International Referred Research Journal, January, 2012, ISSN- 0975-3486, RNI : RAJBIL 2009/30097, VOL- III * ISSUE 28

Research PaperCommerce

WTO And Indian Banking Issues And Challenges

January, 2012 * Dr. Dinesh B. Raghuwanshi. * Reader & Head Dept.of Comm.& Mgt K.N.Arts & Comm. College, Karanja, Washim.(M.S). A B S T R A C T
The world Trade organization (WTO) is an international organization designed to supervise and liberalize international trade, The WTO came into being on January 1, 1995 and is the successor to the General Agreement on Tariffs and Trade (GATT) which was created in 1947 and continued to operate for almost five decades as a de facto international organization. The world trade organization deals with the rules of trade between nations at a global or near global level; it is responsible for negotiating and implementing new trade agreements, and is in charge of policing member countries adherence to all the WTD agreements , signed by the bulk of the world trading nations. The WTO is governed by the ministerial conference, which meets every two years; a general council, which implements the conference's policy decisions and is responsible for day to day administration and a director-general, who is appointed by the ministerial conference. The WTO's head quarters are in Geneva, Switzerland.

Introduction : The world Trade organization (WTO) is an international organization designed to supervise and liberalize international trade, The WTO came into being on January 1, 1995 and is the successor to the General Agreement on Tariffs and Trade (GATT) which was created in 1947 and continued to operate for almost five decades as a de facto international organization. The world trade organization deals with the rules of trade between nations at a global or near global level; it is responsible for negotiating and implementing new trade agreements, and is in charge of policing member countries adherence to all the WTD agreements , signed by the bulk of the world trading nations. The WTO is governed by the ministerial conference, which meets every two years; a general council, which implements the conference's policy decisions and is responsible for day to day administration and a director-general, who is appointed by the ministerial conference. The WTO's head quarters are in Geneva, Switzerland. Mission, Functions And Principles Mission The WTO stated goal is improve the welfare of the people of its member countries, specifically by lowering trade barriers and providing a platform for negotiation of trade. Its main mission is "to ensure that trade flows as smoothly, predictably and free as possible". The main mission is further specified in certain core functions serving and safeguarding five fundamental Principles, which are the foundation of the multilateral trading system. Functions Among the various functions of the WTO, these are regarded by analysts as the most important. * It oversees the implementation, administration and operation of the covered agreement.

* It provides a forum for negotiations and for setting disputes. Additionally, it is WTO's duty to review the national trade policies, and to ensure the coherence and transparency of trade policies through surveillance in global economic policy making. Another priority of the WTO is the assistance of developing, least developed and low-income countries transition to adjust to WTO rules and disciplines through technical cooperation and training. Finally, the WTO cooperates closely with the two other components of the Bretton Woods System, the IMF and the world Bank. Principles The WTO establishes a framework for trade policies; it doesnot define or specify outcomes. That is it is concerned with setting the rules of the trade policy games. Five Principles are of Particular importance in understanding both the pre-1994 GATT and the WTO 1. Nondiscrimination : It has two major favored nation (MFN) rule, and the Both are embedded in the main WTO rules on goods, services and intellectual property, but their precise scope and nature differ across these areas. 2. Reciprocity: It reflects both a desire to limit the scope of free-riding that may arise the scope of freeriding that may arise because of the MFN rule, and to a desire to obtain better access to foreign markets. 3. Binding and enforceable commitments : The tariff commitments made by WTO members in a multilateral trade negotiation and on accession are enumerated in a schedules (list) of concessions. These schedules establish "Ceiling Bindings" a country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade. If satisfaction is not obtained, the complaining country may invoke the WTO dispute settlement Procedures.
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International Referred Research Journal, January, 2012, ISSN- 0975-3486, RNI : RAJBIL 2009/30097, VOL- III * ISSUE 28

