I.

Origin (A) The birth of GATT (B) Objectives of GATT (C) GATT in the first 30 years (D) Erosion of GATT (E) New Round of GATT II. Birth of WTO (A) New Trade Regime (B) Expected Benefits (C) The Debate in India and Some broad assessment III. Deepening and Broadening of WTO Agenda (A) Singapore Ministerial Meeting (B) Doha Ministerial Meeting (C) Cancum Ministerial Meeting IV . WTO and Dvg Countries: An Assessment V. Some suggestions VI. WTO and India
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WTO is a club that everyone wants to join more than two dozen countries are in queue.
Countries that have applied Albania Dec. 92 Algeria Jan. 87 Armenia Dec. 93 Bulgaria Nov. 86 Cambodia Dec. 94 China Mar 87 Croatia Oct. 93 Estonia Mar 94 Jordan Jan 94 Latvia Dec. 93 Lithuania Feb. 94

Mongolia Nepal Panama S. Arabia Russia Sudan Taiwan Ukraine Uzbekistan Vietnam

Oct. 91 Jan. 89 Oct. 91 July 93 Jan. 93 Oct. 94 Sept. 92 Dec. 93 Dec. 94 Jan. 95

Chinas accession completed at Doha Ministerial Meeting Other countries who have acceded: Albania, Croatia, Jordan, Lithuania, and Oman.
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I. ORIGIN (A) Birth of GATT

Bretion woods confe. in 1944:

Designed three grand institutions:

International Monetary Fund

World Bank (IBRD) International Trade Organization (ITO)

for B.O.P
for development

for overseeing commercial trade policies of countries IMF and IBRD were set up; but controversy over the setting up of ITO. The US congress did not ratify. As a stop gap arrangement, the government settled on a compromise agreement i.e. the General Agreement on Tariff and Trade (GATT) The GATT was signed in 1947 at Geneva by 23 countries including India. (B) Objectives of GATT: Establishment of a world trading system in which countries would gradually liberalize trade among countries. Was open to all nations
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(C) GATT in the first 30 years of its history Over the years, it served as the only instrument that laid down a set of rules to govern international trade. In a series of trade round, the governments cut average tariff on manufactured goods from 40 percent in 1947 to less than 10 per cent by the mid 70s, and since then the average tariff has fallen to 5% or less.
Figure 1: GATT Rounds and the Decline in Industrial Countries' Tariffs 40 35 30 25 20 15 10 5 0 1940 1950 1960 1970 1980 1990 2000

Average Tariffs (%)

Year
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As a result, trade grew remarkably. Between 1950-75, the volume of trade expanded by 500 percent, as against an increase in global output by 220 percent.

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This spectacular change owes to three guiding principles of GATT. Reciprocity: If one country lowers its tariffs against anothers exports, it can expect the other country to lower its tariff in return, i.e. exchange concessions against concessions. Nondiscrimination: Countries should not grant one member or group of members preferential trade over others. It is known as MFN status. Under GATT, all are equal. Transparency: Countries are urged to replace non-tariff barriers with tariff, and then bind these tariffs.
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(D) GATTs Erosion: Since the mid-seventies, the volume of world trade has tended to grow at a slower pace in relation to global output. The root cause: Proliferation of a new sort of protectionism. VERs: If a powerful government is worried bout the harm that imports are doing to its producers, then it does not approach GATT. Instead, it requires another government on the pain of retaliation, to restrict its exports. In 70s and 80s, the use of VERs spread to textiles steel cars machinery, etc. (b) Supr 301: It gives the American President the authority to retaliate against unfair trade practices, i.e. practices by foreign countries that discourage American Exports. Countries accused under Super 301 must reach an agreement with USTR within 12 to 18 months, or face retaliation.
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(c) Anti-dumping and countervailing duties: Between 1970 and 1985, the anti-dumping procedure amounted to 77 per cent of all trade activities monitored by GATT. (d) Agricultural Trade: Agriculture was excluded from GATT. The cost of agricultural protection was high. According to OECD calculations, agricultural support cost them about $72 billion a year.
(e) Textiles: World trade in textiles is conducted through what one would call regulated market a web of bilateral quotas that tell each exporting country how much they are allowed to each of the importing countries. The system called MFA. The MFA set up in 1974, again on temporary basis.
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Figure 3: Industrial Country Imports Subject to "Hardcore" Non-tariff Measure 25 23 21 19 17 15 13 11 9 7 5 3 1 -1

Import Expansion % and Value

Figure 4: Effects on Trade of the Elimination of Non-tariff Measures 20 18 16 14 12 10 8 6 4 2 0

