A PROJECT REPORT

ON
PERFORMANCE APPRAISAL IN PEPSICO
Submitted to University of Mumbai in
Partial fulfilment
Of the requirement of the Degree of
M.COM (BUSINESS MANAGEMENT) PART 1.
Under guidance of
PROF. DR.VINAYAK RAJE
SUBJECT
HUMAN RESOURCE MANAGEMENT
VPM S
K.G Joshi College of Arts N.G Bedekar College of Commerce
Thane (W)
Academic Year: 2014-15
BY-
ROHAN SUNIL PATIL
Roll No.57






Vidya Prasark Mandal, Thane

K.G.JOSHI BEDEKAR COLLEGE OF ARTS & N.G.BEDEKAR COLLEGE OF
COMMERCE
CERTIFICATE
OF
PROJECT WORK
This is to certify that MR./MS.ROHAN SUNIL PATIL of M.COM PART-I (BUSINESS MANAGEMENT)
Semester I Roll No.15 has undertaken & completed the project work title PERFORMANCE APPRAISAL IN
PEPSICO during the academic year 2014-15 under the guidance of PROF. MR. VINAYAK RAJE to this
college in fulfillment of the curriculum of MASTER OF COMMERCE PART-I (BANKING & FINANCE)
UNIVERSITY OF MUMBAI.
This is a bonafied project work & the information presented is true & original to the best of our
knowledge and belief




PROJECT GUIDE EXTERNAL EXAMINOR
DECLARATION

I am ROHAN SUNIL PATIL studying in MCOM Part-1 hereby declare that I have
done a project on reference to PERFORMANCE APPRAISAL IN PEPSICO LTD As required by
the university rules, I state that the work presented in this thesis is original in
nature and to the best my knowledge, has not been submitted so far to any other
university.
Whenever references have been made to the work of others, it is clearly indicated
in the sources of information in references.






Student
(ROHAN SUNIL PATIL)


Place: Thane
Date:
ACKNOWLEDGEMENT

It gives me great pleasure to declare that my project on PERFORMANCE APPRAISAL PEPSICO LTD
have been prepared purely from the point of view of students requirements.
This project covers all the information pertaining to PERFORMANCE APPRAISAL . I had tried
my best to write project in simple and lucid manner. I have tried to avoid unnecessary
discussions and details. At the same time it provides all the necessary information. I feel that
it would be of immense help to the students as well as all others referring in updating their
knowledge.
I am indebted to our principal Dr. Mrs. Shakuntala A. Singh Madam for giving us such an
awesome opportunity. I am also thankful to our coordinator Mr. D.M. Murdeshwar Sir and
also librarian and my colleagues for their valuable support, co-operation and encouragement
in completing my project.
Special thanks to Prof. Mr. VINAYAK RAJE my internal guide for this project for giving me
expert guidance, full support and encouragement in completing my project successfully.
I take this opportunity to thanks my parents for giving guidance and for their patience and
understanding me while I am busy with my project work.
Lastly I am thankful to God for giving me strength, spirit and also his blessings for
completing my project successfully.









WORLD TRADE ORGANISATION
The World Trade Organization (WTO) is an organization that intends to supervise
and liberalize international trade. The organization officially commenced on 1
January 1995 under the Marrakech Agreement, replacing the General Agreement
on Tariffs and Trade (GATT), which commenced in 1948. The organization deals
with regulation of trade between participating countries by providing a framework
for negotiating and formalizing trade agreements and a dispute resolution process
aimed at enforcing participant's adherence to WTO agreements, which are signed
by representatives of member governments and ratified by their parliaments. Most
of the issues that the WTO focuses on derive from previous trade negotiations,
especially from the Uruguay Round (19861994).
The organization is attempting to complete negotiations on the Doha Development
Round, which was launched in 2001 with an explicit focus on addressing the needs
of developing countries. As of June 2012, the future of the Doha Round remained
uncertain: the work programme lists 21 subjects in which the original deadline of 1
January 2005 was missed, and the round is still incomplete. The conflict between
free trade on industrial goods and services but retention of protectionism on farm
subsidies to domestic agricultural sector (requested by developed countries) and
the substantiation of the international liberalization of fair trade on agricultural
products (requested by developing countries) remain the major obstacles. These
points of contention have hindered any progress to launch new WTO negotiations
beyond the Doha Development Round. As a result of this impasse, there has been
an increasing number of bilateral free trade agreements signed. As of July 2012,
there were various negotiation groups in the WTO system for the current
agricultural trade negotiation which is in the condition of stalemate.
WTO's current Director-General is Roberto Azevdo, who leads a staff of over 600
people in Geneva, Switzerland. A trade facilitation agreement known as the Bali
Package was reached by all members on 7 December 2013, the first comprehensive
agreement in the organization's history.



History


The economists Harry White (left) and John Maynard Keynes at theBretton Woods
Conference. Both had been strong advocates of a central-controlled international
trade environment and recommended the establishment of three institutions:
theIMF (for fiscal and monetary issues); the World Bank (for financial and
structural issues); and the ITO (for international economic cooperation).
The WTO's predecessor, the General Agreement on Tariffs and Trade (GATT),
was established after World War II in the wake of other new multilateral
institutions dedicated to international economic cooperation notably the Bretton
Woods institutions known as the World Bankand the International Monetary Fund.
A comparable international institution for trade, named the International Trade
Organization was successfully negotiated. The ITO was to be a United Nations
specialized agency and would address not only trade barriers but other issues
indirectly related to trade, including employment, investment, restrictive business
practices, and commodity agreements. But the ITO treaty was not approved by the
U.S. and a few other signatories and never went into effect.
In the absence of an international organization for trade, the GATT would over the
years "transform itself" into a de facto international organization.
The GATT was the only multilateral instrument governing international trade from
1946 until the WTO was established on 1 January 1995. Despite attempts in the
mid-1950s and 1960s to create some form of institutional mechanism for
international trade, the GATT continued to operate for almost
half a century as a semi-institutionalized multilateral treaty regime on a provisional
basis.
From Geneva to Tokyo
Seven rounds of negotiations occurred under GATT. The first real GATT trade
rounds concentrated on further reducing tariffs. Then, the Kennedy Round in the
mid-sixties brought about a GATT anti-dumping Agreement and a section on
development. The Tokyo Round during the seventies was the first major attempt to
tackle trade barriers that do not take the form of tariffs, and to improve the system,
adopting a series of agreements on non-tariff barriers, which in some cases
interpreted existing GATT rules, and in others broke entirely new ground. Because
these plurilateral agreements were not accepted by the full GATT membership,
they were often informally called "codes". Several of these codes were amended in
the Uruguay Round, and turned into multilateral commitments accepted by all
WTO members. Only four remained plurilateral (those on government
procurement, bovine meat, civil aircraft and dairy products), but in 1997 WTO
members agreed to terminate the bovine meat and dairy agreements, leaving only
two.


Uruguay Round

During the Doha Round, the US government blamed Brazil and India for being
inflexible and the EU for impeding agricultural imports. The then-President of
Brazil, Luiz Incio Lula da Silva (above right), responded to the criticisms by
arguing that progress would only be achieved if the richest countries (especially
the US and countries in the EU) made deeper cuts in agricultural subsidies and
further opened their markets for agricultural goods.
Well before GATT's 40th anniversary, its members concluded that the GATT
system was straining to adapt to a new globalizing world economy. In response to
the problems identified in the 1982 Ministerial Declaration (structural deficiencies,
spill-over impacts of certain countries' policies on world trade GATT could not
manage etc.), the eighth GATT round known as the Uruguay Round was
launched in September 1986, in Punta del Este, Uruguay.
It was the biggest negotiating mandate on trade ever agreed: the talks were going
to extend the trading system into several new areas, notably trade in services and
intellectual property, and to reform trade in the sensitive sectors of agriculture and
textiles; all the original GATT articles were up for review. The Final Act
concluding the Uruguay Round and officially establishing the WTO regime was
signed 15 April 1994, during the ministerial meeting at Marrakesh, Morocco, and
hence is known as the Marrakesh Agreement.
The GATT still exists as the WTO's umbrella treaty for trade in goods, updated as
a result of the Uruguay Round negotiations (a distinction is made between GATT
1994, the updated parts of GATT, and GATT 1947, the original agreement which
is still the heart of GATT 1994). GATT 1994 is not however the only legally
binding agreement included via the Final Act at Marrakesh; a long list of about 60
agreements, annexes, decisions and understandings was adopted. The agreements
fall into a structure with six main parts:
The Agreement Establishing the WTO
Goods and investment the Multilateral Agreements on Trade in Goods
including the GATT 1994 and the Trade Related Investment
Measures (TRIMS)
Services the General Agreement on Trade in Services
Intellectual property the Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS)
Dispute settlement (DSU)
Reviews of governments' trade policies (TPRM)
In terms of the WTO's principle relating to tariff "ceiling-binding" (No. 3), the
Uruguay Round has been successful in increasing binding commitments by both
developed and developing countries, as may be seen in the percentages of tariffs
bound before and after the 19861994 talks.



Gains from the Uruguay Round
At the time of signing the Marrakesh agreement, the following kinds of gains were
to benefit the signatories:
1. Static gains due to a reallocation of resources to areas of comparative
advantage (that is, those that are relatively better at producing particular goods).
2. Efficiency gains that would result from reduced slack in economies that have
been highly protected.
3. Dynamic gains due to improved technical efficiency or lower input use per unit
of output and technological change.
The first was supposed to result from a shift in international production patterns.
The second and third were supposed to emerge from a stronger competition within
and between national economies.
This document is popularly known as the Dunkel Draft. The draft comprised two
parts: one, results of agreed negotiations, and two, compromise proposals in areas
of disagreement. The GATT headquarters at Geneva had fixed December 15, 1993
as the deadline to resolve the deadlock. However, the developing countries
opposed the proposals.
The Ministerial Declaration of September 1986 that formally launched the
Uruguay Round of negotiations said - Contracting Parties agree that there is an
urgent need to bring more discipline and predictability to world agricultural trade
by correcting and preventing restrictions and distortions including those related to
structural surpluses so as to reduce the uncertainty, imbalance and instability in
world agricultural markets. Negotiations shall aim to achieve greater liberalization
of trade in agriculture and bring all measures affecting import access and export
competition under strengthened and more operationally effective GATT rules and

disciplines, taking into account the general principles governing the negotiations,
by:
(i) improving market access through, inter alia, the reduction of import barriers;
(ii) improving the competitive environment by increasing discipline on the use of
all direct and indirect subsidies and other measures affecting directly or indirectly
agricultural trade, including the phased reduction of their negative effects and
dealing with their causes;
(iii) minimizing the adverse effects that sanitary and phytosanitary regulations and
barriers can have on trade in agriculture, taking into account relevant international
agreements.
The projections of such gains in terms of increased value of world trade ranged
from $180 billion to $ 230 billion over ten years, around two-thirds of which was
supposed to accrue to developed countries and one-third to developing countries.
developing countries into signing the entire Final Act, even though many specific
agreements such as those relating to intellectual property and investment measures
were seen as detrimental to their interests, and some aspects of the other
agreements were also problematic for them. Even the Indian government presented
a case in favour of signing the Marrakesh Agreement in terms of the benefits that
would come from increased exports of agricultural and textile products in
particular as well as more inflows of investment because of greater international
trade in general.
However, most of these expectations have not been realized so far. It turns out that
many of the projections of increased trade flows were far too optimistic. In fact,
world trade growth has been slower in the second half of the 1990s, after the
signing of the Uruguay Round Agreement, than in the first half of the 1990s. And
many developing countries feel that they have even greater problems of market
access and protectionist barriers to their exports than they had before. This is why
implementation issues have become so important among developing countries in
the WTO.


