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 AntiDumping 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.
Why WTO replaced GATT?
While WTO came in existence in 1995, GATT didnt cease to exist.
It continues as WTOs umbrella treaty for trade in goods.
There were certain limitations of GATT. Like

1.

It lacked institutional structure. GATT by itself was only the

set of rules and multilateral agreements.

2.

It didnt cover trade in services, Intellectual Property Rights

etc. Its main focus was on Textiles and agriculture sector.

3.

A strong Dispute Resolution Mechanism was absent.

4.

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.

5.

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).
Uruguay Round and its Outcomes
This (8 round of multilateral negotiations) round begun in 1986
th

and went on till 1994. Uruguay Round of negotiations covered

more issues and involved more countries than any previous
round. It prescribes, among other things, that tariffs on industrial
products be reduced by an average of more than one-third, that
trade in agricultural goods be progressively liberalized, and that a
new body, the World Trade Organization, be established both to
facilitate the implementation of multilateral trade agreements and
to serve as a forum for future negotiations.
Agreements to liberalize trade in industrial products include
reductions in tariffs and removal of quantitative restrictions. The
advanced countries agreed to reduce tariffs on industrial imports
amounting to 64 percent of the total value of their imports of such

products; 18 percent of their industrial imports were already dutyfree under commitments made prior to the Round. By comparison,
the developing countries agreed to lower their tariffs on about
one-third of their industrial imports, and the participating
transition countries on three-quarters of theirs. Tariff reductions
are to be completed by the year 2000 except for certain sensitive
sectors such as textiles, for which the reductions must be
completed by 2005. Further, outcome of this round mandated
reduction of import duty on Tropical Products, which are mainly
exported by developing and least developed countries.
The most important of them were a fixed timetable for
dismantling the multi-fibre agreement (MFA) governing trade in
textiles enshrined in the agreement on textiles and clothing (ATC)
and the agreement on agriculture (AOA). Consider each in turn.
As per the ATC, developed countries would progressively bring
greater volumes of textile trade under the normal Gatt tariff
disciplines. It was recognised that the developed countries (like
any other country) also needed time for structural adjustment.
The time was mainly required for achieving domestic political
acceptance of structural change in these economies. Accordingly,
it was decided that by January 1, 2005 all textile trade would be
off quotas. What was the actual experience?
While countries like Norway did follow the time table, both the US
and the EU used simple arithmetic to postpone the end of quotas
on exports of developing countries till the end of the period. This
was done by the simple expedient of initially bringing out of
quotas only those textile and clothing items where exports of
developing countries were minimal. When 2005 approached, an
attempt was made to scuttle the ATC by arguing that it would be
harmful for exports of less competitive developing countries!
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.
Principle of the Trading System WTO
1) Non Discrimination
a) Most Favored Nation
Treating other nations equally- Under the WTO agreements,
countries cannot normally discriminate between their trading
partners. If they grant some country a special favor (such as a
lower customs duty rate for one of their products), then theyll
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

This principle of national treatment (giving others the same
treatment as ones own nationals) is also found in all the three
main WTO agreements (Article 3 of GATT, Article 17 of GATS and
Article 3 of TRIPS)
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 negotiation
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.

The

Uruguay

Round

increased

bindings
Percentages of tariffs bound before and after the
1986-94 talks
Before
78
21
73
(These are tariff lines, so percentages are not
weighted according to trade volume or value)

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.
The rules on non-discrimination MFN and national treatment
are designed to secure fair conditions of trade. So too are those
on dumping (exporting at below cost to gain market share) and
subsidies. The issues are complex, and the rules try to establish
what is fair or unfair, and how governments can respond, in
particular by charging additional import duties calculated to
compensate for damage caused by unfair trade.
Many of the other WTO agreements aim to support fair
competition: in agriculture, intellectual property, services, for
example.

The

agreement

on

government

procurement

(a

plurilateral agreement because it is signed by only a few WTO

members) extends competition rules to purchases by thousands
of government entities in many countries. And so on.
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 systems

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.
1.

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.
In order for a financial contribution to be a subsidy, it must be
made by or at the direction of a government or any public
body within the territory of a Member. Thus, the SCM
Agreement applies not only to measures of national governments,
but also to measures of sub-national governments and of such
public bodies as state-owned companies.
Further, Such 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.

Hence there are two types of prohibited subsidies

1.

Subsidies contingent upon export performance.

2.

Subsidies contingent upon use of domestic content over

imported goods.

Further, there is separate category of Actionable subsidies.

These are not prohibited but countries can take Countervailing
measures against these subsidies or they can be challenged in
dispute resolution body of WTO.
For a subsidy to be actionable, 3 conditions should be present
1.

Injury to domestic industry due to subsidized imports of

other country.

2.

There isserious prejudice: 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.

3.

Nullification or impairmentof benefits accruing under the

GATT 1994. It means when benefit to be accrued from
reduction of tariffs (under GATT) are nullified by increase in
subsidies.

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 AntiDumping 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 countrys industry. AntiDumping

Duty

is

aimed

at

counterbalancing

such

subsidization.
2. 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 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 longentrenched 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

eg.

Business

Process

Outsourcing, KPO or LPO services. Here, its in Indias 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.

E.g.

