I. India’s commitment to WTO.
A- India is committed to phased liberalization of trade and investment and progressive integration of its domestic economy with the world economy. Post 2005, India is likely to be the largest free market economy in the world, purely on account of her 1 billion populations. India’s progress in fulfilling her commitment to the WTO can be explained as follows –
1. Quantitative Restrictions – India has been maintaining QR’s on imports on BoP grounds and had committed to the WTO that the QR’s will be completely phased out by 2003. However, the United States had filed a case in the WTO dispute settlement body against these QR’s in May 1997. The DSB had ruled against India and had found that India’s QR’s on imports were not justified on BoP grounds. The DSP recommended that India should bring its imports regime in conformity with its commitment under the WTO agreement. Accordingly, quantitative restrictions on all imports were withdrawn on April 2001.
2. Trade Related Intellectual Property Rights (TRIPs)– The agreement on TRIPS lays down the minimum standards of protection to be adopted by the parties in respect of -
i. Copyrights
ii. Trade marks
iii. Geographical indications
iv. Industrial designs
v. Patents
vi. Lay-out designs of integrated circuits and
vii. Protection of trade secrets and its enforcement
The developing countries were given a transition period of 5 yrs to implement the TRIPs agreement. Those countries who don’t give product patents in certain areas were given the facilities to delay the provisions of product patents for an additional period of 5yrs on the condition that these countries will provide exclusive marketing rights for products which obtain patents after 1st Jan 1995. India cleared the patents (Amendments) Act, 1999 in March 1999 to provide for exclusive marketing rights.
3. Commitments related to industrial design and lay-out design of integrated circuits – Under WTO agreements, the Government of India has committed to protect new industrial design and lay-put design of integrated circuit. The bill related with industrial design and lay-out design was cleared by parliament in December 1999 and bill related with industrial design has been introduced in Rajya Sabha on 20th Dec 1999.
4. Copyrights and related rights – In case of rights of performers, producers of phonograms and broadcasting organizations, the agreement requires compliance with the provision of the Berne Convention. Computer programs are to be protected as literary works. The term of protection for copyrights and rights of performers and producers of phonograms is 50yrs. In case of broadcasting organizations the term is 20yrs. Since India is a signatory to the Berne convention, India has to comply with its provisions. Accordingly the Copyright Act 1957 was amended in 1994 to be in tune with the requirements of the TRIPs agreement. A bill to increase the term of performers rights to 50yrs was passed by parliament in December 1999.
5. Trademarks – A bill to amend the Trade and Merchandise Marks Act 1958 was passed by the parliament in December 1999 which amongst other things provides protection to Service Marks.
6. Geographic Indications – The GATT agreement contains a general obligation that parties shall provide the legal means for interested parties to prevent the use of any means in the designation or presentation of a good that indicates or suggests that the good in questions originates in a geographical area other than the true place of origin of the good. An Act on geographical indication was passed by the parliament in December 1999.
7. Trade Related Investment Measures (TRIMs) – The TRIMs agreement provides a transition period of 5yrs to developing countries i.e. upto December 1999. The developing countries have demanded for additional transition period of 5yrs i.e. upto 2004. A decision by the General Council of the WTO is awaited.
8. Industrial designs – According to the agreements independently created new industrial designs or original designs are to be protected. The Indian Design Act 1911 was reworked to suit to the requirements of the agreement and a bill in this regard was cleared by the Rajya Sabha in December 1999.
9. Reduction of Tariff – India has committed to WTO to reduce tariff on non-agricultural goods. The government has undertaken the phased reduction of tariff over the period March 1995 to 2005. In case of textiles, the reduction of tariff will be achieved over a period of 10yrs but India reserves the right to revert back duties to 1990 level, if certain conditions are not fulfilled according to agreement.
10. Commitment under GATS – Under the General Agreement on Trade in Services (GATS), India has made commitment to WTO in 33 activities. The foreign service providers will be allowed to enter into these activities.
Conclusion – It is clear from the above points that India has fulfilled some of the major commitments made to WTO. The government of India in order to face the challenges from WTO has to accelerate the process of reforms in agriculture, industry and service sector to make them competitive and to take advantage of globalization.
