PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE & ECONOMICS

A Project On

WORLD TRADE ORGANISATION

Subject: ECONOMICS Faculty: Prof. Ms. MONIKA

SR NO. 1 2 3 4 5 6 7 8

TOPIC Introduction Definition Objectives Impact on the Indian economy Features of WTO Indias commitment to WTO Items imported under WTO Articles related to WTO

MEMBERS:
SR NO.
1 2 3 4 5 6 7

NAME
ANJALI BALDOTA SONALI KAPOOR DISHA HINDOCHA CHINMAY DALVI RAJ DAYA KAUSHAL MANDALIA MITEN DATTANI

ROLL NO.
10 43 32 20 24 54 22

Introduction
The World Trade Organization WTO is an international organization whose purpose is to open trade for the benefit of all. We provide the forum for negotiating agreements aimed at reducing obstacles to trade, ensuring a level playing field in international trade, thus contributing to development. We also provide a framework for the implementation and monitoring of these agreements, as well as for settling disputes arising from their application.

Definition:WTO is officially defined as the legal institutional foundation of the multilateral trading system

Objectives of the WTO:

1. Improve the standards of living of people of the member nations and ensure full employment. 2. Ensure optimum use of world resources expanding production, and trade. These objectives not only cover production of and trade in goods but also services. 3. 4. Promote the idea of sustainable development and the need Need for positive efforts to ensure that developing to protect and preserve the environment. countries get a better share of growth in international trade. Developing countries have no much choice but to go along WTO and derive maximum possible advantages. It has given

them an opportunity to improve their own economics both in quality and quantity.

IMPACT ON THE INDIAN ECONOMY

The signing of the WTO agreements will have far reaching effects not only on Indias foreign trade but also on its internal economy. Some of the effects may be favourable.While many of them will be adverse. The exact nature of the impact of the WTO agreements on the Indian economy may not be very clear as yet, but some analysis can be done on the board and get general impact.

FAVOURABLE IMPACT
Increase in export earnings:
According to the estimates prepared by the world bank, OECD and GATT Secretariat, the overall trade impact, as a consequence of the Uruguay round package will be an increase in traded merchandise goods.

Agriculture exports:

Reduction of trade barriers and domestic subsidies in agriculture is likely to raise international prices of agriculture products. India hopes to benefit from this in the form of higher export earnings from agriculture. This seems to be possible all major agriculture developments programs in India will be exempted from the provisions of WTO agreement

Exports of textiles and clothing:

With the phasing out of MFA, exports of textile and clothing will increase and this will be beneficial for india however there are certain important issues that are to be considered as far as phasing out of MFA is concerned. Whole the developed countries demanded a 15 year period for phasing out of MFA the developing countries including india insisted that it be done in done in 10 years.

Multilateral rules and discipline:

It is expected that the rules and disciplines related to practices like antidumping, subsidies and countervailing measure, safeguards and disputes settlements will create condition of fair trade and provide level playing ground for all trading countries. Such conditions will benefit india in its efforts to globalise its economy.

UNFAVOURABLE IMPACT:TRIPs:
Protection intellectual property rights have been one the major concerns of WTO. The agreements on TRIPs at the Uruguay round weighs heavily in favour of multinational corporations and developed countries as they hold very large no of patients. Agreements on TRIPs will work against India in several ways and will lead to monopoly of patent holding MNCs. As the member of WTO india has to comply with the standards of the TRIPs. The agreements onTRIPs goes against othe Indian patent act, 1970 in the following ways:

A) Pharmaceutical sector:

Under the patent act, 1970 only process patents are granted to chemicals, drugs and medicines. This implies that an Indian

pharmaceutical company only needed to develop and patent a process to produce drug and it need not have invented the drug. The company could legally manufacture once it had the product patent this proved beneficial for Indian pharmaceutical companies as they were in the position to sell good quality medicines at low prices. However it should be noted that 97% of all drugs manufactured in India are off_patents and so will remain unaffected.

