wto and specififc issues

7/27/2019 wto and specififc issues

1/35

Economics Of Global Trade & finance

1

Chapter-1

INTRODUCTION

1.1Defination Of WTO1.2Summary1.3 Evolution1.4 Objective & Achievements

1.1 Definition of 'World Trade Organization - WTO'An international organization dealing with the global rules of trade between

nations. Its main function is to ensure that trade flows as smoothly, predictably,

and freely as possible.

At its simplest:-

A global organization dealing with rules of trade between nations.

1.2 The Summary -The World Trade Organization

The WTO was born in 1995 and the Secretariats is located in Geneva. Its an

organization for liberalizing trade, in which for governments to negotiate

trade agreements, settle trade disputes and establish a system of trade rules.

The purpose: To do with trade negotiations and the enforcement of

negotiated multilateral trade rules.


2/35


2

WTO-Rounds

- In 1930: Sevaral countries participated in negotiations to create an

International Trade Organization, because they wanted to boost after the

Second World War.

- In 1948: The General Agreement on Tariffs and Trade (GATT) was born

- In 1960: A new rules on the development is created.

- In 1970: A Plurilateral agreement is created.

- In 1986: In the Uruguay Round brought about the biggest reform of the

worlds trading system since GATT. This led to the creation of the WTO.

- In 1996: Some countries were openly calling for a new round early in the

next century.

- In 2001: Incorporated into the Doha Development Agenda.

1.3 Evolution of the WTO

GATT AND ITS ROLE: -

The general agreement on tariffs and trade (GATT), the predecessor of WTO,

was born in 1948 as result of the international desire to liberalize trade. The

Bretton woods conference of 1944, which has recommended the IMF and

World Bank had also recommended international trade organization (ITO), thatlater on (in 1948) became GATT.

OBJECTIVES OF GATT:-

Raising standard of living. Ensuring full employment and a large and steadily

growing volume of real income and effective demand. Developing full use of

resource of the world. Expansion of production and international trade.


3/35


3

The GATT was transformed into a world trade organization (WTO) with effect

from January, 1995. Thus after about five decades, the original proposal of an

international trade organization took shape as the WTO, which is more power

full body than GATT, has an enlarged role than the GATT. India is one of the

founder members of GATT and the WTO.

Predecessor of the WTOThe GATT 47

The General Agreement on Tariffs and Trade (GATT) 1947 -the first major

effort to establish international rules governing trade in goods. Though initially

conceived as a provisional legal instrument, it endured for almost 50 years.

It functioned without a formal organizational framework to oversee its

implementation as the proposed International Trade Organization (ITO) never

came into being and the ITO Charter (aka the Havana Charter) of which GATT

was only to be a part, never came into effect.

GATTs primary focus was the reciprocal reduction of tariffs which later

expanded to other trade related areas. In the years leading up to the Uruguay

Round, GATT expanded its competence through several rounds of trade

negotiations which witnessed the formulation of complex legal instruments on

specific aspects of trade, particularly disciplines on the use of non tariff barriers.

THE URUGUAY ROUND:-

THE URUGUAY ROUND Uruguay round is the name by which the eighth

round of the multilateral trade negotiations (MTNs) held under the auspices of

the GATT is popularly known because it was launched in Punta del eate in

Uruguay , a developing country, in September 1986 .


4/35


4

The first six rounds of MTNs concentrated almost exclusively on reducing

tariffs; while the seventh round moved on to tackle non tariffs barriers

The UR sought to broaden the scope of MTNs far wider by including new area

such as: Trade in services Trade related aspects of intellectual property (TRIPs)

Trade related investment measure (TRIMs)

TRIMS:-

TRIMS Trade related investment measures (TRIMs) refers to certain conditions

or restrictions imposed by a government in respect of foreign investment in the

country. Trims were widely employed by developing countries.

The agreement on TRIMs provides that no contracting party shall apply any

TRIMs which are inconsistent with WTO articles. An illustrative list identifies

the following TRIMs as inconsistent. Local content requirement. Trade

balancing requirement. Trade and foreign exchange balancing requirements

Domestic sales requirements

TRIPS:-

TRIPS One of the most controversial outcomes of the UR is the agreement on

trade related aspects of intellectual property rights including trade in counterfeit

goods (TRIPs).TRIPs along with TRIMs and services were called the new

issues negotiated in the Uruguay round .


