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The Bretton Woods conference held in 1944 was the starting point for a new order. The world economy was to be organized around three cornerstones: the International Monetary Fund (IMF), the International Trade Organization (ITO), and the International Bank for Reconstruction and Development (IBRD). In 1946 while negotiations on the charter of the ITO were taking place, a group of countries came to a consensus that there was a need for immediate tariff reductions. The United states took an initiate in preparing document on a general agreement on tariffs and trade. Subsequent deliberations between the group of 23 nations, meeting in Geneva, resulted in a set of mutual tariff reductions which were confined as the GATT. The signing of the Final Act of the Uruguay Round by member nations of GATT in April 1994 paved the way for the setting up of the World Trade Organization (WTO). This paper consists of main WTO agreements and different categories, India’s prospective scenario, main shortcomings and benefits proclaimed for India, finally overall impact of WTO on Indian economy.

To study and understand the different provisions and agreements of WTO and their impact on Indian economy (benefits and shortcomings).

According to Bagwell and Staiger (2002), the GATT/WTO creates a system based on the guiding principles of reciprocity and enforcement (through permissible retaliation) under which large countries find it mutually beneficial to lower tariffs. These principles encourage trade, effectively locking in liberalization policies and low tariffs by removing a major incentive to game the system.

According to Winters (2002), accession can include trade reform that induces efficiency in the use and allocation of resources and fosters long-run growth. Accession can also be part of a series of policies that create more efficient and competitive markets and more transparent and predictable policy making .

Subramanian and Wei (2007) also find evidence that developing WTO members that entered under the WTO framework rather than being grandfathered in from the GATT were more likely to have higher trade resulting from WTO membership, although signs of trade growth may come over time as their commitments are phased in. They argue that industrial countries benefited more from their membership in the past because industrial countries liberalized their trade barriers more fully, the WTO was focused on liberalizing trade in manufacturing, and countries were often granted special exemptions for trade in clothing, footwear, and food.

Tang and Wei (2009) find that accession to the WTO tends to raise a developing country’s income and increase its growth rate by about two percentage points for approximately five years if the country was subject to rigorous accession procedures.

According to a joint report by the World Bank and WTO (2015), trade openness achieved through the WTO can spur economic growth in developing countries by helping them to improve the efficiency of resource allocation, exploit comparative advantages, and foster growth among the most globally competitive sectors and domestic firms.

Chemutai and Escaith (2017) find that WTO accessions for least developed countries (LDCs) have taken 12.75 years on average, against 9.5 years for other countries.

World Trade Organisation:

India become a founder member of the World Trade Organization, by ratifying the WTO Agreement on December 30,1994. The former GATT was not really an organization: it was merely a legal arrangement. On the other hand, WTO is new international organization set up as a permanent body and designed to play the role of a watchdog in the spheres of trade in goods, trade in services, foreign investment, intellectual property rights etc. It has five functions as set out in article III:        

First, the WTO shall facilitate the implementation, administration and operation, and further the objectives, of this Agreement and of the multilateral Trade Agreement, and shall also provide the framework for the implementation, administration and operation of the plurilateral trade Agreements.

Second, the WTO shall provide the forum for negotiations among its member concerning their multilateral trade relations in matters dealt with under the Agreements in the annexes to this agreement.

Third, the WTO shall administer the undertaking on the rules and procedure governing the settlement of disputes.

Fourth, the WTO shall administer the trade Policy Review mechanism.

Fifth, with a view to achieving  greater coherence in global economic policy- making, the WTO shall cooperate, as appropriate, with International Monetary Fund and with the International Bank for Reconstruction and Development and its affiliated agencies.

Main Agreements of World Trade Orgnisation:

The Dunkel Proposals, which ultimately constituted the basis of the emergence of WTO, were very comprehensive as these encompass as many as 28 areas concerning international trade. These are:

1. Final Act embodying the results of the Uruguay Round of Multilateral Trade Negotiations,

2.  Measures in favour of least of Least-developed countries,

3. Trade in Goods (Annex 1)

4. Rules in Origin

5. Preshipment  Inspection

6. Anti Dumping

7. Technical Barriers to trade

8. Import licensing Procedures

9. Subsidies and countervailing Duties

10. Customs Valuation

11. Government Procurement

12. Agriculture

13. Sanitary and Phytosanitary Measures Safeguards

14. Trade related Aspects of Investment Measures

15. Textile and clothing

16. Article II (b) of the GATT

17. Article XVII of the GATT

18. Balance of Payments provisions of the GATT

19. Understanding on Rules and Procedures on Dispute Settlement

20. Elements of an Integrated Dispute Settlement

21. Suspension of Concessions

22. Article XXIV of the GATT

23. Article XXVIII of the GATT

24. Article XXXV of the GATT

25. Functioning of the GATT System

26. Trade in Services

27. Trade Related Aspects of Intellectual Property Rights, including trade in counterfeit Goods(Annex III) and

28. Agreement establishing the Multilateral Trade Organizations (Annex IV)

Main Categories of Agreement of World Trade Orgnisation:

