Sybms (A)

group 2

PART A
GENERAL AGREEMENT ON TARIFFS AND TRADE
The General Agreement on Tariffs and Trade (GATT), multilateral treaty between governments, was signed in 1947 and came into force on 1st January 1948. Objectives: The primary of GATT is to expand international trade by liberalizing trade so as to bring about all around economic prosperity. The Preamble to the GATT mentions the following as its important objectives: 1. Raising standard of living. 2. Ensuring full employment and a large and steadily growing volume of real income and effective demand. 3. Developing full use of resources of the world. 4. Expansion of production and international trade. For the realization of its objectives, GATT has adopted the following principles: 1. Non-discrimination: the principle of non-discrimination requires that no member country shall discriminate between the members of GATT in the conduct of international trade. To ensure non-discrimination the members of GATT agree to apply the principle of the most favoured nation (MFN) to all import and export duties. This means that each mission shall be treated as well as the most favoured nation. As far as quantitative restrictions are permitted they too are to be administered without favor. However certain expectations to this principle are allowed for instance GATT, does not prohibit economic integration such as free trade areas or customs union, provided the purpose of such integration is to facilitate trade between the constituent territories and not to raise barriers to the trade of other parties. GATT also permits the members to adopt measures to counter dumping and export subsidies. 2. Prohibition of quantitative restriction: GATT rules seek to prohibit quantitative restrictions as far as possible and limit restrictions on trade to the less rigid tariffs. However, certain exceptions to this prohibition are granted to countries confronted with balance of payments difficulties and to developing countries. Further, import restrictions are allowed to apply to agricultural and fishery products if domestic productions of this articles is subject to equally restrictive production or marketing controls. 3. Consultation: GATT seeks to resolve disagreements trough consultations.

Sybms (A)

group 2

Evaluation of the GATT

The member countries of GATT account for over 90 % of the international trade. This indicates that GATT can considerably help in the orderly development of global trade. One of the principles accomplishments of GATT has been the establishment of the forum for continuing consultations. Disputes that might otherwise have caused continuing hard feeling, reprisals and even diplomatic rupture have been brought to the conference table and compromised. GATT has so far held 8 multinational trade negotiations. Though GATTs efforts at getting tariff reductions and other measures aiming at trade liberalizations are not up to expectations, they are in no way insignificant. The average level of tariff on manufactured goods in industrial countries is about 3% now compared to about 40% in the immediate post 2nd war years.

WTO
GATT was converted from a provisional agreement into a formal international organization called world trade organization (WTO) with effect from January 1995.wto will serve as a single institutional framework encompassing GATT. It will be directed by a Ministerial conference that will meet at least once every 2 years and its regular business will be overseen by a General Council. The old GATT system allowed, under what was known as the Grand-Father clause existing domestic legislation to continue even if it violated a GATT agreement that a member country had accepted by being a signatory to GATT. The WTO specially rules it out.

Sybms (A)

group 2

Introduction to WORLD TRADE ORGANISATION

The World Trade Organization was founded in 1995 to replace the General Agreement on Tariffs and Trade (GATT). This multilateral organization aims to lower tariffs and non-tariff barriers so as to increase international trade. The 146 member states meet in ministerial sessions at least once every two years. NGOs and poor countries fear that further liberalization of trade will only benefit rich countries. WTO negotiations favor the interests of investors and neglect agricultural protectionism by rich countries. Critics often charge that the WTO functions undemocratically and that it has opaque negotiation procedures that harm the interest of the poor. The World Trade Organization (WTO) is an international, multilateral organization, which sets the rules for the global trading system and resolves disputes between its member states, all of whom are signatories to its about 30 agreements. WTO headquarters are located in Geneva; Switzerland. Pascal Lamy is the current Director-General, taking over from the previous Director-General Supachai Panitchpakdi on September 1, 2005. As of December 15, 2005, there are 150 members in the organization, with the Kingdom of Tonga becoming the 150th member. All WTO members are required to grant one another most favoured nation status, such that (with some exceptions) trade concessions granted by a WTO member to another country must be granted to all WTO members. Since its inception in 1995, the WTO has been a major target for protests by the anti-globalization movement.