The World Trade Organization (WTO) on January 1, 1995, succeeded the General
Agreement on Tariff and Trade (GATT). It was a watershed event in the history of
global trade. At present, the WTO has 146 member countries including India. The
WTO deals with the tariffs and quotas between the member countries and works to
remove any anomalies. Agriculture was also included in the WTO (Agreement on
Agriculture)14. India, being one of the signatories of WTO and after losing its
appeal in the WTO, liberalized trade on agro-commodities as per WTO norms.
Article 20 of the AOA15 ensured that these reforms are an ongoing process. Re-
negotiations in this regard take stock of the experience of the past years and
explore the potential for further commitments to the reform process. The Uruguay
Round negotiations involved discussions on new areas such as agriculture, textiles,
garments, trade in services, trade-related intellectual property rights (TRIPS), and
trade-related investment measures (TRIMS), in three distinct thematic groups. The
first was reducing specific trade barriers and improving market access for partner
countries. Areas under this were tariffs, non-tariff measures, tropical products,
natural resource-based products, textiles and clothing, and agriculture. A second
theme was one of strengthening GATT disciplines and improving the rules under
which GATT operated. Areas under this theme were GATT articles, safeguards,
MTN agreements and arrangements, subsidies and countervailing measures,
dispute settlement and functioning of the GATT system (FOGS). The third and
final theme covered new areas including TRIPS, TRIMS, and services.
countries.
Benefits for India
Reduction in export subsidies on farm products in developed countries will make
Indian agricultural exports more competitive.
Exports will increase to $ 1.5 billion by 2005. Fruits, oil seeds, cotton, and milk
products will be benefited due to subsidy reductions.
There will be higher price realizations, which will help in improving the standard
of living of farmers.
Countries will be forced to produce only what they are best at. This will mean
increased efficiency and higher productivity throughout India.

Environmental programmes are exempt from cuts in subsidies so that the
environment protection programmes continue unabated.
India does not have to cut subsidies or lower tariffs as much as developed
countries and it has been given enough time to complete its obligations.
Distortions in the market place would reduce, which would benefit the end
consumer.

Market Access
Market access was sought to be increased in a number of ways. First, the AoA
made tarrification mandatory. That is, countries had to dismantle, in a phased
manner, any non-tariff barriers such as a ban on imports of particular agricultural
products or ceilings set on the quantities of individual products that could be
imported (otherwise termed quantitative restrictions or QRs), and only use import
tariffs or duties as means of protection.
Second, the agreement required that the developed countries reduce their tariff
levels by 36 percent over a six-year period from the start of implementation, with a
commitment to reduce tariffs on each tariff line by a minimum of 10 percent.
Developing countries were required to reduce tariffs by 24 percent over a 4-year
period, and ensure a tariff reduction of 10 percent in each tariff line17. Third, all
countries had to specify ceilings at which their tariffs were bound, or the maximum
level to which tariffs would be raised under any circumstances. Finally, there was a
minimum level of actual access of imported commodities to domestic markets that
each country had to ensure. This was set at 3 percent of average domestic
consumption during the 1986-88 reference years, to be ensured by 1995 and 5
percent of the same by 2000 in the case of the developed countries and 2004 in the
case of the developing countries. If countries did not reflect this minimum access,
they were expected to use the mechanism of tariff-rate quotas, or lower tariffs
for imports of a magnitude required to ensure the realization of minimum access
requirements.
Despite these detailed specifications, the AoA provided countries with an escape
clause in the event of a large and disruptive inflow of imports. Under the Special
Safeguards provisions, countries that had tarrified their QRs, if faced, in the case of
It needs to be noted that given the level of such tariffs at the time of
implementation of the tariff reduction commitment, the actual increase in access
may not be substantial. The least developed countries were provided a concession,
as they were not required to reduce their tariff levels tarrified products, with an
import surge or by a fall in import prices to levels that were low relative to those
that prevailed during the 1986-88 reference period, were allowed to impose higher
tariffs and other restrictions to restrain imports.

Domestic Support
The AoA defined the principles on the basis of which the Aggregate Measure of
Support (AMS) provided by the government of a country to its agricultural sector
was to be computed. The aggregate measure of support was the sum total of the
AoA product-specific and non-product-specific support provided by national and
sub-national or federal governments in individual countries. The original Dunkel
Draft of the Uruguay Round Agreement provided for commitments to reduce
domestic support on a product-by-product basis. However, the agreement between
the G-2, the US, and EC at meetings that took place at Blair House in Washington
in November 1992 (known as the Blair House Accord), which paved the way for
the successful conclusion of the negotiations on the Uruguay Round, replaced
these product-wise commitments to a commitment to reduce overall support to
agriculture.
Not all of these measures of support were considered violative of free trade
principles and therefore eligible for inclusion in calculations of the AMS. In fact,
the Agreement on Agriculture categorized the different possible measures of
support into three categories. The first, termed the amber box measures, were
seen as those policies, which do have a substantial impact on the patterns and
flow of trade. All such domestic support measures were to be taken into account
while computing the AMS level, and countries had to commit themselves to reduce
in the aftermath of the agreement. The second termed the green-box measures
were those that were seen as having no major effect on production and trade and
were considered completely non-violative of the AoA and not subjected to any
reduction commitments.
They included a variety of direct payments to farmers, which were seen as
augmenting their incomes without influencing production decisions. Some of them
were:
Producer retirement programmes,
Resource retirement programmes,
Environmental protection programmes,
Regional assistance programmes,
Public stockholding for food security reasons,
Agricultural input subsidies for low-income, resource-poor families,
Domestic food aid,
Certain types of investment aid,
General services that provide among other things:
Support in the form of subsidies comes by way of (i) price support, or measures
such as government procurement, backed by export or import controls using tariffs
and QRs and (ii) budgetary support, in the form of explicit budgetary outlays on
subsidies on farm inputs and credit, agricultural research and extension, deficiency
payments, insurance and disaster payments, diversion payments for temporary
retirement of resources, and compensation in lieu of reductions in market price
support or implicit budgetary outlay in the form of revenues foregone as a measure
of support to agriculture.
The third, termed the blue-box19 measures, were additional exemptions arrived
at through the Blair House accord and were introduced to allow the US and the EC
to continue to support agriculture, while meeting AMS provisions. They were
exempt from inclusion in the AMS subject to reduction commitments, but were
conditionally actionable. These included notably compensatory payments and land
programmes of the EUs Common Agricultural Policy, aimed at compensating
producers for limiting production, and the US governments deficiency payments
scheme, aimed at compensating producers facing market prices that are below a
targeted level.
AMS Reduction Commitments
The agreement required countries to reduce their AMS levels by 20 percent in the
case of the developed countries and 13.3 percent in the case of the developing
countries during the implementation period. However, there was a minimum level
of support that all countries were allowed to provide, which was set at 5 percent of
the value of production in the case of the developed countries and 10 percent in the
case of the developing countries. Countries were not required to reduce their AMS
below this level in order to realize their domestic support reduction commitments.
Further, those countries characterized by an AMS that was below the de minimus
level, were free to increase the extent of support they offered to agriculture20.
Under market-access provisions of the AOA, countries were required to convert
non-tariff barriers into tariffs, and commit to reduction of tariffs by an unweighted
average of 36 percent with a minimum rate of reduction of 15 percent for each
tariff line. However, the spirit of these measures was lost as developed countries
engaged in dirty tariffication, i.e. there was tendency to use data which allowed
tariffs to be bound as high as possible. Hathaway and Ingco (1995) show that some
European Union (EU) tariffs and the US tariff on sugar contain considerable dirt.
In contrast, though the bound tariff on sugar is 150 percent, India has never
exercised this option completely.
Moreover, Japan, EU, and US have reduced low tariffs more than the high tariffs.
As a result, average rate of reduction was 36 percent, but the average tariff levels
were reduced by less that 36 percent. In contrast, India has agreed to tariff bindings
of 0 percent on commodities such as milk powder long ago, and has high tariff on
liquid milk that is hardly traded. If possible these rates need to be re-negotiated,
and suggestions Blue box provisions are considered to be non-trade distorting.
Such payments were exempt if they:
(1) are based on fixed area and yields, or
(2) made on 85 percent or less of the base level of production, or
(3) made on a fixed number of head of livestock.
The asymmetry involved in setting an acceptable floor to the AMS but defining no
ceiling meant that countries, especially the developed ones that had subsidized
their agriculture heavily in the past and had to reduce the volume of such support
by 20 percent, could end up with levels of support far higher than even 10 percent
of the value of their agricultural output.
As per the AOA, member countries are required to calculate the total aggregate
measure of domestic support (AMS) extended to the agricultural sector every year.
The current measure of AMS should not exceed the base AMS (1986-88 period),
and it has to be reduced by at least 13.3 percent in ten years in the case of
developing countries and by 20 percent during a period of six years for developed
countries. Interestingly, most of the developing countries including India have net-
taxed their agricultural sector, and as a result their AMS is negative. Therefore,
there are no reduction commitments on this issue for India. However, the rules
have been framed in such a way that for most of the developed countries the
current level of AMS is very low.
This situation has become possible due to various reasons. The base year AMS was
calculated for the period 1986-88 when the world prices were very low. As a
result, the base AMS is quite high for the developed countries. Moreover, while
green-box measures are exempted from both the base AMS and current AMS,
there are what are called blue-box measures exempted only from the current AMS.
As a result, for most of the developed countries, base AMS is very high and
current AMS is low. Therefore, the AMS reduction commitments are nearly met
for most of the developed countries. This implies that there will be insignificant
reductions in the domestic support given by the developed countries. This certainly
does not square with the spirit of WTO objectives. In this regard developing
countries may make suggestions either to eliminate the blue-box measures or move
the blue-box into the AMS calculation and subject it to reduction commitments.
Further, they may negotiate for receiving some credit for their negative AMS.
Studies show that the total AMS for India is negative, and, therefore, there are no
reduction commitments on this issue.
The Indian AMS figure varies from year to year. However, it is always below
the threshold of 10 percent. Consequently, domestic agricultural reforms do not
have to happen on account of WTO. There are certainly methodological issues in
computing AMS that need to be cleared up in subsequent negotiations. The
question is: Will India gain from liberalization? If it is accepted that India does
gain from global agricultural liberalization, as studies have indeed documented,
India can afford to be more aggressive in the negotiations. India can then argue that
the blue and green box policies, exempted from AMS calculations should be
disciplined.
The AOA text implies calculation of nominal AMS, which does not give
any consideration to inflation. Within the product-specific AMS, the per unit price
support is to be calculated as the difference between the administered price and
c.i.f. price of the importable commodity or f.o.b. price of the exportable
commodity, the latter prices representing the fixed external reference price for that
commodity. However, part of the difference between the administered price and
the external reference price will be the domestic freight, insurance, and other
related expenses. These must be added to the c.i.f. external reference price so that
the external reference price is comparable to the administered price paid to the
farmers at the village markets.
Export Subsidies
In its bid to make agricultural trade freer, the AoA required nations to reduce the
subsidies they offered to exporters of agricultural products, as these were
considered an unfair practice. Signatories to the AoA committed themselves to
reduce the expenditure they incurred on such subsidies to levels that were 36
percent lower than their 1986-90 average values in the case of the developed
countries and 24 percent lower relative to the same figure in the case of developing
countries. Further, countries agreed to reduce the volume of agricultural exports
that were subsidized, by reducing the share of subsidized exports by 24 percent
relative to the 1986-88 base period in the case of the developed countries and 14
percent in the case of developing countries. Further, it was mandated that
commodities that were not subsidized at the time of the agreement, would not be
supported with subsidies in the future as well. The problem here is often that
export subsidy commitments are seen at aggregated levels.
There are two angles to Indias negotiations in terms of what India has to do and in
terms of what other countries have to do. On disciplines that apply to India, the
issues are fairly simple. There are too many problems on border measures, since
bound rates for agricultural commodities range between 100 and 150 percent with
300 percent for some items. Barring a few items, as shown by agricultural
economists such as Ashok Gulati and Anil Sharma, Indias agricultural products
are price competitive. Since liberalization, even if it is imperfect, Indias
agricultural products are likely to become even more competitive. Consequently,
fears of India being deluged with imports of agro-products are unrealistic, even if
import duties were to be zero. With import duties upwards of 100 percent, the
argument is strengthened. This issue attains some additional significance because
India no longer has access to Article XVIIIB justification of QRs on the balance-
of-payments ground and barring a small prohibited and banned list, everything was
put on OGL (open general license) from 1 April 2001. There is no reason to create
distortions by imposing import duties of more than 40 percent on agricultural
products, while the maximum bound duty on industrial products is 40 percent.
Therefore, a maximum duty of 40 percent on agricultural products is
reasonable. These issues must be discussed among the member countries to see
that the methodology used is consistent across countries and is based on sound
economic principles. In comparison to market access and domestic support,
disciplines on export competition were considered the most binding of all AOA
commitments. Nevertheless, This allows the flexibility to maintain and even
increase subsidies at finer levels of desegregation. It has been observed that the
allocation of TQRs is often arbitrary and non-transparent. As long as TQRs exist,
they amount to a de facto reintroduction of QRs.
Sanitary and Phytosanitary Agreement and Allied Measures
Any discussion on the effects of the WTO agreements on Indian agriculture
will be incomplete without a discussion on SPS and TBT agreements. In fact,
Article 14 of the AOA clearly states: Members agree to give effect to the
Agreement on the Application of Sanitary and Phytosanitary Measures. The
Agreement on SPS allows members to adopt and enforce measures necessary to
protect human, animal or plant life or health, subject to the requirement that these
measures are not applied in a manner which would constitute a means of arbitrary
or unjustifiable discrimination between members where the same conditions
prevail or a disguised restriction on international trade. Moreover, Article 3.2 states
that sanitary and phytosanitary measures that confirm to international standards
and guidelines shall be deemed to be necessary to protect human, and animal or
plant life or health. For food products, the agreement has accepted the guidelines
on food safety and food standards set by the Codex Alimentarius Commission
(CAC). An important component of the CAC guidelines is the implementation of a
food safety system called Hazard Analysis and Critical Control Points (HACCP).
Adoption of the quality system will not only ensure exports of value-added
agricultural products, but will improve our domestic food quality as well. Article 9
of the SPS agreement provides for technical assistance to developing countries to
build their infrastructure for food processing. Similarly, the agreement on
Technical Barriers to Trade (TBT) sets standards for labeling and packaging of
agricultural products as recommended by CAC. Unless India keeps itself abreast of
the emerging guidelines of CAC, it may face non-tariff-barriers in future. In this
regard, WTO does encourage developing countries to take active part in the CAC
activities to decide on various SPS and TBT-related standards. Among developing
countries, India has been active in its participation. This practice needs to be
pursued on a continued basis to protect interests of Indian agriculture, without
jeopardising the spirit of achieving uniform international standards.

