Essay on The World Trade Organisation (WTO) and India !
It is true that the WTO mostly benefit the developed countries. That does not mean that the developing countries like India are losing but not gaining anything. But the gains of these countries are limited as compared to those of the developed countries.
Regarding the Indian Membership in the WTO, wide range apprehensions have been expressed such as: our economic sovereignty has been compromised, our agriculture would be ruined, our farmers would have to buy their seeds every year from multinations, our public distribution system would have to be curtailed, our genetic wealth would be lost, the drug prices would shoot-up, our market would become a heaven for foreigners. But A.V. Ganesan, India’s Chief-negotiator in the Uruguay Round says, “It is only in the area of patents and that too in the area of patents of the pharmaceutical and chemical sectors, that the Final Act involves a radical departure from our own present policies, laws or regulations. In all other areas of the Final Act such as agriculture, foreign investment, services, intellectual property rights other than patents, textiles, tariffs, multilateral trading rules and so on the obligations and commitments envisaged under the various agreements are not at conflict with our current policies or the direction in which our policies are moving under the economic liberalisation process.”
Many politicians and other experts suggest that India should withdraw from the WTO instead of accepting the agreements which are against the national interest. But the withdrawal from the WTO will be the greatest blunder that the nation can commit. By being a member of the WTO, India enjoys the most-favoured nation status with all other members of the WTO. Operating out of the WTO would mean an infinitely labourious task of entering into bilateral negotiations with each and every one of the trading partners which may in turn, impose similar conditions. Hence, India should continue in the WTO in view of the national interest.
ADVERTISEMENTS:
Article XVI. 4 of the agreement establishing the WTO states that “each member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the WTO agreements.” It leads for the surrender of sovereignty of states in the interest of trade and investment. Of course, the U.S. does not fell bound by any such stipulation, because the “Uruguay Round Agreement Act” of the U.S. contains the following provisions:
“Section 102(a):
(a) Relationship of Agreements to United States Law
(1) United States Law to prevail in conflict – No provision of any of the Uruguay Round Agreement, nor the application of any such provision of any person or circumstance that is inconsistent with any law of the United States shall have effect.
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(2) Construction – Nothing in this Act shall be construed,-
(A) To amend or modify any law of the United States, including any law relating to – (i) the protection of human, animal or plant life or health, (ii) the protection of the environment, or (iii) worker safety, or
(B) To limit any authority conferred under any law of the United States, including Section 301 of the Trade. Act of 1974, unless specifically provided for in this Act.”
“Section 102(b) (2)(A):
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(2) Legal Change
(A) In general – No State law, or the application of such a State law, may be declared invalid as to any person or circumstance on the ground that the provision or application is inconsistent with any of the Uruguay Round Agreements, except in an action brought by the United States for the purpose of declaring such law or application invalid.”
Dr. B.P. Jeevan Reddy, the Chairman, Law Commission of India suggests that India should respectfully and faithfully enact similar provision to protect the nation’s interests.
India’s interest is not in further trade liberalisation but in correcting the drawbacks in implementation of existing agreements, putting at rest apprehensions about the fairness of the WTO system and giving all members of the WTO an equal and effective role in the multilateral trading system.
India is demanding not only free trade but also fair trade. Agreement on Textiles and Clothing (ATC) on dismantling restrictions which for more than two decades had been controlling textile exports by the developing countries. The US is following slow progress in dismantling of the controls on imports of textiles. Indian Textile exporters have been protesting at this slow phase- out. The demand now is therefore for an accelerated phase-out. On January 1, 2002, 85 per cent of the Textile products should be freed from restrictions in the developed country markets and by December, 31, 2004 the remaining 15 percent.
The US is indiscriminately applying anti-dumping duties on Indian exports which went against the spirit of the 1994 agreement which explicitly said that ‘Special regard must be given by developed country members to the special situation of the developing members.
There are perceived imbalances in WTO provisions on the Trade- Related aspects of Intellectual Property Rights (TRIPS). While the agreement on patents gave developing countries a ten-year transition period, this was especially neutralised by the clause giving patent-holders exclusive marketing rights in India. India is demanding the following remedies in implementing the TRIPS.
(i) Drugs classified by the World Health Organisation as essential drugs should be exempted from the provisions of TRIPS.
(ii) Living organisms should not be patented nor should traditional knowledge be patentable.
(iii) The date of implementation of the agreement for the developing countries should be pushed back by five years 2005 and more
Two other TRIPS-related issues were the Basmati controversy and protection of indigenous knowledge. The basmati issue showed the need for stronger protection for products with geographic appellations than now available in the TRIPS agreement. The TRIPS rules also had to be amended to give owners of traditional knowledge sufficient reward for the use of the know- how in modern bio-technology.
In implementation of TRIMS India is asking for the extension of the deadline of implementation of TRIMS by another five years to 2005. Another demand is that they should be exempt from the prohibition on local content (indigenisation) requirements.