II. Implications of WTO agreement for Indian economy
A- Implications of WTO agreement for Indian economy are as follows –
1. Reduction in Custom Duties and Export Subsidies – India has agreed to reduce custom duties by 30% over a period of 6yrs. Accordingly the union budget 2000-01 brought down the peak rate of basic custom duty to 35% along with rationalization of total number of slabs in custom duty rates to four i.e. 35, 25, 15 and 5%. Basic custom duty reduction was to be made on items such as raw materials, intermediates and capital goods with the exception of agricultural products, petroleum products, fertilizers and non-ferrous metals like zinc and copper. The WTO agreement enjoins upon its members to remove all export subsidies. However, countries with per capita income of less than $1000 and less than 3.25/- share in the world trade for products are exempted from the removal of subsidies. The economic survey 1998-99 reported that items such as rice, tea, spices, iron ore, leather manufacturer, gems and jewellery had a share of more than 3.25/- and the share of these items in the total exports of India for the year 1996 was 22.8% which means 77% of India’s exports are mot affected by the clause on removal of subsidies.
2. Trade Related Intellectual Property Rights – Under the agreement on TRIPs patents are made available for both product and process inventions in the field of industrial technology. The industrial, agricultural and the bio-technology sectors are covered under the patents provision. The patent regime is feared to affect the drugs and the pharmaceutical industry in India. It is estimated that about 70% of the drugs will be covered by the new patent laws. This will entail royalty payment to the patent holders resulting in a steep rise in prices of drugs in India. However there are conflicting estimates if the percentage of the drugs that will be covered by the new patent laws. For instance, Bibek Debroy, Director, Rajiv Gandhi Institute for Contemporary Studies observed that only less than 10% of the drugs are covered by the patents worldwide. The rest of the drugs i.e. more than 90% of them have become generic i.e. they need no protection.
TRIPs also extends patent like protection to agriculture. Accordingly protection is sought to be extended to micro-organisms, non-biological and micro-biological processes and plant varieties. Article 27 of the text on TRIPs states that India may provide for protection of plant varieties either by patents or by an effective sui generic system or by a combination of the two. This system shall come into existence after the expiry of the transitional period of 10yrs i.e. after 2005. India needs to work hard on documenting its traditional knowledge on Ayurvedic and herbal plants and obtain patent protection or a sui genesis system in order to prevent bio-piracy.
3. Trade Related Investment Measures (TRIMs) – The text on TRIMs provides that governments shall not discriminate against foreign capital i.e. foreign capital should be given national treatment. The main features of the text on TRIMs are as follows –
a) All restrictions on foreign capital, investors and companies should be abandoned.
b) National treatment to foreign investors i.e. they will be given the same rights as a national investor has with regard to investment.
c) Unrestricted investment in all spheres of economic activities.
d) No limitation on the extent of foreign investment in any economic entity.
e) Free imports of raw materials and components.
f) Local content clause will not be imposed on foreign investors.
g) No mandatory export obligations on foreign investors.
h) Elimination of restrictions on repatriation of dividend, interest and royalty income.
i) Complete exclusion of provisions such as phased manufacturing programmes which is intended to increase the indigenous content in manufacture.
Restrictions on foreign capital investment both portfolio and direct have been progressively reduced and more and more industries and sectors of national economy have been thrown open to foreign investment. The opening of the insurance sector to foreign direct investment has been the latest in the league with international airlines industry very much on the block.
4.Textiles and Clothing – The GATT agreement proposes to abandon the Multi – Fibre Agreement by 2003 and fully liberalize the textile sector. The Multi – Fibre agreement is a comprehensive agreement on quota restrictions imposed by the rich countries over the textile exports of developing countries. These quotas will be phased out under the WTO Act in three phases. In the 1st phase (1993-96), 16% of the textile exports to the developed countries will be liberalized. It will be followed by 17% in the 2nd phase (1996-2000) and 18% in the 3rd phase (2000-2003). Thus by 2003 51% of the textiles market will be liberalized.
