WTO and India• India is one of the founder member of WTO • India has most of her foreign trade with those countries, that are members of WTO • Will India gain or lose by becoming a member of WTO has been a great issue of debate over the years Advantages of WTO for India • Increase in foreign trade – Being member of WTO India has trade relations with 152 nations – Removing of tariff & non tariff barriers has opened various new markets for India – India’s trade in goods and services is increasing at a fast rate • Increase in Agricultural Exports – Due to reduction on subsidies in developed nations India’s agricultural exports have increased considerably – WTO has recommended a cut in customs duty and reduction in import restrictions on agricultural goods. This will help India to increase its agricultural exports – In year 2009-2010 India’s agricultural exports were 17,963 million USD and it is expected to double in next five years Increase in Inflow of Foreign Investment • As per TRIMs India has removed certain barriers to foreign investment as a result many MNC’s have invested money in India • Such investments are bound to boost employment • Domestic companies compete with MNC’s hence they have improved themselves . insurance.Improvement in Services • MNC’s have establishes service organisations in India • Outsourcing. IT. banking. transport. hotel etc • Better quality services will be available to Indians • It have generated ample employment opportunities • It will check immigration of young men for jobs . Benefit for clothing and textile industry • Due to Multi-fiber arrangement (MFA) our exports were subject to quota restrictions • Now all these restrictions have been removed • It has helped in increase in exports from India • India’s exports to America and European countries have increased considerably due to removal of quota system . Inflow of better technology • Foreign trade and Investment will bring in better technology and better products • These will improve standard of living of Indian masses • It will promote industrial growth and employment . Benefits of multilateral trade system • WTO promotes trade between member nations • Agreement signed is applicable to all member nations (153) • WTO has opened up India’s trade to 152 nations otherwise India would have to enter into separate agreements with these countries . medicines and other products . pesticides.Promotion of R & D • Research has been increased due to patents • Increased investment in R & D • Researchers get benefit in the form of royalty on patents • It has improved variety of seeds. fertilizers. Benefit to farmers • By paying one time farmer will get better quality of seeds • It will improve production • Farmer can retain a part of their production as seed • This seed can be used for the next crop . Restricts dumping • Dumping is done to damage domestic business • Affected country can lodge a complaint with WTO • WTO’s dispute settlement body takes action against such nations . Arguments against WTO • Critics believes that developed nations will benefit more because of WTO • Developing countries will lose due to WTO • MNC’s will adversely affect our culture • Some people even believe that foreign trade will take us back to colonial period . Disadvantage to agriculture sector • Indian farmers will become dependent on MNC’s for seed and agricultural technology • Farmers will have to pay huge amount for branded seeds and agricultural technology • Big farmers will be benefitted more • Small farmers will be forced to sell their land • This will result in unemployment in rural sector . Reduction in subsidy • Subsidy (on inputs and outputs) in agricultural sector will be removed in phased manner • Developing countries like India will be adversely affected by this • Poor farmers will be the ultimate sufferers . Import of foodgrains • Surplus foodgrains of developed countries will be imported • This import will be on large scale • Domestic farmers will face competition due to this import • Farmers will have to sell their land . Plant breeding protection • Farmers will have to spend large amount on new and improved variety of seed • Their dependence on MNC’s will increase • Farmers can retain the seed for further crops but they cant sell it . Loss to domestic industries • India will not impose any restriction on foreign investment • MNC’s will have free entry in Indian market • There will be strong competition • This will adversely affect domestic industries • Small scale sector will be worse hit • Problem of unemployment . Neem. Tulsi.Patent of Indian herbs by foreign companies • MNC’s have made efforts for the patent of Indian herbs and foodgrains like Haldi. Basmati rice etc • One American company has got the patent of basmati rice in the name of Kasmati and Texamati • India will have to