wto and india

WTO AND INDIA

WTO AND INDIA

By: Dr. Neelam Tandon

WTO GENESISWTO GENESIS

• The General Agreement on Trade and Tariff (GATT) came into existence in 1947

• It sought substantial reduction in tariff and other barriers to trade and to eliminate discriminatory treatment in international commerce.

• India signatory to GATT 1947 along with twenty two other countries

• Eight rounds of negotiations had taken place during five decades of its existence

• Contd.

WTO GENESISWTO GENESIS• WTO Came into existence on 1-1-1995 with the conclusion of Uruguay

Round Multilateral Trade Negotiations at Marrakesh on 15th April 1994, to :

• Transparent, free and rule-based trading system

• Provide common institutional framework for conduct of trade relations among members

• Facilitate the implementation, administration and operation of Multilateral Trade Agreements

• Rules and Procedures Governing Dispute Settlement

• Trade Policy Review Mechanism

• Concern for LDCs• Concern on Non-trade issues such as Food Security, environment,

health, etc.

BASIC PRINCIPLESBASIC PRINCIPLES

Over three quarters of WTO members are developing or least-developed

countries. All WTO agreements contain special provision for them, including

longer time periods to implement agreements and commitments, measures to

increase their trading opportunities and support to help them build the

infrastructure for WTO work, handle disputes, and implement technical

standards.

The 2001 Ministerial Conference in Doha set out tasks, including negotiations,

for a wide range of issues concerning developing countries. Some people call the

new negotiations the Doha Development Round.


Before that, in 1997, a high-level meeting on trade initiatives and technical

assistance for least-developed countries resulted in an “integrated framework”

involving six intergovernmental agencies, to help least-developed countries

increase their ability to trade, and some additional preferential market access

agreements.

A WTO committee on trade and development, assisted by a sub-committee on

least-developed countries, looks at developing countries’ special needs. Its

responsibility includes implementation of the agreements, technical

cooperation, and the increased participation of developing countries in the

global trading system


The WTO organizes around 100 technical cooperation missions to developing

countries annually. It holds on average three trade policy courses each year in

Geneva for government officials. Regional seminars are held regularly in all

regions of the world with a special emphasis on African countries. Training

courses are also organized in Geneva for officials from countries in transition

from central planning to market economies.

The WTO’s key principles, such as non-discrimination and transparency. By

joining the WTO, even a small country automatically enjoys the benefits that all

WTO members grant to each other. And small countries have won dispute cases

against rich countries — they would not have been able to do so outside the

WTO.


The alternative would be to negotiate bilateral trade agreements with each

trading partner. That could even include regularly negotiating the renewal of

commitments to treat trading partners as equals.

For this, governments would need more resources, a serious problem for small

countries. And in bilateral negotiations smaller countries are weaker.

By joining the WTO, small countries can also increase their bargaining power by

forming alliances with other countries that have common interests.

India’s Approach to the Negotiations

1. Comprehensive negotiating proposal submitted to WTO on 15.1.2001 covering Food Security, Market Access, Domestic Support, and Export Competition

2. Proposal on Special and Differential Treatment to Developing Countries

India’s Approach to the Negotiations

1. Comprehensive negotiating proposal submitted to WTO on 15.1.2001 covering Food Security, Market Access, Domestic Support, and Export Competition

2. Proposal on Special and Differential Treatment to Developing Countries

India SeeksIndia Seeks

• Protecting our food and livelihood security by having sufficient flexibility for domestic policy measures.

•Protecting domestic producers from the surge in imports or significant decline in import prices.

•Substantial reduction in export subsidies and domestic support to agriculture in the developed countries for greater market access to products of developing countries.