Ministerial conferences


The World Trade Organization Ministerial Conference of 1998, in thePalace of
Nations (Geneva,Switzerland).The highest decision-making body of the WTO is
the Ministerial Conference, which usually meets 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. The inaugural ministerial conference was held in
Singapore in 1996. Disagreements between largely developed and developing
economies emerged during this conference over four issues initiated by this
conference, which led to them being collectively referred to as the "Singapore
issues". The second ministerial conference was held in Geneva in Switzerland.
The third conference in Seattle, Washington ended in failure, with massive
demonstrations and police and National Guard crowd-control efforts drawing
worldwide attention. The fourth ministerial conference was held in Doha in
the Persian Gulf nation of Qatar. The Doha Development Round was launched at
the conference. The conference also approved the joining of China, which became
the 143rd member to join. The fifth ministerial conference was held
in Cancn, Mexico, aiming at forging agreement on the Doha round. An alliance of
22 southern states, the 0G20 developing nations (led by India,
China, Brazil, ASEAN led by the Philippines), resisted demands from the North
for agreements on the so-called "Singapore issues" and called for an end
to agricultural subsidies within the EU and the US. The talks broke down without
progress.
The sixth WTO ministerial conference was held in Hong Kong from 1318
December 2005. It was considered vital if the four-year-old Doha Development
Round negotiations were to move forward sufficiently to conclude the round in
2006. In this meeting, countries agreed to phase out all their agricultural export
subsidies by the end of 2013, and terminate any cotton export subsidies by the end
of 2006. Further concessions to developing countries included an agreement to
introduce duty-free, tariff-free access for goods from the Least Developed
Countries, following the Everything but Arms initiative of the European Union
but with up to 3% of tariff lines exempted. Other major issues were left for further
negotiation to be completed by the end of 2010. The WTO General Council, on 26
May 2009, agreed to hold a seventh WTO ministerial conference session
in Geneva from 30 November-3 December 2009. A statement by chairman
Amb. Mario Matus acknowledged that the prime purpose was to remedy a breach
of protocol requiring two-yearly "regular" meetings, which had lapsed with the
Doha Round failure in 2005, and that the "scaled-down" meeting would not be a
negotiating session, but "emphasis will be on transparency and open discussion
rather than on small group processes and informal negotiating structures". The
general theme for discussion was "The WTO, the Multilateral Trading System and
the Current Global Economic Environment"
Doha Round (Doha Agenda)

The Doha Development Round started in 2001 is at an impasse.
The WTO launched the current round of negotiations, the Doha Development
Round, at the fourth ministerial conference in Doha, Qatar in November 2001. This
was to be an ambitious effort to make globalization more inclusive and help the
world's poor, particularly by slashing barriers and subsidies in farming.The initial
agenda comprised both further trade liberalization and new rule-making,
underpinned by commitments to strengthen substantial assistance to developing
countries.
The negotiations have been highly contentious. Disagreements still continue over
several key areas including agriculture subsidies, which emerged as critical in July
2006. According to a European Union statement, "The 2008 Ministerial meeting
broke down over a disagreement between exporters of agricultural bulk
commodities and countries with large numbers of subsistence farmers on the
precise terms of a 'special safeguard measure' to protect farmers from surges in
imports." The position of the European Commission is that "The successful
conclusion of the Doha negotiations would confirm the central role of multilateral
liberalisation and rule-making. It would confirm the WTO as a powerful shield
against protectionist backsliding." An impasse remains and, as of August 2013,
agreement has not been reached, despite intense negotiations at several ministerial
conferences and at other sessions. On 27 March 2013, the chairman of agriculture
talks announced "a proposal to loosen price support disciplines for developing
countries public stocks and domestic food aid." He added: ...we are not yet close
to agreementin fact, the substantive discussion of the proposal is only
beginning.



Features of the WTO
Under the auspices of the WTO, many trade-related agreements were signed by
the member countries and for the first time, an Agreement on Agriculture (AOA)
was reached to reform and dismantle trade barriers in the agricultural sector.
The objective of the Agreement of Agriculture is to reform trade in the sector and
to make policies more market oriented. This would improve predictability and
security for importing and exporting countries. The WTO wishes to liberalize trade
barriers within member countries by reducing the tariff and non-tariff barriers,
such as quota restrictions.
- The WTO agreement requires the conversion of all non-tariff barriers on agro-
commodities trade into equivalent tariffs. These tariff rates equivalent are to be
combined with the existing tariffs and the resulting composite tariffs are to be
bound at that rate.
- Each country is given the flexibility in distributing the average tariff cut over
different commodities, as long as each individual tariff is reduced by at least 15%
(10% for the developing countries) over the relevant period.
- Where the resulting tariff is prohibitive, a minimum level of imports, equal to 3%
of domestic consumption is to be guaranteed. These minimum access quotas will
rise to 5% of domestic consumption after six years.
- The minimum allocation quotas for developing countries constitute 2% of
domestic consumption moving up to 4% after 10 years.
- The agreement also provides for a cut in the subsidies from the 1986-90 levels by
36% (24% for the developing countries) over six years (ten years for the
developing countries) in equal annual installments.
- Developed countries are also required to reduce the volume of exports of each
subsidized commodity by 21% over six years with average export levels of 1986-
90. A corresponding reduction by 14% is required for the developing countries.


Functions
Among the various functions of the WTO, these are regarded by analysts as the
most important:
It oversees the implementation, administration and operation of the covered
agreements.
It provides a forum for negotiations and for settling disputes.
Additionally, it is the WTO's duty to review and propagate the national
trade policies, and to ensure the coherence and transparency of trade policies
through surveillance in global economic policy-making. Another priority of the
WTO is the assistance of developing, least-developed and low-income countries in
transition to adjust to WTO rules and disciplines through technical cooperation and
training.
(i) The WTO shall facilitate the implementation, administration and operation and
further the objectives of this Agreement and of the Multilateral Trade Agreements,
and shall also provide the frame work for the implementation, administration and
operation of the multilateral Trade Agreements.
(ii) The WTO shall provide the forum for negotiations among its members
concerning their multilateral trade relations in matters dealt with under the
Agreement in the Annexes to this Agreement.
(iii) The WTO shall administer the Understanding on Rules and Procedures
Governing the Settlement of Disputes.
(iv) The WTO shall administer Trade Policy Review Mechanism.
(v) With a view to achieving greater coherence in global economic policy making,
the WTO shall cooperate, as appropriate, with the international Monetary Fund
(IMF) and with the International Bank for Reconstruction and Development
(IBRD) and its affiliated agencies.
The above five listings are the additional functions of the World Trade
Organization. As globalization proceeds in today's society, the necessity of
an International Organization to manage the trading systems has been of vital
importance. As the trade volume increases, issues such as protectionism, trade
barriers, subsidies, violation of intellectual property arise due to the differences in
the trading rules of every nation. The World Trade Organization serves as the
mediator between the nations when such problems arise. WTO could be referred to
as the product of globalization and also as one of the most important organizations
in today's globalized society.
The WTO is also a center of economic research and analysis: regular assessments
of the global trade picture in its annual publications and research reports on
specific topics are produced by the organization. Finally, the WTO cooperates
closely with the two other components of the Bretton Woods system, the IMF and
the World Bank.