History
The Bretton Woods Conference of 1944 proposed the creation of an International Trade Organization (ITO) to establish rules and regulations for trade between countries. The ITO charter was agreed at the UN Conference on Trade and Employment in Havana in March 1948, but was blocked by the U.S. Senate. Some historians have argued that the failure may have resulted from fears within the American business community that the International Trade Organization could be used to regulate, rather than liberate, big business. Only one element of the ITO survived: the General Agreement on Tariffs and Trade (GATT). Seven rounds of negotiations occurred under GATT before the

Sybms (A) group 2 eighth round - the Uruguay Round - concluded in 1995 with the establishment of the WTO as the GATT's replacement. The GATT principles and agreements were adopted by the WTO, which was charged with administering and extending them. Unlike the GATT, the WTO has a substantial institutional structure.

Mission
The WTO aims to encourage smooth and free trade by promoting lower trade barriers and providing a platform for the negotiation of trade and to resolve disputes between member nations, when they arise. The goal is to help producers of goods and services, exporters, and importers conduct their business. Principles of the trading system The WTO discussions should follow these fundamental principles of trading. 1. A trading system should be discrimination-free in a sense that a country cannot favour another country or discriminate against foreign products or services. 2. A trading system should be freer where there should be little trade barriers (tariffs and non-tariff barriers). 3. A trading system should be predictable where foreign companies and governments can be sure that trade barriers would not be raised and markets will remain open. 4. A trading system should be more competitive. 5. A trading system should be more accommodating for less developed countries, giving them more time to adjust, greater flexibility, and more privileges.

Functions Of WTO
The world trade organization is expected to play its role in the following areas: WTO administers the 28 agreements contained in the final act and a number of multilateral agreements and government procurement through various councils and committees. WTO oversees the implementation of the significant tariff cut (averaging 40%) and also reduction of non-tariff measures agreed to in the trade negotiations. WTO examines regularly the trade regimes of individual member countries. Thus, it acts as a watchdog of international trade.

Sybms (A) group 2 WTO provides for disputes settlement court in order to adjudicate the trade disputes which could not be solved through bilateral talks between member countries. The disputes are examined by the panel of independent experts in view of WTO rules and provide rulings. This procedure is laid down in order to provide equal treatment for all trading partners and to encourage member countries to live up to their obligation. WTO acts as a management consultant for world trade. The economists of WTO observe the pulse of the global economy and provide studies on the main trade issues. Technical co-operation and training division is established in the WTO s secretariat in order to help the developing countries in the implementation of Uruguay round results. Member countries can use the WTO as a forum for continuous negotiation of exchange of trade barriers in the entire world. WTO co-operates with other international institutes like IMF, IBRD(world bank) and ILO involved in global economic policy making. WTO oversees the national trade policies of member governments.

Structure
The world trade organization was created against Geneva conventions and supports "free markets" and policies of the World Bank. All WTO members may participate in all councils, committees, etc., except Appellate Body, Dispute Settlement panels, and multilateral committees. Highest level: Ministerial Conference The topmost decision-making body of the WTO is the Ministerial Conference, which has to meet at least every two years. It brings together all members of the WTO, all of which are countries or customs unions. The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements. Second level: General Council The daily work of the ministerial conference is handled by three groups The General Council, The Dispute Settlement Body and The Trade Policy Review Body. 1. The General Council- is the WTOs highest-level decision-making body in Geneva, meeting regularly to carry out the functions of the WTO. It has representatives (usually ambassadors or equivalent) from all member governments and has the authority to act on behalf of the ministerial conference which only meets about every two years. The council acts on behalf on the Ministerial Council on all of the WTO affairs. The current chairman is Amina Chawahir Mohamed (Kenya). 2. The Dispute Settlement Body - Made up of all member governments, usually represented by ambassadors or equivalent. The current chairperson is Eirik Glenne (Norway). 3. The Trade Policy Review Body (TPRB) - the WTO General Council meets as the Trade Policy Review Body to undertake trade policy reviews of Members under the

Sybms (A) group 2 TRPM. The TPRB is thus open to all WTO Members. The current chairperson is Don Stephenson (Canada). Third level: Councils for Trade The Councils for Trade work under the General Council. There are three councils Council for Trade in Goods, Council for Trade-Related Aspects of Intellectual Property Rights, and Council for Trade in Services - each council works in different fields. Apart from these three councils, six other bodies report to the General Council reporting on issues such as trade and development, the environment, regional trading arrangements and administrative issues. 1. Council for Trade in Goods- The workings of the General Agreement on Tariffs and Trade (GATT) which covers international trade in goods, are the responsibility of the Council for Trade in Goods. It is made up of representatives from all WTO member countries. The current chairperson is Vesa Tapani Himanen (Finland). 2. Council for Trade-Related Aspects of Intellectual Property Rights- Information on intellectual property in the WTO, news and official records of the activities of the TRIPS Council, and details of the WTOs work with other international organizations in the field. 3. Council for Trade in Services- The Council for Trade in Services operates under the guidance of the General Council and is responsible for overseeing the functioning of the General Agreement on Trade in Services (GATS). Its open to all WTO members, and can create subsidiary bodies as required. The current chairperson is Claudia Uribe (Colombia).

