Trade Bloc
WTO regime and India’s stand-off with certain issues
Though the world has become a free-trade zone with the smooth flow of goods, services and intellectual properties without barrier, there are more than enough issues between trading partners or members of other regional trade bodies. In fact, when disputes are common, most Of the time it is perceived that the WTO regime applies a clutch on developing economies, especially in the case Of TRIP, writes Aishwarya Sudheer, a student of final year B. Corn.
The US came out with objections against India 18 months after India signing the WTO agreement. That time, it alleged that India had no patent protection for pharmaceutical and agricultural chemical products in India.
India has been a mender of the World Trade Organisation (WTO) since 1995 – a member since the origin. It was for the best interest of India, which had faced the issues during the quota regime and for breaking the barres of trade control in various geographies the country had signed this landmark agreement. WTO, even now, stands as the most vibrant global trade body offering immense comfort uniformly for every member across the world, though complaints and disputes are inherent in such large number-body.
On the other side, the enabling provision for allowing Regional Trade Agreement (RTA) with due notification to the MO further led to boost the export trade prospects of many countries.
Today, there are 164 members in this global trade body, covering almost every country in the world – except less than a dozen small economies. Besides the MO, there are round 300 RTAs and the number would only increase.
While the WTO dismantles all discrimination among the members, RTAs are made on the basis of reciprocal preferential trade relations between or among a group of countries in a particular or on other preferences.
Though the world has become free-trade zone with smooth flow of goods, services and intellectual properties without barrier, there are more than enough issues between trading partners or members of other regional trade bodies. In fact, when disputes are common, most of the time it is perceived that the WTO regime applies a clutch on developing economies especially in the case of Trade Related Intellectual Property (TRIP) related issues. Developing countries like India feel it more than what the developed countries may take it. One of the best examples is the subsidy and incentive provided by developing economy like India on the basis of certain segments’ temporary issues, vulnerability to competition in the world market and according the local socio-political necessities. This becomes a socio-economic necessity for supporting the underprivileged segment of enterprises, which are unable to access the global market for their sustainability. But developed countries object it.
In fact, there are issues of India incentivizing the domestic industries and agriculture, as these are construed to be against the interest of those countries which do not have this system in place. But that is an unavoidable local political necessity The countries with government incentive system and promotional programmes are naturally capable of having low cost manufacturers, who would be able to make a cut in the market of other countries with significant price advantage over other countries’ manufacturers. Often these lead to disputes. Interestingly, now globally the protectionist policies are on the rise contradictory to the earlier objections of certain countries against Indian subsidy policies. India finds that the global use of protectionist measures in 2018 was unprecedented with the trade wars looming between two of the largest economies of the world — the US and China. It becomes clear that those alleged or opposed India’s gesture of subsidies and incentives for supporting the local enterprises which were in trouble due to the sudden impact of certain policy measures are now resorting to the protectionist measures – obviously for the interest of their domestic business.
India’s share in the global export market is currently 1.68 per cent, while import share is 2.48 per cent. China and the US are the two major trade partners. Indian exports to the US constitute 12 per cent of its imports though there is a huge gap between India’s export and import with the US. Indeed, there are disputes and also attempts from all sides to explore newer opportunities among WTO members. This has become more significant when the world is seeing home works of the US and China fora trade war. At the same time, India sees China and the US coming on one side in the issues like India’s export promotion schemes. Last year, along with the US China, Japan, Brazil, Canada, Egypt, Sri Lanka, Taiwan, Korea, Russia Thailand, the European Union and other countries also approached the WTO with complaint against India as third parties.
Smaller economy like Sri Lanka and Egypt want to stay competent in the global market as often these countries face competition from India. The rising number of third parties supporting the complaint is not a silly matter since the resultant measures under WTO specifications would be broader. This threatens to impose anti-dumping duties against the countervailing measures taken by India. India has teen trying to reach a mutual agreement on this, though it is yet to be final. The importers like the US and China see it harming their domestic economy and manufacturers. It may be noted that Japan China, Thailand and Korea, are members of the Regional Comprehensive Economic Partnership (RCEP) trade agreement along with India. These countries have been pressurizing India to slash duties on most the goods traded among the members.
