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10.    INTERNATIONAL TRADE 
         ORGANISATIONS

WORLD TRADE ORGANIZATION

(a) Organisational Structure

The World Trade Organization (WTO) is the successor organization to the GATT. It came into effect on 1 January, 1995 as a result of the conclusion of Uruguay Round of Multilateral Trade Negotiations. India is a founder member of both GATT in 1947 and the WTO in 1995. The membership of the WTO stands at 147. The Fifth Ministerial Conference, at its meeting in Cancun in September 2003, approved the membership package of Nepal and Cambodia, the first among the Least-Developed Country (LDC) Members to join the WTO after its inception in 1995. These two countries would become full Members of the WTO once they complete the ratification process.

The mandate of the WTO includes trade in goods as well as trade in services. Trade-related issues like trade-related investment measures and trade-related intellectual property rights are also covered. The Ministerial Conference of WTO, represented by the Trade Ministers of all the Members, is the highest decision making body of the WTO and is required to meet at least once every two years. In the interregnum, its functions are carried out by the General Council consisting of the representatives of all the members. The last Ministerial Conference was held in Cancun (Mexico) from 10-14 September 2003. The General Council is assisted in its work by three sectoral councils, viz; the Council for Trade in Goods, the Council for Trade in Services and the Council for Trade Related Aspects of Intellectual Property Rights (TRIPs) and by a large number of Committees, Working Groups/Parties and other bodies dealing with specific Agreements or subjects. All these bodies are serviced by the Secretariat headed by the Director General of the WTO. In addition to such functions as may be assigned to the General Council under various agreements, the General Council also acts as the Dispute Settlement Body (DSB) and Trade Policy Review Body (TPRB). 

Newly acceding members are expected to grant Most Favoured Nation (MFN) treatment and National Treatment (NT) to existing members of WTO. India has been actively participating in the accession process of various countries. The acceding countries extend concessions on a non-reciprocal basis to all the interested existing members by entering into negotiations with them and signing bilateral agreements. During the year under report, India signed bilateral agreements with Nepal and Cambodia. These concessions offered in bilateral agreements are then consolidated and submitted in the form of a protocol of accession and mutilateralized to all the WTO members.

(b) The Doha Work Programme

The Doha Ministerial Declaration of the WTO adopted in November 2001 a comprehensive agenda, called the Doha Work Programme and mandated completion of negotiations on issues covered under this Work Programme by 31 December 2004. The Doha Ministerial Declaration also mandated continuance of the study process for the four Singapore issues until the Fifth Ministerial Conference and taking decision on negotiations thereon, on the basis of an explicit consensus at that Conference.

The Union Minister for Commerce  & Industry and Law & Justice Shri Arun Jaitley meeting with the representatives of Indian National Congress on WTO issues in preparation for the Cancun Ministerial Conference in New Delhi on August 11, 2003 (Monday)

The Union Minister of Commerce & Industry and Law & Justice Shri Arun Jaitley meets the representatives of Trade Union on WTO issues in preparation for the Cancun Ministerial Conference in New Delhi on August 7, 2003 (Thursday)

As mandated at Doha, the Fifth Ministerial Conference of the WTO was held at Cancun (Mexico) from 10-14 September 2003 to review the progress of negotiations under the Doha Work Programme and take decision on modalities of negotiations on Singapore issues on the basis of an explicit consensus decision among WTO Members. Apart from approving the WTO Membership of Nepal and Cambodia, the Conference could not take any decision on the major issues before it in view of lack of consensus among WTO Members, namely Agriculture, Singapore issues and Development related issues. However, the Ministers adopted a Ministerial Statement at the end of the Conference on 14 September 2003 which recognised that more work needed to be done to make progress as required under the Doha mandates. It instructed the officials of WTO Member countries to continue working on outstanding issues with a renewed sense of urgency and taking fully into account all the views expressed by Ministers in the Conference. Further, the Chairman of the General Council in close cooperation with the Director General of WTO was asked to coordinate this work and convene a meeting of the General Council at Senior Officials Level no later than 15 December 2003 to take action necessary at that stage to enable the Members to move towards a successful and timely conclusion of the negotiations. Finally, the Ministers reaffirmed their commitment to all the Doha Declarations and Decisions and to implement them fully and faithfully.