Membership

A world map of WTO participation. Green indicates members, yellow/orange for observers, and grey indicates countries that are neither. The countries of the European Communities (i.e., the EU) are dually represented collectively and individually. The WTO has 150 members (76 members at its foundation and a further 74 members joined over the following ten years). The 25 states of the European Union are represented also as the European Communities. Some non-sovereign autonomous entities of member states are included as separate members.

Sybms (A) group 2 The latest (as of 15 December 2005) member admitted being the Kingdom of Tonga on 15 December 2005 during the ministerial conference. The shortest accession negotiation was that of the Kyrgyz Republic, lasting 2 years and 10 months. The longest was that of China, lasting 15 years and 5 months. Russia, having first applied to join GATT in 1993, is still in negotiations for membership. India is one of the founder members of WTO.

Critique
The stated aim of the WTO is to promote free trade, stimulate economic growth and hence make people's lives more prosperous. Many believe that free trade is not the right way to make people's lives more prosperous but only grants the rich the means to become richer through the loss of the general population. The WTO also promotes economic globalization, which anti-globalization activists consider problematic. WTO treaties have been accused of a partial and unfair bias toward multinational corporations and wealthy nations. The WTO is criticized as being the tool of powerful corporate lobbies. Small countries in the WTO wield little influence. Despite the WTO aim of helping the developing countries, the influential states in the WTO focus on their own commercial interests. The needs of the developing countries are often perceived to be ignored. In addition, the issues of health, safety and environment are steadfastly ignored.

General implications of WTO in nutshell

It is a tribute to the human civilization the sovereign nations have agreed to subordinate their freedom (to act) and have agreed to work within the framework of rules to promote global trade. The Uruguay Round of negotiations has resulted into formations of WTO a rule based system which is expected to lead to smooth and orderly international trade. In nutshell the implications- both threats and opportunities, could be summarized as: 1. The impact of WTO and its agreements are on every economic activity may it be agriculture, trading, service or manufacturing. 2. World markets are opening up due to lowering of tariffs and dismantling of other restrictions in developed and developing countries. Enlightened and awakened entrepreneurs have greater opportunities to benefit from their comparative advantages. 3. Domestic markets will be increasingly threatened because of lowering of tariffs leading to freer entry of foreign goods and because of foreign companies establishing manufacturing bases locally.

Sybms (A) group 2 4. Whereas the developing countries will have greater opportunities in sectors in which they have cost based comparative advantages e.g. textiles, agriculture etc., the developed countries to benefit by opening of service sector and tightening of Intellectual Property Regime. 5. Export Markets will become tougher because of competition among developing countries with similar comparative advantages. 6. The International Trade is increasingly becoming knowledge based. The entrepreneurial ability will come to fore in the new environment.

General Agreement on Trade in Services

Introduction
The General Agreement on Trade in Services (GATS) is among the World Trade Organization's most important agreements. The accord, which came into force in January 1995, is the first and only set of multilateral rules covering international trade in services. It has been negotiated by the Governments themselves, and it sets the framework within which firms and individuals can operate. The GATS has two parts: the framework agreement containing the general rules and disciplines; and the national schedules which list individual countries specific commitments on access to their domestic markets by foreign suppliers. Each WTO Member lists in its national schedule those services for which it wishes to guarantee access to foreign suppliers. All commitments apply on a non-discriminatory basis to all other Members. There is complete freedom to choose which services to commit. In addition to the services committed, the schedules limit the degree to which foreign services providers can operate in the market. For example, a country making a commitment to allow foreign banks to operate in its territory may limit the number of banking licenses to be granted (a market access limitation). It might also fix a limit on the number of branches a foreign bank may open (a national treatment limitation).

Structure of the GATS

The GATS is the first and only set of multilateral rules and commitments covering Government measures which affect trade in services. It has two partsthe framework agreement containing the rules, and the national schedules of commitments in which each Member specifies the degree of access it is prepared to guarantee for Foreign Service suppliers.

