WTO The World Trade Organization (WTO) is the only global international organization dealing with the rules

of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the worlds trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business. Indias Commerce Minister Kamal Nath walked out of WTO meet in Geneva on June 30, 2006 and returned home. It was a well-orchestrated policy to let the West (all the leading industrialized nations) know that India and other developing countries (LDCs) are no longer a push over. The sticking point at this time has been the huge farm subsidies, which the West provides to its farming sector. Massive farm subsidies undercut the competitors and prevent the rest of the world from enjoying benefits of trade. This impasse will persist until the West works harder to level the playing field and help liberalize the trade. Geneva meet has ended. Both the developed countries as well as the LDCs (through a group called G-20) are internally busy to consolidate their respective position before the next ministerial meet. Failure to reach a deal by yearend will prevent the US and the EU, enjoying greater benefits of trade liberalization. Their industrial products, which is the other side of the trade off on farm subsidy cut, will continue to face import restrictions in the LDCs. It is a 149-member organization with Pascal Lamay as its head. It represents all the trading nations of the world, who import-export goods & services. Created on Jan1, 1995, it was considered the biggest reform in trade since WWII. Its predecessor, GATT (General Agreement on Tariff & Trade), had a tumultuous 47 years history. GATT made a beginning in 1948, and provided a framework for trade expansion vis--vis removing barriers on free movement of goods and services. It provided platform for 8 trade negotiations in its checkered history until 1994, the last trade negotiations the Uruguay Round, resulted in the creation of WTO. In each of these Rounds (high level negotiations), the West, mostly Europe, Japan and North America negotiated trade deals with themselves in mind. The developing world including India, China, most of Africa and Latin America were forgotten as backward and without any clout. For Example, the Kennedy Round of 1963 quadrupled the world trade. At that time India and China had not emerged and hence did not figure in the world trade talks. Tokyo Round of 1973-79 quadrupled the already quadrupled world trade in last 25 years. In each case tariffs and trade distorting subsidies were progressively reduced on industrial goods & services. The West enjoyed unprecedented prosperity. US & Japan were the biggest gainers, followed by the all the nations of the Europe. Poor countries stayed poor. Nobody spoke on their behalf, and they had no clout to make their presence felt. There are simple reasons for that. First, the poor countries had no money to compete in the international market with quality goods, second subsidies provided by the nations to encourage development after WWII made their products much cheaper. Hence a die was cast for poor to stay poor. In 1982, China burst on the international trade scene. In 2002, India became an upcoming star for the world to take note. Hence a new trade body

was needed to regulate and encourage trade. Hence at the Uruguay Round, a decision was taken to set up a new body (WTO) to manage the growing trade. Special Mention of Doha Round Doha Round deserves special attention, as it is the first trade related conference after GATT was re-incarnated into WTO. At a ministerial conference in Doha, Qatar, WTO member countries, 149 in all, agreed to launch new trade negotiations. This time it was different, India and China had emerged on the scene as major trading nations. Also the developing world was not going to sit around idly and watch as the West implement trade policies favoring them-selves. In short, developing countries made it clear that unless the developed world allowed them greater access to their markets, there will be no changes to the multilateral trading framework. A bunch of nations (G-20) spearheaded this policy with India & Brazil as its leaders. The G-20s approached the negotiations with the developed world with three main areas of unhappiness: Discriminatory tariffs on goods and services between developed world and the developing world as against tariffs they use between themselves. This prevented a level playing field for all the developing nations of the world. Farm subsidies, which the developed world gives to its farmers, distort the cost structure. Agricultural production in EU & USA is heavily subsidized. These subsidies have been in place for decades. Major beneficiaries of these subsidies are US corporate farmers, and French farm and processing sector in the EU. With these subsidies in place the developing world loses its advantage. Additionally farm imports from developing world are under heavy tariff, which effectively keeps these products out. A major irritant in the trade policies have been the textile exports. Quota system effectively killed any cotton textile business from prospering in the developing world. Luckily, the EU & US relented on these policies. As of last year this policy has been disbanded. Doha Round discussions began with this background. WTO intentions were good except these could not be translated into concrete policies. These irritants have resulted in the deadlock in negotiations. Brazil the most efficient agricultural products producer has concentrated its energies during Doha Ministerial discussions on reduction in farm subsidies in EU and US. India & Pakistan are concentrating on textiles and farm produce. Additional trade concessions on service sector have also been sought by India. The service sector is the key to Indias future as an economic power.