State of Play of negotiations under the Doha Work Programme

Post-Cancún Conference, the state of play of negotiations/discussions under the Doha Work Programme is as follows:

(a) Agriculture

As per the Doha Ministerial mandate, modalities for negotiations in agriculture were required to be established by 31 March 2003, and draft Schedules based on these modalities to be submitted by the Fifth Session of the Ministerial Conference in Cancun, Mexico, in September 2003. Negotiations based on the mandate in Article 20 of the Agreement on Agriculture had formally commenced on 1 January 2000, when initial negotiating proposals were also made by many Members, including India. The work undertaken in the first two phases of these negotiations, which was largely analytical, was carried over into the post-Doha phase. Under Phase 3 of the work programme post-Doha, dedicated special sessions were held, following which in November 2002 the Chairman of the Committee on Agriculture, Special Session, presented an overview paper on the negotiations on agriculture as a basis for comprehensive and substantive review of possible modalities, including rules-related elements. Based on further discussions on this overview paper, the Chairman presented the first draft modalities in mid-February 2003, with a limited revision thereon in March 2003. However, divergences remained among WTO Members on key issues in the negotiations in agriculture, in particular on the nature and extent of reduction in trade-distorting domestic support and in improvements in market access to be achieved. WTO Members that grant export subsidies have also been resisting agreeing on phasing out such subsidies across all products. Modalities could not, therefore, be established by 31 March 2003, and WTO Members agreed to intensify their work towards establishing modalities as soon as possible.

By July 2003, however, it was evident that it may not be possible to establish comprehensive modalities even by the Cancun Ministerial meeting on 10-14 September 2003, and accordingly, the discussions thereafter were based on developing a framework for the modalities. While the European Communities (EC) and the United States (US) had held divergent positions in the discussions earlier, on 13 August 2003 they presented a joint text on a possible framework for modalities for negotiations in agriculture, which was self-serving. While actual level of commitments were not included in the proposed framework, the possibility of the EC and the US retaining their high levels of domestic support and border protection through tariffs, tariff rate quotas, and special safeguards was implicit in their proposals. Equally, they proposed phasing out export subsidies across a limited number of products only, and introduced a new concept of parallelism in the effects of reduction of direct and indirect subsidies on exports, which could create adverse effects for tackling distortions in world markets for agricultural products. Argentina, Brazil, China, Egypt, India, Indonesia, and South Africa, supported by some other developing countries formed an alliance called the G-20 basically to ensure that the framework to be agreed at Cancun would fully meet the objectives of the Doha mandate to substantially reduce trade-distorting domestic support, eliminate export subsidies and provide substantial improvements in market access while securing the food and livelihood security and rural development concerns of developing countries. They presented a proposal for a possible framework on 20 August 2003, as partially revised on 29 August 2003. Many aspects of the G-20 position were shared by some other developing countries and some developed countries, including from the Cairns Group of agricultural products' exporting countries. The Draft Ministerial Declaration presented by the Chairman of the General Council on 24 August 2003 for the consideration of the Ministers at Cancun largely mirrored the EU-US proposal for a framework on agriculture with a few elements from the G-20 proposal as well. At Cancun, the focus of discussions was largely on agriculture in recognition of the centrality of agriculture in resolving the impasse across various aspects of the Doha Work Programme. Based on the discussions at Cancun, the Chairman of the Ministerial Conference presented a revised Draft Ministerial Declaration on 13 September 2003. However, the divergences among WTO Members could not be bridged at Cancun, and subsequently, the Chairman of the General Council along with the Director General, WTO, have held informal consultations in light of the decision of the Cancun Ministerial Conference to convene a meeting at Senior Officials level by 15 December 2003 to move towards successful and timely conclusion of the negotiations.

Since the Cancun Ministerial Conference the G-20 has been continuously coordinating its common approach to the informal consultations by the Chairman General Council. India has also been participating in the meetings of the G-20, both at the Ministerial level and at the Officials level, in order to secure its interests and to safeguard its concerns in agriculture in the on-going negotiations. The G-20 has also been outreaching to other WTO Members towards generating a better understanding of its position. India has also been holding bilateral discussions with other WTO Members towards mutual appreciation of interests and concerns in the multilateral negotiations as well as to promote bilateral trade and cooperation.