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 wests

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 its in Indias interest to push
for liberalization. In 2012, India dragged the US to the World Trade
Organizations (WTOs) dispute settlement body (DSB) over an
increase in the professional visa fee (H1B/L1).
3. 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 favor 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
4. 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 formers specification of Domestic
Content Requirement in relation to procurement of Solar Energy
cells and equipments.
5. AOA
WTOs agreement on agriculture was concluded in 1994, and was
aimed to remove trade barriers and topromote 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.
1.

Domestic Support It refers to subsidies such guaranteed

Minimum Price or Input subsidies which are direct and product
specific. Under this, Subsidies are categorized into 3 boxes

a) Green Box Subsidies which are no or least market

distorting includes measures decoupled from outputsuch as
income-support payments (decoupled income support), safety
net programs, payments under environmental programs, and
agricultural research and-development subsidies.
Such as Income Support which is not product specific. Like in India
farmer is supported for specific products and separate support
prices are there for rice, wheat etc. On the other hand income
support is uniformly available to farmers and crop doesnt matter.
US has exploited this opportunity to fullest by decoupling
subsidies from outputs and as of now green box subsidies are
about 90% of its total subsidies. It was easy for USA because it
doesnt 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. And this makes
decoupling Support with output very complicated.
USA was also in position to subsidies R&D expenditure in
agriculture as almost all the farming in US is capitalist and
commercial. Big agriculturists spend substantial amount on
technology upgradations and R&D. But in India about 80% of
farming is subsistence and hence, India & other developing
countries can use this opportunity.
b) Blue Box Only Production limiting Subsidies under this are
allowed. They cover payments based on acreage, yield, or
number of livestock in a base year.
Targets price are allowed to be fixed by government and if
market prices are lower, then farmer will be compensated with
difference between target prices and market prices in cash. This
cash shall not be invested by farmer in expansion of production.
Loophole here is that there no limit on target prices that can be
set and those are often set far above market prices deliberately.
USA currently isnt using this method, instead here EU is active.
c) Amber Box Those subsidies which are trade distorting and
need to be curbed.
The Amber Box contains category of domestic support that is
scheduled for reduction based on a formula called the Aggregate
Measure of Support (AMS).
The AMS is the amount of money spent by governments on
agricultural production, except for those contained in theBlue
Box, Green Box and de minimis.
It required member countries to report their total AMS for the
period between 1986 and 1988, bind it, and reduce it according to
an agreed upon schedule. Developed countries agreed to reduce
these figures by 20% over six years starting in 1995. Developing

countries agreed to make 13% cuts over 10 years. Least

developed countries do not need to make any cuts.
As we can note that Subsidies were bind to levels of 1986-1988,
there was inequality at very beginning of the agreement. At that
time subsidies which latter came under Amber Box were
historically high in western countries. In developing countries,
including India these subsidies were very limited. It is only now
under pressure of Inflation in prices of agricultural Inputs, and
wide differences between market prices and Minimum support
Price, subsidies have grown to this level. In effect developed
countries are allowed to maintain substantially higher amount of
trade distorting subsidies.
De-Minimis provision
Under this provision developed countries are allowed to maintain
trade distorting subsidies or Amber box subsidies to level of 5%
of total value of agricultural output. For developing countries this
figure was 10%.
So far Indias subsidies are below this limit, but it is growing
consistently. This is because MSP are always revised upward
whereas Market Prices have fluctuating trends. In recent times
when crash in international market prices of many crops is seen,
government doesnt have much option to reduce MSP drastically.
By this analogy Indias amber box subsidies are likely to cross
10% level allowed by de Minimis provision.
Bali Summit, Trade facilitation and Peace Clause
(See Bali Ministerial Meet in next section)

2. 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 cant
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.
3. 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.
These subsidies are also aligned to 1986-1990 levels,
when

export

subsidies

by

developed

countries

was

substantially higher and Developing countries almost had

no export subsidies that time.
But USA is dodging this provision by its Export credit guarantee
program. In this, USA gov. 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 1960s. 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 WTOs 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 cant coerce
other sovereign country. Thus, India has to made 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.
Debates have arisen around this question, some negotiating
parties claiming that SSM could be repeatedly and excessively
invoked, distorting trade. In turn, the G33 bloc of developing
countries, a major SSM proponent, has argued that breaches of
bound tariffs should not be ruled out if the SSM is to be an
effective remedy. SSM is quite important in a scenario in which
west has significant powers to subsidize their production and in
turn, exports.
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 labor-intensive and they have low labor 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.
7. 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.
Main Ministerial Meets
1.

Singapore ministerial meet and Singapore issues

1996

The Singapore issues term refers to areas of

1.

trade and investment;

2.

trade and competition policy;

3.

trade facilitation; and

4.

