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Economics Of Global Trade & finance

Chapter-1 INTRODUCTION 1.1Defination Of WTO 1.2Summary 1.3 Evolution 1.4 Objective & Achievements

1.1 Definition of 'World Trade Organization - WTO' An international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably, and freely as possible. At its simplest:A global organization dealing with rules of trade between nations.

1.2 The Summary -The World Trade Organization The WTO was born in 1995 and the Secretariats is located in Geneva. Its an organization for liberalizing trade, in which for governments to negotiate trade agreements, settle trade disputes and establish a system of trade rules. The purpose: To do with trade negotiations and the enforcement of negotiated multilateral trade rules.

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WTO-Rounds

- In 1930: Sevaral countries participated in negotiations to create an International Trade Organization, because they wanted to boost after the Second World War. - In 1948: The General Agreement on Tariffs and Trade (GATT) was born - In 1960: A new rules on the development is created. - In 1970: A Plurilateral agreement is created. - In 1986: In the Uruguay Round brought about the biggest reform of the worlds trading system since GATT. This led to the creation of the WTO. - In 1996: Some countries were openly calling for a new round early in the next century. - In 2001: Incorporated into the Doha Development Agenda.

1.3 Evolution of the WTO

GATT AND ITS ROLE: The general agreement on tariffs and trade (GATT), the predecessor of WTO, was born in 1948 as result of the international desire to liberalize trade. The Bretton woods conference of 1944, which has recommended the IMF and World Bank had also recommended international trade organization (ITO), that later on (in 1948) became GATT. OBJECTIVES OF GATT:Raising standard of living. Ensuring full employment and a large and steadily growing volume of real income and effective demand. Developing full use of resource of the world. Expansion of production and international trade.

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The GATT was transformed into a world trade organization (WTO) with effect from January, 1995. Thus after about five decades, the original proposal of an international trade organization took shape as the WTO, which is more power full body than GATT, has an enlarged role than the GATT. India is one of the founder members of GATT and the WTO.

Predecessor of the WTO The GATT 47 The General Agreement on Tariffs and Trade (GATT) 1947 -the first major effort to establish international rules governing trade in goods. Though initially conceived as a provisional legal instrument, it endured for almost 50 years. It functioned without a formal organizational framework to oversee its implementation as the proposed International Trade Organization (ITO) never came into being and the ITO Charter (aka the Havana Charter) of which GATT was only to be a part, never came into effect. GATTs primary focus was the reciprocal reduction of tariffs which later expanded to other trade related areas. In the years leading up to the Uruguay Round, GATT expanded its competence through several rounds of trade negotiations which witnessed the formulation of complex legal instruments on specific aspects of trade, particularly disciplines on the use of non tariff barriers. THE URUGUAY ROUND:THE URUGUAY ROUND Uruguay round is the name by which the eighth round of the multilateral trade negotiations (MTNs) held under the auspices of the GATT is popularly known because it was launched in Punta del eate in Uruguay , a developing country, in September 1986 .
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The first six rounds of MTNs concentrated almost exclusively on reducing tariffs; while the seventh round moved on to tackle non tariffs barriers The UR sought to broaden the scope of MTNs far wider by including new area such as: Trade in services Trade related aspects of intellectual property (TRIPs) Trade related investment measure (TRIMs)

TRIMS:TRIMS Trade related investment measures (TRIMs) refers to certain conditions or restrictions imposed by a government in respect of foreign investment in the country. Trims were widely employed by developing countries. The agreement on TRIMs provides that no contracting party shall apply any TRIMs which are inconsistent with WTO articles. An illustrative list identifies the following TRIMs as inconsistent. Local content requirement. Trade balancing requirement. Trade and foreign exchange balancing requirements Domestic sales requirements TRIPS:TRIPS One of the most controversial outcomes of the UR is the agreement on trade related aspects of intellectual property rights including trade in counterfeit goods (TRIPs).TRIPs along with TRIMs and services were called the new issues negotiated in the Uruguay round .

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GATT V/S WTO


For several decades, the General Agreement on Tariffs and Trade was applied on a provisional basis. It was a multilateral agreement containing rules relating to trade in goods, and although it operated like a permanent agreement, it was without a permanent institutional framework, and was serviced by an ad hoc Secretariat. The WTO now provides a permanent institutional framework for the multilateral trading system, with its own Secretariat. In addition, the WTO not only covers trade in goods, as the GATT rules did, but also trade in services and trade-related aspects of intellectual property rights. Also, the dispute settlement mechanism has been considerably strengthened in the WTO.

