In this article we will discuss about:- 1. Introduction to World Trade Organisation 2. Salient Features of WTO 3. Agreements and Liberalisation 4. WTO’s Hong Kong Declaration and Developing Countries.
Introduction to World Trade Organisation:
WTO started with 125 countries. But seven more States including China and Russia were admitted later on as members. Members range from the top four world trade powers—the United States, the European Union, Japan and Canada—to the increasingly influential emerging developing economies of Asia such as India and China to some of the world’s poorest countries, like Bangladesh, Guinea.
The objective of WTO agreements is to establish a multilateral trading system in order to promote free and fair trade among nations. Dunkel Act on which WTO has been founded is wedded to liberalisation of trade based on comparative costs.
Accordingly, this provides for a multilateral framework for trade not only in industrial and agricultural goods but also in services. It also seeks to protect trade related intellectual property rights (TRIPS). By committing the member countries to give Most Favoured Nation (MFN) treatment to all trading partners, it has sought to discourage bilateral trading so as to encourage multilateral trading system.
At present there are 148 member countries of WTO and includes both developed and developing countries of the world.
It is important to note a significant difference between GATT and WTO. Under GATT, a member country could lodge a trade complaint against any other member country. GATT investigated the matter to find out whether the complaint was genuine. However, if investigations by GATT found that complaint was valid, it has no power to enforce its decision.
As a result GATT’s findings were generally ignored by the offending country. However, under WTO, a country can file a trade complaint against another country of violating a WTO rule, its dispute redressal authority would investigate the matter and give its verdict within 6 months and its decision would be legally binding on the offending country to accept it and act accordingly. If the offending country continues to violate, the complainant will be legally entitled to retaliate. Besides, the country that found to be guilty of violating WTO rule, can be penalised by imposing restrictions on its exports.
WTO is officially defined as the legal and institutional foundation of the multilateral trade system. Unlike GATT, the WTO is a permanent organisation created by international treaty ratified by the governments and legislatures of member States. As the principal international body concerned with solving trade problems between countries and providing a forum for multilateral trade negotiations, it has global status similar to that of the International Monetary Fund and the World Bank.
But unlike them, it is not a United Nations agency although it has a ‘cooperative relationship’ with the United Nations. Its underlying documents are a General Agreement consisting of a 38-article code aimed at ensuring open and fair trade in goods, services, agricultural produce and textiles and 500 pages of specific agreements reached at the Uruguay Round.
Salient Features of WTO:
The following fundamental principles have been provided for the functioning of WTO as a multiple trading system:
(a) Market Access Commitment:
WTO agreements which seek to establish multilateral trading system require the member countries to undertake market access commitment on reciprocity basis. In fact, market access is ensured by abolishing non-tariff barriers as well as by reducing tariffs. The understanding on market access requires that member countries will cut tariffs on industrial goods and agricultural products by about 37 per cent.
In order to provide market access for the products of developing countries to the USA, USA agreed to cut down farm subsidies. The developing countries are also required to reduce agricultural subsidies to the level of 10 per cent of the value of agricultural produce.
In the area of trade in services, market access has been ensured by giving foreign service suppliers the same treatment as domestic service suppliers.
(b) Decision at the Ministerial Level Meeting:
Another feature of WTO agreement is that it has upgraded decision-making at the ministerial level. Important decisions regarding trade related matters are to be taken at the Ministerial level meetings. Ministerial level meetings have now been incorporated in the legal structure of WTO.
(c) Wider Range of Issues:
Another important feature of WTO is that it will deal with not only issues and disputes relating to trade in goods but also the whole range of issues concerning trade in services and intellectual property rights.
(d) Multilateral Trading System:
The most important features of WTO is that it seeks to establish just and fair multilateral system of international trade wherein the developed countries, the developing countries, and the least developing countries all have equal opportunities for market access of their products in foreign countries and wherein in discriminatory trade barriers and unjust Government support to exports by different countries have to be eliminated.
WTO Agreements and Liberalisation:
We discuss below various WTO agreements which seek to promote liberalisation of trade:
(1) Liberalisation of trade in manufactures.
