Sem - II Paper III Indian Economy WTO and Indian
Description: Sem - II Paper III Indian Economy WTO and Indian Economy Prof Karunakar Ram Tripathi World Trade Organisation (WTO) WTO is an international organization set up as a permanent body and is designed to play the role of a watchdog in the
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slide1. Sem - II Paper III Indian Economy WTO and Indian Economy Prof Karunakar Ram Tripathi<br>
slide2. World Trade Organisation (WTO) “WTO is an international organization set up as a permanent body and is designed to play the role of a watchdog in the sphere of trade in goods, trade in services, foreign investment, intellectual property rights etc.”<br>
slide3. Origin of WTO Prior to WTO, GATT was signed by 23 nations in 1947.
GATT concerned with the promotion of international trade.
The signing of the Final Act of the Uruguay Round of GATT in April 1994 paved the way for the setting up of the WTO.
The WTO agreement came into force from January 1, 1995.
GATT was merely a legal arrangement whereas the WTO is a legal institution.<br>
slide4. WTO Agreements Agreement on Agriculture (AoA)
Agreement on Industry
Agreement on Trade in Textiles and Clothing
(Multi-Fiber Arrangement)
Agreement on Market Access
Agreement on TRIPS
Agreement on TRIMs
Agreement on Services
Dispute Settlement Body
Agreement on Antidumping Measures
Other Agreements<br>
slide5. Agreement on Agriculture (AoA) This agreement provides a framework for the long-term reform of agricultural trade and domestic policies.
It provides for commitments in the area of market access, domestic support and export competition.
The members have to transform their non-tariff barriers in equivalent tariff measures.
The tariffs resulting from this transformation, as well as other tariffs on agricultural products are to be reduced on an average by 36% in case of developed countries and 24% in case of developing countries.
The reduction were required to be undertaken over 6 years in case of developed countries and 10 years in case of developing countries.
The volume of subsidized agricultural exports is to be reduced by 21 per cent over a six year period.
The LDCs were not required to make any commitment for reduction.<br>
slide6. Agreement on Industry Tariffs on industrial products are to be reduced from an average of 4.7 per cent to 3 per cent, and the share of goods with zero tariffs is to be increase from 20-22 per cent to 40-45 per cent.
Tariffs were to be removed altogether on pharmaceuticals, construction equipment, paper products and steel.
Government subsidies for industrial research are limited to 50 per cent of applied research costs.<br>
slide7. Agreement on Trade in Textiles and Clothing This agreement provides for phasing out the import quotas on textiles and clothing (in force under Multi-fiber Arrangement since 1974) over a span of 10 years, i.e. by the end of the transition period on January 1, 2005.<br>
slide8. Agreement on Market Access The member nations are required to cut tariffs on industrial and farm products in a bid to promote foreign trade and provide better access to foreign competitors in their domestic markets.<br>
slide9. Agreement on TRIPS Under this agreement, member countries are required to adopt a stringent condition for the protection of the intellectual property rights(IPRs).
The scope of agreement was widened to cover patents, copyrights and related rights, geographical indicators, industrial designs, layout designs of integrated circuits and protection of undisclosed information.
In the field of food, medicines, drugs & chemical products, this agreement provides for granting product patents.
Such patents will be granted for 20 years.
In case of copyrights and related rights, protection will be available for 50 years.
The transition period of 10 years was also allowed for developing countries.<br>
slide10. Agreement on TRIMs This agreement calls for national treatment to foreign investment.
The agreement phase out the requirement that foreign investors buy locally supplied inputs or export as much as they import.<br>
slide11. Agreement on Services (GATS) The GATS provides a multilateral framework of principles and services which should govern trade in services under conditions of transparency and progressive liberalization.
In fact, for the first time, trade in services like banking, insurance, travel, maritime transportation, mobility of labour etc. was brought within the ambit of negotiations in the Uruguay Round.<br>
slide12. Dispute Settlement Body Settlement of disputes under GATT was a never ending process.
There was ample scope for procedural delays.
The DSB set up under WTO seeks to plug these loopholes and thus provide security and predictability to the multilateral trading system.
Trade disputes are to be settled by vote of two-third or three-quarters of the member nations rather than unanimously as under GATT.
In this agreement it has been made mandatory to settle a dispute within 18 months.<br>
slide13. Agreement on Antidumping Measures This agreement provides for tougher and quicker action to resolve disputes resulting from the use of antidumping laws, but it dose not ban their use.
