World Trade Organisation (WTO): Top 10 Things to Know about

The following points highlight the top ten things to know about the World Trade Organisation (WTO).

1. History of World Trade Organisation (WTO):

The World Trade Organisation (WTO) came into being on January 1, 1995 which holds a great promise for the entire world economy in respect of international trade.

This world trade organisation will administer the new global trade rules establishing the rule of law in international trade. It amounted to nearly five million dollar last year for goods and services.

The first Director General WTO Peter Sutherland has said, “The WTO binds nations in a global co-operative endeavour to raise incomes and create good jobs through fair and open trade.”

The latest issue of GATT/WTO News (January, 1995) observed that the new global trade rules were achieved after years of negotiations among more than 120 countries and through the WTO agreements and market access commitments, world income is expected to rise by over 500 billion dollar annually the 2005 and annual global trade growth will be as much as a quarter higher by the same year than it would have been otherwise.

2. The Preamble of WTO:

The Preamble of the World Trade Organisation (WTO) states that “there is a need for positive efforts to ensure that developing countries and especially the least developed among them, secure a share in the growth of international trade commensurate with the needs of their economic development.”

The preamble of the WTO, while reiterating the objectives of the GATT, viz., raising standards of income, ensuring full employment and extension of trade, extends these objectives to services.

In addition, it introduces the concept of sustainable development to protect the environment in a manner consistent with the different stages of economic development. It also recognises the need for special measures to ensure a higher proportion of growth in international for the developing countries.

The developing countries will benefit from the increased exports and better treatment with respect to measures taken by other WTO members. Technical assistance is to be provided to developing countries to assist them in assuming their obligation and more effectively realising the benefits of the multilateral trading system under WTO.

Nature of Agreement:

The new World Trade Organisation (WTO) which replaces the General Agreement on Trade and Transfer. (GATT) has come into effect from 1st January, 1995 with the backing of at least 85 founding members including India. The WTO now comes as the third economic pillar of worldwide dimensions along with the World Bank and International Monetary Fund (IMF).

The new trade body—WTO with power to settle trade disputes between nations and to widen the principle of free trade to sectors such is services and agriculture, covers more areas than GATT. The WTO envisages the reduction of tariffs by more than one third and is concerned with further opening of markets.

It is expected that the world trade would be stimulated strongly in the long run as a result of the coming into being the new trade body—WTO. Accounting to an estimate in the year 2005, turnover through international trade could be as high as $ 510 billion annually.

Like GATT, the WTO agreement will regulate the commodities trade, but, in addition it will also deal with services across borders like insurance and tourism. The new WTO conditions also protect intellectual property also protect intellectual property like patents, copyrights and brands. Agriculture and textiles are completely covered by the WTO agreement. Rules on state subsidies have been made stricter to cut down on such payments.

The highest WTO body is a ministerial conference which will meet at least once in two years. The new trade body—WTO, however faces strong north and south differences over the environment and workers’ rights and has to tackle such problems, at priority level.

The WTO will spell order for the near chaotic state of the $5 billion international trade in goods and services. According to a recent study conducted by OECD, if the provisions of the Eighth round are fully implemented, the global income will rise by another $ 2,74,00 crore by 2002. Of this $ 8,600 crore will accrue to the developing countries. India’s export should go up by. $ 150 crore to $ 200 crore annually in addition to the normal growth.

3. Objectives of WTO:

The main objectives of WTO are listed as below:

(a) The primary aim of WTO is implement the new world trade system as visualised in the Agreement.

(b) To promote World Trade in a manner that benefits every country.

(c) To ensure that developing countries secure a better, balance in the sharing of the advantages resulting from the expansion of international trade corresponding to their developmental needs.

(d) To demolish all hurdles to an open world trading system and usher in international economic renaissance because the world trade is an effective instrument to foster economic growth.

(e) To enhance competitiveness among all trading partners so as to benefit consumers and help in global integration.

(f) To increase the level of production and productivity with a view to ensuring level of employment in the world.

(g) To expand and utilise world resources to the best.

(h) To improve the level of living for the global population and speed up economic development of the member of nations.

Here, we must remember that, these objectives of WTO are more or less similar to the objectives of GATT. However, under WTO these are sought to be achieved following a more rigorous and tougher enforcement of policy of export competition, market access and free trade.

4. Scope of WTO:

General Agreement Trade and Tariff was concerned with the trade in goods which were mainly primary manufactured products. The General Agreement on Trade in Services (GATS) is the first multilateral agreement on trade that has as its objective the progressive liberalisation of trade in services. The agreement covers trade in all services sectors and the supply of service in all forms.