(2) Liberalisation of agricultural trade
(3) General Agreement on trade in services (GATS)
(4) Trade related Intellectual Property Rights (TRIPS)
(5) Trade related Investment Measures (TRIMS).
(1) Liberalisation of Trade in Manufactures- Agreement on Tariff Bindings and Tariff Reduction:
The main agreements with regard to trade liberalisation in manufactures are – Firstly, the provision for expansion of tariff bindings which prevent the developed countries from increasing tariff rates in future beyond a particular level. Tariff bindings cover 99 per cent of imports. Secondly, the agreement provides for reduction in tariff rates by the developed countries by 40 per cent from 6.2 to 3.7 per cent. Thirdly, the agreement provides for expansion of duty-free access from 20 to 43 per cent of their imports by the developed countries.
It is however important to note that gain to the developing countries from tariff reduction by the developed countries is not very significant. The average reduction of tariffs on their imports to the developed countries is estimated at 30 per cent and in case of labour-intensive industrial products such as textiles, clothing, leather goods and certain processed primary products such as fish products which are regarded as sensitive, the reduction in tariffs is less than even the average reduction of 30 per cent.
On the other hand, the offers of tariff cuts on imports of manufactures by the developing countries are estimated at about one-third of the average tariff reduction by the whole world. The expansion of tariff bindings which prevent the developing countries from increasing tariffs in future represent significant gains for the developed countries.
(2) Liberalisation of Agricultural Trade:
To achieve liberalisation of agricultural trade, agreement on agriculture was also reached during multinational trade negotiations resulting in the establishment of WTO in 1995. Agreement on agriculture was highly significant as agriculture was a highly protected sector in the developed countries. This distorted world prices of agricultural products as it prevented the developing countries to realise the benefits of their comparative advantage. As a result, exports of developing countries could not increase significantly.
Agreement on agriculture includes the following conditions:
It was agreed that existing non-tariff barriers imposed by the member countries would be replaced by suitable tariffs which would provide almost the same level of protection. This is called tariffication.
(b) Tariff Bindings:
The agreement on agriculture also required that developed countries would reduce their tariff bindings by an average of 36 per cent within six years from 1995. The developing countries were required to reduce tariffs by an average 24 per cent over a period of 10 years, while the least developed countries are not required to make any commitment regarding reduction of tariffs on their farm products.
The developing countries were permitted to indicate only their maximum bindings. For example, India declared maximum bindings of 100 per cent on farm products and 300 per cent on edible oils.
(c) Subsidies and Domestic Support Policies:
Reduction in agricultural subsidies and domestic support prices is another important aspect of agreement on agriculture. The developed countries such as USA and the countries of East European Union (EU) maintain high level of agricultural subsidies and other domestic support programmes to protect their farmers and prevent imports from the developing countries. As a result, exports of farm products of the developing countries suffer a lot. WTO agreement on agriculture requires that subsidies on farm products should not exceed 10 per cent of the value of agricultural production.
Besides, it was agreed that product-specific subsidies, non-product specific subsidies on fertilizers, irrigation, power and seeds etc. were also not to exceed 10 per cent of the value of agricultural output. Agreement on agriculture also provided that countries with closed agricultural markets will have to import agricultural commodities to the extent of 3 per cent of their domestic consumption, going up to 5 per cent over six years. However, developing countries which were facing balance of payments problems were exempted from this rule of compulsory imports.
Agreement on agriculture also provides that countries are free either to give patents on agricultural products or to evolve an effective sui generis (i.e. special) system of protection for plant breeder rights. It implies freedom of multiplication and exchange of indigenously produced seeds or plants in the country. In other words, the farmers are free to retain seeds from their own harvests for their uses and exchange with each other.
The only exception is seeds evolved genetically through the tools of high-tech biotechnology. The patent fee would be payable if the seed or plant varieties bought are genetically superior to and more productive than the local varieties. Thus, the farmers will have to pay a patent fee on branded seeds or plant varieties imported from developed countries. The commercial sale of such seeds would be affected by patents.