The Current Impasse and the Looming Time Table of 2006

The trade discussions take long-long time to make even a small headway. Ministers, who discuss at the meetings, revert back & forth on their position as their home governments like or dislike progress at the talks. The current inconclusive talks in Geneva were the continuance of earlier talks in Hong Kong. The latter were also inconclusive. Politically developing countries are unlikely to accept any formula on their industrial tariffs, without corresponding cuts by the developed countries in subsidies and tariffs. Anything less will be a political suicide for any political system in a democratic country. But there is a deadline looming. The present US President has been empowered by the US Congress to finish trade negotiations by middle of 2007 and present them with a trade deal, for an up or down vote. This fast track mechanism has actually simplified trade negotiation process with the worlds biggest trading nation i.e. US. In order for that to happen, virtually all trade discussions have to be completed by end of 2006. This deadline is driving all the current hectic activity. US being the most powerful of all the trading nations and with its currency as the basis of trade deal settlement is in the drivers seat. Agriculture is at the heart of this round of talks. Consider these few statistics: Agricultural trade is about $800 Billion worth worldwide. It is about 9% of the world total trade. Unfortunately it is the most protected sector. EU is the largest trader in agricultural products including internal trade between member countries. It exports $350 Billion worth of agricultural products (including internal trade) and imports about $380 Billion. US are distant second with $80 Billion in agricultural exports. The sticking point is amount of subsidies and tariffs to be cut by both EU & US. G-20 has urged EU to cut 54% of its tariffs on agricultural products and US to slash 75% of its agricultural subsidies. These are unacceptable to the EU & US. In return they have offered 39% reduction in tariffs and 53% reduction in subsidies. The above gap, in what the developing countries want and what the developed countries have offered has not changed one bit in last six months of negotiations, hence the angry walk out by the Indias Commerce Minister from the Geneva discussion. Although the Western media heralded it as an astringent Indian attitude yet the truth is otherwise. If no deal is reached and the US Congress deadline passes then this missed opportunity will not herald an end of the world trading system. Trade will continue as before. But its expansion may not be as dramatic as one would hope. Next opportunity may not arise for a decade or so. At that time, another Round of discussions will be initiated and US Congress may empower its president to give another opportunity to negotiate a fast rack trade treaty.

