the seven and a half years of the Uruguay Round, over 60 of these countries implemented trade liberalization programmes autonomously. At the same time, developing countries and transition economies were much more active and influential in the Uruguay Round negotiations than in any previous round, and they are even more so in the current Doha Development Agenda.
Major agreements of WTO
All these agreements were concluded during negotiations of Uruguay round i.e. in or before 1995. In most agreements new proposals have been brought in by different countries, which we will discuss later.
Agreement on subsidies and countervailing measures – SCM
The WTO SCM Agreement contains a definition of the term "subsidy". The definition contains three basic elements: (i) a financial contribution (ii) by a government or any public body within the territory of a Member (iii) which confers a benefit. All three of these elements must be satisfied in order for a subsidy to exist.
The Financial contribution must also confer benefit to the industry. Now, in cash grants, benefit will be straightforward to identify, but in cases where there is loan or capital infusion from government/ Public body, it will not be that easy. Such issues are resolved by appellate body of WTO.
Only "specific" subsidies are subject to the SCM Agreement disciplines. There are four types of "specificity" within the meaning of the SCM Agreement:
Enterprise-specificity. A government targets a particular company or companies for subsidization;
Industry-specificity. A government targets a particular sector or sectors for subsidization.
Regional specificity. A government targets producers in specified parts of its territory for subsidization.
Prohibited subsidies. A government targets export goods or goods using domestic inputs for subsidization.
Serious prejudice usually arises as a result of adverse effects (e.g., export displacement) in the market of the subsidizing Member or in a third country market. For e.g. If India starts subsidizing its textile sector heavily, then China can claim that this subsidy is causing serious prejudice to its textile industry.
Against such subsidies members can take Countervailing Measures, such as imposing countervailing duties or antidumping duty. These can only be done in a transparent manner and a sunset period should be specified. Recently, India imposed Anti- Dumping duty on imports of stainless steel from China.
Countervailing Duty – It is imposed on imported goods to counterbalance subsidy provided by the exporter country.
Anti-Dumping Duty – At times countries resort to subsidize production or exports so heavily that exporters are able to sell goods below domestic price or even cost of production in foreign markets. It is aimed at wiping out target country's industry. Anti-Dumping Duty is aimed at counterbalancing such subsidization.
General Agreement on Trade in Services – GATS
The GATS was inspired by essentially the same objectives as its counterpart in merchandise trade, GATT: creating a credible and reliable system of international trade rules; ensuring fair and equitable treatment of all participants (principle of non-discrimination); stimulating economic activity through guaranteed policy bindings; and promoting trade and development through progressive liberalization.
While services in India currently account for over 60 percent of global production and employment, they represent no more than 20 per cent of total trade (BOP basis). This — seemingly modest — share should not be underestimated, however. Many services, which have long been considered genuine domestic activities, have increasingly become internationally mobile. This trend is likely to continue, owing to the introduction of new transmission technologies (e.g. electronic banking, tele-health or tele-education services), the opening up in many countries of long-entrenched monopolies (e.g. voice telephony and postal services), and regulatory reforms in hitherto tightly regulated sectors such as transport. Combined with changing consumer preferences, such technical and regulatory innovations have enhanced the "tradability" of services and, thus, created a need for multilateral disciplines.
Services negotiations in the WTO follow the so-called positive list approach, whereby members' schedules of specific commitments list all of the services sectors and sub-sectors where they undertake to bind the market opening and the granting of national treatment to foreign service suppliers, apart the listed barriers that remain. Sectors and sub-sectors not included in the schedule are exempt from any obligations as regards market access and national treatment.
West is pushing hard to move from positive list approach to negative list approach. In negative list approach, services where GATS is not applicable will have to be negotiated, agreed upon and specified. India is against this concept as it will throw open almost whole Indian services sector to western multinational giants.
Negotiations is services under GATS are classified in 4 modes, interests of different countries depend upon this classification –
Mode 1 – It includes cross border supply of services without movement of natural persons. For example, Business Process Outsourcing. Here, it's in India's interest to push for liberalization given its large human resource pool and competitive IT industry.
Mode 2 – This mode covers supply of a service of one country to the service consumer of any other country. Example, telecommunication.
