How WTO came into existence

The WTO's predecessor, the General Agreement on Tariffs and Trade (GATT), was
established after World War II in the wake of other new multilateral institutions
dedicated to international economic cooperation - notably the Bretton Woods
institutions known as the World Bank and the International Monetary Fund
The GATT was the only multilateral instrument governing international trade
from 1948 until the WTO was established in 1995. Despite attempts in the mid 1950s
and 1960s to create some form of institutional mechanism for international trade,
the GATT continued to operate for almost half a century as a semi-institutionalized
multilateral treaty regime on a provisional basis
The World Trade Organization is the most powerful legislative and judicial body
in the world. By promoting the "free trade" agenda of multinational corporations
above the interests of local communities, working families, and the environment, the
WTO has systematically undermined democracy around the world.

Uruguay Round

Well before GATT's 40th anniversary, its members concluded that the GATT
system was straining to adapt to a new globalizing world economy. In response to
the problems identified in the 1982 Ministerial Declaration (structural deficiencies,
spill-over impacts of certain countries' policies on world trade GATT could not
manage etc.), the eighth GATT round — known as the Uruguay Round — was
launched in September 1986, in Punta del Este, Uruguay. It was the biggest
negotiating mandate on trade ever agreed: the talks were going to extend the
trading system into several new areas, notably trade in services and intellectual
property, and to reform trade in the sensitive sectors of agriculture and textiles; all
the original GATT articles were up for review. The Final Act concluding the Uruguay
Round and officially establishing the WTO regime was signed during the April 1994
ministerial meeting at Marrakesh, Morocco, and hence is known as the Marrakesh
Agreement.
The GATT still exists as the WTO's umbrella treaty for trade in goods, updated as
a result of the Uruguay Round negotiations (a distinction is made between GATT
1994, the updated parts of GATT, and GATT 1947, the original agreement which is
still the heart of GATT 1994). GATT 1994 is not however the only legally binding
agreement included via the Final Act at Marrakesh; a long list of about 60
agreements, annexes, decisions and understandings was adopted. The agreements
fall into a structure with six main parts:

• The Agreement Establishing the WTO

• Goods and investment — the Multilateral Agreements on Trade in Goods
including the GATT 1994 and the Trade Related Investment Measures
• Services — the General Agreement on Trade in Services
• Intellectual property — the Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS)
• Dispute settlement (DSU)
• Reviews of governments' trade policies (TPRM)
 Function
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

agreements.
• It provides a forum for negotiations and for settling disputes.

Additionally, it is the 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 in transition to adjust to WTO rules and disciplines
through technical cooperation and training. The WTO is also a center of economic
research and analysis: regular assessments of the global trade picture in its annual
publications and research reports on specific topics are produced by the organization.
Finally, the WTO cooperates closely with the two other components of the Bretton
Woods system, the IMF and the World Bank
 Principles of the trading system
Five principles are of particular importance in understanding both the pre-1994 GATT
and the WTO:

1. Non-Discrimination: It has two major components: the most favoured

nation (MFN) rule, and the national treatment policy. Both are embedded
in the main WTO rules on goods, services, and intellectual property, but
their precise scope and nature differ across these areas. The MFN rule
requires that a WTO member must apply the same conditions on all trade
with other WTO members, i.e. a WTO member has to grant the most
favorable conditions under which it allows trade in a certain product type
to all other WTO members. "Grant someone a special favour and you have
to do the same for all other WTO members." National treatment means
that imported and locally-produced goods should be treated equally (at
least after the foreign goods have entered the market) and was
introduced to tackle non-tariff barriers to trade (e.g. technical standards,
security standards et al. discriminating against imported goods).
2. Reciprocity: It reflects both a desire to limit the scope of free-riding that
may arise because of the MFN rule, and a desire to obtain better access to
foreign markets. A related point is that for a nation to negotiate, it is
necessary that the gain from doing so be greater than the gain available
from unilateral liberalization; reciprocal concessions intend to ensure that
such gains will materialize.
3. Binding and enforceable commitments: The tariff commitments made
by WTO members in a multilateral trade negotiation and on accession are
enumerated in a schedule (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.
4. Transparency: The WTO members are required to publish their trade
regulations, to maintain institutions allowing for the review of
administrative decisions affecting trade, to respond to requests for
information by other members, and to notify changes in trade policies to
the WTO. These internal transparency requirements are supplemented
and facilitated by periodic country-specific reports (trade policy reviews)
through the Trade Policy Review Mechanism (TPRM). The WTO system
tries also to improve predictability and stability, discouraging the use of
quotas and other measures used to set limits on quantities of imports.
5. Safety 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 noneconomic objectives; articles aimed
at ensuring "fair competition"; and provisions permitting intervention in trade
for economic reasons.
 Agreements of WTO
WTO AGREEMENT ON AGRICULTURE (AOA)

After over 7 years of negotiations the Uruguay Round multilateral trade negotiations
were concluded on December 15, 1993 and were formally ratified in April 1994 at
Marrakesh, Morocco. The WTO Agreement on Agriculture was one of the many
agreements which were negotiated during the Uruguay Round.

The implementation of the Agreement on Agriculture started with effect from

1.1.1995. As per the provisions of the Agreement, the developed countries would
complete their reduction commitments within 6 years, i.e., by the year 2000,
whereas the commitments of the developing countries would be completed within 10
years, i.e., by the year 2004. The least developed countries are not required to make
any reductions.

The products which are included within the purview of this agreement are what are
normally considered as part of agriculture except that it excludes fishery and
forestry products as well as rubber, jute, sisal, abaca and coir.

The WTO Agreement on Agriculture contains provisions in 3 broad areas of

agriculture and trade policy: market access, domestic support and export
subsidies.