$260 bn $115 bn $55 bn

% ofT otal

Industrial Countries

Developing countries

All countries 1981 1986

EC

USA

All Industrial Countries

(E) The URUGUAY ROUND The 8th Round launched in 1986 at PUNTA DEL ESTE, URUGUAY It is the most complex one as it included not only issues relating to tariff and non-tariff barriers, but also issues such as
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TRIMs: Trade Related Investment Measures: GATT had identified 12 policies that dvd countries feel interfering with their companies wanting to invest abroad. The most restrictive of these are rules about local content, export preferences and foreign exchange restrictions. Dvd countries want to establish some disciplines in the use of Investment Measures.
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Dvg country position Many dvg countries have been opposed to the idea of dismantling these restrictions for various reasons. The country prefers to channel investments in accordance with development needs and priorities. Many of the prevailing regulations are directed with an aim to strengthen the domestic capital goods sector, developing indigeneous technology, and diversifying their exports. Govts in their countries loose the autonomy in the choice of ecopolicies
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TRIPs: Trade Related Intellectual Property Rights : Many producers in Europe and America complain that their patents, trade marks and other intellectual property rights are infringed in foreign markets by dvg. countries. Companies in rich countries allege that all such disputes over intellectual property are a straight forward matter of piracy or theft.
Agriculture and Textile: Dvd countries want agri. Protection to continue MFA to continue
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The dvg countries object that matching rich country standards of patent protection would make such goods a lot more expensive.

Dvg countries want agriculture to be brought under GATT MFA to be dismantled

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Services Traditionally trade implied trade in goods; and services were categorized as non-tradable goods. But now this definition is blurred, thanks to technological development. The development in telecommunications has led the way to a world with no need for going to a bank, traveling to a business meeting or from parting newspaper/periodicals. Technological development has made it possible to deliver to any point in the world any service product that can be reduced to electronically coded bits of information with great reliability and at less cost. As a result trade in services has expanded fast. Between 1970 and 1988, trade in services is reported to have increased at the rate of 15 p.c. per annum; and the service sector has been on ascent in the industrialized countries. Nearly 70 percent of Americas GDP and of employment in services. The US has been orchestrating for inclusion of services
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Dvg countries argue: 1.Their banking, insurance, telecommunication, shipping etc. will be exposed to fierce competition from the dvd world. 2.The dvg countries, as a group, are already big importers of services. A liberal policy can affect their b.o.p. 3.Affect domestikc employment displace worker.

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Fig ure 5: World Exports of Comme rcia S rvice l e s*

600 500 400 300 200 100 0 78 79 80 81 82 83 84 85 86 87 88 89

$ bn

F i gur e 6 : L edi n g E x p o r t er s o f C o m m er c i al Ser v i c es, 1 9 8 8 90 80 70 60 50 40 30 20 10 0

Canada

Australia

S. Korea

Switzerland

Singapore

Hongkong

Holland

Austria

M exico

Sweden

Denmark

Norway

Bengium/L ux

W . Germany

Britain

France

Spain

Japan

Italy

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USA

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The Ministerial meeting held in Dec. 1990 at Brussels for concluding negotiations failed to achieve its objective. II. Establishment of World Trade Organization (WTO) To break the impasse, Mr. Arthur Dunkel, submitted a comprehensive document on 30th Dec. 1991. This is called DUNKEL Draft. On April 15, 1994, 116 nations signed the draft. It has created a lot of dissent and controversy. The main legal instrument negotiated in the Uruguay Round
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(a) MARRKESH Agreement establishing WTO

(b) Multilateral Agreements. 1. General Agreement on Tariff and Trade, GATT 1994 Agreement on implementation of article VII of GATT 1994 (custom valuation) Agreement on pre-shipment inspection Agreement on technical barriers to trade (TBT) Agreement on Application of Sanitary and Phytosanitary measures (SPS) Agreement on import licencing procedures Agreement on safeguards Agreement on subsidies and countervailing measures (SCM)
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Agreement on Implementation of Article VI of GATT 1994 (Anti dumping) Agreement on Trade Related Investment Measures (TRIMs) Agreement on Textiles and clothing Agreement on Agriculture (AOA) Agreement on Rules of origin (ROO)
2. General Agreement on Trade in Services (GATS) 3. Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs)

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(A) The New Trade Regime A summary of important Uruguay Round Decision 1. Agriculture: 2. Tariffication: One third of all lines for trade in agriculture were previously unbound and carried by nontariff measures. All these are now replaced by single tariffs, which may be specific advalarem, and equivalent to the level of protection in 1986-88. Tariff Reduction: Tariffs resulting from tariffication process together with other tariffs are to be reduced by 36 percent over six years in the case of dvd countries; and 24 percent over ten years in the case of dvg countries.

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 Minimum Access commitment: To ensure that this tariffication translates into changes in trading patterns, countries have guaranteed minimum level of access 3 percent of domestic consumption initially, and going upto 5 percent in 6 years to their markets. Reduction in Domestic Support: Domestic support programmes in the industrial countries are to be reduced by 20 per cent in a six year period and 13 per cent over ten years in the case of dvg countries.
(First calculate aggregate Measure of support. The AMS is a measure quantifying the aggregate value of domestic support or subsidy given to each category of agricultural product. Domestic policies to be included/excluded in AMS calculation.
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Amber box Those policies which do have a substantial impact on the pattern and flow of trade; and are therefore included in AMS calculation

Green Box Policies that are not deemed to have a major effect on production and trade and exempted from AMS calculation Research programmes Pest and disease control measures Training facilities Extension and advisory services Inspection services Public stockholding for food security purposes Domestic food aid

Blue box Policies that fall into neither of these categories, but are perhaps somewhere in between. Also exempted from AMS calculation Complementary payments for land set aside program of EUs common Agricultural Policy US deficiency payments all such direct payments under production limiting program exempt.