Principles of the 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 policy games.
Five principles are of particular importance in understanding both the pre-1994
GATT and the WTO:
1. Non-discrimination. It has two major components: the most favoured
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 favour 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).
2. 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 materialise.
3. 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 them
for loss of trade. If satisfaction is not obtained, the complaining country may
invoke the WTO dispute settlement procedures.
4. 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.
5. 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.
There are three types of provision in this direction:
articles allowing for the use of trade measures to attain non-economic
objectives;
articles aimed at ensuring "fair competition"; members must not use
environmental protection measures as a means of disguising protectionist
policies.
provisions permitting intervention in trade for economic reasons.
Exceptions to the MFN principle also allow for preferential treatment
of developing countries, regional free trade areas and customs unions.
Organizational structure
The General Council has the following subsidiary bodies which oversee
committees in different areas:
Council for Trade in Goods
There are 11 committees under the jurisdiction of the Goods Council each with a
specific task. All members of the WTO participate in the committees. The Textiles
Monitoring Body is separate from the other committees but still under the
jurisdiction of Goods Council. The body has its own chairman and only 10
members. The body also has several groups relating to textiles.
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 WTO's work with other international
organizations in the field. 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). It is open to all WTO members, and can create subsidiary bodies
as required.

Trade Negotiations Committee

The Trade Negotiations Committee (TNC) is the committee that deals with the
current trade talks round. The chair is WTO's director-general. As of June 2012 the
committee was tasked with the Doha Development Round.
The Service Council has three subsidiary bodies: financial services, domestic
regulations, GATS rules and specific commitments. The council has several
different committees, working groups, and working parties. There are committees
on the following: Trade and Environment; Trade and Development (Subcommittee
on Least-Developed Countries);Regional Trade Agreements; Balance of Payments
Restrictions; and Budget, Finance and Administration. There are working parties
on the following: Accession. There are working groups on the following: Trade,
debt and finance; and Trade and technology transfer.

Decision-making

The WTO describes itself as "a rules-based, member-driven organization all
decisions are made by the member governments, and the rules are the outcome of
negotiations among members"
.
The WTO Agreement foresees votes where
consensus cannot be reached, but the practice of consensus dominates the process
of decision-making.
Richard Harold Steinberg (2002) argues that although the WTO's consensus
governance model provides law-based initial bargaining, trading rounds close
through power-based bargaining favouring Europe and the U.S., and may not lead
to Pareto improvement.
Dispute settlement
In 1994, the WTO members agreed on the Understanding on Rules and
Procedures Governing the Settlement of Disputes (DSU) annexed to the "Final
Act" signed in Marrakesh in 1994. Dispute settlement is regarded by the WTO as
the central pillar of the multilateral trading system, and as a "unique contribution to
the stability of the global economy". WTO members have agreed that, if they
believe fellow-members are violating trade rules, they will use the multilateral
system of settling disputes instead of taking action unilaterally.
The operation of the WTO dispute settlement process involves the DSB panels,
the Appellate Body, the WTO Secretariat, arbitrators, independent experts and
several specialized institutions. Bodies involved in the dispute settlement process,
World Trade Organization.
Accession and membership
The process of becoming a WTO member is unique to each applicant
country, and the terms of accession are dependent upon the country's stage of
economic development and current trade regime. The process takes about five
years, on average, but it can last more if the country is less than fully committed to
the process or if political issues interfere. The shortest accession negotiation was
that of the Kyrgyz Republic, while the longest was that of Russia, which, having
first applied to join GATT in 1993, was approved for membership in December
2011 and became a WTO member on 22 August 2012. The second longest was that
of Vanuatu, whose Working Party on the Accession of Vanuatu was established on
11 July 1995. After a final meeting of the Working Party in October 2001, Vanuatu
requested more time to consider its accession terms. In 2008, it indicated its
interest to resume and conclude its WTO accession. The Working Party on the
Accession of Vanuatu was reconvened informally on 4 April 2011 to discuss
Vanuatu's future WTO membership. The re-convened Working Party completed its
mandate on 2 May 2011. The General Council formally approved the Accession
Package of Vanuatu on 26 October 2011. On 24 August 2012, the WTO welcomed
Vanuatu as its 157th member. An offer of accession is only given once consensus
is reached among interested parties.
Accession process

WTO accession progress:
Members (including dual-representation with the European Union)
Draft Working Party Report or Factual Summary adopted
Goods and/or Services offers submitted
Memorandum on Foreign Trade Regime (FTR) submitted
Observer, negotiations to start later or no Memorandum on FTR submitted
Frozen procedures or no negotiations in the last 3 years
No official interaction with the WTO
A country wishing to accede to the WTO submits an application to the General
Council, and has to describe all aspects of its trade and economic policies that have
a bearing on WTO agreements.
[65]
The application is submitted to the WTO in
a memorandum which is examined by a working party open to all interested WTO
Members.
After all necessary background information has been acquired, the working party
focuses on issues of discrepancy between the WTO rules and the applicant's
international and domestic trade policies and laws. The working party determines
the terms and conditions of entry into the WTO for the applicant nation, and may
consider transitional periods to allow countries some leeway in complying with the
WTO rules.
The final phase of accession involves bilateral negotiations between the applicant
nation and other working party members regarding the concessions and
commitments on tariff levels and market access for goods and services. The new
member's commitments are to apply equally to all WTO members under normal
non-discrimination rules, even though they are negotiated bilaterally.
When the bilateral talks conclude, the working party sends to the general council
or ministerial conference an accession package, which includes a summary of all
the working party meetings, the Protocol of Accession (a draft membership treaty),
and lists ("schedules") of the member-to-be's commitments. Once the general
council or ministerial conference approves of the terms of accession, the
applicant's parliament must ratify the Protocol of Accession before it can become a
member. Some countries may have faced tougher and a much longer accession
process due to challenges during negotiations with other WTO members, such as
Vietnam, whose negotiations took more than 11 years before it became official
member in January 2007.
Members and observers
The WTO has 160 members and 24 observer governments. In addition to
states, the European Union is a member. WTO members do not have to be
full sovereign nation-members. Instead, they must be a customs territory with full
autonomy in the conduct of their external commercial relations. Thus Hong Kong
has been a member since 1995 (as "Hong Kong, China" since 1997) predating the
People's Republic of China, which joined in 2001 after 15 years of negotiations.
The Republic of China (Taiwan) acceded to the WTO in 2002 as "Separate
Customs Territory of Taiwan, Penghu, Kinmen and Matsu" (Chinese Taipei)
despite its disputed status. The WTO Secretariat omits the official titles (such as
Counselor, First Secretary, Second Secretary and Third Secretary) of the members
of Chinese Taipei's Permanent Mission to the WTO, except for the titles of the
Permanent Representative and the Deputy Permanent Representative.
As of 2007, WTO member states represented 96.4% of global trade and 96.7% of
global GDP
\
Iran, followed by Algeria, are the economies with the largest GDP and
trade outside the WTO, using 2005 data. With the exception of the Holy See,
observers must start accession negotiations within five years of becoming
observers. A number of international intergovernmental organizations have also
been granted observer status to WTO bodies. 14 states and two territories so far
have no official interaction with the WTO.
Agreements

The WTO oversees about 60 different agreements which have the status of
international legal texts. Member countries must sign and ratify all WTO
agreements on accession. A discussion of some of the most important agreements
follows. The Agreement on Agriculture came into effect with the establishment of
the WTO at the beginning of 1995. The AoA has three central concepts, or
"pillars": domestic support, market access and export subsidies. The General
Agreement on Trade in Services was created to extend the multilateral trading
system to service sector, in the same way as the General Agreement on Tariffs and
Trade (GATT) provided such a system for merchandise trade. The agreement
entered into force in January 1995. The Agreement on Trade-Related Aspects of
Intellectual Property Rights sets down minimum standards for many forms of
intellectual property (IP) regulation. It was negotiated at the end of the Uruguay
Round of the General Agreement on Tariffs and Trade (GATT) in 1994.
The Agreement on the Application of Sanitary and Phytosanitary Measuresalso
known as the SPS Agreementwas negotiated during the Uruguay Round of
GATT, and entered into force with the establishment of the WTO at the beginning
of 1995. Under the SPS agreement, the WTO sets constraints on members' policies
relating to food safety (bacterial contaminants, pesticides, inspection and labelling)
as well as animal and plant health (imported pests and diseases). The Agreement
on Technical Barriers to Trade is an international treaty of the World Trade
Organization. It was negotiated during the Uruguay Round of the General
Agreement on Tariffs and Trade, and entered into force with the establishment of
the WTO at the end of 1994. The object ensures that technical negotiations and
standards, as well as testing and certification procedures, do not create unnecessary
obstacles to trade". The Agreement on Customs Valuation, formally known as the
Agreement on Implementation of Article VII of GATT, prescribes methods of
customs valuation that Members are to follow. Chiefly, it adopts the "transaction
value" approach.In December 2013, the biggest agreement within the WTO was
signed and known as the Bali Package.
AGREEMENT ON AGRICULTURE
The Agreement on Agriculture is an international treaty of the World Trade
Organization. It was negotiated during the Uruguay Round of the General
Agreement on Tariffs and Trade, and entered into force with the establishment of
the WTO on January 1, 1995.


The Agreement on Agriculture
The increase in allocation to cotton related agricultural research shows that India
should concentrate on a few commodities where it already has an advantage.
The Agreement on Agriculture signed at the end of the Uruguay Round of
negotiations deals mainly with the nature of entry of the imported goods in
domestic markets and the nature of support provided to the domestic farmers and
exporters of agricultural goods by their governments. It also lists the different types
of crops subsidies that have to be reduced. Are the farmers of the developing
countries receiving equal benefit as compared to the farmers in the developed
countries? How would these measures improve the ability of Indian farmers to
compete in world markets?
The Agreement on Agriculture signed at the end of the Uruguay Round of
negotiations, which has as its objective the establishment of a fair and market-
oriented agricultural trading system, dealt with three groups of issues. These were
(i) better market access, or easier entry of imported goods into different national
markets;
(ii) reduced domestic support, or lower direct or indirect support provided to
domestic farmers by national governments; and
(iii) lower export subsidies or lower budgetary support for exporters of
agricultural products.