(3) GATS (General Agreement on Trade in Services):
The General Agreement on Trade in Services (GATS) has been one of the major achievements of Uruguay Round of negotiations which now forms part of WTO legal framework. GATS cover all service sectors including financial services, telecommunications, transport, tourism, audio-visual and professional services. GATS require some basic obligations to be fulfilled by all member countries of WTO with regard to international trade in services.
GATS applies to services provided by service suppliers of one country and sold to consumers of another country (for example, tourism). It also applies to services provided by the commercial presence of a supplier of one country in the territory of another (for example, bank of a country providing banking service in another country). It is equally applicable to services supplied by companies of one country in the territory of another. However, GATS shall not cover services provided by the government which are not supplied on a commercial basis.
GATS require countries to provide most favoured nation treatment (MFN) to all member countries. It implies that equally favourable treatment is to be accorded to service suppliers of all member foreign countries. GATS also require that member countries should have transparency in their trade in services.
This implies that each country should promptly publish all its relevant law and regulations pertaining to services including international agreements pertaining to trade in services to which the country is a signatory. Besides, each member country shall provide all information sought by any other member country relating to any service covered by GATS. Further, the countries are required to accord Foreign Service suppliers the same treatment as domestic service suppliers.
The countries may be exempted from GATS if they face balance of payments difficulties. They may also be exempted from GATS for national security reason as well as for purposes of protecting public order. The GATS requires that the countries would provide market access to Foreign Service suppliers.
Hence, they would not impose restrictions on the number of service suppliers, total value of service transactions, the total number of service operations, joint ventures through which service may be supplied and the participation of foreign capital. The GATS has excluded labour movement from its purview. It allows countries to apply immigration laws to regulate the entry of persons into their territories. Countries are specifically allowed to apply visa requirements selectively to some countries and not to others.
(4) TRIPS (Trade Related Intellectual Property Rights) Agreement:
One of the most controversial agreements of Uruguay Round of negotiations relates to Trade- Related Intellectual Property Rights or briefly known as TRIPS. The agreement regarding TRIPS requires member countries to provide patent protection to all products or processes in all fields of technology.
This protection is granted subject to the following three conditions:
(1) The product or the process is a new one
(2) It contains an inventive step
(3) It is capable of industrial application for 20 years from the grant of the patent.
TRIPS agreement covers the following seven intellectual properties:
(ii) Copyrights and other related rights.
(iii) Geographical indications.
(iv) Industrial designs.
(vi) Layout designs of integrated circuits.
(vii) Undisclosed information including trade secrets.
Patents shall be available without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced. The patent-holder would enjoy exclusive marketing rights for a particular period. Anybody else seeking to manufacture and sell the product would have to establish that there has been no violation of the patent-holder’s rights. The term of patent under the new regime would be 20 years from the date of the filling of the application.
Since the patent would be available for products or processes, it would be possible in chemical- based products like drugs and pharmaceuticals, agro-chemicals, alloys and food products to take patents for new products for 20 years and process patents thereafter for another 20 years. The countries which do not have product patent in certain areas (in India, agriculture and horticulture, technologies relating to atomic energy and chemical-based products like chemicals, alloys, drugs and pharmaceuticals, agro-chemicals, food products and so on are exempt from product patents) are given 10 years transition period for the introduction of product patents.
The countries are free to give patents or adopt an effective sui generis system of protection for plant breeder rights enshrined in the International Union for Protection of New Plant Varieties (IUPOV) convention.
A period of five years was given to implement the provisions of the TRIPS agreement. In respect of copyrights and related rights India is a signatory to the Berne convention. Likewise, in respect of layout designs and integrated circuits India is signatory to Washington Treaty whose main obligations have also been incorporated in the TRIPS.
TRIMS (Trade related Investment Measures) Agreement:
TRIMS agreement refers to conditions or restrictions imposed on foreign investors. This agreement requires that investment regulations by member countries have to give same treatment to domestic products and imports. The TRIMS agreement specifically forbids imposing restrictions on operations of an enterprise which result in protecting domestic products and making imports disadvantageous. The foreign trade related restrictions on investment by foreign enterprises were generally imposed by developing countries including India.