Export subsidies cut: Dvd countries 36 p.c. 6 yrs Dvg countries 24 p.c. 10 yrs Plant varieties including seeds must be protected either by a patent or by a Sui-generic system or by a combination of both.
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 SPS Agreement The SPS Agreement concerns with the application of measures to protect animal, plant and human life and health; and is integrated with the Agreement on Agriculture. SPS is a set of rules, principles and benchmarks for WTO members to protect themselves from trade related risks to human, animal and plant health; but the same time warranting that these measures are not misused for protection purposes. To achieve its proximate goal, the agreement lays down the following guideposts:

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1. Risk assessment The agreement encourages the use of systematic risk analysis. 2. Rules on setting protection levels: Measures to ensure food safety and to protect the health of animals and plants should be based on analyses of accurate and scientific data 3. Harmonization: In order to harmonize SPS on as wide a basis as possible, the agreement encourages members to base their measures on international standards, guidelines wherever they exist

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4.

5.

6.

Equivalence: The agreement encourages countries to grant equivalence to SPS measures of other countries, which may differ from the importing countries measures, if the exporting countries demonstrate that their standards achieve the same or equal level of sanitary and phytosanitary protection as that of importing countries standards. Transparency: Lays down elaborate rules to ensure that there is complete transparency in SPS measures of member countries. Special and Differential treatment to Dvg countries: The agreement recognises the problems of dvg countries in employing with SPS measures of importing countries; and hence calls for providing (i) technical and financial assistance, and (ii) longer live frame for compliance.
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2. Textiles & Apparel: For the last two decades, trade in textiles has been controlled by a network of bilateral quotas MFA set up in 1974 to provide temporary protection to dvd country producers, whose business was threatened by a surge of cheap imports. Under the UR, this will be integrated In the first year, 16 p.c. of textile imports of base year value to be integrated In the fourth year, 17 per cent In the seventh year, 18 per cent In the tenth year, remaining 49 per cent 3. Industrial goods: Dvd countries to cut import duties on industrial goods by an average of 5 per cent over the next five years, besides exempting about 40 percent of other goods, including items like steel, pharmaceuticals.
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4. Services: The term services cover a wide range of economic activities. The secretariat of WTO has divided these divergent activities into the following 12 sections: Business services, Communication services, Construction and engineering services, Distribution services, Financial services, Health services, Tourism & Travel services, Recreational services and other services. *GATS provides for secure and more open market in services in a similar manner as the GATT have done for trade in goods. But unlike in GATT, services are an area where the process of liberalization has just begun. The agreement contain a set of mutually agreed and legally enforceable rules to cover international trade in services such as MFN treatment, transparency of laws, natural treatment, and arrangement for dispute settlement.
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Broad agreement reached in Engineering, computer related services and travel services. It was decided to continue negotiations for liberalization in Financial services Movement of National Persons Telecommunications Maritime transport Air transport Considerable progress in Financial Services Liberalisations. What are financial services? Insurance and Related Services Banking and Other Financial Services
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How important are Financial Services?

The sector is estimated to involve $1.2 trillion per day in foreign exchange transaction.

International financing extended by banks around the world

is estimated to be $6.4 trillion. The world banking assets are put at more than $ 20 trillion. Stock market capitalization at over $ 10 trillion. The market listed bonds of $ 10 trillion.

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5. Trade Related Intellectual Property Rights (TRIPs)

A new area brought into the scope of GATT. So far, the international system for the protection of intellectual property has been embodied in the legal and international framework provided by the World Intellectual Property Organization (WIPO). Developed countries, not happy with WIPO, wanted a stronger and tougher rule. Accordingly, the Uruguay Round Agreement, expands he scope of IPR: Establishes standards for the acquisition and protection of intellectual property rights, provisions for their national enforcement, and for multilateral dispute settlement.

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5. (contd.)

National treatment and most favoured nation treatment are to apply in respect of all intellectual property rights covered by the agreement.
Minimum standards of protection for IPR provided in respect of copyright, trademark, industrial designs, patents, layouts, designs of integrated circuits etc. In the patent area, minimum standards provided for patent protection in all areas of technology, including pharmaceuticals, for 20 years.

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6. TRIMs

All restrictions affecting the entry of FDI or their entry into certain sectors is to be removed. This includes the following measures taken routinely : 1.Local content requirement (which requires that foreign companies use a specified quantity of local material in production) 2.Export requirement (where foreign investors are required to export a certain percentage of their production). 3.Trade balancing requirement (which puts limit on imports) 4.Local equity requirement (to ensure that a certain percentage of the companys equity be held by local investors). 5.Foreign exchange restrictions and limitations on remittances of profits.
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7 Dispute Settlement

Dispute to be settled under the integrated dispute settlement body. Firm time limits over the stages of the dispute settlement process.