• Finally, a more equitable & fair trading framework for agricultural commodities

Market AccessMarket Access

The negotiations on market access should include the following issues: Comprehensive binding of tariffs

Reduction of peak tariffs and removal of tariff escalations

Reduction in the number of tariff rate quotas (TRQs) in a progressive manner

Volume of imports allowed under quotas to be substantially expanded till TRQs are eventually eliminated

Transparent administration of TRQs •

Export SubsidiesExport Subsidies

The negotiations on export subsidies should include the following issues:

Countries using export subsides should phase out this form of farm support within two years of implementation of the revised disciplines to be followed by countries in the agricultural sector.

Export subsidies discipline should include all forms of spending that enhances the capacities of exporters to increase trade, e.g. export credit, guarantees and insurance programmes.

Non-Trade ConcernsNon-Trade Concerns

The issue of non-trade concerns should be articulated as under:

Non-trade concerns should be adequately reflected in the decisions, particularly those related to market access and domestic support.

It needs to provide an enabling environment for the countries to address the concerns relating to food security and livelihoods.

The relevant decisions of the World Food Summit on food security and livelihoods need to be integral part of the negotiations.

S&D in Doha Ministerial Declaration S&D in Doha Ministerial Declaration

“We agree that special and differential treatment for developing countries shall be an integral part of all elements of the negotiations and shall be embodied in the Schedules of concessions and commitments and as appropriate in the rules and disciplines to be negotiated, so as to be operationally effective and to enable developing countries to effectively take account of their development needs, including food security and rural development”.

S&D to Developing CountriesS&D to Developing Countries

•Increase the levels of tariffs on sensitive products•Special Safeguards (SSGs) •No requirement to provide minimum access requirements•Administration of tariff rate quotas for improved market access•Right to use export subsidies •Exemption for resource poor farmers in Product Specific Support

Issues of Regional Importance Issues of Regional Importance

•1. Crops that are significant from the point of view of sustaining livelihoods and regional development

•2. Crops in which the individual states can be considered to be efficient producers considering the global trends

•3. Crops in which the states have been accumulated surpluses

•4. Crops that face the threat from cheap imports

•5. Crops that have been facing fluctuating prices, resulting in uncertainties for the farmers

Issues of Export Competitiveness of Select Agro-products


Rice:

•The rice export is projected to increase to 2.7 million tonnes in 2005 from current level of 1.8 million tonnes. •In spite of much favourable domestic resource cost, the nominal protection co-efficient is marginal which is due to volatile international prices.

•The domestic supply gap, quality, processing, marketing, transportation etc., are going to be key factors for sustaining India’s rice export potential.

Spices:

• Owing to expanding global demand of spices, there is potential for accelerating Indian spice export but the rising competition would require concerted efforts.

•The problem of pesticide residue and low yields are to be tackled.



Tea:

•The Indian tea export is projected to increase marginally from 159 thousand tonnes during 1993-95 to 165 thousand tonnes in 2005.

•India’s export competitiveness as well as share in export of tea is declining.

•The strategies include promotional measures, joint ventures for tea blending and marketing and support for importing machinery and packaging materials.

Coffee:

•The coffee export is projected to reach to 180 thousand tonnes in 2005 from the level of 160 thousand tonnes in 90s.

•There is emergence of new markets in Asia and Eastern Europe and hence India has to focus on this aspect as well.

•The quality, R&D and post-harvest methods are important to sustain the growth.



Cashew :

•The emergence of Vietnam and Brazil as exporters, decline in domestic production of raw cashew and quality stipulations by importing countries, may make the projections un-achievable.

•The improvement in the processing facility, land development for additional plantation crop area and removal of legal barriers for such area expansion are suggested for sustaining the export potential.

Marine Products : Indian marine products are expected to increase by about 10.2%, per annum, in the next five years. The marine processing industry is well developed but to sustain the growth, availability of raw materials for effective production planning and development of scientifically managed aqua-culture resources are envisaged. The transport and other infrastructure to support export are also envisaged.

Trade Barriers And WTOTrade Barriers And WTO

One positive development in 2009 was the absence of any major increase in trade barriers

imposed by WTO members in response to the crisis. The number of trade-restricting

measures applied by governments has actually declined in recent months. However,

significant slack remains in the global economy, and unemployment is likely to remain high

throughout 2010 in many countries. Persistent unemployment may intensify protectionist

pressures.