5/35


5

GATT V/S WTO

For several decades, the General Agreement on Tariffs and Trade was applied

on a provisional basis. It was a multilateral agreement containing rules relatingto trade in goods, and although it operated like a permanent agreement, it was

without a permanent institutional framework, and was serviced by an ad hoc

Secretariat. The WTO now provides a permanent institutional framework for the

multilateral trading system, with its own Secretariat. In addition, the WTO not

only covers trade in goods, as the GATT rules did, but also trade in services and

trade-related aspects of intellectual property rights. Also, the dispute settlement

mechanism has been considerably strengthened in the WTO.

3.1 Nature

The GATT was a set of rules, with no institutional foundation, applied on a

provisional basis. The WTO is a permanent institution with a permanent

framework and its own secretariat.

3.2 Scope

The GATT rules applied to trade in goods. The WTO Agreement covers trade in

goods, trade in services and trade-related aspects of intellectual property rights.

3.3 Approach

Whilst the GATT was a multilateral instrument, a series of new agreements

were adopted during the Tokyo Round on a plurilateral-that is, selective-basis,

causing a fragmentation of the multilateral trading system. The WTO has been

adopted, and accepted by its Members, as a single undertaking: the agreements

which constitute the WTO are all multilateral, and therefore involve

commitments for the entire membership of the organization.


6/35


6

3.4 Dispute settlement

The WTO dispute settlement system has specific time limits and is therefore

faster than the GATT system; it operates more automatically, thus ensuring less

blockages than in the old GATT; and it has a permanent appellate body to

review findings by dispute settlement panels. There are also more detailed rules

on the process of the implementation of findings.

1.4 Objective and Achievements of WTO

The main overall motto of WTO is to promote and ensure the international trade

in the member countries with the mantra of LIBERELISATION,

PRIVATISATION AND GLOBALISATION. Beside this the WTO has

following some key objectives Trade without discrimination To set and enforce

rules for international trade, To provide forum for negotiating and monitoring

the international trade

i. To resolve trade disputes.ii. To increase the transparency of decision-making processes.

iii. To cooperate with other major international economic institutionsinvolved in global economic management.

iv. To help developing countries benefit fully from the global trading system.


7/35


7

Chapter-2

WORKING OF WTO

2.1 Function2.2 Principle Of Trading System2.3Organisation Structure of the WTO2.4 WTO: Benefits For Business

2.1 WTOs functionsi. Administers the WTO Agreements and facilitates their operation and

implementation.

ii. Provides a forum for trade negotiations among member states on matterscovered by the Agreements and for further liberalisation of trade amongst

members.

iii. Responsible for the settlement of differences and disputes betweenmembers.

iv. Responsible for periodic reviews of the trade policies of membersAlso provides technical assistance and training for developing countries.

2.2 Principle Of Trading System

The WTO establishes a framework for trade policies; it does not define or

specify outcomes. That is, it is concerned with setting the rules of the trade


8/35


8

policy games. Five principles are of particular importance in understanding both

the pre-1994 GATT and the WTO:

i. Non-discrimination- It has two major components: the most favorednation (MFN) rule, and the national treatmentpolicy. 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 favors and you have

to do the same for all other WTO members. National treatment means

that imported goods should be treated no less favorably than domestically

produced goods (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).

ii. Reciprocity- It reflects both a desire to limit the scope offree-riding thatmay 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.

iii. Binding and enforceable commitments-The tariff commitments madeby 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
http://en.wikipedia.org/wiki/Most_favoured_nationhttp://en.wikipedia.org/wiki/Most_favoured_nationhttp://en.wikipedia.org/wiki/National_treatmenthttp://en.wikipedia.org/wiki/Non-tariff_barriers_to_tradehttp://en.wikipedia.org/wiki/Free_rider_problemhttp://en.wikipedia.org/wiki/Unilateralismhttp://en.wikipedia.org/wiki/Unilateralismhttp://en.wikipedia.org/wiki/Free_rider_problemhttp://en.wikipedia.org/wiki/Non-tariff_barriers_to_tradehttp://en.wikipedia.org/wiki/National_treatmenthttp://en.wikipedia.org/wiki/Most_favoured_nationhttp://en.wikipedia.org/wiki/Most_favoured_nation


9/35


9

them for loss of trade. If satisfaction is not obtained, the complaining

country may invoke the WTO dispute settlement procedures.

iv. Transparency-The WTO members are required to publish their traderegulations, 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 ofquotas and other measures used to set limits on quantities of

imports

v. Safety valves-In specific circumstances, governments are able to restricttrade. The WTO's agreements permit members to take measures to

protect not only the environment but also public health, animal health and

plant health.