Sybms (A) group 2 The GATS covers all services with two exceptionsi.e. services provided in the exercise of governmental authority and, in the air transport sector, air traffic rights and all services directly related to the exercise of traffic rights. Notwithstanding this very broad scope, the Agreement and the negotiations taking place under it are one of the least controversial areas of current work in the WTO. This is because of its remarkable flexibility, which allows Governments, to a very great extent, to determine the level of obligations they will assume. There are four main elements of flexibility:

Member Governments choose those service sectors or sub sectors on which they will make commitments guaranteeing the right of foreign suppliers to provide the service. Each Member must have a schedule of commitments, but there is no minimum requirement as to its coveragesome cover only a small part of one sector; For those services that are committed, Governments may set limitations specifying the level of market access and the degree of national treatment they are prepared to guarantee; Governments were able to limit commitments to one or more of the four recognized "modes of supply" through which services are traded. They may also withdraw and renegotiate commitments; In order to provide more favorable treatment to certain trading partners, Governments may take exemptions, in principle limited to 10 years duration, from the MFN principle, which is otherwise applicable to all services, whether scheduled or not.

The GATS and investment

The fact that under GATS WTO Members can make commitments allowing foreign suppliers to establish in their markets has led to criticism from some anti-WTO activists who opposed the negotiations for a Multilateral Agreement on Investment (MAI) in the Paris-based Organisation for Economic Co-operation and Development (OECD). The GATS has been said to be an attempt to resurrect the MAI. Scott Sinclair of the Canadian Centre for Policy Alternatives has said that "The GATS investment restrictions demolish industrial policy whether primarily aimed at goods or services, closing off the path to development taken by most advanced countries to other countries." What these activists have failed to say is that it can be used by Governments, if they so decide, to attract foreign investment into sectors where it is needed. The GATS guarantees the conditions which provide policy stability for potential investors. But there is no obligation to make commitments under the GATS. Presumably Mr. Sinclair is stating that the GATS prevents Governments from applying restrictions to foreign service providers operating in the market. This is fundamentally untrue. If commitments are made, they can be subject to the six types of limitations specified in the agreement, which include, besides quantitative limits, restrictions on the share of foreign capital and on the

Sybms (A) group 2 type of legal entity permitted. In addition, any type of national treatment limitation conditions applying only to foreign supplierscan be scheduled. The GATS bears no resemblance to the MAInot surprisingly, since the OECD has 30 member Governments and the GATS over 140, three quarters of which are developing countries or economies in transition. Moreover, the GATS allow Governments to impose on Foreign Service providers any conditions they wish, including those pertaining to local employment or technology transfer.

Agreement on Trade-Related Investment Measures (TRIMs) This Agreement, negotiated during the Uruguay Round, applies only to measures that affect trade in goods. Recognizing that certain investment measures can have traderestrictive and distorting effects, it states that no Member shall apply a measure that is prohibited by the provisions of GATT Article III (national treatment) or Article XI (quantitative restrictions). Examples of inconsistent measures, as spelled out in the Annex's Illustrative List, include local content or trade balancing requirements. The Agreement contains transitional arrangements allowing Members to maintain notified TRIMs for a limited time following the entry into force of the WTO (two years in the case of developed country Members, five years for developing country Members, and seven years for least-developed country Members). The Agreement also establishes a Committee on TRIMs to monitor the operation and implementation of these commitments. The agreement also provides for consideration, at a later date, of whether it should be complemented with provisions on investment and competition policy more broadly.

Agreement on Trade Related Aspects of Intellectual Property Rights, Including Trade in Counterfeit Goods (TRIPs)

10

Sybms (A) group 2 The agreement recognizes that widely varying standards in the protection and enforcement of intellectual property rights and the lack of a multilateral framework of principles, rules and disciplines dealing with international trade in counterfeit goods have been a growing source of tension in international economic relations. Rules and disciplines were needed to cope with these tensions. To that end, the agreement addresses the applicability of basic GATT principles and those of relevant international intellectual property agreements; the provision of adequate intellectual property rights; the provision of effective enforcement measures for those rights; multilateral dispute settlement; and transitional arrangements. Part I of the agreement sets out general provisions and basic principles, notably a national-treatment commitment under which the nationals of other parties must be given treatment no less favorable than that accorded to a partys own nationals with regard to the protection of intellectual property. It also contains a most-favoured-nation clause, a novelty in an international intellectual property agreement, under which any advantage a party gives to the nationals of another country must be extended immediately and unconditionally to the nationals of all other parties, even if such treatment is more favorable than that which it gives to its own nationals.