Market Access

This includes tariffication, tariff reduction and access opportunities. Tariffication

means that all non-tariff barriers such as quotas, variable levies, minimum import
prices, discretionary licensing, state trading measures, voluntary restraint
agreements etc. need to be abolished and converted into an equivalent tariff.
Ordinary tariffs including those resulting from their tariffication are to be reduced by
an average of 36% with minimum rate of reduction of 15% for each tariff item over
a 6 year period. Developing countries are required to reduce tariffs by 24% in 10
years. Developing countries as were maintaining Quantitative Restrictions due to
balance of payment problems were allowed to offer ceiling bindings instead of
tariffication.

Special safeguard provision allows the imposition of additional duties when there
are either import surges above a particular level or particularly low import prices as
compared to 1986-88 levels.

It has also been stipulated that minimum access equal to 3% of domestic

consumption in 1986-88 will have to be established for the year 1995 rising to 5% at
the end of the implementation period.

Domestic Support

For domestic support policies, subject to reduction commitments, the total support
given in 1986-88, measured by the Total Aggregate Measure of Support (total AMS),
should be reduced by 20% in developed countries (13.3% in developing countries).
Reduction commitments refer to total levels of support and not to individual
commodities. Policies which amount to domestic support both under the product
specific and non product specific categories at less than 5% of the value of
production for developed countries and less than 10% for developing countries are
also excluded from any reduction commitments. Policies which have no or at most
minimal, trade distorting effects on production are excluded from any reduction
commitments. The list of exempted green box policies includes such policies which
provide services or benefits to agriculture or the rural community, public stock-
holding for food security purposes, domestic food aid and certain de-coupled
payments to producers including direct payments to production limiting programmes,
provided certain conditions are met.

Special and Differential Treatment provisions are also available for developing
country members. These include purchases for and sales from food security stocks at
administered prices provided that the subsidy to producers is included in calculation
of AMS. Developing countries are permitted untargeted subsidised food distribution
to meet requirements of the urban and rural poor. Also excluded for developing
countries are investment subsidies that are generally available to agriculture and
agricultural input subsidies generally available to low income and resource poor
farmers in these countries.

Export Subsidies

The Agreement contains provisions regarding members commitment to reduce

Export Subsidies. Developed countries are required to reduce their export subsidy
expenditure by 36% and volume by 21% in 6 years, in equal installment (from 1986
–1990 levels). For developing countries the percentage cuts are 24% and 14%
respectively in equal annual installment over 10 years. The Agreement also specifies
that for products not subject to export subsidy reduction commitments, no such
subsidies can be granted in the future.

THE AGREEMENT ON TRADE RELATED INVESTMENT MEASURES

The Agreement on Trade Related Investment Measures (TRIMs) is one of

Agreements covered under Annex IA to the Marrakech Agreement, signed at the end
of the Uruguay Round (UR) negotiations. The Agreement addresses investment
measures that are trade related and that also violate Article III (National treatment)
or Article XI (general elimination of quantitative restrictions) of the General
Agreement on Tariffs and Trade. An illustrative list of the measures that are violative
of the provisions of the Agreement is annexed to the text of the Agreement. These
pertain broadly to local content requirements, trade balancing requirements and
export restrictions, attached to investment decision making.

WTO AGREEMENT ON TRADE-RELATED ASPECTS OF

INTELLECTUAL PROPERTY RIGHTS (TRIPS)
The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights
(TRIPS), negotiated during the Uruguay Round, introduced intellectual property rules
for the first time into the multilateral trading system. The Agreement, while
recognizing that intellectual property rights (IPRs) are private rights, establishes
minimum standards of protection that each government has to give to the
intellectual property right in each of the WTO Member countries. The Member
countries are, however, free to provide higher standards of intellectual property
rights protection.

The Agreement is based on and supplements, with additional obligations, the Paris,
Berne, Rome and Washington conventions in their respective fields. Thus, the
Agreement does not constitute a fully independent convention, but rather an
integrative instrument which provides “Convention–plus” protection for IPRs.

The TRIPS agreement is based on the basic principles of the other WTO Agreements,
like non-discrimination clauses - National Treatment and Most Favoured Nation
Treatment, and are intended to promote “technological innovation” and “transfer and
dissemination” of technology. It also recognizes the special needs of the least-
developed country Members in respect of providing maximum flexibility in the
domestic implementation of laws and regulations.

Issues under negotiations in the TRIPS council of the WTO

A. Relationship between TRIPS Agreement and the Convention on Biological
Diversity (CBD) and Protection of Traditional Knowledge.

B. Additional protection to geographical indications (GIs) to products other

than wines and spirits.

C. Multilateral GI Register for wines and spirits.

D. Non-Violation and Situation Complaints.

INFORMATION TECHNOLOGY AGREEMENT (ITA-II)

The Information Technology Agreement (ITA), a plurilateral agreement within the

WTO, aims to expand world trade in information technology products considering the
key role this trade plays in development of information based industries and the
dynamic expansion of the world economy while recognizing the goal of raising the
standards of living and expanding the production of and trade in goods. ITA also
desires to achieve maximum freedom of trade in information technology products
and to encourage continued technological development of the information technology
industry on the worldwide basis.

The objective of the Agreement is to bring down tariffs on IT items in stages

to zero level by a specified year. The concessions evolving out of the negotiations
would be in addition to those already agreed upon under the GATT. India joined
the ITA on 25th March 1997.
Issues to be considered

• To what extent would ITA-II enhance market access for our IT products in
third country markets?
• To what extent would further liberalisation of trade in this sector, as
envisaged under the proposed ITA-II, help in expansion of IT hardware and
software industry in India?
• To what extent is the product coverage, as envisaged under proposed ITA-II,
relevant for the development of IT sector in India?
• What should be our response to ITA II?