2.3 Organizational structure of the WTOi. Ministerial Conference- The apex body for decision making (meets

every 2 years). Composition:-ministerial representatives.ii. General Council- performs the functions of the Conference between

meetings and has specific duties assigned to it by the WTO agreements.

Composition:- governmental representatives.

iii. The General Council also meets as the Dispute Settlement Body and theTrade Policy Review Body.
http://en.wikipedia.org/wiki/Import_quotahttp://en.wikipedia.org/wiki/Trade_restrictionhttp://en.wikipedia.org/wiki/Trade_restrictionhttp://en.wikipedia.org/wiki/Trade_restrictionhttp://en.wikipedia.org/wiki/Trade_restrictionhttp://en.wikipedia.org/wiki/Import_quota


10/35


10

iv. Councils forTrade in Goods (oversees GATT), Trade in Services(oversees GATS) and TRIPS which report to and assist the General

Council.

v. Committees on special subjects, Committees functioning under theCouncils and Committees for the Plurilateral Agreements.

vi. Membership- developed, developing, least developed countries andeconomies in transition.

vii. Decision making is by consensus. If consensus is not possible decisionswill be taken by a majority vote.


11/35


11

STRUCTURE OF WTO


12/35


12

2.4 WTO: Benefits for business

Creation of a stable, rule based, multilateral trading regimeMarket access translates into market opportunities

The rule based system creates certain rights of access- Security of access

Tariff bindings and disciplines on barriers to trade whether tariff or non

tariff. It also provides non discriminatory treatment of products and services.

- Stability of access

The application of uniform rules in key areas of the trading process e.g.

customs valuation, import licenses etc.

- Rights against unfair trade practices for

1) Domestic industry

2) Export industry

3) Import industry

Participating in the process

Why is it important?

Improve market access through continuous lobbying through chambers of

commerce, trade/product/service organizations.


13/35


14/35


14

Chapter-3

WTO and Issues Concerning India

3.1 Issues3.2 Agreement On Agriculture3.3Annexure:-Food Security-An Important Non-Trade Concern

3.1 IssuesBackground India one of members of General Agreement on Tariffs and Trade

(GATT) since 1948. After Marrakesh Agreement, India joined WTO since

inception in 1995. Aim to participate in WTO rule based system with greater

stability, transparency and predictability in governance of international trade.

Developing countries like India availed of greater trade opportunities and also

challenged certain policies of developed countries (DCs) Developmental issues

increasingly focused along with trade issues S&D treatment for developing and

LDCs incorporated

i. Areas of concernIn spite of special provisions for developing countries, certain imbalances and

inequities experienced. A number of DCs not fulfilled some obligations for

trade liberalization while developing countries asked to reduce import duties

and provide greater market access.

India has reduced tariffs to bring them to bound levels. Even lower for a large

number of commodities as part of the reforms process. Now, India committed to

reduce tariffs to bring in line with South East Asian countries by 2007. We are


15/35


15

not in a position to reduce tariffs substantially to the extent suggested by

developed countries since Customs duties important source of revenue for

developing countries like India. The industrial sector faces several constraints-

some protection warranted for specific industries.

Non-agricultural tariffs gradually reduced but agricultural tariffs require greater

caution due to following reasons. India and other developing countries have

argued that agriculture is way of life and employs large proportion of workforce

while contributing significantly to GDP. Exposure to volatile international

market would affect not only domestic prices but also incomes of poor.

Some DCs not fully implemented the required reduction of domestic support to

farmers, export subsidies and tariffs. WTO permits non-distortionary subsidies.

Experience shows these can be trade distorting and DCs have steadily increased

such subsidies leading to excessive global production. Disadvantage to

developing countries since such subsidies unaffordable. Get less competitive in

world market.