Trade Barriers And WTOTrade Barriers And WTO “During these difficult times, the multilateral trading system has once again proven its value. WTO rules and principles have assisted governments in keeping markets open and they now provide a platform from which trade can grow as the global economy improves. We see the light at the end of the tunnel and trade promises to be an important part of the recovery. But we must avoid derailing any economic revival through protectionism,” said WTO Director-General Pascal Lamy.

The 12% drop in the volume of world trade in 2009 was larger than most economists had predicted. This contraction also exceeded the WTO's earlier forecast of a 10% decline. World trade volumes fell on three other occasions after 1965 (—0.2% in 2001, —2% in 1982, and —7% in 1975), but none of these episodes approached the magnitude of last year's economic slide .Trade in current US dollar terms dropped even further than trade in volume terms (—23%), thanks in large part to falling prices of oil and other primary commodities.


Economists have suggested a number of reasons why trade declined so steeply, including the

imposition of some of protectionist measures. But the consensus that has emerged centres

on a sharp contraction in global demand as the primary cause. This was magnified by the

product composition of the fall in demand, by the presence of global supply chains, and by

the fact that the decline in trade was synchronized across countries and regions. The

weakness in private sector demand was linked to the global recession triggered by the sub-

prime mortgage crisis in the United States. What began in the US financial sector soon spread

to the real economy, with global repercussions. Limited availability of trade finance also

played a role.


Sharp falls in wealth during the recession caused households and firms to reduce their

spending on all types of goods, especially consumer durables (e.g. automobiles) and

investment goods such as industrial machinery .Purchases of these items could be postponed

easily in response to heightened economic uncertainty, and they may also have been more

sensitive to credit conditions than other types of goods.

Whatever the reason for their decline, the reduction in demand for these products fed

through to markets that supply inputs for their production, particularly iron and steel. Falling

demand for iron and steel was also linked to the slump in building construction in countries

where property markets had been booming before the crisis (e.g. the United States, the

United Kingdom, Ireland and Spain).


The fact that some products comprise a disproportionately large share of world trade,

compared with their share of overall output, may have further depressed world trade flows

relative to overall production (GDP or gross domestic product). For example, consumer

durables and investment goods make up a relatively small fraction of global output but a

relatively large part of world trade. Consequently, a decline in demand for these products

would have had a greater impact on trade than on GDP

INDIA and WTOINDIA and WTO

India is committed to a rule-based, multilateral trade regime which is fair, equitable and an

early conclusion of the Doha Round of trade negotiations at the World Trade Organisation

(WTO); however, the core concerns of the Round, namely, the development concerns of

developing countries, have to be addressed.

The principal aim of India's negotiating strategy in agriculture negotiations has been to

protect the interests of farmers particularly with regard to their food and livelihood security.

Substantial and effective reductions in domestic support and customs tariffs by developed

countries, while enabling developing countries to protect and promote the interests of their

low income and resource poor farmers, is a key priority for India and other developing

countries in the agriculture negotiations.

India is a net exporter of cotton. Textile industry imports cotton mainly of extra long staple

variety such as Savin and Pima which is not grown domestically.

Proposed Agricultural NegotiationsProposed Agricultural Negotiations

The special safeguard mechanism (SSM), a tool that will allow developing countries to raise

tariffs temporarily to deal with import surges or price falls.

Tariff simplification — ending the use of complex tariffs so that most or all end up as straight

percentages of the price, with some possibly left as “specific” duties (dollars, euros etc, per

tonne, litre, etc).

Tariff quota creation — shorthand for whether sensitive products, which will have smaller

tariff cuts than normal, can only be products that already have “tariff quotas” (where imports

inside the quotas have low duties). If other products can be sensitive, then new tariff quotas

would have to be created.