ELECTRONIC COMMERCE AND WORK PROGRAMME IN WTO

Recognising that Global Electronic Commerce is growing and creating new

opportunities for trade, Trade Ministers at the Second Ministerial Conference of WTO,
Geneva (17-20th May, 1998), adopted a Declaration to commence a work programme
on the subject in the General Council of WTO, for making recommendations to the
next Ministerial Conference. In the meanwhile, it was decided to continue with the
current practice of not imposing customs duty on electronic transmissions, a decision
which was also to be reviewed at the Third Ministerial Conference. The work
programme involving the relevant WTO bodies was to take into account "the
economic, financial and development needs of developing countries", and also the
work being undertaken in other international fora on this subject. Commerce
Minister, in his statement at WTO, emphasized that a standstill on export duties on
electronic transmission should be precursor to a more dynamic regime of technology
flows and free movement of professionals and technicians in this field. The Geneva
Declaration has formed the basis of zero duty on electronic commerce from May
1998 to December, 1999. The Third Ministerial Conference of WTO at Seattle could
not review the work programme relating to e-commerce. Thereafter, no decision has
yet been taken on the issue of extending the period of zero duty on e-commerce.

Work Programme related to E-commerce and deliberations in various

bodies of WTO

A process is underway in the General Council of WTO to discuss and deliberate on

the various multilateral trade issues raised by Members. The objective of the process
is to make recommendations on these issues. While it is the generally held view that
goods ordered electronically but delivered physically would continue to attract the
existing disciplines of WTO, unresolved issues remain in cases of electronic delivery
of goods and services. Some of these issues are being discussed in the various
bodies of the WTO including in the Council for Trade in Services, Council for Trade in
Goods, TRIPS Council and Committee for Trade & Development.

The deliberations have centered around the following issues:

- Characterisation: How should electronic transmissions be characterized i.e., are

such transmissions, goods, or services or something else? Can legal disciplines of
GATT be applied to digitized contents delivered through electronic means, in as far
as these contents could be characterized as goods?
- Market Access related to e-commerce: Whether conduct of trade by electronic
means would change the obligations laid down in the tariff bindings contained in
schedules of member countries. How sould customs duties be applied to electronic
transmissions?

- Classification: How should digitalized products be classified and the extent to

which harmonized system (HS) of classification could be applicable to such products?

-Rules of Origin: To what extent would rules of origin be applicable to an electronic

commerce setting as sophisticated technology allowing for easy duplication and
unlimited routing of digitalized data made it difficult to find out where a transmission
actually originated?

- Standardisation relating to e-commerce: The current expansion of electronic

commerce was based on the freedom of transactions and standards needed to be
developed to promote electronic commerce and not to prevent such a development.
Should WTO aim at developing general disciplines and principles apart from setting
specific standards for electronic commerce?

- Copyright and related rights: A number of issues arise out of electronic

commerce in connection with copy right and related rights, in the light of changes
that digital networks have brought to the way that works and other protected
materials are created, produced, distributed and used. These include implications for
definition of publication, right of re-production, right of communication, moral rights,
right holder, protected subject matter, limitations and collective management. Where
would these be addressed?

- Scope of GATS with respect to electronic delivery of service: Would

electronic delivery of services fall within the scope of General Agreement on Trade in
Services (GATS) since the agreement applies to all services regardless of the means
by which they are delivered? If GATS discipline is applied to electronic delivery of
services what implications does it have on the previous commitments undertaken in
respect of the different services sectors? Are MFN obligations applicable to the supply
of services through electronic means?

- Development dimension of e-commerce: The importance of taking into account

revenue and fiscal implications of electronic commerce for developing countries and
the importance of developing human resources and critical infrastructure in this
regard.

- Zero duty on electronic transmission: There are proposals that the zero duty
on e-commerce be extended for an indefinite period. In case coming few years
witness a substantial growth in digitized delivery of goods and services, would this
not lead to foreclosing of options for revenue likely to accrue in future?

TRADE AND ENVIRONMENT

The WTO has no specific agreement dealing with the environment. But a number of
WTO agreements include provisions dealing with environmental concerns. The
Agreement on Technical Barriers to Trade and the Agreement on Sanitary and
Phytosanitary Measures address environment related issues. Environment issues
have also been addressed in GATT Article XX (b) and (g) as part of general
exceptions.

After the conclusion of the Uruguay Round in 1994, a Committee on Trade and
Environment (CTE) was established in the WTO. The broad mandate of the CTE
was to promote an understanding of the relationship between trade measures and
environmental measures for achieving sustainable development and to make
recommendations on the need for modifications of the provisions of the multilateral
trading system to ensure compatibility with an open, equitable and non-
discriminatory trading system.

In keeping with the above mandate, the CTE developed a comprehensive work
programme, which covers the items as below:

Item 1: The relationship between the provisions of the multilateral trading system
and trade measures for environmental purposes, including those pursuant to
Multilateral Environmental Agreements (MEAs).

Item 2: The relationship between environmental policies relevant to trade and

environmental measures with significant trade effects and the provisions of the
multilateral trading system.

Item 3: The relationship between the provisions of the multilateral trading system
and charges and taxes for environmental purposes and the relationship between the
provisions of the multilateral trading system and requirements for environmental
purposes relating to products, including standards and technical regulations,
packaging, labelling and recycling.

Item 4: The provisions of the multilateral trading system with respect to the
transparency of trade measures used for environmental purposes and environmental
measures and requirements which have significant trade effects.

Item 5: The relationship between the dispute settlement mechanisms in the

multilateral trading system and those found in Multilateral Environment Agreements.