The following conditions which favour domestic production were prohibited under TRIMS agreement:
1. Local content requirement:
That is, foreign enterprises must use a certain amount of locally produced inputs in production of products.
2. Trade balancing requirement:
That is, imports by a foreign enterprise shall not exceed a certain proportion of exports by it.
3. Trade and foreign exchange balancing requirements.
4. Domestic sales requirement:
This requires an enterprise to sell a certain proportion of its output locally.
However, it was agreed that subsidies applicable solely to domestic enterprises and government procurement policy in favour of domestic producers will not violate the TRIMS agreement. Thus, under TRIMS agreement, investment regulations have to accord same treatment to domestic products and imports. The TRIMS agreement requires removal of quantitative restrictions on imports and exports. However, exemptions are allowed if a country is suffering from balance of payments problems.
The industrialised countries were required to eliminate conditions covered under TRIMS by July 1, 1997. Developing countries were required to do so by 2000 and least developed countries were required to eliminate them by 2002.
India notified the TRIMS required by it before 2000. It notified two TRIMS conditions – (1) Relating to local content requirements in the production of certain pharmaceutical products and (2) Dividend balancing requirements in the case of investment in 22 categories of consumer items. These were to be eliminated by 1-1-2000. The developing countries, including India, requested for extension of transition period for the elimination of the notified TRIMS. In view of the failures of the Seattle Ministerial Conference and Cancun conference no final decision was taken on this request of the developing countries.
WTO’s Hong Kong Declaration and Developing Countries:
After failures at Seattle and Cancun, the ministerial meeting in Hong Kong in December 2005 negotiated trade liberalisation to conclude Doha Round on Development. In Nov. 2001 in the Ministerial meeting at Doha the developed countries (the US and EU) and developing countries, it was agreed to start new round of talks to promote development through trade liberalisation, hence the name ‘Doha Round on Development’. The two successive ministerial meetings at Seattle and Cancun failed to arrive at an agreement acceptable to the LDCs and developing countries.
It may be noted that Uruguay Round of 1994 resulted in setting up of WTO in Jan. 1995. It may be further noted that the agenda of Uruguay Round as well as its outcome discriminated against developing countries. The trade negotiations of Doha Round are meant to remove this discrimination against the developing countries. During the negotiations developed countries have been raising irrelevant issues so as to protect their agriculture and textiles industry through tariffs and non-tariff barriers (NTB) so as to prevent free and fair trade from the viewpoint of developing countries.
On the other hand, at the conclusion of Uruguay Round, the developed countries succeeded in extracting an agreement regarding the inclusion of services and intellectual property rights – the two issues which concern them most. In return for this agreement on services and intellectual property rights, they agreed to eliminate over a period of 10 years high tariff and non-tariff barriers on textiles, agricultural products, sugar- the products which are of special interest for developing countries.
However, the developed countries did not fulfill promise on one protest or the other. Commenting on this duplicity on the part of developed countries, Stiglitz writes, “When the Uruguay Round began there was a grand bargain to expand the trade agenda to include services and intellectual property rights—the two issues which are of particular concern to developed countries. In return developed countries were to make major concessions on agriculture—the livelihood of the vast majority of people in developing countries — and textile quota, the only trade area (besides sugar) in which quantitative restrictions persist. In the end developed countries got what they wanted, and developing countries were told to be patient – eventually the developed countries would fulfill their part of the deal. Even as the rich countries urged developing countries to make quick adjustments, they claimed that they needed a decade to make the transition to a quota-free textile regime. In truth they were buying time; they did nothing for a decade and when the quota finally ended last January (i.e., Jan. 2005) they pleaded they were still not prepared and thus concluded a three-year extension with China.”
Hong Kong Conference was meant to negotiate trade issues relating to agriculture, non-agriculture services and intellectual property rights so as to achieve trade liberalisation for promoting economic development. The problem with regard to agriculture is that the developed countries, the US and EU, provide export subsidies and also give financial support on a large scale to their agriculture resulting in cheapening of their agricultural products.