8. World Trade New world trade body established from Organization 1st January 1995 to implement, administer (WTO) and operate GATT 1994. Two features are : (i)countries acceding to WTO must accept all decisions in the round as a package. (ii)Acceding countries agree to be bound by an integrated dispute settlement process that enables cross-retaliation, i.e. a country found not to comply in one area can be retaliated against in another area where it can really hurt.
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(B) Expected Benefits: The new GATT Agreement is expected to boost

global trade by around $200-300 billion a year.

EEC US : : $ 61 billion 36 billion

Former Soviet Block

Japan Dvg countries

:
: :

37 billion
27 billion 16 billion

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(C) The Debate in India and Some Broad Assessment Are we under obligation to reduce agricultural subsidies?

Concerns about PDS and the minimum access to imports.

The question of IPRs in areas like pharmaceuticals : concern that prices of drugs will increase manifold. Implication of TRIMs : Does it mean complete freedom to MNCs and TNCs to operate freely in the country.

Concern over the opening of critical areas like the financial

service.

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(i) Agriculture: This is one area where government has been jubilant of resting major benefits. Success in reducing agricultural support measures in the EU, US and Japan is expected to render major benefits to Indias exports because Indian agriculture has comparative advantage. Does this portray reality? * The US, EU and Japan maintain high tariff levels on a wide range of agricultural goods. USA : Sugar: 244 p.c.; ground 168 pc; milk 83 pc EU : Wheat: 352 p.c. Oats: 361 p.c. Japan : Wheat : 388 p.c. Wheat products: 352 p.c.

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The 36 per cent tariff reduction required under WTO will still leave production in these countries with high tariffs. In

contrast, India has to reduce tariffs and eliminate all non-tariff

barriers. Apart from this SPS measures. The WTO allows certain kinds of subsides to continue,

particularly exp. Credits and direct income provisions to

farmers. The continued use of exp. Subsidies allows massive dumping of agril. Products by the US and EU. The Sanitary and Phytosanitary Measures (SPS) has become a non-tariff protection.
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(ii) Textiles: Progress in unraveling MFA is expected to bring major benefits to India. Here again there are causes for concern: * The phasing of MFA is accompanied by a system of temporary transitional selective safeguards whose

operational details are still not defined. That would

have the effect of thwarting spectacular growth of exports for textile exporting countries like India if such imports are conceived to cause serious damage to industries in the importing countries. * There are antidumping laws the most powerful

weapon in the hands of US and EU.

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Industry: The prospect of faster reduction in ind. tariffs represents yet another source of potential benefit. But there are again uncertainties: * The mechanism through which elimination of VERs would be achieved is yet not clear. * Again the impact of faster cuts in import duties are likely to be small because tariff in ind. Countries are already low.
Services: The impacts are difficult to predict (a) This is an area where there are large sectoral exceptions and the liberalization of services is still on. (b) the commitment on the movement of natural persons is still in the initial stages of negotiations. Nevertheless, the prospect of substantial gains may still be a wishful thinking.
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IPR:

This is one area where the new and tougher rules can put us to greater disadvantages. For India, it will mean virtually repealing the Indian Patent Act of 1970 because Indian Patent Law provides only process patents, not product patents. The TRIPs agreement requires product and process patent to be given in all branches of technology for 20 years. What do we risk by amending our patent act in accordance with WTO requirements. The flipside is that the bulk of registered patents are held by industrialized countries; and the domestic production of these patented products will become costly.
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IPR:

(contd.)
The most deleterious effect of this is expected in chemical and pharmaceutical products.

However, it applies only to patented drugs. Those

drugs which have come out of the patent, prices will not increase. Of the 270 drugs listed by WTO

as essential life saving, only 10 to 15 percent are

on patent. For India, 28 major patented drugs constitute 80 percent of Indias drug production. Of these, 22 will be out of patent by 2005. Only 7 drugs will be under patent.
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TRIMs: This is yet another unfortunate trait for India.

* This will severely jeopardize our ability to regulate the objectives and priorities, weaken domestic capital goods sector, arrest the growth of indigenous technological capability. * It will also become a drain on foreign exchange reserves negatively affect our b.o.p. and increase external debts.

*When linked to be threat of cross retaliation, removal

of all investment measures can become a major social and economic threat.
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Some Broad Assessment:

(1) The new regime forecloses the development alternatives for developing countries. An Eco. Monoculture with only one model dominating the world. (2) The way WTO skews the treatment of matter in favour of dvd countries.

TRIPS: Rights are protected, but no obligation laid on the holder of IPR.
TRIMS: Same as above. Observe the asymmetry in the treatment of capital and labour.

