Table of Contents

1. About WTO..2 2. Foundations of WTO..3 3. Principles of WTO ..5 4. Arenas in which WTO operates.11 5. India and the WTO ..14 6. Marketing implications for India.22

7.

WTO-some recent problems..24

9. Bibliography26

About WTO
The World Trade Organisation or WTO was born in 1995. Today with more than 132 members WTO is the new look face of what is previously known as GATT. The World Trade Organization (WTO) is the only international body dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world's trading nations. These documents provide the legal ground-rules for international commerce. They are essentially contracts, binding governments to keep their trade policies within agreed limits. Although negotiated and signed by governments, the goal is to help producers of goods and services, exporters, and importers conduct their business.

Three main purposes

The system's overriding purpose is to help trade flow as freely as possible - so long as there are no undesirable side effects. That partly means removing obstacles. It also means ensuring that individuals, companies and governments know what the trade rules are around the world are and giving them the confidence that there will be no sudden changes of policy. In other words, the rules have to be transparent and predictable. Because the agreements are drafted and signed by the community of trading nations, often after considerable debate and controversy, one of the WTO's most important functions is to serve as a forum for trade negotiations. A third important side to the WTO's work is dispute settlement. Trade relations often involve conflicting interests. Contracts and agreements, including those painstakingly negotiated in the WTO system, often need interpreting. The most

harmonious way to settle these differences is through some neutral procedure based on an agreed legal foundation. That is the purpose behind the dispute settlement process written into the WTO agreements. At the heart of the system known as the multilateral trading system are the WTOs agreements, negotiated and signed by a large majority of the worlds trading nations, and ratified in their parliaments. These agreements are the legal ground-rules for international commerce. Essentially, they are contracts, guaranteeing member countries important trade rights. They also bind governments to keep their trade policies within agreed limits to everybodys benefit.

Foundation of WTO
The WTO is the embodiment of the Uruguay Round results and the successor to the General Agreement on Tariffs and Trade. Many countries of the world are signatories to the General Agreement on Tariffs and Trade or GATT, now known as the World Trade Organisation since 1995 whereby member countries agree to exchange most-favored-nation customs treatment. The General Agreement on Tariffs and Trade came into force on January 1, 1948 (GATT) The first round of GATT tariff negotiations at Geneva in 1947 involved more than one hundred bilateral negotiations and the results were consolidated into a single comprehensive annex to the Agreement, divided into schedules. These schedules covered some 45,000 separate tariff items. Subsequent rounds of tariff negotiations at Annecy in 1949, at Torquay in 195051, at Geneva in 1956 and again in 1960-61, and most recently in Tokyo, Uruguay, and Switzerland have extended these concessions to many other items

and have encouraged more countries to join the GATT. At present GATT membership covers more than 132 contracting parties. Under the General Agreement on Tariffs and Trade or GATT, now taken over by WTO since 1995, World Trade Organization with more than 132 member countries are prohibited from using import quotas. However, some exceptions are allowed, such as for agricultural and fisheries products when such quotas are non-discriminatory between one supplying country and another. Now taken over by WTO since 1995 (as well as assuring most-favored -nation treatment among the contracting parties), provides for scheduled tariff concessions and lays down rules and regulations to govern the conduct of international trade. WTO and GATT are not the same The WTO is GATT plus a lot more. GATT (the institution) was small and provisional, and not even recognized in law as international organization. It has now been replaced by the World Trade Organization. GATT (the agreement) has been amended and incorporated into the new WTO Agreements. GATT deals only with trade in goods. The WTO Agreements now cover services and intellectual property as well. Some basic differences are: WTO agreement upgrades the GATT to the ministerial level. The GATT of the past worked in narrow confines of tariffs and tariff-cutting formulae and the issues and disputes arising out of them. But the new agreement would raise it to the political level. Ministerial meetings would be embedded in the legal structure of the WTO. The amendment procedure provided in the WTO agreement will greatly facilitate the process of bringing new issues within its competence.

