Learn about India’s Role and Gain from WTO Talks

Let us make in-depth study of India’s role and gain from WTO talks.

India’s Role in WTO Talks:

India has consistently taken the stand that the launch of any new round of talks depends on a full convergence of views amongst the entire WTO membership on the scope and framework for such negotiations.

Our more urgent task is to resolve the concerns of developing countries on implementation of the Uruguay Round agreements. We are against calls for new commitments from the developing world for achieving symmetry and equity in the existing agreements. It is in favour of ‘non-trade’ issues be permanently kept off the negotiating table.

Incorporating Livelihood Clause:

Ensuring food and livelihood security is critical, particularly for a large agrarian economy like India. India’s proposal in ongoing negotiations includes suggestions like allowing developing countries to maintain appropriate level of tariff bindings, commensurate with their developmental needs and the prevailing distortions in international markets.

We are also seeking a separate safeguard mechanism including provision for imposition of quantitative restrictions under specified circumstances, particularly in case of a surge in imports or decline in prices; exemptions for developing countries from obligations to provide minimum market access; exemptions of all measures taken by developing countries for poverty alleviation, rural development and rural employment.

Our immediate priority is that the agreements reached earlier with the developing countries should be implemented so as to correct inherent imbalances in some of the Uruguay Round agreements. Sincere and meaningful implementation of commitments undertaken by developed countries and operationalization of all special and differential treatment clauses for developing countries in the various agreements be made.

We also strongly favour extension of higher levels of protection to the geographical indications for products like Basmati rice, Darjeeling tea, and Alphonso mangoes at par with that provided to wines and spirits under the Trade-related Aspects of Intellectual Property Rights (TRIPS) agreement. In the TRIMS (Agreement on Trade-Related Investment Measures) review we want flexibility for developing countries in adopting appropriate domestic policy while permitting foreign investment.

Developed Countries Demand and Singapore Issues:

Developed countries are pushing for a comprehensive agenda like rules on investment, environment, competition policy, trade facilitation, transparency in government procurement, labour standards etc. They are pressing for incorporating non-trade issues of environment and labour standards. Using as an excuse that production of products in developing countries are not being done under proper environment and labour standards they can ban the imports of their products or impose other non-tariff restrictions. The developing countries are opposed to these non-trade issues.

WTO and Indian Agriculture and Farmers:

Some critics of WTO have expressed the fears that Indian farmers are threatened by the WTO. There is however no adverse impact. India has bound its tariff to the extent of 100 per cent for primary agricultural products, 150 per cent for processed agricultural products and 300 per cent for edible oils. A few agricultural products had been bound historically at low levels but these bindings have been raised following the Article XXVIII negotiations held in this regard.

It has also been possible to maintain without hindrance the domestic policy instruments for promotion of agriculture or for targeted supply of food grains. Domestic policy measures like the operation of minimum support price, public distribution system as well as provision of input subsidies to agriculture have not in any way been constrained by the WTO agreement.

Certain provisions in the Agreement on Agriculture (AoA) also give us flexibility to provide support for research, pest and disease control, marketing and promotion services, infrastructure development, payments for relief from natural disasters, payments under the regional assistance programmes for disadvantaged regions and payments under environmental programmes. Indian farmers now need to take advantage of the opportunity provided by the AoA, by addressing productivity issues and making their products more competitive globally.

WTO and Indian Industries:

Indian industry has had to face greater competition in the wake of globalisation. But it has successfully competed, as can be inferred from the fact that there has been no particular surge in imports. In fact, as per the provisional data for 2000-01 our non-oil imports declined by 14 per cent while our exports rose by over 20 per cent in the same period. A close watch is also being kept to ensure that Indian industry does not have to face unfair competition from dumped or subsidized imports of other countries.

As for drug prices, safeguards are provided like compulsory licensing, price controls, and parallel imports which should help address this concern. It must also be recognized that the prices of medicines are influenced by several factors including the level of competition, size of market, purchasing capacity etc. The issue of affordable access to treatment for AIDS, which has gathered international attention in recent months, is hopefully a pointer in the right direction. The TRIPS agreement should not be allowed to hinder the efforts of developing countries to provide affordable access to medicines.

The apex Indian organisations representing various industries are sincerely working towards ensuring a gainful transition with least disadvantage into the global economy. The government also has to strive to improve infrastructure and provide a facilitating environment for inducing acceleration in trade. Developed countries have been putting pressures on inclusion of non- trade issues such as labour standards, environment protection, human rights, rules on investment, competition policy in the WTO agreements.

