INTRODUCTION

The birth of World Trade Organization (WTO) on January 1, 1995 holds a great promise for the
entire world economy in respect of international trade. This World Trade Organization will
administer the new global trade rules establishing the rule of law in international trade, which
amounted to nearly five trillion dollar last year for goods and services. Peter Sutherland, the first
Director General of WTO recently said, The WTO binds nations in a global co-operative
endeavor to raise incomes and create good jobs through fair and open trade. The World Trade
Organization (WTO) founded on January 1, 1995 as successor to the General Agreement on
Trade and Tariff (GATT), is based in Geneva, While GATT focused primarily on trade in goods,
the WTO also covers cross-border trade in service and ideas, and the movement of personnel.
Objectives of the WTO:
The agreement establishing WTO reiterated the objectives of the GATT. More specifically, the
WTO outlined its objectives to include the following under its scope:
i. Raise standard of living and incomes by ensuring. (i) Full employment, (ii) expanding
production and trade, and (iii) optimal use of worlds resources;
ii. Adopt the idea of sustainable development in relation to the optimal use of worlds resources,
i.e. reinforce the need to protect and preserve the environment in a manner consistent with the
various levels of national economic development;
iii. Recognize the need for positive efforts to ensure that developing countries secure a better
share of growth in international trade;
iv. To demolish all hurdles to an open world trading system and usher in international economic
renaissance because the world trade is an effective instrument to foster economic growth;

HISTORY
After going on for seven years, the multinational trade negotiations among states (Uruguay
Round) reached their final destination on 15 December, 1993 when delegations of 101 countries
gave their approval by consensus to a new GATT agreement. The purpose of this agreement was
to secure through liberalized global markets, rapid economic development with a view to
increase international income by 200 to 300 billion dollars by the 21st century.
After the consensus agreement of December, 1993 the representatives of 125 countries including
India, signed the new treaty on 15 April, 1994 at Marrakech, Morocco. This gave rise to the hope
that by it international economic order will witness the century of justice, equality and
cooperation. The international tariffs shall be lessened by 40%. After the signing of this treaty a
joint declaration was issued in which it was hoped that by the introduction of trade liberalization
and by of definite building of rules of economic order, the internationalization of trade

liberalization and by a definite building of rules of economic order, the international trade would
show a rapid progress. It was decided to establish a World Trade Organization and for this a
committee was established.
Over the years, GATT evolved through eight rounds of multilateral trade negotiations, the last
and most extensive being the Uruguay Round (1986-1994).The WTOs creation was agreed to at
the end of the 1986-93 Uruguay Round of international trade negotiations. The agreement was
formalized in the Final Act of the Round, which was signed by trade ministers in Marrakesh,
Morocco, in April 1994. Launched on January 1, 1995, it replaced the old General Agreement on
Tariffs and Trade (GATT), which had acted as an interim world trade watchdog since 1948.
The new GATT and WTO opened a new era of liberalized international trade. However, it also
gave rise to the possibility of an increased pressure of the developed countries on the developing
countries. Attempts on the part of the developed countries to incorporate a labor clause or a
special clause in the GATT reflected such a possibility. It has to be checked and negotiated by the
developing countries.

AGREEMENT OF URUGUAY
ORGANIASTION (WTO)