This distorts trade between the countries as it prevents market access in developed countries for products of developing countries which have comparative advantage in their production. Developing countries discovered that their gains from trade with developed countries were far less than they were made out to be and LDCs (Least Developed Countries) felt that they were actually worse off by agreeing in Uruguay Round of talks resulting m establishment WTO. Thus developed countries lost their credibility.
With the above background the Ministerial Conference at Hong Kong adopted a declaration which called for conclusion in 2006 of trade negotiations launched at Doha in Nov. 2001. This Hong Kong declaration established time frame and targets in specific areas of trade liberalisation.
The following agreement which addresses some of the concerns of developing countries related to agriculture was reached:
1. First, it was resolved to complete Doha Round on Development in 2006 and conclude negotiations for liberalisation of trade between members of WTO.
2. Elimination of Agricultural Export Subsidies:
The agreement was reached in Hong Kong that export subsidies given by the developed countries will be eliminated by the year 2013 in a phased manner. While the earlier proposal was to phase these export subsidies by 2010, the EU, the largest provider of export subsidies, sought a longer phase-out period. Thus, the agreed end-date of 2013 gives the EU a level of comfort of phasing out its export subsidies as a part of its next phase of reforms of the common agricultural policy (CAP).
This is an achievement of the developing countries as it was contended by its earlier Trade Commissioner of WTO, Pascal Lamy, that Doha declaration had not mandated elimination of export subsidies in the developed countries. It may be noted further that under the agreement developing countries like India will continue to have the right to provide marketing and transport subsidies on agricultural exports for 5 years beyond the date for elimination of all forms of subsidies.
To increase market access in the developed countries for the agricultural products of developing countries, the Hong Kong declaration has agreed to banding approach suggested by the group G-20 of developing countries, According to this approach, agricultural tariffs have been put in four bands ranging from the lower to the high level, with the provision that tariff in the higher band will be subject to deeper cuts.
The extent of cut in agricultural tariffs in each band is yet to be agreed upon in future negotiations. The higher cuts in tariffs in the higher bands will greatly bring down the agricultural tariffs of the developed countries and will therefore improve market access for agricultural exports of the developing countries in the developed industrialised economies. However, it will also mean substantial reduction in agricultural tariffs of developing countries such as India who have higher tariff bindings. India’s tariff bindings for agricultural products are in the range of 100 to 150 per cent and will therefore require reduction of about 35 per cent which is quite large.
However, in the Hong Kong declaration, the developing countries have been provided some special safeguards in connection with the cuts in agricultural tariffs. Firstly, the developing countries have been given the flexibility to self-designate an appropriate number of tariff lines as special products (SPs). However, the self-designation of a number of tariff lines as special products will require the satisfaction of some criteria such as needs of food security, livelihood security and rural development.
Secondly, under Hong Kong agreement on agriculture (AoA) the developing countries were also entitled to adopt Special Safeguard Mechanism (SSM) based on import quantities and price triggers. This means under special safeguard mechanism, developing countries can raise their tariff on imports of agricultural products in the event of a sudden increase in imports or fall in prices of imports. However, they are not allowed to reintroduce quantitative restrictions (QRs) which both the developed and developing countries have already eliminated.
Domestic Support for Agriculture:
In Hong Kong declaration developed countries agreed to the proposal of G-20 (i.e., the group of developing countries including India and Brazil) for reduction of trade-distorting agricultural subsidies with higher linear cuts in higher bands. However, the extent of reduction in these subsidies was left for future negotiations. It may be noted that Blue Box and Green Box agricultural subsidies have been excluded from the scope of reduction. But there is a provision for review of the criteria of the Green Box subsidies in which most of the EU domestic subsidies are included.
In Doha Round on Development it was agreed to reduce the minimum level of support (de minimis) to agriculture allowed to be exempted from reduction for both developed and developing countries. Developing countries were entitled to a 10 per cent of the value of total production for providing domestic support to agriculture. In Hong Kong it was agreed that those developing countries whose domestic support to agriculture was below 10 per cent of the value of production and therefore no commitment to reduce them will be exempt from reductions in de minimis as well as overall trade-distorting agricultural subsidies.