Technical barriers to trade and stringent restrictions on grounds of SPS

regulations to be relaxed to prevent protectionist measures by DCs on this plea.

Grant of patents on non-original innovations particularly linked to traditional

medicines issue of concern.

Mechanism proposed for disclosure of source of origin of biological material

used along with consent of country of origin. Dissemination of knowledge and

also patent rights for seed diversity important for developing countries. Under

agreement on Trade in Services, developing countries have asked for relaxing

restrictions on movement of natural persons.

India has advantage in movement of highly skilled and experienced

professionals. Developing countries had wanted unbundling of Singapore issues

comprising MAI, competition policy, trade facilitation and transparency in


16/35


16

Government procurement. Some issues of concern for developing countries

incorporated in Doha Declaration.

ii. Status of NegotiationsNegotiations at WTO for remaining issues and implementation of Doha

Declaration. These issues brought forth by developing countries at Cancun but

no consensus arrived at. Divergence of interests. No agreement on formula for

tariff reductions for agricultural commodities as well as on Singapore issues.

Proposed relaxations under S&D found inadequate by developing countries.

Under Singapore issues, definition of investment and scope for investors

obligations could not be made. Extent of competition policy and trade

facilitation not arrived at. Formula for tariff reductions in non-agricultural

products that would take care of tariff peaks, high tariffs and tariff escalations

not agreed. Group could not arrive at consensus towards finalizing a declaration.

There is continued attempt to work out a mutually acceptable solution and

negotiations. A blended formula for tariff reductions in agriculture proposed

by US and EC whereby a proportion of tariff lines would be subject to Uruguay

Round formula tariff reductions and a proportion to be made duty free.

However, G-20 not found this acceptable. Felt it would prevent proper delivery

of Doha mandate for market access. Continued negotiations are on.

iii. Tariff Structure in IndiaGiven importance attached to reduction of tariffs, we look at tariff structure in

India and alternative strategy for tariff negotiations. Tariff structure in India

highly complex in early 1990s. With initiation of reforms, substantial reduction

in customs duty rates. Simple average duty rates declined from 128% in 1991-


17/35


17

92 to 22.4% as per interim budget for the year 2004-05. Weighted average duty

rates declined from 72.5% to 18.2% during this period, as in table.

While average duty rates have declined, still large number of tariff rates

prevalent ranging from zero per cent to over 150% during 2004-05. Co-efficient

of variation (CV) around average duty rates quite high.

Commodity Groups in range 100% or higher in 2004-05 include coffee, tea,

alcoholic beverages, essence and perfumes, sugar items, grapes and juices,

motor cars, and motor cycles. In the 50-100% range, commodities are edible

oils, wheat, rice and some other agricultural goods.

iv. Tariff Structure and ImportsWhile undertaking tariff reductions, important to look at trade implications of

plausible scenarios Simple econometric exercise undertaken to look at relation

of imports and tariff structure at two digit HS level. Period taken is 1991-92 to

2001-02. Several functional forms attempted.

Relative share of imports to GDP as functional tariffs seen as function of tariffs

in linear and as a double log function. (M i /G co-efficient gave elasticity of

imports to GDP ratio. where Mi is imports in US $ million and T i is tariff rate

in the commodity groups respectively seen at the 2 digit level. Latter function

yielded better fit and hence chosen for further analysis. *(T i ) (M i /GDP) = a

* (T i ) DP) = a +

Projections made accordingly, given growth rates of GDP and actual tariff rates.

Results not very robust although R 2 and t values not insignificant for most

commodity groups. Import projections compared to actual imports for the year

information available i.e. for 2002-03 suggest that projected imports much

higher than actual quantities imported. Sectoral analysis suggests that actual


18/35


18

imports much lower for sectors like petroleum and products and other mineral

oils and mineral products; cereal products, certain oilseeds; pharmaceutical

products; fertilizers; printed books; railway locomotives & equipments; and

project goods. This requires further analysis. Important identify reasons why

this fit gave good projection in earlier study taking period 1991-92 to 1997-98

but not for this longer period up to 2001-02.

