The impact of WTO in India

Impact of WTO on India

India is a founder member of the General Agreement on Tariffs and Trade (GATT) 1947 and its successor, the World Trade Organization (WTO), which came into effect in 1995 after the conclusion of the Uruguay Round (UR) of Multilateral Trade Negotiations. India’s participation in an increasingly rule based system in the governance of international trade is to ensure more stability and predictability, which ultimately would lead to more trade and prosperity for itself and the 134 other nations which now comprise the WTO. India also automatically avails of MFN and national treatment for its exports to all WTO Members.

Ministerial Conferences of WTO

The first Ministerial Conference held in 1996 in Singapore saw the commencement of pressures to enlarge the agenda of WTO. Pressures were generated to introduce new Agreements on Investment, Competition Policy, Transparency in Government Procurement and Trade Facilitation. The concept of Core Labor Standards was also sought to be introduced. India and the developing countries, who 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). Most importantly the SMC clearly declared on the Trade- Labor linkage as follows:

“We reject the use of labor standards for protectionist purposes, and agree that the comparative advantage of countries, particularly low-wage developing countries, must in no way be put into question. In this regard we note that the WTO and ILO Secretariat will continue their existing collaboration”.

The Second Ministerial Conference of WTO, held at Geneva in May 1998, established a process to prepare for the Third Ministerial Conference and to submit recommendations regarding the WTO’s future work program, which would enable Members to take decisions at the Third Ministerial Conference at Seattle.

The Geneva Ministerial Conference (GMC) Declaration had identified the following issues for the General Council’s work, paragraphs 9(a) to 9(b) of the Declaration:

    1. Issues, including those brought forward by Members, relating to implementation of existing agreements and decisions;
    2. The negotiations already mandated at Marrakesh (Agriculture and Services) and to ensure that such negotiations begin on schedule;
    3. Mandated reviews already provided for under other existing agreements and decisions taken at Marrakesh;
  1. Recommendations concerning other possible future work on the basis of the work program initiated at Singapore Ministerial Conference consisting of:
    1. Trade and Investment;
    2. Trade and Competition Policy;
    3. Transparency in Government Procurement;
    4. Trade Facilitation.
  2. Recommendations on the follow-up to the High-Level Meeting on Least-Developed countries;
  3. Recommendations arising from consideration of other matters proposed and agreed to by Members concerning their multilateral trade relations.

The 3rd Ministerial Conference held in Seattle during 30th November-3rd December, 1999 was being looked up by many, specially in the developing countries, as a launching pad for a comprehensive round of negotiations.

In the preparatory process in the General Council of the WTO (September 1998 to September 1999), new issues which were proposed for the negotiating agenda by some Members under paragraph 9(d) are as follows:

  1. Industrial Tariffs
  2. Global Electronic Commerce
  3. Trade and Labour Standards
  4. Trade and Environment
  5. Coherence in the interaction of WTO and other international organizations.
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Outcome of the Seattle Ministerial Conference of WTO

The Indian delegation to the Third Ministerial Conference of the WTO was led by the Union Minister of Commerce & Industry, Mr. Murasoli Maran. The delegation also included Members of Parliament, senior officials from different Ministries and representatives from the apex Chambers of commerce and industry.

The Seattle Conference attracted wide attention because of proposals by some countries to press for the launching of a comprehensive round of negotiations covering subjects as wide ranging as labour issues, coherence in global economic architecture, agriculture etc. Even before the commencement of the Conference there were widespread protests and demonstrations in Seattle by a number of anti-WTO groups ranging from environmental activists to labour unions. The inaugural session which was to be held in the forenoon of 30th November, 1999 had to be abandoned because of disturbances. The plenary which was to start in the afternoon on the same day had to be held under heavy police protection.

The Chairmen of various Working Groups tried to narrow down the differences in their respective groups with a view to arriving at a consensus in the draft Ministerial text that had been transmitted from the Geneva preparatory process. However, in view of the wide divergence of views, no group could present draft texts for inclusion in the Ministerial declaration acceptable to all the members.

As there was no prospect of reaching a conclusion on a large number of issues, it was decided after consultation among key members that it would not be practicable to adopt any Ministerial declaration. The Chairperson of the Conference made only a brief statement on 3rd December followed by brief reports by the Chairmen of the various groups. The Chairperson observed that divergences of opinion remained that would take time to be narrowed down. It was therefore, decided to suspend the work of the Seattle Ministerial Conference.

While the above constituted the overall outcome, the deliberations and consultations which took place on several of the important issues are briefly outlined below subject-wise (these positions are indicative and not definitive since a number of delegations, including ourselves, made it clear that nothing was agreed until everything was agreed).