ROUND

AND

WORLD

TRADE

The seven agreement of Uruguay round and WTO are as follows: I. Agreement on Manufactured
Goods II. Agreement on Agriculture III. Agreement on Trade in Textiles and Clothing (MultiFiber Arrangement) IV. Agreement on Trade-related Investment Measures (TRIMS) V.
Agreement on Trade-Related Intellectual Property Rights (TRIPS) VI. Agreement on Trade in
Services VII. Agreement on Anti-dumping.
I. Agreement on Manufactured Goods:
With regard to manufactured goods other than textiles the developed nations agreed to reduce
their tariffs by 40 per cent to an average of 3-8 per cent from the pre-UR level of 3-6 per cent.
II. Agreement on Agriculture:
It was for the first time that agriculture was brought under the GATT purview and major areas
were covered by the treaty.
According to the treaty, countries with closed farms are to import at least three per cent of
domestic consumption of a product, raising the percentage to 5 over six years. Trade distorting
support for farmers is to be cut by 20 per cent in a period of six years for developed countries,
and by 13.3 per cent for the developing countries. All non-tariff barriers like quotas are to be
converted into tariffs that would be reduced by 36 per cent for industrialized countries, and by 24
per cent for developing countries.

The cuts will be implemented over six years for developed countries and 10 years for developing
nations. The value of the direct export subsidies will be cut by 36 per cent over six years, and
volume by 21 per cent. The base period is 1986-90 or 1991-92 if exports were higher in that
period. The poorest nations, however, will be exempted from farm reforms. Golden and Winters
(1992) have described as how the structural adjustment programmers affect the country
dominated by agriculture.
III. Agreement on Trade in Textiles and Clothing (Multi-Fiber Arrangement):
The treaty allows for abolishing the Multi-Fiber Arrangement (MFA) in international textile trade
which allows quota restrictions by importing countries largely, the developed nations on export
countries. Beginning in 1995, the MFA is to be erased within a decade so that textile and clothing
is integrated into GATT. All parties to GATT must abide by its textile and clothing agreement to
ensure market access, enforcement of policies favoring a fair international climate for trading
activities and non-discrimination against imports. Special treatment is envisaged for member
nations that are not part of the MFA agreement and for new members and least-developed
economies.
IV. Agreement on Trade-related Investment Measures (TRIMS):
The TRIMS agreement aims to remove any TRIMS that is inconsistent with Article III of GATT
that provides for national treatment of foreign investment, and Article XI that prohibits
quantitative restrictions.
According to it, investment measures inconsistent with GATT provisions are imposing the
foreign investors (i) to use local inputs, (ii) to produce for exports as a condition to obtain
imported goods as inputs, (iii) to balance foreign exchange outgo on importing inputs with
foreign exchange earnings through export, and (iv) not to export more than a specified
proportion of the local production. According to Article 5(2) of the TRIMS Agreement, the
deadline for the elimination of TRIMS inconsistent with GATT terms is not the same for all
countries: the industrialized countries have to eliminate them by 1, July 1997, the developing
nations by 2000 AD, and the least developed countries (LDCs) by 2002 AD.
V. Agreement on Trade-Related Intellectual Property Rights (TRIPS):
The agreement on TRIPS aims at introducing fair trade by taking the different standards
prevalent worldwide for protection and implementation of Intellectual Property Rights (IPRS) in
the areas of copyright, trademarks, trade secrets, industrial designs, integrated circuits,
geographical indications and patents.
Under the provisions on rental rights, which have been introduced, authors of computer
programs and producer of sound recordings will be able to allow or stop commercial renting of