3.1 Nature The GATT was a set of rules, with no institutional foundation, applied on a provisional basis. The WTO is a permanent institution with a permanent framework and its own secretariat.

3.2 Scope The GATT rules applied to trade in goods. The WTO Agreement covers trade in goods, trade in services and trade-related aspects of intellectual property rights.

3.3 Approach Whilst the GATT was a multilateral instrument, a series of new agreements were adopted during the Tokyo Round on a plurilateral-that is, selective-basis, causing a fragmentation of the multilateral trading system. The WTO has been adopted, and accepted by its Members, as a single undertaking: the agreements which constitute the WTO are all multilateral, and therefore involve commitments for the entire membership of the organization.

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3.4 Dispute settlement The WTO dispute settlement system has specific time limits and is therefore faster than the GATT system; it operates more automatically, thus ensuring less blockages than in the old GATT; and it has a permanent appellate body to review findings by dispute settlement panels. There are also more detailed rules on the process of the implementation of findings.

1.4 Objective and Achievements of WTO

The main overall motto of WTO is to promote and ensure the international trade in the member countries with the mantra of LIBERELISATION, PRIVATISATION AND GLOBALISATION. Beside this the WTO has following some key objectives Trade without discrimination To set and enforce rules for international trade, To provide forum for negotiating and monitoring the international trade i. ii. iii. To resolve trade disputes. To increase the transparency of decision-making processes. To cooperate with other major international economic institutions involved in global economic management. iv. To help developing countries benefit fully from the global trading system.

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Chapter-2 WORKING OF WTO

2.1 Function 2.2 Principle Of Trading System 2.3Organisation Structure of the WTO 2.4 WTO: Benefits For Business

2.1 WTOs functions

i.

Administers the WTO Agreements and facilitates their operation and implementation.

ii.

Provides a forum for trade negotiations among member states on matters covered by the Agreements and for further liberalisation of trade amongst members.

iii.

Responsible for the settlement of differences and disputes between members.

iv.

Responsible for periodic reviews of the trade policies of members Also provides technical assistance and training for developing countries.

2.2 Principle Of Trading System

The WTO establishes a framework for trade policies; it does not define or specify outcomes. That is, it is concerned with setting the rules of the trade
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policy games. Five principles are of particular importance in understanding both the pre-1994 GATT and the WTO: i. Non-discrimination- It has two major components: the most favored nation (MFN) rule, and the national treatment policy. Both are embedded in the main WTO rules on goods, services, and intellectual property, but their precise scope and nature differ across these areas. The MFN rule requires that a WTO member must apply the same conditions on all trade with other WTO members, i.e. a WTO member has to grant the most favorable conditions under which it allows trade in a certain product type to all other WTO members Grant someone a special favors and you have to do the same for all other WTO members. National treatment means that imported goods should be treated no less favorably than domestically produced goods (at least after the foreign goods have entered the market) and was introduced to tackle non-tariff barriers to trade (e.g. technical standards, security standards et al. discriminating against imported goods). ii. Reciprocity- It reflects both a desire to limit the scope of free-riding that may arise because of the MFN rule, and a desire to obtain better access to foreign markets. A related point is that for a nation to negotiate, it is necessary that the gain from doing so be greater than the gain available from unilateral liberalization; reciprocal concessions intend to ensure that such gains will materialize. iii. Binding and enforceable commitments-The tariff commitments made by WTO members in a multilateral trade negotiation and on accession are enumerated in a schedule (list) of concessions. These schedules establish "ceiling bindings": a country can change its bindings, but only after negotiating with its trading partners, which could mean compensating

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them for loss of trade. If satisfaction is not obtained, the complaining country may invoke the WTO dispute settlement procedures. iv. Transparency-The WTO members are required to publish their trade regulations, to maintain institutions allowing for the review of administrative decisions affecting trade, to respond to requests for information by other members, and to notify changes in trade policies to the WTO. These internal transparency requirements are supplemented and facilitated by periodic country-specific reports (trade policy reviews) through the Trade Policy Review Mechanism (TPRM). The WTO system tries also to improve predictability and stability, discouraging the use of quotas and other measures used to set limits on quantities of imports v. Safety valves-In specific circumstances, governments are able to restrict trade. The WTO's agreements permit members to take measures to protect not only the environment but also public health, animal health and plant health.