Item 6: The effect of environmental measures on market access, especially in

relation to developing countries, in particular to the least-developed among them,
and environmental benefits of removing trade restrictions and distortions.

Item 7: Issue of export of domestically prohibited goods (DPGs)

Item 8: The relevant provisions of the Agreement on Trade-related aspects of

Intellectual Property Rights (TRIPS).

Item 9: The work programme envisaged in the decision on Trade in Services and
the Environment.
Item 10: Inputs to the relevant bodies in respect of appropriate arrangements for
relations with intergovernmental and non-governmental organizations referred to in
Article V of the WTO Agreement.

TECHNICAL BARRIERS TO TRADE

Technical regulations and product standards may vary from country to country.
Different regulations and standards make it difficult for producers and exporters to
cater to different markets. So, if regulations are set arbitrarily, they could be used
for protecting the domestic industry and can become obstacles to trade. The
Agreement on Technical Barriers to Trade tries to ensure that regulations, standards,
testing and certification procedures do not create unnecessary obstacles. But at the
same time, the TBT Agreement recognizes the countries’ rights to adopt the
standards they consider appropriate — for example, for human, animal or plant life
or health, for the protection of the environment or to meet other consumer interests.
The WTO members are not prevented from taking measures necessary to ensure
their standards are met. But to prevent such diversity, the Agreement encourages
countries to use international standards where these exist, but does not require
them to change their levels of protection as a result.

The TBT Agreement also sets out a code of good practice for the preparation,
adoption and application of standards by the central government bodies. It also
includes provisions describing how local government and non-governmental bodies
should apply their own regulations — normally they should use the same principles
as the central governments.

GENERAL AGREEMENT ON TRADE IN SERVICES (GATS)

The General Agreement on Trade in Services was created to extend the multilateral
trading system to service sector, in the same way the General Agreement on Tariffs
and Trade (GATT) provides such a system for merchandise trade. The Agreement
entered into force in January 1995

SANITARY AND PHYTO-SANITARY (SPS) AGREEMENT

The Agreement on the Application of Sanitary and Phytosanitary Measures - also

known as the SPS Agreement was negotiated during the Uruguay Round of the
General Agreement on Tariffs and Trade, and entered into force with the
establishment of the WTO at the beginning of 1995.

Under the SPS agreement, the WTO sets constraints on members' policies relating to
food safety (bacterial contaminants, pesticides, inspection and labelling) as well as
animal and plant health (imported pests and diseases).
 Is Trade really an Engine for Growth
and Development for Developing
Country?
Recent Trends in World Trade

Trade occurred since the time of the Stone Age when people exchanged goods and
commodities by means of barter trade. However, no currency was involved until later
time when it was used as media of transaction.

Trade has expanded at an accelerating rate since the end of World War II. Statistics
show that over the past 55 years’ time between 1950 and 2004, global trade
increased 145 times at a rate of 2.6% per year. The trade has grown even faster
over the recent 5-year period (2000-2004), increasing from US$13,069 billions to
US$18,220 billions in 2004 at a rate of 9% p.a. (UNCTAD 2005). The global trade
grew faster than the overall economy during the time, thus creating a huge amount
of money flowing around the globe and generating a lot of employment.

Statistics also show that countries, particularly developing countries, open their
economies more for international trade as evidenced from the increased contribution
of trade to GDP from 23% to 38% during 1985-1997.

Two important factors are regarded as the main contributors to an upward trend of
the global trade growth:

1. Advances in transportation, communication and information technologies that

helped facilitating trade, reducing transaction and transportation costs, and
increasing economy of speed and efficiency which lead to an increase in
trade.
2. Improvements in trading environment of negotiation and formation of
multilateral, regional and bilateral trade agreements which reduced tariff,
non-tariff barriers, and trading costs; increased competitiveness; and
expanded trade.

Disproportionate Gains from Trade

Although trade has had a significant role in bringing about growth and development
to the global economy, it was the developed countries which occupied more than
65% of total world trade volumes in 2002 reaping benefits from international trade.
Relevant research analyses and statistics show that developed countries obtained
benefits and proportionate gains from trades mostly due to better terms of trade and
efficiency gains. On the contrary, the disproportionate gains, and for some a welfare
loss, were found to generally fall upon the less-developing countries as results of the
combined effects of limited market access, domestic and export subsidies put in
place by the developed countries, unfair competition and other trade/non-trade
barriers.
Bias against Developing Countries

Although purportedly a democratic institution, the WTO is dominated by the leading

industrialized countries and by the corporations of these countries. The logic of
commercial trade pervades the WTO. The development goals articulated when GATT
was first formed have been put aside—or are wrongly assumed to be the natural
consequence of increased trade. Developing countries have little power within the
WTO framework for the following reasons:

1. Although developing countries make up three-fourths of WTO membership

and by their vote can in theory influence the agenda and outcome of trade
negotiations, they have never used this to their advantage. Most developing
country economies are in one way or another dependent on the U.S., the EU,
or Japan in terms of imports, exports, aid, security, etc. Any obstruction of a
consensus at the WTO might threaten the overall well-being and security of
dissenting developing nations.
2. Trade negotiations are based on the principle of reciprocity or "trade-offs."
That is, one country gives a concession in an area, such as the lowering of
tariffs for a certain product, in return for another country acceding to a
certain agreement. This type of bartering benefits the large and diversified
economies, because they can get more by giving more. For the most part,
negotiations and trade-offs take place among the developed countries and
some of the richer or larger developing countries.
3. Developing countries have fewer human and technical resources. Many
cannot cope with the 40-50 meetings held in Geneva each week. Hence they
often enter negotiations less prepared than their developed country
counterparts.
4. Developing countries have discovered that seeking recourse in the dispute
settlement system is costly and requires a level of legal expertise that they
may not have. Furthermore, the basis on which the system is run—whether a
country is violating free trade rules—is not the most appropriate for their
development needs.