Success or Failure of these Talks

In macro terms, Indias Commerce Minister laid out the impact of these talks on India. He said that success would mean that India could hope to boost its growth from about 8% to 10-11% in five years. Failure could take away a percentage or two from its growth. Hence stakes for India are very high. Similar benefits will accrue for Brazil, Pakistan, and South Africa. Other smaller nations will enjoy benefits in varying degrees. For the developed world of EU, and US, there will be a great satisfaction with the opening up of the markets, which hitherto have been closed. Industrial activity in Europe & US will multiply. As the developing world exports more, they will import more of Wests industrial goods & services. Hence, benefits to both groupings are huge. World trade could see a multifold expansion in twenty years. World Bank has estimated that freeing trade of all barriers & subsidies, about 320 million people, living on $2 a day will be lifted out of the poverty line in about ten years. Other analysts have put a higher figure of 440 million. With that kind of possibilities, success at these negotiations is of great importance. Although, next ministerial discussions of WTO have not been scheduled yet both sides are busy re-evaluating their position. Soon they will meet again with upcoming deadline in mind. In any trade talks progress is slow. In these talks, the fundamentals have already been sorted out. It is the details, which are a contentious issue. Soon these will be sorted out too. Challenges Within the EU Community, which are hindering Trade Talks EU Commissioner holds the mandate to negotiate on behalf of the 25 member nations, but its hands are tied. The Common Agricultural Policy (CAP) of EU and its reform may present a big hurdle. EU also knows that in order to get a better access for its industrial goods, they have to give up something. None of the member nations are willing to give up anything. Hence it may cause split on national lines. France, a major agricultural products producer would veto any deal, which contains a significant subsidy cut. On the other hand Briton and Germany would prefer reduced tariffs worldwide for their industrial products. In short, there is unlikely be a deal in the agricultural sector without French being on board. They are unlikely to be onboard without private incentives to them from within the EU. So far nothing has happened. EU commissioner is shuttling between capitals looking for an opening to break the impasse. He has not succeeded so far. Is failure of Trade talks an Option? If the talks fail, credibility of WTO will at stake. Nobody will take it seriously anymore. Bilateral trade agreements between nations will proliferate. This will circumvent the whole concept of multi-lateral trade co-operation. A huge market opening opportunity will be missed and all that have been accomplished in prior discussions may or may not be salvaged. In the absence of a global instrument, trade dispute resolution may also suffer. Worst impact will be on the developing countries. Their chances of progress will be curtailed. All the above will reflect poorly on WTO.

Let us hope that these talks succeed. It is in the greater interest of developed and the developing countries that this impasse is broken. Next such opportunity may be a decade away. At that time new realities will have to be taken into consideration. Some of the developing countries like India & China may ask for bigger piece of action. The West again may refuse and impasse may continue. By then WTO will be irrelevant and would have to be re-incarnated into something else. In the preceding years bilateral trade agreements will take the place of multi-lateral agreements. These bilateral agreements will be harder to circumvent, should any time in future WTO agreement is negotiated. INDIA AND WTO It is not by accident, but by agreed intent that we have called these negotiations the Development Round and not a Market Access Round. Any outcome in this Round and at Hong Kong would need to pass this litmus test - development outcome test - and not ambition in market access alone as seen by some Members. In fact, I have been calling for a 'Development Audit' of the Uruguay Round, as a mean to assessing the developmental impact both positive & negative of the Uruguay Round. Such an audit would help us tremendously in avoiding pitfalls, if any, and building upon strengths. In Agriculture, it remains critical to our collective interests that the trade-distorting subsidies and protection provided by a few developed countries are eliminated so that a level playing field is established. Export subsidies of all forms must be eliminated by a definite date and trade distorting domestic support substantially reduced under the Doha Round, in order to provide market access opportunities to all and to deliver the development dimension. Agriculture supports and provides livelihood to the bulk of the farming community in the developing world. The viability and dynamism of our agriculture sector remains essential to secure success in our poverty alleviation strategies. We cannot accept proposals that would have the potential to disrupt our social and economic fabric. Tariffs remain the only instrument of protection and for safeguarding food and livelihood security and rural development. Appropriate policy space must be intrinsic to any agreement at Hong Kong and beyond. For India, satisfaction on appropriate number of Special Products and Special Safeguard Mechanism with price and volume triggers are absolutely essential. We have been mobilizing the G-33 on this. I have constantly maintained that we cannot establish any linkage between Sensitive Products & Special Products, either in selection or number or treatment.