(b) Services

The General Agreement on Trade in Services (GATS), negotiated during the Uruguay Round, is the first set of multilaterally agreed and legally enforceable rules and disciplines ever negotiated to cover international trade in services. At the conclusion of Uruguay Round, India had taken commitments in a few areas of economic interest, including Financial Services, Telecommunication Services, Health Services, Business Services, Construction and related Engineering Services, Tourism & Travel Services etc. India's commitments are based on its domestic policy and the commitments have been taken mainly in mode 3 (i.e. commercial presence) and are within the framework of our policy on Foreign Direct Investment (FDI).

The negotiations under GATS for progressive liberalisation commenced from 1.1.2000 in accordance with the Guidelines and Procedures for Negotiations drawn up by the members, based on a proposal by India and 22 other developing countries. The Doha Ministerial Conference took note of the progress of negotiations and mandated that the participants/member-countries file their initial Requests for specific commitments by 30th June, 2002 and their initial Offers by 31st March, 2003. Many countries, including India, have interpreted the deadline given in the DMD as an indicative one and, accordingly, the process of exchange of requests and submission of initial offers is still underway.

India has submitted Requests to a number of Member countries in Architectural Services, Audio Visual Services, Computer and Related Services, Health Services, Maritime Services, Tourism and Travel Related Services, Financial Services, Construction and Related Engineering Services, and Accounting and Book-keeping Services. India has also received Requests from 27 countries in various Service Sectors. Bilateral meetings have been held with the respective trading partners, on the margins of the meetings of the Council for Trade in Services in Geneva wherein requests made and received were discussed. As part of this Request-Offer process, over 40 countries including India have submitted their initial Offers to the WTO.

India's core objectives in the negotiations under GATS are ensuring easier access for the movement of natural persons (Mode 4), particularly skilled professionals, and facilitating increased provision of remote services through electronic means (Mode 1). On the other hand, the core interest of most of our trading partners as evident from the requests is in Mode 3, in which the request is either for binding the presently applicable FDI policy or to offer a more liberal policy than that currently prevailing. Being fully engaged in the services' negotiations, India is actively participating in bilateral negotiations on requests and offers.

On the rule-making side, the Working Party on Domestic Regulations (WPDR) is undertaking work for developing disciplines applicable to licensing requirements & procedures, qualification requirements & procedures, and technical standards. Such disciplines are expected to be based on objective criteria and are not more burdensome than necessary. In the Working Party on GATS Rules, discussions are on-going in the areas of Emergency Safeguards Measures, Subsidies and Government Procurement under GATS. The Negotiations on Safeguards have made some progress while in the other two areas not much has been achieved. Negotiations on Safeguards were scheduled to be completed within two years of the coming into effect of the Agreement, but it could not be completed by the specified target date and the deadline has been extended till 15th March, 2004. On Subsidies, Government Procurement and Domestic Regulations, as per the negotiating Guidelines and Procedures, the negotiations are to be concluded prior to the conclusion of negotiations on specific commitments.

Issues relating to Services were not deliberated to any significant degree at the Fifth Ministerial Conference held in Cancun in September 2003.

(c) Non-Agricultural Market Access (NAMA)

Negotiations on market access for nonagricultural products commenced following the mandate at the Doha Ministerial Conference. A Negotiating Group on Market Access (NGMA) was established and was given a time frame of upto the Cancun Ministerial Conference for finalizing the modalities for negotiations.

Several formal and informal meetings of the NGMA were held during 2002 and 2003. Several proposals were made by Members including detailed proposals on modalities by India, China, EC, Japan, South Korea and the US. No consensus could be reached on any of these proposals. Finally on 16 May 2003 the Chairman of the NGMA submitted a set of modalities on his own responsibility which reflected the ambitions and concerns expressed by the various Members. In view of divergences among Members, no final decision inter alia on NAMA could be adopted at Cancun. Post-Cancun, divergences between developed and developing country Members have come into sharper focus. Most developing countries have been stressing that the concept of less than full reciprocity should be incorporated in the core formula for tariff reductions and the sectoral initiative should be voluntary with a positive end tariff for developing countries. India has also been stressing the need for treating non-tariff barriers (NTBs) as part of the NAMA negotiations and incorporating them in the final modalities to be agreed upon.