transparency in government procurement,

These four issues have collectively come to be known as the

Singapore issues in the context of the WTO, because it was at the

first ministerial conference of the WTO in Singapore in

1996 that they were first brought up as possible areas on which
the multilateral body could initiate negotiations.
As it can be inferred from these four areas, only trade facilitation
is directly related to trade, while other three are only indirectly
related (if not unrelated) to trade. Developed countries wanted to
include all these areas in negotiations. In contrast, developed
countries wanted implementation of outcomes of Uruguay round.
Hence, from very beginning of WTO deliberations, contradictions
of interests of both developed and developing world came to
surface, which continues till date.
Further, The USA and Norway were behind the push for bringing in
labour standards in the WTO, but developing countries were able
to get the meeting to agree that the International Labour
Organisation is the competent body to do such work.
What was Indias stand?
On issues like investment and competition policy, India feels
that having a multilateral agreement would be a serious
impingement on the sovereign rights of countries. To an extent, of
course,

this

is

inherent

in

any

multilateral

treaty,

but investment is seen as an area in which ceding sovereign

rights would leave governments, particularly developing country
governments, with too little room for maneuver in directing
investments into areas of national priority.
These are concerns that many other developing countries also
share. In addition, on the specific issue of competition policy as
applicable to hardcore cartels, India has pointed out that there
is no clarity on whether these would include export cartels. The
Organisation of Petroleum Exporting Countries (OPEC) is perhaps
the best known example of an export cartel that rigs prices by
fixing production ceilings. On the issue of transparency in
government procurement, the Indian position is that while the

principle is entirely acceptable, there cannot be a universal

determination of what constitutes transparent procedures. On
trade facilitation, India has argued that once again while the idea
is unexceptionable, developing countries may not have the
resources by way of technology, or otherwise to bring their
procedures in line with those in the developed world over the
short to medium term.
2. Doha

Ministerial

meet

and

Doha

Development

Agenda 2001
For the next ministerial (Seattle) meet developed countries tried
to push a lopsided agreement on Singapore Issues down the
throat of developing countries, but latter successfully resisted. All
this while, allegations were hurled on developed countries for
ignoring developmental challenges of developing and least
developed countries. This made developed countries to agree to a
developmental agenda and new round of negotiations Doha
Development Round begun at 4 ministerial meet in Doha. It is
th

said

that

this was

agreed

to

by developed

countries

in

expectation that contents of Singapore Issues will be agreed by

dissidents.
Main issues of Doha Development Round
a. Agriculture First proposal in Qatar, in 2001, called for the
end agreement to commit to substantial improvements in market
access; reductions (and ultimate elimination) of all forms of
export subsidies (including under Green and blue box); and
substantial reductions in trade-distorting support.
The United States is being asked by the EU and the developing
countries, led by Brazil and India, to make a more generous offer
for reducing trade-distorting domestic support for agriculture. The
United States is insisting that the EU and the developing countries
agree to make more substantial reductions in tariffs and to limit
the number of import-sensitive and special products (aoa) that

would be exempt from cuts. Import-sensitive products are of most

concern to developed countries like the European Union, while
developing countries are concerned with special products
those exempt from both tariff cuts and subsidy reductions
because

of

development,

considerations. Brazil

food

security,

has emphasized

or

livelihood

reductions in trade-

distorting domestic subsidies, especially by the United States

(some of which it successfully challenged in the WTO U.S.-Brazil
cotton dispute), while India has insisted on a large number of
special products that would not be exposed to wider market
opening.
b. Access to patented medicines A major topic at the Doha
ministerial regarded the WTO Agreement onTrade-Related Aspects
of Intellectual Property Rights (TRIPS). The issue involves the
balance of interests between the pharmaceutical companies in
developed countries that held patents on medicines and the
public health needs in developing countries. Before the Doha
meeting, the United States claimed that the current language in
TRIPS was flexible enough to address health emergencies, but
other countries insisted on new language.
On 30 August 2003, WTO members reached agreement on the
TRIPS and medicines issue. Voting in the General Council,
member governments approved a decision that offered an interim
waiver under the TRIPS Agreement allowing a member country to
export

pharmaceutical

products

made under

compulsory

licenses to least-developed and certain other members. It also

allows members to not to allow evergreening of Patents.
c. Special and differential treatment (SDT) SDT as a
principle has been there since 1970s in multilateral negotiations
under GATT. In Doha round, members agreed that Developing and
Least developed countries will continue to be eligible for a
favorable treatment. However, of late developed countries are

dragging their feet here too. They now claim that big developing
countries

like

India,

China,

Brazil

and

South

Africa

are

unreasonable in their demand and only least developed countries

are

rightful

claimant

of

differential

treatment.

Here

it

is

inconceivable that poor countries like India are to be treated at

par with western developed world. At the December 2005 Hong
Kong ministerial, members agreed to five S&D provisions for least
developed countries(LDCs), including the duty-free and quota-free
access.
d. Implementation issue: Developing countries claim that they
have had problems with the implementation of the agreements
reached in the earlier Uruguay Round because of limited capacity
or lack of technical assistance. They also claim that they have not
realized certain benefits that they expected from the Round, such
as increased access for their textiles and apparel in developedcountry markets. They seek a clarification of language relating to
their interests in existing agreements.
Apart

from

this,

there

was

agreement

on

prevention

of

appropriation of Traditional Knowledge of developing world by

Corporations in west
3. Cancun Ministerial Meet Abandonment of Singapore
issues 2003
At Fifth WTO Ministerial Conference, the main task was to take
stock of progress in negotiations and other work under the Doha
Development Agenda. With Doha Development Agenda in place it
was expected that some concessions will be made on Singapore
issues, but position remained entrenched as they were.
The only positive development from the point of view of trade
negotiations was the creation and survival of the new developing
country negotiating group, the G-20. In particular, subsequent
mini-negotiations have seen the growing importance of members
of the G-20 like India, Brazil and South Africa.