A- India is committed to phased liberalization of trade and investment and progressive integration of its domestic economy with the world economy. Post 2005, India is likely to be the largest free market economy in the world, purely on account of her 1 billion populations. India’s progress in fulfilling her commitment to the WTO can be explained as follows –
1. Quantitative Restrictions – India has been maintaining QR’s on imports on BoP grounds and had committed to the WTO that the QR’s will be completely phased out by 2003. However, the United States had filed a case in the WTO dispute settlement body against these QR’s in May 1997. The DSB had ruled against India and had found that India’s QR’s on imports were not justified on BoP grounds. The DSP recommended that India should bring its imports regime in conformity with its commitment under the WTO agreement. Accordingly, quantitative restrictions on all imports were withdrawn on April 2001.
2. Trade Related Intellectual Property Rights (TRIPs)– The agreement on TRIPS lays down the minimum standards of protection to be adopted by the parties in respect of -
i. Copyrights
ii. Trade marks
iii. Geographical indications
iv. Industrial designs
v. Patents
vi. Lay-out designs of integrated circuits and
vii. Protection of trade secrets and its enforcement
The developing countries were given a transition period of 5 yrs to implement the TRIPs agreement. Those countries who don’t give product patents in certain areas were given the facilities to delay the provisions of product patents for an additional period of 5yrs on the condition that these countries will provide exclusive marketing rights for products which obtain patents after 1st Jan 1995. India cleared the patents (Amendments) Act, 1999 in March 1999 to provide for exclusive marketing rights.
3. Commitments related to industrial design and lay-out design of integrated circuits – Under WTO agreements, the Government of India has committed to protect new industrial design and lay-put design of integrated circuit. The bill related with industrial design and lay-out design was cleared by parliament in December 1999 and bill related with industrial design has been introduced in Rajya Sabha on 20th Dec 1999.
4. Copyrights and related rights – In case of rights of performers, producers of phonograms and broadcasting organizations, the agreement requires compliance with the provision of the Berne Convention. Computer programs are to be protected as literary works. The term of protection for copyrights and rights of performers and producers of phonograms is 50yrs. In case of broadcasting organizations the term is 20yrs. Since India is a signatory to the Berne convention, India has to comply with its provisions. Accordingly the Copyright Act 1957 was amended in 1994 to be in tune with the requirements of the TRIPs agreement. A bill to increase the term of performers rights to 50yrs was passed by parliament in December 1999.
5. Trademarks – A bill to amend the Trade and Merchandise Marks Act 1958 was passed by the parliament in December 1999 which amongst other things provides protection to Service Marks.
6. Geographic Indications – The GATT agreement contains a general obligation that parties shall provide the legal means for interested parties to prevent the use of any means in the designation or presentation of a good that indicates or suggests that the good in questions originates in a geographical area other than the true place of origin of the good. An Act on geographical indication was passed by the parliament in December 1999.
7. Trade Related Investment Measures (TRIMs) – The TRIMs agreement provides a transition period of 5yrs to developing countries i.e. upto December 1999. The developing countries have demanded for additional transition period of 5yrs i.e. upto 2004. A decision by the General Council of the WTO is awaited.
8. Industrial designs – According to the agreements independently created new industrial designs or original designs are to be protected. The Indian Design Act 1911 was reworked to suit to the requirements of the agreement and a bill in this regard was cleared by the Rajya Sabha in December 1999.
9. Reduction of Tariff – India has committed to WTO to reduce tariff on non-agricultural goods. The government has undertaken the phased reduction of tariff over the period March 1995 to 2005. In case of textiles, the reduction of tariff will be achieved over a period of 10yrs but India reserves the right to revert back duties to 1990 level, if certain conditions are not fulfilled according to agreement.
10. Commitment under GATS – Under the General Agreement on Trade in Services (GATS), India has made commitment to WTO in 33 activities. The foreign service providers will be allowed to enter into these activities.
Conclusion – It is clear from the above points that India has fulfilled some of the major commitments made to WTO. The government of India in order to face the challenges from WTO has to accelerate the process of reforms in agriculture, industry and service sector to make them competitive and to take advantage of globalization.