There are main agreements of WTO can be divided into the following categories:
1. Agreement on Agriculture
2. Agreement on trade in textiles and clothing ( Multi Fiber Agreement )
3. Agreement on Market Access
4. Agreement on Trade Related Investment Measures (TRIMs)
5. Agreement on Trade Related Intellectual Property Rights (TRIPs)
6. Agreement on Services
7.  Dispute Settlement Body

India’s Perspective of WTO Provisions:

 India become a founder member of the World Trade Organization, by ratifying the WTO Agreement on December 30,1994. The perspective of India towards the World trade Organization can be observed by the following points:

1. Expectations from phasing out Multi Fiber Agreement: From the perspectives of India it has been observed that India’s expectations from phasing out Multi Fiber Agreement has been positive as phasing out of Multi Fiber Agreement will result in the increase in value of India’s shares in the World Exports from 0.5 percent to 1 percent. Also phasing out of the Multi Fiber Agreement will also be favourable for India in context of exports of textiles and clothing. Also reduction of tariff and non-tariff barriers shall facilitate greater excess in the foreign market.

2. Benefits from increasing the price of agricultural Products: It had been expected that by the reduction in subsidies and barriers to trade benefits can be derived by increasing in the price of the exports of agricultural products. The major state of central Government Programmes had been exempted from the World Trade Organization discipline in the agricultural agreement from India’s point of view.

3. Strengthen the Multilateral Rules and Disciplines: multilateral Rules and Discipline regarding anti-dumping, subsidies, countervailing measures, safeguards and dispute settlement had been exempted from the World Trade Organization’s agreement. So as to ensure greater security and predictability in the International trading System which can turn favourable in case of India.

Benefits in New Scenario

WTO accession can increase economic growth in a variety of ways. Trade openness also allows for greater economies of scale, affects the return on investment (closed economies can face falling rates of return on investment), generates new sources of demand for other developing countries, and gives firms access to inputs which are unavailable domestically to help boost productivity In this new trade scenario, trading countries will benefit a lot. So too will be the case of India.

Export-expansion

One type of benefit to India will flow from the expansion of exports for several reasons. One, with restrictions on the import of agricultural products in which it has tremendous comparative advantage, by virtue of good and a very large variety of soils and cheap labour. Two, the agro-based industries will also exports much and earn much for foreign exchange as these are little/nil Import Intensive. Three, export expansion will be further accelerated in the context of barrier less trade because of the recent liberalization of the economy. In fect something of the sort has already taken place. India is one of among a very few countries whose export have in recent years, gone up sharply, despite recessionary conditions in the developed economies. Four, there will be cheapening of imports (with less customs duties). A significant part of these imports goes to export as inputs. This will make exports more competitive price–wise. Five, exports will also increase on account of export of some services.

Gains in efficiency

An important aspect of benefits will be a large improvement in the efficiency of the economy. This will be happen because of three principal factors. One, a free trade in the external sector, coupled with the present domestic policy of marketisation of the economy, will bring about allocative efficiency. Factors will move out of activities in which they earn less and move into activities in which they can earn more. In other word, factor-allocation will take place in terms of comparative advantage. This will mean both more output/income and large employment for the abundant and cheap labour. Two, there will be an increase in competitive efficiency. There will be large many units, both from foreign sources and domestic sources, which will be competing to reduce costs of production. This will make exports more competitive and growth less costly. Consumers will also gain through reduction in cost /price of goods. Three, the easy entry of foreign direct investments will also improve economy’s efficiency in more than one way. It will bring with it most modern technology. The marketing capabilities, associated with this type of investment, will provide foe a sustained basis of growth in the form of rising demand. The economy will also gain through an efficient management of resources.

Main Shortcomings

While some significance benefits will result from the new environment of the world trade.

Losing on Comparative Advantage

There are reasons to believe that we may not be able to take full advantage of our comparative advantage. Three points can be made in this regard. One, concerns the trade in services. It included such services as banking, insurance, telecommunications etc. The developed countries have a decisive advantage over others in these services, because of the use of the most advanced technology and the economies of large scale. India may also gain from the export of such services but only to a limited extent. The services in which India enjoys comparative advantage have not been included. These services are, for examples, consultancy services, professional skills, labour services etc.

Second is about the Multi-Fiber Agreement (MFA). India like some other countries enjoys comparative advantage in textile and clothing. The MFA, which provided for quota restrictions on the export of these products, was to end in 1991. This will restrict expansion of exports because of the limitations of quotas.