4. Geneva Talks 2004 Here Singapore issues were

dropped from Doha Agenda. Further it was agree to proceed
in areas of agriculture, Non- Agricultural market access,
Services and Trade facilitation.
4. Potsdam , 2007
In June 2007, negotiations within the Doha round broke down at a
conference in Potsdam, as a major impasse occurred between the
USA, the EU, India and Brazil. The main disagreement was over
opening up agricultural and industrial markets in various countries
and how to cut rich nation farm subsidies.
6. Bali Ministerial Meet and Bali Package Trade
Facilitation and Peace Clause 2013
In Bali Trade facilitation was agreed to by all nations and for
adjustments/adaptations to limits under Agreement on Agriculture
(de minimis provisions); a Peace clause was agreed at. Peace
clause gave countries 4 year times to adjust to the limit and avoid
sanctions.
Date for ratification of Bali agreement was 31 July, 2014, on which
India declined to ratify unless a permanent solution is reached.
After this, in November, India US reached understanding in
which time limit of 4 years was removed and in return Trade
Facilitation was agreed to by India.
Notably, in Deal at Bali, Developed countries were able to woo
under developed countries on basis of a Special Package for
them directed toward Social and physical infrastructure. India as a
result was isolated in all this, only South Africa extended some
support to Indias stand
Trade

Facilitation

requires

member

countries

to

invest

in

Infrastructure that facilitates Imports and exports, simplify custom

procedures and remove other non-tariff barriers.
It should be noted that development of Infrastructure is already a
priority for government and it is much desirable in agriculture too,

as India is net exporter of agri products. But issue was of 4 years

of peace clause, which now stands removed.
Trade facilitation deal was marketed by developed countries as a
progressive and much needed deal for good of all type of
countries. It is being said that it will boost up Global GDP by $ 1
Trillion and will add millions of new job. This argument has a little
or no empirical backing and it is feared that western supplier will
invade domestic markets of developing and underdeveloped
countries. Trade facilitation along with special package is like
saying that gains of developed countries will be so big, that losses
of under-developed countries will be lucratively compensated by
them.
7. 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 transAtlantic trade elephants. They also tabled detailed proposals for
a permanent
programmes for

solution
food

for

security

public
and

stockholding

a special

safeguard

mechanism (SSM) to protect millions of resource-poor and lowincome 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:
1.

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.
2. 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 WTOs domestic subsidy cap, until a
permanent

solution

is

found

by

the

11th

Ministerial

Conference in 2017.
2. 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).
2. There were other decisions of particular interests of least
developing Countries. One of them is Preferential Rules of
Origin. It entails that Made in LDC products will get
unrestricted access to markets of non-LDCs.
2. There was affirmation that Regional Trade Agreements (RTAs)
remain complementary to, not a substitute for, the multilateral
trading system (WTO).
2. 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.
Impact

of

Reginal

trade

agreements/

Trans

pacific

Partnership (TPP) on WTO

Association of South East Asian Countries (ASEAN), European
Union, North American Union etc. are some associations that
provide more liberal and seamless access of members markets to
fellow member countries. This runs counter to objectives of WTO
which seeks to establish a global rule based system of trading
with minimal barriers. However, for so many different countries at
different stages of socio-economic development, it is nigh
impossible to agree to a common trading regime. Consequently,
countries lobby with group of likeminded countries and aim at
arriving at a mutually symbiotic agreement which ensures a winwin deal for all participants.
Entering into a free trade agreement or formation of custom union
may at times violate Most favorable Nation principle of WTO.
Hence, most such agreements are entered into keeping in mind
exceptions allowed by MFN principle. Agreements while giving

preferential treatment to few members must not create new trade

barriers for nonmembers.
Recently, 12 nations led by United States concluded a Trans
Pacific Partnership Treaty (TPP). Treaty includes both developed
and developing nations (like Vietnam, Peru, and Chile). The
contents of this treaty are on the lines of stand taken by U.S. in
WTO negotiations. It provides stringent provisions for Labor
Standards, Environment Standards and Intellectual Property.
Further, it gives power to private corporations, to sue member
countries for violation of terms of treaty. USs biggest trade
partner China is not party to treaty. Negotiations led by US are
underway for a similar treaty with European countries, dubbed as
Trans-Atlantic partnership.
On the other hand India and China are participating in and leading
negotiations of Regional Comprehensive Economic partnership
(RCEP) Agreement. This agreement is likely to reflect interests of
developing countries in its final draft.
It is said that when such strong regional agreement (TPP and
RCEP) will emerge reflecting different positions taken by different
countries, negotiations will start among these two groups and
over time they will be subsumed under WTO. However, it is feared
that US is likely to use its dollar muscle to lure developing and
least developed countries to join these not so fair treaties.
It is best said that course of multilateralism is evolving and only
time will tell whether WTO will ever be able to provide a common
trading platform aimed towards development or not.
Is WTO a friend or foe of India?
India 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 unfavorable to Indias 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.

Accordingly, India remains committed to various

developmental issues such as Doha Development Agenda, Special

Safeguard Mechanism, Permanent solution of issue of public stock
holding etc.
Apart from this, Dispute Resolution Mechanism of WTO is highly
efficient. Chronological list of cases in WTO can be accessed here.
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.
Cases of Complaints against India
1.

India Certain Measures Relating to Solar Cells and Solar

Modules (Complainant: United States)

2.

India Anti-Dumping Duties on USB Flash Drives from the

Separate Customs Territory of Taiwan, Penghu, Kinmen and
Matsu(Complainant: Chinese Taipei)

3.