Other Agreements
In addition to the above agreements, the WTO agreements reached agreements on the understanding and implications of certain articles of GATT 1947, viz., pre-shipment inspection, rules of origin, import licensing, countervailing duties, safeguards etc.<br>
slide14. WTO and Indian Economy<br>
slide15. “It was expected that the implementation of WTO agreement benefit to developing countries like India in many way. On the other hand it has some concerns/challenges also.”<br>
slide16. Benefits Under the WTO, thirteen major agreements were signed.
A few of these are Agreement on Agriculture (AoA), Agreement on Textiles and Clothing (ATC) and Agreement on Services (GATS).
It is important to observe that the developing countries, like India, have tremendous export competitiveness in these fields.
Therefore, implication of this fact was that the globalization process initiated by the formation of WTO has eliminated bias, which prevailed in GATT framework
Therefore, these agreements may benefit India in following ways:-<br>
slide17. Benefits from Trade Expansion:- It was expected that due to the WTO agreement there will be significant expansion in global trade.
In fact, it was estimated by the GATT secretariat that the level of merchandise trade in goods would increase by 745 billion $ in year 2005.
The GATT secretariat further projected that the largest increase would be in the areas of clothing (60%), followed by 20% for agriculture, forestry and fishery products and 19% for processed foods and beverages.
It was felt that India would achieve large gains in these sectors through the formation of WTO.
It was estimated that India’s market share in world export would increase from 0.5% to 1.0% and its share in export market would range from 3.5 to 7.0 billion $ per year.<br>
slide18. Benefits from phasing out of MFA:- The agreement on Multi-Fiber Arrangement agreement did not provide an immediate market access for the third world countries.
However, it was argued that phasing out of MFA by 2005 would benefit India by pushing up its exports of textiles and clothings.<br>
slide19. Benefit from AoA:- The WTO agreement calls for reduction in domestic subsidies and barriers to trade.
Therefore, it was expected that this agreement is likely to increase the prices of agricultural products in international market.
Agricultural subsidies granted by developing countries, including India, could be continued till such time they remain within the prescribed limit specified in the agreement.
In fact, India had hoped that the reduction of subsidies in the USA and the EU would enable in to increase its earnings from agricultural exports.<br>
slide20. Benefits from Multilateral Rules and Disciplines:- The WTO agreements had strengthened multilateral rules and disciplines.
The most important of these relate to anti-dumping measures and countervailing duties, pre-shipment inspection, rules of origin, import licensing, safeguards, subsidies, dispute settlement etc.
These arrangements were likely to ensure greater security and predictability for the international trading system and create favourable environment for India in new world economic order.<br>
slide21. Concerns/Challenges Challenges from TRIPs and TRIMs Clause:-
Through TRIPs clause, protection of intellectual property rights (patents, copyrights, trademarks etc.) has become more stringent.
Also, this clause is discriminatory and is highly weighted in favour of the patent holder.
It would increase the area of coverage under the patent system such as drugs, agriculture, plants, chemicals etc.
Besides, TRIMs clause calls for similar treatment to foreign (MNC) companies.
As the developed countries and their MNCs have vast resources and facilities for research and development, they would be at an advantageous position to invest in product as well as in process patents.
Therefore this clause may adversely affect the Indian economy.
This clause may adversely affect the three sector viz. agriculture, pharmaceutical and industrial microbiology.<br>
slide22. Challenges from GATS Clause:- Inclusion of trade in services is expected to benefit developed countries much more than developing countries like India.
This is due to fact that there is a vast level of difference in the development of services like banking, insurance, telecommunication, shipping etc. between developed and developing countries.<br>
slide23. Challenges from Non-Tariff Barriers:- There are many contingency trade policy measures and non-tariff barriers – packaging and labeling regulations, standards, labour standards, documentation and related procedures, company and product registration etc.
These measures continue to act as significant barriers to exports from developing countries.
Such barriers are stiffer for products with lower value addition and lower technological content such as agriculture, textiles and leather products.
These products are major interest of developing countries like India.<br>
slide24. Challenges from AoA:- Tenth Five Year Plan noted number of concerns:-
AoA has legitimised the various trade distorting practices of the developed countries in their favour.
AoA provides that countries not using any subsidies during the period 1986-88 (identified as base period) are prohibited from introducing any new subsidies in the WTO regime.
About 40 to 50 per cent of support to farmers in USA and EU is in the form of Green Box and Blue Box which are exempted from reduction commitments.
An issue of specific concern to the developing countries is the issue of food security.
The AoA does not address this issue adequately.<br>
slide25. Trespassing the Sovereignty of Nation-States:- Under the guise of ‘rule based multilateral order’, ‘global integration’, and ‘development of free trade’, the developed nations have succeeded in building up a new international economic order that fully serves their interests and sacrifices the interests of the large and deprived majority of the developing countries.