2.3 Organizational structure of the WTO

i.

Ministerial Conference- The apex body for decision making (meets every 2 years). Composition:-ministerial representatives.

ii.

General Council- performs the functions of the Conference between meetings and has specific duties assigned to it by the WTO agreements. Composition:- governmental representatives.

iii.

The General Council also meets as the Dispute Settlement Body and the Trade Policy Review Body.

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iv.

Councils for Trade in Goods (oversees GATT), Trade in Services (oversees GATS) and TRIPS which report to and assist the General Council.

v.

Committees on special subjects, Committees functioning under the Councils and Committees for the Plurilateral Agreements.

vi.

Membership- developed, developing, least developed countries and economies in transition.

vii.

Decision making is by consensus. If consensus is not possible decisions will be taken by a majority vote.

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STRUCTURE OF WTO

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2.4 WTO: Benefits for business


Creation of a stable, rule based, multilateral trading regime Market access translates into market opportunities The rule based system creates certain rights of access - Security of access Tariff bindings and disciplines on barriers to trade whether tariff or non tariff. It also provides non discriminatory treatment of products and services. - Stability of access The application of uniform rules in key areas of the trading process e.g. customs valuation, import licenses etc. - Rights against unfair trade practices for 1) Domestic industry 2) Export industry 3) Import industry

Participating in the process Why is it important? Improve market access through continuous lobbying through chambers of commerce, trade/product/service organizations.

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Overcome problem areas in international trading e.g. technical standards, high tariffs on processed goods. Expand or protect trading interests through support or opposition of new subject areas in trade negotiations. Preserve or defend markets through their governments use of the dispute resolution mechanism.

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Chapter-3 WTO and Issues Concerning India 3.1 Issues 3.2 Agreement On Agriculture 3.3 Annexure:-Food Security-An Important Non-Trade Concern

3.1 Issues
Background India one of members of General Agreement on Tariffs and Trade (GATT) since 1948. After Marrakesh Agreement, India joined WTO since inception in 1995. Aim to participate in WTO rule based system with greater stability, transparency and predictability in governance of international trade. Developing countries like India availed of greater trade opportunities and also challenged certain policies of developed countries (DCs) Developmental issues increasingly focused along with trade issues S&D treatment for developing and LDCs incorporated i. Areas of concern

In spite of special provisions for developing countries, certain imbalances and inequities experienced. A number of DCs not fulfilled some obligations for trade liberalization while developing countries asked to reduce import duties and provide greater market access. India has reduced tariffs to bring them to bound levels. Even lower for a large number of commodities as part of the reforms process. Now, India committed to reduce tariffs to bring in line with South East Asian countries by 2007. We are
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not in a position to reduce tariffs substantially to the extent suggested by developed countries since Customs duties important source of revenue for developing countries like India. The industrial sector faces several constraintssome protection warranted for specific industries. Non-agricultural tariffs gradually reduced but agricultural tariffs require greater caution due to following reasons. India and other developing countries have argued that agriculture is way of life and employs large proportion of workforce while contributing significantly to GDP. Exposure to volatile international market would affect not only domestic prices but also incomes of poor. Some DCs not fully implemented the required reduction of domestic support to farmers, export subsidies and tariffs. WTO permits non-distortionary subsidies. Experience shows these can be trade distorting and DCs have steadily increased such subsidies leading to excessive global production. Disadvantage to developing countries since such subsidies unaffordable. Get less competitive in world market. Technical barriers to trade and stringent restrictions on grounds of SPS regulations to be relaxed to prevent protectionist measures by DCs on this plea. Grant of patents on non-original innovations particularly linked to traditional medicines issue of concern. Mechanism proposed for disclosure of source of origin of biological material used along with consent of country of origin. Dissemination of knowledge and also patent rights for seed diversity important for developing countries. Under agreement on Trade in Services, developing countries have asked for relaxing restrictions on movement of natural persons. India has advantage in movement of highly skilled and experienced professionals. Developing countries had wanted unbundling of Singapore issues comprising MAI, competition policy, trade facilitation and transparency in
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Government procurement. Some issues of concern for developing countries incorporated in Doha Declaration.

ii.