(d) Developmental Issues

(i) TRIPS And Public Health

The Doha Declaration on TRIPS and Public Health recognized the problem of countries having insufficient or no manufacturing capacities in the pharmaceutical sector in effectively using the flexibility of compulsory license because of restriction on export under the provisions of Article 31(f) of TRIPS Agreement and directed the TRIPS Council of WTO to find a solution to this problem.

Various proposals were submitted in the TRIPS Council by the developing as well as developed countries. This led to the Decision in the WTO General Council meeting held on 30 August, 2003 regarding grant of waivers from the obligations under Article 31(f) and 31(h) of the TRIPS Agreement. This will ease the problem being faced by developing countries and LDCs having no or insufficient manufacturing capacities in the pharmaceutical sector in issuing compulsory licenses. This is intended to be a temporary mechanism which is to be followed by an amendment to the TRIPS Agreement. This decision would enable manufacture and export of pharmaceutical products under compulsory license to countries with limited or no manufacturing capacities in the pharmaceutical sector.

(ii) Implementation Issues

The various Subsidiary Bodies of the WTO were mandated to deliberate upon certain implementation issues and make recommendations for adoption by the General Council/TNC. There has been very little progress in the successful resolution of these implementation issues to the satisfaction of developing countries. As the implementation issues are very important part of the Doha Ministerial Declaration addressing the concerns of the developing countries, we are consistently advocating our stand that these issues will have to be addressed to our satisfaction.

(iii) Review of Special and Differential Treatment (S & DT) Provisions

The Doha Ministerial Conference instructed the Committee on Trade and Development (CTD) to examine all the S&DT clauses in the WTO Agreements in the following context: (I) Identify the non-mandatory or `best endeavour clauses; and (ii) How to make the "non mandatory" or `best endeavour' clauses mandatory and make them precise, effective and operational. The CTD was required to report to the General Council with clear recommendations for a decision by July 2002.

Of the 88 issues for consideration, India, either on its own or along with likeminded Members, submitted 11 proposals in the Committee on Trade and Development. Even though July 2002 deadline was initially fixed for the Committee on Trade and Development to report the recommendations for adoption, no progress could be made by that time. By the end of 2002, there were only 4 out of 88 proposals on which understanding could be reached. The deadline was, therefore, revised to February 2003. In May 2003, General Council Chairman circulated a list of proposals on S&D, classified into 3 overall categories: Category 1 included 36 proposals on which the Chairman of the General Council felt there was a "greater likelihood of reaching agreement". Category 2 comprised 38 proposals, including those that were being discussed as part of mandated negotiations. Category 3 comprised 12 proposals on which delegated have had most difficulty in finding consensus.

During the days immediately preceding the Cancun Conference the Chairman of GC concentrated attention on Category 1 of the S&DT issues on which he felt there was likelihood of agreement before Cancun. In fact, Category 1 covered only issues that are of very limited value addition to developing countries including the LDCs. Para 11 of the Draft Ministerial Text of 24th August 2003 and para 12 of the revised draft text of 13th September 2003 related to Special and Differential Treatment provisions. Decision on 27 issues out of 88 issues were proposed in the draft text of 13th September 2003. All these issues related to Least Developed Countries (LDCs) and even to them the economic benefits that accrue would be minimal. Issues in Category 2 and 3 are of greater and more significant economic and trade importance to developing countries and LDCs. These were left un-addressed. No time frame was also indicated. The absence of any significant movement in S&DT review antagonized LDCs, in general, and the African Group, in particular, at Cancun, which contributed to the outcome of the Conference.

(iv) Technical Assistance

Activities to impart technical assistance to developing countries including LDCs are being carried out by the WTO as a part of Annual Technical Assistance Plan. The developing countries have however emphasised that seminars alone are not adequate. To ensure that the fruits of Doha are reaped by the developing countries, the technical cooperation should ensure creation of hardware and trained human resources in the developing countries. Therefore, the focus of technical cooperation needs to be changed towards achieving this objective.