their works with regard to the public. The TRIPS agreement mentions the kind of rights that
would be recognized as trade-mark or service mark capable of protection.
It also details the rights of trade mark and service mark owners, the use and licensing of these
marks and their protection. Regarding intellectual property rights for trade secrets, those having
commercial significance must be given protection by parties to GATT against a breach of
confidence and unfair commercial use. Test data for pharmaceutical and agricultural chemicals
must also be given protection from unfair commercial exploitation.
Industrial designs will be entitled to a protection for 10 years. Independently created designs
that are new or original shall be protected. There is an option to exclude from protection, those
designs dictated by technical or functional considerations, as against aesthetic consideration
which constitutes the coverage of industrial designs. Protection to layout designs of integrated
circuits, based on the Washington Treaty on Intellectual Property in report of integrated circuits
administered by WIPO, is to be provided for at least 10 years.
The rights provided for farmers allow them to (i) use all seeds and not only those patented by
seed companies, and some parts of them for further use, and (ii) exchange seeds amongst
themselves as they desire. The researchers can freely use a patented seed to produce a different
seed variety. TRIPS provides for compulsory patenting of biotechnological inventions. Patents
must also be made available for microbiological processes.
Thus, GATT treaty provides for patenting of drugs and chemicals. Micro-organisms for which
patents are to be issued include minute life forms such as bacteria, virus, algae, fungi, as also
genes which are used in different areas such as medicine, industry and environment. Under the
GATT proposals, a mere discovery of naturally occurring gene sequence cannot be patented.
VI. Agreement on Trade in Services:
The General Agreement on Trade in Services (GATS) brought, for the first time, trade in services
like banking, insurance, travel, maritime transportation, mobility of labor, etc., within the ambit
of negotiation. For the purpose of regulating trade in services, the trade has been defined to
include four modes of supply: supply through cross-border movement; movement of consumers,
commercial presence; and presence of natural persons. The agreement contains three elements: a
framework of general rules and disciplines; annexes addressing special conditions relating to
individual sectors; and national schedules of market areas commitment.
It is adapted on the basic GATT principles such as MFN (Most Favored Nation) status to other
member nations, non-discrimination, maintenance of transparency and a commitment for
liberalization in general terms.

VII. Agreement on Anti-dumping:

The anti-dumping agreement allows anti-dumping measures of an item which is exported at a
price much less than its normal value, as such imports would adversely affect the domestic
industry concerned in the importing country. The agreement provides criteria to determine that a
product is dumped and is responsible for affecting the domestic industry along with the rules
involved in any anti-dumping investigation activity.
The agreement specifies the valid time period of any anti-dumping action that is taken. In
addition to the above, the Uruguay Round also reached agreements on pre-shipment inspection,
rules of origin, import licensing, safeguards, etc. (Sauve, 1994).

STATUS
It is officially defined as the legal and institutional foundation of the multilateral trading
system. Unlike GATT, the WTO is a permanent organization created by international treaty
ratified by the governments and legislatures of member states.
As the principle international body concerned with solving trade problems between countries and
providing a forum for multilateral trade negotiations, it has global status similar to that of the
International Monetary Fund and the World Bank. But unlike them, it is not a United Nations
agency although it has a co-operative relationship with the United Nations.
Its underlying documents are the General Agreement a 38-article code aimed at ensuring open
and fair trade in goods, services, agricultural produce and textiles and 500 pages of specific
accords reached in the Uruguay Round.

LEADERSHIP STRUCTURE
The WTO is headed by a director-general (currently Roberto Azevedo,) who has four deputies
from different member states. The WTOs ruling body is the General Council, comprising each
member countrys permanent envoys. It sits in Geneva an average of once a month. Its supreme
authority is the Ministerial Conference, to be held every two years.
The General Council appoints the director-general to a four-year term after consultations among
member countries.

MEMBERSHIP
The WTO has 162 members and 22 observer governments. Kazakhstan is the most recent
member, having joined on 30 November, 2015. Afghanistan and Liberia had their memberships
approved in December 2015, and subject to their ratification of the agreement they will become
members in 2016. In addition to states, the European Union is a member. WTO members do not
have to be fully independent states. 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.

ORGANISATIONAL 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.

BASIC PRINCIPLES
In its broad perspective, the WTO was to strive at creating a liberal and open trading
environment by which enterprises could trade under conditions of fair and undistorted
competition.

Towards the achievement of this, the four principles that were laid down to guide the trading
rules of its members are as follows:

Most Favored Nation (MFN) Treatment:

The principle of MFN treatment laid that tariffs and regulations must be applied to imports or
exports without discrimination among members. In other words, no member country was to be
accorded a treatment of a favored nation.

National Treatment:

It prevents discrimination between imported products and equivalent domestically produced

goods, especially in levying internal taxes and domestic regulations.