Status of Negotiations

Negotiations at WTO for remaining issues and implementation of Doha Declaration. These issues brought forth by developing countries at Cancun but no consensus arrived at. Divergence of interests. No agreement on formula for tariff reductions for agricultural commodities as well as on Singapore issues. Proposed relaxations under S&D found inadequate by developing countries. Under Singapore issues, definition of investment and scope for investors obligations could not be made. Extent of competition policy and trade facilitation not arrived at. Formula for tariff reductions in non-agricultural products that would take care of tariff peaks, high tariffs and tariff escalations not agreed. Group could not arrive at consensus towards finalizing a declaration. There is continued attempt to work out a mutually acceptable solution and negotiations. A blended formula for tariff reductions in agriculture proposed by US and EC whereby a proportion of tariff lines would be subject to Uruguay Round formula tariff reductions and a proportion to be made duty free. However, G-20 not found this acceptable. Felt it would prevent proper delivery of Doha mandate for market access. Continued negotiations are on. iii. Tariff Structure in India

Given importance attached to reduction of tariffs, we look at tariff structure in India and alternative strategy for tariff negotiations. Tariff structure in India highly complex in early 1990s. With initiation of reforms, substantial reduction in customs duty rates. Simple average duty rates declined from 128% in 1991-

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92 to 22.4% as per interim budget for the year 2004-05. Weighted average duty rates declined from 72.5% to 18.2% during this period, as in table. While average duty rates have declined, still large number of tariff rates prevalent ranging from zero per cent to over 150% during 2004-05. Co-efficient of variation (CV) around average duty rates quite high. Commodity Groups in range 100% or higher in 2004-05 include coffee, tea, alcoholic beverages, essence and perfumes, sugar items, grapes and juices, motor cars, and motor cycles. In the 50-100% range, commodities are edible oils, wheat, rice and some other agricultural goods.

iv.

Tariff Structure and Imports

While undertaking tariff reductions, important to look at trade implications of plausible scenarios Simple econometric exercise undertaken to look at relation of imports and tariff structure at two digit HS level. Period taken is 1991-92 to 2001-02. Several functional forms attempted. Relative share of imports to GDP as functional tariffs seen as function of tariffs in linear and as a double log function. (M i /G co-efficient gave elasticity of imports to GDP ratio. where Mi is imports in US $ million and T i is tariff rate in the commodity groups respectively seen at the 2 digit level. Latter function yielded better fit and hence chosen for further analysis. *(T i ) (M i /GDP) = a * (T i ) DP) = a + Projections made accordingly, given growth rates of GDP and actual tariff rates. Results not very robust although R 2 and t values not insignificant for most commodity groups. Import projections compared to actual imports for the year information available i.e. for 2002-03 suggest that projected imports much higher than actual quantities imported. Sectoral analysis suggests that actual
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imports much lower for sectors like petroleum and products and other mineral oils and mineral products; cereal products, certain oilseeds; pharmaceutical products; fertilizers; printed books; railway locomotives & equipments; and project goods. This requires further analysis. Important identify reasons why this fit gave good projection in earlier study taking period 1991-92 to 1997-98 but not for this longer period up to 2001-02. Looking at import elasticity, found elasticity less than (-)1.0 for 13 commodity groups out of 99. This suggests that reduction in tariff would result in higher percentage increase in import ratio for these commodities. These items included animal/vegetable fat, sugars, cocoa, vegetable and fruit preparations, tobacco items, carpets and textile, floor coverings, apparels and clothing, human hair, feathers, ships and boats, furniture, beddings, toys, sports items Other sectors elasticity found to be between (-)1.0 and zero and even positive for few.

v.

Some Final Observations

Large tariff reductions of essential import items like cereals, dairy products, edible oils and other agricultural products with low elasticity would benefit the consumers but would be unacceptable on considerations of number of people dependent on these items for their livelihood and implications on domestic production. These sensitive items are also heavily subsidized by DCs. On the other hand, drastic tariff reductions on items with high import elasticity could lead to substantial surge in imports and affect the domestic economy adversely. It is imperative that tariff rates need to be rationalized and more importantly made more uniform and transparent. While undertaking reduction commitments, need to carefully identify sectors that could be subjected to greater tariff reductions than others.

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At the same time, items of export interest with high import content need separate treatment. Delicate balance of various considerations required to determine tariff reductions such that have minimal detrimental impact on economy.