Therefore it is argued that the WTO trespasses the sovereignty of Nation-State.<br>
slide26. References: Misra, S.K. and V.K. Puri, Indian Economy (37 ed, 2015) pp 512-519, Himalaya Publishing House, Mumbai.<br>
slide2. World Trade Organisation (WTO) “WTO is an international organization set up as a permanent body and is designed to play the role of a watchdog in the sphere of trade in goods, trade in services, foreign investment, intellectual property rights etc.”<br>
slide3. Origin of WTO Prior to WTO, GATT was signed by 23 nations in 1947.
GATT concerned with the promotion of international trade.
The signing of the Final Act of the Uruguay Round of GATT in April 1994 paved the way for the setting up of the WTO.
The WTO agreement came into force from January 1, 1995.
GATT was merely a legal arrangement whereas the WTO is a legal institution.<br>
slide4. WTO Agreements Agreement on Agriculture (AoA)
Agreement on Industry
Agreement on Trade in Textiles and Clothing
(Multi-Fiber Arrangement)
Agreement on Market Access
Agreement on TRIPS
Agreement on TRIMs
Agreement on Services
Dispute Settlement Body
Agreement on Antidumping Measures
Other Agreements<br>
slide5. Agreement on Agriculture (AoA) This agreement provides a framework for the long-term reform of agricultural trade and domestic policies.
It provides for commitments in the area of market access, domestic support and export competition.
The members have to transform their non-tariff barriers in equivalent tariff measures.
The tariffs resulting from this transformation, as well as other tariffs on agricultural products are to be reduced on an average by 36% in case of developed countries and 24% in case of developing countries.
The reduction were required to be undertaken over 6 years in case of developed countries and 10 years in case of developing countries.
The volume of subsidized agricultural exports is to be reduced by 21 per cent over a six year period.
The LDCs were not required to make any commitment for reduction.<br>
slide6. Agreement on Industry Tariffs on industrial products are to be reduced from an average of 4.7 per cent to 3 per cent, and the share of goods with zero tariffs is to be increase from 20-22 per cent to 40-45 per cent.
Tariffs were to be removed altogether on pharmaceuticals, construction equipment, paper products and steel.
Government subsidies for industrial research are limited to 50 per cent of applied research costs.<br>
slide7. Agreement on Trade in Textiles and Clothing This agreement provides for phasing out the import quotas on textiles and clothing (in force under Multi-fiber Arrangement since 1974) over a span of 10 years, i.e. by the end of the transition period on January 1, 2005.<br>
slide8. Agreement on Market Access The member nations are required to cut tariffs on industrial and farm products in a bid to promote foreign trade and provide better access to foreign competitors in their domestic markets.<br>
slide9. Agreement on TRIPS Under this agreement, member countries are required to adopt a stringent condition for the protection of the intellectual property rights(IPRs).
The scope of agreement was widened to cover patents, copyrights and related rights, geographical indicators, industrial designs, layout designs of integrated circuits and protection of undisclosed information.
In the field of food, medicines, drugs & chemical products, this agreement provides for granting product patents.
Such patents will be granted for 20 years.
In case of copyrights and related rights, protection will be available for 50 years.
The transition period of 10 years was also allowed for developing countries.<br>
slide10. Agreement on TRIMs This agreement calls for national treatment to foreign investment.
The agreement phase out the requirement that foreign investors buy locally supplied inputs or export as much as they import.<br>
slide11. Agreement on Services (GATS) The GATS provides a multilateral framework of principles and services which should govern trade in services under conditions of transparency and progressive liberalization.
In fact, for the first time, trade in services like banking, insurance, travel, maritime transportation, mobility of labour etc. was brought within the ambit of negotiations in the Uruguay Round.<br>
slide12. Dispute Settlement Body Settlement of disputes under GATT was a never ending process.
There was ample scope for procedural delays.
The DSB set up under WTO seeks to plug these loopholes and thus provide security and predictability to the multilateral trading system.
Trade disputes are to be settled by vote of two-third or three-quarters of the member nations rather than unanimously as under GATT.
In this agreement it has been made mandatory to settle a dispute within 18 months.<br>
slide13. Agreement on Antidumping Measures This agreement provides for tougher and quicker action to resolve disputes resulting from the use of antidumping laws, but it dose not ban their use.
Other Agreements
In addition to the above agreements, the WTO agreements reached agreements on the understanding and implications of certain articles of GATT 1947, viz., pre-shipment inspection, rules of origin, import licensing, countervailing duties, safeguards etc.<br>
slide14. WTO and Indian Economy<br>
slide15. “It was expected that the implementation of WTO agreement benefit to developing countries like India in many way. On the other hand it has some concerns/challenges also.”<br>
slide16. Benefits Under the WTO, thirteen major agreements were signed.