Protection through Tariffs:

While advocating liberal trade, the WTO recognizes that some members may need to protect
their domestic production against foreign competitors. The underlying principle was, however,
that such protections through tariffs must be kept at low levels in what was called as bound tariff
framework.

Bound Tariffs:

The principle of bound tariff advises the member countries to reduce and gradually eliminate
protection to domestic production. The reduction and ultimate phase-outs of tariffs was meant to
provide the cushion time required for gaining competitive strength and the tariffs were to be
phased out firmly in a committed time frame.

SALIENT FEATURES OF WTO

Some of the most important salient features of world trade organization are as follows: (a) NonDiscrimination (b) Free Trade (c) Stability in the Trading System (d) Promotion of Fair
Competition (e) Special Concern for Developing Countries (f) Market Access Commitment (g)
Decision at the Ministerial Level Meeting (h) Wider Range of Issues (i) Multilateral Trading
System.
(a) Non-Discrimination:
This is the most important principle on which WTO has been founded. The principle of nondiscrimination means two things. (1) All trading partners will be granted the most favored nation
(MFN) status, that is, each member state of WTO will treat every other member state equally as
the most favored nation doing trade. No discrimination will be done by a member of state
between different trading states who are also members of WTO. However, some exceptions have
been provided in this regard, for example, in case regional trade agreements exist. (1) Foreign

goods, services, trademarks, patents and copyrights shall be given the same treatment as is given
to nationals of a country.
(b) Free Trade:
The objective of WTO, as in case of GATT, is to promote free trade among nations through
negotiations. For this purpose WTO has to work for progressive liberalization of trade through
reduction in tariffs and removal of quantitative restrictions on imports by member countries.
(c) Stability in the Trading System:
Under WTO agreements member states are committed not to raise tariff and non-tariff trade
barriers arbitrarily. This provides stability and predictability to the trading system.
(d) Promotion of Fair Competition:
WTO system of multilateral trading system provides for transparent, fair and undistorted
competition among the various countries. Rules such as Most Favored Nation (MFN) treatment
to all trading parties, equal treatment to foreign goods, patents and copyrights as with nationals
ensure fair competition among trading countries. Besides, WTO agreement provides for
discouraging unfair competitive practices such as export subsidies and dumping (that is, selling
products abroad below domestic prices to gain market access).
(e) Special Concern for Developing Countries:
WTO has shown special concern for the developing countries as it has given them more time to
adjust to agreements under it and also some special privileges. An important feature of WTO is
that it would deal with not only the disputes in the area of trade in goods but a whole range of
issues such services and intellectual property rights.
(f) Market Access Commitment:
WTO agreements which seek to establish multilateral trading system require the member
countries to undertake market access commitment on reciprocity basis. In fact, market access is
ensured by abolishing non-tariff barriers as well as by reducing tariffs. The understanding on
market access requires that member countries will cut tariffs on industrial goods and agricultural
products by about 37 per cent. In order to provide market access for the products of developing
countries to the USA, USA agreed to cut down farm subsidies. The developing countries are also
required to reduce agricultural subsidies to the level of 10 per cent of the value of agricultural
produce. In the area of trade in services, market access has been ensured by giving Foreign
Service suppliers the same treatment as domestic service suppliers.
(g) Decision at the Ministerial Level Meeting:

Another feature of WTO agreement is that it has upgraded decision-making at the ministerial
level. Important decisions regarding trade related matters are to be taken at the Ministerial level
meetings. Ministerial level meetings have now been incorporated in the legal structure of WTO.
(h) Wider Range of Issues:
Another important feature of WTO is that it will deal with not only issues and disputes relating to
trade in goods but also the whole range of issues concerning trade in services and intellectual
property rights.
(i) Multilateral Trading System:
The most important features of WTO is that it seeks to establish just and fair multilateral system
of international trade wherein the developed countries, the developing countries, and the least
developing countries all have equal opportunities for market access of their products in foreign
countries and wherein discriminatory trade barriers and unjust Government support to exports by
different countries have to be eliminated.