Nelson Mandela, commenting on the Uruguay Round, said: "The developing countries
were not able to ensure that the rules accommodated their realities... it was mainly
the preoccupations and problems of the advanced industrial economies that shaped
the agreement." He added that rules applied uniformly are not necessarily fair
because of the different circumstances of members.
 Failure of Doha Round
The WTO talks were as much a distraction as an opportunity. The agenda was aimed
at a world that no longer exists. Negotiations of some form should and will resume:
the questions are "where?" and "between whom?" Success will require a different
game, with different rules and different players. This column considers the options.

Trade negotiators in Geneva have finally admitted the obvious and given up on their
efforts to negotiate a new WTO trade agreement. As a result, the Doha Round of
trade negotiations has been allowed to collapse. Next comes the blame game, with
finger pointing across the Atlantic and across the rich-poor-countries trench.

Negotiations aimed at a world that no longer exists

Neither the collapse of the Round, nor the recriminations to follow, should be taken
too seriously. The mandate for negotiations under the auspices of the Doha Round
has fallen further and further behind the pace of change in the world economy. At
the same time, there never was much overlap between the stated goals of the
Round, and the actual room for manoeuvre afforded negotiators. Similarly, there will
be little overlap between the real causes of the collapse, and the recriminations to
follow. In short, the negotiations:

• framed issues for a world that no longer exists,

• required actions that developing countries are unwilling to undertake, and
• fell victim to a shift in WTO Member composition and behavior that makes
Members increasingly hesitant to make concessions in the WTO where the
MFN clause means that a concession to relatively small players like Chile or
Australia is automatically extended to China and India.

Success requires a different game, with different rules and different players

Consider agriculture – the proximate cause of the Doha collapse. According to World
Bank commodity price indexes, in 2001 grain prices were only 70 % of their nominal
1995 levels. In defining the negotiating agenda for the Doha Round, the focus of
commodity exporters in the WTO (Brazil, Argentina, Australia, etc.) has been to raise
these prices by eliminating price-distorting policies. At the same time, major
importers (India, China) have also been concerned about the impact of low prices on
their farmers. Reflecting this concern, the policy research program at international
organizations -- World Bank, FAO, IFPRI – has highlighted the impact of agricultural
trade on poverty. (Hertel and Winters 2005). This set of concerns is also at the root
of the game-ending impasse on special safeguards involving China, India, and the
US. But this world no longer exists.

A combination of events since 2001 has made these issues moot. Rising incomes in
Asia, combined with adverse shifts in growing conditions, have combined to fuel
rapid increases in commodity food prices. At the same time, bio-fuels initiatives in
the OECD have, somewhat unintentionally, reinforced the process of rising prices The
role of energy prices in this regard is also a reflection of adverse supply conditions
(driven by politics rather than climate) and rapid income growth. The consequence is
that commodity grain prices, as of June 2008, are 218% above 2001 levels in real
terms (after adjusting for general inflation), and as a consequence we have seen
food riots across Asia.

Given this, the Doha Round agenda seems misguided to say the least. Unless there
is a dramatic drop in demand conditions (i.e. we somehow unwind recent income
growth in India and China and South East Asia and prevent future growth), special
safeguards should be a non-issue for developing country farmers growing staple
grains, and for OECD exporters. Additionally, the real political risk for the least
developed countries is further increases in food prices. Indeed, they are demanding
action on this issue from the G8. Yet ironically, if India and Brazil did get what they
asked for on farm subsidies, and if the EU and US did eliminate all targeted
subsidies, prices would go up even more.

Impasses over agriculture are as much an excuse as a cause of the

breakdown

In a sense, developing countries are collectively asking that food prices go up and
down at the same time. The inconsistency reflects divergent interests across the
newer, non-OECD members of the WTO. It also highlights the fact that remaining
impasses over agriculture are as much an excuse as a cause. The problem is
irreconcilable differences in views on trade policy, linked to differences in stages of
economic development.

Non-agricultural issues

Moving past agriculture to NAMA and services, developing country gains at this point
really require South-South dialog and South-South initiatives at liberalization.

This is the message from much of the policy modeling literature. Indeed, model-
based analysis of recent NAMA proposals simply reinforces the message from earlier
research on the impacts of multilateral trade liberalization, namely: “active
developing country participation in terms of market access concessions is critical to
their prospects. If developing countries continue for the most part with business as
usual after the round, in terms of trade policy, there is little scope for actual benefits
accruing to developing countries.” (Francois, van Meijl and van Tongeren 2005).

The most egregious barriers faced by the South are actually in the South, and major
developing country players, sitting behind 15% or 20% average tariffs, are a bit
disingenuous when howling about the 3% average OECD manufacturing tariff they
face across the rich-poor income trench. Yet, for a complex set of reasons, the NAMA
modalities for tariff reductions (the proposed rules for tariff reductions) do indeed
point in the direction of business as usual. (See Francois and Martin 2003, and
Francois et al 2005, regarding "binding overhang."). In the end game, continued
rhetoric and name calling directed at the OECD is a signal that developing countries
are not yet able or ready to confront this issue. Like the impasse in agriculture,
blaming the OECD is cover for further inertia at home in the developing world.

Is the collapse of Doha a bad thing?

Given that the Doha Round was focused on an agenda misaligned with the real
world, its collapse may be a good thing. The older WTO Members, the core of the old
GATT system, have been firmly committed to a process of deeper integration and
ongoing liberalization since the end of the Second World War. The newer Members,
brought on board during the Uruguay Round or with the creation of the WTO, do not
share the same philosophy. They are at different stages of development, and as a
result have different perceptions about the trade off between global markets and
national economic interests.