Principles of WTO
Multilateral trading system i.e. the system operated by the WTO. Most nations - including almost all the main trading nations - are members of the system. But some are not, and that is why the word "multilateral" is used, instead of "global" or "world", to describe the system. In WTO affairs, the word has an additional important meaning. Here, "Multilateral" refers to activities on a global or near-global level (in particular among all WTO members). It contrasts with actions taken regionally or by other smaller groups of countries. (This is different from the common use of the word in other areas of international relations where, for example, a "multilateral" security arrangement can be regional.)

The WTO agreements are lengthy and complex because they are legal texts covering a wide range of activities. They deal with agriculture, textiles and clothing, banking, telecommunications, government purchases, industrial standards, food sanitation regulations, intellectual property, and much more. But a number of simple, fundamental principles run throughout all of these documents. These principles are the foundation of the multilateral trading system.

The principles
The trading system should be without discrimination - a country should not discriminate between its trading partners (they are all, equally, granted "mostFavoured-nation" or MFN status); and it should not discriminate between its own and foreign products, services or nationals (they are given "national treatment"). It would be then, Freer - with barriers coming down through negotiation

Predictable - foreign companies, investors and governments should be confident that trade barriers (including tariffs, non-tariff barriers and other measures) should not be raised arbitrarily; more and more tariff rates and market-opening commitments are "bound" in the WTO. More competitive - by discouraging "unfair" practices such as export subsidies and dumping products at below cost to gain market share. More beneficial for less developed countries - by giving them more time to adjust, greater flexibility, and special privileges.

Trade without discrimination

1. Most-Favoured-nation (MFN): treating other people equally Under the WTO Agreements, countries cannot normally discriminate between their trading partners. Grant someone a special favor (such as a lower customs duty rate for one of his or her products) and you have to do the same for all other WTO members. This principle is known as most-Favoured-nation (MFN) treatment). Some exceptions are allowed. For example, countries within a region can set up a free trade agreement that does not apply to goods from outside the group. Or a country can raise barriers against products from specific countries that are considered to be traded unfairly. And in services, countries are allowed, in limited circumstances, to discriminate. But the agreements only permit these exceptions under strict conditions. In general, MFN means that every time a country lowers a trade barrier or opens up a market, it has to do so for the same goods or services from all its trading partners - whether rich or poor, weak or strong. 2. National treatment: treating foreigners and locals equally Imported and locally produced goods should be treated equally - at least after the foreign goods have entered the market. The same should apply to foreign and

domestic services and to foreign and local trademarks, copyrights and patents. This principle of "national treatment" (giving others the same treatment as one's own nationals) is also found in all the three main WTO agreements. National treatment only applies once a product, service or item of intellectual property has entered the market. Therefore, charging customs duty on an import is not a violation of national treatment even if locally produced products are not charged an equivalent tax.

3. Freer trade: gradually, through negotiation Lowering trade barriers is one of the most obvious means of encouraging trade. The barriers concerned include customs duties (or tariffs) and measures such as import bans or quotas that restrict quantities selectively. From time to time other issues such as red tape and exchange rate policies have also been discussed. Since GATT's creation in 1947-48 there have been eight rounds of trade negotiations. At first these focused on lowering tariffs (customs duties) on imported goods. As a result of the negotiations, by the late 1980s industrial countries' tariff rates on industrial goods had fallen steadily to about 6.3%. But by the 1980s, the negotiations had expanded to cover non-tariff barriers on goods, and to the new areas such as services and intellectual property. Opening markets can be beneficial, but it also requires adjustment. The WTO agreements allow countries to introduce changes gradually, through "progressive liberalization". Developing countries are usually given longer to fulfil their obligations.

4.Predictability: through binding

Sometimes, promising not to raise a trade barrier can be as important as lowering one, because the promise gives businesses a clearer view of their future opportunities. With stability and predictability, investment is encouraged, jobs are created and consumers can fully enjoy the benefits of competition -

choice and lower prices. The multilateral trading system is an attempt by governments to make the business environment stable and predictable. In the WTO, when countries agree to open their markets for goods or services, they "bind" their commitments. For goods, these bindings amount to ceilings on customs tariff rates. Sometimes countries tax imports at rates that are lower than the bound rates. Frequently this is the case in developing countries. In developed countries the rates actually charged and the bound rates tend to be the same. A country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade. The system tries to improve predictability and stability in other ways as well. One way is to discourage the use of quotas and other measures used to set limits on quantities of imports - administering quotas can lead to more red-tape and accusations of unfair play. Another is to make countries' trade rules as clear and public ("transparent") as possible. Many WTO agreements require governments to disclose their policies and practices publicly within the country or by notifying the WTO. The regular surveillance of national trade policies through the Trade Policy Review Mechanism provides a further means of encouraging transparency both domestically and at the multilateral level.