In this regard, WTO has a much wider scope than GATT as new areas are included in the Agreement i.e. implications for the production process of goods also. Agriculture, a controversial area, has been included and other areas having implication for the production process of goods have also been included.

The other new areas are:

1. Trade Related Intellectual Property Rights (TRIPS)

2. Trade Related Investment Measures (TRIMS)

3. General Agreement in Trade in Services (GATS)

The WTO will follow the decision-making process of the GATT. The decisions would be based on the principle of consensus which will be deemed to exist if there is no formal objection from any member. Voting can be resorted to if no decision can be arrived at through consensus.

The decisions will be taken by the majority of votes cast on the basis of one country one vote. In this way, the implementation of WTO is little bit tough but have a wider acceptance under GATT.

5. Major Agreement of WTO:

The major agreement of WTO are briefly summarised as below:

(i) Trade in Agriculture:

The Uruguay Round has achieved a major breakthrough by bringing the agricultural sector in the preview of WTO. Article 42 of the Agreement for Agriculture Conveys that participating governments do not “maintain, resort to or revert to any measures of the kind which have been converted into ordinary customs duties.” Increased market access for agricultural products includes the “tariffication” of all non-tariff measures (conversion of tariff equivalents) with the exception of those products for which special treatment has been negotiated—and a binding of all tariffs on agricultural products.

The measures are to be so converted to include virtually all Non-Tariff Measures which include quantitative import restrictions, variable import levies, minimum import prices, discretionary import licensing, and non-tariff measures maintained through state trading enterprises and voluntary export restraints.

Consequently, the security of trade in agricultural products will for the first time be greater than in industrial products, since 100 per cent of agricultural products tariff line will be bound. Agriculture was most conversial of the times. Thus, there was a consensus on the need for a reform of agricultural trading policies.

In order to solve the problem, the major features of the Final Act are listed as under:

(a) Reduction in Domestic Subsidies:

According to the proposals, in developing countries the value of subsidy payment should not exceed 10 percent of the value of gross agricultural output. In order to calculate total subsidies given to farmers Total Aggregate Measurement of Support (AMS), all the product and non-product specific subsidies must be totaled together.

In our country, Govt., provides minimum support price to 20 agricultural products and the subsidy given in each case is less than 10 per cent. The ratio currently stands at 5.2 per cent. Moreover, according to the proposal, this 10 per cent norm excludes subsidies to the low income and resource poor farmers and those farmers having less than 2.5 hectares are defined as low income and resource poor farmers in the draft proposal.

(b) Reduction in Export Subsidies:

Coming to export subsidies, the developing countries giving huge export subsidies are required to reduce the subsidies both on the value basis as well as on quantity basis on the value basis it must be reduced by 36 per cent in 6 years whereas on quantity basis, it is 21 percent during the same span of time. For developing countries, this limit is 24 percent and 14 percent respectively during the period of 10 years.

(c) Public Distribution System:

Regarding the Public Distribution System, the Final Act contains specific foot notes to allay our fears and they exempt developing countries from the disciplines envisaged in respect of public stock holding and food-aid operations.

This system will not be affected in Indian context. In our country, Public Distribution System at present is little above 20 million tonnes per annum which is less than 10 percent of the total consumption of food-grains as compared with 30 percent people still living below the poverty line.

(ii) Market Access:

The WTO has made the provision of rules for and administers the Trade Policy Review Mechanism. Through a reduction in trade barriers and abolition of discrimination among products, be it through foreign measures or domestic policies, the market access is greatly improved. The obligation to bind tariffs can provide exporters with greater certainty regarding market access conditions.

These are as:

(1) The WTO rules allow contracting parties (original member’s nations) to contest measures employed by another contracting party that nullify or impair such bindings/agreements.

(2) Under WTO non-tariff measures are converted into ad valorem specific tariffs.

(3) A tariff binding is the legally set maximum rate at which a tariff may be set.

(4) The resultant tariffs are bound and reduced gradually over a period of six years.

(5) Investment subsidies available to agriculture and agricultural subsidies are provided to low income or poor producers. These subsidies need not be reduced by the developing countries. The developed countries do not have these options.

(6) The developing countries have been given special and more favourable treatment. The period of six years has been extended to 10 years for these countries.

(7) Actual tariff can be below the bound rate, but cannot go above it unless the rate is renegotiated with trading partners.