Looking at import elasticity, found elasticity less than (-)1.0 for 13 commodity

groups out of 99. This suggests that reduction in tariff would result in higher

percentage increase in import ratio for these commodities. These items included

animal/vegetable fat, sugars, cocoa, vegetable and fruit preparations, tobacco

items, carpets and textile, floor coverings, apparels and clothing, human hair,

feathers, ships and boats, furniture, beddings, toys, sports items Other sectors

elasticity found to be between (-)1.0 and zero and even positive for few.

v. Some Final ObservationsLarge tariff reductions of essential import items like cereals, dairy products,

edible oils and other agricultural products with low elasticity would benefit the

consumers but would be unacceptable on considerations of number of people

dependent on these items for their livelihood and implications on domestic

production. These sensitive items are also heavily subsidized by DCs. On the

other hand, drastic tariff reductions on items with high import elasticity could

lead to substantial surge in imports and affect the domestic economy adversely.

It is imperative that tariff rates need to be rationalized and more importantly

made more uniform and transparent. While undertaking reduction

commitments, need to carefully identify sectors that could be subjected to

greater tariff reductions than others.


19/35


19

At the same time, items of export interest with high import content need

separate treatment. Delicate balance of various considerations required to

determine tariff reductions such that have minimal detrimental impact on

economy.

3.2 WTO AGREEMENT ON AGRICULTURE

i) IntroductionAfter 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, Morrocco. 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 fromJanuary 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.


20/35


20

ii) Salient FeaturesThe WTO Agreement on Agriculture contains provisions in 3 broad areas of

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

subsidies.

a) Market AccessThis 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 safeguardprovision 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 accessequal to 3% of domestic

consumption in 1986-88 will have to be established for the year 1995 rising to5% at end of the implementation period.

b)Domestic supportFor domestic support policies, subject to reduction commitments, the total

support given in 1986-88, measured by the total Aggregate Measurement of

Support (AMS) should be reduced by 20% in developed countries (13.3% in

developing countries). Reduction commitments refer to total levels of support


21/35


21

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.

Polices 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 Treatmentprovisions 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

subsidized 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.

c) Export SubsidiesThe Agreement contains provisions regarding member's 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 instalment

(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.


22/35


22

iii) LIKELY ISSUES FOR NEGOTIATIONS AND POSSIBLEINDIAN STAND

a) Market Access:

i) High agricultural tariffs and tariff peaks being applied by some WTO

members are significant barriers to meaningful market access opportunities. We

would have to very carefully articulate it as India will need to have a reasonable

level of tariff protection for taking care of its food security and rural

employment concerns.

ii) Tariff escalation is another factor, which discourages developing countries

from diversifying from primary commodity production to processed value

added agricultural products for export purposes.

iii) The operation of tariff rate quotas in a non-transparent and complex manner

limits trade opportunities of new suppliers, particularly from developing

countries. In this context, thus, guidelines on TRQ allocation and administration

would be sought so as to enhance market access opportunities. It may be

desirable to press for the elimination of tariff rate quota system itself.

iv) Certain aspects of sanitary and phytosanitary measures which limit market

access particularly for exports of developing countries would also figure

prominently in the forthcoming negotiations.

v) The special safeguard provisions, which are available to only a few Member

countries, would also be coming up for review and India would press for its

availability to all developing countries.


23/35


23

b) Domestic Support:

i) During the course of implementation of obligations/commitments, a number

of member countries particularly from the developing world have experienced

difficulty in calculating and notifying their aggregate measurement of support

(AMS) on account of the following factors:-

a) Financial/resource constraints limit the capacity of most developing countries

to provide support to their agricultural sector even upto the de minimis level.

b) Lack of clarity in the agreement with regard to the treatment of negative

AMS and "excessive inflation", reduces the flexibility provided to developing

countries during the Uruguay Round to address their domestic policy concerns.

Such implementation issues would require clarification during the current

negotiations.

ii) The 'Green Box' should be revisited for a further tightening of criteria as it

currently incorporates various provisions for support, many of which are not

non-trade distorting. Moreover, as it is currently designed, it is not of much

assistance to developing countries as it does not reflect their support

programmes.

iii) The Blue Box measures which refer to direct payments to farmers under

production limiting programmes which are currently exempt from AMS

reduction commitments, should either be totally dispensed with or alternatively

should be subject to reduction commitments.

iv) Ways and means to incorporate increased flexibility in the level and use of

de minims support would also be discussed.


