Prof.S.P.Das Xavier Institute of Management GATT/WTO AND GLOBAL ECONOmomICc LIBERALISATION (Internal Circulation Only) The global business environment is very significantly influenced by the World Trade Organisation (WTO) principles and agreements. They also affect the domestic environment, For example, India has had to substantially liberalise imports, including almost complete removal of quantitative import restrictions. The liberalisation of imports implies that domestic firms have to face an increasing competition from foreign goods. Liberalisation of foreign investment can result in growing competition from local outfits of MNCs. bi These liberalisations, on the other hand, also provides new opportunities for Indian firms as the foreign markets become more open for exports and investments. The liberalisation also enables Indian firms to seek foreign equity participation and foreign technology. This could help them to expand their business or improve competitiveness. Further, the liberalisation facilitates global sourcing by Indian firms so that they can improve their competitiveness. Indian suppliers can benefit from global sourcing by foreign firms. WTO principles and agreements are a very ‘environment significantly impacting domes important component of the global as global business. Firms will have to be efficient and dynamic to survive the global competition. Inefficient firms may go out of business. Consumers stand to benefit significantly from the liberalisation, GATT The General Agreement on Tariffs and Trade (GATT), the predecessor of WTO, was born in 1948 as result of the international desire to liberalise trade. The Bretton Woods Conference of 1944, which had recommended the IMF and World Bank, had also recommended the establishment of an International Trade Organisation (ITO). Although the IMF and World Bank were established in 1946, the ITO charter was never ratified, because of objections that its enforcement provisions would interfere with the autonomy of domestic policy making. Instead, the GATT, which had been drawn up only as an interim agreement to fill the gap until the ITO charter was ratified, became the framework for international trading system since it came into being in 1948. The international trading system since 1948 was, at least in principle, guided by the rules and procedures agreed to by the signatories to the GATT which was an agreement signed by the contracting nations which were admitted on the basis of their willingness to accept the GATT disciplines Source : Economic Environment of Business Text & Cases by Francis Cherunilam Page 1 & scanned with OKEN ScannerGATT/WTO And Global Economic Liberalisation The GATT was transformed into a World Trade Organisation (WTO) with effect from January, 1995. Thus, after about five decades, the original proposal of an International Trade Organisation took shape as the WTO. The WTO, which is a more powerful body than the GATT, has an enlarged role than the GATT. India is one of the founder members of the IMF, World Bank, GATT and the WTO. Objectives The Preamble to the GATT mentioned the following as its important objectives. BEESSE | 1 Ralsing standard of lving 225028 | 2 ensuring full employment and a large and steadily growing volume #be aoe of real income and effective demand. Be 7 g 3. Developing full use of the resources of the world. 2 : 4. Expansion of production and international trade. é 8 Source - Economic Environment of Business Text & Cases by Francis Cherunilam GATT embodied certain conventions and general principles governing international trade among countries that adhere to the agreement. The rules or conventions of GATT required that: “2 "Any proposed Change in thé tariff, or other type of commercial policy of a member country should not be undertaken without consultation of other parties to the agreement. 2. The countries that adhere to GATT should work towards the reduction of tariffs and other barriers to international trade, which should be negotiated within the framework of GATT. For the realisation of its objectives, GATT adopted the following principles: 4. Non-discrimination: The principle of non-discrimination requires that no member country shall discriminate between the members of GATT in the conduct of international trade, To ensure non-discrimination the members of GATT agree to apply the principle of most favoured nation (MFN) to all import and export duties. This means that "each nation shall be treated as well as the most favoured nation.” As far as quantitative restrictions are permitted, they too, are to be administered without favour. However, certain exceptions to this principle are allowed, For instance, GATT does not prohibit economic integration such as free trade areas or customs union, provided the purpose of such integration is "to facitate trace between the constituent terrtories and hot to raise barriers to the trade of other patties.” The GATT also permits the members to adopt measures to counter dumping and export subsidies. However, the application of such measures shall be limited to the offending countries Page 2 & scanned with OKEN Scanner rfuo GATT/WTO And Global Economic Liberalisation An Evaluation of GATT The growing acceptance of GATT, despite its shortcomings, is evinced by the increase in the number of the signatories. When the GATT was signed in 1947, only 23 nations were party {0 it Itincreased to 99 by the time of the Seventh Round and 117 countries participated in the next, i.e, the Uruguay Round. In April 2008, there were 151 members with several more Countries formally seeking accession to the WTO. The signatory countries account for about 90 Per cent of the international trade indicating the potential of the WTO in bringing about an orderly development of the international trade. One of the principal achievements of GATT was the establishment of a forum for Continuing consultations. "Disputes that might otherwise have caused continuing hard feeling, reprisals, and even diplomatic rupture have been brought to the conference table and compromised". GATT could achieve considerable trade liberalisation. There were, of course, several exceptions. 3Eee Agricultural trade was clearly an exception to the liberalisation. Far from $22, | becoming freer, trade in agriculture became progressively more distorted by the B 28 58 | support given to farmers (which took the form of severe barriers to imports and & 2 = § | subsidies to exports) in the industrial nations. 3gee8 ols Similarly, another exception was textiles. Trade in textiles was restricted by 8 S= 8 | the Multifibre Arrangement (MFA). Under the MFA imports of textile items to a £ g 98 | | number of developed countries were restricted by quotas. pase Besides agriculture and textiles, two exceptions to the general trend of $888 | trade liberalization have been trade of developing countries and economic ==~ = integration. Developing countries with balance of payments problems have been generally exempted form the liberalisation. Even the Uruguay Round has granted such ‘exemptions to developing countries. Page 3 Source : Economic Environment of Business Text & Cases by Francis Cherunilam 8 & scanned with OKEN Scanner~ THE U GATT/WTO And Global Economic Liberati, ‘Although the picture of trade liberalisation has to be qualified with such exceptions, the GATT achieved very commendable trade liberalisation. The average level of tariffs on manufactured products in industrial countries was brought down from about 40 per cent in 1947 to nearly three per cent after the Uruguay Round. Indeed the period of 1950-1973 is conspicuous by the splendid results of progressive trade liberalisation. In the 275 years since 1720, this period witnessed the highest average annual growth rates in output and international trade. These rates were substantially higher than for any other period. Indeed, the 1950s and 1960s are described as the golden decades of capitalism. The output levels of companies using newer and newer technologies in many cases were much larger than the domestic markets could absorb. Expansion of markets to other countries enabled even companies in other industries to increase their output. There was also a surge in international investments. The progressive liberalisation of trade, however, suffered a setback since 1974. Although the elimination of Tariff Barriers continued, even the developed countries have substantially increased Non-Tariff Barriers since then. The collapse of the Bretton Woods system in the early 1970s and the oil crisis made matters very difficult for many countries, both developing and developed, and as a result of these demands for protection increased dramatically. The developing country exports have been hit very hard by the NTBs, as pointed out earlier in this chapter. Further, the exports of developing countries gained significantly less from the GATT Rounds than did exports of the industrial nations. The trade liberalisation has been confined mostly to goods of interest to the developed countries. In case of agricultural commodities not only was that there was no liberalisation, but also there was an increase in protection. Manufactured products of interest to developing countries like textiles and clothing, footwear etc. have been subject to increasing non-tariff