What are the intellectual properties? 1. Copyright 2. Trademarks 3. Geographical indications 4. Industrial designs 5. Patents 6. Layout designs 7. Trade secrets

The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) is an international treaty which sets down minimum standards for most forms of intellectual property regulation within all member countries of the WTO. Specifically, TRIPs deals with copyright and related rights (i.e. rights of performers, producers of sound recordings and broadcasting organizations); geographical indications (including appellations of origin); industrial designs; integrated circuit layout-designs; 11

Sybms (A) group 2 patents (including the protection of new varieties of plants); trademarks; and undisclosed or confidential information, (including trade secrets and test data). TRIPs also specify enforcement procedures, remedies, and dispute resolution procedures. The obligations under TRIPs apply equally to all member states; however developing countries are allowed a longer period in which to implement the applicable changes to their national laws. Although subsequent developments have expanded the original requirements of TRIPs, the agreement itself introduced intellectual property law into the international trading system for the first time, and remains the most comprehensive international agreement on intellectual property to date.

Indian Economic Overview

The economy of India is the fourth-largest in the world as measured by purchasing power parity (PPP), with a GDP of US $3.36 trillion. When measured in USD exchange-rate terms, it is the tenth largest in the world, with a GDP of US $691.87 billion (2004). India was the second fastest growing major economy in the world, with a GDP growth rate of 8.1% at the end of the first quarter of 20052006. However, India's huge population results in a relatively low per capita income of $3,100 at PPP. The country's economy is diverse and encompasses agriculture, handicrafts, industries and a multitude of services. Services are the major source of economic growth in India today, though two-thirds of the Indian workforce earns their livelihood directly or indirectly through agriculture. In recent times, India has also capitalized on its large number of highly educated people who are fluent in the English language to become a major exporter of software services, financial services and software engineers. India has adhered to a socialist-inspired approach for most of its independent history, with strict government control over private sector participation, foreign trade, and foreign direct investment. Since the early 1990s, India has gradually opened up its markets through economic reforms by reducing government controls on foreign trade and investment. Privatization of public-owned industries and opening up of certain sectors to private and foreign players has proceeded slowly amid political debate.

12

Sybms (A) group 2 The socio-economic problems India faces are a burgeoning population and lack of infrastructure, as well as growing inequality and unemployment. Poverty also remains a problem although it has seen a decrease of 10% since the 1980s.

13

Economy of India
Currency Sybms (A) Fiscal year Current fiscal year Current Five-Year Plan Central bank Trade organisations and treaties Union budget Inflation rate (monthly) 1 Indian Rupee (INR) () = 100 Paise = 0.02283 US dollar = group 2 0.01897 Euro April 1March 31 (20052006) 10th (20022007) Reserve Bank of India (RBI) SAFTA, ASEAN, WIPO and WTO $67.3 billion (revenue) $104 billion (expenditure) 3.53% (September) People Prime Minister Manmohan Singh (Chairman of the Planning Commission) Finance Minister Commerce Minister RBI Governor SEBI Chairman P. Chidambaram Kamal Nath Y. Venugopal Reddy M. Damodaran Indices Corruption Perceptions Index Index of Economic Freedom UN Human Development Index 88th (2005) 118th (mostly unfree) (2005) 127th (2005) Gross Domestic Product (GDP) GDP at PPP GDP at current exchange rates GDP real growth rate (at PPP) GDP growth rate GDP per capita GDP by sector $3,362,960 million(4th) $691,876.3 million(10th) 6.2% (43rd) (2003) 8.1% (March-May, 2005) $3,100 (155th) agriculture (21.8%), industry (26.1%), services (52.2%)

Demographics Population below poverty 25% (2002 est.)

