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Updated: October 12, 2010 11:51 IST

WTO and Indian economy

U. Sankar
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The World Trade Organisation (WTO) was created on January 1, 1995 to promote world trade. The multilateral trade agreements include the General Agreement on Tariffs and Trade (GATT) 1994 and its related agreements; the General Agreement on Trade in Services (GATS); and the Trade-related Intellectual Property Rights (TRIPS). In addition to these agreements, Annexures 1 and 2 cover the dispute settlement mechanism and Annexure 3 the trade policy mechanism. A noteworthy feature is that these three Annexures are part of a “single undertaking” approach. The fundamental principles of the regime are: most favoured-nation (treating all countries equally); national treatment (treating foreigners and locals equally); and freer trade (reductions in tariffs and removal of non-tariff barriers).

The WTO has 153 members and about a two-thirds of them are developing countries. The special and differential treatment provisions allow the developed countries to treat the developing countries more favourably than the other WTO members. Developing countries face some challenges in coping up with the trade regime. They are: fulfilling commitments under WTO agreements which require legal and administrative reforms; capacity-building to articulate concerns and trade-offs during the negotiations; adaptation and mitigation policies to contain the adverse effects of globalisation; and the shrinking of policy space because of the global commitments. They are conscious that they did not do the preparatory work at the negotiations stage. They were hesitant about the GATS and the TRIPS, but accepted them because all the agreements formed a “single undertaking”. Further, they perceive that the globalisation process is skewed (greater mobility of goods and capital and lesser mobility of labour) and that most of the S&DT provisions are not mandatory. The Doha ministerial conference (2001) tried to incorporate development concerns in the new round of trade negotiations.

Perspective

This book, which is a compilation of 18 papers, provides the developing countries' perspective, negotiating options and strategies, market access, trade facilitation and government procurement, TRIPS and GATS, and growth, poverty and inequality. Manoj Pant notes that, with the single-undertaking clause allowing cross-sectoral bargaining, the art of negotiations is something that developing countries have to learn.

Arvind Panagariya argues that, the continued asymmetries in the influence of the rich and poor countries notwithstanding, the WTO is by far India's best hope for protecting its trading rights. He says India, while evolving its negotiating strategies, must take into consideration the direct benefits that flow from the demands put forward, define its negotiating positions positively rather than negatively, and take a hard look at the endgame.

As for market access, developing countries want trade in agriculture to be freed from domestic supports and other non-tariff distortions and the tariff escalations for labour-intensive products — such as textile and clothing and leather products — in developed countries to be removed.

The TRIPS agreement has been a contentious issue for the developing countries because it affects the structure and functioning of the pharmaceutical industry, which has serious implications for health care.

Declaration

The initiatives taken by Brazil, India, and South Africa led to the adoption of a Declaration on TRIPS and public health by the WTO ministerial conference in 2001. This declaration acknowledges the primacy of the countries' right to grant compulsory licences and the freedom to determine the grounds on which such licences are granted and also the right to determine what constitutes a national emergency or other circumstances of extreme urgency for the purpose of implementing the TRIPS agreement.

In respect of GATS, India's comparative advantages rest with Mode 1 (cross-border supply of service) and Mode 4 (provision of services requiring the temporary movement of natural persons).

Consensus

The European Union and the United States have made plurilateral requests to India for greater commercial presence rights (Mode 3). Rashmi Banga examines the competitiveness and preparedness of different service sectors in India for carrying the liberalisation process forward, besides highlighting the domestic and external constraints. There seems to be a consensus that, in the long term, growth in trade will accelerate economic growth and may reduce income inequality and that, in the short term, there is a possibility of the inequality widening in the absence of appropriate domestic policies.

Overall, the book gives an exhaustive and lucid account of the WTO issues, the perceptions of the developed as well as the developing countries on various trade issues, and how national circumstances of countries influence negotiation strategies and formations of coalitions. However, it does not deal with the recent global melt-down and its implications for the global trading regime. Trade-related policymakers and students interested in policy issues affecting international trade will find the publication useful.

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