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(3) Widening and deepening of WTOs list of regulatory barriers by simply prefixing Trade-Related to any issue which it thinks. The new issues are:

A link between labour standards and World Trade

A link between Environment and World Trade Moves towards a new Multinational Agreement on Investment (MIA)

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III. WIDENING AND DEEPENING WTOS AGENDA

(A) Singapore Issues At the first ever ministerial conference of WTO, held in

Singapore in 1996, they demanded the negotiation mandate

of WTO to be broadened to include:

Trade and investment

Trade and competition policy Transparency in Government procurement

Trade Facilitation
Labour Standards Environment Standards
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Trade and Investment: The TRIMs agreement prevents countries from imposing conditions on investors: such as local content requirements, exp., obligation etc. Having got the foot of investment in the WTO door, the dvd countries are now trying to get the main body in through the foreign investment treaty. The EU with support from other dvd has been lobbying to introduce a Multilateral Investment Agreement (MIA) in the WTO. The treaty would give rights to foreign companies to establish themselves with 100 percent equity in all sectors in any WTO country, without any restrictions, and to be given national treatment. In promoting it, the dvd countries say the foreign investment treaty would lead to greater foreign investment in the south.
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Trade and Investment: (contd.)

However, concern for the interest of the south is only a pretext. The real motive of the proponents is to increase the access of their companies to resources and markets of dvg countries, as well as to have another powerful instrument to block the development of potential rivals. An international agreement on investment of this type is designed to maximize foreign investors rights while minimizing the authority, rights and policy space of governments of dvg countries. This has serious consequences in terms of policy making in economic, social and political spheres. It would weaken the dvg countries bargaining position.
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Trade and competition problem: EU proposal * Proponents of this agenda wants to bring multilateral rules that discipline members to establish national competition law and policy. These laws/policies should incorporate the core principles of WTO defined as transparency, nondiscrimination (MFN and national treatment). Most importantly the core WTO principles would be applied to competition. * Competition law and policy in appropriate form, are beneficial to dvg countries. However, each country must have full flexibility to choose a model which is suitable, and which can also change through time to suit the changing conditions.
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Trade and competition problem: EU proposal (contd.)

* The proposed model for competition policy to provide effective opportunity for competition in the local market for

foreign firms, and thus apply WTO core principles to

competition law/policy would only affect the needed flexibility. * The abuse of antidumping actions in the dvd countries is anti-competitive against dvg country products. The restrictive

business practices of large firms also hinder competition.

However, these are not the issues desired by rich countries.

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Transparency in Government Procurement:

* This agenda initiated by the US. The US outlaws overseas bribery by its firms. The US feel other countries firms do bribe; and that hurts American companies in obtaining overseas contacts. * The proponents want the government procurement to be fully integrated in the WTO. * If this takes place, the governments in future will not be

allowed to give preferences to local companies for the

supply of goods and services. The effects on dvg countries would be severe.
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Trade Facilitation: * Here its proponents wants to bring the same set of rules and procedures similar to that in dvd countries. For example, it proposes the physical examination of goods by the customs authorities should only be in a small number of cases selected on a random basis to improve the flow of goods through customs barrier. But this ignores the wide differences in the administrative, financial and human resources between the dvd and dvg countries. Here, in this case, it increases the risk of avoidance of payment of adequate customs duties. * Improvement in trade facilitation should be a subject of international cooperation and routed through institution such as World Customs Organization (WCO).
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Labour standards: Some dvd countries US and France were making great attempts to get the issue of trade and international labour standards accepted in the ministerial meeting as an important agenda of WTO. They allege that lower labour standards in dvg countries are an unfair trade advantage, and dvg countries are guilty of social dumping. These countries advocate that goods exported from such countries should be subject to trade penalties such as countervailing duties. * An objective analysis would reveal that the push by dvd countries to include labour standards in the agenda of WTO is not by feeling of goodwill or solidarity with the third world workers, but protectionist motives aimed at against competitive imports from dvg countries. The dvd countries are facing serious problems of unemployment. They are pointing to southern countries as culprits that exploit workers with low wages and poor labour conditions in order to attempt TNCs to move their production away from the high wage norm.
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Environment standards: If a country which has lower environmental standards in an industry, and where the cost of that countrys product is not internalized and the price is too low, and is exporting that product to another country, then the farmer is practicing economic dumping, and the latter importing country, has the right to impose trade penalties such as countervailing duties. What happened at the Singapore meeting? At the ministerial conference in Singapore, no agreement reached. The issue of labour standards shifted to ILO. Similarly, the issue of Environment postponed. For others, working groups were set up on investment, competition policy and transparency in government procurement to conduct study process without any negotiating mandate.
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(B) Doha Ministerial Meeting: The same, Singapore issues investment, competition policy, government procurement and trade facilitation, have been the most contentious ones at the Doha ministerial level. Even though working groups were set up on these issues by WTO at Singapore Ministerial level, the groups have not completed their work. Even then, Dvd countries wanted to launch negotiations right away. Dvg countries resisted a negotiating mandate, and wanted the working groups to complete their work prior to negotiations. After much deliberations, dvg countries succeeded in postponing the decision on the launch of negotiations on these issues.
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The Doha development agenda focused on the development dimension of agriculture by bringing on issues of food security and rural development. It also emphasized the need to take up the non-trade concerns in the negotiations as provided for in the WTO Agreement on Agriculture (AOA). Emphasis was on phasing out of domestic support to agriculture and elimination of export subsidies from the dvd countries. The Doha Development Agenda also expressed concerns about the possible negative effects of reforms on the least developed, and net food importing countries. In this regard, it was proposed to give special consideration to the needs of these countries especially in the context of food aid, technical and financial assurance for improving agricultural products, infrastructure and finance normal level of commercial imports of basic foodstuff and also review of the follow up.
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The DDA identified Special and Different Treatment (S&DT) as an integral part of all elements of agricultural negotiations in a bid to bring development to the centre stage of the WTO process. A major concern of dvg countries with the process of trade liberalization for non-agricultural products, in the UR has been the persistence of high and peak tariffs, specific duties, tariff escalation, and NTBs in dvd countries. It has also been shown that the process of trade liberalization has been asymmetric with dvg countries, taking deeper cuts than dvd countries. The Doha ministerial conference sought to address this asymmetry by proposing negotiations on the market access for non-agricultural goods. Subsequently, a negotiating group on market access (NGMA) has been set up at the WTO and different countries have presented proposals or modalities for trade liberalization.
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The implementation of TRIPs has raised three sets of