Mode 3 – Commercial presence – which covers services provided by a service supplier of one country in the territory of any other country. This opens door of relevant sector in one country to investments from another country. Accordingly, it is in west's interest to push for liberalization here. There has been sustained pressure to open up higher education sector, insurance sector, Medical sector, etc. through this mode.
Mode 4 – Presence of natural persons – which covers services provided by a service supplier of one country through the presence of natural persons in the territory of any other country. E.g. Infosys or TCS sending its engineers for onsite work in US/Europe or Australia. Here again it's in India's interest to push for liberalization. In 2012, India dragged the US to the World Trade Organization's (WTO's) dispute settlement body (DSB) over an increase in the professional visa fee (H1B/L1).
TRIPS
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is an international agreement administered by the World Trade Organization (WTO) that sets down minimum standards for many forms of intellectual property (IP) regulation as applied to nationals of other WTO Members. It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994.
It remains an issue between Developed and developing countries. TRIPS was fine tuned in favour of developing countries in 2003, as part of Doha development agenda, when all members agreed to compulsory licensing in certain cases. However, now U.S. and Europe remain unhappy about current strict terms of patent allowed by TRIPS
TRIMS
The Agreement on Trade-Related Investment Measures (TRIMS) recognizes that certain investment measures can restrict and distort trade. It states that WTO members may not apply any measure that discriminates against foreign products or that leads to quantitative restrictions, both of which violate basic WTO principles. A list of prohibited TRIMS, such as local content requirements, is part of the Agreement. Recently India was dragged to WTO by U.S. over former's specification of Domestic Content Requirement in relation to procurement of Solar Energy cells and equipments.
AOA
WTO's agreement on agriculture was concluded in 1994, and was aimed to remove trade barriers and to promote transparent market access and integration of global markets. Agreement is highly complicated and controversial; it is often criticized as a tool in hands of developed countries to exploit weak countries. Negotiations are still going on for some of its aspects.
Agreement on agriculture stands on 3 pillars viz. Domestic Support, Market Access, and Export Subsidies.
Domestic Support – It refers to subsidies such guaranteed Minimum Price or Input subsidies which are direct and product specific.
The US has exploited this opportunity to fullest by decoupling subsidies from outputs. It was easy for USA because it doesn't have concern for food security. Further, it has prosperous agro economy, and farmers can better respond to markets and shift to other crops. But in India, domestic support regime provides livelihood guarantee to farmers and also ensures food security and sufficiency. For this MSP regime tries to promote production of particular crop in demand.
Market Access: The market access requires that tariffs fixed (like custom duties) by individual countries be cut progressively to allow free trade. It also required countries to remove non-tariff barriers and convert them to Tariff duties.
Earlier there were quotas for Imports under which only certain quantities of particular commodities were allowed to Import. This is an example of Non-tariff Barrier.
India has agreed to this agreement and substantially reduced tariffs. Only goods which are exempted by the agreement are kept under control.
Maximum tariff has been bonded as required by WTO, under which a higher side of tariffs is fixed in percentage that should never be surpassed. Generally actual tariffs are far below this high limit. This makes custom policy transparent and tariffs can't be fixed arbitrarily.
If India is able to diversify its production and add value by food processing, then this is a win-win deal for India. A number of commodities are exported to West and low tariffs in west will benefit Indian suppliers.
Export Subsidy: These can be in form of subsidy on inputs of agriculture, making export cheaper or can be other incentives for exports such as import duty remission etc. These can result in dumping of highly subsidized (and cheap) products in other country. This can damage domestic agriculture sector of other country.
But USA is dodging this provision by its Export credit guarantee program. In this, USA government gives subsidized credit to purchaser of US agricultural products, which are to be paid back in long periods. This is generally done for Food Aid programs, such as (Public Law-480) under which food aid is send massively to under developed countries. India also received this Aid in 1960's. But this is only at concessional rates and credit options. But this results in perpetual dependence on foreign grain in recipient countries and destroys their domestic agriculture. So this is equally trade distorting subsidy, which is not currently under ambit of WTO's AOA.