24/35


24

c) Export Subsidies:

i) Export subsidies are universally acknowledged to be the single most trade

distortive impact in agriculture because of their potential of displacing

developing country exports. There would be a strong demand for a complete

outlawing of export subsidies. India would also press for it. However, as long as

the export subsidies are permitted to be given by any country above the de

minims limit provided under the WTO's Subsidies and Countervailing Measures

agreement, India should also have right to give export subsidies upto an

appropriate level.

ii) Establishment of disciplines in the field of export credits, guarantees and

deferred paymentswhich have a negative effect on prices and competition in the

world agricultural market would be insisted and India would like it to be also

included under the disciplines of Export Subsidies.

iii) On account of ambiguity in the existing language of the Agreement on

Agriculture, certain countries are resorting to 'rolling over of export subsidies.

This practice would need to be suitably addressed as it amounts to negation of

reduction commitments.

iv) Non Trade Concerns:The Non Trade Concerns (NTCs) including food security and the need to

protect the environment, alluded to in Article 20 of the Agreement on

Agriculture would be taken into account during negotiations.

Food Security for India is not only availability of sufficient food but also

adequate means to procure the same. Eminent agricultural economists and

scientists like Dr. Swaminathan also believe that food security is economic

access to food. Accordingly this has ramifications for employment and


25/35


25

livelihood. For developing countries like India which are still grappling with the

twin problems of poverty and unemployment, the production of food and

economic access to it are primary objectives. As opposed to this certain

developed countries are advocating multifunctionalcharacter of agriculture

which essentially signifies that agriculture has functions other then providing

food and fiber and also includes the protection of environment and maintaining

the economic viability or rural areas. Viewed against the needs of developing

countries concerns about the maintenance of rural landscape appear to be

hollow. Any attempts to try and equate the two different scenarios and continue

heavy subsidization of agriculture would be resisted. The concept of multi

ficationality needs to the examined from the perspective of developing

countries. Here, we would like to highlight the fact that the non-trade concerns

of developed countries and those of developing countries differ not only in

content but in priority also.

For countries like India, multi functionality of agriculture is best main fested in

its ramifications in areas such as food security, employment and the elimination

of poverty in rural areas. Moreover, these issues are neither emotive nor

undefined but are practical and harsh realities which decision makers have to

confront when addressing issues of agricultural policies. The need to provide

employment opportunities in pre-dominantly rural agrarian areas is one of the

main NTCs which India would like to see addressed.

v) Biotechnology:

Biotechnological inventions are increasingly affecting agricultural production

and trade. New genetically engineered varieties of crops have increased

productivity and are more pest resistant. This has important ramification for

increasing productivity which is of central concern to almost all developing

countries. To this extent, we would support carefully controlled use of


26/35


26

biotechnology in agriculture. At the same time, there are environmental

concerns relating to biotechnology. It is feared that Genetically Modified

Organisms (GMOs), not having been fully tested for their effect on human

health or the environment, should be treated as a class apart. There are also fears

that new technologies like the so called 'terminator gene'could imbalance the

ecosystem if it spreads beyond controlled production areas.

A concrete country position needs to be evolved in this regard.

v) Strengthening of the Special & Differential Treatment:Special & Differential Treatment accorded to developing countries under the

Uruguay Round would be another area of importance to developing countries.

These special provisions were designed to take into account the constraints

faced by many developing countries in taking advantage of trading

opportunities due to structural problems like inadequate infrastructure, lack of

resources etc. The existing imbalance and problems of implementation of the

agreement would be a high priority item in the next round.

3.3 ANNEXUREFOOD SECURITY-AN IMPORTANT NON-TRADE CONCERN

1. The objective of the Agreement on Agriculture (AOA) was to bring about

discipline in one of the most distorted sectors of trade, by, inter alia, disciplining

the unrestricted use of production and export subsidies, as well as by reducing

import barriers, including non-tariff barriers. Thus, the AOA sought to limit the

extent of support granted by individual countries and attempted to ensure that

countries adopt a more liberal policy as far as agricultural trade was concerned.


27/35


27

At the same time, as indicated in the Preamble, the AOA recognized non-trade

concerns (NTCs) of countries. These NTCs amongst others include food

security and the need to protect the environment.