negotiating concerns in recent time. (a) Its impact on prices and availability of essential

medicines in the context of HIV AIDS drugs controversy in

south Africa. It led the Doha Ministerial Conference to adopt a declaration on TRIPs and public health, recognizing the supremacy of public health concerns over TRIPs and allowing members some flexibility. However, the US under

pressure from its pharma industry is dragging its feet for

signing agreement.

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(b) TRIPS agreement created an anomalous situation knowledge created from traditional community innovations system is left free for commercial exploitation without any compensation, while intellectual property resulting from formal innovations system is protected from unauthorized commercial exploitation. This resulted in private enterprises obtaining patents on traditional knowledge of particular communities without prior informed consent of the owners of knowledge. Dvg countries have been seeking a redressal of this. In recognition of this, the Doha Ministerial instructed the council on TRIPs to examine the relationship between the TRIPs agreement and the convention on Biological Diversity.
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(c) Another concern of dvg countries has been the stringent food safety standards and other environmental standards imposed by the dvd countries. The WTO agreement on SPS aims to ensure that these standards and regulations are not used for protectionist purposes; and do not cause adverse impacts on trade. However, there is considerable discretion available to importing countries to impose their own rules and standards such as inspection of imported products, specific treatment or processing of products, fixing of minimum allowable levels of pesticide residue, labeling and packaging requirements, good manufacturing processes etc. There is evidence that this flexibility has been exploited by using very minute risk assessments, sometimes in non-transparent manner.
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(C) Cancum Meeting: Most important question: whether to launch negotiations on the new issues or Singapore issues, i.e. MIA, competition policy, transparency in govt. procurement, trade facilitation, Ministers have choice between two options: (1)Launch negotiations now and complete the agreements of superspeed by Jan 2005s or (2) continue discussing and clarifying the issues back in Geneva. The EU, Japan and other dvd countries try to push hard option 1. Dvg countries, option 2. The final draft declaration implies that negotiations on the four Singapore issues would begin after the fifth Ministerial meeting on the basis of explicit consensus on modalities of negotiation. So far no consensus. Countries are split. Another conflict over the meaning of modalities. Dvd countries define it to mean procedural matters and a mere listing of principle/ issues. But dvg countries argue: modalities mean scope and definition, the issues to be covered, the obligations. They point to the current negotiations on agri. And non-agri. Products where modalities take on this substantive meaning.
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IV. WTO and Developing Countries: An assessment: Multilateral trade negotiations have failed to liberalise the trade and industrial policy regimes in the worlds richest and most dvd countries. The dvd countries while preaching the virtues of free trade to dvg countries have been resistant to bring down peak tariffs, high specific duties, and tariff escalation that affect imports for dvg countries. There are also clear signs of protectionist backlash in the dvd world in different sectors with market access for the developing world becoming ever elusive. While developing countries are constantly being pushed to undertake increasing liberalization commitments, dvd countries finds new ways to protect their industries, agriculture, and services. This situation is in sharp contrast to the avowed goals of the WTO as set out in the preamble to the MARRAKESH agreement recognizing the need for positive efforts designed to ensure that dvg countries secure a share in the growth in international trade commensurate with the need of their economic development.
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Post UR Tariffs in Quad Countries on Select items of Exports from Dvg countries: Agril. Product
Product description Agricultural products Milk (>3 pc fat) Milk in power with or without sugar Yoghurt and butter Cereals & preparation EU 113 55-66 69 32-84 Japan 220 160-280 300-620 70-900 USA 66 55-85 30-80 0-20 Canada 241 243-243 238-300 1-77