(8) The least developed developing countries are not required to make any reduction, although they are also prohibited from maintaining non-tariff measures.

(9) To improve market access, industrial countries are required to reduce tariff by 36 per cent over six years while the developing countries have to reduce by 24 per cent over 10 years.

(iii) Textile and Clothing:

The WTO has adopted discriminatory quantitative restrictions in the textiles and clothing sector by over 30 years under Short-Term Arrangements, Long Term Arrangements in 1974 and Multi-Fibre Arrangement (MFA) upto 31 December, 1994. The MFA is a series of bilaterally negotiated quotas to limit the access of developing country textile exports to the developed countries during the fifties.

It was designed to protect the US textile producers for the booming Japanese textile exports. Later on it was extended to many other developing countries including India. These Quantitative Restrictions had covered a growing number of products over the years and had become increasingly restrictive.

(i) The Agreement on Textiles and clothing has the provision for prohibitions of any such restrictions on free exports and elimination of MFA-arrangement. The quantitative restrictions only affect exports of developing countries to the industrial countries and not the trade among the industrial countries themselves.

The implementation of the Agreement by the WTO on textile and clothing would mean ‘the elimination of MFA’ or the elimination of all non-tariff measures in textile of and clothing industries over a period of 10 years (1995-2004). Thus, it is integral textile and clothing sector on January 1, 2005 into free trade system under WTO.

(ii) Division of 10 year period will be in three stages: 16 per cent by first three years; 17 per cent by 4 next years and another 18 per cent by next three years. In this way, 51 percent of the total imports will be integrated into the free trade system of WTO on January 1, 2002 while the remaking 49 per cent will be integrated by January 1, 2005.

(iii)The countries can introduce discriminatory restrictions on the products under WTO provision which were not already made subject to GATT or WTO rules or which they do not have existing bilateral arrangement.

(iv)The interest of developing countries has been kept safe under certain safe-guards mechanism which is applicable maximum for three years period. The developing countries allowed to follow non-tariff measures in certain circumstances if imports are threat to their domestic industries.

(iv) Trade Related Intellectual Property Rights (TRIPS):

TRIPS provides nine types of intellectual property, patenting of micro-organisms and plant varieties is one of them. The Agreement however, silent about the norms and standard for protection. After the WTO has completed four years (after 1999) a provision is also made to review the position.

In the mean time the countries are free to adopt either the patenting of verities on ‘Sui-generis’ systems or combination of both. In countries where there is no provision for ‘Patent’s have been granted grace period of two years 10 introduce the same. Incidentally, patents are given to inventions and innovations and not for discoveries.

The natural genetic material is away from allowing them to be patented. Thus following will remain outside the preview of patents: plants, animals, biological system related to procreation of plants and animals and all such products which are detrimental to man, animal or the general environment. India has accepted ‘Sui-Generis’ system.

It is different from ‘patents’ and commonly refers to the system of protection of ‘Plant Breeders Right’ (PBR). It has allowed farmers to retain the seed, use them on their own farm and exchange with the neighbouring farmers. The only restriction is that ‘Commercial Sale’ of branded seeds shall not be allowed. Only the owners of the Plant Breeders Right will produce and market their breaded plants.

(v) Trade related Investment Measures (TRIMS):

TRIMS which applies to investment measures related trade in goods only, is a thin agreement. It has provided for the removal of restrictions of foreign investments which distort free trade, influence conditions of production, costs and prices. Largely, these restrictions on investment are found in developing countries against the free and unhindered inflow of foreign capital. Moreover, these restrictions are in the form of conditions which the foreign investors are required to fulfill before they are allowed entry.

These are:

(i) To offer national treatment and all such facilities to all foreign investors as are available to their domestic investors,

(ii) To remove all TRIMS within a period of five years,

(iii) Not to force external investors, to make investment in the ‘priority areas’ of host country, and

(iv) To extend all facilities to foreign investors so as to raise the level of global output and employment and thereby case the ‘balance of payments’ problems of member countries.

In short, this provision of TRIMS under WTO opens up the opportunity to foreign investors to invest anywhere in the world. The Agreement further ensures that all the units whether ‘indigenous’ or ‘foreign’ shall be treated at par without any discrimination in terms of regulations and policies. However, condition can be imposed regarding fulfillment of export obligation to balance the outflow and inflow of foreign exchange for such venture.