In addition, the MFN clause may now be a problem. It was meant to protect smaller
Members like Luxemburg and New Zealand in the negotiating tumble between larger
economies like the US, Europe, and Japan. It was also meant to serve as a safeguard
against resumption of pre-War preferential colonial trading regimes. Yet we now
have large and rapidly growing economies that can in theory get away with refusing
to make concessions, while still gaining from any MFN concessions made between
OECD countries. (To be blunt, there is hesitation to make indirect concessions to
China, whether or not people are willing to name the dragon in the middle of the
room.)

Despite MFN, we also have an emerging system of trade preferences that looks
uncomfortably similar to the old colonial trading systems. For the OECD and middle
income developing countries, plurilateral negotiations may be the only way forward.

OECD nations will move forward, but will it be via the WTO?

We can expect the OECD Members to move forward on a number of fronts, including
services, various manufacturing sectors, product standards recognitions, and a range
of other issues. The question is whether or not this happens in Geneva. Will they be
allowed to take the form of WTO plurilateral agreements ensconced in Geneva and
open to new signatories (so developing countries can sign on when ready), or forced
to take the form instead of (yet more) variations on the theme of regional
agreements.

One option, for example, is a zero-for-zero plurilateral agreement on manufacturing

tariffs, perhaps with an agreed common flat rate on third countries to mitigate third
country impacts and avoid rules of origin problems. (Francois 2007b. Also see
Baldwin 2008 on using regional approaches to reinforce multilateralism). Another
possibility is sector agreements on services (possibly on an MFN basis). For
agriculture, apart from some narrow issues (cotton, bananas), we really need to wait
until the emerging commodity price structure becomes clearer, and the public
finance underpinnings of the US and European subsidy schemes start to crumble
under the pressure of competing fiscal needs -- like the looming Geriatric Boom that
is the echo of the Baby Boom. (Francois 2007a,c).

The Doha Development Round was as much distraction as opportunity, with an

agenda focused too much on intractable and outdated issues. Negotiations of some
form should and will resume. The questions are "where?" and "between whom?" It is
important that (developing) WTO Members allow them to take shape in Geneva,
even if they do not have an immediate interest in participation, so that the
plurilateral agreements that emerge are open to future accession. This means that
WTO Members will need to be flexible in defining and allowing scope for sector level
negotiations, or negotiations between a subset of Members, in place of an integrated
process involving all Members.
Additional reasons are:
The recently concluded Doha round of trade negotiations that were held under the
auspices of the World Trade Organisation (WTO) collapsed yet again, and possibly for
the final time. WTO Director, Pascal Lamy, announced on 30 July, with great
sadness, that the world had allowed a great opportunity to.... "slip through its
fingers."

The trade talks that have been limping along for the last seven years, were initiated
amidst great hope and fanfare in Doha, Qatar in November, 2001. They were
expected to bring about a more open world trade order, in terms of lowering trade
barriers, tariffs and facilitating the freer flow of goods, services and personnel. The
WTO-designed model of free flow of trade amongst its members, however, has not
delivered its promises of increased economic prosperity, and in fact the economic,
political, social and environmental situation has worsened in most developing and in
some developed countries.

The recently concluded negotiations, were seeking to obtain greater cuts in tariffs
and agricultural subsidies and agree on the modalities to achieve these reductions.
Traditionally, WTO negotiations are very complex procedures, as the guiding
principles have to be transparency, flexibility and consensus and mainly the
realisation that no one formula can fit the requirements and needs of all member
states. It is the consensus that has chiefly eluded these talks.

Doha Round 2008 sent several important messages by its collapse. It signaled that
governments of most developing countries are unwilling to agree to terms that are
unacceptable to their people and sacrifice their concerns for the greater good of free
trade. There is a strong commitment to put the concerns of small farmers first, and a
refusal to compromise policy space by agreeing to measures that can jeopardise
their livelihoods and economic security. The major stumbling block was agricultural
subsidies. The message was clear, the OECD countries can no longer force their
heavily subsidised agricultural products on emerging economies in Asia and Latin
America.

The resounding "NO" also heralds a new world order politically, where American
hegemony is seen to be on a decline. Emerging economies like India and China,
which are identified as the main dissenters at the Doha Round, are positioning
themselves in asserting their rights to defend their economic independence by
protecting their agricultural sectors, especially since the acceptance of the proposals
would have sounded a death-knell for the small food producers and indigenous
agricultural micro-economies.

The US and the EU can no longer dictate the direction these economies will take, or
regulate their momentum and expansion.

An unequal playing field is created by subsidies offered to their agricultural sector by

developed countries, and the livelihood of millions of poor farmers and agricultural
workers in the less developed regions of the world, face extinction.
The attention has focussed largely on the extent of market access that can be
garnered by the developed countries for their exports, without much consideration
for their weaker importing partners to gain equal access for their own exports.

On one-hand, these subsidies allow for cheap agricultural products to flood markets
in developing regions, severely affecting local production; on the other hand, highly
subsidized commodities, like cotton, rice etc. flood the markets and force down
prices, threatening the livelihood of millions of small growers and farmers.

A case in point is African cotton which competes with heavily subsidized American
cotton, on the world markets. ..."Since almost all the cotton produced by West Africa
farmers is exported onto the world market, it competes directly with subsidized US
cotton crippling the livelihoods of poor African farmers. Millions of cotton farmers risk
losing their main source of livelihood with the issue of subsidy to farmers by the
American government now in abeyance. Removing subsidies to the over 20,000
American farmers would result in a higher world price of cotton. Oxfam America
estimates 8 to 20 per cent increase in household incomes by farmers if the world
price of cotton were to increase by six to 14 per cent.