barriers. While the developed countries enjoy a more liberalised trading environment, the growing NTBs have been severely affecting the exports of developing countries. Ironically, the developed countries are increasing the protectionism when the developing countries are liberalising. This is indeed a sad commentary onthe GATT and other multilateral organisations. & scanned with OKEN ScannerGATT/WTO And Global Economic Liberalisation THE URUGUAY ROUND Uruguay Round (UR) 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 Este in Uruguay, a developing country, in September 1986. Because of the complexities of the issues involved and the conflicts of interests among the participating countries, the Uruguay Round could not be concluded in December 1990 as was originally scheduled, When the negotiations dragged on, Arther Dunkel, the then Director General of GATT, presented a Draft Act embodying what he thought was the result of the Uruguay Round. This came to be popularly known as the Dunkel Draft. This was replaced by an enlarged and modified final text which was approved by delegations from the member countries of the GATT on 15" December 1993. This Final Act was signed by ministers of 125 governments on 15th April 1994. The results of the Uruguay Round are to be implemented within ten years since 1995. Different time periods were given for effecting the different agreements. The first six Rounds of MTNs concentrated almost exclusively on reducing See tariffs, while the Seventh Round (Tokyo Round-1973-78) moved on to tackle | 3585 non-tariff barriers (NTBs). The UR sought to broaden the scope of MTNs far | ££ 20 wider by including new areas such as: gese «Trade in services gees * Trade related aspects of intellectual property (TRIPs) = 255 + Trade related investment measures (TRIMs). 3. 5 Se 2332 Because of the inclusion of these new aspects in the GATT negotiations, the |» 39 32 developing countries had serious apprehensions, about outcome of the Uruguay | = 88 SF Round. ‘The Uruguay Round took up three basic subjects for discussion: 1. Reducing specific trade barriers and improving market access. 2. Strengthening GATT disciplines, 3. Problems of liberalisation of trade in services, trade related aspects of intellectual property rights (TRIPs) and trade related investment measures (TRIMs). The most outstanding feature of the UR was the inclusion of the subjects in the 3° item referred to above in the MTNs of GATT. The traditional concems of the GATT were limited to international trade in goods. The UR went much beyond goods to services, technology, investment and information. Some of the important features of the Uruguay Round Agreements are given below. Source : Economic Environment of Business Text & Cases by Francis Cherunilam Pages & scanned with OKEN ScannerGATT AND WTO as converted from a provisional agreement into tion (WTO) with effect fror Following the UR Agreement, GATT we ee formal international organisation called World Trade Org: y January 1, 1995. WTO now serves as a single institutional framework encompassing aoe a all the results of the Uruguay Round. It is directed by a Ministerial Conference da meet 2 least once every two years and its regular business is overseen by a General Council. The old GATT system allowed, under what was known as the ‘grandfather clause’ existing domestic legislation to continue even if it violated a GATT agreement that a membei country had accepted by being a signatory to GATT. The WTO, specially rules this out. The situation, after the coming into effect of WTO may be described as the GATT is dead, long live the GATT. Under the old system, there were two GATTs: (i) GATT the Agreement — ie. the agreement between contracting parties (governments) setting out the rules for conducting international trade; (ii) GATT the Organisation — an international organisation created to facilitate discussions and administration related to the Agreement (ad hoc, though, continued to exist until the establishment of the WTO). GATT the organisation, ceased to exist with the establishment of WTO; GATT the agreement, which always dealt with (and still does) trade in goods, continues to exist, in amended form, as part of the WTO alongside two new agreements, viz., General Agreement on Trade in Services (GATS) and General Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs). The old text is now called ‘GATT 1947" and the updated version is called 'GATT 1994". In short. TABLE 38.1 : DIFFERENCE BETWEEN GATT AND WTO GATT wro ] GATT was ad hoc and provisional WTO and its agreements are permanent GATT had contracting parties WTO has members GATT system allowed existing domestic WTO does not permit this legislation to continue even if it violated a GATT agreement GATT was less powerful, dispute settlement | WTO is more powerful than GATT, dispute system was slow and less efficient, its ruling _| settlement mechanism is faster and more could be easily blocked efficient, very difficult to block the rulings. ‘Source : Economic Environment of Business Text & Cases hy Francis Cherunilam Page 6 & scanned with OKEN Scanner% YF / BY icy 4 GATT/WTO And Global Economic Liberalisation Functions The WTO has the following five specific functions. 1, The WTO shall facilitate the implementation, administration and operation and further the objectives of the Multilateral Trade Agreements and shall also provide the framework for the implementation, administration and operation of plurilateral Trade Agreements. 2. The WTO shall provide the forum for negotiations among its members concerning their multilateral trade relations in matters dealt with under the Agreements. 3. The WTO shall administer the ‘Understanding on Rules and Procedures Governing the Settlement of Disputes’ 4, The WTO shall administer the 'Trade Review Mechanism’ 8. With a view to achieving greater coherence in global economic policy making, the WTO shall cooperate, as appropriate, with the IMF and IBRD and its affiliated agencies. The General Council will serve four main functions: 1. To supervise on a regular basis the operations of the revised agreements and ministerial declarations relating to (a) goods, (b) services and (c) TRIPs; 2. To act as a Dispute Settlement Body; 3. To serve as a Trade Review Mechanism; and 4. To establish Goods Council, Services Council and TRIPs Council, as subsidiary bodies. The WTO is a more powerful body with enlarged functions than the GATT and is envisaged to play a major role in the world economic afairs, To become a member of the WTO, a country must completely accept the results of the Uruguay Round SALIENT FEATURE OF UR AGREEMENT Liberalisation of Trade in Manufactures Ueralisation of trade in manufactures is sought to be achieved mostly by reduction of tariffs and phasing out of non-tariff barriers, Tarif Barriers : The major liberalisations in respect of trade in manufactures, regarding tariff, are: 1. Expansion of tariff bindings 2. Reduction in the tariff rates 3. Expansion of duty-free access ‘The UR Agreement envisages substantial tariff reductions in both industrial and developing countries. Source : Economic Environment of Business Text & Cases by Francis Cheranllans . Page7 & scanned with OKEN ScannerTree — GATT/WTO And Global Economic Liberatisay, The main liberalisations by industrial countries include the expansion of tariff bindings (ie, commitment not to exceed a particular level of tariff) to cover 99 per cent of imports, the expansion of duty-free access from 20 to 43 per cent of imports, and the reduction of trade weighted average tariff by 40 per cent, from 6.2 to 3.7 per cent. However, the gains to developing countries from the tariff cuts by industrial countries is less impressive. The reduction in the average tariffs on their exports to industrial markets is 30 er cent and the labour intensive manufactures (textiles, clothing, leather goods) and certain processed primary products (fish products) which are regarded as sensitive have below average tariff cuts. In industrial countriestariffs will be eliminated in several sectors like steel, Pharmaceuticals and wood and wood products. Developing countries agreed to bind their tariffs on 61 per cent of their imports of industrial Products, compared with 13 per cent before the UR Round. They also offered to reduce their trade-weighted average bound tariff on imports from industrial countries by 28 percent, from 15 to 11 per cent. The offers of tariff reduction on manufactures by developing countries are estimated to amount to over a third of the world total. The expansion of tariff binding by the developing countries, which rules out future increases in tariffs, is regarded as a significant achievement. India has bound tariffs at 40 per cent (where they were above 40 per cent in 1993-94) on industrial raw materials, components and capital goods and at 25 per cent in other cases. After’ the UR Agreement comes into force, about 68 per cent of India's tariff lines will be bound (compared to five percent earlier). In comparison, many developing countries in Asia and Latin ‘America have bound between 90 and 100 per cent of their tariff lines at levels comparable to, or lower than, India’s bindings. 