3.2 WTO AGREEMENT ON AGRICULTURE

i)

Introduction

After over 7 years of negotiations the Uruguay Round multilateral trade negotiations were concluded on December 15, 1993 and were formally ratified in April 1994 at Marrakesh, Morrocco. The WTO Agreement on Agriculture was one of the many agreements which were negotiated during the Uruguay Round. The implementation of the Agreement on Agriculture started with effect from January 1, 1995. As per the provisions of the Agreement, the developed countries would complete their reduction commitments within 6 years, i.e., by the year 2000, whereas the commitments of the developing countries would be completed within 10 years, i.e., by the year 2004. The least developed countries are not required to make any reductions. The products, which are included within the purview of this agreement are what are normally considered as part of agriculture except that it excludes fishery and forestry products as well as rubber, jute, sisal, abaca and coir.

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ii)

Salient Features

The WTO Agreement on Agriculture contains provisions in 3 broad areas of agriculture and trade policy: market access, domestic support and export subsidies. a) Market Access This includes tariffication, tariff reduction and access opportunities. Tariffication means that all non-tariff barriers such as quotas, variable levies, minimum import prices, discretionary licensing, state trading measures, voluntary restraint agreements etc. need to be abolished and converted into an equivalent tariff. Ordinary tariffs including those resulting from their tariffication are to be reduced by an average of 36% with minimum rate of reduction of 15% for each tariff item over a 6 year period. Developing countries are required to reduce tariffs by 24% in 10 years. Developing countries as were maintaining Quantitative Restrictions due to balance of payment problems, were allowed to offer ceiling bindings instead of tariffication. Special safeguard provision allows the imposition of additional duties when there are either import surges above a particular level or particularly low import prices as compared to 1986-88 levels. It has also been stipulated that minimum access equal to 3% of domestic consumption in 1986-88 will have to be established for the year 1995 rising to 5% at end of the implementation period. b) Domestic support For domestic support policies, subject to reduction commitments, the total support given in 1986-88, measured by the total Aggregate Measurement of Support (AMS) should be reduced by 20% in developed countries (13.3% in developing countries). Reduction commitments refer to total levels of support
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and not to individual commodities. Policies which amount to domestic support both under the product specific and non-product specific categories at less than 5% of the value of production for developed countries and less than 10% for developing countries are also excluded from any reduction commitments. Polices which have no or at most minimal trade distorting effects on production are excluded from any reduction commitments The list of exempted green box policies includes such policies which provide services or benefits to agriculture or the rural community, public stock holding for food security purposes, domestic food aid and certain de-coupled payments to producers including direct payments to production limiting programmes, provided certain conditions are met. Special and Differential Treatment provisions are also available for developing country members. These include purchases for and sales from food security stocks at administered prices provided that the subsidy to producers is included in calculation of AMS. Developing countries are permitted untargeted subsidized food distribution to meet requirements of the urban and rural poor. Also excluded for developing countries are investment subsidies that are generally available to agriculture and agricultural input subsidies generally available to low income and resource poor farmers in these countries. c) Export Subsidies The Agreement contains provisions regarding member's commitment to reduce Export Subsidies. Developed countries are required to reduce their export subsidy expenditure by 36% and volume by 21% in 6 years, in equal instalment (from 1986-1990 levels). For developing countries the percentage cuts are 24% and 14% respectively in equal annual installment over 10 years. The Agreement also specifies that for products not subject to export subsidy reduction commitments, no such subsidies can be granted in the future.

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iii)

LIKELY ISSUES FOR NEGOTIATIONS AND POSSIBLE INDIAN STAND

a) Market Access: i) High agricultural tariffs and tariff peaks being applied by some WTO members are significant barriers to meaningful market access opportunities. We would have to very carefully articulate it as India will need to have a reasonable level of tariff protection for taking care of its food security and rural employment concerns. ii) Tariff escalation is another factor, which discourages developing countries from diversifying from primary commodity production to processed value added agricultural products for export purposes. iii) The operation of tariff rate quotas in a non-transparent and complex manner limits trade opportunities of new suppliers, particularly from developing countries. In this context, thus, guidelines on TRQ allocation and administration would be sought so as to enhance market access opportunities. It may be desirable to press for the elimination of tariff rate quota system itself. iv) Certain aspects of sanitary and phytosanitary measures which limit market access particularly for exports of developing countries would also figure prominently in the forthcoming negotiations. v) The special safeguard provisions, which are available to only a few Member countries, would also be coming up for review and India would press for its availability to all developing countries.