India Measures Concerning the Importation of Certain

Agricultural Products(Complainant: United States)

4.

India Certain Taxes and Other Measures on Imported Wines

and Spirits(Complainant: European Communities)

Cases of Complaints by India

1.

United States Countervailing Measures on Certain HotRolled Carbon Steel Flat Products from India (Complainant:
India)

2.

Turkey Safeguard measures on imports of cotton yarn

(other than sewing thread)(Complainant: India)

3.

European Union and a Member State Seizure of Generic

Drugs in Transit(Complainant: India)

Hence, WTO is a body which provides opportunity to aggrieved

country to bring unfair trade practices to notice of Dispute
Settlement body and to bring an end to such unfair practice. This
dimension of WTO makes it a desirable and neutral body as it
seeks to create a just global trading system.
What is Indo USs WTO problem?
Since end of cold war both countries have witnessed a
spectacular improvement in bilateral relations in almost all
spheres. However, at WTO platform two countries remain arch
rival and leaders of opposite camps. U.S. has severe disliking for
Indias

position

in

atleast

two

spheres

Agriculture

and

Intellectual Property.
Agriculture
We have already seen that Agreement on Agriculture which was
hatched in Uruguay round negotiations is heavily tilted in favor of
developed world. For balancing this India as part of Group of
developing

and

least

developed

nations

(G-33)

proposed

amendment to AOA in 2008. Current quest of G-33, toward

achieving permanent solution is follow up story of this proposal
only. As of now, Peace Clause agreed to in 2013, allows us
perpetually

to

continue

our

food

stocking

program

at

administered prices, without being dragged into WTO for violation

of AOA.
Intellectual Property
Further, as part of Doha Development Agenda, developing
countries managed to tweak Agreement on Trade related aspects
of Intellectual Property (TRIPS) in favor of developing countries by
allowing compulsory licensing in certain circumstances. First

compulsory license was granted by Indian Patent Office to NATCO

for nexavar drug produced originally by German firm Bayer AG.
Since then US pharma industry has been apprehensive of
frequent evocation of this principle in developing world. US not
only want this concept to be done away with, it also wants a
liberal IPR regime which allows evergreening of patents. 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

cant

be

granted.

India

due

to

its

promising

pharmaceutical industry exploits these powers religiously. Since

Indias course is not violative of TRIPS, question of India being
challenged in WTO doesnt arise
Domestic Content Requirement in Solar Panel
Recently, India lost this case to US in WTOs 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.
India now has appealed against this decision and can get 2 year
reprieve from rolling back of scheme.
Earlier this year, 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.
Visa problem
Recently, U.S. has double the fees for certain categories of H1B
and L1 visas to $4,000 and $4,500 respectively. H1B and L1 visas
are temporary work visas for skilled professionals. India is the
largest user of H1B visas (67.4 per cent of the total 161,369 H1B

visas issued in FY14 went to Indians) and is also among the

largest users of L1 visas (Indians received 28.2 per cent of the
71,513 L1 visas issued in FY14). India is likely to pursue bilateral
discussions over the issue, but as last resort it may head to WTO
if nothing comes out.
Why

India

stayed

out

of

Information

Technology

Agreement-II in Nairobi?
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 semiconductors.

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. Original
ITA was signed in 1996. New ITA aims at expanding lists of items
covered and total elimination of custom tariffs in 7 year
framework. Since 1996 many new items have creeped in
electronics industry which remains outside the ambit of ITA.
Current dismal state of Indian electronic industry is often
attributed to ITA of 1996. This compelled India to keep certain
electronic items tariff free which gave us infamous inverted duty
structure. Here, domestic products are charged to higher excise
duty than custom duty on imports. This put Indian manufacturers
at serious disadvantage in comparison to foreign vendors.
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.
How Indias stand differs when it comes to services?

From Indias point of view, services present a different picture

from agriculture and industrial tariffs. As an emerging global
power in IT and business services, the country is, in fact, a
demander in the WTO talks on services as it seeks more liberal
commitments on the part of its trading partners for cross-border
supply of services, including the movement of natural persons
(human beings) to developed countries, or what is termed as
Mode 4 for the supply of services. With respect to Mode 2, which
requires consumption of services abroad, India has an offensive
interest.
In sharp contrast, the interest of the EU and the US is more in
Mode 3 of supply, which requires the establishment of a
commercial

presence

in

developing

countries.

Accordingly,

requests for more liberal policies on foreign direct investment in

sectors like insurance have been received. These developed
countries are lukewarm to demands for a more liberal regime for
the movement of natural persons.
Unlike many developing countries, India has taken offensive
positions in this area as it has export interests in information
technology (Mode 1). The country also seeks greater access to
the EU and the US in terms of the movement of natural persons,
or what is termed as Mode 4 in cross-border supply of services.
Lack of movement in Mode 4 due to opposition by the US and the
EU may affect Indias ability to offer much in other modes of
services.
India would also like to see issues like economic needs test,
portability of health insurance and other such barriers in services
removed. As far as delivery of services through commercial
presence (Mode 3) is concerned, there is an increasing trend of
Indian companies acquiring assets and opening businesses in
foreign markets in sectors such as pharmaceuticals, IT, nonconventional energy, etc. This is further evidenced by the

increase in Outward Foreign Direct Investment. India may,

therefore, have some interest in seeking liberalisation in Mode 3,
although it may need to strike a balance with domestic
sensitivities in financial services. Mutual recognition of degrees,
allowing portability of medical insurance, reducing barriers to
movement of professionals, etc, are some of the areas of interest
to India.
An important issue relating to the delivery of services and
liberalisation

is

domestic

regulatory

reforms.

