World Trade Organization (WTO)

Organizational Structure of WTO

World Trade Organization is a permanent trade organization having its own secretariat and huge organizational set up.The headquarters of WTO are at Geneva in Switzerland.Organizational structure of WTO is headed by Ministerial Conference which meets after every two years.General council a permanent organ of WTO works under the policy framework of Ministerial Conference.General Council is assisted by Dispute Settlement Body (DSB) and Trade Policy Review Body (TPRB). Under General Council,various Councils/Working Groups work.These are Council for Trade in Goods,Council for TRIPs,council for trade in services,council for Trims,Trade Negotiations Committees and Working Groups.The organizational structure of WTO is clear from the following chart.

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IMPACT OF WTO AGREEMENTS ON INDIAN ECONOMY

The signing of WTO agreements will have far reaching effects not only on India’s foreign trade but also on its internal economy. Although the ultimate goal of WTO is to free world trade in the interest of all nations of the world, yet in reality the WTO agreements has benefitted the developed nations more as compared to developing ones. The impact of WTO on India’s economy is staged as follows: –

I. Positive Impact I Benefits I Advantages I Gains from WTO: –

The Positive impact of WTO on India’s economy can be viewed from the following points: –

1)Increase In Export Earnings

Estimates made by World Bank, Organization for Economic Co-operation and Development (OECD) and the GATT Secretariat, shows that the income effects of the implementation of Uruguay Round package will be an increase in traded merchandise goods. It is expected that India’s share in world exports would improve.

2) Agricultural Exports

Reduction of trade barriers and domestic subsidies in agriculture is likely to raise international prices of agricultural products. India hopes to benefit from this in form of higher export earnings from agriculture. This seems to be possible because all major agriculture development programmes in India will be exempted from the provisions of WTO Agreement.

3) Export Of Textiles And Clothing

With the phasing out of MFA (Multi – Fiber Arrangement), exports of textiles and clothing will increase and this will be beneficial for India. The developed countries demanded a 15 year period of phasing out of MFA, the developing countries, including India, insisted that it be done in 10 years. The Uruguay Round accepted the demand of the latter. But the phasing out Schedule favours the developed countries because a major portion of quota regime is going to be removed only in the tenth year, i.e. 2005. The removal of quotas will benefit not only India but also every other country’.

4) Multilateral Rules And Disciplines

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.

5) Growth To Services Exports

Under GATS agreement, member nations have liberalized service sector. India would benefit from this agreement. For e.g.- India’s services exports have increased from about 5 billion US $ in 1995 to 96 billion US $ in 2009-10. Software services accounted for about 45% of service exports.

6) Foreign Investment

India has withdrawn a number of measures against foreign investment, as per the commitments made to WTO. As a result of this, foreign investment and FDI has increased over the years. A number of initiatives have been taken to attract FDI in India between 2000 and 2002. In 2009-10, the net FDI in India was US $ 18.8 billion.

II. Negative Impact / Problems I Disadvantages Of WTO Agreements on Indian Economy

1) TRIPs

The Agreement on TRIPs at Uruguay Round weights heavily in favour of Multinational Corporations and developed countries as they hold a very large number of patents. Agreement on TRIPs will work against India in several ways and will lead to monopoly of patent holding MNCs. As a member of WTO, India has to comply with standards of TRIPs.

The negative impact of agreement on TRIPs on Indian economy can be stated as follows:

a) Pharmaceutical Sector

Under the Patents Act, 1970, only process patents were granted to chemicals, drugs and medicines. This means an Indian pharmaceutical company only needed to develop and patent a process to produce and sell that drug. This proved beneficial to Indian pharmaceutical companies as they were in a position to sell quality medicines at low prices both in domestic as well as in international markets. However, under the agreement on TRIPs, product patents needs to be granted. This will benefit the MNCs and it is feared that they will increase the prices of medicines heavily, keeping them out of reach of poor. Again many Indian pharmaceutical companies may be closed down or taken over by large MNCs.

b) Agriculture

The Agreement on TRIPs extends to agriculture through the patenting of plant varieties. This may have serious implications for Indian agriculture. Patenting of plant varieties may transfer all gains in the hands of MNCs who will be in a position to develop almost all new varieties with the help of their huge financial resources and expertise.

c) Microorganisms

The Agreement on TRIPs also extends to Microorganisms as well. Research in micro – organisms is closely linked with the development of agriculture, pharmaceuticals and industrial biotechnology. Patenting of micro – organisms will again benefit large MNCs as they already have patents in several areas and will acquire more at a much faster rate.

2) TRIMs

Agreement on TRIMs provide for treatment of foreign investment on par with domestic investment. This Agreement too weights in favour of developed countries. There are no provisions in Agreement to formulate international rules for controlling restrictive business practices of foreign investors. In case of developing countries like India, complying with Agreement on TRIMs would mean giving up any plan or strategy of self – reliant growth based on locally available technology and resources.

3) GATS

One of the main features of Uruguay Round was the inclusion of trade in services in negotiations. This too will go in favour of developed countries. Under GATS agreements, the member nations have to openup services sector for foreign companies. The developing countries including India have opened up services sector in respect of banking, insurance, communication, telecom, transport etc. to foreign firms. The domestic firms of developing countries may find it difficult to compete with giant foreign firms due to lack of resources & professional skills.

4) Non – Tariff Barriers

Several countries have put up trade barriers and non – tariff barriers following the formation of WTO. This has affected the exports from developing countries. The Union Commerce Ministry has identified 13 different non – tariff barriers put up by 16 countries against India. For eg. MFA (Multi – fiber arrangements) put by USA and European Union is a major barrier for Indian textile exports.

5) Agreement On Agriculture (AOA)

The AOA is biased in favour of developed countries. The issue of food security to developing countries is not addressed adequately in AOA. The existence of global surpluses of food grains does not imply that the poor countries can afford to buy. The dependence on necessary item like foodgrains would adversely affect the Balance of Payment position.

6) Inequality Within The Structure Of WTO

There is inequality within the structure of WTO because the agreements and amendments are in favour of developed countries. The member countries have to accept all WTO agreements irrespective of their level of economic development.

7) LDC Exports

The 6th Ministerial Conference took place at Hong Kong in December 2005. In this Conference, it was agreed that all developed country members and all developing countries declaring themselves in a position to do so, will provide duty – free and quota – free market access on a lasting basis to all products originating from all Least Developed Countries (LDC). India has agreed to this. Now India’s export will have to compete with cheap LDC exports internationally. Not only this, the cheap LDC exports will come to Indian market and compete with domestically produced goods.

India will face several problems in the process of complying with WTO agreements, but it can also reap benefits by taking advantage of changing international business environment. For this it needs to develop and concentrate on its areas of core competencies.

World Trade Organization (WTO)

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