The agreement on TRIPs also extends IPRs to agriculture Through the patenting of plant varities. This will have serious implications for Indian agriculture, where government bodies and agriculture, universities carry out plant breeding and seed production. Patenting of plant varities would transfer all grain in the hands of MNCs who will be in the position to develop plant varieties with the help of their huge financial resources. In a country where a large Majority poor depend on agriculture for their livelihood, these developments will have serious consequences.

B) Agriculture:

Under TRIPS agreement, patenting has been extended to the large area of microorganisms as well. Patenting of microorganisms will again benefit large MNCs that ether already have patent in these areas or will aquire them at much faster rate now. Thus these development of these vital sectors that is agriculture pharmaceuticals and industrial biotechnology will always be in hand of MNCs

(c) Microorganisms:

2)TRIMS:

agreement on trims provide for treatment of foreign investment on par with domestic investment .this agreement too weighs in favour of developed countries. In 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 major feature of the Uruguay round was the inclusion of trade in services in the negotiations. This too will go in favour of developed countries. As far as India is concerned the service industry here is developing countries. Indian firms will have to compete with giant foreign firms in the service sector. Besides the foreign firms will be free to remit profits, royalties and interests to the parent country causing foreign exchange burden for India.

(4) Trade and non-tariff barriers (NTBs):

Several countries have put up trade barriers and NTBs following the formation of the WTO. This has adversely affected the exports of developing like India. Product that have been hit by these barriers include textiles, pharmaceuticals, marine products, floriculture, basmati rice, carpets, sports goods, leather goods and several items of food products.

(5) LDC exports:

In the Hong Kong Ministerial Conference of WTO in December 2005, 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.India has agreed to this commitment. This will have adverse effect on India.India exports will now have To compete with cheap LDC exports internationally. At the same time cheap LDC exports will come to the Indian market and compete with domestically produced goods.

Key features of the world trade developments in 2004 include the following:
Strong economic growth and rapid trade expansion were present in all regions in 2004. The expansion of merchandise trade continued to exceed merchandise output growth by a large margin. The excess of trade over output growth was again particularly large for manufactures. The sharp rise in prices and traded volumes of many primary commodities has often been a major factor explaining the relative strength of regions and product groups in international trade flows. The most prominent illustration of this is, of course, export growth of net oil exporters. The sharp increase in net oil imports of China, the United States and India since 2000 had been a major factor behind the expansion of oil trade and the increase in oil prices. Sharp price increases for iron and steel, ores, non-ferrous metals and fuels combined with a further depreciation of the US dollar vis--vis the currencies of major European traders led to a double-digit price increase for world merchandise trade, the largest annual increase since 1995. These four product groups (iron and steel, ores, non-ferrous metals and fuels) recorded export growth in excess of 30 percent in 2004. Product groups with the weakest nominal growth in 2004 included agricultural products, textiles and clothing. Transportation services expanded by 23 percent to $500 billion, the fastest increase among all services categories. The expansion was boosted by rising transportation costs and a strong increase in the volume of merchandise trade. Oil exporting regions (the Commonwealth of Independent States, the Middle East and Africa) increased their merchandise exports much faster than the global average. North America and Europe are the two regions whose

merchandise export and import growth remained below the global average growth in 2004. The merchandise exports of least-developed countries (LDCs) are estimated to have increased by one third to $62 billion in 2004. Higher commodity prices and an increase in the volume of crude oil contributed to this strong performance. Non-oil exporting LDCs recorded lower than average export growth for the group. The emergence of China as a major import and export market for goods and services continued unabated in 2004. The share of China in the exports and imports of many countries has doubled between 2000 and 2004. By 2004, China had become the world's third largest merchandise trader.

Indias commitment to WTO.