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b) Domestic Support: i) During the course of implementation of obligations/commitments, a number of member countries particularly from the developing world have experienced difficulty in calculating and notifying their aggregate measurement of support (AMS) on account of the following factors:a) Financial/resource constraints limit the capacity of most developing countries to provide support to their agricultural sector even upto the de minimis level. b) Lack of clarity in the agreement with regard to the treatment of negative AMS and "excessive inflation", reduces the flexibility provided to developing countries during the Uruguay Round to address their domestic policy concerns. Such implementation issues would require clarification during the current negotiations. ii) The 'Green Box' should be revisited for a further tightening of criteria as it currently incorporates various provisions for support, many of which are not non-trade distorting. Moreover, as it is currently designed, it is not of much assistance to developing countries as it does not reflect their support programmes. iii) The Blue Box measures which refer to direct payments to farmers under production limiting programmes which are currently exempt from AMS reduction commitments, should either be totally dispensed with or alternatively should be subject to reduction commitments. iv) Ways and means to incorporate increased flexibility in the level and use of de minims support would also be discussed.

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c) Export Subsidies: i) Export subsidies are universally acknowledged to be the single most trade distortive impact in agriculture because of their potential of displacing developing country exports. There would be a strong demand for a complete outlawing of export subsidies. India would also press for it. However, as long as the export subsidies are permitted to be given by any country above the de minims limit provided under the WTO's Subsidies and Countervailing Measures agreement, India should also have right to give export subsidies upto an appropriate level. ii) Establishment of disciplines in the field of export credits, guarantees and deferred payments which have a negative effect on prices and competition in the world agricultural market would be insisted and India would like it to be also included under the disciplines of Export Subsidies. iii) On account of ambiguity in the existing language of the Agreement on Agriculture, certain countries are resorting to 'rolling over of export subsidies. This practice would need to be suitably addressed as it amounts to negation of reduction commitments.

iv)

Non Trade Concerns:

The Non Trade Concerns (NTCs) including food security and the need to protect the environment, alluded to in Article 20 of the Agreement on Agriculture would be taken into account during negotiations. Food Security for India is not only availability of sufficient food but also adequate means to procure the same. Eminent agricultural economists and scientists like Dr. Swaminathan also believe that food security is economic access to food. Accordingly this has ramifications for employment and
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livelihood. For developing countries like India which are still grappling with the twin problems of poverty and unemployment, the production of food and economic access to it are primary objectives. As opposed to this certain developed countries are advocating multifunctional character of agriculture which essentially signifies that agriculture has functions other then providing food and fiber and also includes the protection of environment and maintaining the economic viability or rural areas. Viewed against the needs of developing countries concerns about the maintenance of rural landscape appear to be hollow. Any attempts to try and equate the two different scenarios and continue heavy subsidization of agriculture would be resisted. The concept of multi ficationality needs to the examined from the perspective of developing countries. Here, we would like to highlight the fact that the non-trade concerns of developed countries and those of developing countries differ not only in content but in priority also. For countries like India, multi functionality of agriculture is best main fested in its ramifications in areas such as food security, employment and the elimination of poverty in rural areas. Moreover, these issues are neither emotive nor undefined but are practical and harsh realities which decision makers have to confront when addressing issues of agricultural policies. The need to provide employment opportunities in pre-dominantly rural agrarian areas is one of the main NTCs which India would like to see addressed. v) Biotechnology: Biotechnological inventions are increasingly affecting agricultural production and trade. New genetically engineered varieties of crops have increased productivity and are more pest resistant. This has important ramification for increasing productivity which is of central concern to almost all developing countries. To this extent, we would support carefully controlled use of

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biotechnology in agriculture. At the same time, there are environmental concerns relating to biotechnology. It is feared that Genetically Modified Organisms (GMOs), not having been fully tested for their effect on human health or the environment, should be treated as a class apart. There are also fears that new technologies like the so called 'terminator gene' could imbalance the ecosystem if it spreads beyond controlled production areas. A concrete country position needs to be evolved in this regard. v) Strengthening of the Special & Differential Treatment:

Special & Differential Treatment accorded to developing countries under the Uruguay Round would be another area of importance to developing countries. These special provisions were designed to take into account the constraints faced by many developing countries in taking advantage of trading opportunities due to structural problems like inadequate infrastructure, lack of resources etc. The existing imbalance and problems of implementation of the agreement would be a high priority item in the next round.

