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World Trade Ion - 2

The World Trade Organization was established on January 1, 1995 to oversee the global trading system and administer new international trade agreements. It replaced the General Agreement on Tariffs and Trade. The WTO aims to liberalize trade through agreements that reduce barriers such as tariffs and establish global trade rules in areas like agriculture, textiles, intellectual property and dispute settlement. While the WTO promises benefits from increased trade, developing countries like India worry that its rules could disadvantage their domestic industries and force the adoption of developed country standards.

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Kaushik Nath
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41 views4 pages

World Trade Ion - 2

The World Trade Organization was established on January 1, 1995 to oversee the global trading system and administer new international trade agreements. It replaced the General Agreement on Tariffs and Trade. The WTO aims to liberalize trade through agreements that reduce barriers such as tariffs and establish global trade rules in areas like agriculture, textiles, intellectual property and dispute settlement. While the WTO promises benefits from increased trade, developing countries like India worry that its rules could disadvantage their domestic industries and force the adoption of developed country standards.

Uploaded by

Kaushik Nath
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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WORLD TRADE ORGANISATION

The World Trade Organisation was born on January 1, 1995

The purpose of WTO was to implement the new proposals of GATT and administer
the new global rules of trade. The proposals put forward by Arthur Dunkel in the
Uruguay round of GATT was debated for 8 yeas and it finally ended by 118 countries
agreeing and signing the treaty at Marakesh resulting in dissolving of GATT and
formation of the WTO.

The main role of WTO would be :

 To administer the 28 agreements of the final act of the Uruguay Round.

 Act as forum for trade negotiations

 Settling trade disputes.

 Reviewing national trade policies.

 Assisting developing countries in trade policy.

 Co-operating with other international organizations.

WTO AGREEMENTS

 Agreement on agriculture
This provides a framework for long-term reforms in the agricultural sector,
particularly with a market orientation. The member countries are required to
transform their non-tariff barriers in tariff and reduce the tariffs by 36% in developed
countries and 24% in developing countries. These changes are to take place over a
period of 6 years in developed countries and 10 years in developing countries

 Agreement on textiles and clothing( Multi-Fibre Agreement)


This provides for phasing out the import quotas on textiles and clothing in force under
the MFA over a span of 10 years.

 Agreement on market access


The member nations well cut tariff on industrial and farm goods by an average on
37%.

 Agreement on TRIPS
By the TRIPS agreement, countries would be forced to adopt stringent patent
protection laws. Apart from patents, utility models, trademarks and industrial designs,
TRIPS also included copyrights layout designs and integrated circuits. The
Agreement lays stress on product patents where the final product can be patented as
against process patent where only the process of manufacturing could be patented.
The developing countries were given a time period of 10 years to implement the
patent laws.

 Agreement on TRIMS
Agreement on TRIMS calls for national treatment of foreign investments. It identifies
4 measures which should be eliminated.
a) Obligation to use local inputs
b) To produce for exports as a pre-condition to get imported inputs.
c) To match export earnings with spending on imported raw materials.
d) Not to export more than a specified proportion.

 Agreement on Services
For the first time trade in services like banking, insurance, travel, mobility of labor
was brought within the ambit of negotiations. The GATS (General Agreement for
Trade in Services) provides a multilateral framework of principles and services which
should govern trade in services under conditions of transparency and liberalization.

 Dispute Settlement Body


It took –a long time to settle disputes under GATT. So, the Dispute Settlement Body
under WTO seek to plug these loopholes and thus provide security to the multilateral
trading system. It has now been made mandatory to settle disputes within 18 months
and the decisions of the Body would be binding on all the members.

INDIA’S COMMITMENT TO WTO

 To bind its tariff lines


As a member of WTO, India bound 67 % of its tariff whereas it was only 6%
previously. The phased reduction should have been completed by 2005.

 To remove quantitative restrictions


An agreement was reached between USA and India which envisaged the phasing out
of all quantitative restrictions by April 2001. In line with this India removed
quantitative restrictions on 714 items in 2000 and remaining 715 items in 2001.

 To abide by the new rules of TRIPS


The Patents( Amendments ) Act, 1999 was passed by the Parliament in March 1999
to provide for Exclusive Marketing Rights. This was followed by the Patents
(Amendments) Act,2002. The new patent regime provides for product patents in
drugs and farm products. In respect to plant varieties a decision has been taken to put
in place a sui generic system as it is in our national interest.

 To obey the directives of TRIMS in case of selected items


The developing countries had been given a transition period of 5 years to change from
their existing system and adopt the provisions of WTO. The Govt. of India notified
two TRIMs, that relating to local content requirements in production of
pharmaceutical products and dividend balancing requirement in the case of
investment in 22 categories of consumer items.

Allowing trade under GATS


Under GATS, India has made commitment on 33 activities where foreign service
providers will be allowed. The choice of the activities has been guided by
considerations of national benefits with respect to capital inflows, technology and
employment.

BENEFITS PROCLAIMED FOR INDIA

 Benefits from expansion of trade


According to GATT Secretariat, the Uruguay round package will increase world trade
by about U.S. $745 billions. The greatest increase would come in the areas of
clothing, agriculture, forestry, fishery products, processed food and beverages. Since
India’s existing and potential export possibilities lies in these fields it is logical to
believe that India will have large gains in these sectors. This would result in possible
trade gains in the range of 2 to 5 billion dollars per year.

 Benefits from phasing out of the MFA


It has been argued that the phasing out of the MFA by 2005 will benefit India as the
exports of textiles and clothing will increase.

 Improved prospects for agricultural exports.


India also expects to benefit from increased prospects of agricultural exports as prices
of agricultural products are expected to rise with removal of subsidies and barriers to
trade. On the other hand, India has made sure that agricultural subsidies paid by the
developing countries may not be withdrawn.

 Benefits from multilateral rules and discipline.


The Uruguay Round Agreement ahs 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 international trading system and thus create a more favourable
environment for India.

WORRIES FOR INDIA

CERTAIN issues of the WTO are a cause of worry for developing countries. They
are:

 There is inherent inequality in the structure of WTO. It is heavily biased towards


the developed countries and its provisions are expected to benefit only such
countries. Two aspects of this inequality lies in firstly, that all countries have to
accept all the Agreements irrespective of their level of development. Secondly,
the TRIPS require all countries to follow the same patent rules.as
 If patents are imposed in line with the TRIPS, developing countries like India
with a limited scope for R & D will suffer.
 All inventions will take place in the developed countries and India can make use
of it only after payments of heavy royalties.
 By virtue of the TRIMS agreement, developed countries can carry out investment
activities upto any length in less developed countries.
 This might lead the domestic companies in these countries into unequal
competititon.
 In case of services, there is a vast difference in the quality of services between
developed and developing countries. So, if the service sector is opened up, there
will be more import of foreign services into India rather than Indian services
moving abroad.
 The developed countries want to link the issue of trade with labour standards.
 There are two main issues
one of core labour standard and the other of child labour..
 They want uniform wage standards in all countries because of the fear that
globalisation would push investment away from such countries to poor countries
due to low wages.
 In case of child labour they are demanding a ban on products produced by child
labour . This would mean disregarding the realities of poor countries.
 Most TWCs are of the opinion that the provisions of WTO are against the
sovereign interest of these countries and are aimed at promoting the business
interest of the developed capitalist nations.

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