A- India is committed to phased liberalization of trade and investment and progressive integration of its domestic economy with the world economy. Post 2005, India is likely to be the largest free market economy in the world, purely on account of her 1 billion populations. Indias progress in fulfilling her commitment to the WTO can be explained as follows

1. Quantitative Restrictions
India has been maintaining QRs on imports on Bop grounds and had committed to the WTO that the QRs will be completely phased out by 2003.The DSB had ruled against India and had found that Indias QRs on imports were not justified on Bop grounds. The DSP recommended that India should bring its imports regime in conformity with its commitment under the WTO agreement. Accordingly, quantitative restrictions on all imports were withdrawn on April 2001.

2. Trade Related Intellectual Property Rights (TRIPs)

The agreement on TRIPS lays down the minimum standards of protection to be adopted by the parties in respect of i. Copyrights ii. Trademarks iii. Geographical indications iv. Industrial designs v. Patents vi. Lay-out designs of integrated circuits and vii. Protection of trade secrets and its enforcement. The developing countries were given a transition period of 5 yrs to implement the TRIPs agreement. Those countries who dont give product patents in certain areas were given the facilities to delay the provisions of product patents for an additional period of 5yrs on the condition that these countries will provide exclusive marketing rights for products which obtain patents after 1st Jan 1995. India cleared the patents (Amendments) Act, 1999 in March 1999 to provide for exclusive marketing rights.

3. Commitments related to industrial design and layout design of integrated circuits

Under WTO agreements, the Government of India has committed to protect new industrial design and lay-put design of integrated circuit. The bill related with industrial design and lay-out design was cleared by parliament in December 1999 and bill related with industrial design has been introduced in Rajya Sabha on 20th Dec 1999.

4. Copyrights and related rights

In case of rights of performers, producers of phonograms and broadcasting organizations, the agreement requires compliance with the provision of the Berne Convention. Computer programs are to be protected as literary works. The term of protection for copyrights and rights of performers and producers of phonograms is 50yrs. In case of broadcasting organizations the term is 20yrs. Since India is a signatory to the Berne convention, India has to comply with its provisions. Accordingly the Copyright Act 1957 was amended in 1994 to be in tune with the requirements of the TRIPs agreement. A bill to increase the term of performer rights to 50yrs was passed by parliament in December 1999.

5. Trademarks
A bill to amend the Trade and Merchandise Marks Act 1958 was passed by the parliament in December 1999 which amongst other things provides protection to Service Marks.

6. Geographic Indications
The GATT agreement contains a general obligation that parties shall provide the legal means for interested parties to prevent the use of any means in the designation or presentation of a good that indicates or suggests that the good in questions originates in a geographical area other than the true place of origin of the good. An Act on geographical indication was passed by the parliament in December 1999.

7. Trade Related Investment Measures (TRIMs)

The TRIMs agreement provides a transition period of 5yrs to developing countries i.e. up to December 1999. The developing

countries have demanded for additional transition period of 5yrs i.e. up to 2004. A decision by the General Council of the WTO is awaited.

8. Industrial designs
According to the agreements independently created new industrial designs or original designs are to be protected. The Indian Design Act 1911 was reworked to suit to the requirements of the agreement and a bill in this regard was cleared by the Rajya Sabha in December 1999.

9. Reduction of Tariff
India has committed to WTO to reduce tariff on nonagricultural goods. The government has undertaken the phased reduction of tariff over the period March 1995 to 2005. In case of textiles, the reduction of tariff will be achieved over a period of 10yrs but India reserves the right to revert back duties to 1990 level, if certain conditions are not fulfilled according to agreement.

10. Commitment under GATS

Under the General Agreement on Trade in Services (GATS), India has made commitment to WTO in 33 activities. The Foreign Service providers will be allowed to enter into these activities.