History of the Agreement

The idea of replacing agricultural price support with direct payments to farmers
decoupled from production dates back to the late 1950s, when a Panel of Experts,
chaired by Professor Gottfried Haberler, was established at the twelfth session of
the GATT Contracting Parties to examine the effect of agricultural protectionism,
fluctuating commodity prices and the failure of export earnings to keep pace with
import demand in developing countries. The 1958 Haberler Report stressed the
importance of minimising the effect of agriculture subsidies on competitiveness,
and recommended replacing price support by direct supplementary payments not
linked with production, anticipating discussion on green boxsubsidies. Only more
recently, though, has this shift from price support to producer support become the
core of the reform of the global agricultural system.
Historical context
By the 1980s, government payments to agricultural producers in industrialised
countries had caused large crop surpluses,which were unloaded on the world
market by means of export subsidies, pushing food prices down. The fiscal burden
of protective measures increased, due both to lower receipts from import duties and
higher domestic expenditure. In the meantime, the global economy had entered a
cycle of recession, and the perception that opening up markets could improve
economic conditions led to calls for a new round of multilateral trade
negotiations. The round would open up markets in services and high technology
goods, and ultimately generate much needed efficiency gains. With a view to
engaging developing countries in the negotiations, many of which were
demandeurs of new international disciplines, agriculture, textiles and clothing
were added to the grand bargain.
In leading up to the 1986 GATT Ministerial Conference, developed country farm
groups that had benefited from protectionist policies strongly resisted any specific
compromise on agriculture. In this context, the idea of exempting production and
trade-neutral subsidies from WTO commitments was first proposed by the US in
1987, and echoed soon after by the
EU. By guaranteeing farmers a continuation of their historical level of support, it
also contributed to neutralising opposition to the round. In exchange for bringing
agriculture within the disciplines of the WTO and committing to future reduction
of trade-distorting subsidies, developed countries would be allowed to
retain subsidies that cause not more than minimal trade distortion in order to
deliver various public policy objectives
.


Three Pillars
The AoA has three central concepts, or "pillars": domestic support, market access
and export subsidies
Domestic support: the boxes
The first pillar of the AoA is "domestic support". The WTO Agreement on
Agriculture negotiated in the Uruguay Round (19861994) includes the
classification of subsidies into boxes depending on their effects on production
and trade: amber (most directly linked to production levels), blue (production-
limiting programmes that still distort trade), and green (causing not more than
minimal distortion of trade or production).
[3]
While payments in the amber box had
to be reduced, those in the green box were exempt from reduction commitments.
Detailed rules for green box payments are set out in Annex 2 of the Agreement on
Agriculture. However, all must comply with the fundamental requirement in
paragraph 1, to cause not more than minimal distortion of trade or production, and
must be provided through a government-funded programme that does not involve
transfers from consumers or price support to producers.
[1]

The AoA's domestic support system currently allows Europe and the USA to spend
$380 billion every year on agricultural subsidies alone. "It is often still argued that
subsidies are needed to protect small farmers but, according to the World Bank,
more than half of EU support goes to 1% of producers while in the US 70% of
subsidies go to 10% of producers, mainly agri-businesses." . The effect of these
subsidies is to flood global markets with below-cost commodities, depressing
prices and undercutting producers in poor countries a practice known
as dumping.