(vi) General Agreement on Trade and services (GATS):

The Uruguay Round brings the services sector into the pale of multilateral trade rules for the first time. According to the General Agreement on Trade in Services (GATT) only two obligations viz.; “Most Favoured Nation Treatment (MFN)” and “Transparency” apply to the entire universe of services. The other two commitments as national treatment as well as market access apply only to services which are opened up according to specific negotiated commitments.

Thus, trade in services has been defined as the supply of a service through production, distribution, sale or delivery by the physical presence of the enterprises. Moreover, to promote growth in the developed countries by providing larger markets and in developing countries by transfer of technologies free trade in services like banking, shipping, transport, telecommunication etc. has been provided.

WTO also provides for free trade in services only which are based on ‘advanced technology’ which are related to banking, insurance, shipping, transport, telecommunication, and tourism etc. It would promote growth in the developed countries by providing larger markets and in developing countries through transfer of technologies from the developed countries. MNCs are granted freedom to operate across all member countries under the agreement and are to be treated as par to the domestic companies.

(vii) Dispute Settlement:

From the perspective of developing countries, it should be noted that the elements of the 1966 Decision on Dispute Settlement will continue to apply under the WTO dispute settlement procedures. Here, we must remember that this Decision has seldom been used, mainly because developing countries have only recently become more frequent users of the GATT dispute settlement procedures. It contains features of specific interest to developing countries, including automatic access to the “good offices” of the Director-General of the WTO to mediate and seek to find a satisfactory solution to the dispute, and to follow procedure to shorter time-limits to complete their deliberations.

(viii) Monitoring of Trade Policies:

The TPRM provide for a Trade Policies Review Body to evaluate regularly the trade policies and practices of members, every two years for the four major traders (the EC, US, Japan and Canada), every four years for the next sixteen leading traders, and every six years for the remaining traders, although longer intervals may be prescribed for least-developed countries.

The TPRM process has helped countries assess their trade and economic reforms, and have made contribution to some portion of the liberalization that has taken place under the Uruguay Round. In the future, the TPRM process will go a long way to help WTO members evaluate their implementation of the Agreements, and provide an early warning of trends of potential concern to all participants in the trading system.

6. Role of World Trade Organisation (WTO):

The world trade organisation (WTO) is expected to play a significant roles in administering the new global trade rules in the following way:

1. WTO and Trade Development,

2. WTO and Dispute settlement Mechanism,

3. WTO—An Third Pillar in International Economic Relations,

4. WTO and General Benefits, and

5. Regional Trading Blocks—A Threat to WTO.

(i) WTO and Trade Development:

(i) The WTO administers, through various councils and committees, the 28 agreements contained in the final act of the Uruguay Round, plus a number of plurilateral agreements, including one government procurement.

(ii) The WTO also oversees the implementation of the significant tariff cuts (averaging 40 per cent) and reduction of non-tariff measures agreed to in the trade negotiations.

(iii)The WTO is a watchdog of international trade, regularly examining the trade regimes of individuals members. In its various bodies, members flag proposed or draft measures by other that cause trade conflicts. Members are also required to notify in detail various trade measures and statistics, which are maintained by the WTO.

(iv) The WTO provides several conciliation mechanisms for finding an amicable solution to trade conflicts arises among member countries.

(v) If any, trade disputes that cannot be solved through bilateral talks are adjusted under the WTO Dispute Settlement Court. Panels of independent experts are established to examine disputes in the light of WTO rules. This streamlined procedure ensures equal treatment for all trading partners, thus encourages members to live upto their obligations.

(vi) The WTO is a management consultant for world trade. Its economists keep a close watch on the pulse of the global economy and provide studies on the main trade issues of the day. The secretariat assists developing countries in the implementation of Urguay Round results through a newly established development division and strengthened technical co- operation and training division.

(vii) It is a forum where countries continuously negotiate exchange of trade barriers all over the world.

(ii) WTO and Dispute settlement Mechanism:

The WTO offers a far more powerful mechanism in order to resolve disputes over trade, arising out of growing competition for markets among the members. It has been correctly observed from a recent report of WTO that developing countries are emerging more as active users of the multilateral dispute-settlement mechanism than the developed nations. On March, 5, 1996, the Dispute Settlement Body (DSB) established two panels at the request of Philippines and Costa Rica.

The DSB decision raised the number of active panels in WTO to four, with three of them involving developing country. However, the first WTO dispute, which had been settled bite-rally involved two developing countries Singapore and Malaysia. Therefore, improvements in the WTO’s dispute-settlement procedures over those of GATT have facilitated the lodging of formal complaints for all members.