II. Implications of WTO agreement for Indian economy
A- Implications of WTO agreement for Indian economy are as follows –
1. Reduction in Custom Duties and Export Subsidies – India has agreed to reduce custom duties by 30% over a period of 6yrs. Accordingly the union budget 2000-01 brought down the peak rate of basic custom duty to 35% along with rationalization of total number of slabs in custom duty rates to four i.e. 35, 25, 15 and 5%. Basic custom duty reduction was to be made on items such as raw materials, intermediates and capital goods with the exception of agricultural products, petroleum products, fertilizers and non-ferrous metals like zinc and copper. The WTO agreement enjoins upon its members to remove all export subsidies. However, countries with per capita income of less than $1000 and less than 3.25/- share in the world trade for products are exempted from the removal of subsidies. The economic survey 1998-99 reported that items such as rice, tea, spices, iron ore, leather manufacturer, gems and jewellery had a share of more than 3.25/- and the share of these items in the total exports of India for the year 1996 was 22.8% which means 77% of India’s exports are mot affected by the clause on removal of subsidies.
2. Trade Related Intellectual Property Rights – Under the agreement on TRIPs patents are made available for both product and process inventions in the field of industrial technology. The industrial, agricultural and the bio-technology sectors are covered under the patents provision. The patent regime is feared to affect the drugs and the pharmaceutical industry in India. It is estimated that about 70% of the drugs will be covered by the new patent laws. This will entail royalty payment to the patent holders resulting in a steep rise in prices of drugs in India. However there are conflicting estimates if the percentage of the drugs that will be covered by the new patent laws. For instance, Bibek Debroy, Director, Rajiv Gandhi Institute for Contemporary Studies observed that only less than 10% of the drugs are covered by the patents worldwide. The rest of the drugs i.e. more than 90% of them have become generic i.e. they need no protection.
TRIPs also extends patent like protection to agriculture. Accordingly protection is sought to be extended to micro-organisms, non-biological and micro-biological processes and plant varieties. Article 27 of the text on TRIPs states that India may provide for protection of plant varieties either by patents or by an effective sui generic system or by a combination of the two. This system shall come into existence after the expiry of the transitional period of 10yrs i.e. after 2005. India needs to work hard on documenting its traditional knowledge on Ayurvedic and herbal plants and obtain patent protection or a sui genesis system in order to prevent bio-piracy.
3. Trade Related Investment Measures (TRIMs) – The text on TRIMs provides that governments shall not discriminate against foreign capital i.e. foreign capital should be given national treatment. The main features of the text on TRIMs are as follows –
a) All restrictions on foreign capital, investors and companies should be abandoned.
b) National treatment to foreign investors i.e. they will be given the same rights as a national investor has with regard to investment.
c) Unrestricted investment in all spheres of economic activities.
d) No limitation on the extent of foreign investment in any economic entity.
e) Free imports of raw materials and components.
f) Local content clause will not be imposed on foreign investors.
g) No mandatory export obligations on foreign investors.
h) Elimination of restrictions on repatriation of dividend, interest and royalty income.
i) Complete exclusion of provisions such as phased manufacturing programmes which is intended to increase the indigenous content in manufacture.
Restrictions on foreign capital investment both portfolio and direct have been progressively reduced and more and more industries and sectors of national economy have been thrown open to foreign investment. The opening of the insurance sector to foreign direct investment has been the latest in the league with international airlines industry very much on the block.
4.Textiles and Clothing – The GATT agreement proposes to abandon the Multi – Fibre Agreement by 2003 and fully liberalize the textile sector. The Multi – Fibre agreement is a comprehensive agreement on quota restrictions imposed by the rich countries over the textile exports of developing countries. These quotas will be phased out under the WTO Act in three phases. In the 1st phase (1993-96), 16% of the textile exports to the developed countries will be liberalized. It will be followed by 17% in the 2nd phase (1996-2000) and 18% in the 3rd phase (2000-2003). Thus by 2003 51% of the textiles market will be liberalized.
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