Third refers to the current efforts of the developed countries to link some issues with trade. These are human rights, environment protection and social conditions of labour such as use of cheap labour. These issues, no doubt, are important but these need to be discussed at appropriate forum. However, bringing them up for negotiations in relation to trade, as some developed countries are doing, may adversely affect exports of the developing countries.

Insufficient provisions for agriculture subsidies

The limit of the subsidy up to 10 percent of the value of agricultural output is very low. The subsidy on the production is a powerful factor, as has been proved by experience, in spreading new technologies in several areas of the country. These subsidies have also played an important role in influencing the cropping-pattern. The subsidies is also needed to raise output as also to provide employment to a major part of the working force of the country. In fact , the need for subsidies will be all the  more as we make efforts to develop agriculture in the dry and rainfed areas, induce farmer to diversify by switching over from low yielding mono-crop systems to high yielding and multi-crop systems.

Inadequate provision for the small farmers and the poor

There are a very little for the small farmers and the poor of the country. As for the small farmers are concerned, the following points can be made. Apart from the low percentage of general subsidy referred to above there is nothing by way of special concessions for the marginal farmer (with operational holdings of less than one hectare of land) and the small  farmer (with operational holdings of one to two hectares of land). Their number is very large accounting for 78 percent of the total holding in the country. Most of these farmers grow crops on marginal land of poor quality. There could be higher subsidy of them and still more subsidy of crops grow on poor quality land.

As for the poor, the one important relief– giving arrangement, namely, the public distribution system (PDS) has also been given inadequate attention. The  provision that the purchases for the PDS and the sales through it at the market prices will be of  little help in times, of scarcity like droughts etc.

Inappopriateness of patenting living or-ganisms

The provisions relating to the patenting of all life forms, including plants and mico-organi sms, do not go well with the commonsense perceptions about patents. Unlike inventions, the products in this case are natural i.e., produced by Nature. 

Unequal competition

The provision in the GATT and the Dunkel Draft will make the competitive environment more unfavourable  for the developing countries like India. It will be an unequal competition with firms from the developed count having more competition strength. three points may be made in support of the formulation. One, is associated with the import of the agricultural products to the extent of the value of corresponding domestic consumption. Two, while much of the support system for agriculture is sought to be demolished in the name of removing distortions to clear the way for free trade. Three, the patenting of living organism will make the significantly advanced countries to compete in the market of such patents from a position of great strength.

Maximising Gains

Now that a new world trade organization has started functioning it is important that we derive the maximum possible advantage out of it

Benefits Proclaimed For India

As per the supporters of WTO; it is said that India has likely to drive many benefits by being as member country in WTO . Some of the major  benefits that are obtained by India are :

1- Benefits availed from phasing out of Multi-Fibre Arrangement : It was said that phasing out of multi-fiber arrangement by 2005 will help in increasing the exports of clothing and textiles. Developed countries demanded the time period of 15 years will the time period of ten years was asked by developing countries. accepting the demand of the developing countries was enthusiastically received in these countries in Uruguay Round.     

2- Benefits from multilateral rules and disciples: The Uruguay Round Agreement made powerful the multilateral rules and discipline. The most crucial of all the rules and discipline relates to the rules regarding anti-dumping, subsidies and countervailing measures, safeguard and disputes settlement.

3- Improved prospects for agricultural exports: Since being a country rich with agricultural diversity; the third benefit India expects from World Trade Organization relates with the improvement in the exports of these agricultural products by reducing in domestic subsidies and trade barriers. On the one hand India expects the improvement in the earnings from the agricultural exports while on the other hand; it was made ensured that all the major programmes related to the development of the agriculture were remain to be exempted from the agricultural agreement.

4- Benefits from expansion in trade: it was anticipated that by establishing the World Trade Organization will help in raising the international trade by reducing the restrictions prevailing in the international trade and by globalizing the markets. For example the World Bank, OECD and GATT Secretariat had forecasted that the income effect which can be seen after implementing the Uruguay Round would add the amount between 213 and 274 billion US dollars annually to the world income. 

Either India gained or it was not as useful for India as it were expected can be derived from the performance of the various sectors and the loopholes of the Indian Economy under the regime of World Trade Organization. It has been observed that the contribution of the secondary and the tertiary sector of the Indian Economy had risen the Gross Domestic Product (GDP) in comparison with the primary sector. The faster global linkage can be witnessed in1990’s as comparing with 1980’s and more during the second half of the 1990’s. Increase in the shares of manufacturing goods during the post World Trade Organization era due to the structural changes in which had occurred in India. Also the growth rate of the gross domestic product was satisfying. So it can be concluded that Indian Economy had been much benefitted by being a member of World Trade Organization.

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