A few of these are Agreement on Agriculture (AoA), Agreement on Textiles and Clothing (ATC) and Agreement on Services (GATS).
It is important to observe that the developing countries, like India, have tremendous export competitiveness in these fields.
Therefore, implication of this fact was that the globalization process initiated by the formation of WTO has eliminated bias, which prevailed in GATT framework
Therefore, these agreements may benefit India in following ways:-<br>
slide17. Benefits from Trade Expansion:- It was expected that due to the WTO agreement there will be significant expansion in global trade.
In fact, it was estimated by the GATT secretariat that the level of merchandise trade in goods would increase by 745 billion $ in year 2005.
The GATT secretariat further projected that the largest increase would be in the areas of clothing (60%), followed by 20% for agriculture, forestry and fishery products and 19% for processed foods and beverages.
It was felt that India would achieve large gains in these sectors through the formation of WTO.
It was estimated that India’s market share in world export would increase from 0.5% to 1.0% and its share in export market would range from 3.5 to 7.0 billion $ per year.<br>
slide18. Benefits from phasing out of MFA:- The agreement on Multi-Fiber Arrangement agreement did not provide an immediate market access for the third world countries.
However, it was argued that phasing out of MFA by 2005 would benefit India by pushing up its exports of textiles and clothings.<br>
slide19. Benefit from AoA:- The WTO agreement calls for reduction in domestic subsidies and barriers to trade.
Therefore, it was expected that this agreement is likely to increase the prices of agricultural products in international market.
Agricultural subsidies granted by developing countries, including India, could be continued till such time they remain within the prescribed limit specified in the agreement.
In fact, India had hoped that the reduction of subsidies in the USA and the EU would enable in to increase its earnings from agricultural exports.<br>
slide20. Benefits from Multilateral Rules and Disciplines:- The WTO agreements had strengthened multilateral rules and disciplines.
The most important of these relate to anti-dumping measures and countervailing duties, pre-shipment inspection, rules of origin, import licensing, safeguards, subsidies, dispute settlement etc.
These arrangements were likely to ensure greater security and predictability for the international trading system and create favourable environment for India in new world economic order.<br>
slide21. Concerns/Challenges Challenges from TRIPs and TRIMs Clause:-
Through TRIPs clause, protection of intellectual property rights (patents, copyrights, trademarks etc.) has become more stringent.
Also, this clause is discriminatory and is highly weighted in favour of the patent holder.
It would increase the area of coverage under the patent system such as drugs, agriculture, plants, chemicals etc.
Besides, TRIMs clause calls for similar treatment to foreign (MNC) companies.
As the developed countries and their MNCs have vast resources and facilities for research and development, they would be at an advantageous position to invest in product as well as in process patents.
Therefore this clause may adversely affect the Indian economy.
This clause may adversely affect the three sector viz. agriculture, pharmaceutical and industrial microbiology.<br>
slide22. Challenges from GATS Clause:- Inclusion of trade in services is expected to benefit developed countries much more than developing countries like India.
This is due to fact that there is a vast level of difference in the development of services like banking, insurance, telecommunication, shipping etc. between developed and developing countries.<br>
slide23. Challenges from Non-Tariff Barriers:- There are many contingency trade policy measures and non-tariff barriers – packaging and labeling regulations, standards, labour standards, documentation and related procedures, company and product registration etc.
These measures continue to act as significant barriers to exports from developing countries.
Such barriers are stiffer for products with lower value addition and lower technological content such as agriculture, textiles and leather products.
These products are major interest of developing countries like India.<br>
slide24. Challenges from AoA:- Tenth Five Year Plan noted number of concerns:-
AoA has legitimised the various trade distorting practices of the developed countries in their favour.
AoA provides that countries not using any subsidies during the period 1986-88 (identified as base period) are prohibited from introducing any new subsidies in the WTO regime.
About 40 to 50 per cent of support to farmers in USA and EU is in the form of Green Box and Blue Box which are exempted from reduction commitments.
An issue of specific concern to the developing countries is the issue of food security.
The AoA does not address this issue adequately.<br>
slide25. Trespassing the Sovereignty of Nation-States:- Under the guise of ‘rule based multilateral order’, ‘global integration’, and ‘development of free trade’, the developed nations have succeeded in building up a new international economic order that fully serves their interests and sacrifices the interests of the large and deprived majority of the developing countries.
Therefore it is argued that the WTO trespasses the sovereignty of Nation-State.<br>
slide26. References: Misra, S.K. and V.K. Puri, Indian Economy (37 ed, 2015) pp 512-519, Himalaya Publishing House, Mumbai.<br>