In short WTO is making an all-out effort to evolve a consensus on controversial and key issues like inclusion of social clause on trade agenda. The Director General of the Geneva-based WTO. Renato Ruggiero conveyed that the immediate challenge is to build a consensus on the subject to trade and labour standards in order to avoid this becoming a divisive issue. The new WTO agreement extends the amount of Government procurement opened to international competition by 10 times compared to the earlier agreement.

(iii) WTO—An Third Pillar in International Economic Relations:

Besides the World Bank and the IMF, the World Trade Organisation (WTO) is now being considered as the third pillar in the post-war international economic relations. The WTO will have three main legal instruments: The General Agreement on Tariffs and Trade (GATT) along with associated agreements and jurisprudence; the General Agreement on Trade in Services (GATTS) and the agreement on Trade-related Intellectual Property Rights (TRIPS).

A noteworthy feature of WTO is that its highest decision making body would be the Ministerial Conference which alone will have the authority to take decision on all matters under any of the agreements covered by the WTO.

During the intervals between the meetings of the Ministerial Conference, the General Council would carry out its functions, including its role as the dispute settlement body.

Reacting to the establishment of the WTO and ratification of the Final Act by different countries, trade experts contend that the significant reductions in tariff and non-tariff barriers negotiated would provide the international trading environment a new dynamism and vitality.

(iv) WTO and General Benefits:

The general benefits of WTO are discussed below:

(i) Firstly, regarding the benefits of the WTO, it has been observed that increasing market access opportunities and efficient rules for undistorted competition would help the developing countries for their liberalisation economic policies.

(ii) Secondly, the GATT secretariat, predecessors to the WTO, has estimated that by the year 2005, the volume of world trade would range between 9 to 24 per cent above the level that would have occurred in the absence or Uruguay Round. It will result an increase in world income from trade liberalisation in goods could range between $ 110 billion and $ 510 billion annually.

(iii) Thirdly, World Trade Organisation (WTO) will strengthen the institutional framework for trade relations among member countries. Accordingly, with the establishment of WTO, a new trade order was likely to emerge. An OECD study had indicated that GATT’s final act could increase the income of developing countries by 70 billion dollars by 2002.

(iv) Fourthly, the task before the WTO, as the initial experience suggests, is not going to be easy, by any means. The WTO had to contend with several disputes during this initial short period. It is now getting firmly established as an effective institution for recording and reprocessing of world trade and international economic relations towards the path of free flow of trade in goods and services.

(v) Lastly, according to WTO report, ‘International Trade-Trends and Statistics’ observed that world trade in merchandise goods is expected to increase in volume by eight per cent in 1995. The report further point out that trade growth and would remain above the average of the past decade, thus modest showing down next years.

(v) Regional Trading Blocks—A Threat to WTO:

It has been noticed that many regional trading blocks have been formed in various countries under different regions which are going to frustrate the very spirit globalisation and multilateralism in world trade. Therefore, doubts have also been arisen over the rise of regional trading arrangements which, it is feared would militate multilateralism.

The magnitude, handling and scrutiny of regional trading arrangements such as European Union (EU), North Atlantic Free Trade Arrangements (NAFTA) and the Asia Pacific Economic Co- operation (APEC) and their link with the credibility of the strengthened multilateral trading system is obvious.

Now question arises whether the time is ripe for a substantial review of the way in which working parties who belong to these regional trading blocks fulfill obligations under Article XXIV of the Final Act, which ensures that results of their efforts are both transparent and meaningful for multilateral co-operation and promotion of global trade.

But there is a growing tendency among countries located in a geographical region to form their own trading block. Now there is a talk of forming another regional economic co-operation grouping of 29 Indian Ocean Rim Countries. But regionalism must be compatible with multi-laterism of WTO and to attain that regional groups must treat each other favourably in matters of trade and should not apply discrimination against those countries outside the regional grouping.

Regionalism till late had been one of the main building blocks for liberalization and reform around the world and has increased the possibilities of improving liberalisation of trade. It was no longer an exception to the system and was becoming a status symbol for nations to join a regional trading bloc. In this sense the emergence of regionalism was still not a threat to the existence of the multilateral trading system.

Keeping all facts in mind, the answer to this problem of regionalism had to be found in multilateralism who are inter-dependence for their development activities. Thus, the future of growth and employment generation depends much on the interdependence of the developed world and the participation made by the developing countries.

