GATT WTO AND INDIA : Business Economics 1st Year

LESSON – 15

GATT, WTO AND INDIA

OBJECTIVES

            After going through this chapter, you should be able to

• Understand India’s commitments of WTO
• Know the benefits and disadvantages to India

STRUCTURE

15.1    Introduction

15.2    India’s Commitments of WTO

            15.2.1 Tariff Lines

            15.2.2 Quantitative Restrictions

            15.2.3 TRIPs

            15.2.4 TRIMs

            15.2.5 GATs

            15.2.6 Customs Valuation Rules

15.3    Benefits to India

15.4    Disadvantages to India

Unit Questions

15.1  INTRODUCTION

            India was one of the original contracting parties (cps) in the GAIT. India also joined the WTO at its very inception. Irrespective of political changes, since 1991, the Government of India has been implementing structural adjustment programmes according to the dictates of WTO, IMF and the World Bank.

15.2  INDIA’S COMMITMENTS OF WTO

15.2.1 Tariff Lines

            As a member of the WTO, India has bound about 67 percent of its tariff lines whereas prior to the Uruguay Round only 6 percent of the tariff lines were bound. For non-agricultural goods, with a few exceptions, ceiling bindings of 40 per cent ad valorem on finished goods and 25 per cent on intermediate goods, machinery and equipment have been undertaken. The phased reduction to these bound level is being undertaken over the period March 1995 to the year 2005. Under the Agreement on Agriculture, except for a few items, India’s bound rate ranges from 100 to 300 percent and no commitments have been made regarding market access, reduction of subsidies or tariffs.

15.2.2 Quantitative Restrictions (QRs)

            QRs on imports maintained on balance of payments grounds were notified to WTO in 1997 for 2,714 tariff lines at the eight-digit level. In view of the improvements in India’s balance of payments, the Committee on Balance of Payments Restrictions had asked India for a phase out for the QRs. Based on presentations before this committee and subsequent consultations with main trading partners, India reached an agreement with these countries, except USA, to phase out the QRs over a period of six years beginning 1997. The Disputes Settlement Panel and the Appellate Body ruled in favour of USA and against India. This means that India is now required to phase out QRs in a period of less than six years. In fact, an agreement between USA and India has already been reached which envisages the phasing out of all QRs by India by April 1,2001. Prior to the announcement of the Exim Policy for the year 2000-01 on March 31,2000 there were 1,429 items on which QRs were present in India. This policy removed QRs on 714 items. QRs on the balance 715 items will go by April 1, 2001.

15.2.3 TRIPs

            The ruling of the two WTO Dispute Settlement Panels following the complaints made by the USA and the European Union that India had failed to meet its commitments under Article 70.8 (requiring the setting up of the Mail Box System) and Article 70.9 (granting of Exclusive Marketing Rights) made it obligatory for the Government of India to make appropriate amendments to the Patents Act, 1970 by April 1 9, 1999. The Patens (Amendment) Act, 1 999 was passed by the Parliament in March 1999 to provide for Exclusive Marketing Rights. In respect of plant varieties, a decision has been taken to put in place a suigeneris system as it is perceived to be in our national interest. A legislation to this effect tabled in the Parliament has been referred to a Joint Parliamentary Committee.

            As far as copyrights and related rights are concerned, the Copyright Act  

1957 as amended in 1994 takes care of our interest and meets the requirements of the TRIPs Agreement except in the case of terms of protection of performer’s rights. A Bill to increase this term to 50 years was passed by Parliament in December, 1999. As far as lay—out designs are concerned, a legislation giving protection to them was introduced in the Rajya Sabha on December 20,1999 by the Department of Electronics. In the field of trademarks, The Trade and Merchandise Marks Act (TMMA), 1958 is in its essential features, in accordance with international law. A Bill passed in Parliament in December, 1999 provides for protection to service marks. The Government of India decided to enact a new law on the subject to take advantage of the provisions of the TRIPs Agreement. A Bill in this regard was passed by the Parliament in December, 1999.

15.2.4 TRIMs

            Under the TRIMs Agreement, developing countries have a transition period of 5 years up to December 31,1999 during which they can continue to maintain measures inconsistent with the Agreement provided these are duly notified. The Government of India notified two TR Viz. that relating to local content requirements in the production of certain pharmaceutical products and dividend balancing requirement in the case of investment in 22 categories of consumer items.

15.2.5 GATS

            Under the General Agreement on Trade in Services (GATS), India has made commitments in 33 activities. Foreign service providers will be allowed to enter these activities. According to the Government of India, the choice of the activities has been guided by considerations of national benefit (viz., the impact on capital inflows, technology and employment).

15.2.6 Customs Valuation Rules

            India’s legislation on Customs Valuation Rules, 1998, has been amended to bring it in conformity with the provisions of the WTO Agreement or implementation of Article VII of GATT 1994 and the Customs Valuation Agreement.

15.3. benefits to india

            1. World Bank, OECD and the GATT Secretariat have estimated that the income effects of the implementation of the Uruguay Round package will add between 213 and 274 billion U.S dollars 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 U.S dollars in the year 2005, than it would otherwise had been. The GATT Secretariat further projects that the largest increases will be in the areas of clothing (60 per cent), agriculture, forestry and fishery products (20 per cent) and processed food and beverage (19 percent).