5.Promoting fair competition The WTO is sometimes described as a "free trade" institution, but that is not entirely accurate. The system does allow tariffs and, in limited circumstances, other forms of protection. More accurately, it is a system of rules dedicated to open, fair and undistorted competition. The rules on non-discrimination - MFN and national treatment - are designed to secure fair conditions of trade. So too are those on dumping (exporting at below cost to gain market share) and subsidies. The issues are complex, and the rules try to establish what is fair or unfair, and how governments can respond, in particular by charging additional import duties calculated to compensate for damage caused by unfair trade.

Many of the other WTO agreements aim to support fair competition: in agriculture, intellectual property, services, for example. The agreement on government procurement (a "plurilateral" agreement because it is signed by only a few WTO members) extends competition rules to purchases by thousands of "government" entities in many countries. And so on.

6.Encouraging development and economic reform It is widely recognized by economists and trade experts that the WTO system contributes to development. It is also recognized that the least-developed countries need flexibility in the time they take to implement the agreements. And the agreements themselves inherit the earlier provisions of GATT that allow for special assistance and trade concessions for developing countries. Over three-quarters of WTO members are developing countries and countries in transition to market economies. During the seven and a half years of the Uruguay Round, over 60 of these countries implemented trade liberalization programs autonomously. At the same time, developing countries and transition economies were much more active and influential in the Uruguay Round negotiations than in any previous round. This trend effectively killed the notion that the trading system existed only for industrialized countries. It also changed the previous emphasis on exempting developing countries from certain GATT provisions and agreements. At the end of the Uruguay Round, developing countries were prepared to take on most of the obligations that are required of developed countries. But the agreements did give them transition periods to adjust to the more unfamiliar and, perhaps, difficult WTO provisions - particularly so for the poorest, "least-developed" countries. A ministerial decision adopted at the end of the round gives least developed countries extra flexibility in implementing WTO agreements. It says better-off countries should accelerate implementing market access commitments on goods exported by the least-developed countries, and it seeks increased technical assistance for them.

The result is also a more prosperous, peaceful and accountable economic world. Decisions in the WTO are typically taken by consensus among all member countries and they are ratified by members parliaments. Trade friction is channeled into the WTOs dispute settlement process where the focus is on interpreting agreements and commitments, and how to ensure that countries trade policies conform with them. That way, the risk of disputes spilling over into political or military conflict is reduced. By lowering trade barriers, the WTOs system also breaks down other barriers between peoples and nations.

Arenas in which WTO operates

The WTO agreements cover goods, services and intellectual property. They spell out the principles of liberalization, and the permitted exceptions. They include individual countries' commitments to lower customs tariffs and other trade barriers, and to open and keep open services markets. They set procedures for settling disputes. They prescribe special treatment for developing countries. They require governments to make their trade policies transparent. And they share a common three-part structure. Tariffs: more bindings and closer to zero The results of Uruguay Round lists individual countries' commitments on specific categories of goods and services. These include commitments to cut and "bind" their customs duty rates on imports of goods. In some cases, tariffs are being cut to zero - with zero-rates also committed in the 1997 agreement on information technology products. There is also a significant increase in the number of "bound" tariffs - duty rates that are committed in the WTO and are difficult to raise.

Agriculture: fairer markets for farmers The original GATT did apply to agricultural trade, but it contained loopholes. For example, it allowed countries to use some non-tariff measures such as import quotas, and to subsidize. Agricultural trade became highly distorted, especially with the use of export subsidies which would not normally have been allowed for industrial products. The Uruguay Round agreement is a significant first step towards order, fair competition and a less distorted sector. It is being implemented over a six-year period (10 years for developing countries), that began in 1995. Participants have agreed to initiate negotiations for continuing the reform process one-year before the end of the implementation period.