Appropriate

domestic regulations are necessary to prevent market failure as

well as to address issues like quality control, accreditation and
equivalence, effective registration and certification systems,
revenue sharing, etc, for protecting and informing consumers. In
addition, regulatory frameworks can also advance transparency.
Any market access commitments that India might make during
the ongoing negotiations must be preceded by an effective
regulatory framework. The hiatus in the negotiations could be
utilized for putting into place appropriate regulatory regimes in
different service sectors.
Some experts are of the view that under the Uruguay Round
commitments, developed countries already have a liberal trade
regime in Mode 1 (which covers Business Processing Outsourcing
or BPOs) with regard to some of the service sectors of interest to
India. Further research needs to done to assess the extent of
autonomous liberalisation undertaken by developed countries,
which can be locked in during the negotiations, and consequent
gains that can accrue to India. Further, even in the absence of
additional liberalisation, Indias service exports would continue to
grow in view of its cost advantage and demography. India could
also explore the possibility of finalizing mutual recognition
agreements with the main importers of services, so that

differences in national regulatory systems do not act as barriers

to its exports.
Should India provide market access in Higher Education?
As we have read in General Agreement on Trade in Services, Mode
3 classification covers services provided by a foreign commercial
establishment through physical presence in relevant country.
Accordingly,

western

countries

are

pushing

hard

to

get

unrestricted access to Indian education sector under this mode

and again India is defensive. India has already made some offers
on this front to WTO in run up to Nairobi Meet. Topics are still
under negotiation and discussion.
Coverage of higher education in GATS will encourage treatment of
education as a tradeable 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.
On other hand, India is in desperate need to create more and
better quality educational institutions. Gross enrolment in higher
education is just 12% while government aims to increase it to
30%. For all this, it is imperative that more investment is
attracted in the sector. Overtime due to competition, students will
get

better

educational

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.
Conclusion

India has to continue its effort to prevent issues of developmental

importance to be sidelined. 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 G20/33 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 IndiaAfrica 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 thats partly why it remains most assertive and subtle power
in any negotiation.
AGREEMENT ON TRADE RELATED INTELLECTUAL PROPERTY RIGHTS (TRIPs) :Intellectual property Rights seek to protect the interest of inventors and developers of
products and processes from being copied by others. The main features of TRIPs
agreements :

Minimum Standards of protection to be provided by each member.

Domestic procedures must be put in place for enforcement of IPRs by each member nation.

Dispute Settlement between WTO members.

Agreement on TRIPs cover the following areas Copyright and related rights, trade
marks including services marks, industrial designs, geographical indications, patents, layout
designs of integrated circuits and protection of undisclosed information or trade secrets.
WTO's TRIPs agreement is an attempt to narrow down the gaps in the way these
rights are protected around the world. Disputes over TRIPs agreement are to be governed
by WTO dispute settlement procedures. TRIPs agreement desires to reduce distortions and
impediments to international trade while protecting intellectual property rights.
B.
1)

POSITIVE IMPLICATIONS OF TRIPs AGREEMENT :Patents :Under Agreement on TRIPs, protection is given to patents, copyrights, layout designs
etc. For Eg.:- when patented drugs get exclusive marketing rights for certain period, and if
some other firm wants ' to use that products name, they have to take permission from patent
holder. Permission may be given only after signing agreement for royalty or fees.
TRIPs agreement has also given a boost to Research and Development in the field
of pharmaceuticals, engineering, electronics etc. Thus agreement on TRIPs have benefited
the member nations of WTO.

2)

Public Health :The Doha Conference held in Doha, Qatar in Nov. 2001, recognised the need to
protect public health and to provide medicines to all. Here the developing countries need not
source their essential medicines at high cost from MNCs from developed countries, which
have patents. Countries like India, China and Brazil would benefit as they possess the
resources and technology to manufacture essential medicines and export these without
having to secure compulsory licensing from patent holders.

3)

Geographic Indication Status (GIS):WTO also provides GIS for certain items. Once a country gets GIS, the firms from
only that country can use the generic brand name. For Eg. :- India has obtained GIS for
Darjeeling Tea and also for other products. This means, only Indian firms can use Darjeeling
Tea brand, which shows Darjeeling Tea produced in India is unique.

B)
1)

NEGATIVE IMPLICATIONS OF TRIPs AGREEMENT

Favours Developed Nations
Agreement on TRIPs favours developed countries as under TRIPs protection .is
given to IPRs such as patents, trade marks, layout designs etc. Thus it favours developed
nations as they have large number of patents.

2)

Agriculture
In Agriculture patenting of plant varieties is done through TRIPs. This may have
serious implications for developing countries. MNCs are in a position to develop almost all
new varieties with the help of their financial resources and expertise. This may transfer all
gains in the hands of MNCs.