3.3 ANNEXURE
FOOD SECURITY-AN IMPORTANT NON-TRADE CONCERN

1. The objective of the Agreement on Agriculture (AOA) was to bring about discipline in one of the most distorted sectors of trade, by, inter alia, disciplining the unrestricted use of production and export subsidies, as well as by reducing import barriers, including non-tariff barriers. Thus, the AOA sought to limit the extent of support granted by individual countries and attempted to ensure that countries adopt a more liberal policy as far as agricultural trade was concerned.
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At the same time, as indicated in the Preamble, the AOA recognized non-trade concerns (NTCs) of countries. These NTCs amongst others include food security and the need to protect the environment. 2. However, this fine balance between trade and non-trade concerns, as mandated in the Preamble, does not appear to have been fully reflected in the provisions of the Agreement and consequently in its implementation. The major thrust of the Agreement appears to be based on the hypothesis that liberalisation is the panacea of all ills in the agricultural sector. While this may be tenable from a conventional economic view point, such a reasoning does not take into account the problems faced by a number of developing countries, which because of certain underlying constraints, have to necessarily take into account non trade concerns such as food security, while formulating their domestic policies. This is particularly true of developing countries, where a significant percentage of the population is not only dependent on the agricultural sector for its livelihood, but is also surviving just around the poverty line. In such countries a purely market oriented approach may not be appropriate. Instead, for some countries it may be necessary to adopt, what we would like to term a market plus approach, in which non trade concerns such as the maintenance of livelihood of the agrarian peasantry and the production of sufficient food to meet domestic needs are taken into consideration. We, therefore, feel that at this juncture it is important to closely examine this aspect of the AOA, so as to ensure that the reform process in the agriculture sector takes into consideration the food security and other non trade concerns of countries like India. 3. Ensuring food security that is the access of the population to sufficient food to meet its nutritional requirements is a basic objective of governmental policies in agrarian developing countries. Hence, food security issues cover not only issues related to the availability and stability of food supplies but also to issues of access to this supply i.e. related to the resources that may be needed to
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procure the required quantity of food. It is therefore clear that issues related to food security are sensitive issues and hence countries in which a large percentage of population is dependent on this sector, would like to have a certain degree of autonomy and flexibility in determining their domestic agricultural policies. These policies would naturally be geared towards improving productivity, enhancing income levels, reducing vulnerability to market fluctuations, ensuring stability of prices etc. Inter alia, this would be achieved through reliability of production and supplies, so that seasonal variations in access to food are minimal. It is for this reason that national food production policies have been central to domestic agricultural policies not just for developing countries, but also for the developed countries who are net importers of food, as has been brought out in the papers submitted by Norway and Japan. It is, therefore, clear that in this sense food security is a legitimate national concern and has been so recognized by the FAO (Food & Agriculture Organization). In fact, during the World Food Summit of 1996 "the importance for food security of sustainable agriculture, fisheries, forestry and rural development in low and high potential areas" was explicitly recognized. This recognition of the importance of food security even for low potential areas clearly underlines a developmental perspective which goes beyond mere trade concerns, and is, therefore, germane to the outlook and interest of developing countries. 4. Let us, therefore, examine both the external and internal dimensions of this problem particularly from the perspective of developing countries. 5. Countries which argue and support rapid liberalisation of the agricultural sector contend that global food sufficiency would in a way ensure food security since countries could then produce what they are most competent and efficient in, while importing the rest of their food requirements. Such an argument presupposes that all countries would at all times have sufficient foreign
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exchange to procure their food requirements internationally. This assumption is obviously not true since not all developing countries would be in a position to import food grains, even if these were available at competitive prices, due to their limited foreign exchange reserves. Moreover, these countries often face cross sectoral pressures on their available funds, which further limits their capacity to procure internationally. This problem is further compounded in case there are unforeseen variations in the international prices. 6. Similarly, there are various internal constraints which if not appropriately addressed, would severely limit the capacity of developing countries to increase domestic production, to at least a certain minimum percentage of their requirement. Firstly, holdings are small and the majority of farmers belong to the small and marginal category. This limits any attempts to introduce mechanized farming and also constrains the adoption of new technologies unless accompanied by large scale extension programmes. Consequently, the productivity is low and the total production varies substantially, since a large percentage of the agricultural sector continues to be at the mercy of the vagaries of nature. Further, only a small percentage of what is produced finds itself in the market, the rest being used by the small and marginal farmers for sustenance or for simple barter. At the same time, there is increasing pressure on land from non agricultural users, both because of the rising level of urbanization as also because of the geographic spread of industries. If this limitation on the availability of agricultural land is viewed in the context of the growth in population, which most of the developing countries invariably face, it would be clear that the only way in which agricultural growth can be sustained and the objective of food security attained, would be through increased governmental support in the use of inputs, particularly in terms of irrigation, electricity, fertilizers, pesticides, technical know-how, high yielding varieties, infrastructural development, market support etc.
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7. It is, therefore, clear that there are significant external and internal ramifications of attaining the objectives of food security. While it may not be possible to immediately ensure that developing countries are able to produce at least a certain minimum percentage of their annual food requirement, this is a goal which has to be pursued, particularly in light of the constraints that developing countries would face in adopting an external solution to this problem. Recognizing the percentage of small farmers in the agricultural sector of most developing countries, it is clear that a major part of the financial burden of increased inputs would have to be met through governmental subsidies. It would need to be recognized that the small farmer would not be able to meet his principal responsibility without adequate support from government. Public intervention would therefore be necessary in order to achieve these national goals. 8. Finally, it needs to be said that agricultural self reliance forms a vital underpinning for the growth of the GDP of agrarian developing economies since good agricultural production provides purchasing power to a large majority of a population, which in turn spurts industrial growth. Self-sufficiency in food production has therefore a specific developmental perspective as opposed to a purely commercial perspective. Hence, it is our view that developing countries need to be provided the requisite flexibility within the AOA to pursue their legitimate non trade concerns. More specifically, developing countries need to be allowed to provide domestic support in the agricultural sector to meet the challenges of food security and to be able to preserve the viability of rural employment, as different from the trade distortive support and subsidies presently permitted by the Agreement. It is therefore important that a differentiation is made between such domestic support measures which are presently being used to carve out a niche in the international