Under the Hong Kong agreement export subsidies on cotton will be eliminated by developed countries in 2006 and trade-distorting domestic subsidies on agricultural products were to be reduced drastically over a shorter period of time.
Non-Agricultural Market Access (NAMA):
The Hong Kong declaration provided for the reduction or elimination of tariffs including peak levels of tariffs, high levels of tariffs and tariff escalation on non-agricultural goods, particularly on the products of exports which are of great interest for the developing countries. In this context of market access for non-agricultural products it has been agreed to apply Swiss formula. According to this formula, deeper cuts in tariff rates on a line-by-line basis have to be made by countries levying higher tariffs. How larger will be the cut in tariff levels will depend on the coefficients to be agreed.
However, in Hong Kong declaration the provision for special and differential treatment (S&DT) and less than full reciprocity for developing countries had been included. According to this provision, a certain proportion of tariff lines of the developing countries may be subjected to tariff cuts lower than that permitted by applying Swiss formula and a certain percentage of the tariff lines of these countries may be kept unbound (that is, without any binding for tariff reduction).
Thus flexibilities granted under S&DT include the longer implementation period as well as applying less than Swiss formula cuts or no cuts for a specified list of tariff lines as unbound. These have been declared as an integral part of the modalities for negotiations under NAMA. On the sectoral initiatives, India and most of the developing countries have emphasized that formula approach should be the main modality for negotiations and sectoral initiative can only be a voluntary exercise.
In the Hong Kong declaration it was also decided to achieve a higher level of liberalisation of trade in services and towards that negotiations would be intensified. New date lines were fixed for submission of revised offer and draft schedules of commitments by the member countries. These negotiations on trade in services will be conducted in accordance with principle of GATS and the Guidelines and Procedures for the Negotiations on Trade in Services. According to GATS and these guidelines, the developing countries were required to liberalise the service sectors and modes of supply of their own choice and determine the extent of liberalisation.
India is particularly concerned with liberalisation of trade in services as it wants to increase its access to the markets of developed countries for the services such as ITES (Information Technology Enabled Services) in which it has a comparative advantage. In services, India submitted its revised offer in August 2005. Eleven service sectors and 94 sub-sectors were covered in the revised offer.
It is thus clear that with regard to services much depends on revised services offer by the member countries and the future negotiations.
Market Access for LDCs:
An important feature of Hong Kong declaration is that it was decided to provide duty-free and quota-free market access for all LDCs (Least Developed Countries) products to all developed countries. The developing countries which are in a position to provide such access to LDCs are expected to do so.
Agreement on TRIPS:
On December 6, 2005, the General Council of WTO adopted the amendment to the TRIPS to address public health concerns of developing countries which was reaffirmed by Hong Kong Declaration. This amendment enables manufacturing and export of pharmaceutical products under compulsory license to countries with limited or no manufacturing capacities in the pharmaceutical sectors. On Trips, CBD (Convention of Bio-Diversity) on relationship and protection of traditional knowledge, India along with a number of other developing countries which are rich in bio-diversity proposed that the Trips Agreement of WTO should be amended to provide for – (i) disclosure of source of the traditional knowledge used in the invention; (ii) disclosure of evidence of prior informed consent under the relevant national regime; and (iii) disclosure of evidence of benefit sharing under the relevant national regime. With this amendment the use of India’s natural herbs such as Neem, Arjuna, Ashavagandha and others for preparing medicines and also certain plant varieties such as Basmati rice will get protection from the use by multinational companies.
WTO Negotiations and India:
In Hong Kong India made some modest gains in the field of agriculture, industrial products and TRIPS. A good number of issues concerning liberalisation of global trade were yet to be resolved. However, much depends on future negotiations during which several issues, particularly regarding market access for industrial goods and services were to be resolved. Whether in these future negotiations, developed countries will adopt an attitude which ensures fair and free trade from the viewpoint of LDCs and developing countries. Already the developed countries propose to link lower farm subsidies by them to greater market access for non-agricultural goods in the developing countries.