Department of Commerce in collaboration with UN Conference on Trade and Development (UNCTAD) and the UK Department for International Development (DFID) has launched a project, entitled "Strategies and Preparedness for Trade and Globalization in India". The aim of the project is two-fold, viz. to assist in understanding the development dimension of key trade issues, particularly as they related to the current WTO Agenda; and to strengthen the country's human and institutional capacity for analysis of globalization-related issues and facilitate a policy environment that will support and sustain a more equitable process of globalization.

(e) Singapore Issues

The four Singapore Issues, viz. relationship between trade and investment; interaction between trade and competition policy; transparency in government procurement; and trade facilitation have been under discussion in a clarificatory mode since the Doha Ministerial Conference in 2001. Discussions in the respective Working Groups focused on the elements identified in the Doha Declaration. We have been maintaining that the process was a clarificatory one as understood by the Doha Declaration read along with the Chairman's Understanding before the adoption of the Declaration. The Chairman's clarification made it clear that negotiations would proceed based only on explicit consensus and individual Members have the right to take a position to prevent this consensus and thus block negotiations from proceeding. The period since Doha did not see the emergence of any consensus on modalities.

Since Doha, India had been participating constructively on discussions in different working groups on Singapore Issues. While maintaining our original stand that these issues had no place under the WTO framework as they were non-trade issues, we also submitted papers to the Working Groups highlighting our concerns on a number of elements in the Singapore Issues. We emphasised that there was no clarity on many elements and hence there was no case for coming to an explicit consensus agreement on modalities of negotiations as required by the Doha Mandate. Our goal was to continue the clarification process at the WTO till there was further clarity.

This lack of consensus on modalities was reflected in the draft Ministerial Text which was transmitted by the Chairman, General Council for the consideration of Ministers at Cancun. On all the Singapore Issues, the two diverging viewpoints one seeking commencement of negotiations on the basis of annexed modalities and the other seeking continuation of the clarification process at the WTO were reflected as alternative options.

India, along with 15 other countries who constituted a Core Group on Singapore Issues called the G-16, made a submission on this issue to the General Council. In this submission (WT/GC/W/514), it was highlighted there was lack of clarity on many elements in each of the Singapore Issues. The elements needing further clarification were annexed to the submission. The submission requested that these elements for clarification be annexed to the draft Ministerial Text and also circulated to all Members. This submission was also circulated as a Ministerial Document at the Cancun Ministerial.

In the days before the Ministerial Conference formally began at Cancun, there were a number of bilateral meetings both at the Ministerial level and at official level. India forcefully put forward its position on continuation of the clarification process although proponents desired commencement of negotiations. We also reiterated the lack of explicit consensus on modalities. 

The core group of 16 countries (G-16) including India which was formed on Singapore Issues consisted of Bangladesh (representative of the LDC group), Botswana, China, Cuba, Egypt, Indonesia, Jamaica, Kenya, Malaysia, Nigeria, Philippines, Tanzania, Zambia, Zimbabwe, Uganda and Venezuela. The G-16 took a strong and effective stand highlighting the problems in including Singapore Issues at the WTO and the lack of explicit consensus on modalities. The
G-16 also wrote to the facilitator on Singapore Issues highlighting our concerns.

However, the second draft Ministerial text released on 13 September 2003 ignored the position taken by over 90 countries including India and suggested commencement of negotiations on three of the four Singapore Issues, viz, Investment, Transparency in Government Procurement and Trade Facilitation. This was completely unacceptable to India and the Commerce & Industry Minister of India made a forceful intervention in the debate on this draft pointing out the lack of explicit consensus.

(i) Relationship between Trade and Investment

In 2003, two meetings of the Working Group on the Relationship between Trade and Investment took place. In both the meetings, discussion centered on the elements identified in Paragraph 22 of the Doha Declaration.

Prior to the Cancun Ministerial, the Department hosted an International Conference on Trade, Investment and Development of 15 developing countries in New Delhi from 18 to 20 May, 2003 with a view to exploring possible coalition building in this area. The conference enabled a better understanding of the issues involved and the generation of a common position on investment.

(ii) Interaction between Trade and Competition Policy

In 2003, two meetings of the Working Group on the Interaction between Trade and Competition Policy took place. Here too, discussion centered around the elements identified in Paragraph 22 of the Doha Declaration.