Textiles: back in the mainstream Textiles, like agriculture, are one of the hardest-fought issues in the WTO, as it was in the former GATT system. It is now going through fundamental change under a 10-year schedule agreed in the Uruguay Round. Among the changes: the system of import quotas that has dominated the trade since the early 1960s is being phased out as products are brought under GATT rules in four steps.

Services: rules for growth and investment The General Agreement on Trade in Services (GATS) is the first ever set of multilateral, legally-enforceable rules covering international trade in services. GATS operates on three levels: the main text containing general principles and obligations; annexes dealing with rules for specific sectors; individual countries' specific commitments to provide access to their markets. GATS also has a fourth element: lists showing where countries are temporarily not applying the "mostFavoured-nation" principle of non-discrimination. These commitments - like tariff schedules under GATT - are an integral part of the agreement. So are the temporary withdrawals of most-Favoured-nation treatment. Negotiations on commitments in four sectors have taken place after the Uruguay Round. A full new services round will start no later than 2000.

Intellectual property: protection and enforcement The Uruguay Round brought intellectual property rights - copyrights, trademarks, patents, etc - into the GATT-WTO system for the first time. This is an increasingly important part of trade. The new agreement tackles five broad issues: how the trading system's principles should be applied to intellectual property rights, how best to protect intellectual property rights, how to enforce the protection, how to settle disputes, and what should happen while the system is gradually being introduced.

Anti dumping, subsidies, safeguards, contingencies etc. binding tariffs, and applying them equally to all trading partners (MFN) are key to the smooth flow of trade in goods. The WTO agreements uphold the principles, but they also allow the principles to be broken - in some circumstances. Three issues are important: action taken against dumping (selling unfairly at a low price) subsidies and special "countervailing" duties to offset the subsidies emergency trade restrictions designed to "safeguard" domestic industries.

Non-tariff barriers: technicalities, red tape, etc Finally, a number of agreements deal with various technical, bureaucratic or legal issues that could involve hindrances to trade. Technical regulations and standards import licensing rules for the valuation of goods at customs, preshipment inspection, further checks on imports countries of origin.

For the specialists: the plurilateral agreements Two agreements remain signed by only a few WTO members. They are called plurilateral. These are: civil aircraft government procurement

Trade Policy reviews: transparency and feedback The WTO conducts regular reviews of individual countries' trade policies - the trade policy reviews. This is partly to ensure that individuals and companies involved in trade face transparent regulations and policies. The importance of the process can be seen from the seniority of the Trade Policy Review Body - it's the WTO General Council in another guise.

India and the WTO

Issues of Current Importance - An Overview WTO-related issues of current importance in India relate mainly to rights and obligations emanating from these Agreements. A summary of these issues along with India's official stand on each of them is outlined below: Quantitative Restrictions (QRs) Article XI of the General Agreement on Tariffs and Trade 1994 provides that no prohibitions or restrictions (other than duties i.e., tariffs) whether made through quotas, import or export licenses or other measures shall be maintained by any member of the WTO. However, under provisions of Article XVIII-B of GATT, India maintains quantitative restrictions on import of items in respect of 2400 tariff lines in the HS (Harmonised System) codes. In May 1997, India presented a plan for elimination of these restrictions on imports over a period of 9 years, which was considered at consultations held in the Committee on Balance of Payments Restrictions in June-July 1997. While the plan generally received the support of developing countries, the developed countries felt that the phase-out period was too long and that the number of items proposed for phase-out during the later years of the plan was too many. Although India agreed to reduce the phase-out period to 7 years, even this was not acceptable to the developed countries. Subsequently, the US, EC, Canada, Australia, New Zealand and Switzerland initiated dispute settlement proceedings against India and sought consultations under Article XXII of GATT. In the consultations that followed, India reached agreements with all countries except the US and entered into a phase-out period of 6 years starting from 1997. The US filed a dispute against India. A panel was constituted on 18th November, 1997 to examine the US allegations that the continued maintenance of QRs on imports by India was inconsistent with Indias obligations under the WTO agreement.