14

Sybms (A)

group 2

India's economic history can be broadly compartmentalized into three eras, beginning with the pre-colonial period lasting up to the 17th century. The advent of British colonization of the Indian subcontinent started the colonial period in the 17th century, which ended with the Indian independence in 1947. The third period is the postindependence period after 1947. But lets put more light on the 3rd era that is post independence period:-

Post Independence:

Growth rate of India's real GDP per capita (Constant Prices: Chain series) (1950-2000). Data Source: Penn World tables. Indian economic policy after independence, influenced by the colonial experience (which was seen by Indian leaders as exploitative in nature), and by their exposure to Fabian socialism, became protectionist in nature, implementing a policy of import substitution, industrialisation, state intervention in labour and financial markets, a large public sector, overt regulation of business, and central planning. Jawaharlal Nehru, the first prime minister of India, along with the statistician Prasanta Chandra Mahalanobis, formulated and oversaw the economic policy of independent India. They expected favourable outcomes from this strategy since it involved both the public and private sectors and was based on direct and indirect state intervention instead of a Soviet-style central command system. The policy of concentrating simultaneously on capital and technology intensive heavy industry and subsidising hand based and low-skilled cottage industries was

15

Sybms (A) group 2 criticised by economist Milton Friedman, who thought it would not only waste both capital and labour, but also retard the development of smaller manufacturers. India's low average growth rate up to 1980 was derisively referred to as the Hindu rate of growth, because of the contrasting high growth rates in other Asian countries, especially the East Asian Tigers. The economic reforms that surged economic growth in India after 1980 can be attributed to two stages of reforms. The pro-business reform of 1980 initiated by Indira Gandhi and carried on by Rajiv Gandhi, eased restrictions on capacity expansion for incumbents, removed price controls and reduced corporate taxes. The economic liberalisation of 1991, initiated by then Indian prime minister P. V. Narasimha Rao and his finance minister Manmohan Singh in response to a macroeconomic crisis did away with the Licence Raj (investment, industrial and import licensing) and ended public sector monopoly in many sectors, thereby allowing automatic approval of foreign direct investment in many sectors. Since then, the overall direction of liberalisation has remained the same, irrespective of the ruling party at the centre, although no party has yet tried to take on powerful lobbies like the trade unions and farmers, or contentious issues like labour reforms and cutting down agricultural subsidies.

Government intervention
State planning After independence, India opted to have a centrally planned economy to ensure an effective and equitable allocation of national resources for the purpose of balanced economic development. After liberalisation, the emergence of a market economy with a fast growing private sector, planning has become indicative, rather than prescriptive in nature. The process of formulation and direction of the Five-Year Plans is carried out by the Planning Commission, headed by the Prime Minister of India as its chairperson. Mixed economy India is a mixed economy combining features of both capitalist market economies and socialist command economies. Thus, there is a regulated private sector (the regulations have decreased since liberalisation) and a public sector controlled almost entirely by the government. The public sector generally covers areas which are deemed too important or not profitable enough to leave to the instability of capitalistic markets. Thus such services as railways and postal system are carried out by the government. Since independence, various phases have seen nationalisation of such areas as banking, thus bringing them into the public sector, on one hand, and privatisation of some of the Public Sector Undertakings during the liberalisation period on the other. Global trade relations Until the liberalisation of 1991, India was largely and intentionally isolated from the world markets in order to protect its fledging economy and achieve self-reliance. Foreign trade was subject to import tariffs, export taxes and quantitative restrictions, while foreign direct investment was restricted by upper limit equity participation, requirements on technology transfer, export obligations and government approvals, which were needed 16

Sybms (A) group 2 for nearly 60% of new FDI in the industrial sector. These restrictions ensured that FDI averaged only around $200 million annually between 1985-1991 and a large percentage of the capital flows consisted of foreign aid, commercial borrowing and deposits of nonresident Indians. India's exports were stagnant for the first 15 years, due to the predominance of tea, jute and cotton manufactures, whose demand were generally inelastic. Imports in the same period consisted predominantly of machinery, equipment and raw materials due to the nascent industrialisation. Post-liberalisation, the value of India's international trade has become broader based and gone up to Rs. 63,080,109 crores in 2003-04 from Rs.1, 250 crores in 1950-51. India's major trading partners are China, United States, UAE, UK, Japan and the European Union. India is a founder-member of General Agreement on Tariffs and Trade (GATT) since 1947 and its successor, the World Trade Organization since its inception. While participating actively in its general council meetings, India has been crucial in voicing the concerns of the developing world. For instance, India has continued its opposition to the inclusion of such matters as labour and environment issues and other non-tariff barriers into the WTO policies.