FUNCTIONS OF WTO
The WTO is meant to perform the following functions:
i. Administer through various councils and committees, the 29 agreements contained in the final
Act of the Uruguay round of world trade talks, plus a number of plurilateral agreements,
including those on government procurement;
ii. Oversee the implementation of the significant tariff cuts (average 40 per cent) and reduction of
non-tariff measures agreed to in the trade negotiations;
iii. Act as a watchdog of international trade by regularly examining the trade regimes of
individual members;
iv. Ensure that members notify in detail various trade measures and statistics, which are to be
maintained by the WTO in a large database;
v. Provide several conciliatory mechanisms for arriving at an amicable solution to trade conflicts
among members;
vi. Resolve trade disputes that cannot be solved through bilateral talks by adjudication in the
WTO dispute settlement court;
vii. Act as a management consultant for world trade by having its economists keep a close watchon the pulse of the global economy and provide inputs to WTO by studies conducted on the main
issues of the day; and

viii. Assist developing countries through its secretariat to implement the Uruguay round
agreements through a newly-established development division and a technical co-operation and
training division.
The WTO is, thus, a forum where countries continuously negotiate the exchange of trade
concessions and trade restrictions all over the world. The WTO has a substantial agenda for
further negotiations in many areas, notably certain services sectors.

WTO AGREEMENTS
The WTOs rule and the agreements are the result of negotiations between the members. The
current sets were the outcome to the 1986-93 Uruguay Round negotiations which included a
major revision of the original General Agreement on Tariffs and Trade (GATI).
GATT is now the WTOs principal rule-book for trade in goods. The Uruguay Round also
created new rules for dealing with trade in services, relevant aspects of intellectual property,
dispute settlement and trade policy reviews. The complete set runs to some 30,000 pages
consisting of about 30 agreements and separate commitments (called schedules) made by
individual members in specific areas such as, lower customs duty rates and services marketopening. Through these agreements, WTO members operate a non-discriminatory trading system
that spells out their rights and their obligations. Each country receives guarantees that its exports
will be treated fairly and consistently in other countries markets. Each country promises to do
the same for imports into its own market. The system also gives developing countries some
flexibility in implementing their commitments.
(a) Goods:
It all began with trade in goods. From 1947 to 1994, GATT was the forum for negotiating lower
customs duty rates and other trade barriers; the text of the General Agreement spelt out
important, rules, particularly non-discriminations since 1995, the updated GATT has become the
WTO s umbrella agreement for trade in goods. It has annexes dealing with specific sectors such
as, agriculture and textiles and with specific issues such as, state trading, product standards,
subsidies and action taken against dumping.
(b) Services:
Banks, insurance firms, telecommunication companies, tour operators, hotel chains and transport
companies looking to do business abroad can now enjoy the same principles of free and fair that
originally only applied to trade in goods. These principles appear in the new General Agreement
on Trade in Services (GATS). WTO members have also made individual commitments under
GATS stating which of their services sectors, they are willing to open for foreign competition
and how open those markets are.

(c) Intellectual Property:

The WTOs intellectual property agreement amounts to rules for trade and investment in ideas
and creativity. The rules state how copyrights, patents, trademarks, geographical names used to
identify products, industrial designs, integrated circuit layout designs and undisclosed
information such as trade secrets intellectual property should be protected when trade is
involved.
(d) Dispute Settlement:
The WTOs procedure for resolving trade quarrels under the Dispute Settlement Understanding
is vital for enforcing the rules and therefore, for ensuring that trade flows smoothly. Countries
bring disputes to the WTO if they think their rights under the agreements are being infringed.
Judgments by specially appointed independent experts are based on interpretations of the
agreements and individual countries commitments.
The system encourages countries to settle their differences through consultation. Failing that,
they can follow a carefully mapped out, stage-by-stage procedure that includes the possibility of
the ruling by a panel of experts and the chance to appeal the ruling on legal grounds.
Confidence in the system is Bourne out by the number of cases brought to the WTO, around 300
cases in eight years compared to the 300 disputes dealt with during the entire life of GATT
(1947-94).
(e) Policy Review:
The Trade Policy Review Mechanisms purpose is to improve transparency, to create a greater
understanding of the policies that countries are adopting and to assess their impact. Many
members also see the reviews as constructive feedback on their policies.
All WTO members must undergo periodic scrutiny, each review containing reports by the
country concerned and the WTO Secretariat.