By removing these subsidies, the price of cotton would rise, and the lives of millions
of poor farmers in Africa, would greatly improve.

The Doha Round originally had rather different objectives and focus.

The negotiations held the promise of ushering in a new era of open and free flowing
trade, in which smaller, less developed economies would stand to gain access to new
and expanded markets. It also hoped to convince the US and the EU to re-examine
their excessively protectionist farm subsidies, which had skewed the world markets
for agricultural goods.

Liberalization of agriculture and trade across-the-board, without considerations or

adjustments for small-scale producers, can have life threatening effects and can be
instrumental in dramatically raising poverty levels in developing countries. Most
developing countries saw these negotiations merely as a means for huge, agro-based
corporations like Monsanto, etc. to establish a large, permanent presence in
developing countries, crippling their own small-scale agro-businesses and imposing
their policies and products on the local markets and gaining control on food supply
mechanisms.

The US and EU are seen by the developing world as the major culprits in the failure
of these talks as their focus shifted away from the original development based
agenda to one that was self-serving and revolving around expanding their export
base at the cost of the developing world. Officially, however, the blame was placed
on countries like India, China and Brazil to cause first the stalemate and eventually
the collapse of the talks by their dissension.

Mritiunjoy Mohanthy, assistant professor of economics, Indian Institute of

Management (IIM) Calcutta) explores the reasons that led India to voice its
resounding "No". He explains, in his recent article, WTO flop show - why it was right
to say no:"India was "looking at protecting the livelihood of farmers"[i]. But for once
there might be substance to rhetoric. For a while when it looked as if there was a
reasonable probability that a deal might be done, it was clearly going to be at the
expense of policy space in agriculture. India’s farmers, the G-33 and developing
countries with a defensive interest in agriculture must have heaved a huge sigh of
relief...." (rediff.com 30,July 2008).

He goes on to explain that developing countries are becoming vocal in their

reluctance to sacrifice policy space available to them to address issues of protection
of livelihoods and reduction of poverty at the alter of globalisation and world trade.
His argument is that marginal and small farmers and farm workers in developing
countries like India, are already leading very precarious lives, the balance between
survival and annihilation is fragile and delicate. They are very vulnerable to natural
and political calamities and upheavals as there are few safety nets available to them.

It is therefore unrealistic to then expect these groups to effectively compete in world

markets, where their goods are pitted against those produced by large units enjoying
heavy subsidies by the world’s most strong economies.

The issue he sees at the heart of the problem is not the question of agricultural
modernization, but it is the way developing countries are being asked to implement
it. That is the crux and it was inevitable that the dissenting voices quashed the
negotiations to the chagrin of the OECD members. The modernisation strategy
suggested, was at the expense of small and marginalised farmers. He concludes that
....." it is important to remember that 95 percent of the world small and marginal
farmers live in poor, developing countries and that 75% of the world’s poor survive
on agriculture. For developing countries therefore the key to both food security and
livelihood security is the ability to protect small and marginal farmers from unfair
competition and the policy space within which develop an agricultural policy centered
on small-farmers and the maximization of employment growth. Therefore, once
again, China, India and developing countries with defensive interests in agriculture
held firm and, despite the threats and blandishments and the nature of other deals
that might be cut, said clearly that policy space in agriculture is not tradable. It was
right to say no. "

One may assume from that with the failure of the Doha Round, the future of trade
talks is doomed, and a great opportunity is lost for true globalisation of world trade.

This doomsday scenario is not shared by all. Many sincerely believe that in fact
within the ashes of its failure, lie a future path for more vigorous and fruitful
multilateral negotiations and discussions, based on a more egalitarian and broad-
based framework. In all practical sense it will be "business as usual" for many and
the process of trying to reach new understandings and concessions will continue
amongst trading partners both large and small.

In view of the present food crisis, it is imperative for developing countries to ensure
food security and protection of their policy space on issues concerning protection of
small farmers.

By its failure, the Doha Round provides a opportunity to the developing countries to
formulate stronger trade and agricultural policies that allow them more muscle and
clout. It will give the US and the EU an opportunity to re-examine their existing
policies of high farm subsidies and encourage a re-evaluation of negotiating tools if
they are to expand their markets. New challenges have been thrown up by the
demise of the Round. The gauntlet has been flung down by the developing world and
it awaits to see what adjustments and compromises are to made by its stronger
trading partners.

It is clear that the old way of doing business by partial coercion and dictation, now
stand repudiated. The newly emerging forces like India, China and Brazil, that are
driving the economic engines of Asia and Latin America, are unwilling to
complacently accept the status quo and are forging ahead to take a leadership role in
international politics and trade. There is an emergence of political and economic
readjustment and realignment.

The WTO will continue to function as a multilateral trade facilitator, and if it wishes to
remain effective and viable, it will have to rethink its future role in tackling and
managing the diverse requirements of its members. Its’ negotiating process needs to
be more inclusive and transparent, encouraging greater debate and open discussion
versus the present mode of closed-door negotiations. A greater level of democratic
debate and discussion will ensure that every stage of the negotiations allow the
weaker, more vulnerable participating countries to safeguard their interests and
ensure that their concerns are addressed and not sidelined.

Trade is always a means of achieving economic development, never an end in itself.