Share of top five investing countries in FDI inflows. (1991-2004)

Rank

Country Mauritius United States Japan Netherlands United Kingdom

Inflows (Million USD) 8,898 4,389 1,891 1,847 1,692

Inflows (%) 34.49% 17.08% 7.33% 7.16% 6.56%

1 2 3 4 5

17

Sybms (A)

group 2

Balance of payments
India is a net importer, with its imports totaling $89.33 billion and exports totaling $69.18 billion. Since independence, India's balance of payments on current account has been negative for most of the years, owing to a larger share of imports vis--vis exports. Since liberalisation, incidentally precipitated by a balance of payment crisis, India's exports have been consistently rising, covering 80.3% of India's imports in 2002-03, up from 66.2% in 1990-91. Although India is still a net importer, since 1996-1997, India's overall balance of payments (current account balance + capital account balance) has been positive, largely on account of increased foreign direct investment and deposits from nonresident Indians, which until then, was occasionally positive on account of external assistance and commercial borrowings. As a result, India's foreign currency reserves stood 141 billion USD as on 2005-2006. India's reliance on external assistance and commercial borrowings has decreased since 1991-1992 and since 2002-2003, it has been repaying them. Declining interest rates and reduced borrowings have decreased India's debt service ratio to 14.1% in 2001-02 from 35.3% in 1990-91.

Impact of WTO Agreements on Indian Economy

Agreement: General Agreement on Tariff & Trade (GATT) Objective: Prohibits: Action of Governments/organizations that distort normal trade; discrimination between member nations and discrimination between domestic and lawfully imported foreign goods. Sets guidelines for implementation of agreements settlement of disputes. Impact on Indian policy/ laws India started reforms during GATT negotiation period (86-94). Import duties down from peak 300% to 50%. Already complies WTO binding on most tariff lines. Committed to create freer trade regime as per GATT agreement; already amended host of legislation, more to follow.

18

Sybms (A) group 2 Business Implications: Impact on all manufactures, traders and service providers. Import of all products will be accelerated by removal of quantitative restrictions. Led external liberalization speedily done. Only those business whether producing for domestic market or for foreign markets, who have international vision will survive and grow. Agreement: agreement on Import Licensing procedures Objective: To ensure transparency in issuance of import licenses unprescribes time limits for licenses to be issued. Impact on Indian policy/ laws: System progressively improved, though still far from being perfect. Delays & misuse of discretionary powers frequent, EDI being put in place Business Implications: Improved system within India and in other countries will have a positive fall out for small business who are usually at the restrictive policy environment. Agreement: Rules applicable on Exports Objective: Allows export products to be relieved of indirect taxes (e.g. excise), prohibits direct tax benefits (e.g. Income Tax wavers on export earnings) Also allows countries to levy duties on exports for controlling it, if situation so demands, but prohibits other restrictions (except in few cases). Impact on Indian policy/ laws: EXIM Policy provides schemes to neutralize incidence of indirect taxes. Government provides Income Tax wave on Export earnings. Business Implications: Exporting companies have right to demand from govt. such schemes that neutralize the incidence of indirect taxes on the export product. Agreement: Trade Related Investment Measures (TRIMS) Objectives Currently prohibits countries from imposing 5 types of investment conditions on investors Impact on Indian policy/ laws: Direct impact on Govt.s FOREX & industrial policies. Foreign investment permissions Business Implications: 19

Sybms (A) Currently 5 types of TRIM are prohibited out of 24 already identified. Agreement: Market Access Negotiations

group 2

Objectives By 1st Jan 2000, developed countries to cut tariffs by 40%, developing by 30% in five equal installments. Impact on Indian policy/ laws: Reduced duties on most tariff lines successively to comply with the agreement. Peak rate of duty is down from 300% to 50%; finished goods from 150% to 40% Business Implications: Massive increase in competition for domestic manufactures. Reduction in duties in developed countries not to have much impact these are already very low. Agreement: Agreement on agriculture Objectives: The subsidies on agriculture to be removed and converted in tariffs. 36% reduction on tariffs by developed, 24% by developing. Minimum market access in closed markets

Impact on Indian policy/ laws: No obligation for India to reduce subsidy given to farmers (AMS calculations reveal it is taxed than subsidized) Sets high tariffs 100% on primary products, 150% on processed food, 300% on edible oils No commitment regarding market access (being under Balance of Payment Cover, though disputed) Business Implications: Removal of distortion like high subsidies and QRs will expand market for India agricultural products. Agreement: Agreement on State Trading Enterprises Objectives Recommends STEs conduct their activities commercially. WTO to be informed of their activities Impact on Indian policy/ laws: Restructuring of STEs like MMTC, STC etc. commercialization of their activities Business Implications: 20

Sybms (A) Currently the agreement has limited scope. Agreement: General Agreement on Trade in Services (GATS)

group 2

Objectives: All services come under GATS (12 sectors) Requires countries to ensure MFN principle, Transparency, mutual recognition of qualifications etc. List liberalization commitments of countries Impact on Indian policy/ laws: EXIM policy (amended in 1999) incorporates services chapter for the first time; same status as to merchandise. Committed to open 10 sectors Partial liberalization in Banking sector, Telecom Sector (TRAI established in lines of SEBI), Insurance (IRA established) etc. Business Implications: Services constitute 40% of GDP, state monopolies in all the major sectors. Ecommerce and internet will fuel export of services further.