7 Non-tariff Barriers: In the area of NTBs, the Agreements to restraints (VERs) and to phase out the Multifibre Arrangements landmark achievements for developing countries, abolish voluntary export (MFA) are regarded as The phasing out ofthe existing VERs within four years and the MFA within ten years would Scale back the coverage of NTBs on developing countries’ trade from 18 per cent of their 1090 exports. As trade in derestricted product lines would tend to grow faster than other trade, this coverage could fall to 4.2 per cent by 2005 The UR Agreement seeks to phased out the MFA by 2005. According to some estimates the phasing out of MFA would contribute about 20 per cent of ‘the total welfare gains from the UR. The largest gains will go to the MFA importers who will be able to import basic clothing and textiles from the more efficient suppliers in ASEAN, China, South Asia and other regions. By 2008, the total benefits to the European Community, the US and Canada are estimated at $56 billion per year at 1992 prices. Income gains of over $13 billion are of text significant the UR Agreement A very si jose Tovt & Cases by Francis Cherunilam ‘Source Rennamin Fos & scanned with OKEN ScannerGATT/WTO And Global Economic Liberalisation projected for highly competitive exporters such as China, Indonesia, Thailand and South Asian exporters, despite the loss of quota rents provided under the MFA. Some less competitive exporters will suffer from the loss of their preferential access to industrial country markets unless they are able to increase their efficiency, and some Currently unrestricted importers will lose as the exports currently diverted toward them by restrictions elsewhere can flow freely to the other markets. Liberalisation of Agricultural Trade As mentioned earlier, one of the salient features of the UR was the inclusion, for the first time, of agriculture in the MTN. The exclusion of agriculture from the previous Rounds and its effective exemption from the GATT discipline made agriculture a highly protected sector in the developed countries. The depressing impact of this on world prices prevented efficient Producers from realising the benefits of their comparative advantage. Developing country exports suffered a lot The important aspects of the UR Agreement on agriculture include. 1. Tariffication 2. Tariff binding 3. Tariff cuts 4, Reduction in subsidies and domestic support. Tariffication and Tariff Cuts: Tariffication means the replacement of existing non-tariff restrictions on trade such as import quotas by such tariffs as would provide substantially the same level of protection. From the first year of the Agreement's implementation, nearly all border protection is to be bound by tariffs, which (in principle) are to be no higher than the tariff equivalent of the protection levels prevailing in the base periods. Industrial countries are then to reduce their tariff bindings by an average of 36 per cent within six years (from 1995) while all developing countries but the poorest are required to reduce tariffs by an average of 24 per cent over a period of ten years. Least developed countries are not required to make any commitment for reduction of tariffs on agricultural products. On agricultural tariffs, developing countries have the flexibility of indicating maximum ceiling binding. India has indicated ceiling bindings of 100 per cent on primary products and 300 per cent on edible oils. & scanned with OKEN ScannerGATT/ WTO And Global Economic Liberatise, tig, Subsidies and Domestic Support Policies: The UR Agreement deals with three Categories of subsidies. 1. Prohibited subsidies - those contingent upon export performance or the use of domestic instead of imported goods. 2. Actionable subsidies - those that have demonstrably adverse effects on other member countries. Non-actionable subsidies including those provided (with stipulated limitations) to industrial research and procompetitive development activity to disadvantaged regions, or to existing facilities to adapt themselves to new environmental requirements. The UR Agreement sought to significantly curtail subsi @ The Agreement also puts restrictions on the use of countervailing measures against competitors’ subsidies. To prevent undue hardships, developing countries and countries in transition from centrally planned to market economies are allowed extra time to bring the subsidies into conformity with the new rules. While industrial economies are required to reduce, over six years, the volume of subsidised agricultural exports by at least 21 per cent and the value of subsidies at least by 36 per cent, the Tespective figures for developing countries are 14 per cent and 24 per cent. All countries are bound not to introduce new subsidies. The UR agreement has brought the domestic support policies also under the multilateral trade discipline. However, domestic support measures that have almost a minimal impact on trade ("green box" policies) such as general government services in the areas of research, disease control, infrastructure and food security as also certain direct payments such as certain income support policies, structural adjustment assistance, payment under environmental programmes and regional assistance programmes are exempted, The non-exempted types of subsidies included in the aggregate measure of support (AMS) required to be reduced include assistance in the form of production-limiting subsidies and assistance given for growth of agriculture and rural development like procurement at support prices and subsidies on inputs and credit. However, even these subsidies are required to be reduced only if their total amount as a proportion of the value of agricultural production exceeds five per cent in case of developed countries and 10 per cent in case of developing countries. If the non-exempted subsidies are above these limits, they are required to be reduced by 20 per cent in case of developed countries and by 13.3 per cent in developing countries by 1999. According to government of India, India's total AMS is negative (without taking into account exemptions available on input subsidies to low income and resource poor farmers) and there are no reduction commitments. Nor does India have any minimum market access commitments in agriculture. (The UR Agreement provides for the establishment of minimum access sect quotas, at reduced tariff rates, where the access is less than 3 per cent of tl °. Been consumption. The minimum access tariff quotas are to be expanded to five per cent implementation period). Page 10 & scanned with OKEN ScannerGATT/WTO And Global Economic Liberalisation Assistance for 'food security” such as the food subsidy under the public distribution system (PDS) will be exempted to the extent they confine to the poor. Non-agricultural Export Subsidies Countries whose per capita income is less than $1000 are not bound to phase out export subsidies. (India's per capita income in 2000 was only $460). However, even such countries will have to phase out export subsidies on products where the share in the world exports is 3.25 per cent or more in two consecutive years. This is applicable to India in respect of exports of diamonds. GATS The General Agreement on Trade in Services (GATS) which extends multilateral rules and disciplines to services is regarded as a landmark achievement of the UR, although it achieved only little in terms of immediate liberalisation. Because of the special characteristics and the socio-economic and political implications of certain services, they have been generally subject to various types of national restrictions. Protective measures include visa requirements, investment regulations, restrictions on repatriation, marketing regulations, restrictions on employment of foreigners, compulsions to use local facilities etc. Heavily protected services in different countries include banking and insurance; transportation; television, radio, film and other forms of communication; and so on. The GATS defines services as the supply of a service from the territory of one member (country) into the territory of any other member; in the territory of one member to the service consumer of any other member; by a service supplier of one member, through commercial presence in the territory of any other member, or by a service supplier of one member, through presence of natural persons of a member in the territory of any other member. In short, the GATS covers four modes of international delivery of services. 1. Cross-border supply (transborder data flows, transportation services) 2. Commercial presence (provision of services abroad through FDI or representative offices). 