Duty Free Schemes for LDCsDuty Free Schemes for LDCs

India was the first developing country to offer duty-free, quota-free treatment to LDC exports

in 2008. It is working to ensure that the scheme provide effective market access, noting that

important LDC products are covered like cotton, cane sugar and ready-made garments. It said

that the scheme has become fully operational for 14 LDCs, and urged other LDCs to utilize this

facility.

Bangladesh underlined the importance of the scheme for LDCs, and thanked Brazil and India

for their update reports on their respective programmes.

Anti –Dumping InvestigationsAnti –Dumping Investigations

During January — June 2010, 19 WTO Members reported initiating a total of 69 new investigations, compared with 97 new investigations reported by 18 WTO Members for the corresponding period of 2009. The Members reporting the highest number of new initiations during January — June 2010 were India, reporting 17 new initiations, followed by the European Union, reporting 8 new initiations, Argentina (7), Brazil and Israel (5 each).

Dumping is said to occur when the goods are exported by a country to another country at a price lower than its normal value. This is an unfair trade practice which can have a distortive effect on international trade. Anti dumping is a measure to rectify the situation arising out of the dumping of goods and its trade distortive effect. Thus, the purpose of anti dumping duty is to rectify the trade distortive effect of dumping and re-establish fair trade.

Anti-Dumping IssuesAnti-Dumping Issues

The use of anti dumping measure as an instrument of fair competition is permitted by the WTO. In fact, anti dumping is an instrument for ensuring fair trade and is not a measure of protection per se for the domestic industry. It provides relief to the domestic industry against the injury caused by dumping.

Note: Import of cheap products through illegal trade channels like smuggling do not fall within the purview of anti-dumping measures.

Anti dumping, in common parlance, is understood as a measure of protection for domestic industry. However, anti dumping measures do not provide protection per se to the domestic industry. It only serves the purpose of providing remedy to the domestic industry against the injury caused by the unfair trade practice of dumping. In fact, anti dumping is a trade remedial measure to counteract the trade distortion caused by dumping and the consequential injury to the domestic industry. Only in this sense, it can be seen as a protective measure. It can never be regarded as a protectionist measure.

Difference between Anti-Dumping and Customs Duty


Although anti dumping duty is levied and collected by the Customs Authorities, it is entirely

different from the Customs duties not only in concept and substance, but also in purpose and

operation. The following are the main differences between the two: -

Conceptually, anti dumping and the like measures in their essence are linked to the notion of

fair trade. The object of these duties is to guard against the situation arising out of unfair

trade practices while customs duties are there as a means of raising revenue and for overall

development of the economy.

Customs duties fall in the realm of trade and fiscal policies of the Government while anti

dumping and anti subsidy measures are there as trade remedial measures.

The object of anti dumping and allied duties is to offset the injurious effect of international

price discrimination while customs duties have implications for the government revenue and

for overall development of the economy.



Anti dumping duties are not necessarily in the nature of a tax measure in asmuch as the

Authority is empowered to suspend these duties in case of an exporter offering a price

undertaking. Thus such measures are not always in the form of duties/tax.

Anti dumping and anti subsidy duties are levied against exporter / country inasmuch as they

are country specific and exporter specific as against the customs duties which are general and

universally applicable to all imports irrespective of the country of origin and the exporter.

Thus, there are basic conceptual and operational differences between the customs duty and

the anti dumping duty. The anti dumping duty is levied over and above the normal customs

duty chargeable on the import of goods in question.

Dumping ParametersDumping Parameters

Dumping means export of goods by one country / territory to the market of another country territory at a price lower than the normal value. If the export price is lower than the normal value, it constitutes dumping. Thus, there are two fundamental parameters used for determination of dumping, namely, the normal value and the export price. Both these elements have to be compared at the same level of trade, generally at ex-factory level, for assessment of dumping.