Market Access
"Market access" is the second pillar of the AoA, and refers to the reduction
of tariff (or non-tariff) barriers to trade by WTO member-states. The 1995 AoA
required tariff reductions of:
36% average reduction by developed countries, with a minimum per tariff line
reduction of 15% over six years.
24% average reduction by developing countries with a minimum per tariff line
reduction of 10% over ten years.
Least Developed Countries (LDCs) were exempted from tariff reductions, but
either had to convert nontariff barriers to tariffsa process called tariffication
or "bind" their tariffs, creating a "ceiling" which could not be increased in future.
Export subsidies
"Export subsidies" is the third pillar of the AoA. The 1995 AoA
required developed countries to reduce export subsidies by at least 36% (by value)
or by at least 21% (by volume) over the six years. In the case of developing
country Members, the required cuts are 14% (by volume) and 24% (by value) over
10 years.
Indian Agriculture and the WTO: A developing country perspective
India and the WTO
India has 6 percent of the worlds human population, 15 percent of the worlds
livestock, 2 percent of the worlds geographical area, 1 percent of rainwater, 1
percent of forest, and 0.5 percent of pastureland. Consequently, the stress on the
population-supporting capacity of natural ecosystems is immense. The country has
over 7500 km of coastline and about 2.1 million sq km of exclusive economic zone
in the oceans. Around 60 percent of the geographical area suffers from soil erosion,
water logging, and salinity. Two-thirds of the total 450 million heads of livestock
struggle for survival in crowded rain fed regions.
Nearly 70 percent of the population in India depends on agriculture. It was hoped
that the start of the WTO negotiations would pave the way for an arrangement
reflecting the aspirations of farming communities in India and other developing
countries. The failure of the Seattle Ministerial Conference in 1999 blunted that
hope. Indian agriculture was perceived as badly hit when, in compliance with its
obligations under WTO on April 1, 2000, the Government of India eliminated all
import restrictions from more than 700 items, a large portion of which were
agricultural commodities. The remaining 700 or so items were freed from import
restrictions in 2001. The result of this liberalization2 is that many agricultural
commodities and processed foods have entered the Indian market from different
countries and are seen on supermarket shelves. The political economy of Amir
Ullah Khan is a fellow at the India Development Foundation. Having graduated
from the Osmania University College of Engineering, he obtained his Post
Graduate Diploma in Management from the Institute of Rural Management at
Anand, Gujarat in 1989. In 1993, he joined the Indian Civil service after which he
worked for four years as a Researcher with Project LARGE (Legal Adjustments
and Reforms for Globalising the Economy) of the UNDP and Ministry of Finance,
Government of India. He headed the Academic unit at the School of Finance and
Management, India Chapter where he taught Economics and Management at the
chapters of the School in New Delhi, Madras and London. For two years he
worked as Executive Director and Editor, Encyclopaedia Britannica India Pvt Ltd.
and then as Director, Asia for the International Policy Network. He has recently
edited a volume on Indian Agriculture and has written several papers on legal and
economic issues. While the Uruguay Round negotiations were going on, the
perception was that India would gain in the market access area and would lose in
the new areas. The Uruguay Round agreements entered into force on January 1,
1995. agriculture as a result is at a crossroads where liberalization, globalization
and world trade have caused some concern in the Indian farming community.
Within the agriculture text proper there are border measures and domestic policy
disciplines. On border measures, QRs must be converted to tariffs, and tariffs
brought down to 36 percent (over six years) by developed countries and by 24
percent (over ten years) by developing countries. Export subsidies must be reduced
by stipulated percentages on both volume (21 percent for developed and 16 percent
for developing countries) and budgetary terms (36 percent for developed and 24
percent for developing countries). In addition, there is a minimum market access
commitment of 5 percent, increasing to 5 percent over a period of six years. Eight
years after the Uruguay Round agreements entered into force, there is reason for
the wide spread dissatisfaction with the implementation of the agricultural sector
liberalization. There are times when agreements have not been implemented, or
agreements have been circumvented and their spirits violated. The reasons are not
far to seek. First, the Uruguay Round was the first attempt to impose multilateral
disciplines on agriculture. Second, the liberalization proposed was an imperfect
one, unlike the Dunkel Draft that which would have liberalized agriculture much
more.
It is now fairly certain that the rise in international prices due to agricultural trade
reforms, as predicted by many studies, may not pass on fully to the farmers and to
developing countries. In fact, one does not see a consistent increase in the spot
export prices of agricultural commodities. Despite the implementation of the
reforms, there have been wide fluctuations in the spot export prices of agricultural
products. This should not, however, come as a surprise as the international markets
are very thin. Exogenous supply shocks arising out of over-production or shortages
in countries like India can cause sharp fluctuations in export prices, as the markets
are inherently thin. India may want to emphasize these points and bargain for
concessions somewhere else. If agricultural prices are not expected to rise, higher
reduction commitments by the developed countries in various forms of price and
non-price support could be suggested.
Indias priorities in the World Trade Organization (WTO) negotiations on
agriculture cannot but include the protection of domestic agricultural production
and the welfare of farmers, what with the political interests that prevail in an
economy facing uncertain electoral issues. The government has no choice but to
bring in measures that seek to ensure food security, livelihood, and rural
development. Obtaining market access for products of export interest to India is
also high on the agenda. There are four sets of WTO agreements that are relevant
to agriculture. First, there is the agriculture text proper. Second, there is the
sanitary and phytosanitary measures (SPS) agreement. Third, the agreement on
intellectual property rights, specifically on microorganisms and plant and seed
varieties. Fourth, the agreements on industrial tariffs, especially after the phase-out
of the quantitative restrictions (QRs), which have implications for fertilizers and
the fertilizers policy. On domestic measures, there is the system of calculating the
AMS (Aggregate Measurement of Support) with a threshold AMS level of 10
percent for developing countries and 5 percent for developed countries. In excess
of the threshold, developed countries have to reduce the base level of AMS by 20
percent. Developing countries have to reduce the base level of AMS by 13.3
percent.
Indias proposal, submitted to the World Trade Organization in
November 2002, states that the country is in favour of methodologies for minimal
tariff reduction and for provisions of special safeguards against import surges.
Currently, developed countries have these provisions while developing and less
developed countries do not. On domestic support, Indias proposal calls for steep
reduction in all forms of trade distorting domestic support by developed countries
and flexibility to developing countries to improve their agriculture, food, and
livelihood security. It also calls for immunity from challenges of Article 6.2
measures. Steep reductions in export subsidies of developed countries and a call
for disciplining export credit, guarantees, and insurance provided by developed
countries such as the United States are demanded. India is also in favour of
developing countries retaining marketing and transport subsidies on exports.
Developed countries through dirty tariffication, as agreed under the Uruguay
Round, have clearly and not so cleverly undermined agricultural trade
liberalization. After promising market access to agricultural goods in return for
agreeing to widen the scope of multilateral trade negotiations to cover trade-related
intellectual property, trade-related investment measures and trade-in-services
during the Uruguay round, developed countries have not reduced agricultural
subsidies or lowered tariff and non-tariff barriers.
They are now seeking further market access in new areas such as
investment in return for market access in agriculture. Developed countries should
demonstrate their commitment to the multilateral trading system by delivering
what was already promised rather than continue asking for further concessions
from the poorer countries.
The Current Situation
Many blame import liberalization in general and the World Trade
Organization in particular for overflowing godowns and falling agricultural
product prices in the country in recent times. The impending removal of the last of
the quantitative restrictions (QRs) on all agricultural products has added to the
fears for the future of Indian agriculture. While contractual obligations and import
liberalization forced on the Government have indeed considerably increased the
exposure to the world market, there has been a tendency to shift the blame for
domestic problems on to external factors.
The immediate challenge is what will follow the removal of QRs. There
is no reason to believe that there will be a flood of imports, only that protection can
no longer be provided by a ban on imports but by customs duties. With the
plugging of loopholes that existed in the form of zero tariffs on cereals and dairy
products, agriculture will for now continue to enjoy a measure of protection.
Where the Government could fail - as it did in the case of edible oil imports is by
moving slowly on increasing tariffs whenever global or domestic prices fall.
However, the fairly high levels of tariff protection that India can now invoke could
be under threat when the next phase of multilateral negotiations on agriculture
begins at the WTO. For instance, the European Union has set tariff bindings for
the base period at about 60 percent above the actual tariff equivalents on an
average. The US has set them at 45 percent above the recent rates.
This is the second issue, on which the Government has approved a set of
proposals that will constitute Indias initial negotiating stance. These talks will be
completed only years down the line. In its first set of proposals, the Government
appears to have chosen to place greater importance on protecting agriculture than
on liberalizing farm exports. This is apparent from the demand for constituting a
Food Security Box that will facilitate higher levels of protection and codify
provisions that already exist in the WTO agreements.
The third issue is the functioning of the 1994 WTO deal on agriculture,
which far from boosting trade, has been used by the rich countries to increase farm
subsidies. Experts in the country have demanded a review of this agreement, but
such a review underlies the preparatory work now going on at the WTO for future
talks. Besides, India has officially already made proposals to address the
implementation problems in the farm pact. Going further may force India to
offer more concessions on imports.
A fourth issue is intellectual property protection. Compelled as India was
in 1994 to agree to provide sui generis protection to plant varieties it had the choice
of drafting its own legislation. This could have contained innovative provisions to
protect traditional rights. Yet, six years of procrastination and inter-Ministry
squabbling have meant that no legislation has been enacted, opening the door to
disputes at the WTO from other countries.
Where imports have caused problems they have followed either leaden-
footed decision-making or the Government placing the interests of the consumers
above that of the farmers. Both were evident in the setting of tariffs for edible oils
(mainly palmolein), which were raised only recently. The larger problems that
Indian farmers face are the result of high costs, low productivity, falling public
investment, poor market development and ultimately limited purchasing power
among one billion people. All these are domestic policies.
Features of the General Agreement on Trade and Tariffs
To get to a complete understanding of agriculture trade issue, it is important to
look at the historical developments culminating in the Agreement on Agriculture.
The General Agreement on Trade and Tariffs would be the first institution one
must look at. The basic elements of the 1947 GATT were:
An influential section in the policy-making establishment has been pushing for
India to become an aggressive agricultural exporter. But the twin of joining the
side of the agricultural exporters at the WTO is a lowering of import protection.
While India continues to demand adequate market access for its exports, the
Government has wisely decided against too aggressive a position on liberalization
of trade in agriculture.
GATT, which came into force in 1948, contained tariff concessions that were
agreed upon during the first multilateral trade negotiations and a set of rules
designed to prevent these concessions from being frustrated by restrictive trade
measures. The global trade relations were now to be based on multilateralism,
globalization, and liberalization of national and international economies. The
multilateral trade negotiations on GATT began in January 1948.
The Most Favoured Nation (MFN) Principle: The Most Favoured Nation (MFN)
principle, or the principle of non-discrimination meant that each contracting party
was required to provide all other contracting parties with the same conditions of
trade as the most favorable terms it extends to any one.
Reciprocity: Benefits of any bilateral agreements regarding tariff reductions or
market access should be extended simultaneously to all other contracting parties,
and should be equally reciprocated.
Transparency: This meant that the use of quotas should be limited, except in
specific conditions (those widely used for agricultural trade).
Tariff reduction: Since tariffs were the main form of trade protection in 1947,
most negotiations focused on tariff reduction.
While these basic elements have remained, there have been some important
exceptions and waivers to this. Developing countries were given special status,
recognising that their industrialization process required them to impose more and
different types of trade protection. Later, from the 1970s, this was extended to a
Generalized System of Preferences (GSP), which promised differential and more
favourable treatment to developing countries. The possibility of preferential trade
agreements was retained, because countries that offer each other more favourable
treatment within a customs union were allowed to waive full adherence to the
MFN clause. Agricultural trade was given special treatment, and was effectively
excluded from the GATT Rounds until the Uruguay Round.
The Uruguay Round
The Uruguay Round (1986-94) is considered by both its defenders and its critics as
a major landmark in international trade negotiations. It has changed the terms of
the world trade regime in many significant ways. In this round, besides negotiation
areas of tariff and non-tariff measures, three new areas were touched:
1. Trade in services,
2. Trade related investment measures (TRIMS),
3. Trade related intellectual property rights (TRIPS)
Because of differences among the 115 member countries, these negotiations could
not be finished within 4 years. The main areas of dispute were agriculture, textiles
and 9 It is at Torquay that the United States indicates that it would not support the
idea of the ITO.10 The Uruguay Round also persists with this trend, such as in the
government procurement code or the information technology agreement. In the
government procurement negotiations, India is an observer, but not a signatory. In
the final Uruguay Round package, such GATT-plus, agreements are called
Plurilateral trade agreements. This is in contrast to multilateral trade agreements,
which are GATT/WTO agreements proper and have universal application.
TRIPS. To break this deadlock in talks, Arthur Dunkel, the then Director General
of GATT, unilaterally presented a 433-page document on December 20, 1991. 11
The Final Act, which was signed in Marrakesh in 1994 by 135 countries, consisted
of an entirely new set of 16 agreements that had superseded the earlier GATT
agreement. It created a formal international institution - the World Trade
Organization or WTO12, which came into force on 1 January 1995 - to oversee
implementation of multilateral trading rules.
It introduced many new areas under the purview of GATT and the WTO:
agriculture, textiles and clothing, services, trade-related intellectual property rights,
trade-related investment measures, subsidies, anti-dumping rules, public
procurement, and so on. It allowed for trade disputes to be brought before a
Dispute Settlement Body of the WTO and for retaliation across trading categories
for transgression of rules. It enforced a shift from quantitative restrictions on
imports to tariffs, as well as greater predictability in tariff reductions by forcing
every member country to declare tariff bindings in all traded goods, and by
promising tariff reduction over time.
Agriculture and IPRs - The TRIPS Agreement
Basic Elements of TRIPS
The TRIPS23 Agreement protects intellectual property rights in all WTO member
countries and constrains the production of imitation products. While its purpose is
to encourage invention and innovation by ensuring private agents a return for
investment in Research and Development, it is framed in such a way that it may
discourage competition and prevent the dissemination of knowledge and
technology. Recent experience suggests that this has actually been the result.
Article 2 of the agreement is of relevance to agriculture. In respect of Parts II, III
and IV of this Agreement, members shall comply with Articles 1 through 12, and
Article 19, of the Paris Convention (1967). Nothing in Parts I to IV of this
Agreement shall derogate from existing obligations that members may have to
each other under the Paris Convention, the Berne Convention and the Treaty on
Intellectual Property in Respect of Integrated Circuits (Article 2)24. Estimates
indicate that up to 90% of technology and product patents in the world and 80% of
those in developing countries are owned by MNCs, which have tended to use such
product patents as a tool for stifling competitors. Even apart from this, there are
several aspects of both the way in which TRIPS are framed and the manner of its
operation so far, which are of concern to developing countries. One critical issue
relates to the development of technology: should it be determined by the need of
society in general or by the possibilities of private profit? There are other
questions, such as, how to ensure that there is research and development in areas of
special interest to society and of special benefit to the public, which do not have
short-term profitability but provide long-term benefit and high social returns.
Similarly, if public research is downsized and technology development becomes
increasingly private in scope, then what ensures peoples access to technology?
This is more than an issue of technology transfer between developed and
developing countries, it refers to the access of people within developed countries to
such technology as well. This issue also impinges on market structure, for it
implies monopoly rights to patent holders. Another problem is that of the right to
traditional knowledge of communities, and possibilities of bio-piracy and other
forms of knowledge theft, which is even more problematic because such theft
removes existing knowledge from the public sphere and makes it a source of
private gain. In this context, there are several aspects of
The Agreement on Trade-Related Aspects of Intellectual Property Rights is set out
in Annex 1C of the Final Uruguay Round text. There are 73 articles in the text,
split up into seven different parts. Part I is on general provisions and basic
principles. Part II is on standards for specific intellectual property rights and covers
copyright and related rights, trademarks, geographical indications, industrial
designs, patents, layout designs of integrated circuits, and protection of undisclosed
information. There is also a section on the control of anti-competitive practices in
contractual licenses. Part III is on the enforcement of intellectual property rights.
Part IV talks about the acquisition and maintenance of intellectual property rights,
while Part V in on dispute prevention and settlement. Part VI is on transitional
arrangements and Part VII talks about institutional arrangements.
This is relevant because of Article 1.3 of the Paris Convention, which states:
Industrial property shall be understood in the broadest sense and shall apply not
only to industry and commerce proper, but such as wise to agricultural and
extractive industries and to all manufactured or natural products, for example,
wines, grain, tobacco leaf, fruit, cattle, minerals, mineral waters, beer, flowers, and
flour (Article 1.3). the TRIPS agreement that can create problems for developing
countries in particular. They should be subject to renegotiation to incorporate some
of these legitimate concerns.
Transfer of Technology
It has already been stressed by the representatives of several developing countries
in the WTO that the objective of fostering the transfer and dissemination of
technology, which is already explicitly stated in Article 7 of the TRIPS Agreement,
should be made operational through special provisions. This is because, after a
period in the early 1990s when technology access constraints were relaxed
somewhat, there has been a tightening up after TRIPS was signed. In fact, the
developing and least developed countries now face growing constraints to get
access to up-to-date technologies. The enhanced competition between MNCs,
which has also been reflected in the growing tendency towards merger and
concentration at the international level, has in turn been associated with a reduced
willingness to part with or share new technologies. Also, the stronger protection to
invention, which has been granted under TRIPS, makes it more difficult for
industries in developing countries to use the technology developed elsewhere,
through reverse engineering and other devices. This reduces one of the more
obvious means of catching up by late industrializes, and of the more important
sources of technology particularly for small and medium enterprises across the
world25.
Research and Development
The shift towards greater private funding for research has been associated with a
change in research patterns themselves, moving at the margin away from areas of
greater social importance to those of currently higher profitability. Thus, medicine
and disease research have been increasingly oriented towards the curative aspects
of disease rather than prevention, and it has dealt more with diseases that are more
common or more potentially dangerous in the rich societies. By contrast, the
diseases that continue to proliferate in developing countries, and which within such
countries are more prevalent among the poor, get less emphasis and certainly less
research funds.
Similarly, in the area of crop research, the focus has been on improving the quality
of certain products in a consistent way, or on genetically modifying certain crops
so as to ensure particular features that are found to improve marketing chances,
rather than on improving yields. This is despite the fact that yield improvement
remains the primary concern of most cultivators across the world and will remain
the prime determinant of global food security at least as long as world population
continues to increase.
For this to change in a way that would be more beneficial to people in general, the
increasingly common perception that scientific research is essentially something
that is carried out or funded by private corporations, must be fought. It is important
to remember
The enhancement of technology flows to developing countries requires revision in
several articles of the TRIPS Agreement, such as Article 27.1 (working
obligations), Article 31 (b) (broader application of refusal to deal as an
autonomous ground for compulsory licenses), Article 40 (specification of illegal
restrictive business practices in voluntary licenses), and Article 66.2 (further
specification of measures to be adopted to encourage the transfer of technology to
Least Developed Countries). that even in the developed countries, until the 1980s
most of such kind of research was actually funded by governmental and quasi-
governmental agencies, other public bodies and universities, rather than by
corporations. While the profit motivation was not entirely absent, certainly it was
not the dominant motivating principle in much of the most important research that
has occurred even in this century. It is necessary to recreate this pattern, in both
developed and developing countries, simply because the research areas with the
greatest long-term benefit to societies remain those where social returns are higher
than private returns, and where, therefore, socially desirable levels of expenditure
will not otherwise be maintained
Control of Monopolies
There is an inherent contradiction between the competition policy that seeks to
prevent the exercise of undue and unfair market power, and the TRIPS agreement,
which effectively grants monopoly rights to patent holders. Since most R&D is
now conducted under the aegis of MNCs or funded indirectly by them, they also
end up holding the vast majority of the patents.26
There is sufficient evidence that such patents are used as a means of
increasing market power and undermining the competition, and this in turn can
easily lead to the growth of monopolies with attendant forms of anti-competitive
business practices. In some cases, these monopolies and the fact that large MNCs
control important patents can be especially worrying when the products relate to
crucial areas such as agricultural seeds and life-saving drugs. By restricting
competition, the TRIPS rules will enable some companies to jack up prices of their
products far beyond costs and thus earn rents in terms of monopoly revenues and
profits. This has already been clearly seen in the case of computer software.
Thus, IPRs allow companies a monopoly of seed ownership and other
biotechnology products. These companies can then also behave in a monopolistic
way in global sales and distribution. For example, the chemical company
Monsanto owns the second largest cottonseed company in the world (Stoneville
Pedigreed) and is a major shareholder in the worlds largest cottonseed company
(Delta & Pineland). Restrictive business practices have been found to occur in
cases where farmers who use Monsantos Roundup Ready soybean seeds also end
up using Monsantos pesticides and allow inspections of their fields. The linking of
seeds and pesticides purchases has also been found in the case of cotton cultivation
in South Asia, with problematic effects in terms of higher variability of output in
addition to higher monetary costs for farmers.
The number of patents granted worldwide in 1995 was about 710,000 and that at
the end of 1995 about 3.7 million patents were in force in the world. Since then,
there has been an increase in patenting activity, dominantly by large companies
based in the North. Thus, it has been estimated that industrial countries hold 97
percent of all patents, and that 90 percent of all technology and product patents are
held by MNCs strengthening of IPRs has taken place with a more effective
application of competition law, such as an increase in the number of compulsory
licenses granted in the United States to remedy anti-competitive practices. But
such conditions do not exist in most countries, nor is the institutional framework
strong enough vis--vis large multinational companies, to ensure the effectiveness
of anti-trust measures. In general, therefore, the nature of patent law itself needs to
be sensitive to the potential that may be implicit in it for creating or strengthening
monopoly behaviour, and it should contain provisions that allow for revoking of
patents or reduction of patent period if the holder is found guilty of anti-
competitive behaviour. This is especially necessary in the case of patents relating
to essential products.
Biodiversity and Indigenous Knowledge
Much technological progress in the recent past has been in the field of
biotechnology and genetic engineering, which in turn has been based on generic
resources that are often available only in the tropics (that is, mainly developing
countries). Increasingly, while research organized by private corporations into
genetic resources has drawn on the traditional knowledge of indigenous
communities, these communities and people themselves do not benefit from the
patents or even from the resulting inventions. The issue of acknowledging and
rewarding the contribution of indigenous and local communities is currently being
discussed internationally. The Convention on Biological Diversity has attempted to
deal with the question of peoples participation in biotechnological research
activities in areas where genetic resources are located, and share the fruits of such
research. Similarly the Food and Agriculture Organization of the UN in an
International Undertaking has developed the concept of farmers rights, defined
as the rights arising from the past present and future contribution of farmers in
conserving, improving and making available plant genetic resources.
These are important because they recognize the inherent communal and
participatory nature of invention and technological progress, an aspect that the
TRIPS approach has hitherto missed completely.
Reconciling the TRIPS agreement with these conventions and peoples rights may
become one of the focal points of re-negotiation. This could include the
amendment of Article 27.1 (requirement of universal novelty as a condition for
patentability), and Article 29 (obligation to prove that prior informed consent has
been obtained with regard to claimed biological materials). A new provision on
traditional knowledge could also be considered. An important point in this
regard is that those developing countries that are hastening to meet the
requirements of the TRIPS agreement may end up pushing through legislation that
does not adequately safeguard the traditional knowledge rights and therefore
negatively affects all citizens27. The new Patents Act in India is also being
criticized on grounds of inadequate protection to bio-diversity and traditional
knowledge.
Under the Industrial Property Bill 1999, Kenyas attempt to domesticate
an agreement on Trade-Related Aspects of Intellectual Property Rights is
unwittingly skewed in favour of foreign control over local genetic resources. In
particular, small-scale farmers ability to grow food through seed saving could be
severely curtailed due to failure to protect indigenous and traditional knowledge
systems. Doctors and international medical relief agencies in Kenya have launched
a vigorous campaign against the proposed Industrial Property Bill.
Life Forms and Plant Varieties
Article 27.3 (b) of TRIPS says that members may also exclude from patentability,
plants and animals other than microorganisms, and essentially biological processes
for the production of plants and animals other than non-biological and
microbiological processes. However, members shall provide for the protection of
plant varieties either by patents or an effective sui generis system or by any
combination thereof. These provisions were to be reviewed after four years, but no
systematic review has been put into place at the WTO.
There are two key issues involved with respect to the patenting of life
forms and the protection of plant varieties. The first relates to the process of bio-
piracy, that is the theft of biological resources and traditional knowledge from the
developing countries. Examples of bio-piracy abound - the case of the US patent
on the use of turmeric for healing wounds is a well-known one. The second aspect
is the advent of biotechnology. The ability to identify, isolates, and move genetic
materials across species types has aroused great commercial interest and
investment in biotechnology. Genetically engineered crops and foods are being
produced with the global market as their target; thus the need to obtain IPR
protection for such new products.
In relation to the patenting of life forms, Article 27.3(b) provides that
countries may exclude from patenting plants, animals and essentially biological
processes, but countries must patent micro-organisms, micro-biological and non-
biological processes. But there is no scientific or legal rationale for the distinction
made between the different types of life forms and of natural processes. In fact,
such a distinction goes against the basic principle of patent laws in many countries
that discoveries (as opposed to inventions) are not patentable.
The second aspect of Article 27.3 (b) is the protection of plant varieties.
Countries must protect plant varieties through the patent system, or through the
establishment of an effective sui generis (i.e., unique or of its own kind) system or
any combination of the two. Once again, there is no clear distinction that can be
drawn between plants and plant varieties from the scientific or legal perspectives.
However, there is a history of plant variety protection, in order to protect the
interests of commercial plant breeders, which sought protection for their crop
varieties but found it difficult to meet the requirements of the patent system. A
recent proposal of the African Group28 of WTO members is significant, as it
questions the TRIPS Agreements requirement for mandatory patenting of some
life .
Public Health
It has already been mentioned that an important human right, certain processes of
globalization erode the right to medical care, and this is especially true in the area
of public health. The implementation of public health policies may be restrained by
the implementation of TRIPS. It forces all countries, rich and poor, to adopt the
same, strict guidelines on respecting corporate patents, trademarks and copyrights.
The TRIPS Agreement guarantees monopoly ownership over, among other things,
pharmaceutical patents; thus, a WTO member may not be able to suspend
intellectual property rights even to address critical public-health29 issues.
One of the most important areas of public concern relates to the availability and
prices of life-saving drugs. The move from process patents to product patents
dramatically reduces the ability of companies in developing countries to produce
cheaper versions of important life-saving drugs, especially those relating to cancer
and HIV/AIDS. The extent to which this can make a difference is apparent in the
very wide differences in drug prices that can be observed in India, where process
patents were possible until the law which has just been passed in 2000, and other
developing countries in Asia where such patents were not allowed in the 1990s.
Environment
While several new innovations can have adverse ecological and environmental
implications, the area of biotechnology research and application is perhaps the
most fraught in this regard. Many environmentalists are concerned that the present
lack of controls and accountability in the system will be detrimental to the global
environment, especially as it is likely to accelerate biodiversity loss and could
threaten natural ecosystems.
Once an approach focused on public health is accepted, several articles may
require revision, for instance, Article 27.1 in order to exclude the patentability of
essential medicines listed by WHO; Article 30 so as to incorporate an explicit
recognition of an early working exception for the approval of generic products
before the expiration of a patent; and, Article 31 in order to clarify the right to
grant and the scope of compulsory licenses for public health reasons.