3)

Micro - Organisms
Research in Micro-organisms is closely linked with the development of agriculture,
pharmaceuticals and industrial biotechnology. Patenting of Micro-organisms again will
benefit MNCs.
Q.4 : Explain the implications of TRIMs Agreement of WTO on member nations.
Write note on TRIMs. (M.2011)

OR

Ans. A) AGREEMENT ON TRADE RELATED INVESTMENT MEASURES (TRIMs)

Agreement on Trade Related Investment Measures (TRIMs) include introduction of
measures to be adopted by member countries to treat foreign investments on par with
domestic investments and also removal of quantitative restrictions on imports. It is an
attempt by a national government to place conditions on foreign company that wishes to
operate within its borders.
Certain investment measures that discriminate against foreign investment were to be
withdrawn such as
a) Obligation on foreign investors to use local inputs.
b) To produce for exports as a condition to obtain imported inputs.
c) To meet export obligation.
d) Employment of local people.
e) Technology Transfer requirements.
f) Use of specific production technology.
g) Local equity requirement.
h) Control on use of imported inputs.
The member nations of WTO including India have withdrawn the above measures to
encourage trade related investment.
TRIMs are of two types:
Positive TRIMs :These include investment incentive to move to the country in question or to move to
a specific place within that country.

Negative TRIMs :~
These include local equity requirements, licensing requirements, foreign exchange
restrictions, transfer of technology requirements, trade balancing requirements, import export requirements etc.
B)

POSITIVE IMPACT OF TRIMs :TRIMs agreement have positive impact on developing countries as foreign
investment is treated at par with domestic investment. For Eg. TRIMs agreement will
encourage foreign firms to invest in India. This will generate a good amount of competition.
In order to survive, Indian firms will have to be proactive with competitive strategies, which
not only would improve their performance, but also would provide better service to
customers.

C)

NEGATIVE IMPACT OF TRIMs :Developing countries (including India) have withdrawn a number of measures that
restricts foreign investments. TRIMs agreement also favours developed nations. MNCs from
developed countries with their huge financial and technological resources can displace
Indian industry and play a dominant role. Besides foreign firms will be free to remit profits,
dividends, etc. to parent company. This will cause foreign exchange drain on developing
nations.
Q. 5 : Discuss the implications of GATS Agreement of WTO on member nations.
Write note on GATS.
Ans. A) GENERAL AGREEMENT ON TRADE IN SERVICES (GATS)

OR

For the first time, in Uruguay Round, trade in services like banking, insurance, travel,
transport etc. was brought under negotiations. The General Agreement on Trade in Services
(GATS) is the first multilateral agreement on trade in services. All member nations are bound
to open their services sector to domestic private and foreign competition.
GATS has two major requirements
1)

To grant the Status of Most Favoured Nation (MFN) to other member nations on nondiscriminate basis with regard to trade in services and

2)

Maintenance of transparency. There is also commitment for progressive

liberalisation.
The inculsion of Services in agreement shows their growing importance in world
economy. Under GATS, India has made commitment for 33 activities where foreigners are
allowed to enter. The choice of activities have been based on national benefit like impact on
capital inflows, technology, employment etc.
Improvements in the quality of service that will emerge from liberalisation and
increased competition will contribute to increase in efficiency, productivity, consumer welfare
and growth in developing countries. No doubt there is a wide difference in the quality of
services rendered between the developed and developing countries. The inclusion of trade
in service sector is likely to be more beneficial to developed countries than to developing
countries.
B.

POSITIVE IMPACT OF GATS :GATS provide an opportunity not only to avail services from other member countries

but also to increase the quality of its own services due to competition. Foreign firms are
allowed in number of service sectors. Through joint ventures or partnership foreign firms
may enter in India. This will enable Indian firms to expand and diversify their service
activities with professional expertise and foreign support.
In many developing countries, sectors like travel and tourism, hotels, retail trading,
banking, insurance, education and communication are open for international competition.
C.

NEGATIVE IMPACT OF GATS :In GATS agreement member nations have to open up the services sector for foreign

companies. Developing countries including India have opened up the services sector in
respect of banking, insurance, communication, telecom, transport etc. to foreign firms.
Developing countries may find it difficult to compete with giant foreign firms due to lack of
resources and professional skills.
Q.6: Explain the impact of WTO Agreements on Indian Economy.
OR
Analyse the impact of WTO agreements on India. What are its Pros and Coins?
Ans. A) IMPACT OF WTO AGREEMENTS ON INDIAN ECONOMY :The signing of WTO agreements will have far reaching effects not only on Indias
foreign trade but also on its internal economy. Although the ultimate goal of WTO is to free
world trade in the interest of all nations of the world, yet in reality the WTO agreements has
benefitted the developed nations more as compared to developing ones. The impact of WTO
on Indias economy is staged as follows :I.

Positive Impact I Benefits I Advantages I Gains from WTO :-

The Positive impact of WTO on India's economy can be viewed from the following
points:1)

Increase In Export Earnings :Estimates made by World Bank, Organisation for Economic Co-operation and
Development (OECD) and the GATT Secretariat, shows that the income effects of the
implementation of Uruguay Round package will be an increase in traded merchandise
goods. It is expected that Indias share in world exports would improve.
2)

Agricultural Exports :Reduction of trade barriers and domestic subsidies in agriculture is likely to raise
international prices of agricultural products. India hopes to benefit from this in form of higher
export earnings from agriculture. This seems to be possible because all major agriculture
development programmes in India will be exempted from the provisions of WTO Agreement.
3)