This is against the letter and spirit of Hong Kong Declaration. And it is these kinds of tactics of the developed countries that Joseph Stiglitz predicted and thought that due to this Doha Round on Development will collapse. This issue and other ones were to be resolved in a meeting of group G-6 to which India along with Brazil had been invited. The other members invited in this meeting of G-6 were the US, European Union (EU), Japan and Australia.
After the suspension in negotiations during July 2006 due to the wide differences in the positions of WTO members, especially on agricultural domestic support and market access, there was a resumption of negotiations on Nov. 16, 2006, and again on Feb. 7, 2007, in Geneva on the suggestions that the framework of negotiations, inclusiveness and the progress made so far be preserved and attempt should be made to arrive at an outcome that strikes a balance between development of the developing countries and interests of the developed countries. However, due to difference in the positions of USA and European Union on the one hand and the developing countries including India, China, Brazil on the other no final agreement could be reached.
During the negotiations while safeguarding the interests of India’s poor agricultural producers remains paramount for India, making gains in services negotiations where it is a demander is no less important. In the case of industrial tariffs, India’s growth and development concerns need to be addressed along with other developing countries.
In our view it must be made clear to the developed countries that the artificiality of prices arising out of the substantial domestic agricultural subsidies provided by the developed countries must be dealt with firmly if we are to make any headway towards fair trade in agriculture. Developing countries have a right to use the flexibilities provided in Hong Kong declaration to protect their small and medium enterprises and their infant industries like automobiles. Therefore, in future trade negotiations no compromise is made on flexibilities in connection with agriculture and industrial products granted to the developing countries in Hong Kong declaration.
Trade Facilitation Agreement at Doha Round Negotiations:
An important issue of Doha Round Negotiations relates to the agreement on trade facilitation for easing of customs procedures and movement of goods between countries. A draft of agreement on trade facilitation was worked out by WTO members on December 14, 2009. The draft text was revised six times in 2010 through discussions in the meetings of negotiating group on trade facilitation.
India has been actively participating in these meetings and has given a few proposals regarding trade facilitations on which agreement could not be reached. Developing countries do not want to change their trade procedures but expect others to do so. Least developed countries, in general, do not want to undertake any binding commitment.
Capacity constraint and lack of resources are two major factors that prevent developing countries (and least developed countries) from taking on binding commitment regarding trade facilitation. However, there were general indications that developed countries might not invest in building infrastructure in these countries, although the July 2004 Framework Agreement clearly linked commitments by developing countries to provide support and assistance for infrastructure development by the developed countries. It is important that this linkage is respected, especially by the developed countries, before any agreement on trade facilitation is finalised.
Before final agreement on trade facilitation is reached, it needs a solution where it does not have to compromise on its minimum support price (MSP) for agricultural products which is the most critical requirement for India’s food security policy.
Therefore, India is pushing for a change in rules to ensure its grain document programme and minimum support price for rice and wheat are not affected by subsidy cap of 10 per cent of the value of production which has been fixed by WTO.
The exemption from this 10 per cent of the value of production of these crops is valid only up to 2017. That is, beyond 2017, the value of India’s procurement of these products at the minimum support prices would not exceed this ceiling of 10 per cent of the value of production and therefore this would affect India’s food security programme as with future rise in procurement prices would breach this 10 per cent subsidy cap. This violation would invite penalty on India under WTO agreement. Therefore, India is insisting that its food security concerns must be addressed before international agreement on easing of trade procedures is reached.
Negotiations on trade facilitation went on for years. This trade facilitation will help large exporters such as the US, EU and China. In Bali in 2013 WTO members agreed to finalise the trade facilitation agreement by July 31, 2014. Unfortunately despite food security concerns having not been addressed along with finalising trade facilitation agreement, India’s then UPA government agreed for trade signing this agreement by July 31, 2014.
When the Negotiating Group (which included India) meeting was held in the last week of July 2014, there was NDA government which refused to sign the agreement saying that its food security concern should be first addressed. As a result, there was deadlock in negotiations on trade facilitation agreement.