This is because by asserting that particular developing countries are not observing and implementing the rules in regard to the non-trade issues so that the developed countries can ban the imports of some goods in their countries, as the USA has been trying to do so from time to time. We are against any inclusion of non-trade issues that are directed in the long run at enforcing protectionist measures, particularly against developing countries.

India’s Gain from WTO:

Now almost a decade has passed when India joined WTO from the very beginning in Jan. 1, 1995. India has benefitted from joining WTO, despite the failures of two ministerial level conferences at Seattle and Cancun. We explain below the gains India has achieved by joining WTO.

Exports and Imports:

According to the recent estimates. India’s exports have almost doubled in less than a decade. With exports going up from $26.33 billion in 1994-1995 when India joined WTO to $ 51.7 billion in 2002-03. Besides, India’s share in total world exports of goods and commercial services increased from 0.6 in 1995 to 0.86 in 2001 whereas its total world imports of goods and commercial services increased from 0.78 in 1995 to 0.99 per cent during the same period.

Exports of Textiles and Clothing:

According to a WTO agreement known as Multi- Fibre Agreement (MFA) entire quotas in textile and clothing trade will come to end from January 1, 2005. Till now WTO agreement has required the member countries to phase out their existing quotas by the Dec. 31, 2004. It has further restrained them from expanding the size of quotas annually.

These measures have helped India to increase its market access for its textile and clothing products. With effect from January 1, 2005, the entire textiles and clothing trade would get integrated into the multilateral trade framework of WTO.

According to recent report (Feb. 2004), after China, India is largest gainer from the end of quotas and the consequent free trade in textiles and clothing. It is estimated that export market of $500 billion in garments alone with employment potential of 30 million jobs will be up for grabs from which India can get a good share.

Five years ago, Indian economists feared the country’s fabrics sector would be steam­rollered by China. But recent reforms in the industry have given hope. India could see apparel exports rise between 40-100 per cent ($6.7 billion in 2001). A target of $50 billion in textile and clothing exports by 2010 is no longer a pipe dream.

Gain in Exports of Software Services:

Further, thanks to WTO agreement on free trade in services India has become a world leader in software services which are contributing a lot to foreign exchange earnings and employment generation for Indians.

A Good Deal of Earnings from BPO:

BPO (Business Processing Outsourcing Services) from USA and UK are coming to India which have enabled us to earn not only foreign exchange but also to generate a large number of employment opportunities for educated Indian youth. Recently, there is resentment in the USA against BPO to India and other countries because it is causing loss of jobs in the USA and UK. But BPO to India and other developing countries are in accordance with the comparative advantage principle and raises profits of American companies which on being used for further investment will generate more employment opportunities in the USA

India’s Demand from the Industrialized Countries about Agricultural Subsidies and Movement of Labour:

In its negotiating proposal, India has demanded substantial reduction in tariffs, elimination of trade-distorting domestic support and export subsidies in developed countries. The movement of professionals {i.e., labour) from developing countries is constrained by a number of factors such as lack of specific sectorial commitments, lack of mutual recognition of qualifications, lack of transparency in administration of visa regimes, discriminatory practices in use of Economic Needs Test and social security contributions. India has, therefore, sought liberalisation of movement of professionals through removal of these constraints and submitted a paper for discussion at the ongoing negotiations.

Failure of WTO Talks at Cancun:

From Sept. 10 to 14, 2003 trade ministers of developed and developing countries met for the next stage of talks on multilateral trading system. In an earlier meeting at Doha is Nov. 2001 ministers recognised the inequities of Uruguay Round of negotiations. It was expected that the developing countries would get a just and fair global trading system at the conclusion of Cancun meeting.

But these hopes were not fulfilled and Cancun meeting ended in a failure. At Cancun, a group of 21 developing countries led by India, Brazil and China frustrated the attempts of US-European Union Cambine to pressurize the developing countries to accept the agenda that suited them most and was against the interests of the developing countries.

Draft declaration prepared by WTO allowed the developed countries to maintain or keep domestic subsidies and support for their agriculture and farmers and avoided eliminating export subsidies and credit concessions on their exports, especially on farm products and textiles.

On the other hand, draft declaration sought even stiffer tariff cuts by developing countries. In this way, developing countries were badly treated with regard to market access of their products to the developed countries. All these were not acceptable to the developing countries including India.

African countries who are badly hit by the subsidies and domestic support on the farm products by the developed countries walked out of the meeting. As a result, Cancun meeting ended without adopting any declaration. The lesson from the failure of Cancun meeting is that unless the developed countries look beyond their own interests and tries to evolve multilateral trading system which is just and fair to the developing countries talks cannot succeed.