Sensitive products are sensitive commercially; whereas special products are special because they deal with the food & livelihood security of millions of poor people. The first & foremost point we have been making is that Para 8 flexibilities (to set aside a certain percentage of our products and keep them insulated from tariff cuts) is a stand-alone provision, and cannot be traded off against less than full reciprocity in the tariff reductions formula. In non-agricultural market access (NAMA) negotiations, India seeks significant market access for developing countries through reduction in tariff peaks, tariff escalation, high tariffs and non-tariff barriers in the developed countries on products of our export interest. Here again any proposal for Swiss formula with a single coefficient for developing and developed countries alike is a non-starter. Developed countries are to undertake greater percentage reduction commitments through the formula. Para 4 is clear on this. We should determine the level of ambition in reduction percentage terms, and not in end-result terms. There is no mandate for harmonization. Under Services, progress in negotiations have been slower than we desire, but hold promise of optimistic results. 28 countries including India have submitted their Revised Offers. India filed its revised offer in August. India's Revised Offer is a substantial improvement over the Initial Offer. (11 sectors and 94 sub-sectors are covered in the Revised Offer, as opposed to 7 sectors and 47 sub-sectors in our Initial offer). Unfortunately, there is not much improvement in areas of interest to India viz. Movement of Natural Persons (Mode 4) and Cross Border Supply (Mode 1) in the offers of developed countries, but discussions in the Group co-chaired by India have been positive, and we expect a better result. Coupled with market access (Mode 4) commitments, it is equally important to have disciplines on domestic regulations. In particular, qualification requirements, licensing requirements and technical standards should not be such as to impede effective market access. In the light of the architecture of GATS, proposals based on quantitative targets on a onesize-fits-all basis disregards the ability and sensitivities of developing countries, and so we have opposed it. We have suggested qualitative bench marking, instead. Developing countries are a recognised repository of traditional knowledge. The traditional knowledge of their indigenous communities has been used for ages to provide cost effective cures for a number of ailments. Developing countries have, therefore, sought amendments in the TRIPS Agreement to prevent bio piracy of biological material and to prevent misappropriation of traditional knowledge. We are asking for disciplines on

disclosure of the source of origin of the biological resources and traditional knowledge along with securing prior informed consent and equitable benefit sharing. It is a matter of concern that developed countries have been attempting to introduce a new classification of 'advanced developing countries'. We have made it clear that any such divisive attempt can derail the round. The emergence of G-20, of which India is a founder member, and the lead role being played by it has been pivotal in the area of agriculture negotiations. India has been actively engaged in different formats (FIPs, G-4, G-20, G-33, Core Group on Services) in the negotiations and would continue to play a constructive role in pursuing its national interests. In fact, in the FIPs, India along with Brazil are representatives of the G-20. I have just come back from G-4 meeting on November 7 which India hosted at London and meeting of some key Ministers at Geneva. There are such wide gaps in the negotiating positions. Therefore, expectations for Hong Kong would need to be calibrated downwards. But this does not mean that the major milestone but all the same, a milestone, is on the way. It was never meant to be the final destination. In my assessment, another 6 months or so of negotiations would be required after Hong Kong in order to accomplish full modalities. The next few days are crucial in order to make progress. All efforts would need to be made to bridge the gaps in positions. The onus, however, remains on the developed countries to move and to meet the aspirations of developing countries. In my interaction with key Trade Ministers, I have made it very clear that July Framework was not up for re-negotiations and there was no question of it being reopened. India is willing to work with other countries with a view to delivering pro-development outcomes and balanced progress on all issues under negotiations.

Indian reform contributes to growth: reforms need to continue to achieve high growth and reduce poverty
The Indian economy has grown rapidly over the past decade, with real GDP growth averaging some 6% annually, in part due to the continued structural reform, including trade liberalization, according to a WTO Secretariat report on the trade policies and practices of India. Social indicators, such as poverty and infant mortality have also improved during the last ten years. In order to achieve further significant reductions in poverty, India is currently targeting higher real GDP growth of between 7% and 9% (compared with 5.4% expected for 2001/02); to meet this goal, it will be important, as stressed by the authorities, to continue, and even accelerate, the reform process and increase competition in the economy.