(iii) Transparency in Government Procurement

In 2003, two meetings of the Working Group on  Transparency in Government Procurement took place. The discussion focused on twelve elements identified by the Chair in the context of Transparency in Government Procurement. At Cancun, the draft decision for Ministers' consideration sought to initiate multilateral negotiations in this area. Initially, it was proposed that the negotiations should be wide ranging. Later, however, the draft was modified to suggest that the area of concern for developing countries like applicability of the WTO Dispute Settlement Understanding; product coverage; and prescriptions regarding domestic review mechanism would be included in the negotiations without prejudging the positions of Members.

(iv) Trade Facilitation

Trade Facilitation broadly deals with modernisation, harmonisation and simplification of Customs clearance procedures. The strong demanders for multilateral rule on Trade Facilitation continued to be EC, Canada, Australia, Norway and Switzerland. Most of the other developed and several developing countries also supported this proposal. During the study process and the meetings held in the Council for Trade in Goods of WTO during March and June 2003, India along with many other developing countries like Brazil, China, Malaysia, Philippines, Jamaica and Uruguay continued to highlight that they were still unconvinced about the need for binding rules on Trade Facilitation in WTO in view of several concerns including resource implications.

(f) Rules & RTAs

These negotiations are currently being undertaken in the Negotiating Group on Rules (NG Rules). In respect of Anti-dumping and Subsidies Agreements, the various proposals submitted to the Negotiating Group on Rules (NG Rules) have generally sought strengthening of disciplines. India has made three submissions to the NG Rules. The first submission has sought special and differential treatment for developing countries during anti-dumping and countervailing duty investigations. The second submission has identified specific provisions of the Anti-Dumping Agreement which require amendments. In respect of the Subsidies Agreement, India's submission inter-alia seeks inclusion of capital goods and consumables in the definition of inputs consumed in the production process, clarification in provisions relating to duty drawback schemes and improvement in provisions relating to export competitiveness.

Apart from negotiations on Anti-Dumping Agreement and the Subsidies Agreement, the NG Rules has also been discussing issues relating to Regional Trade Agreements (RTAs) and Fisheries Subsidies. In respect of fisheries subsidies the negotiations have so far not gathered adequate momentum. In respect of RTAs, concern has been expressed by various countries at the increasing number of such agreements that could undermine the multilateral trading system. Presently, the focus is to reach some agreement that would improve the transparency of RTAs. Issues being discussed for enhanced transparency include when to notify Regional Trading Agreements (at the time of signature or after ratification); where to notify such agreements (in the Committee on Regional Trade Agreement (CRTA) or in the Council for Trade in Services, or in the Council for Trade in Goods and for RTAs under the Enabling Clause in the Committee for Trade and Development); what to notify (whether to have a factual report prepared by the WTO Secretariat to aid the process of examination of RTAs); how to notify the changes to existing RTAs; and periodicity of examination of RTAs.

India has responded to these proposals in a constructive manner. It has however expressed strong reservation on the proposal by several countries that to enhance transparency, all RTAs, including those formed under the Enabling Clause, should be notified to the CRTA and be subject to a factual enquiry process (while RTAs under GATT Article XXIV and GATS Article V be subject to a factual enquiry followed by an examination process). This stand has been taken with a view to keep intact the character of the Enabling Clause which, unlike GATT Article XXIV and GATS Article V, does not provide for examination but only for notification and, upon request, for prompt consultation. As pointed out in India's paper in WTO on this subject (TN/RL/W/114), the Enabling Clause is the codification of the concept of the differential and more favourable treatment and this can not be allowed to be diluted in any way in course of the current negotiations which is often called a development round. 

India in its PaperTN/RL/W/114 has also emphasized the need to discuss substantive issues like definition of the term "substantially all trade" under GATT Article XXIV, addressing the trade distorting effects of the preferential rules of origin; and clarification of issues concerning SPS, TBT and Trade Defence Measures in the RTA context.

(g) Dispute Settlement Understanding (DSU)

The deadline for finalization of DSU amendment proposals was May 2003 and the negotiations on DSU are not a part of single undertaking. The time frame for concluding negotiations on DSU has been extended to May 2004. Comprehensive set of proposals have been tabled by EC, India along with certain other countries, Australia, LDCs, Africa Group, Costa Rica, Mexico, Japan etc.