7. Emergence of WTO and India:

Being a founder member of World Trade Organisation (WTO) country like India would get immense benefits. At present, only just five per cent of our tariff lines remain bound. With the finalisation of the Uruguay Round, about 68 per cent of India’s tariff lines covering basically raw materials, components and capital goods, but excluding consumer goods, petroleum, fertilisers and some non-ferrous metals would have been bound.

The expert view is that it is in the long term interest of India to have low duties on raw materials, components and capital goods since they satisfy the productive needs of the economy.

However, regarding the threat arising out of TRIPs, the Commerce Minister, Pranab Mukherjee has pointed out that exclusive marketing rights to be provided for patent holders would no way dilute the national interest in such crucial areas as agriculture, drugs and pharmaceuticals as enough safe grounds had been built into the system to take care of the concern voiced by developing, countries including India. It is expected that our country would now stands to gain immensely from the membership of WTO.

Let us now discuss different provisions of WTO in the context of our country in detail:

I. WTO Agreement and Agricultural Sector:

The foremost fear was found among Indian farmers who thought that will be only on the mercy of multinational corporations who controls the distribution of vital agricultural inputs, such as seeds, fertilizers, pesticides, and insecticides.

Only a few farmers will benefit from the improved inputs of the multinationals. Small farmers will became land-less labourers in the course of time and agriculture in India will no longer remain a source of livelihood for two-thirds of India’s population. It will only add to their staggering poverty.

The Agreement proposes that developing countries should slash direct subsidies on agricultural products (product subsidies) as well as subsidies on inputs like electricity, water, credit and fertilizers (non-product subsidies) to less than 10 per cent of the product value.

Developed countries, on the other hand, should slash these subsidies over a period of time of 5 per cent. Small and poor farmers are however exempted from this clause.

It is totally wrong to think that Agreement would cause a reduction in subsidies. The Aggregate Measure of Support (AMS) which is designed to calculate the extent of protection the country enjoys, negative in the case of Indian agriculture. This means that the domestic price of most commodities is less than their international price.

Thus it will not require India to remove the subsidies. As per estimates of Commerce Ministry, the ‘non-product specific AMS’ works out to be between 2.9 to 6.0 per cent which is less than 10 per cent. At present, India’s total farm subsidies are below 6 per cent, and therefore this provision of the Agreement will not adversely effect in India.

(i) Slashing Subsidies:

On the whole, Indian Agriculture—a non-commercial activity—will not attract, Agreement rule which are relevant for commercial production and trading activities. As India is not a agricultural exporter, the controversy on its impact on India’s agriculture will only be marginal. The real impact will be on Japanese and South Korean farmers.

(ii) Increase in Exports of Food Grains:

The prices of agricultural products in the developed countries would go up as a result of slashing subsidies. As a result, our farmers will be benefitted as getting of higher price of their product in the international market. This will stimulate India’s exports particularly of rice to countries like Japan and South Korea.

(iii) Increase in Production:

It is felt that the prices of certain products in India would also go up due to imports of certain agriculture commodities to meet domestic shortage like oil-seeds.

(iv) Public Distribution System:

The Agreement does not interfere with the Public Distribution System in India that will continue to offer essential food supplies to the weaker section of the society at subsidized rates.

(v) No Increase in Imports of Food Grains:

As per agreement, it is not expected to raise India’s imports of food-grains. It is stated in the treaty that the poor countries facing balance of payments problem may continue to impose Tariff on the import of food-grains. India can avail of this provision and avoid imports of food stuffs thereby stay off easy imports of food-grains.

It is doubtful that with nearly 100 per cent tariff duty on imports of food-grains, 150 per cent on processed foods and 300 per cent on edible oils, imports can hardly sustain in the domestic markets.

(vi) Patents and Sui-Generis:

The government of India has clarified that the present policy of not ‘patenting’ the seeds would continue. As regards Sui Generis system, it is expected that the protection of the rights of Breeders should ensure improved varieties of plants breeds. The system is the basic research in seed and breed technology in India.

A critical analysis of patents and Sui-Generis shows that seed production, i.e., development of new varieties, their multiplication and marketing which were largely under Government sector in the past years, are moving into the hands of private sector.

Latest biotechnological tools are now being deployed by the corporate in the development of hybrid and synthetic seeds and planting material. India has the potential to emerge as a major exporter of seed in the world market.

(vii) Freedom to Use Seeds:

It is doubtful that only rich and big farmers would afford the use of ‘brand seeds’. Which in turn this will obviously wider the gap between the rich and the poor farmers. It is again a baseless fear. Under WTO Agreement the farmers are free to exchange their seeds with the other. They therefore need not necessarily buy seeds from the open market.