  1. Implementation issues : A good deal of discussions took place on this subject in Seattle, further to the extensive consultations held in Geneva earlier. The Working Group Chairman (Canada) came up with a final proposal (similar to what was mooted by the Secretariat) that meant a few immediate decisions at Seattle and establishment of a special mechanism to examine and make recommendations within one year, and in any case by the Fourth Ministerial Session, on other implementation issues. The Chairman’s text also proposed negotiations in respect of Anti-Dumping and Subsidies Agreements. While India and most other countries were prepared to go along with the Chairman’s text, the US had reservations and was opposed to any negotiations on anti-dumping and subsidies and could, at the most, agree to a few (not all) of the issues raised by the Committee on Anti-Dumping and Subsidies respectively. No consensus could, therefore, emerge.
  2. Agriculture : Mandated negotiations have to commence on 1.1.2000 on Agriculture. In the run-up to Seattle,however, the Cairns Group of countries supported by US sought to secure a more rigorous negotiating mandate that would speed up elimination/ reduction of their export/domestic subsidies. EC, Japan, Norway etc., resisted this to the very end. While EC appeared to display some flexibility on this issue, Japan put up stiff opposition on further inroads into elimination of domestic subsidies.As for India, our concerns relating to food security were adequately reflected.
  3. Services: No substantive negotiation took place in Seattle as there was hardly any divergence of views on the draft text which adequately takes into account India’s concerns.
  4. Investment and Competition Policy: India, Malaysia, Hong Kong, China and Pakistan proposed the continuation of the study process launched at Singapore. EC and others stubbornly argued that they wanted negotiations to be launched right away. Given this, the talks broke off but a ‘bridge proposal’ which aimed at carrying forward the study process to prepare for negotiations to be launched by the Fourth Ministerial Conference began to take shape. While India, Malaysia, Hong Kong, China and Pakistan continued to oppose even the “bridge proposal”, a number of other developing countries (including countries such as Zimbabwe, Sri Lanka and Egypt) showed inclination to agree to launch negotiations or to agree to the compromise proposal.
  5. Market Access for non-agricultural items: There was virtually no opposition for the launching of negotiations in this area except that a number of developing countries including ourselves pointed out the priority that we attached to the implementation issues and made it clear that agreeing to any text on this issue depended on progress in other areas. The text which evolved during the Green Room consultations left open the modalities to be followed for the tariff reduction exercise although the APEC countries wanted a specific reference to their Accelerated Tariff Liberalisation (ATL) initiative. EU wanted a common tariff reduction method to be adopted for all countries while certain others preferred a formula approach to be the main methodology. While our concerns were largely met in the draft text, the US insisted on avoiding any reference to peak-tariffs saying it was a politically sensitive issue. Several developing countries, including us, however, firmly opposed the substitution of ‘peak tariffs’ by any other phraseology. This matter still needs to be resolved.
  6. Transparency in Government Procurement: There were broadly three proposals on this subject at the Seattle Ministerial. First, that the Working Group should continue its work until the fourth Ministerial session. India and number of developing countries supported this proposal. Second, that the Seattle Ministerial should mandate commencement of negotiations based on the elements that had formed the basis of discussion in the Working Group with the objective of concluding an Agreement at the latest by the Fourth Ministerial session. A number of developed and developing countries such as Brazil and South Africa supported this proposal. Third, that the Ministers adopt at Seattle an Agreement on Transparency in Government Procurement based on the formulation proposed by the United States and the European Communities. After further discussions in the open-ended Seattle Working Group on Singapore issues and other issues, its Chairman gave his understanding that there was virtual consensus among Members present on the second proposal. He noted that India was the only Member present that stated that it could not join such a consensus and urged India to reconsider its position. India had stated that it could only support further work in the Working Group aimed at arriving at a consensus on the elements of a Transparency agreement.
  7. Trade and Environment: Developed countries, particularly EU, were very keen on negotiations on environment related issues to accommodate concerns of their civil society. They wanted environmental considerations integrated throughout the negotiations in the new Round (‘mainstreaming’) which will also dilute the focussed mandate of the Committee on Trade and Environment (CTE ) to that extent. USA was further keen that Members right to set high environmental standards was not undermined by trade rules. US and CAIRNS Group countries also called for the removal of environmentally damaging subsidies such as agricultural subsidies and fishery subsidies that contributed to over capacity. Developing countries sought adjustments in the TRIPS Agreement for preservation of biological diversity and reward for traditional knowledge. The proposal to mainstream environment and dilute the role of CTE and the US proposal regarding environmental standards were opposed by some developing countries including India while there was considerable support for removal of environment- related subsidies. The TRIPS related proposals were supported by some, but there was no consensus.
  8. Intellectual Property: Many members were willing to complete the negotiations on the establishment of a multilateral system of notification and registration of geographical indications for wines and possibly spirits, while there was an emerging consensus for an early decision on the ongoing discussions on inclusion of other products for the higher level of protection as has been provided to wines under Art 23 of TRIPS. Other work programmes proposed to be launched at Seattle included a proposal to make recommendations to the Fourth Ministerial Conference on the scope for protection for traditional knowledge and folkfore under the TRIPS Agreement, and review of Article 71.1, including enhancing the Agreement to respond to its objectives and principles as well as new developments elsewhere, and of Article 27.3(b) relating to life forms and plant varieties.
  9. Other issues: There were a few other issues which were less controversial. Subjects belonging to this category included E-commerce and trade facilitation. A proposal to set up a working group on transfer of Technology, supported by India also found wide support but was opposed by USA, while EC and some others preferred discussions on this issue within the Committee on Trade and Development. On the other hand, the proposed Working Group on Bio-technology, pursued by USA was hardly discussed because of strong opposition from many members, including India.
  10. Regarding transparency in the functioning of WTO, US and EU were keen for some kind of mechanism whereby civil society could participate in the WTO functioning, inter alia, through amicus curiae briefs in the trade dispute settlement mechanism. But this was sharply opposed by India and many other developing countries.
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Conclusion :

Thus WTO has been playing a very important role in India’s foreign trade. And India will be much more benefited if the present DOHA round gets completed. Pascal Lamy has projected that it will be completed in the year of 2012.

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