pay heavy royalty for using these products . Effect on prices • If patents on common products are approved countries like India will have to give huge royalty to the patent holders • This will adversely affect prices of these products • Pharmaceutical industry will be hard hit because of patents . Increased litigation cost • MNC can file claim against Indian company for copying patent before WTO • They will have to waste their time and money to prove their innocence • Legal services in America are expensive • Foreign courts award high compensation . environment costs and labour costs • Developed countries are trying to link these factors with trade • They argue that social costs. environment costs and labour costs are high in developed countries as compared to developing nations • So developed countries should be allowed to impose tariff on imports to neutralize this effect • If developed countries impose tariff this will be of great disadvantage to the developing countries .Issue of social costs. ASEAN and NAFTA less significant • These groups promoted regional trade • WTO promoted multilateral trade • The role of regional groupings have reduced as far as trade is concerened .Loss to regional groupings • Multilateral trade has left regional groupings like SAARC. insurance. education. transport. and hotel services will not be able to compete with MNC’s • Domestic services organizations will have to wind up their business .Disadvantage to service sector • It is feared that WTO will adversely affect our service sector • Banking. Increase in unemployment • WTO promotes free trade • It means free flow of goods and services • MNC’s use capital intensive and better technology • Domestic companies will not be able to compete with MNC’s • Domestic companies will have to wind up their businesses leading to unemployment . False apprehensions about WTO • Compulsory reduction in agricultural subsidy – Presently subsidy given to farmers in India is 3% – This can be given up to 10% • Disturbance to PDS – WTO critics argue that WTO will adversely affect our PDS – WTO has no objection for PDS to people living below poverty line in developing countries . • Compulsory import of foodgrains – Import of foodgrains is not compulsory for countries facing balance of payment problems – India can impose quantitative restrictions on import of foodgrains • Increase in prices of medicines – It is believed that patents will increase prices of medicines in India – Hardly 10 % of medicines are covered by patents – WHO has kept the life saving drugs outside WTO – Indian Pharmaceutical companies have already filed patents for various medicines . 78% .25% of world trade share – India’s share in world trade is only 1.• Reduction in export subsidy – Export subsidies are to be eliminated by year 2013 – Developing nations can give export subsidy till 2018 – These conditions are applicable to countries having 3. India’s Commitment to WTO • Reduction in tariff and non tariff barriers – India has reduced various tariff and non tariff barriers – Liberal imports are allowed by India • Amendments in Patents Act – India has amended its patent act in 2005 – As a result there has been a steep rise from 1911 in 2004-05 to 16061 in 2008-09 . • Protection of plant breeders – Sui-Generis system • TRIPs (Trade related intellectual property rights) – India has amended Copyrights Act 1957 – Trade and Merchandise Marks Act 1958 – Designs Act was formulated in 2000 – Trade marks registration in India has gone up from 11190 in 2002-03 to 101300 in 2007-08 . • Geographical Indications – India has passed The Geographical Indications of Goods (Registration and Protection) Act in 1999 – Under this act correct geographical origin of the product is to be given so that other company or country can not get the patent – For example Darjeeling Tea. Mysore Aggarbatti. Chanderi Sarees. Kullu Shawls. Kancheepuram and banarsi Silk etc . tea.• TRIMs (Trade Related Investment Measures) – India has allowed 100% foreign investment in advertising. hotels resorts. coal processing. power. tours and travel agencies have started their businesses in India . ports. airports. oil refining. Airlines. insurance companies. drugs and real estate – Foreign investment is treated at par with domestic investment in these industries • GATS (General Agreement on Trade in Service) – India has allowed foreign service providers to set up business in India – Many foreign banks. Role of WTO in International Trade • Shift from bilateral trade to multilateral trade • Increase in volume of world trade – Reduction in tariff and non tariff barriers • Change in composition of world trade – Only goods to services • Settlement of dispute – DSB of WTO • Increase in agricultural exports • Expansion in trade in textile and clothing • Restrictions on dumping .