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trade and between those measures which would allow developing countries to alleviate rural poverty. 9. India is anxious that the AIE process must therefore examine the manner in which developing countries can be provided additional flexibilities by appropriate adjustments to the provisions of the AOA, in order to enable them to pursue their legitimate non- trade concerns. India believes that a focussed discussion on the subject will contribute to increased awareness to the non-trade concerns of countries like India, such as food security and rural employment, and thus enable the WTO Membership to deal with the subject of continuation of the reform process in the agricultural sector with sensitivity to these concerns.

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Chapter-4

CONCLUSION
4.1 Advantages and Disadvantages of WTO 4.2 Role of India in WTO

4.3 Conclusion 4.4 Bibliography


4.1 Advantages and Disadvantages of WTO

Advantages:-

- The WTO is a forum which discusses the differences on trade between members. - Is Transparency and predictability. - Establish a system of trade rules between countries. - The WTO makes more efficient the specialization of a country with a product, getting better advantages. - Help to balance the trade between countries. - Encourages the stability of the negotiations and helps the development of a country. - Try to balance opportunities for all countries. - Dont allow that developed countries trample on less develop countries.

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Disadvantages:-

- The WTO is fundamentally Undemocratic. - Industrialized countries benefit more than poor countries. - Try to monopolize all basic services. - Developed countries have an advantage over developing countries. - Don't allow the participation of developing countries.

Although there are several advantages of the WTO and although one of the principles is that no discrimination, it is disturbing to see that if there are fold over the favoritism to developed countries than developing.

4.2 Role of India in WTO :

Role of India in WTO India is a founder member of the General Agreement on Tariffs and Trade (GATT) 1947 and its successor, the World Trade Organization (WTO), which came into effect on 1.1.95 after the conclusion of the Uruguay Round (UR) of Multilateral Trade Negotiations. India's participation in an increasingly rule based system in the governance of international trade is to ensure more stability and predictability, which ultimately would lead to more trade and prosperity for itself and the 149 other nations which now comprise the WTO. India also automatically avails of MFN and national treatment for its exports to all WTO members. India has aligned itself with WTO in the goal to reduce the trade barriers and tariffs to zero by 2025.

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4.3 Conclusion

. It will be just to highlight one issue each where the RICH countries and poor countries need to be honest. Let us be honest to understand that dominance of politics over economics and fair play will never render justice. With malice toward none ,charity for all with firmness in right as god has given us to see the right, let us strive on to achieve adjust and prosperous nation among all other nation

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4.4 BIBLOGRAPHY

The WTO Website: www.wto.org Some related websites of interest OECD www.oecd.org ITC www.intracen.org World Bank www.worldbank.org

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