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WTO

The birth of WTO on January 1, 1995, holds a great

promise for the entire world economy in respect of international trade. WTO will administer the new global trade rules establishing the rule of law in international trade, which amounted to nearly $5 tillion last year for goods and services. Peter Sutherland, the first director general of WTO recently said, The WTO binds nations in a global cooperative Endeavour to raise incomes and create good jobs through fair and open trade.

Contd
The WTO is the embodiment of the Uruguay round

results and the successor to the General Agreement of Tariffs and Trade (GATT). The WTO has larger membership than GATT, the present number of members stand at 144. India is one of the founder members of WTO. The lastest issue of GATT/WTO observed that the new global trade rules were achieved after 7 years of negotiations among more than 120 countries and through the WTO agreements and marekt access commitments, world income is expected to rise by over $500 billion annyally.

Objectives
To improve SOL in the member countries To ensure full employment and broad increase in

effective demand To enlarge production and trade of goods To ensure optimum utilization of world resources To accept the concept of sustainable development To protect environment

Features of WTO
It is an international orgn. to promote multilateral trade It has replaced GATT It promotes free trade by removing tariff and non tariff barriers I intl trade It has fixed set of rules and regulations and it has a legal status. Its rules

and regulations are mutually designed and agreed upon by member nations Agreements agreed by member countries are binding on all members of WTO and if any member does not follow such agreements, then its complaint can be lodged with the Dispute Settlement Body of WTO In includes trade in goods, trade in services, protection of IPR, foreign investment etc. Unlike IMG and World Bank, WTO is not an agent of UN. Unlike IMF and World Bank, there is no weighted voting (on the basis of capital). Rather all the WTO members have equal voting rights. WTO has a huge organizational setup.

India and WTO


As a founder member of GATT and WTO, avails of

most favored nation and national treatment from all WTO members for its exports. As a member of WTO, India has bound about 67% of its tariff lines whereas prior to uruguay round only 6% lines were bound. For non agricultural good 40% and 25% on intermediate goods, machinery etc.

India now stands to gain immensely from the

membership of wto. At the time the joining the wto, the opposition political parties strongly opposed. The fears expressed by the opposition parties regarding adverse effects of membership on farmers and the agricultural sector, prices of food grains due to withdrawal of food subsidies which would become obligatory under the terms of membership of that body and life savings drugs and medicines becoming out of the reach to the poor due to enforcement of new patent laws that wto would require us to enact have all proved almost groundless.

Advantages
Disputes are handled constructively Rules make life easier for all Free trade cuts the cost of living

Helps promote peace with in nations


Free trade cuts the cost of living Trade raises income Trade stimulates economic growth The system encourages good governance

DI in Indian Public Sector since 1991


1991 took a initial step. To sale of equity to raise the discipline level and reduce budgetary gaps A comprehensive policy on public sector was set up in 1994. review of strategic and essential infrastructure enterprises and new procedures to tackle sick and loss making units The importance was widened in the later half of 1990s A DI commission was set up in 1996 to carefully examine withdrawal of public sector from non core, non strategic areas with assurance to workers about job security. It was refined in 1999, to include only defense related, atomic energy undertakings and railway transport among strategic enterprises. With this govt has come down to 51 to 26% and govt. will have vigilance. A dept. of DI was set up in 2000 to proceed with the program of disinvestment and p0vt. In 2001, the issue of closing down of non revivable units came into picture.

Disinvestment
The term disinvestment is defined as the shrinkage

of capital investment which is caused by the failure of a firm to maintain or replace its capita assets which are being used up or by the sale of the capital good by the firm, such as the equipment owned by it. Disinvestment also means the withdrawal of capital from a country or a corporation.

Disinvestment is the sale of a part of equity holding held

by the govt. in any PSUs to private investor. Disinvestment has been a major strategy by which the govt. has financed fiscal deficit. Besides financing fiscal deficit, the economic motivation behind is to improve efficiency of PSUs. The govt. expects that even small percent of pvt. Ownership will discipline inefficient managers and motivate them. This can be substantiated by the fact that during 1982-93 the net profit to the capital employed in the PSUs was one third (2.0%) as that of the private sector.

Background of DI
The Indian economy had virtually embraced bankruptcy

during the period 1981-91. The public sector which was to achieve commanding heights and was taught to be the correct path for India's economic growth right from independence was characterized by poor performance. In 1991, there were 236 operating public sector undertaking of which only 123 were profit making. The top 20 profit making PSUs counted for 80% of the profits, implying that less than 10 % of the PSUs were responsible for 80% of profits. The return on public sector investment of the year 90-91 was just over 2%.

Reasons
Low rate of return on investment Declining contribution on national savings Poor capacity utilization

Overstaffing, bureaucratization leasing to excessive

delays and wastage of scar resources on account of this phenomenon many public sector enterprises have become more a burden than as asset to the govt.

Objectives
To put national resources and assets to optimal use To raise resources from within the public sector for

meeting loss relating to restructuring of those units which are sick To improve performance of the public sector units in order to make them globally competitive To modernize public sector units through strengthening R&D To retire public debt To widen the capital market base To mitigate fiscal deficits.

Benefits to India
Boost to exports Security and predictability Policy assistance

Trade links
Settlement of dispute Special concession

Promotion of competition
Technical assistance Sustainable development Policy review mechanism

Disadvantages to India
No export push Prominence to developed nations Price rise

Danger to services sector


Not really free trade Erosion of autonomy

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