Groundnuts, shelled
Cane sugar Grape juice Coffee preparations Tea preparations

0
71-73 215 8 0

470
85-100 30 130 100

132
77-90 14 27 91

0
7 10 0 0

Smoking tobacco
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30

310

5
59

Post UR Tariffs in Quad Countries on Select items of Export from Dvg countries: Industrial Products
EU Woven fabrics of > 80 percent combed wool Babies garments, knitted or croch synthetic fibre Womens blouses or trousers knitted 12 11 11 Japan 8 22 9-11 USA 25 16 32 Canada 14 18 18

Mens shirts, woven of cotton and man made fibres

Waterproof footwear Footwear with leather uppers Ceramic tableware, kitchenware etc.
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11
13 6

7
27 140

20-28
38 10

17-18
20 18

8-9
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28-29

0
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Post UR Tariffs in Quad Countries on Select items of Exports from Dvg countries: The poor pay more
Country Nepal Ireland Bangladesh France Per capita 2001 exports Tariff paid GDP to US in billion in million $240 $22660 $370 $24170 $0.20 $18.60 $2.35 $30.02 $25 $29 $331 $330 Rate 12.3% 0.2% 14.1% 1.1%

Cambodia Singapore

$260 $30170

$0.96 $14.90

$152 $96

15.8% 0.6%

As table above notes, the US now collects more tariff revenue from Bangladeshi goods than from French goods, even though Bangladesh exports only $2 billion in goods to the US and France $30 billion.
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Dvg countries were lured into accepting liberalization of trade in services by the prospect of increased market access in the dvd countries for their skilled professionals. However, an overview of the commitments made by industrialized countries in services suggest that most of the commitments made by industrialized countries simply maintain the existing status quo without providing meaningful market access. No much commitments in regards to movement of national persons. There has been proliferation of environmental and health requirements imposed on trade especially in dvd countries. These requirements not only include product standards and regulations, but also voluntary measures, standards set by the private sector, buyers requirement and supply chain management. These regulations have often been applied in such a manner that they act as non-tariff barriers.
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While dvd counties have sought to phase out all subsidies

under the agreement on subsidies and countervailing measures (SCM), R&D subsidies upto 75 percent of the costs

of ind. Research are non-actionable under article 8.2 of the

agreement. In order to retain the technological edge, government of dvd countries have been supporting technological activities of national enterprises through a wide variety of government ind. Complexes.

Yet another asymmetry in the subsidies and countervailing

measures is its failure to discipline the investment incentives given by host governments to attract FDI inflows.
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An illustrative list of investment incentives given by industrialized countries governments.

Site
Kentucky, US S. Caralina US

MNE and year

Toyota, 1985 BMW, 1992

Subsidy
$150 million $150 million

Jobs created
3,000 1900

Subsidy per job

$50,000 $79,000

Albama, US
New Mexico, US Setubal, Portugal

Mercedez Banz, 1996

Intel, 1993 Ford, 1991

$300 million
$289 million $484 million

1500
2400 1900

$200,000
$120,000 $254,000

Germany
UK UK UK
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Dow 1996
Samsung 1994 Siemens, 1995 Lucha Gold Star 1996

$6.8 billion
$89 million $177 million $320 million
WTO

2000
3000 1500 6100

$34,00,000
$30,000 $51,000 $48,000
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In 2001 the OECD countries subsidized their agr sector to

the tune of $311 billion. These subsidies added upto as much as 31 pc of the gross value of agricultural output in OECD countries. In Japan, the subsidies amounted to as high as 59 percent of the gross value of agricultural output. A number of other WTO agreements such as TRIPs and TRIMs are resulting in significant increase losses for dvg

countries.

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Income transfers resulting from TRIPs in Select Countries

Country Net income transfers following TRIPs agreement (millions of 1995 as 200 dollars) Major Net gainers 19083 6768 5673 3326 2968 2968 1097 Major Net losers -15333 -1521 -3879 -2550 -903 -530
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US Germany Japan France UK Switzerland Australia Rep. of Korea China Israel Mexico India Brazil
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Balance of commitments: The Uruguay Round Scorecard The outcome of the Uruguay Round was a good one for the North. Not only did the industrial countries gain from the concessions they received; the economics of the concessions they gave was also positive, through the opening up of their own agriculture and textile sectors. And for the South? On the gain dimension market accessdeveloping countries did not achieve a mercantilist surplus (see the table below). Their tariff reduction covered as large a share of their imports as did those of the industrial countries, and their tariff cuts, measured by how these reduction will affect importers costs, were deeper than those of the industrial countries. This is true even when we take into account the tariff equivalent of the Multifibre Arrangement (MFA) quotas that the industrial countries have committed themselves to remove.
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Tariff Concessions, All Merchandise

Industrial Economies Developing Economies

Percent Depth Percentage Depth age of of of imports of cut imports cut* Includes tariffication and bound reductions on agricultural products Includes the above plus the tariff equivalent of elimination of the Multifibre Arrangement 30 1.0 29 2.3