INDIAS ROLE IN WORLD TRADE ORGANISATION

India has consistently taken the stand that the launch of any new round of talks depends on a full
convergence of views amongst the entire WTO membership on the scope and framework for
such negotiations. Our more urgent task is to resolve the concerns of developing countries on
implementation of the Uruguay Round agreements. We are against calls for new commitments
from the developing world for achieving symmetry and equity in the existing agreements. It is in
favor of non-trade issues be permanently kept off the negotiating table.

Incorporating Livelihood Clause:

Ensuring food and livelihood security is critical, particularly for a large agrarian economy like
India. Indias proposal in ongoing negotiations includes suggestions like allowing developing
countries to maintain appropriate level of tariff bindings, commensurate with their
developmental needs and the prevailing distortions in international markets.
We are also seeking a separate safeguard mechanism including provision for imposition of
quantitative restrictions under specified circumstances, particularly in case of a surge in imports
or decline in prices; exemptions for developing countries from obligations to provide minimum
market access; exemptions of all measures taken by developing countries for poverty alleviation,
rural development and rural employment.
Our immediate priority is that the agreements reached earlier with the developing countries
should be implemented so as to correct inherent imbalances in some of the Uruguay Round
agreements. Sincere and meaningful implementation of commitments undertaken by developed
countries and operationalization of all special and differential treatment clauses for developing
countries in the various agreements is made.
We also strongly favor extension of higher levels of protection to the geographical indications for
products like Basmati rice, Darjeeling tea, and Alphonso mangoes at par with that provided to
wines and spirits under the Trade-related Aspects of Intellectual Property Rights (TRIPS)
agreement. In the TRIMS (Agreement on Trade-Related Investment Measures) review we want
flexibility for developing countries in adopting appropriate domestic policy while permitting
foreign investment.

Developed Countries Demand and Singapore Issues:

Developed countries are pushing for a comprehensive agenda like rules on investment,
environment, competition policy, trade facilitation, transparency in government procurement,
labor standards etc. They are pressing for incorporating non-trade issues of environment and
labor standards.

Using as an excuse that production of products in developing countries are not being done under
proper environment and labor standards they can ban the imports of their products or impose
other non-tariff restrictions. The developing countries are opposed to these non-trade issues

THE GAINS INDIA HAS ACHIEVED BY JOINING WTO

Now almost a decade has passed when India joined WTO from the very beginning in Jan. 1,
1995. India has benefitted from joining WTO, despite the failures of two ministerial level
conferences at Seattle and Cancun. We explain below the gains India has achieved by joining
WTO.

WTO Agreement and Agricultural Sector:

The major fear was found among India farmers who thought that they would be only on the
mercy of multinational corporations who control the distribution of vital agricultural inputs, such
as seeds, fertilizers, pesticides and insecticides.
Only a few farmers will benefit from the improved inputs of the multinationals. Small farmers
will become land less laborer in the course of time and agriculture in India will no longer remain
a source of livelihood for two-thirds of India s population. It will only add to their staggering
poverty.
The agreement proposes that developing countries should slash direct subsidies on agricultural
products (product subsidies) as well as subsidies on inputs like electricity, water, credit and
fertilizers (non-product subsidies) to less than 10 percent of the product value.
Developed countries, on the other hand, should slash these subsidies over a period of time to 5
percent. Small and poor farmers are however exempted from this clause. At present, Indias total
farm subsidies are below 6 percent and therefore, this provision of the Agreement will not
adversely affect in India.