II. Implications of WTO agreement for Indian economy

A- Implications of WTO agreement for Indian economy are as follows

1. Reduction in Custom Duties and Export Subsidies

India has agreed to reduce custom duties by 30% over a period of 6yrs. Accordingly the union budget 2000-01 brought down the peak rate of basic custom duty to 35% along with rationalization of total number of slabs in custom duty rates to four i.e. 35, 25, 15 and 5%. Basic custom duty reduction was to be made on items such as raw materials, intermediates and capital goods with the exception of agricultural products, petroleum products, fertilizers and non-ferrous metals like zinc and copper. The WTO agreement enjoins upon its members to remove all export subsidies. However, countries with per capita income of less than $1000 and less than 3.25/- share in the world trade for products are exempted from the removal of subsidies. The economic survey 1998-99 reported that items such as rice, tea, spices, iron ore, leather manufacturer, gems and jewellery had a share of more than 3.25/- and the share of these items in the total exports of India for the year 1996 was 22.8% which means 77% of Indias exports are not affected by the clause on removal of subsidies.

2. Trade Related Intellectual Property Rights

Under the agreement on TRIPs patents are made available for both product and process inventions in the field of industrial technology. The industrial, agricultural and the bio-technology sectors are covered under the patents provision. The patent regime is feared to affect the drugs and the pharmaceutical industry in India. It is estimated that about 70% of the drugs

will be covered by the new patent laws. This will entail royalty payment to the patent holders resulting in a steep rise in prices of drugs in India. However there are conflicting estimates if the percentage of the drugs that will be covered by the new patent laws. For instance, Bibek Debroy, Director, Rajiv Gandhi Institute for Contemporary Studies observed that only less than 10% of the drugs are covered by the patents worldwide. The rest of the drugs i.e. more than 90% of them have become generic i.e. they need no protection. TRIPs also extends patent like protection to agriculture. Accordingly protection is sought to be extended to microorganisms, non-biological and micro-biological processes and plant varieties. Article 27 of the text on TRIPs states that India may provide for protection of plant varieties either by patents or by an effective sui generic system or by a combination of the two. This system shall come into existence after the expiry of the transitional period of 10yrs i.e. after 2005. India needs to work hard on documenting its traditional knowledge on Ayurvedic and herbal plants and obtain patent protection or a sui genesis system in order to prevent bio-piracy.

3. Trade Related Investment Measures (TRIMs) The

text on TRIMs provides that governments shall not discriminate against foreign capital i.e. foreign capital should be given national treatment. The main features of the text on TRIMs are as follows a) All restrictions on foreign capital, investors and companies should be abandoned. b) National treatment to foreign investors i.e. they will be given the same rights as a national investor has with regard to investment.

c) Unrestricted investment in all spheres of economic activities. d) No limitation on the extent of foreign investment in any economic entity. e) Free imports of raw materials and components. f) Local content clause will not be imposed on foreign investors. g) No mandatory export obligations on foreign investors. h) Elimination of restrictions on repatriation of dividend, interest and royalty income. i) Complete exclusion of provisions such as phased manufacturing programmes which is intended to increase the indigenous content in manufacture. Restrictions on foreign capital investment both portfolio and direct have been progressively reduced and more and more industries and sectors of national economy have been thrown open to foreign investment. The opening of the insurance sector to foreign direct investment has been the latest in the league with international airlines industry very much on the block.

4.Textiles and Clothing

The GATT agreement proposes to abandon the Multi Fibre Agreement by 2003 and fully liberalize the textile sector. The Multi Fibre agreement is a comprehensive agreement on quota restrictions imposed by the rich countries over the textile exports of developing countries. These quotas will be phased out under the WTO Act in three phases. In the 1st phase (1993-96), 16% of the textile exports to the developed countries will be liberalized. It will be followed by 17% in the 2nd phase (19962000) and 18% in the 3rd phase (2000-2003). Thus by 2003 51% of the textiles market will be liberalized.

Items Imported Under WTO

The WTO agreements do not require any Member country to import any product. WTO Agreements only lay down the rules for global trade to be followed by the WTO Members. India's total imports during the last 3 years were:

Year in Rs. crore 2004-05 2003-04 2002-03

Imports

in $million

490,532 109,173 359,108 78,150 297,206 61,412

There is no indication that imports have adversely affected India's economy