30

1.6

29

2.3

*Depth of cut, dt/(1+T), is a weighted average across all products, including those on which no reduction was made. Source: Finger and Winters 2002 Reciprocity in the WTO, in Hoekman, B. et al. (eds.) Development, Trade, and WTO: A Handbook, The World Bank 9 July 2012 WTO 68

WTO, Trade Liberalization and Trade Growth: Lessons from Quantitative Studies Recent empirical studies conducted by Professor Andrew Rose of the University of California at Berkeley, a seat of higher learning well known for its orthodox views, and brought out by the London based Centre for Economic Policy Research (CEPR) does not find any evidence of effectiveness of WTO in trade promotion. WTO has No Effect on Trade Liberalization The research included a rigorous analysis using a large panel data set covering 175 countries with observations over 50 years and 67 measures of trade policy and trade liberalization conducted in the framework of gravity model of international trade. The study does not find membership of GATT/WTO to be related with any of the measures of the trade policy or liberalization.
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WTO has No Effect on Trade Growth Either Then the question Professor Rose asked was whether GATT/WTO membership has promoted trade? The research is unable to find a positive effect of GATT/WTO membership on trade. Despite an extensive search, he is unable to find a compelling evidence showing that the GATT/WTO has actually encouraged trade. GSP has led to Doubling of Trade Unlike GATT/WTO memberships effect on trade, the GSP (Generalized System of Trade preferences) that developed countries give to developing countries does seem to have a strong effect on trade, and is associated with an approximate doubling of trade.
Source: RIS Based on Rose (2002a, 2002b, 2003)

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V. SOME RECOMMENDATIONS 1. An independent commission to make a Development Review of the Multilateral Trading System: Given the key importance of the emerging world trading system for the development and sustainability of the world economy, it is important to undertake a thorough review of the type of asymmetries that have crept in; the Cancun conference provides an opportunity to the WTO membership to seek a redressal of the emerging asymmetries in the world trading system before moving forward to expand its agenda. The dvg countries should call for appointment of an independent commission to review the development consequences of Uruguay and Doha Rounds before moving forward. This commission should identify asymmetries that have crept into system and recommend ways for reform for giving a real meaning to development on the trade agenda.
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2. Dvg countries should seek full implementation of all outstanding issues before a negotiating mandate on any other issues could even be discussed. 3. Given the reluctance of dvd countries to make meaningful commitments on the movement of natural persons, dvg countries should seek a framework agreement to provide for movement of natural persons. 4. In the agreement of Agri (AOA), some key issues for negotiations are: Facilitating dvd country market access to dvg countries Tariff rationalization of dvd countries a ceiling on tariff peaks of dvd countries in a necessity. Enhanced tariff rate quota (TRQ) Special safeguard Measure (SS) for special products Complete elimination of green and blue box subsidies of dvd countries.
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5. An International Framework for protection of trading knowledge under TRIPs agreement: The member states should establish sui-generic system for protection of traditional knowledge and genetic resources. The protection of traditional knowledge at national level will not be complete until there is an internal framework for use of TK outside the country of origin. The framework should establish a procedure that requires patent or other IPR applications to disclose the source of origin of TK or genetic resource used and enclose a certificate from a competent authority in the source country of prior informed consent and benefit sharing conditions. This would require an amendment in the TRIPs agreement. 6. Expanding geographical indication coverage to other products: steps should betaken to implement extension and scale of protection of GIS beyond wines and sprits, which is an outstanding implementation issue from the Doha Ministerial.
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Moratorium on further strengthening IPR regime. Agreement on SPS linking implementation with effective technical assistance. The SPS agreement in WTO contains provisions for technical assistance to be provided by the importing countries to assist the exporters in their compliance with the new standards imposed by them. Furthermore, the SPS agreement provides that where subsidized investment are required in order for an exporting dvg country member to fulfill the sanitary and phyto-sanitary requirements of an importing country member, the latter shall consider providing such technical assistance as well permit the dvg country member to maintain and export its market access opportunities for the products involved. However, available evidence suggests that promised technical assistance is not delivered in an adequate as timely manner.
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VI. WTO and India: What has been happening? In the tariff liberalization process, each country has submitted official rates. This includes: BASE RATEandOFFER RATEAlso called as Bound RateIn the negotiation, India had agreed to bind tariff for 3373 commodity/ commodity groups. This accounted for 65 per cent of Indias total tariff lines.

For agricultural commodities, India has committed three bound rates:

Raw materials Edible oils
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100 p.c.

Processed Agricultural Commodities

150 p.c.
300 p.c.
75

However, the binding rates for a number of agricultural

commodities are very low; and in a few cases, it is zero. The range of bound rates for most of the items is 0-55 percent. These are owing to commitments made by India in earlier round of negotiations.

Apart from tariff, India has to remove all QRs. Though India
should have removed all the QRs, India maintained under the pretext of B.O.P. consideration. Australia, Canada, Japan, EU, New Zealand, Switzerland and the US had objections.
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