There is little doubt that subsidies and support to agriculture should be controlled and better targeted. WTO negotiations also claim to work towards this direction, but inherent conflicting and vested interest of few countries are too influential in WTO. Every country has different requirements and different product mix, so enough flexibility is must in any agreement. Further, right to food is a global movement and is guaranteed by numerous UN conventions. So, ensuring food security is a domestic concern of a nation, international community can just advice but can't coerce other sovereign country. Thus, India has to make its expenditure much more effective, with dynamic policy and resist any outside pressure which is misdirected towards negative results for Indian people.
Special Safeguard Mechanism
A Special Safeguard Mechanism (SSM) would allow developing countries to impose additional (temporary) safeguard duties in the event of an abnormal surge in imports or the entry of unusually cheap imports.
Special Products
At the 2005 WTO Ministerial Conference in Hong Kong, members agreed to allow developing countries to "designate an appropriate number of tariff lines as Special Products" (SPs) based on "food security, livelihood security and rural development".
6) Multifibre Arrangement and Agreement on Textiles and Clothing
The MFA was introduced in 1974 as a short-term measure intended to allow developed countries to adjust to imports from the developing world. Developing countries and countries without a welfare state have an absolute advantage in textile production because it is labour-intensive and they have low labour costs.
The Arrangement was not negative for all developing countries. For example, the European Union (EU) imposed no restrictions or duties on imports from the emerging countries, such as Bangladesh, leading to a massive expansion of the industry there.
It was decided to bring the textile trade under the jurisdiction of the World Trade Organization. The Agreement on Textiles and Clothing provided for the gradual dismantling of the quotas that existed under the MFA. This process was completed on 1 January 2005. However, large tariffs remain in place on many textile products.
Sanitary and Phyto- Sanitary Measures
This agreement was one of the results of Uruguay Round of negotiation entered into force with the establishment of the World Trade Organization on 1 January 1995. The Agreement sets out the basic rules for food safety and animal and plant health standards. It allows countries to set their own standards. But it also says regulations must be based on science. They should be applied only to the extent necessary to protect human, animal or plant life or health. And they should not arbitrarily or unjustifiably discriminate between countries where identical or similar conditions prevail.
The Doha Round
Its aim is to achieve major reform of the international trading system through the introduction of lower trade barriers and revised trade rules. The work programme covers about 20 areas of trade. The Round is also known semi-officially as the Doha Development Agenda as a fundamental objective is to improve the trading prospects of developing countries.
The Round was officially launched at the WTO's Fourth Ministerial Conference in Doha, Qatar, in November 2001. The Doha Ministerial Declaration provided the mandate for the negotiations, including on agriculture, services and an intellectual property topic, which began earlier.
In Doha, ministers also approved a decision on how to address the problems developing countries face in implementing the current WTO agreements. When they launched the Doha Round, ministers placed development at its centre.
The ministers ask the WTO Director-General to ensure that WTO technical assistance focuses — as a priority — on assisting developing countries to implement existing WTO obligations, and on increasing their capacity to participate more effectively in future multilateral trade negotiations.
They also say the WTO Secretariat should cooperate more closely with international and regional intergovernmental organization so as to increase efficiency and synergies in carrying out this mandate.
Major concerns: Tariffs, non-tariff measures, agriculture, labor standards, environment, competition, investment, transparency, patents etc.
Latest – Nairobi Ministerial Meet – 2015:
Recently concluded Nairobi meet was a huge disappointment for the developing and under developed world. Here, U.S. trade Representative unabashedly called Doha Development Agenda a dead, outdated and undesirable course. West is desperately trying to set aside development aspect of negotiations, to which it had agreed in Doha. Its focus is now on Trade Facilitation Agreement which was agreed to in Bali meet. Further, they are trying to introduce new issues (including some Singapore issues) such as Government Procurement, E-commerce, Investment, Competition policy. To this India and other developing countries took strong objection.
In the run-up to the Nairobi meeting, a large majority of developing countries led by India, China, South Africa, Indonesia, Ecuador, and Venezuela prepared the ground to ensure that the Doha Round of negotiations are not closed by the two trans-Atlantic trade elephants. They also tabled detailed proposals for a permanent solution for public stockholding programmes for food security and a special safeguard mechanism (SSM) to protect millions of resource-poor and low-income farmers from the import surges from industrialized countries.