Within the WTO Committee on Trade and Environment, India has already
indicated the need to amend the TRIPS Agreement in order to facilitate the access
to and use of environmentally sound technologies. The proposal requires the
amendment of Article 31 (compulsory licenses) and Article 33 (duration of
patents), and suggests that patent holders should be subjected to an obligation of
transferring environmentally sound technologies on fair terms and most favorable
conditions. It also proposes a financial compensatory mechanism.
Compulsory Licensing
Compulsory licensing may occur due to the following reasons: (a) when reasons of
general interest justify it, national public authorities may allow the exploitation of a
patent by a third person without the owner's consent. This involves the government
giving a manufacturer; which could be a company, government agency, or other
party; a license to produce a drug for which another company holds a patent, in
exchange for the payment of a reasonable royalty to the patent holder. The effect is
to introduce generic competition and drive prices down, as has occurred in India.
Compulsory licensing can lower the price of medicines by 75% or more.
Zimbabwe, for example, could issue a license to a local company for an HIV/AIDS
drug manufactured by Bristol-Myers Squibb. The Zimbabwean firm would then
manufacture the drug for sale in Zimbabwe under a generic name and it would pay
a reasonable royalty to Bristol-Myers Squibb on each sale.
Five kinds of use without authorization of the right holder are expressly envisaged
by the TRIPS Agreement: (1) licences for public non-commercial use by the
Government; (2) licences granted to third parties authorized by the Government for
public non-commercial use; (3) licences granted in conditions of emergency or
extreme urgency; (4) licences granted to remedy a practice determined after
administrative or judicial process to be anti-competitive; and (5) licences arising
from a dependent patent.
In addition, since the Agreement does not state that these are the only cases
authorized, Member states are not limited with regard to the grounds on which they
may decide to grant a license without the authorization of the patent holder. They
are in practice only limited in regard to the procedure and conditions to be
followed. Thus, in principle, compulsory licences can be issued for considerations
of public health as well as to prevent anti-competitive practices and possible uses
connected with monopoly.
Parallel Imports
Another strategy for coping with the effects of TRIPS on high drug prices, for
example, is by parallel imports. Parallel importing involves a government or
another importer shopping in the world market for the lowest priced version of a
drug rather than accept the price at which it is sold in their country. In the
pharmaceutical market, as has been shown, prices tend to vary dramatically. For
instance, one study found that the retail prices in USD of 100 tablets of a
commonly used anti-ulcer drug Ranitidine marketed in
its brand name Zantac by the multinational drug company Glaxo in 15 developing
and developed countries of Asia Pacific varied from US $ 3 to 183. Australia and
New Zealand, two advanced affluent countries, recorded prices higher than eight
developing countries. Mongolia, a least developed country with the lowest per
capita GNP, recorded a price almost nine times that of Australia and New Zealand.
Since parallel imports involve imports of a product from one country and
resale without authorization of the original seller, to another, thereby allowing the
buyer to search for the lowest world price. Both the promotion and transfer of
technology, as well as public health or nutrition could justify derogation of the
patentees exclusive rights. Scrutiny of the exceptions existing in much national
legislation gives an idea of the different possibilities [Correa, 1999b]: (1) parallel
importation of the protected product; (2) acts carried out on a private basis and for
non-commercial purposes; (3) scientific research and experiments involving the
patented invention; (4) preparation of drugs by unit and on medical prescription in
pharmacy dispensaries; (5) a person being, in good faith, already in possession of
the invention covered by the patent; and (6) tests carried out before the expiry of
the patent to establish the bio-equivalence of a generic drug. Compulsory licensing
and parallel imports are currently permitted under the TRIPS rules. In addition to
these measures, there is scope within the TRIPS Agreement (under Article 30) for
a number of exceptions to exclusive patent rights.
Given these conditions, there is a wide range of exceptions that an be provided that
are within the scope of Article 30, such as :
(1) acts done privately and/or on a non-commercial scale, or for a non-commercial
purpose,
(2) use of the invention for research,
(3) use of the invention for teaching purposes,
(4) experimentation for teaching purposes,
(5) preparation of medicines under individual prescriptions,
(6) experiments made for the purpose of seeking regulatory approval for marketing
of a product after the expiry of a patent, and
(7) use of the invention by a third party that had used it bona fide before the date
of application of the patent.
The Doha Ministerial Meet
When the WTOs fourth ministerial meet ended on November 14 2001 at Doha,
Qatar, after an unscheduled sixth-day of negotiations, there were three declarations
that were released. These were: the Doha Development Agenda, or the
ministerial declaration which set out a road-map for a new round of trade talks,
even though there was no explicit mention of a round; the declaration on a set of
implementation issues raised by the developing countries; and a political
statement on the TRIPS agreement and public health. Agreement on these
declarations notwithstanding, there is many a question that remains unanswered. It
is unclear to what extent developing countries, led by India, were able to redress
existing inequalities in the world trading system and stall imposition of new
burdens through a new round of negotiations.
Gains for India
The principal gain is in the political statement dealing with patents and public
health. In the past, some African countries have won themselves the clearance to
obtain cheap imports of AIDS drugs from countries such as India, which do not yet
recognize product patents. More recently, even the governments in the US and
Canada, who have been votaries of strong patent protection, have expressed
willingness to resort to similar imports or to compulsorily license the production of
ciprofloxacin in the event of an Anthrax emergency. Spurred by these
developments, developing countries and a number of NGOs have been demanding
more clearly specified and enhanced flexibility in ignoring clauses of the Trade
Related Intellectual Property rights (TRIPS) agreement and overriding patents for
public health reasons.
The developed countries want such flexibility to be provided for only in the event
of a public health emergency such as an AIDS epidemic. As opposed to this,
Brazil, India, the sub-Saharan African countries and some NGOs have been
demanding greater autonomy for countries in deciding the public health grounds on
which they should be able to resort to such measures. The political statement does
go a part of the way in providing for such autonomy, besides making special
concessions to least developed countries. Though this does not constitute a formal
amendment of the Uruguay Round Agreement, inasmuch as such ministerial level
political statements are taken account of by dispute-settlement panels when
deciding on complaints of treaty violations, the developing countries have indeed
won themselves a victory vis--vis the developed countries and the drug
multinationals headquartered there.
The declaration states that:
(a) Each member has the right to grant compulsory licenses and the freedom to
determine the grounds upon which such licenses are granted; and
(b) Each member has the right to determine what constitutes a national emergency
or other circumstances of extreme urgency, it being understood that public health
crises, including those relating to HIV/AIDS, tuberculosis, malaria and other
epidemics, can represent a national emergency or other circumstances of extreme
urgency.