It must serve a greater purpose of lifting communities out of poverty instead of

increasing it. If the world community wishes to achieve a truly global world trading
market, adjustments have to be made to include the concerns of all the participants,
both developed and developing countries.
 India and WTO
Problems facing India in WTO & its Implementation:

There are several problems facing these Multilateral Trade agreements:

- Predominance of developed nations in negotiations extracting more benefits from

developing and least developed countries

- Resource and skill limitations of smaller countries to understand and negotiate

under rules of various agreements under WTO

- Incompatibility of developed and developing countries resource sizes thereby

causing distortions in implementing various decisions

- Questionable effectiveness in implementation of agreements reached in past and

sincerity

- Non-tariff barriers being created by developed nations.

- Regional cooperation groups posing threat to utility of WTO agreement itself, which
is multilateral encompassing all member countries

- Poor implementation of Doha Development Agenda

- Agriculture seems to be bone of contention for all types of countries where France,
Japan and some countries are just not willing to budge downwards in matter of
domestic support and export assistance to farmers and exporters of agriculture
produce.

- Dismantling of MFA (Multi Fiber Agreement) and its likely impact on countries like
India

- Under TRIPS question of high cost of Technology transfer, Bio Diversity protection,
protection of Traditional Knowledge and Folk arts, protection of Bio Diversities and
geographical Indications of origin, for example Basmati, Mysore Dosa or Champagne.
The protection has been given so far in wines and spirits that suit US and European
countries.

Implications for India

It appears that India does not stand to gain much by shouting for agriculture reforms
in developed countries because the overall tariff is lower in those countries. India will
have to tart major reforms in agriculture sector in India to make Agriculture globally
competitive. Same way it is questionable if India will be major beneficiary in
dismantling of quotas, which were available under MFA for market access in US and
some EU countries. It is likely that China, Germany, North African countries, Mexico
and such others may reap benefit in textiles and Clothing areas unless India embarks
upon major reforms in modernization and up gradation of textile sector including
apparels.

Some of Singapore issues are also important like Government procure, Trade and
Investment, Trade facilitation and market access mechanism.

In Pharma-sector there is need for major investments in R &D and mergers and
restructuring of companies to make them world class to take advantage. India has
already amended patent Act and both product and Process are now patented in
India. However, the large number of patents going off in USA recently, gives the
Indian Drug companies windfall opportunities, if tapped intelligently. Some
companies in India have organized themselves for this.

The Objective of WTO Reiterated:

It is very clear that the intention of the negotiators was to use trade as an
instrument for development, to raise standards of living, expand production, keeping
in view, particularly, the needs of developing countries and least-developed
countries. The WTO must never lose sight of this basic principle. Every act of
implementation and of negotiation, every legal decision, has to be viewed in this
context. Trade, as an instrument for development, should be the cornerstone of all
our deliberations, decisions and actions. Besides, the system should be seen to be
equitable and fair. It must be used in such a manner that the letter and spirit of the
Agreements is fully observed. 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. It should
also be recognized that different economies have different features and structures,
different problems, different cultures. The pace of change must be carefully
calibrated to take into account such differences. All Members should guard against
unilateral action that cuts at the root of multilateral agreement and consensus.

Developing countries have generally been apprehensive in particular about the

implementation of special and differential treatment provisions (S&D) in
various Uruguay Round Agreements. Full benefits of these provisions have not
accrued to the developing countries, as clear guidelines have not been laid
down on how these are to be implemented. "

India and the developing countries, which were already under the burden of fulfilling
the commitments undertaken through the Uruguay Round Agreements, and who also
perceived many of the new issues to be non-trade issues, resisted the introduction
of these new subjects into WTO. They were partly successful. The Singapore
Ministerial Conference (SMC) set up open-ended Work Program to study the
relationship between Trade and Investment; Trade and Competition Policy; to
conduct a study on Transparency in Government Procurement practices; and do
analytical work on simplification of trade procedures (Trade Facilitation).
 What India should do?
The most important things for India to address are speed up internal reforms in
building up world-class infrastructure like roads, ports and electricity supply. India
should also focus on original knowledge generation in important fields like
Pharmaceutical molecules, textiles, IT high end products, processed food, installation
of cold chain and agricultural logistics to tap opportunities of globalization under
WTO regime.

India's ranking in recent Global Competitiveness report is not very encouraging due
to infrastructure problems, poor governance, poor legal system and poor market
access provided by India.

Our tariffs are still high compared to Developed countries and there will be pressure
to reduce them further and faster.

India has solid strength, at least for mid term (5-7 years) in services sector primarily
in IT sector, which should be tapped and further strengthened.

India would do well to reorganize its Protective Agricultural policy in name of rural
poverty and Food security and try to capitalize on globalization of agriculture
markets. It should rather focus on Textile industry modernization and developing
international Marketing muscle and expertise, developing of Brand India image, use
its traditional arts and designs intelligently to give competitive edge, capitalize on
drug sector opportunities, and develop selective engineering sector industries like
automobiles & forgings & castings, processed foods industry and the high end
outsourcing services.

India must improve legal and administrative infrastructure, improve trade facilitation
through cutting down bureaucracy and delays and further ease its financial markets.

India has to downsize non-plan expenditure in Subsidies (which are highly ineffective
and wrongly applied) and Government salaries and perquisites like pensions and
administrative expenditures.

Corruption will also have to be checked by bringing in fast remedial public grievance
system, legal system and information dissemination by using e-governance.

The petroleum sector has to be boosted to tap crude oil and gas resources within
Indian boundaries and entering into multinational contracts to source oil reserves.

It wont be a bad idea if Indian textile and garment Industry go multinational setting
their foot in western Europe, North Africa, Mexico and other such strategically
located areas for large US and European markets.

The performance of India in attracting major FDI has also been poor and certainly
needs boost up, if India has to develop globally competitive infrastructure and
facilities in its sectors of interest for world trade.
WTO policies and its effect
on developed and
developed countries

With special reference reference

to India