66World Trade Organization

The World Trade Organization (WTO) is a global international organization dealing

with the rules of trade between nations. The work of WTO moves around WTO
agreements, negotiated and signed by the bulk of the world's trading nations and
ratified in their parliaments. The goal is to help producers of goods and services,
exporters, and importers conduct their business.

The World Trade Organization is an international organization which was created for the liberalization of
international trade. The World Trade Organization came into existence on January 1st, 1995 and it is the
successor to General Agreement on Trade and Tariffs (GATT). The World trade organization deals with the rules
of trade between nations at a global level. WTO is responsible for implementing new trade agreements. All the
member countries of WTO have to follow the trade agreement as decided by the WTO.

Structure of the WTO:

Following is the structure of WTO.

Highest Level: Ministerial Conference

The Ministerial Conference is the top most body of the WTO, which meets in every two years. It brings together
all the members of WTO. 

Second Level: General Council

The General Counsel of the WTO is the highest level decision making body in Geneva, which meets regularly to
carry out the functions of WTO. 

Third Level: Councils for Trade

The Workings of GATT, which covers international trade in goods, are the responsibility of the Council of Trade.  

Fourth Level: Subsidiary Bodies

There are subsidiary bodies under the various councils dealing with specific subjects such as agriculture,
subsidies, market access etc.

Benefits Of WTO

 It helps promote peace and prosperity across the globe.

 Disputes are settled amicably.
 Rules bring about greater discipline in trade negotiations, thereby reducing inequalities to a large
extent.
 Free trade reduces the cost of living and increases household income.
 Companies have greater access to markets and consumers have wider range of products to choose
from.
 Good governance accelerates economic growth

India and WTO

India is one of the founding members of WTO along with 134 other countries. India's participation in an
increasingly rule based system in governance of International trade, would ultimately lead to better prosperity for
the nation. Various trade disputes of India with other nations have been settled through WTO. India has also
played an important part in the effective formulation of major trade policies. By being a member of WTO several
countries are now trading with India, thus giving a boost to production, employment, standard of living and an
opportunity to maximize the use of the world resources.
Problems facing India in WTO & its Implementation:

But there are several problems facing these Multilateral Trade agreements:

- Predominance of developed nations in negotiations extracting more benefits from

developing and least developed countries

- Resource and skill limitations of smaller countries to understand and negotiate under
rules of various agreements under WTO

- Incompatibility of developed and developing countries resource sizes thereby causing

distortions in implementing various decisions

- Questionable effectiveness in implementation of agreements reached in past and

sincerity

- Non-tariff barriers being created by developed nations.

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

- Poor implementation of Doha Development Agenda

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

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

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

Implications for India

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

In Pharma-sector there is need for major investments in R &D and mergers and

restructuring of companies to make them world class to take advantage. India has
already amended patent Act and both product and Process are now patented in India.
However, the large number of patents going off in USA recently, gives the Indian Drug
companies windfall opportunities, if tapped intelligently. Some companies in India have
organized themselves for this.

Excerpts from Speech of Ramkrishna Hegde, the then Minister, at Geneva in

1998-

"In order to make WTO an effective multilateral body, which serves the objectives for
which it was set up, it is necessary to go back to the basic principles. The Uruguay
Round negotiators had stated their intentions quite clearly in the Preamble to the
Marrakesh Agreement establishing the WTO. They recognised "that their relations in the
field of trade and economic endeavour should be conducted with a view to raising
standards of living, ensuring full employment and a large and steadily growing volume of
real income and effective demand, and expanding the production of and trade in goods
and services, while allowing for the optimal use of the world's resources in accordance
with the objective of sustainable development, seeking both to protect and preserve the
environment and to enhance the means for doing so in a manner consistent with their
respective needs and concerns at different levels of economic development. They
recognized also "that there is need for positive efforts designed to ensure that
developing countries, and especially the least developed among them, secure a share in
the growth in international trade commensurate with the needs of their economic
development".

The Objective of WTO Reiterated:

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

Developing countries have generally been apprehensive in particular about the

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

The first Ministerial Conference held in 1996 in Singapore saw the commencement of
pressures toenlarge the agenda of WTO. Pressures were generated to introduce new
Agreements on Investment, Competition Policy, Transparency in Government
Procurement and Trade Facilitation. The concept ofCore Labor Standards was also
taken up for introduction.

 India and the developing countries, which were already under the burden of fulfilling the
commitments undertaken through the Uruguay Round Agreements, and who also
perceived many of the new issues to be non-trade issues, resisted the introduction of
these new subjects into WTO. They were partly successful. The Singapore Ministerial
Conference (SMC) set up open-ended Work Program to study the relationship between
Trade and Investment; Trade and Competition Policy; to conduct a study on
Transparency in Government Procurement practices; and do analytical work on
simplification of trade procedures (Trade Facilitation).

Most importantly the SMC clearly declared on the Trade-Labor linkage as

follows:

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

Not many people in this country are aware that there is a dispute settlement system in
the WTO. This is at the heart of the WTO and sets it apart from the earlier GATT.
Countries like the USA and the European Union have brought cases against us and won
these cases like in pharmaceutical patents. India too has complained against the US and
Europe and it too has won its fair share of disputes in areas like textiles. India must
effectively use this mechanism to extract fair share in world markets.

It would be advantageous for India to give concrete shape to SAARC economic forum or
Free market and align itself with ASEAN.

What India should do?

The most important things for India to address are speed up internal reforms in building
up world-class infrastructure like roads, ports and electricity supply. India should also
focus on original knowledge generation in important fields like Pharmaceutical molecules,
textiles, IT high end products, processed food, installation of cold chain and agricultural
logistics to tap opportunities of globalization under WTO regime.

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

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

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

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

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

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

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

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

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