Patents The Agreement on Trade Related intellectual Property Rights (TRIPS) under the Uruguay Round pact required India to make certain provisions in the Patent Act to fulfil its obligations under Articles 70.8 and 70.9, notwithstanding the transition period allowed under the Agreement for switchover to product patents. These obligations relate to providing some means to receive product patent applications in the field of pharmaceutical and agro chemical products (Article 70.8) and grant of Exclusive Marketing Rights (EMR) on fulfillment of certain conditions (Article 70.9). The US filed a dispute against India at the WTO alleging that India had not complied with the provisions of Articles 70.8 and 70.9 of the TRIPs Agreement. A Panel set up by the Dispute Settlement Body (DSB) of the WTO ruled that India had not complied with its obligations. On an appeal made by India, the Appellate Body of the WTO, which also recommended that India take the necessary steps to comply with its obligations, considered the matter. It was subsequently determined that this be done by 19 April 1999. In order to comply with these rulings, a Bill, namely, Patents (Amendment) Bill 1998 was passed by the Rajya Sabha on 22 December 1998, but the Bill could not come up for consideration in the Lok Sabha. Meanwhile, in order to fulfil its obligations, the government promulgated an Ordinance the Patents (Amendment) Ordinance, 1999 on 8th January, 1999. The amendment has been made to provide a means in the Indian Patents Act of 1970 for filing of applications for product patents in the fields of agro chemicals and pharmaceuticals. The amended Act also provides for grant of Exclusive Marketing Rights to the applicant after a set of conditions has been fulfilled.

Geographical Indications Section 3 of the TRIPs Agreement provides for mutual recognition of Geographical Indications (like Basmati Rice and Darjeeling Tea). The Agreement contains a provision that a member shall provide the legal means for interested parties to prevent the use of any means in the designation or presentation of a good that indicates or suggests that the good in question originates in a geographical area other than the true place of origin in a manner which misleads the public as to the geographical origin of the good. There is, however, no obligation under the Agreement to protect geographical indications which are not protected in their country of origin or which have fallen into disuse in that country. In India, we do not have any specific law on geographical indications. The need to enact a separate law on this subject has been recognised and separate legislation on geographical indications is being drafted in consultation with the concerned ministries and experts.

Agriculture The Agreement on Agriculture is coming up for review in the year 2000. The root cause of distortion of international trade in agriculture is the massive domestic subsidies given by industrialised countries to their agricultural sector over the decades. This has led to excessive production (as well as of import restrictions to keep out foreign agricultural products from their domestic markets) and its dumping in international markets. In order to minimise such dumped exports and to keep their markets open for efficient agricultural producers of the world, the starting point has to be the reduction of the domestic production subsidies given by the industrialised countries, followed by reduction of export subsidies and the volume of subsidised exports, and minimum market access opportunity for foreign agricultural producers. This being the rationale, the Agreement on Agriculture provided for (a) reduction of domestic subsidies , (b) reduction in export subsidies, and (c) tariff binding and progressive reduction of tariffs in agricultural commodities i.e., market access. Under the Uruguay Round, India

has not made any commitments regarding market access, reduction of subsidies or tariffs since it is under a balance of payments cover. We were committed only to bind our tariffs which we have done, at 100% for primary products, 150% for processed products and 300% for edible oils. However, in course of time there may be pressure on developing countries including India to provide some market access as well as lower tariff bindings. Better market access for Indian agricultural products is being sought. Broadly, Indias approach to the review of the Agreement on Agriculture is that it would give us an opportunity to have a fresh look at this area from the development perspective and the needs of developing countries, as a number of inequities still remained in the implementation of the Agreement. Under the Uruguay Round, we had bound tariffs on these commodities at zero or very low levels. While seeking higher bindings for these commodities, we have to offer compensation to holders of initial negotiating rights. Initial negotiations have been held with the US, EC, Australia and Argentina.