The WTO Secretariat report, along with the policy statement by the Government of India, will serve as a basis for the third Trade Policy Review (TPR) of India by the Trade Policy Review Body of the WTO on 19 and 21 June 2002. Recognizing the important linkages between trade and economic growth, the Government has simplified the tariff, eliminated quantitative restrictions on imports, and reduced export restrictions. It plans to further simplify and reduce the tariff. However, the level of protection through the tariff remains relatively high and the anti-export bias inherent in imports and other constraints still remains. To help counteract this anti-export bias, export promotion measures have gained in importance. The Government has recently announced a further increase in these measures and plans to continue reforms of the tariff and other taxes. Tariff and tax reform are also crucial to address the problem of high fiscal deficits, which have continue to grow despite efforts to reduce public spending. Moreover, with the customs tariff accounting for some 30% of net government tax revenue, further reform of the tariff may depend on major tax reform. The report notes that the authorities are firm in their view that improving the economic growth rate requires further structural reform. As restrictions on trade and competition have been reduced, constraints associated with infrastructure and regulatory bottlenecks have become increasingly evident and need to be addressed urgently both through regulatory reform and through increased investment. Despite further liberalization of the FDI regime, Indias record in attracting investment remains disappointing, with FDI accounting for some 1% of GDP. The government has also taken various steps to improve enforcement of intellectual property rights which should help to attract FDI. A major development since the previous Review was the removal of all import restrictions maintained for balance-of-payments reasons. Thus, the customs tariff has become the main form of border protection. There have been significant recent efforts to rationalize the tariff, but, with numerous exemptions based on end-use, it remains complex and applied tariffs, which averaged some 32% in 2001/02, remains relatively high. As a result of additional bindings taken by India in the WTO, the share of tariff lines that are bound has increased since the previous Review, from 67% to 72%. The average (final) bound rate is 50.6%, higher than the applied MFN rate; this gap provided ample scope for applied rates to be raised recently on a few agricultural products. While import licensing and tariff restrictions are generally declining, there appears to have been an increase in other border measures such as anti-dumping, with some 250 cases initiated since 1995. Internal reforms have concentrated on improving efficiency and competition in the economy. Thus, while industrial policy remains important, its scope seems to have been reduced significantly. In addition, since the previous review, there has been a reduction in the number of activities reserved for the public sector and for the small scale industry. The need for increased competition is being addressed by gradually reducing the degree of direct government involvement in economic activities, including through a programme to restructure and privatize state-owned companies. The privatization programme has thus far had limited success and must also be stepped up to address the fiscal deficit. In addition, price controls, currently maintained on several products including

fertilizers, petroleum products and in agriculture, add to the fiscal burden of subsidies. (implicit and explicit subsidies were estimated at some 14,5 % of GDP in the mid-1990s). Policy in the agriculture sector has been guided by domestic supply and self-sufficiency considerations. Thus, the sector is shielded through import and export controls, including tariffs, state trading, export restrictions and, until recently, import restrictions. The result of this policy has been a substantial increase in stocks to unsustainable levels and the costs associated with maintaining these stocks. In services, significant reforms have been pursued since the previous Review, especially in telecommunications, financial services and, to some extent, in infrastructure services, such as power and transport. Liberalization of telecommunication services has resulted in an increase in availability and a reduction in tariffs. The reduction in telecommunication tariffs is also likely to benefit the software sector, one of the major success stories in recent years. Efforts have also been made to address transportation and power shortages although with mixed results. Electricity, in particular, remains in short supply and constrained by the loss making state electricity boards (SEBs). The report concludes that Indias economic reform programme resulted in strong economic growth throughout the 1990s. The recent slowdown, although partly due to the overall slowdown in the world economy, also demonstrates the necessity of continuing these reform efforts. In particular, difficult decisions are required to redress the fiscal imbalance, by reducing subsidies, completing the process of tariff and tax reform, and stepping-up privatization of state-owned enterprises. CONCLUSION These are various details which explains how India is related with WTO is the only global international organization dealing with the rules of trade between nations.