The second but minor victory for the developing countries was their ability to
get the ministerial meet to deliberate and make a declaration on the more than 40
issues relating to the implementation of the Uruguay Round that had been raised by
them over time.
However, the situation in countries, which have no manufacturing capacity to
be able to effectively utilize compulsory licensing, has been left ambiguous. The
declaration merely states: We recognize that the WTO Members with insufficient
or no manufacturing capacities in the pharmaceutical sector could face difficulties
in making effective use of compulsory licensing under the TRIPS Agreement. We
instruct the Council for TRIPS to find an expeditious solution to this problem and
to report to the General Council before the end of 2002. This does weaken the
flexibility available to some countries.
The declaration splits the implementation issues into those that were settled
at Doha and a number of outstanding issues, which would be negotiated as part of
the new round. However, not much should be made of the victory involved in
having some of the issues settled at Doha. Barring some agreement on the
imposition of anti-dumping duties by the advanced countries, the most crucial
implementation problems such as those relating to domestic support for agriculture
in the US and EU and trade in textiles have been just accepted as issues that are in
need of negotiation as part of a new enlarged round. That is, going against the
grain of demands from the developing countries, including India, in the run up to
Doha, that implementation issues need to be sorted out before any new round of
talks is initiated, almost all of those issues have been included in the agenda of the
new round.
The major setback here is that rather than settle the implementation issues in an
area where even the Uruguay Round had mandated a review that began last year,
the declaration ties up discussions on agriculture with discussions on a whole range
of issues that are to be taken up as part of a new round. This is significant because
that set of negotiations have been defined as a single undertaking, implying that
countries do not have the choice of joining an agreement on some of the issues
while opting to reject agreement on the rest. This would mean that the developing
countries are being made to pay twice - they were bullied into signing an
iniquitous agreement at the time of the Uruguay Round negotiations; and, now, to
redress some of that inequity they are being forced to offer more concessions in
new areas as part of the single undertaking mechanism. Third, after much hard
bargaining, the developing countries have managed to obtain a small concession in
the area of agricultural support in the developed countries.
The EU had, after much stonewalling, to agree to reduce, with a view to phasing
out, of agricultural export subsidies. This is only a small advance, since no date
has been set for the phase out and since the real issue, which is the reduction in the
use of permitted green- and blue-box subsidies by the developed countries to
subsidize their farming community, has been left to be renegotiated in the course
of the new round. This despite the evidence that many of those subsidies not only
affect the volume of world production and trade, but in the final analysis of world
prices as well.
The fourth minor victory is in the area of geographical indications. Geographical
indication is a kind of implicit copyright, provided, for example, to wine producers
from France for use of the word Champagne. Developing countries have managed
to include a provision to discuss the extension of that privilege to commodities
other than wine and spirits. If that discussion leads to such an extension, it could,
for example, help India to file for protection regarding use of terms such as
basmati, Kancheepuram, Kolhapuri, etc., on geographical grounds.
Finally, India has won a symbolic victory on the inclusion of the Singapore
issues. The immediate agenda for the new round includes, besides implementation
issues and the already mandated negotiations on agriculture and services, only
industrial tariffs, anti-dumping duties and certain aspects of trade and environment.
Core labour standards have just been referred to and the work of the ILO in this
area taken note of. And negotiations
on the so-called Singapore issues, such as foreign investment, competition policies,
public procurement and trade felicitation, though not altogether dropped, are to be
taken up as part of the new round only after reconsidering the matter and
generating an explicit consensus on negotiations on these at the time of the fifth
ministerial meet to be held in 2003. While agreeing to postpone final decision on

these issues, the developed countries have also put in a mandate for completion of
negotiations by 200532.
Problems that persist
A disappointment at the Doha meeting was that the promise of greater
transparency made after the fiasco at Seattle was not delivered. Doha made clear
the distance developing countries as a group have to travel if they are to make any
real difference to the unequal international trading order. The most disconcerting
was the innumerable ways in which the developed countries conspired to divide
the developing countries and win major concessions for them. The scenario as it
evolved was indeed quite instructive.
To start with, the US set itself up as a reasonable negotiator demanding some
liberalization of agricultural trade plus inclusion of issues such as industrial tariffs
and anti-dumping duties in the agenda for a new round of trade negotiations. The
EU, on the other hand, remained intransigent on agricultural protection and
subsidies, but put on the table a range of new issues varying from the environment
to investment and competition policies. This almost predetermined the
compromise, the EU gave in a bit on agricultural trade, the developed camp as a
whole agreed to discuss implementation, but in return got a new round, which at
the minimum had the issues raised by the US on the agenda and at the maximum
included all issues raised by the EU. The actual outcome included a new round that
had on its agenda a combination of issues lying somewhere between the minimal
demands of the US and the maximal demands of the EU.











Conclusion
Infrastructure in relation to post-harvest technology, including rural
communication, godowns, refrigerated storage, and transportation arrangements
for perishable commodities is inadequate. The World Trade Agreement stringent
requirements of sanitary and phytosanitary measures are yet to be understood.
There is an urgent need to improve yield per drop of water. During the last few
decades, farmers in various countries have shifted from flow irrigation to sprinkler,
drip, and now membrane irrigation. Plant-scale agronomy is replacing field-scale
agronomy. Precision farming techniques need to be adopted. Contract farming and
corporate farming, with increased investments needs to grow. There is indeed an
urgent need to quickly implement the Plant Variety Protection and Farmers Rights
Act as well as Biodiversity Act without delay. Indian farmers need adequate
information. Computerized systems of information need to be developed and the
benefits of cyberspace should be extended to poor farm families.
Given the complexities and escape routes available to the western world in the
implementation of the agreements, one could question the methodologies followed
in the reduction commitment norms. Market-access commitments have been
tampered with dirty tariffication. Moreover, already low rates of tariffs have been
reduced as compared to a reduction in high tariff rates.35 On the other hand, some
of Indias low tariff bindings may be re-negotiated. Calculation of price support
within the product-specific AMS is not clearly defined in the text. Therefore, it
would be a good idea to bring a consensus among the member countries on this
issue. Developing countries that have net-taxed their agriculture, may ask for credit
of some sorts for having negative AMS. Further, blue-box policies may be
suggested to be eliminated altogether or moved out of the exemptions for the
calculation of current AMS. Moreover, along with export subsidies, export credits
and guarantees may also be suggested to be brought under reduction commitments.
The SPS and TBT agreements do affect agricultural markets. Modernizing our
agricultural processing will not only enhance our export-market potential, it would
also reform domestic food quality.

Understanding the direction and magnitude of the effects of WTO agreements on
Indian agriculture is a very difficult proposition. Some attempts have been made in
the past to quantify the effects of the WTO Agreement and trade liberalization on
Indian agriculture. While the direction of the gains to Indian agriculture may be
correct, one may not agree with the assumptions of their models, and the
magnitude and distribution of these gains. In the presence of imperfectly
competitive export market structures, the increase in terms-of-trade for Indian
agriculture may not be as high as predicted by the computable general equilibrium
studies that implicitly assume perfectly competitive markets. Whatever little
improvement may occur in the terms-of-trade, it will have negative or at best very
little effect on farmers welfare, as supply response to terms-of-trade improvement
is ambiguous. On this ground, developing countries may ask for further and sharp
reductions in the export subsidies and domestic support given by the developed
world. Indian agriculture will stand to gain through improvements in irrigation,
transport, agricultural extension services and research. Expenditures on such items
are exempt from domestic support reduction commitments under the green-box
policies.
In the emerging post-WTO world economic order, direct competition from
imported goods cannot be prevented. With the eventual dismantling of the
quantitative restrictions and reductions of industrial tariffs, our choice of warding
off foreign competition is nothing more than wishful thinking. So, we must focus
on how India can use the changed conditions to earn benefits. Therefore, the Swiss
Formula may be suggested to reduce higher tariffs by steeper cuts. There is a need
to commercialize the farm operations by improving the management and
marketing techniques. This can be achieved by establishing mutually beneficial
linkages with the industry. Thus, there is plenty of scope for India to change from a
mere producer to an exporter of value-added and processed farm products and high
quality seeds.