Agreements: Trade Related Intellectual Property Rights (TRIPS) Objectives Provides protection to IPRS as Patents, Copyrights, Trade marks, Ind. Designs, layout designs for ICs, Geographical Indications & Undisclosed information. National and MFN Treatment Developing countries to implement within 5 years, LDCs in 11 years. Impact on Indian policy/ laws: Immediate change required in Patents Act (1970), Trade & Merchandise Marks Act (1958), Designs Act (1911), Copyright Act (1957) etc. TRIPS agreement will also trigger changes in certain provisions of Contract Act(1872), Law of Torts, Companies Act(1961), IT Act (1961), MRTP Act (1969) etc. New acts to be enacted Business Implications: Impact will be on all businesses. The transfer of technology cases may increase however on commercial terms. Agreement: Patents Objectives: Patents to be given for process as well as products 21

Sybms (A) Life 20 year Compulsory licensing on case to basis

group 2

Impact on Indian policy/ laws: Patents Act amended (1999), now allows product patent in pharmacetucals, agrichemicals and food,. Patent life increased to years 20, microorganisms made patentalble New law for plant varities being drafted Business Implications: Immediate impact on pharma ,agrichemicals and food patented products cannot be manufactured without license Agreement: Copyrights Objectives Defination & scope broadened now includes software, sound recordings, films etc. Minimum protection 50 years Impact on Indian policy/ laws: The new amendment bill contains changes as per TRIPS Agreement Business Implications: Would benefit Indian software, music and film industry besides authors, publishing companies. Agreements: Trademarks Objectives: Covers trade as well as Service Marks Protection for 7 years Impact on Indian policy/ laws: New amendment bill to cover TRIPS promulgation Business Implications: Impact on counterfeit trade. Care should be exercised in choosing names of the companies or products. Agreement: Ind. Designs & lay out Designs Objectives: Covers new and original industrial designs and layout designs for ICs. Minimum protection for 10 years. Impact on Indian policy/ laws: 22

Sybms (A) group 2 New amendment bill contains changes as per agreement: includes service marks Business Implications: Implications for Indian designers as well as garment /textile industry using protected design & manufactures of ICs. Agreement: Undisclosed Information & Trade Secrets Objectives: Does not demand it to be intellectual property but stipulates their protection through contractual obligations Impact on Indian policy/ laws: Impact on Know-How agreements, contract act, etc. Business Implications: Employees, consultants, licensees, sub-contractors, etc. restrained from divulging confidential information

ANALYSIS
23

Sybms (A)

group 2

From our survey we learned that WTO helps to bring improvements in the Indian economy. WTO does not affect our environment. It provides with dispute settlement courts. WTO helps in technical co-operation and training. It helps us to build a stronger base of exports and manufacturing base in the country. WTO acts as a management consultant. It accesses international markets. WTO gives certain guidelines such as EURO 3 and EURO 4 which are environment specifications and has to be achieved by every country but India is still stuck up with EURO 1. WTO has set these certain standards. When the annual report is given by WTO then India will be rated bad and will be ranked 105th as our environment is still poor whereas USA ranks first. India is the biggest exporter of: 1. Gems and jewellery including diamondsCreated by faizan 2. Textiles and 3. Engineering. India spends a huge amount of budget on oil and petrol. The SSI units of India can establish their manufacturing base in US by RBIs permission and they will have to follow the rules of US. The representatives of India are a group of 30 members headed by Ministers of Commerce, External Affairs, Foreign Affairs Minister and it also consists of people from the corporate world. Therefore we can conclude by saying that WTO is a threat as well as a boon to Indian economy but has done wonders in sectors like service sectors, IT sectors, and pharmaceuticals but it has to still reach the heights like the country of Japan. India has to work on corruption, employment, training facilities, and others.

24