2. However, this fine balance between trade and non-trade concerns, as

mandated in the Preamble, does not appear to have been fully reflected in the

provisions of the Agreement and consequently in its implementation. The major

thrust of the Agreement appears to be based on the hypothesis that liberalisation

is the panacea of all ills in the agricultural sector. While this may be tenable

from a conventional economic view point, such a reasoning does not take into

account the problems faced by a number of developing countries, which

because of certain underlying constraints, have to necessarily take into account

non trade concerns such as food security, while formulating their domestic

policies. This is particularly true of developing countries, where a significant

percentage of the population is not only dependent on the agricultural sector for

its livelihood, but is also surviving just around the poverty line. In such

countries a purely market oriented approach may not be appropriate. Instead, for

some countries it may be necessary to adopt, what we would like to term a

market plus approach, in which non trade concerns such as the maintenance of

livelihood of the agrarian peasantry and the production of sufficient food to

meet domestic needs are taken into consideration. We, therefore, feel that at this

juncture it is important to closely examine this aspect of the AOA, so as to

ensure that the reform process in the agriculture sector takes into consideration

the food security and other non trade concerns of countries like India.

3. Ensuring food security that is the access of the population to sufficient food

to meet its nutritional requirements is a basic objective of governmental policies

in agrarian developing countries. Hence, food security issues cover not only

issues related to the availability and stability of food supplies but also to issues

of access to this supply i.e. related to the resources that may be needed to


28/35


28

procure the required quantity of food. It is therefore clear that issues related to

food security are sensitive issues and hence countries in which a large

percentage of population is dependent on this sector, would like to have a

certain degree of autonomy and flexibility in determining their domestic

agricultural policies. These policies would naturally be geared towards

improving productivity, enhancing income levels, reducing vulnerability to

market fluctuations, ensuring stability of prices etc. Inter alia, this would be

achieved through reliability of production and supplies, so that seasonal

variations in access to food are minimal. It is for this reason that national food

production policies have been central to domestic agricultural policies not just

for developing countries, but also for the developed countries who are net

importers of food, as has been brought out in the papers submitted by Norway

and Japan. It is, therefore, clear that in this sense food security is a legitimate

national concern and has been so recognized by the FAO (Food & Agriculture

Organization). In fact, during the World Food Summit of 1996 "the importance

for food security of sustainable agriculture, fisheries, forestry and ruraldevelopment in low and high potential areas" was explicitly recognized. This

recognition of the importance of food security even for low potential areas

clearly underlines a developmental perspective which goes beyond mere trade

concerns, and is, therefore, germane to the outlook and interest of developing

countries.

4. Let us, therefore, examine both the external and internal dimensions of this

problem particularly from the perspective of developing countries.

5. Countries which argue and support rapid liberalisation of the agricultural

sector contend that global food sufficiency would in a way ensure food security

since countries could then produce what they are most competent and efficient

in, while importing the rest of their food requirements. Such an argument

presupposes that all countries would at all times have sufficient foreign


29/35


29

exchange to procure their food requirements internationally. This assumption is

obviously not true since not all developing countries would be in a position to

import food grains, even if these were available at competitive prices, due to

their limited foreign exchange reserves. Moreover, these countries often face

cross sectoral pressures on their available funds, which further limits their

capacity to procure internationally. This problem is further compounded in case

there are unforeseen variations in the international prices.

6. Similarly, there are various internal constraints which if not appropriately

addressed, would severely limit the capacity of developing countries to increase

domestic production, to at least a certain minimum percentage of their

requirement. Firstly, holdings are small and the majority of farmers belong to

the small and marginal category. This limits any attempts to introduce

mechanized farming and also constrains the adoption of new technologies

unless accompanied by large scale extension programmes. Consequently, the

productivity is low and the total production varies substantially, since a large

percentage of the agricultural sector continues to be at the mercy of the vagaries

of nature. Further, only a small percentage of what is produced finds itself in the

market, the rest being used by the small and marginal farmers for sustenance or

for simple barter. At the same time, there is increasing pressure on land from

non agricultural users, both because of the rising level of urbanization as also

because of the geographic spread of industries. If this limitation on the

availability of agricultural land is viewed in the context of the growth in

population, which most of the developing countries invariably face, it would be

clear that the only way in which agricultural growth can be sustained and the

objective of food security attained, would be through increased governmental

support in the use of inputs, particularly in terms of irrigation, electricity,

fertilizers, pesticides, technical know-how, high yielding varieties,

infrastructural development, market support etc.