(viii) Market Access:

Dunkel Draft will in no way injure the interest of Indian farming community. Rather, it will stimulate India’s exports of food-grains and encourage research in the field of crop farming. The Draft does not interfere with any of our plans of rural upliftment. The Govt., is not contemplating any cut in subsidy offered to the farmers. Farmers have the full freedom of using a part of their output as seeds for the next crop.

They can also exchange their surplus produce mutually. Moreover, procurement of food-grains, public distribution system and buffer stocks in food-grains would continue as usual. The treaty proposes guaranteed access to importers of at least 3 per cent of the market for each agricultural item.

This has been termed as minimum compulsory access (MCA) in agricultural trade. A country may however get exemption from this clause on the ground of its balance of payments problem.

II. Trade Related Investment Measures (TRIMS):

According to the Agreement, India will not impose any restriction on external investment. This means that MNCs will have a free play in the Indian market. This may adversely affect the interest of Indian industrialists who have a poor competitiveness.

It is feared that the levels of production and employment may hamper but it is all wrong, illogical and baseless criticism. TRIMS are expected to generate a variety of benefits for the Indian economy. In fact, it will improve the levels of investment, production and employment. The Govt., will have the right to continue to exercise its control with regards to the degree of freedom and the areas to be privatised.

III. Trade Related Intellectual Property Rights (TRIPS):

TRIPS is suspected to discourage the process of research and innovations in poor countries like India. In matters of TRIPS, all member countries have been placed on equal footing and uniform standards. This is unjustified in view of the low standard of research and innovations in developing countries like India.

Any set back to the already poor set-up related to research and innovations may adversely affect Indian agriculture and the industry in general. It is doubted that because of TRIPS prices of medicines may rise by 10-15 per cent and agriculture sector may also be adversely effected.

The Agreement has the provision of copyright, trade-marks, trade- secrets, industrial designs and patents under the purview of TRIPS. This is not expected to be detrimental to India’s interest because in the field of patents, particularly related to medicines, laws in India do not exactly synchronise with the Agreement.

There may be some moderate rise in the prices of medicines. Only 10 to 15 per cent of the medicines in India are within the purview of patents under the Agreement. World Health Organisation has kept essential and life saving drugs out of the purview of WTO.

Moreover, there is generous availability of non-patented medicines. In India which should help contain the price-rise of patented medicines. This patent laws will come into force after 10 years. This period will be sufficient enough for the Indian Pharmaceutical Industry to develop its own brand to counter the rise of medicines.

IV. Trade in Services (GATS):

GATS is also feared to be adversely affected. Domestic banking, insurance, transport and communication services are far less competitive compared to those offered by MNCs. Owing to the poor operational efficiency, domestic services are bound to suffer. This is also an statement and exaggerated statement. This will open up new vistas of growth for the Indian economy. This will provide better employment opportunities in the country.

V. Trade in Textile and Clothing:

Indian clothing industry is expected to get gain from WTO Agreement. Quota restrictions on the import of Indian textiles will be withdrawn within the next 10 years. This will stimulate India’s export to the United States and European countries in particular. This will unfold more employment opportunities in the trade of textile.

8. Expected Benefits from the Agreement:

In view of the new trade profile, it is expected that developing countries like ours, will certainly get benefits from the agreement of GATT.

These significant gains can be attained as of:

(i) Export Promotion:

The major benefit that India will incur is in the form of export promotion due to several reasons. With the reduction in restrictions in developed countries, on import of agricultural goods. India will be able to expand its exports of agricultural goods. Moreover, agro-based industries will also export much and earn much of foreign exchange. Similarly, export expansion will be further accelerated in context of the free trade.

(ii) Gains in Efficiency:

Dunkal proposals will lead to an improvement in efficiency. As free trade in the external sector will bring about a locative efficiency. Factors will move into activities in which they can earn more. This will result in more output and income as well as large employment opportunities for the abundant and cheap labour.

Moreover, there will be an increase in competitive efficiency. Large units both from foreign sources as well as domestic sources will compete to reduce the cost of production. This will make exports more competitive and growth less costly.

(iii) Changing Trade Profile:

It is hoped that new emerging trade scenario will influence world trade greatly by the introduction of several new elements in developing countries of the world. As, trade in agricultural goods and services is to be brought within the limit of negotiation of reducing/eliminating barriers.