3. Consumption abroad (tourism) 4, Movement of personnel (entry and temporary stay of foreign consultants) While industrial countries have offered market access commitment of some kind on over half (about 54 per cent) of their service activities, developing countries did so only on less than one-fifth (about 17 per cent) of their service categories. Tourism and travel-related services are the only activities in which a substantial number of developing countries made commitments. Page 11 | & scanned with OKEN ScannerGATT/ WTO And Global Economic Liberatis., The framework of CATS includes basic obligation of all member countries on internationay trade in services, including financial services, telecommunications, transport, audio visual, tourism, and professional services, as well as movement of workers. Among the obligations is a most favoured natio n (MFN) obligation that essentially prevents Countries from discriminating among foreign supplie rs of services. Another obligation is the transparency requirements according to which each member country shall promptly Publish all its relevant laws and regulations pertaining to services including international agreements init With reference to domestic regulation, the A general application affecting trade in services are administered in a reasonable, objective and Impartial manner. There would be a requirement that parties, establish ways and means for Prompt reviews of administrative decisions relating to the supply of services. ‘greement lays down that all measures of It is recognised that particular pressures on the balance of payments of a Member in the Process of economic development or economic transition may necessitate the use of restrictions to ensure, inter alia, the maintenance of a level of financial reserves adequate for the implementation of its programme of economic development or economic transition, ‘A member country may, therefore, apply restrictions on intemational transfers and Payments for current transactions under certain circumstances envisaged under the GATS. In the event of serious balance of payments and external financial difficulties or threat thereof, a member may adopt or maintain restrictions on trade in services on which it has undertaken Specific commitments including on payments or transfers for transactions related to such commitments, ‘The commitments of member countries under the GATS also include national treatment (that is, to treat foreign suppliers of services like domestic suppliers) and provision of market access. & scanned with OKEN Scanneruc As stated earlier, the fear of the developing countries is that the liberalisation es will lead to the domination of the services sector of the ies by the multinationals of the industrialised countries. Asa matter of fact, the trade in Services is already dominated by the developed countries. The developing countries are net importers of services and their deficit has been growing. The apprehension is that a liberalisation of trade in services will accentuate the problem. have great 19 countries fit from have se Although many services are labour intensive and, therefore, the developing Countries should be expected to have an advantage here, there have been several constraints in benefiting from this advantage. These include, technical, organisational, financial and legal. Moreover, immigration laws of developed countries restrict the manpower flow from the developing to developed countries. This severely limits the scope of developing countries in benefiting from their Comparative advantage. It may be noted that the industrial issue in the Uruguay Round. TRIMS to benef developin Services trade, they countries did not like to bring this Trade Related Investment Measures (TRIMSs) 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 TRIM which is inconsistent with the WTO Articles. An illustrative list identifies the following TRIMS as inconsistent. 1. Local content requirement (i.e, a certain amount of local inputs be used in products) " 2. Trade balancing requirement (.e., imports shall not exceed a certain proportion Stade and foreign exchange balancing requirements &. Domestic sales “fequirements (ie., 2 company shell sell a certain proportion of its output locally) The Agreement requires the notification of all WTO-inconsistent TRIMs a phasing out within two, five and seven years by industrial developing and least developed countries, respectively. Transition period am i ee developing and least developed countries if they face difficu TRIMs. Page 13, cnt of Business Text & Cases by Francis Cherunilam ‘onomic Environme! & scanned with OKEN ScannerGATT/ WTO And Global Economic Liberalisay, 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. (See the Chapter on Patents and Trade Marks for details regarding TRIPs). Anti-dumping Measures The UR Agreement provides greater clarity and more detailed rules concerning the method of determining dumping and injury, the procedure to be followed in anti-dumping investigations, and the duration of antidumping measures. It also clarifies the role of dispute-settlement panels in conflicts relating to anti- dumping actions taken by national authorities. more action ent. antidumping now A product is regarded as dumped when its export price is less than the normal price in the exporting country or its cost of production plus a reasonable amount for administrative, selling and any other costs and for profits. Z £ zg s 5 s The Anti-dumping measures can be employed only if dumped imports are shown to cause serious damage to the domestic industry in the importing country. Further, anti-dumping measures are not allowed if the ‘margin of dumping, (i.e., the price differences) is de minimis (defined as 2 per cent of the export price of the product) or the volume of dumped imports is negligible (less than 3 per cent of imports of the product in question) Safeguard Actions Members may take safeguard actions, i.e., import restrictions to protect a domestic industry from the negative effects of an unforeseen import surge, if a domestic industry is threatened with serious injury. The UR Agreement, however, prohibits the use of such actions where they constitute grey-area measures, including voluntary export restraints, orderly marketing arrangements or other similar measures applied on either exports or imports. The existing grey area measures are to be phased out by 1999. Further, the Agreement provides for discipline on the use of all safeguard measures, including time limits, requirements for safeguard investigation, and nondiscrimination (generally) among sources of supply. Safeguard measures would not be applicable to developing countries where their share in the member country's imports of the product concerned is relatively small. & scanned with OKEN Scannerf GAI1/ WTO And Global Economic Liberalisation EVALUATION OF THE URUGUAY ROUND The success of the UR Agreement will depend upon the spirit with which it will be translated into practice. The tariffication of trade barriers was claimed to be a significant success of the UR. However, because of the way the NTBs were converted into tariffs, the so-called dirty \ariffication, many of the tariff bindings exceeded the protection rate applying during the base Period (which itself was one of generall 7 ly high level of protection), some by as much as 200 per cent. 2 2 i 22 Several estimates of the gains from the UR Agreement are available. 3 S> = | They vary widely. According to some estimates the real world income (in 20 B25 | constant 1992 US dollar) will increase by between $212 billion and $274 8 g=® 65 q | billion in 2005. Further, such annual increases will follow. This amounts to §_ _ 88 | around one percent of World GDP. According to a GATT study, the gain will £23823 | beas high as $510 billion. 22,883 28 38 Most of the gains will accrue to the developed countries. Some developing countries in the category of least developed countries and net food importers are expected to lose because of the Uruguay Round package. According to some estimates the increase in real income will be roughly 1.6 per cent of GDP for the European Union, 0.2 per cent for the US and 0.9 for Japan. As a single country, the largest gain in absolute terms will accrue to the US (between $28 and $67 billion). It will be between $27 and $42 billion for Japan, between $61 and $98 billion for the EU and between $36 and $78 billion for the developing countries. The gains would amount to about 2.5 per cent of the GDP for China, 0.5 per cent for India, 0.6 per cent for South Africa and 0.3 per cent for Brazil. ‘The GATT had estimates that world trade would increase by 12 per cent (on top of the normal growth rate), if the UR package is completely implemented. In constant 1992 US dollars, this represents an increase of $745 billion. The value of world exports (including services) will increase by around 10 percent. Exports of North America will increase by 8 per cent and European union by 10.3 percent. Some of the largest projected increases in world trade are in areas that are of interest to developing countries. For instance, world trade in textiles is projected to grow by 34 per cent, that in clothing by 60 per cent and that in agricultural, forestry and fishery products by 20 per cent. Page 15, Source Economic Environment of Business Text & Cases by Francis Cherunilam & scanned with OKEN ScannerGALI) Wi sae ~~ tsar, tld Bank, OECD and the GATT Secretariat i i de by the Wor According to the estimates made by age will add between $213 to 274 bilion the income effects of the implementation of UR pac! z annually to world income. The GATT Secretariat's estimate of the overall trade impact is that the level of merchandise trade in goods will be higher by $745 billion in the year 2005, than it would otherwise have been. The largest increase will be in the areas of clothing (60 percent), agriculture, forestry and fishery products (20 per cent) and processed food and beverages (19 per cent). Since India's existing potential export competitiveness