Normal Value: Normal value is the comparable price at which the goods under complaint are sold, in the ordinary course of trade, in the domestic market of the exporting country.If the normal value can not be determined by means of the domestic sales, the following two alternative methods may be employed to determine the normal value: -Comparable representative export price to an appropriate third country.Constructed normal value, i.e. the cost of production in the country of origin with reasonable addition for administrative, selling and general costs and reasonable profits.Export price: The Export price of the goods allegedly dumped into India means the price at which it is exported to India. It is generally the CIF value minus the adjustments on account of ocean freight, insurance, commission, etc. so as to arrive at the value at ex-factory level.

Dumping ParametersDumping Parameters

Dumping Margin: The margin of dumping is the difference between the Normal value and the export price of the goods under complaint. It is generally expressed as a percentage of the export price.

Illustration: Normal value US$ 110 per kg.Export price US$ 100 per kg.There is dumping in this case as export price is lower than normal value and dumping margin in this case is US$ 10 per kg., i.e. 10% of the export price.

Dumping is a function of two variables, namely Normal Value and Export Price, which must be compared at the same level of trade i.e. at the ex-factory level.

Essentials of Anti-Dumping InvestigationEssentials of Anti-Dumping Investigation

The domestic producers expressly supporting the anti dumping application must account for

not less than 25% of the total production of the like article by the domestic industry.

The application is deemed to have been made by or on behalf of the domestic industry, if it is

supported by those domestic producers whose collective output constitute more than 50% of

the total production of the like article produced by that portion of the domestic industry

expressing either support for or opposition as the case may be, to the application.

Note: This is to further clarify that a domestic industry, which seeks relief, should give

sufficient evidence with respect to the above parameters. Unless the above parameters are

satisfied, it will not be possible for the Authority to initiate an anti-dumping investigation.


The following are essential for initiating an anti dumping investigation: -

Sufficient evidence to the effect that ;

•there is dumping

•there is injury to the domestic industry; and

•there is a causal link between the dumping and the injury, that is to say, that the dumped

imports have caused the alleged injury.


The domestic producers expressly supporting the anti dumping application must account for

not less than 25% of the total production of the like article by the domestic industry.

The application is deemed to have been made by or on behalf of the domestic industry, if it is

supported by those domestic producers whose collective output constitute more than 50% of

the total production of the like article produced by that portion of the domestic industry

expressing either support for or opposition as the case may be, to the application.

Note: This is to further clarify that a domestic industry, which seeks relief, should give

sufficient evidence with respect to the above parameters. Unless the above parameters are

satisfied, it will not be possible for the Authority to initiate an anti-dumping investigation.


Broadly, injury may be analyzed in terms of the volume effect and price effect of the dumped

imports. The parameters by which injury to the domestic industry is to be assessed in the anti

dumping proceedings are such economic indicators having a bearing upon the state of

industry as the magnitude of dumping, and the decline in sales, selling price, profits, market

share, production, utilization of capacity etc.

Besides the calculation of the margin of dumping, the Designated Authority also calculates the Injury Margin for the Domestic Industry. The Injury Margin is the difference between the Non-Injurious Price due to the Domestic Industry and the Landed Value of the dumped imports.Landed Value for this purpose is taken as the assessable value under the Customs Act and the applicable basic Customs duties except special duties.For calculating Non-Injurious Price, the Authority calls for costing information from the domestic industry in the prescribed Performa for the period of investigations and for three previous years.


In the anti dumping proceedings, it is imperative to prove that the dumping has caused injury to the domestic industry. No anti dumping duty shall be recommended without a finding of this causal relationship. That is to say,Dumping should lead to Injury

The causal link is to be established generally in terms of the following effects of dumped imports on domestic industry: -

•volume effect•price effect

The volume effect of dumping relates to the market share of the domestic industry vis-à-vis the dumped imports from the subject country/ies while with regard to the price effect, the Designated Authority shall consider whether there has been a significant price under cutting by the dumped imports as compared with the price of the like product in India, or whether the effect of such imports is otherwise to depress prices to a significant degree or prevent price increase which otherwise would have occurred to a significant degree.

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