Again, the two proposals were actively opposed by the US, which led a sustained campaign to ensure that there was neither an outcome on continuing DDA negotiations nor a deal on SSM and public stockholdings for food security.
Highlights of Nairobi outcomes:
There was a commitment to completely eliminate subsidies for farm exports. Under the decision, developed members have committed to remove export subsidies immediately, except for a handful of agriculture products, and developing countries will do so by 2018. Developing members will keep the flexibility to cover marketing and transport costs for agriculture exports until the end of 2023, and the poorest and food-importing countries would enjoy additional time to cut export subsidies.
Ministers also adopted a Ministerial Decision on Public Stockholding for Food Security Purposes. The decision commits members to engage constructively in finding a permanent solution to this issue. Under the Bali Ministerial Decision of 2013, developing countries are allowed to continue food stockpile programmes, which are otherwise in risk of breaching the WTO's domestic subsidy cap, until a permanent solution is found by the 11th Ministerial Conference in 2017.
A Ministerial Decision on a Special Safeguard Mechanism (SSM) for Developing Countries recognizes that developing members will have the right to temporarily increase tariffs in face of import surges by using an SSM. Members will continue to negotiate the mechanism in dedicated sessions of the Agriculture Committee. (This means issue is not closed and still under negotiation).
There was affirmation that Regional Trade Agreements (RTAs) remain complementary to, not a substitute for, the multilateral trading system (WTO).
Ministers acknowledged that members "have different views" on how to address the future of the Doha Round negotiations but noted the "strong commitment of all Members to advance negotiations on the remaining Doha issues.
Current issues of India in WTO
Intellectual Property
Further, as part of Doha Development Agenda, developing countries managed to tweak 'Agreement on Trade related aspects of Intellectual Property' (TRIPS) in favour of developing countries by allowing compulsory licensing in certain circumstances.Indian Patent Act as amended in 2005 allows protection of both product and process, but it allows patent only when there is enhanced efficacy of the substance. If a company re-invents a previously known substance in to new form e.g. from Solid to Liquid, then protection can't be granted. India due to its promising pharmaceutical industry exploits these powers religiously.
US pharmaceutical industry has been apprehensive of frequent evocation of this principle in developing world.Since India's course is not violative of TRIPS, question of India being challenged in WTO doesn't arise.
Domestic Content Requirement in Solar Panel
Recently, India lost this case to US in WTO's dispute resolution body. India has prescribed 'domestic content requirement' for procurement of Solar cells/panels for its target of installing 100 GW of solar power by 2022. Under this some (about 5%) procurement was reserved to be bought from Indian vendors, to promote indigenous industry. US alleged that this is against principles of Non Discrimination and National Treatment.
The WTO has ruled against India on an appeal filed by US.
The mandatory requirement of domestic content has been introduced by GOI to give impetus to 'Make in India' programme in solar energy sector. However such a move, not only violates global trading obligations by India but also make the final consumer vulnerable to being subjected to higher costs for using solar energy. In globalised world, a manufacturer has to be provided with freedom to choose best product on both quality and price basis, to give impetus to a particular sector.
However, India's limitations should have been considered in light of recent geo-political and economic changes.
* Need to diversify its energy sources.
* Climate change goals to achieve 40% requirements via renewable energy by 2030.
* Boost to make in India and employment generation.
* Rising pollution in metropolitan cities have prompted it to take actions for large scale promotion of solar energy based energy generation.
* Also, 23 US states (about half of the total number) have "Buy Local" rule for Solar Energy. If there is "Non Discrimination" in true sense, then these should apply to US as well.
While India will now have to allow for imported solar panels instead of relying solely on domestic ones to meet its targets, it does not necessarily mean that the nation would no longer be able to fulfil these climate obligations from solar power generation. India could still generate its electricity from solar power. The panels that are utilized in the plants would just not come from those supplied by domestic solar producers alone. If cheaper imported panels became available, consumers would still continue to use solar power for electricity generation.
Earlier, WTO had ruled against the Indian ban on import of poultry meat, eggs and live pigs from the US, stating that it was not consistent with international norms.