lies to a significant extent in these product groups, India could be expected to obtain gains in these sectors. Itwas estimate, cuts in protection on total merchandise trade will increase real incomes in developing countries by $55 to 90 billion (or 1.2 to 2 per cent of their GDP in 1992) while the gains to the world as a whole will be in the order of $200 billion. EVALUATION OF WTO WTO has come to play a very important role in the global, and thereby, national economies. National economic policies are significantly influenced by | 02 the principle, policies and agreements of WTO, Because of this there are severe | = 28 criticisms against WTO, particularly in the developing countries. In fact, WTO | 3 52 has both positive and negative impacts. The growing acceptance of | $5 %— GATTANTO, despite their shortcomings, is evinced by the increase in the | 825 number of member countries. When the GATT was signed, in 1947, only 23 | #525 nations were party to it. The membership of the WTO increased from 128 in | £= 25 July 1995 to 151 countries in May 2008 and a number of nations more have | 223 ¢ been negotiating membership. It is interesting to note that the Peoples Republic | 3 = © 2 of China, which was one of the original signatories of the GATT quit it in the late | 23222 1940s following the assumption of power by the communist party, but got | Seu admitted to the WTO, after prolonged negations, with effect from January 1, 2002. The WTO members now account for about 95 per cent of the international trade indicating the potential of the WTO in bringing about an orderly development of the international trade. Benefits of WTO 1. GATTWTO has made significant achievements in reducing the tariff and ["5q non-tariff bartiers to trade. Developing countries too have been benefiting | 35 significantly out it. gs 2. The liberalisation of investments has been fostering economic growth of a | 8g number of countries. _ | &e 3. The liberalisation of trade and investment has been resulting in increase in | § ® competition, efficiency of resource utilisation, improvement in quality and | £3 ¢ 52 productivity and fall in prices and acceleration of economic development. BOR r 4. WTO provides a forum for multilateral discussion of economic relations | Fs oe between nations. Sgsce 5. It has a system in place to settle trade disputes between nations. gigié 6. WTO has a mechanism to deal with violation of trade agreements. geese 7. WTO does considerable research related to global trade and disseminates a wealth of information. . 7 Page 16 Source : Economic Environment of Business Text & Cases by Francis Cherunilam 8 & scanned with OKEN ScannerGATT/WTO And Global Economic Liberalisation Drawbacks/Criticisms As mentioned above, the WTO has be je iticis srawbackaertigems eke ne oot, en subjected to a number of criticisms. Important 1. Negotiations and decision making i in th countries. 9 in the WTO are dominated by the developed 2. Many developing countries, do not have the financial and knowledge resources to effectively participate in the WTO discussions and negations 3. Because of the dependence of developing countries on the developed ones, the developed countries are able to resort to arms-twisting tactics 4. Many of the policy liberalisations are done without considering the vulnerability of the developing countries and the possible adverse effect on them. 5. The WTO has not been successful in imposing the organisation's disciplines on the developed countries. 6. The developing countries have, in general, been getting a raw deal from the WTO. It may also be noted that it has become a trend to blame WTO even for matters for which it is not responsible. Itis necessary that the developing countries do their home work properly before they go to the. negotiating table, stand united to protect their common interests and formulate and implement strategies to combat the threats and to take advantage of the opportunities of the emerging world order. The tragedy, however, is that not only that the developed countries are not eamestly implementing the provisions of the UR Agreement which will benefit the developing countries, but also they tend to become more protectionist in several respects. The irony is that while the developing countries have been increasingly opening up their markets, the developed countries have been increasing the barriers to the developing countries in several respects. Joseph E. Stiglitz, a Nobel laureate and former chief economist and senior vice president of World Bank (had also been on the Council of Economic Advisors under President Clinton) observes that "the level of pain in developing countries created in the process of globalization and development as it has been guided by the IMF and the international economic organizations has been far greater than necessary. The backlash against globalization draws its force not only from the perceived damage done to developing countries by policies driven by ideology but also from the inequities in the global trading system. Today, few—apart from those with vested interests who benefit from keeping out the goods produced by the poor countries— defend the hypocrisy of pretending to help developing countries by forcing them to open up their markets to the goods of the advanced industrial countries while keeping their own markets protected, policies that make the rich richer and the poor more impoverished—and increasingly angry." & scanned with OKEN Scanner— @ oF Fi GATT/ WTO And Global Economic Liberalisay, i DOHA DECLARATION ‘The Fourth session of the Ministerial Conference of the WTO was held in Doha (Qatar) in Vv November 2001, in which Ministers from the 142 member countries participated, provided the mandate for negotiations on a range of subjects and other work, including issues concerning the implementation of the present agreements.. The Ministerial attracted a lot of attention because of the conflict of interests of the developed and developing countries. The negotiations included those on agriculture and services, which began in early 2000. The Fifth Ministerial Conference in Cancun, Mexico, in September 2003, was intended as a stocktaking meeting where members would agree on how to complete the rest of the negotiations. But the meeting was soured by discord on agricultural issues, including cotton, and ended in deadlock on the “The Fifth Ministerial Conference in Cancun, Mexico, in September 2003, was intended as a Stocktaking meeting where members would agree on how to complete the rest of the Negotiations. But the meeting was soured by di i i s y discord on agricultural issues, incl and ended in deadlock on the "Singapore issues" ITEM Tet At Doha, the developed countries wanted a new round of multilateral trade negotiation t be launched soon, covering what are known as the Singapore Issues (a list of seven tema Which were proposed at the meeting in Singapore in 1996 for future negotiations. Thece included: investment, competition policy, trade facilitation, transparency in savensnait Procurement, environment, and agriculture anti trade related aspects of intell rights (TRIPs). Tete the fade commensurate with the needs of their Developing countries like India on the other hand held that the Implementation Issues should be resolved before a new Round. India had almost single handedly fight against the developed countries. The Doha meet concluded by drawing up the ‘Doha Development ‘Agenda’ for new trade liberalisation talks; with India approving the ministerial declaration only after it was satisfied that the conference Chairman's statements had addressed the country’s concerns in the four Singapore issues of foreign investment, competition policies, transparency in government procurement and trade facilitation, it emphasized the importance of enhanced market access, balanced rules, and well targeted sustainably financed technical assistance and capaci programmes. igned to ensure that developing countries, and developed among them secure a share ‘a declaration, WTO will continue to make Although, the developed nations, as expected, won the upper hand India's bold stand has had a commendable impact. Because of India's refusal to approve the agenda unless it was modified, the Chairman of the meeting announced that an explicit consensus would be required at the fifth ministerial conference in 2003, before negotiations could begin on the highly controversial Singapore issues. It is an indication that when the strong position taken by a single developing country can have such positive effects, collective action by the developing countries can have profound impact. es by Francis Cherunilam Page 18 ‘Source : Economic Environment of Business Text & Cas i 3 : a 2s u : § : 8 4 & 8 3 pos! & scanned with OKEN Scannera = a GATT/WTO And Global Economic Liberalisation The Dona Ministerial adopted three major declarations: (i) on the negotiating agenda for the new round, (ii) on some 40 implementation concerns of the developing countries and (iii) on the political statement dealing with patents and public health. One remarkable achievement of the Doha Ministerial for developing countries is that in the case of TRIPs and public health, it allowed waiver of the patent law to face a national emergency. Now it will be possible for developing