Services The Uruguay Round brought the services sector, for the first time, into the fold of multilateral trade negotiations. According to the General Agreement on Trade in Services (GATS) the Most Favoured Nation (MFN) and "transparency" (viz., publication of all laws and regulations) are the 2 obligations that apply to all services. The commitments, viz., market access and national treatment apply to services that are to be opened up according to specific negotiated commitments only, subject to conditions incorporated in the schedule of commitments. The Agreement covered all the 4 modes of delivery of a service, including crossborder supplies, "commercial presence" and "movement of natural persons". The General Agreement on Trade in Services is coming up for review in the year 2000. Preparations for the negotiations would involve deciding the market access that we can give and the market access that our services would like to have in

other countries. This involves filing of schedules in respect of 12 major sectors and 161 sub-sectors. Preparatory work in this regard has already been initiated. Movement of natural persons (for supply of manpower services in the industrialised countries) is of special importance to us as India enjoys a distinct comparative advantage in this area covering a whole range of services from computer and related services to hotel, health, engineering, construction and other professional services. The process of economic liberalisation involving opening up of capital intensive services such as banking, telecommunications etc., must be matched by increased access for the temporary movement of our skilled and professional people in services of export interest to us. However, developed countries in regard to the fourth mode have made hardly any commitments for delivery of services under GATS i.e., movement of natural persons. Negotiations on this will also form part of GATS negotiations in 2000.

Implementation issues For some months now, India has been articulating the view that special and differential provision of WTO Agreements for developing countries should be more clearly defined and implemented fully by the developed countries, so that the full benefits of the multilateral trading system accrue to the developing countries. For creating a consensus on this issue in the WTO, a Symposium of G-15 Group was also held in New Delhi on 10-11 December 1998. Specific examples have been cited by India to show that intentions of the negotiators have not been translated into practice: In respect of the Agreement on Textiles and Clothing (ATC), while the provisions have been implemented in letter, meaningful market access has not accrued to the developing countries. Another example relates to Article dealing with Quantitative Restrictions on Imports maintained by developing countries for BOP considerations, which is distinguished from another Article by the fact that it explicitly provides for assessment of the adequacy of foreign exchange reserves after taking into account the long-term development needs of a developing country. In actual

practice, however, both the articles are treated similarly. Again, Article 15 of the Agreement on Implementation of Article VI of GATT (1994), which related to antidumping, urges developed countries to seek constructive remedies before imposing Anti-dumping measures against developing countries. In actual practice, anti-dumping measures are virtually being used by certain developed countries to deny access to the products of developing countries, with repeated anti-dumping proceedings being initiated on the same commodity, as with some textile export items in the EU. Similarly, the injunctions to advanced countries contained in Article 10 of the Agreement on Sanitary and Phytosanitary Measures and that contained in Article 12 of the Agreement on Technical Barriers to Trade for taking into account the special needs of developing countries in their formulation and application of standards, are hardly ever honored in implementation. Similar insensitivity to the constraints of the developing countries mark the Agreement on Subsidies and Countervailing Measures, which considers non-actionable the subsidies used by developed countries, but considers actionable the kinds of subsidies usually deployed by developing countries for development, diversification and upgradation of their industry. The Understanding on the Settlement of Disputes is another instrument where provisions for special and more favorable treatment of developing countries remain at the level of best endeavor' type of provisions. There is no way to ensure that preferential treatment is accorded to developing countries in practice. India has emphasized that procedures must be developed to make sure that the interests of developing countries are protected and that developed countries do not use dispute settlement proceedings as instruments for coercion of less privileged member countries. Other implementation issues highlighted by India related to food security concerns of developing countries like India vis-a-vis the Agreement on Agriculture; concerns about Unilateral Trade Restrictions imposed by countries which are inconsistent with their WTO obligations; provisions relating to Regional Trading Arrangements that are tending to threaten the thrust towards global free

trade; imbalances in the TRIPs Agreement; the question of transfer of technology at fair and reasonable cost in the context of Trade and Environment, the Agreements on Sanitary and Phytosanitary Measures and Technical Barriers to Trade, and also in connection with the new subject of Electronic Commerce; national regulations on rules of origin threatening the market access of developing countries particularly in the area of textiles; the pressure on developing countries to liberalise areas of interest to the industrialised world, while delaying meaningful market access in areas of comparative advantage to developing countries, such as Textiles and on the matter of movement of professionals and skilled personnel.