Information technology agreement II
As many as 53 WTO members agreed in Nairobi to a seven-year time frame to scrap all tariffs on 201 IT products that account for an annual trade of $1.3 trillion. Such a pact is touted to drive down prices of items ranging from video cameras to semi-conductors. However, India had been opposing such an agreement on fears that the deal would benefit only those countries (notably the US, China, Japan and Korea) that have a robust manufacturing base in these products, and not India. This Information Technology Agreement is being called ITA-II.
It is expected that by 2020 India will consume electronic items worth $ 400 billion. As per current situation, out of this it is likely to import atleast goods worth $300 billion. Electronic hardware manufacturing is one of the main components of 'Make in India' and 'Digital India' program. Hence India stayed away from ITA-II.
Coverage of higher education in GATS (mode 3)
Western countries are pushing hard to get unrestricted access to Indian education sector under this mode and again India is defensive.Coverage of higher education in GATS will encourage treatment of education as a tradable commodity.It is possible that any agreement will curb power of Indian government to provide subsidy and support to the sector. Further, it is likely to affect reservation policy of India. Further, foreign university will consume scarce educational human resource available in India, leaving less competitive domestic and public institution starved of good teachers. It is also feared that this will speed up process brain drain from India as foreign universities are likely to design courses under ambit of their parent institution.It is imperative that more investment is attracted in the sector. Overtime due to competition, students will get bettereducational alternatives and at cheaper costs. However, for this to happen, government has to draw certain redlines while negotiating on the issues of support to public institutions, scholarship to weaker sections and on its reservation policy.
Is WTO India's friend of foe?
India has been a WTO member since 1 January 1995 and a member of GATT since 8 July 1948. It is one of the prominent members of WTO and is largely seen as leader of developing and under developed world. At WTO, decisions are taken by consensus. So there is bleak possibility that anything severely unfavourable to India's interest can be unilaterally imposed. India stands to gain from different issues being negotiated in the forum provided it engages with different interest groups constructively, while safeguarding its developmental concerns.
In absence of such a body we stand to lose a platform through which we can mobilize opinion of likeminded countries against selfish designs of west. Thanks to vast resources of developed countries they can easily win smaller countries to their side. WTO provides a forum for such developing countries to unite and pressurize developed countries to make trade sweeter for poor countries. Although the WTO does not manage the global economy impartially, but it is often argued that in operation, it has a systematic bias toward rich countries and multinational corporations, harming smaller countries which have less negotiation power.
Apart from this, Dispute Resolution Mechanism of WTO is highly efficient. Countries drag their trading partner to this body when action of one country is perceived to be unfair and violative of any WTO agreement, by other country.
Conclusion
India has to continue its effort to prevent issues of developmental importance to be side-lined. Until this is done WTO cannot impinge upon sovereignty of India. India has already marked red line in sectors such as agriculture by making it clear than there is no scope of compromise on its positions. West has relentlessly tried to project India as rigid and uncompromising negotiator. However, these attributes are better suited to U.S. and other developed countries. They have been backtracking on various commitments under Doha Development Round and desperately trying to bring in new issues including Singapore issues. These issues are prejudicial to interests of majority of countries and vast majority of population. Consequently, majority of countries stand with India after failure of every meet.
India needs to upscale its diplomatic capability. In recent Nairobi meet, it was seen that while developed countries spoke in unison, there was no such unity in developing countries. Brazil, a prominent member of WTO, has already broken away from G-20/33 group and has aligned itself close to position held by developed countries; thanks to its globally competitive agricultural sector. India made a serious effort last year at India- Africa summit to arrive at common agenda for WTO and was largely successful. However, there needs to be larger combined effort in bringing on the common platform of developing nations in all continents. U.S. has been already doing it for several years and that's partly why it remains most assertive and subtle power in any negotiation.
REFERENCES:
The Hindu editorials.
Economic and Political Weekly magazine
http://globalriskinsights.com/2016/03/what-does-the-wto-ruling-mean-for-u-s-india-solar/
www.insightsonindia.com
www.wto.org
www.yourarticlelibrary.com
https://www.wto.org/english/thewto_e/countries_e/india_e.htm
www.britanicca.com
International trade law research guide.
Research paper of Xuepeng Liu on GATT/WTO promotes trade strongly.