Exports and Imports:

According to the recent estimates, Indias exports have almost doubled in less than a decade.
With exports going up from $26.33 billion in 1994-1995 when India joined WTO to $51.7 billion
in 2002-03. Besides, Indias share in total world exports of goods and commercial services
increased from 0.6 in 1995 to 0.86 in 2001 whereas its total world imports of goods and
commercial services increased from 0.78 in 1995 to 0.99 per cent during the same period.

Exports of Textiles and Clothing:

According to a WTO agreement known as Multi- Fiber Agreement (MFA) entire quotas in textile
and clothing trade will come to end from January 1, 2005. Till now WTO agreement has required

the member countries to phase out their existing quotas by the Dec. 31, 2004. It has further
restrained them from expanding the size of quotas annually.
These measures have helped India to increase its market access for its textile and clothing
products. With effect from January 1, 2005, the entire textiles and clothing trade would get
integrated into the multilateral trade framework of WTO.
According to recent report (Feb. 2004), after China, India is largest gainer from the end of quotas
and the consequent free trade in textiles and clothing. It is estimated that export market of $500
billion in garments alone with employment potential of 30 million jobs will be up for grabs from
which India can get a good share.
Five years ago, Indian economists feared the countrys fabrics sector would be steamrollered by
China. But recent reforms in the industry have given hope. India could see apparel exports rise
between 40-100 per cent ($6.7 billion in 2001). A target of $50 billion in textile and clothing
exports by 2010 is no longer a pipe dream.

Gain in Exports of Software Services:

Further, thanks to WTO agreement on free trade in services India has become a world leader in
software services which are contributing a lot to foreign exchange earnings and employment
generation for Indians.

A Good Deal of Earnings from BPO:

BPO (Business Processing Outsourcing Services) from USA and UK are coming to India which
have enabled us to earn not only foreign exchange but also to generate a large number of
employment opportunities for educated Indian youth.
Recently, there is resentment in the USA against BPO to India and other countries because it is
causing loss of jobs in the USA and UK. But BPO to India and other developing countries are in
accordance with the comparative advantage principle and raises profits of American companies
which on being used for further investment will generate more employment opportunities in the
USA.

Indias Demand from the Industrialized Countries about Agricultural Subsidies and
Movement of Labor:

In its negotiating proposal, India has demanded substantial reduction in tariffs, elimination of
trade-distorting domestic support and export subsidies in developed countries. The movement of
professionals (i.e., labor) from developing countries is constrained by a number of factors such
as lack of specific sectorial commitments, lack of mutual recognition of qualifications, lack of
transparency in administration of visa regimes, discriminatory practices in use of Economic
Needs Test and social security contributions. India has, therefore, sought liberalization of

movement of professionals through removal of these constraints and submitted a paper for
discussion at the ongoing negotiations.

No Increase in Imports of Food Grains:

As per agreement, it is not expected to raise Indias imports of food grains. It is stated in the
treaty that the poor countries facing balance of payments problems may continue to impose Tariff
on the import of food grains.
India can avail of this provision and avoid imports of foodstuffs, thereby stay off easy imports of
food grains. It is doubtful that with nearly 100 percent tariff duty on imports of food grains, 150
percent on processed foods and 300 percent on edible oils, imports can hardly stain in the
domestic markets.

Freedom to Use Seeds:

It is doubtful that only rich and big farmers would afford the use of brand seeds. This, in turn
will obviously widen the gap between the rich and the poor farmers. It is again a baseless fear.
Under WTO Agreement the farmers are free to exchange their seeds with the other. They,
therefore, need not necessarily buy seeds from the open market.