4. Transparency: The WTO members are required to publish their trade regulations, to maintain institutions allowing for the review of administrative decisions effecting trade, to respond to requests for information by other members, and to notify changes in trade policies to the WTO. 5. Safty Valves: In specific circumstances, governments are able to restrict trade. There are three types of provisions in this direction: articles allowing for the use of trade measures to attain non economical objectives; articles aimed at ensuring "fair competition"; and provisions permitting intervention in trade for economic reasons. WTO and GATS General Agreement on Trade in services (GATS) commenced on 1st January, 2000 is one of the main WTO agreements. For the first time, trade in services like banking, insurance, mobility of labour etc. was brought within the ambit of negotiations in the Uruguay Round. The GATS provides a multilateral framework of principles and services which should govern trade in services under conditions of transparency and progressive liberalization. It spells out certain obligations like grant of MFN (The most favoured nation) Status to the other member nations with regard to trade in services, maintenance of transparency and also a commitment for liberalization in general terms.Under the General Agreement on Trade in Services (GATS), India has made commitments in 33 activities. Foreign service providers will be allowed on enter these activities. According to the Government of India, the choice of the activities has been guided by considerations of national benefit (VIZ, the impact on capital inflow, technology and employment). Issue Influencing International Banking International Banking issues that WTO participants will likely discuss center on policy questions. As the shape of individual countries financial infrastructure varies widely throughout the world, there exists, a need for coherent and consistent banking practices. Perceptions about what constitute good banking practices also vary with cultural and political differences between nations. The following are some issues which influence the international banking. Transparency The level of openness that banks are required to maintain with respect to their assets and risks is a very hot topic of late. The issue is usually referred to as transparency. The united states typically advocates raising standards by increasing the quality and effectiveness of oversight such that the market for borrowed and lent funds is increasingly efficient in more countries. Reserve requirements that are deemed adequate in some countries are seen as dangerously inRESEARCH AN ALYSI S

adequate in others. Such divergence trends to minimize confidence in the system as a whole. Money Supply Central banks are responsible for deciding how to change the money supply, and these policy making institutions are the only entities in an economy that can legally alter the amount of money in an economy. There tends to be great temptation, particularly in countries with weak central banks, to simply add money reserves to the economy. This will boost growth in the short team, but such quick fixes tend to raise inflation rates. Such policies can also changes the trade balances between nations as foreign exchange rates will change with the amount of currency in circulation. Most western countries push for increased independence of countries central banks and distancing monetary policy from the political process. The goal is to minimize fluctuations in currencies and inflation. Greater flux in these areas acts as a disincentive to trade and foreign investment. Countries that can not distance central bank policy tend to risk losing the confidence of international investors. Speculators Foreign exchange speculators place very large bets on the change in exchange rates between one or more currencies, and in some cases can actually creates selffulfilling prophecies when other follow their lead. Many countries feel victimized by currency speculation and are moving away from free capital flow in order to minimize the influence of speculators on foreign exchange rates. Moving away from free flow capital also minimizes trade and international investment. A great deal of dialogue is currently underway, and will likely occur at the ministerial about this topic. Consolidation Consolidation within the banking industry is occurring throughout the world. The question of to what degree are countries ready to allow foreign ownership of banking institutions comes in to play. Factors favoring crisis -ridden countries to adopt WTO Negotiations.Several factors made it easier for crisis -ridden countries to embrace the WTO negotiation. Some of them are as follows: First, the negotiation were not concerned with the liberalization of the capital account but purely with the terms on which foreign suppliers would be allowed to do business, subject to whatever capital controls where in force. While it is tune that a government is required to allow capital flows when the country has a commitment liberalizing the supply of a service requiring such capital movement, the capital account liberalization involved is limited in extent. Second, the liberalization of financial services trade take place inside a system of rules and
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International Referred Research Journal, January, 2012, ISSN- 0975-3486, RNI : RAJBIL 2009/30097, VOL- III * ISSUE 28

procedures with the necessary flexibility and safeguard clauses to address prudential concern Government are free to take any measure necessary to preserve the stability of the financial system and also temporary, non discriminatory restrictions on trade in services in the event of serious balance -of-payment and external financial difficulties. Third, these particular negotiations were mostly about allowing foreign institutions to establish in the market- entailing foreign direct investment to provide services and bring technology, capital and expertise with them commitment in the WTO provide guarantee that the terms and conditions on which in-

vestment decision are made, and trade is carried on , are not going to change overnight. Conclusion As the shape of individual countries financial infrastructure varies throughout the world, there exists a need for coherent and consistent banking practices. Good banking practices also very from nations to nations. The tendency to find fault with systems and policies other than ones own makes achieving consensus a challenge. The WTO members must mutually support and encourage each other to achieve the final goal. It must be recognized that all members should assume a negotiating rather than an adversarial posture.

R E F E R E N C E
Financial Services and WTO Indian Economy by S.K. Misra, V.K.Puri Indian Economy by R.K. Dhar, Money Banking and International Trade By R.R. Pual World Trade organization ((http://en. Wikipediaorgwiki/WTO) WTO and Banking Issues by Darain Morgan.

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