2. The phasing out of the MFA (Multi-Fibre Arrangement) by 2005 will benefit India as the exports of textiles and clothings will increase. While the developed countries had demanded a 15 year period, the developing countries (including India) had insisted on a 10 year period. Acceptance of the developing countries demand in the Uruguay Round has been enthusiastically received in these countries. However, the catch here is that the phasing out schedule favours the developed countries as a major proportion of quota regime to the extent of 49 per cent is going to be removed only during the tenth year, i.e., by 2005. Thus the Uruguay Round does not provide an immediate market access for the Third Word textile exports. By the time the MFA is completely phased out in 10 years, the developed countries could gear themselves to effect improvement !n quality, efficiency and competitiveness.

            3. The third benefit that India expects relates to the improved prospects for agricultural exports as a result of likely increase in the prices of agricultural products due to reduction in domestic subsidies and barriers to trade. While on the one hand earnings from agricultural exports are likely to increase, on the other hand India has ensured that all major programmes for the development of agriculture will be exempted from the disciplines in the agricultural Agreement.

            4. The Uruguay Round Agreement has strengthened multilateral rules and disciplines. The most important of these relate to anti-dumping, subsidies and countervailing measures, safeguards and disputes settlement. This is likely to ensure greater security and predictability of the international trading system and thus create a more favourable environment for India in the new world economic order.

15.4  DISADVANTAGES TO INDIA

            The most serious disadvantages to India are likely to flow from the Agreements pertaining to the TRIPs, TRIMs and services.

TRIPs:

            Protection of intellectual property rights-patents, copyrights, trademarks etc., has been made more stringent in the Uruguay Round. This has been done to protect the interest of multinational corporations and the developed countries as the Agreement on TRlPs is highly weighted in favour of patent holders. However, as correctly pointed out by Muchkund Dubey, IPRs (Intellectual Property Rights) protection is anti-competition and anti-liberalization and goes against the spirit of opening up the world economy and global integration. It amounts to “legalising” the “Monopoly” of MNCs. Thus protection of lPRs is, itself, a barrier to trade.

            1. The first point to be noted in this context is that the TRIPs Agreement goes against the Patent Act of India, 1970 in almost all important areas as would be clear from the discussion below;

(i)         Under the Indian Patents Act only process patents can be granted in food, chemicals and medicines. TRIPs Agreement provides for granting product patents also in all these areas.

(ii)        Under the TRIPs Agreement methods of agriculture and horticulture and bio-technological process are patentable there can not be any exceptions as under the Indian Act.

(iii)       TRIPs Agreement provides that the general term of a patent shall be 20 years. The Indian Patents Act provides for a general term of 14 years for both product as well as process patents.

(iv)       In India, there are reasonable and effective provisions for the compulsory licensing of patents and also for the revocation of patents in public interest. Under TRIPs Agreement, there are no such provisions.

(v)        Under TRIPs no ceiling can be placed on royalty demanded on patents like in the Indian Patents Act.

(vi)       Importation will be treated as working of a patent in the TRIPs Agreement, contrary to the patent philosophy in India; and

(vii)      TRIPs also reverses the burden of proof.

            2. Under the Patent Act of 1970 in India, only process patents are granted to drugs and medicines.

            Once product patents are introduced, generics cannot come to the market until after the expiry of the patent. Thus the Introduction of product patents in India is certainly going to affect sections of the poor who will not have the generic option open. In addition, as more and more potential medicines of MNCs are prescribed by the doctors, many Indian drug companies will be forced to shutdown. Drug company profits will start flowing overseas more quickly and skilled labour may face unemployment as production moves over seas.

            3. The extension of intellectual property rights to agriculture (Via the patenting of plant varieties) has serious consequences for India. In India, plant breeding and seed production are largely in the public domain. Plant breeding is undertaken by agricultural universities and units of ICAR (Indian Council of Agricultural Research), whereas seed multiplication is in the hands of the National and State Seed Corporations. This is due to the reason that India being a poor country where agriculture is the livelihood of the majority of the population, the government must bear the responsibility of ensuring the supply of adequate quantities of seeds at reasonable prices to the farmers. The aim is not to maximise profit as would be the case in the private sector, but to sustain the livelihood of the majority of the population on the one hand, and to achieve self-sufficiency in food grains on the other hand. Patenting of plant varieties will transfer all the gains to the multinational companies. Almost all new varieties will belong to MNCs simply by virtue of their massive financial resources.

            4. Under TRIPs patenting has been extended not only to plant varieties but to the large area of micro organisms as well. Micro organisms refer to very small forms of life. In this category are included such living creatures as bacteria, virus, fungus, algae (the green scum that grows near water), small plants and animas, and even genes. As argued by Suman Sahai, there are vital economic sectors that are linked to micro organisms, the most important being agriculture, pharmaceuticals and industrial biotechnology.

            In the field of agriculture, efforts are on world wide to develop bio-substitutes (which are based to a large extent on micro organisms) for chemical fertilizers and pesticides as the latter are not ecological:’, sustainable and will poison our land and water.

            In the field of pharmaceuticals, several kinds of drugs are derived from micro organisms. The patenting of life forms will strike at the very roots of indigenous manufacturing of such drugs. As far as industrial biotechnology is concerned, it is estimated that in the coming two to three decades, 60 to 70 per cent of the global economy would rest on biotechnology because this is perhaps the most versatile of all the technologies that we have seen so far. Patents in all the three fields (agriculture, pharmaceuticals and industrial biotechnology) linked to micro organisms are either already with the multinational companies or are likely to be acquired at a much faster rate vis-a-vis the developing countries. Thus multinational companies belonging to the developed countries are likely to dominate the “global” economy that will emerge in the coming years.

UNIT QUESTIONS

1.            Explain India’s commitments of W.T.O.

2.            Describe the benefits and disadvantages to India. 

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