countries to set aside the patent laws if they have to face epidemics such as malaria, tuberculosis, and AIDS. Each country has been given the freedom to define a national emergency. ‘The Doha declaration on TRIPS and public health was a milestone that recognized that intellectual property rights were subservient to public health concerns. It clearly stated that the TRIPS agreement does not and should not prevent members from taking measures to protect It specifically recognizes the flexibility that countries have to use compulsory public health. to find a licensing for local production. The declaration also set a timetable of December 2002 solution for countries that did not have adequate manufacturing capacity. But negotiations ran aground — reopening them is urgent. & In agriculture, it is conceded by all countries that subsidies need to be reduced and should be ultimately phased out. However, in the case of food security concerns, exception is permitted. All forms of export subsidies will be phased out. This is big problem for the developed countries which have been providing mounting subsidies. The success or failure of developing countries will depend on to what extend India can muster the support of other developing countries to fight for their common cause as well as how well it will do its own home wok to be effective at the negotiation table, WTO AND DEVELOPING COUNTRIES As in the case of the previous Rounds, the developing countries, in general, are dissatisfied with the outcome of the Uruguay Round. Do Developing Countries Suffer in the WTO System? The Wall Street Journal has reported that while the US and the EC are getting the best pieces of the world trade pie, the developing countries are getting the crumbs. It is true that the Uruguay Round mostly benefits the developed countries. That does not mean that developing countries like India are losing - their gain is limited as compared to that of the developed countries. Certain indiscriminate liberalisations indeed harm the interests of the developing countries, particularly the most disadvantaged among them like the LDCs. and further liberalization by developed countries is needed for the developing countries to take advantage of globalisation. i of Business Text & Cases by Francis Cherunilam Page 19 Source : Economic Environment & scanned with OKEN ScannerGATT/WTO And Global Economic Liberalisq: Special Consideration ‘Some of the areas like TRIPs, TRIMs and services have been very sensitive as far as the developing countries are concerned as the Uruguay Round Agreements in them mean that the developing countries will have to lower the protection against competition from the unequal developed economies. However, as in the previous Rounds, the UR also gives special considerations to developing countries, particularly to the least developed countries and to those with balance of payments problems. The Agreement, however, lays down that member countries imposing trade restrictions for balance of payment purposes should do So in a way that causes minimum disruption to international trade and quantitative restrictions should be avoided as far as possible. their honour ined by the reluctance to countries The Hon Kong Ministerial Meet held in December 2005 also has recognised the need for special consideration some of the ° problems of th countries, le developing liberalization commitments. developed The problem: i i i wre? s of developing countries, however, need a more serious consideration by the Agricultural Trade Liberalisation Indeed, it would be the developed countries who would suffer most by liberalisation of the agricultural sector. But to argue that the developed countries should completely liberalise agriculture without any reciprocity on part of the developing countries is clearly illogical. As a matter of fact, the UR proposals in respect of agriculture, as in several other cases, give special consideration to the developing countries. Developed countries will, however, be hit hard. For example, agricultural subsidies in the European countries have been of the order of 30 to 50 per cent. While the liberalisation of agricultural trade and the increase in agricultural prices due to cut in producer subsidies in the developed countries would benefit agricultural exporters, the increase in food prices due to cut in subsidies may adversely affect the food importers. More than 100 of the developing nations are reported to be net food importers. However, the increase in food prices should be expected to make food production in these countries more competitive leading to an increase in production. It may be noted here that it has been alleged that the subsidisation of production and export of farm production in the developed countries Would have the effect of discouraging their production in the developing countries where farmers have not been able to compete with the imported stuff bearing artificially low price because of the subsidies. It is estimated that since subsidised agricultural exports cannot be dumped on the world market, international agricultural prices could go up by as much as 10 Per cent. EEE SSG & scanned with OKEN Scanner$0.55 billion. But the real gai : eal gain will de China, Hong Kong, Tai pend on the country's ability 1s , Taiwe ty to com 7 9, Taiwan, South Korea, etc. which are considered laden nove fot i fextle trade. Services Trade Liberalisation Developin: i ai eee feed were very apprehensive about the proposal to liberalise trade in nt - + for {tunately for them, the differences of opinion between the US and EC is issue left the service sector largely unaffected. 7 Dissimilar Effects The effect of the UR is not the same on all countries. For example, a measure which .cts one developed country may unfavourably affect another developed country. ne favourable or unfavourable impact may also vary. It is, therefore, quite interest have occurred both among developed and developing countries. not very interested in liberalising the trade in textiles Jd gain a direct entry to the NAFTA through some fer competitors like India and Pakistan. favourably affe Further, the extent of t natural that conflicts of Latin American countries were perhaps because they calculated that if they coul regional arrangement, it would provide them an edge ov ica, Indonesia and some Caribbean islands Some studies also show that sub-Saharan Afri ion leads to higher will be poorer as a result of the UR ‘Agreement. However, if liberalisati productivity, they would also gain. “The surest proof of the the outcome." Although me people in the .ed with the UR proposals. entirely happy at dequately liberalised, sor two milion jobs in the US would now No country is, therefore, entirely pleas: success of the Uruguay Round is that no country is India is quite dissatisfied that the textile trade is not a US are angry over the liberalisation move, alleging that hang in balance. ich signed the Uruguay Round 'e GATT Director General Peter ct does not mean the end of tes. There will be disputes tries and between re of the pie, ed, all nations whi satisfaction." As th Round trade pat the start of dispul between develor le compe! of Uruguay remal nse of shared dis: f the Uruguay it marked countries, than 5 billion peopl vitable." As the foreign minister Trade Agreement have "a set Southerland stated, the signing of disputes. Southerland remarked that between developed and developing developed countries. “There are mere and that makes conflicts all the more ine\ ping coun ing for their shat Page 21 & scanned with OKEN ScannerGATT/ WTO And Global 2Conone ee ESN Unequal Participation Although it was expected that significant benefits would accrue to the developing countries from the UR Agreement, they have been encountering many road blocks. The developing countries are disadvantaged in the WTO system because of their inability to effectively participate in the negotiation process. They are not able to understand the implications and possible impacts of different proposals and agreements because of their analytical deficiendes. According to Dubey, "most of the agreements and understandings reached during the Uruguay Round trade negotiations are unequal and unbalanced from the point of view of developing countries. This was mainly because of the weak bargaining position of these countries, their general state of unpreparedness for the negotiations, their dearth of skilled manpower and financial resources to participate effectively, and the lack of transparency in the negotiating process. Some of the agreements are qual and unbalanced.” and financial countries suffer from Besides, lack of earnestness on the part of the governments is also responsible for the suffering of the developing countries. For example, the delay in taking protective measures in respect of geographical indications by Government of India is responsible for the basmati rice issue and the like. ‘An IMF publication observes that while small and poor countries have acquired a very significant say in decision making in the WTO, their ability to participate in the "reciprocity game" at the heart of the WTO remains limited. These countries also pose a challenge for the WTO because their interest in the broader trade liberalization agenda is more limited as a result of their existing (preferential access to rich country markets. One of the underlying reasons for the developing countries not benefiting much out of WTO is "that it is a mercantilist institution in the sense that countries trade off one another's protection — you give me better access to your market, and I'll give you better access to my market. The currency for these negotiations is market size, However, the small and poor countries don't have much to offer either individually or collectively to the rest of the world in terms of market access.” So their influence derives not from this traditional coinage of the WTO but from the fact that the WTO is a very democratic institution. Each country has one vote and to make a major. Implementation Issues Developed countries have resorted to covert measures to deny the developing countries the legitimate benefits of the proposed trade liberalisations. Dubey points out that, subsidies normally maintained by developed countries have been made non-actionable, while several of those given by developing countries in pursuit of an export-led development strategy have either been prohibited or put in the actionable category. ‘Source : Economic Environment of Business Text & Cases by Francis Cherunilam Page 22 & scanned with OKEN Scanner., . 