Information Technology Agreement - ITA India was among the participants of the ITA-I and Indias schedule of reduction in tariffs up to the year 2001 has been accepted by consensus by the other participants. In all, India bound 217 tariff lines at the six-digit level - tariffs on 95 tariff lines by 2003, 2 tariff lines by 2004 and the balance 116 lines in the year 2005. India also participated in the ITA-II talks during 1998. The proposals under ITA-II were examined with the concerned Departments in consultation with the industry. India has reservations regarding coverage under ITA-II of certain products which are of strategic and defense importance and certain items which are of dual use or multi-use, as also regarding non-Information Technology consumer products.

Millennium Round The European Communities and some of other developed countries have put forward the idea of a comprehensive round of negotiations in the year 2000 ("Millennium Round"). At the special session of the General Council of the WTO held in Geneva in September 1998 marking the start of the process leading to the Third Ministerial Conference, our perception was conveyed that such initiatives - whether of a Multilateral Agreement on Investment (MAI) or a Millennium Round - were premature, as developing countries are in the process of implementing the obligations arising out of the Uruguay Round Agreements and time was needed to assess the impact of taking on these commitments before entering into any new obligations. India is still in the processing of implementing the last round of tariff negotiations, which will go on at least till the year 2000. Similarly, in many spheres India like other developing countries has transition periods even up to 2005 as in the TRIPs Agreement. Overloading the WTO agenda at this point, therefore, may not be realistic. India is in constant contact with other developing countries to develop common positions on this subject. Consultations are also being held with other Ministries and industry associations to finalise a position that would yield maximum advantage to the country.

Marketing implications for India

The implications of complying with WTO regulations and its ramifications for India in various spheres of International Marketing are enumerated below. Quantitative Restrictions (QR) This is one of the most important aspects the WTO regulations, which will have a profound impact on the Indian market by opening up its markets to foreign goods, and giving foreign markets access to its exports. The twin fold implications will be the increased competition within the Indian market due to availability of larger quantity of goods, as well as larger markets for Indian goods. Removal of QR's will lead to creation of larger markets, which will mean exporters are exposed to newer markets to operate in.

Patents India, through her laws and jurisprudence, is already in compliance with the TRIPS standards on copyright and related rights, trademarks, geographical indications, industrial design, undisclosed information and even with some of the provisions on patents. This could sound the death-knell for Indian piracy if properly implemented. The concept of Exclusive Marketing Rights (EMR) could allow new companies (like Pfizer) into India and at the same time allow India to market its traditional knowledge (like Neem, Haldi etc) in new markets abroad. The implementation of TRIPS properly in member countries will enable the easy

flow of knowledge based ideas and provide them with an incentive to export to new markets.

Agriculture This is one of the most contentious issues that countries faced while acceding to the WTO regulations. This would expose Indian farmers for the first time directly to international scrutiny. The major impact would be in the form of decreasing of the government support for the agricultural industry. Subsidies in India are already below the prescribed limit of 10 % of the total value of agricultural output. Subsidy reductions will harm only large farmers who have been the major beneficiaries of these subsidies in India. This implies that these farmers who so far were operating under protection from the government are now exposed to the world competition and hence they need to gear up to face this situation. But the provision regarding import of a minimum of 3% of food grains and raw cotton used in the country will mean a loss of market for Indian farmers of an equivalent extent, and will imply greater competition for domestic competition. Removal of subsidies will effect the diffusion of new agricultural technologies such as biofertilizers or new variety of seeds. This in turn could effect food production and lead to a food crisis.

Textile and Clothing: This is perhaps the most important sector from the perspective of developing countries in general and India in particular as this is the major export of India. The Multi Fiber Agreement in this area is a tool under which importing (which are generally the developed countries) allot quotas to the exporting countries thus putting restrictions to their amounts of exports. But under WTO a proposed phase out of quotas has been agreed upon which will end in the year 2005. This would result in substantial increase of trade in textiles for India. By doing away with the ceiling, Indian exporters will get a much larger access to the world textile

market and ample opportunity to exploit its comparative advantage in terms of cheap labor inputs and compete in the world market. Furthermore, countries like China, South Korea and Taiwan who account for 30% of the international trade in textiles will vacate many labor intensive industries owing to rise in wages. The products taken out of MFA will be governed by the new WTO rules.