30/35


30

7. It is, therefore, clear that there are significant external and internal

ramifications of attaining the objectives of food security. While it may not be

possible to immediately ensure that developing countries are able to produce at

least a certain minimum percentage of their annual food requirement, this is a

goal which has to be pursued, particularly in light of the constraints that

developing countries would face in adopting an external solution to this

problem. Recognizing the percentage of small farmers in the agricultural sector

of most developing countries, it is clear that a major part of the financial burden

of increased inputs would have to be met through governmental subsidies. It

would need to be recognized that the small farmer would not be able to meet his

principal responsibility without adequate support from government. Public

intervention would therefore be necessary in order to achieve these national

goals.

8. Finally, it needs to be said that agricultural self reliance forms a vital

underpinning for the growth of the GDP of agrarian developing economies

since good agricultural production provides purchasing power to a large

majority of a population, which in turn spurts industrial growth. Self-sufficiency

in food production has therefore a specific developmental perspective as

opposed to a purely commercial perspective. Hence, it is our view that

developing countries need to be provided the requisite flexibility within the

AOA to pursue their legitimate non trade concerns. More specifically,

developing countries need to be allowed to provide domestic support in the

agricultural sector to meet the challenges of food security and to be able to

preserve the viability of rural employment, as different from the trade distortive

support and subsidies presently permitted by the Agreement. It is therefore

important that a differentiation is made between such domestic support

measures which are presently being used to carve out a niche in the international


31/35


31

trade and between those measures which would allow developing countries to

alleviate rural poverty.

9. India is anxious that the AIE process must therefore examine the manner in

which developing countries can be provided additional flexibilities by

appropriate adjustments to the provisions of the AOA, in order to enable them

to pursue their legitimate non- trade concerns. India believes that a focussed

discussion on the subject will contribute to increased awareness to the non-trade

concerns of countries like India, such as food security and rural employment,

and thus enable the WTO Membership to deal with the subject of continuation

of the reform process in the agricultural sector with sensitivity to these

concerns.


32/35


32

Chapter-4

CONCLUSION

4.1 Advantages and Disadvantages of WTO4.2 Role of India in WTO4.3 Conclusion4.4 Bibliography

4.1 Advantages and Disadvantages of WTO

Advantages:-

- The WTO is a forum which discusses the differences on trade between

members.- Is Transparency and predictability.

- Establish a system of trade rules between countries.

- The WTO makes more efficient the specialization of a country with a product,

getting better advantages.

- Help to balance the trade between countries.

- Encourages the stability of the negotiations and helps the development of a

country.

- Try to balance opportunities for all countries.

- Dont allow that developed countries trample on less develop countries.


33/35


33

Disadvantages:-

- The WTO is fundamentally Undemocratic.

- Industrialized countries benefit more than poor countries.

- Try to monopolize all basic services.

- Developed countries have an advantage over developing countries.

- Don't allow the participation of developing countries.

Although there are several advantages of the WTO and although one of the

principles is that no discrimination, it is disturbing to see that if there are fold

over the favoritism to developed countries than developing.

4.2 Role of India in WTO :

Role of India in WTO 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 on 1.1.95 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 149 other

nations which now comprise the WTO. India also automatically avails of MFN

and national treatment for its exports to all WTO members. India has aligned

itself with WTO in the goal to reduce the trade barriers and tariffs to zero by

2025.


34/35


34

4.3 Conclusion

. It will be just to highlight one issue each where the RICH countries and poorcountries need to be honest. Let us be honest to understand that dominance of

politics over economics and fair play will never render justice.

With malice toward none ,charity for all with firmness in right as god has

given us to see the right, let us strive on to achieve adjust and prosperous nation

among all other nation


35/35


4.4 BIBLOGRAPHY

The WTO Website: www.wto.org

Some related websites of interest

OECD www.oecd.org

ITC www.intracen.org

World Bankwww.worldbank.org
http://www.wto.org/http://www.oecd.org/http://www.intracen.org/http://www.worldbank.org/http://www.worldbank.org/http://www.intracen.org/http://www.oecd.org/http://www.wto.org/

wto and specififc issues

Documents

Transcript of wto and specififc issues