It is not the first time the US has come up with allegations and objections. The US came out with objections against India 18 months after India signing the WTO agreement. That time it alleged, India had no patent protection for pharmaceutical and agricultural chemical products in India. It alleged that India had violated Articles 27, 65 and 70 of the TRIPS Agreement. A few months later WTO set up a panel as dispute settlement body. In the following year, the Panel came out with its report with a finding that India had not complied with its obligations under Article 70.8(a) or Article 63(1) and (2) of the TRIPS Agreement. It found India’s failure in establishing a mechanism that preserved “novelty and priority in respect of applications for product patents for pharmaceutical and agricultural chemical inventions and was also not in compliance with Article 70.9 of the TRIPS Agreement by failing to establish a system for the grant of exclusive marketing rights.’ On 15 October 1997, India notified its intention to appeal certain issues of law and legal interpretations developed by the Panel. The report of the Appellate Body was circulated to Members on 19 December 1997.
The Appellate Body upheld, with modifications, the Panel’s findings on Articles 70.8 and 70.9, but ruled that Article 63(1) was not within the Panel’s terms of reference. Finally India had to relent and had been given 15 months for implementing the order. In April 1999, accordingly, India presented its status report on enactment of relevant legislation to implement the recommendations, as the dictation of the regime.
Now developing trade rules for e-commerce is going to be another issue which more than 75 countries are putting pressure on India to join talks and agree a plurilateralpact.
India on binding provisions for cross-border data flow, preventing data localisation and protection of source code. China which was held on the same stand of India has surprisingly joined the group, which has upset us. According to some reports, India told tie WTO that developing countries need to maintain policy space in certain aspects of e-commerce such as ownership and use and flow of data in sunrise sectors like cloud computing and data storage and in the facets related to hosting of servers, big data analytics and machine to machine (M2M) communication. This may not favour economies like India and poor countries.
India’s trade relationship with China was unique and no other bilateral trading relationship evoked as much interest in India as the India-China trade relationship, the analysis pointed out. Within 17 years, China has become India’s biggest trading partner.
The stand of 75 countries (as of now with possibility of more countries joining the group), is termed premature digital liberalization. Reports pointed out that the civil society groups viewed it as threat to the economic sovereignty and future development prospects of developing and poor countries, as this will open space for only some of the global players to dominate the digital trade. Recently a business news paper in its report said: “These proposed negotiations on e-commerce which, if concluded, would severely constrain the policy space of countries to develop their economies in the future, and would accelerate the global disadvantaging of workers and small enterprises in all countries vis-àvis large corporations that characterizes the current global economy,” said a group of 18 civil society organisations from places like India, Finland, Norway, the UK and Africa. A few months ago the government of India released a study conducted by the Department of Commerce on India China Trade. The report analyzed the magnitude, extent and plausible reasons of India’s rising trade deficit with China. India’s trade relationship with China was unique and no other bilateral trading relationship evoked as much interest in India as the India-China trade relationship, the analysis pointed out. Within 17 years, China has rapidly become India’s biggest trading partner. Trade between the two countries has been expanding but India’s trade deficit with China has been growing like India’s trade relationship with another big economy, the US.
Within 17 years, China has rapidly become India’s biggest trading partner. Trade between the two countries has been expanding but India’s trade deficit with China has been growing like India’s trade relationship with another big economy, the US.
Most industry associations want the Government of India to pursue a defensive approach to Free Trade Agreements (FTAs) and raise tariffs on the doctrine of domestic markets for domestic producers. China ceded concessions on 200 products in its Free Trade Agreements to India’s competing countries like Peru, Pakistan, Australia, South Korea and ASEAN. These countries import from China keeping it as the Most Favored Nation (MFN). India has studied the idea of Free Trade Agreement (FTA) or tariff concessions by China to India like – what it has yielded to India’s competing countries in FTA that can be beneficial in increasing India’s exports to China. The tariff concessions by China to other countries naturally would impede raising the share of India’s exports in the Chinese market. The competing countries which have FTAs with China would limit the scope for Indian exports, thereby seriously harming Indian interest in the global market. It is expected that India would take this matter for negotiations with China under agreements like Asia Pacific Free Trade Agreement (APTA) in which both India and China are involved during the review exercise. India is studying various aspects including the introduction into the historical aspects of trade relations between India and China and the trends of bilateral trade between the two large economies. The government has studied top 200 items that India imports from China and China’s import from India to opportunity available for India in increasing its services exports to China. The study also used indices like Revealed Comparative Advantage (RCA) and Trade Complementary Index (TCI) for analyzing the extent of India’s and China’s competitiveness in this area and the future potential.