Export Of Textiles And Clothing :With the phasing out of MFA (Multi - Fibre Arrangement), exports of textiles and
clothing will increase and this will be beneficial for India. The developed countries demanded
a 15 year period of phasing out of MFA, the developing countries, including India, insisted
that it be done in 10 years. The Uruguay Round accepted the demand of the latter. But the
phasing out Schedule favours the developed countries because a major portion of quota
regime is going to be removed only in the tenth year, i.e. 2005. The removal of quotas will
benefit not only India but also every other country'.
4)

Multilateral Rules And Disciplines :The Uruguay Round Agreement has strengthened Multilateral rules and disciplines.
The most important of these relate to anti - dumping, subsidies and countervailing
measures, safeguards and disputes settlement. This is likely to ensure greater security and
predictability of the international trading system and thus create a more favourable
environment for India in the New World Economic Order.
5)

Growth To Services Exports :Under GATS agreement, member nations have liberalised service sector. India would
benefit from this agreement. For Eg:- Indias services exports have increased from about 5
billion US $ in 1995 to 96 billion US $ in 2009-10. Software services accounted for about
45% of service exports.
6)

Foreign Investment :India has withdrawn a number of measures against foreign investment, as er the
commitments made to WTO. As a result of this, foreign investment and FDI has increased
over the years. A number of initiatives has been taken to attract FDI in India between 2000
and 2002. In 2009-10, the net FDI in India was US $ 18.8 billion.
II.

Negative Impact / Problems I Disadvantages Of WTO Agreements on Indian Economy :1)

TRIPs :The Agreement on TRIPs at Uruguay Round weights heavily in favour of
Multinational Corporations and developed countries as they hold a very large number of
patents. Agreement on TRIPs will work against India in several ways and will lead to
rponopoly of patent holding MNCs. As a member of WTO, India has to comply with
standards of TRIPs.
The negative impact of agreement on TRIPs on Indian economy can be stated as
follows

a)

Pharmaceutical Sector :Under the Patents Act, 1970, only process patents were granted to chemicals, drugs
and medicines. This means an Indian pharmaceutical company only needed to develop and
patent a process to produce and sell that drug. This proved beneficial to Indian
pharmaceutical companies as they were in a position to sell quality medicines at low prices
both in domestic as well as in international markets. However, under the agreement on
TRIPs, product patents needs to be granted. This will benefit the MNCs and it is feared that
they will increase the prices of medicines heavily, keeping them out of reach of poor. Again
many Indian pharmaceutical companies may be closed down or taken over by large MNCs.

b)

Agriculture :The Agreement on TRIPs extends to agriculture through the patenting of plant
varieties. This may have serious implications for Indian agriculture. Patenting of plant
varieties may transfer all gains in the hands of MNCs who will be in a position to develop
almost all new varieties with the help of their huge financial resources and expertise.

c)

Microorganisms :The Agreement on TRIPs also extends to Microorganisms as well. Research in micro
- organisms is closely linked with the development of agriculture, pharmaceuticals and
industrial biotechnology. Patenting of micro - organisms will again benefit large MNCs as
they already have patents in several areas and will acquire more at a much faster rate.
2)

TRIMs :Agreement on TRIMs provide for treatment of foreign investment on par with
domestic investment. This Agreement too weights in favour of developed countries. There
are no provisions in Agreement to formulate international rules for controlling restrictive
business practices of foreign investors. Jn case of developing countries like India, complying
with Agreement on TRIMs would mean giving up any plan or strategy of self - reliant growth
based on locally available technology and resources.
3)

GATS :One of the main features of Uruguay Round was the inclusion of trade in services in
negotiations. This too will go in favour of developed countries. Under GATS agreements, the
member nations have to openup services sector for foreign companies. The developing
countries including India have opened up services sector in respect of banking, insurance,
communication, telecom, transport etc. to foreign firms. The domestic firms of developing
countries may find it difficult to compete with giant foreign firms due to lack of resources &
professional skills.
4)

Non - Tariff Barriers :Several countries have put up trade barriers and non - tariff barriers following the
formation of WTO. This has affected the exports from developing countries. The Union
Commerce Ministry has identified 13 different non - tariff barriers put up by 16 countries
against India. For eg. MFA (Multi - fibre arrangements) put by USA and European Union is a
major barrier for Indian textile exports.
5)

Agreement On Agriculture (AOA)

The AOA is biased in favour of developed countries. The issue of food security to
developing countries is not addressed adequately in AOA. The existence of global surpluses
of food grains does not imply that the poor countries can afford to buy. The dependence on
necessary item like foodgrains would adversely affect the Balance of Payment position.
6)

Inequality Within The Structure Of WTO

There is inequality within the structure of WTO because the agreements and
amendments are in favour of developed countries. The member countries have to accept all
WTO agreements irrespective of their level of economic development.
7)
LDC Exports
The 6th Ministerial Conference took place at Hong Kong in December 2005. In this
Conference, it was agreed that all developed country members and all developing countries
declaring themselves in a position to do so, will provide duty - free and quota - free market
access on a lasting basis to all products originating from all Least Developed Countries
(LDC). India has agreed to this. Now India's export will have to compete with cheap LDC
exports internationally. Not only this, the cheap LDC exports will come to Indian market and
compete with domestically produced goods.
India will face several problems in the process of complying with WTO agreements,
but it can also reap benefits by taking advantage of changing international business
environment. For this it needs to develop and concentrate on its areas of core competencies.