The other issues of concern to India are the wide-spread erection of non-tariff barriers by the rich countries (in the form of product standards, certification measures, labelling and restrictive import policies) the neglect of greater market access in the rich countries to India’s skilled professionals and the need to correct deficiencies in the WTO agreement on agriculture.
The foreign trade and investment regime will change drastically after India fully implements all the provisions of different agreements of WTO such as TRIPS, GATS, TRIM, SCMS etc from the year 2000/2004. India will have to tighten its patents regime, introduce product patents and grant patent protection for a much longer period. Further, India will have to grant national treatment to foreign firms. In matters such a government purchases and contracts, it cannot favour domestic firms on discrimination against foreign firms.
All member countries will have to be considered as most favoured nations and no country can be favoured or discriminated against based on political and other considerations. Foreign direct investments cannot be regulated or cleared on a case by case basis as is being done now. Nor can conditions be imposed on foreign direct investments such as export obligations, domestic sourcing of components and indigenisation programmes.
Likewise, foreign countries also cannot discriminate against Indian Firms. Market conditions and environmental factors relating to the availability of raw materials and other resources for several developing countries are similar to that of India. Indian enterprises that have introduced modifications in technologies imported from the developed countries can be at an advantage in investing and locating their units in other developing countries having similar demand and environmental conditions.
India, in the Ministerial Conferences, stressed the need for the WTO to first address the slow progress and drawbacks in implementation of the existing agreement. This is necessary because till now such clauses, known as ‘best endeavour’ clauses and were ignored in the process of implementation. Larger transition periods are needed in case of India.
India is open to negotiations on two issues-on e-commerce and information technology, there is a need to examine ‘the constructive role’ that these two sectors could play in the development process.
India from the beginning stood against for bringing the agreements of trade and labour standards and the trade and environmental issues into the WTO. At the same time India says that there is no need for a multilateral agreement on foreign investment and competition. The WTO is pursuing to convince India to accept the above issues.
India in the New Millennium:
When the Director-General of the WTO came on a three day visit on January 10-13, 2000 to convince India to accept the linkage of trade and labour standards, India expressed its strong views that the WTO should be confined only to trade issues and the non-trade issues of labour standards and environment issues could be properly addressed by the appropriate institutions, more competent and better equipped than the WTO. India cleared its stance on the proposed new round of trade negotiations as well as a host of other critical issues such as non-trade barriers and anti-dumping measures. India and other developing countries should display the solidarity in fighting against the attempts by the US and the E.U. to impose non-trade issues on the agenda of WTO in future.
India as a founder member of both the GATT and the WTO must become proactive on the world arena by evolving itself into a formulator of visions and leader of the WTO in the new millennium. India must play a much larger and important role in global trade. For a long time, it shut itself from the world and was a recipient of aid. Now India made the transition from closed to market led economies. It is now past that the era of dependence. India became one of the ten industrial countries of the world. The situation is ripe for India to play a leading role at multilateral trade institute. India needs to take the leadership role on behalf of other developing economies.
In the immediate future India should address three sets of issues to withstand in the global trade.
1) First, decades ago India had bought its tariffs at GATT on some agricultural commodities at the zero rate. This did not matter as long as these products enjoyed protection in the Quantitative Restrictive regime. But if Indian farmers and processors are to enjoy a modicum of protection, then these tariffs have to be re-negotiated before all the QRs are removed. The negotiations which have been going on for some time have to be completed quickly.
2) Second, the government will have to find a way of addressing the anomalous situation of allowing import of some products which are reserved for production in the small scale sector.
3) The third and high-profile area is import of used cars. With second hand cars of high quality available at throwaway prices in a number of foreign markets, imports in the post-QR regime could pose a major threat to the products – India and Foreign – in the local market. Since India has so far not bound its tariffs on cars, it does have the freedom of setting the import duty on used cars at a sufficiently high level to atleast partially neutralise the price disadvantage of domestic manufacturers. The high tariff may even have to be supplemented with non-tariff measures such as tough environmental norms and roadworthiness certificates, if the domestic consensus is that the investment that has been made in the local automotive industry should be protected from import of inexpensive second hand vehicles.
To be a dynamic force and to play a catalystic role in the WTO, India should face the following challenges:
1) India has to work creatively and very hard to make a dent in leading edge technologies being developed all over the world.
2) India should bring about universal literacy.
3) India should make its presence felt on the world of science. India needs a very elaborate national science policy which should address the area of health.
4) India should reach the international standards in the quality of both industrial and agricultural products.
5) India should properly plan and utilise its cheap and abundant human and natural resources.
6) India should open up its economy to foreign investment without the detriment of native investment.
India’s leadership is required to get the next WTO round started by finding an appropriate way of discussing the critical trade related issues.