3, 3, GATT/WTO And Global Economic Liberalisation ie eee : : oat Ss ‘ eae maintained by major developed countries have, instead of coming down, g Ip pl ly because these countries were able to switch over to subsidies permissible under the Agreement on Agriculture, before the commencement of its plorenictonc Liberalisation of textiles trade has hailed as a boon for the developing countries. However, here also the developing countries have been deceived because developed importing countries have sought to comply with the targets of liberalisation set out in the Agreement on Textiles and Clothing (ATC) by taking credit for the items already outside restriction. t are ted in letter and in several cases jing countries reements have not The _developit virtually deceiv as the UR Agt been. implement red ‘As an UNCTAD Report points out, rich countries, despite their commitment in the TRIPS agreement, have taken no real steps to share their technology in the interests of reducing poverty. The TRIPS agreement includes provisions for technology transfers, but with few details and no discussion on implementation The TRIPS agreement does not provide intellectual property protection for indigenous knowledge such as those used in traditional medicine. The TRIPs agreement introduces a global minimum standard for promoting invention. Intellectual property Tagimes are intended to balance the two social goals of promoting inventions and promoting the Tes of inventions, Thus the TRIPS agreement incorporates provisions in the interests of users, cech as compulsory licensing or parallel imports that give governments flexibility to allow local manufacturing or imports of goods under patents. But the wording of these provisions is so Vague that they are difficult to apply — so clarifying them would be a first step. spirit by the developed countries. ‘Another way rich countries tilt the playing field for trade seems, on its face, to have litle to do with trade. Rich countries, to varying degrees, pay large subsidies to their domestic food producers. These subsidies are so large — totalling $311 billion a year — thal they affect world fharket prices of agricultural goods, causing direct harm to poor countries EU-subsidized exports have contributed to the decline of the dairy industries in Brazil and Jamaica and the ‘sugar industry in South Africa.” West African cotton producers have increased the efficiency of thelr cotton sector, achieving competitive production costs. But they cannot compete against subsidized farmers in rich countries. Annual agricultural subsidies in rich countries considerably exceed the national income of all of Sub-Saharan Africa. Developing countries have identified various instances of inequalities and imbalances in the Uruguay Round Agreements and submitted a large number of formal proposals for rectifying them. ‘These proposals have been known as the implementation issues. It is argued that the implementation issues should be urgently resolved and any new round of MTN shall be taken up only after that. However, the developed countries want the new round of MTN soon. passion on the intries has ty and com Par ofthe developed cou iade the WTO a rather unfair system, “The implementation issues are not a spanner thrown by a group of developing countries to ape a new round of trade negotiations. Their attempt to resolve them is designed to safeguard their most vital trading interests and to restore a modicum of balance in WTO agreements after an unfortunately belated realization that Geveloping countries were short-changed in the Uruguay Round negotiations. Wiel ‘eat stake is the very credibility of the international trading system in the eyes of the developing countries. Resolution of the implementation issues is the only way to restore credibility.” Part of the der Lack of sinceri & scanned with OKEN ScannerGATT/WTO And Global Economic Liberalisat Conclusion i is id regulations mo One of the achievements of the UR is the making of the rules an transparent, thus making trade harassment and unilateral actions more difficult. The results the UR will be implemented by the newly set up World Trading Organisation (WTO) makir dispute settlement and arbitration easier. Because of the unequal participation and lack of bargaining power, the developin courtiers have not been getting a fair deal from the WTO and other international organizations To make matters worse, as observed earlier, while the developing countries have beer increasingly opening up their markets, the developed countries have been increasing protectior and denying justice to the developing countries in several respects. As Stiglitz candidly observes, “the international institutions must undertake the perhaps-painful changes that will enable them to play the role they should be playing to make globalization work, and work not just for the well off and the industrial countries, but for the poor and the developing nations.. The developed world needs to do its part to reform the international institutions that govern globalization. We set up these institutions and we need to work to fix them. If we are to address the legitimate concerns of those who have expressed a discontent with globalization, if we are to make globalization work for the billions of people for whom it has not, if we are to make globalization with a human face succeed, then our voices must be raised. We cannot, we should not, stand idly by." The Uruguay Round Agreements and WTO have come in for scathing criticisms in India, Many politicians and others have argued that India should withdraw from the WTO. Most of the criticisms are either baseless or due to lack of knowledge of the international trading environment, and misinformation, or are just meant to oppose the government by the opposition parties. Should India Quit WTO? Accepting the demand of some of the critics, that India should withdraw from the WTO will be a great blunder that the nation can commit. By being a part of WTO India enjoys the most favoured nation (MFN) status with all the other members of the WTO. Opting out of the system would mean an infinitely laborious task of entering into bilateral negotiations with each and every one o( the trading partners which would amount to "having one's arms twisted bilaterally by the US, the EC and Japan, turn by turn, on everything from intellectual property rights to NPT, human rights and environmentally clean technologies for packaging."" It may be noted at this juncture that China got readmitted to the system after a long wait and lobbying. One major controversy pertains to the agricultural subsidies. Much hue and cry have been raised in India about this factor. However, it needs to be mentioned that the Agreement would Not adversely affect India's agricultural subsidies and its agriculture exports. Developing countries were expected to largely benefit because of the lowering of the agricultural protection by the developed countries, in spite of the fact that the wish of the developing countries that the major Wester nations would totally drop subsidies for their producers, substantially lower tariffs, and open markets did not materialize. However, the developed nations, in general, have not brought about the expected liberalisation. —_——_—_———— & scanned with OKEN ScannerWr CATIY WI . . And Global Economic Liberati Feed ralisation rts per year. tate gains may ra exports, Year. More generous estimates range from Compliance Measures India has taken several measures to comply with the TRIPs Agreement. On copyrights and telated rights, the Agreement requires compliance with the provisions of Bern Convention to which India is a signatory and the new Copyright Act of India already meets the requirements of the TRIPs Agreement. Trade and Merchandise Marks Act of 1958 was replaced by a new Act, namely, The Trade Marks Ac/, 1999, so as to provide for the protection of service marks also, ion of Geographical Indications of Goods, a sui generis legislation, viz,, the ie Pindteetons Sf Goede (Registration & Protection) Act, 1999 has been enacted in Geographical inci the requirements under the TRIPS Agreement and to protect products of order to COMPLY Wi i primary intends to protect the valuable geographical indications Indian origin as well TT tion under the Act is available only to the geographical indication of our country, THe Pact ‘and to the authorized users. The Act permits any association of registered under the Act ary organization or authority established by law representing the persons oF producers oF er ods to register a geographical indication. It may be possible to interest of the Piers of the traditional knowledge in goods produced and sold using aru ive ation can register and protect their traditional knowledge under this law. ical ins Pet : rtiament has passed the Protection of Plant Varieties and Farmers’ Rights The Indian Parlier™tve of giving a significant thrust to agricultural growth by providing an Act, 200 1. with the oO} e ection of plant varieties and farmers’ rights. This is expected to effective syste bel for research and development both in the public and the private sectors stimulate investment jew plant varieties by ensuring appropriate returns on such investment. for the developmen’ © acknowledges that the conservation, exploration, collection, The ee auation of plant genetic resources for food and agriculture are essential to characterization, ove anal food and nutritional security as also for sustainable development of meat Se present and future generations, It also acknowledges shat the pant ena agricultul ¢ raw material indispens: : "cae fo ae Sc et a ee aunt ot the plant genetic resources forms an integral part of our Act. the & scanned with OKEN ScannerGATT/ WTO And Global Economic Liberalisatioy India provides for the protection and enforcement of different fields of intellectual property through both specific national legislation as well as the Code of Civil Procedure and the Code of Criminal Procedure by way of civil remedies and criminal penalties. These provide effective deterrent to the infringement of IPRs. The criminal cases and civil suits for the infringement of IPRs lie in the judicial system for other cases. The amended patent law of contains provisions for mandatory disclosure of source and geographical origin of the biological material used in the invention while applying for patents in India. Provisions have also been incorporated to include non-disclosure or wrongful disclosure of the same as grounds for opposition and for revocation of the patents, if granted. To protect traditional knowledge from being patented, provisions have also been incorporated in the law to include anticipation of invention by available local knowledge, including oral knowledge, as one of the grounds for opposition as also for revocation of patent. In order to further strengthen these provisions, a new provision has been added to exclude innovations which are basically traditional knowledge or aggregation or duplication of known properties of traditionally known component or components from being patented. India is a party to the Connection on Biological Diversity (CBD), which came into force in December 1993. The CBD offers opportunities to India to realize the benefit of these resources. We have already introduced a Bill in the Parliament which is likely to be passed in the coming Winter Session of the Parliament in December 2002. The proposed legislation addresses the basic concems of access to, collection and utilization of biological and knowledge by foreigners and sharing of benefits arising out of such success. Various suggestions have been advanced in India to extend protection to knowledge, innovations and practices. These include: (i) documentation of TK; (i) registration and innovation patent system; and (ii) development of a sui generis system. It is sometimes believed that proper documentation of associated TK could help in checking bio-piracy. Documentation could be a double-edged sword. It is assumed that if the material knowledge is documented, it can be made available to patent examiners the world over so that prior art in the case of inventions based on such materials/knowledge arefis readily available to them. & scanned with OKEN Scannerin GATT/ WIC , '/ WTO And Global Economic Liberalisation em, Ml aad! OF The principles and Agreements of WTO have very significant impact on the business environment. Figure 38.1 provides a bird's eye view of the important impacts. The salient features of the Uruguay Round Agreement are given below. 4. The Uruguay Round substantially expanded the scope of multilateral trade negotiation by including services, intellectual property rights (TI 'RIPs) and trade related aspects of investment measures (TRIMs), as against only goods in the past. 2. With effect from January 1, 1995, GATT (which was temporary an ad hoc) was replaced by a permanent organisation, the WTO. 3, WTO is GATT plus a lot more. Under the GATT there was only one major agreement GATT. Under the WTO there are agreements related to three major areas — GATT, GATS and TRIPs. 4, WTO is a more powerful and effective organisation than GATT. It has a more effective dispute settlement mechanism. 5, The Uruguay Round Agreement seeks to liberalise trade in manufactures by enlarging tariff bindings, reducing tariffs and removing tariffs. achievement of the UR is the measures fo liberalise trade in agriculture, eee nighly protected sector, particularly 1 the developed countries. These wet ures are tariffication, tarif bindings, tariff cuts and reduction in subsidies and domestic support. ies are required to adopt product patent (as also process patent). es, Feigao re ont for drugs, food and chemical substances for which the India had orriwas 7 years and 14 years for other products. Under the WTO regime the patent period for all products '8 20 Yea! under WTO also developing countries; particularly least developed 8, As under CATT: UTGeg'a number of concessions and faveurs. THEE liberalisation countries, f° A°7etfGr and they are allowed longer period fe Atl the liberalisation requirements “the WTO also calls upon the ‘developed nations to grant special cammiments. Fronts rm developing counties, There, are ‘also some committees preferetne WTO {0 look after the interests and special needs of the developing countries. 9, There is a general complaint that the, fruits of the liberalisation accrue mostly to the Yoveloped countries. It is pointed out that the industrialized countries, which make up sees per cent of the membership, will appropriate about 70 per cent of the additional only 20 Penerated by the implementation of the UR agreements The losers, mostly in income deneraispean, are some of the poorest counties In the world, The develoPed Africa an“gain substantially because of their higher level of participation in trade and cunt eof the fact that significant part of liberalizations has been in respect of goods of because. them. Liberalisation of trade in textiles, by phasing out MFA, however, will ‘substantially benefit ‘the developing countries. & scanned with OKEN ScannerGATT/ WTO And Global Economic Liberalisatio} 410. Even after all UR concessions are fully implemented by the industrialised countries, significant trade barriers in the form of high tariff peaks (exceeding 12 per cent but in some cases reaching or exceeding 300 per cent) will continue to affect many exports from developing countries. The removal of such barriers needs to be given high priority. There are several other areas of critical importance to the developing countries 411. Developing countries are terribly disadvantaged due to the participation gap 42. India has taken several measures to comply with the TRIPs Agreement: these include amendments to some laws and new legislations. 13. Estimates of India's possible gain from the trade liberalisation vary very wide — between $2 billion and $7 billion a year. Although the liberalisation of trade in textiles will benefit the developing countries, India's gain will depend a lot on her competitive strength vis-a-vis other textile exporters. India's gain from the trade liberalisation will be much less than that of many other leveloping countries, such as the South East Asian economies and China, because India's hare in the world trade is very low (less than one per cent) and her foreign trade-CDP ratio is ery low. (More elaborate and illustrative treatment of WTO is available in the new edition of the author's International Business- Prentice Hall of India). eegeme aT & scanned with OKEN ScannerTHE WTO IMPACT oe t t GATTIGATS TRIMS | TRIPS a ! lion of Pr t nopoly es Liberalisation of rovides mor Liberalisation in Maret power to owners of trade in goods Investments intellectual and services property Facilitates Opportunity Increases Facilitates Facilitates competition ‘obal for indian ‘aren joint ventures foreign from foreign sourcing firms to investment and and investment by odsiservices export competition from technology Indian firms go foreign firms. acquisition (including joint L ventures) ¥ ¥ | Threat to || Benefits to Increases Threat to Benefits Benefits domestic consumers || competitiveness domestic the domestic ee: of domestic firms firms ‘economy firms Encourages globalization of Indian Firms © scanned with OKEN Scanner