WTO-some recent problems

A flurry of activity as put the World Trade Organization on centre stage in the recent past. Far from being an organization overseeing the smooth functioning of global trade relations, the WTO is being besieged on all fronts. The most important event in recent weeks has been the failure of negotiators to agree on a global pact of liberalised trade in telecom services. This was one of the unfinished tasks of the Uruguay Round. It was agreed in December 1993 that member-countries of GATT/WTO would give themselves time until April 1996 to draw up an agreement on opening up of the telecom sector. But the deadline has passed without any deal and negotiators have now given themselves another year to stitch together a settlement. The global telecom service market is estimated to worth more than $500 billion a year and is also believed to be highly profitable. So, not surprisingly countries home to the major telecom manufacturers and providers of services have been keen on removing the barriers to cross-border services. But trade in telecom services was a new item on the GATT/WTO agenda; hence it was always expected that an agreement in this area would be difficult. It was initially put out that the reason for the deadlock was the unsatisfactory nature of offers by Asian countries to open their telecom markets. The countries identified as thus holding back a deal were; Malaysia, Indonesia, Japan and India. But what ultimately did cause collapse of the telecom talks was a dispute among the advanced countries. With the U.S withdrawing its earlier offer on satellite based telecom services there was little chance of an agreement. The argument was that if the U.S opened its satellite based market, many European and other companies would threaten local companies in the U.S market. These fears are no different from that voiced by many developing countries in a number of other areas. Another dispute, also one in which the U.S is a party, is over petroleum exports by Venezuela and Brazil to the U.S and is seen as a test case for WTO's dispute settlement mechanism. Earlier the WTO had ruled against the U.S setting

different standards on petroleum imports- standards that were ostensibly set on environment considerations but which in the complaint by Venezuela and Brazil is stated to be protectionist. Now, the WTO's appellate body has also turned down an appeal by the U.S. It now remains to be seen if the U.S will withdraw its restrictions. A third and impending dispute on which the U.S has already given notice is India's failure to fully comply with the UR agreement on introduction of new rules on patents. India in that regard has passed an ordinance proposing to convert its process patent into product patent in compliance with the WTO norms.

BIBLIOGRAPHY

T.N. Srinivasin: Developing Countries and the Multilateral Trading System Amiya Rao : 'A Drama Called GATT' ; Economic And Political Weekly,1994 Arun Ghosh :'GATT and the Indian Constitution' ; EPW, January 1995 S.P Shukla: 'Resisting The World Trade Organization' ; EPW, March 1994 Jayashree Watal: 'Implementing the TRIPS Agreement- Policy options for India; EPW, September 1997 Girish Mishra : 'WTO and Developing Countries' ;World Focus,1995 V.Jayanth: WTO--- Some Recent Problems, World Focus WTO Publication, 1995 WTO Website Various other sites on the internet

Executive Summary
WTO, came into being on March 1995 after eight long years of negotiation that started with the Uruguay Round in 1989 and ended at the Marrakech. It is basically an improvement over the existing GATT structure. Apart from trade in goods and services, it includes trade in services, intellectual property rights and financial investments. It is designed to ensure a non-discriminatory international trading system through enforcement of uniform rules and disciplines. WTO in its current position is expected to facilitate free trade of goods and services between countries. But the formation of this body has come under a lot of criticism also with critics accusing it of having policies that are favorably tilted towards the developed countries at the cost of growth of the developing countries. However, the five years that the WTO has been operating, it has been able to successfully diffuse some important trade conflicts. The major implication of the WTO has been in making markets easily accessible. It means that the world competition is going to increase tremendously as a result. It will now become a case for survival of the fittest. For Indian exporters it will be a major challenge as internal government protection in the form of subsidies in agriculture, change from process to product patent, garment export protection etc, are all going to be phased out in a planned manner forcing them to upgrade their techniques and become world competitive. But the bright side of it is that Indian exporters can now operate across the world markets. For example, Indian garment exports are not able to achieve their potential targets because of quota restrictions by countries like US. With the phasing of the MFA, quantitative limits will be out and Indian garment industries potential will then be put to test.

A Project on

WORLD TRADE ORGANIZATION

Submitted to: PROF. DHANKAR

Submitted by: MANAV VERMA Section: Finance PGP Fall Winter 1999-2001

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT NEW DELHI