These non-tariff restrictions will go beyond the external sector and encompass the domestic policies. Moreover, domestic investment measures and intellectual property right in different countries will make trade transactions to influence domestic policies of the said countries. Similarly, with the help of multinational corporations can merge as a front rank country among the developing as well also developed countries.

In fact trend towards marketed globalisation can promote trade in several goods and services without trade barriers and restrictions. It needs free, smooth and uniform conditions across the countries in respect of movements of goods and services as well as foreign investment.

9. Short Comings of the Proposal:

From GATT, along-with those of the Dunkel Draft will change almost entire economic world of present international trade. Despite the fact, it will confer many benefits specially for developing countries still it is doubtful, it possessed few serious pitfalls and shortcomings. In short, let us look at the shortcomings of the GATT.

1. Less Provisions for Small and Poor Farmers:

Dunkel proposals brings very little for the small and poor farmers of the country. The small farmers constitute 76 percent of the total holdings of the country. But, apart from the low percentage of the general subsidy, there is no special concessions for marginal and small farmers. These farmers grow crops on marginal land of poor quality.

Thus, there could be higher subsidies for these farmers in the form of input subsidies. But, the Dunkel Draft provides no flexibility in respect of the provisions for subsidy. Moreover, as for poor farmers are concerned, relief giving arrangement known as Public Distribution System has also been dealt with inadequate attention.

The provisions of purchases for PDS and sales through it at market prices will be of little help in times of scarcity. In these times, prices will be higher which will affect the poor lots adversely.

2. Less Provisions for Agricultural Subsidies:

Dunkel Draft provides a subsidy limit upto 10 percent of the value of agricultural output. The subsidy on production is an instrument factor to spread new technologies in the far away areas of the country. Moreover, these subsidies are the kingpin to influence the cropping pattern as well as to raise the level of output and employment.

In reality, the need for subsidies will be all the more as we make efforts to develop agriculture in the dry and rain-fed areas.

Thus, in the light of the above analysis, this limit of subsidy seems to be very low. One estimate puts that these subsidies should be more than 40 percent. Therefore, it is in the long run interest of the country to continue with the present policy for the balanced development of agriculture.

3. Unequal Competition:

GATT and Dunkel provisions will make the competitive environment more unfavourable for the developing countries. It will be an unequal competition with firms from the developed countries getting more competitive strength. The limit put on the import of agricultural products to the extent of 3 per cent seems to very low in percentage terms.

But in absolute terms, it is not so. In absolute terms, it comes out to be’5 million tones of food-grains and about 3 lakh bales for cotton. Moreover, the producers will face an uncertainty and fluctuating market in the imported products which will adversely hit the small farmers.

4. Inappropriate Patenting Living Organisms:

Another pitfall relates to the provision of patenting of all life forms. It do not go well with the perceptions about patents. These products like invent are natural. Thus, these are the discoveries. These products cannot be neatly precisely defined so as to be able for patenting in terms of laws.

Moreover, from this, patenting of living organism will hamper country’s efforts progress. But sometimes, gestation period is required to translate organisms into market viable products. However, foreign companies will over us. They will obtain and start business on the patented products.

5. Loss of Comparative Advantage:

By adopting Dunkel proposals, we cannot take full advantage of our comparative advantage. Dunkel Draft has included those services in which developed countries have a decisive advantage over other. India may also gain from the export of these services to a little extent because the services in which India enjoys comparative advantage have not been included.

Moreover, in the case of Multi-Fibre Agreement (MFA) in which India like other countries enjoy comparative advantage provided quota restrictions on export. These restrictions had to end in 1991. It has been given fresh lease till 2003. This will restrict limitations of quotas.

10. Over-All-Assessment:

The establishment of WTO is right, though late, step towards, creating a new international trade order. It requires a new emphasis on transparency, economic growth of developing countries. WTO should try to build its role as a depository of trade Agreements. India which has also joined as founder member of WTO could not afford to opt out of WTO and remain in isolation from rest of the world.

It would have been suicidal for Indian economy. Dr. Manmohan Singh then finance minister has rightly observed “GATT Treaty is expected to diversify Indian agriculture, encourage India’s multilateral transactions of scientific knowledge and raise productivity standard and output manifold.”

The Final Act embodying all the results of the negotiations of Uruguay Round is an international legal treaty incorporating obligations and commitments. Under our legal system such international treaties are not self executing in nature.

We have to bring our laws, regulations, administrative and judicial frame work in line with the obligations and commitments undertaken by us in the treaty. A pragmatic way to assess the implications of such a legal treaty is to see whether due to the treaty, we have to change our existing policies, laws and regulations.