Other Issues relating to the TRIPS Agreement

(i) Negotiations on extension of higher level of protection to geographical indications other than wines and spirits

Doha Ministerial Declaration under paragraph 18 directed that this issue would be addressed in the TRIPS Council pursuant to paragraph 12 of the Declaration. Trade Negotiations Committee (TNC) set up after Doha Conference was to report to the General Council by the end of 2002, however as there was no consensus among the Members on this issue, no agreement could be reached. Draft Cancun Ministerial Text (Second Revision dated 13th September 2003) under para 13 regarding implementation issues, while reaffirming the mandates given under para 12 of Doha Ministerial Declaration and Decision on Implementation-Related Issues and Concerns, instructed the TNC and other negotiating bodies to redouble the efforts to find appropriate solutions as a priority and requested the Director General to continue the consultations undertaken by him on issues including issues related to the extension of the protection of geographical indications provided for in Article 23 of the TRIPS Agreement to products other than wines and spirits. The General Council shall review progress and take appropriate action . However, since there was no consensus among the Member countries on the draft Cancun Ministerial Text, the above draft language also could not be agreed to.

(ii) Negotiations on the relationship between TRIPS Agreement and CBD

Doha Ministerial Declaration under paragraph 19 directed that this issue would be addressed in the TRIPS Council pursuant to paragraph 12 of the Declaration. TNC was to report to the General Council on this issue by the end of 2002, however as there was no consensus among the Members on the issue, no agreement could be reached. Draft Cancun Ministerial Text (Second Revision) under para 23 while taking note of the work undertaken by the TRIPS Council, agreed that this work shall continue on the basis of para 19 of Doha Ministerial Declaration and the progress made so far. The General Council shall report on its work in this regard to next Ministerial Session. However, since there was no consensus among the Member countries on the draft Cancun Ministerial Text, the above draft language also could not be agreed to.

(iii) Negotiations on Non-Violation Complaints

Doha Declaration on Implementation-Related Issues and Concerns under para 11.1 directed the TRIPS Council to continue its examination of the scope and modalities for complaints of the types provided for under subparagraphs 1(b) and 1(c) of Article XXIII of GATT 1994 and make recommendations to the Fifth Session of the Ministerial Conference. It was agreed that, in the meantime, Members would not initiate such complaints under the TRIPS Agreement. A number of proposals from developing and developed countries were submitted in the TRIPS Council in this regard. The draft Cancun Ministerial Text (Second Revision) under para 22 took note of the work done by the TRIPS Council and directed it to continue its examination of the scope and modalities for complaints of the types provided for under subparagraph 1(b) and 1(c) of Article XXIII of GATT 1994 and make recommendations to the first Ministerial Conference to be held after 1 August 2004. It was agreed that, in the meantime, Members would not initiate such complaints under the TRIPS Agreement. However, since there was no consensus among the Member countries on the draft Cancun Ministerial Text, the above draft language also could not be agreed to.

Trade and Environment

Doha Ministerial Declaration has provided a negotiating mandate. Para 31(i) the relationship between existing WTO rules and specific trade obligation set out in Multilateral Environment Agreements (MEAs), limited in scope to parties to the MEA in question; Para 31(ii) procedures for regular information exchange between MEA Secretariats and the relevant WTO Committee; Para 31(iii) Market access negotiations for environmental goods and services.

Para 32 of Doha Declaration provides that the Committee on Trade and Environment (CTE) to pursue the work programme on all agenda items and give particular attention to (i) the effect of environmental measures on market access, especially in relation to developing countries, in particular the least-developed among them, and those situations in which the elimination or reduction of trade restrictions and distortions would benefit trade, the environment and development; (ii) the relevant provisions of the Agreement on Trade-related Aspects of Intellectual Property Rights; and (iii) labelling requirements for environmental purposes.

EC, Argentina, Australia and Switzerland, India, the US and other countries made submissions under para 31(i) of the Doha Declaration. India stated that the mandate given under this para refers only to the trade measures that are mandatory and specific in their entirety.

Under Para 31(ii) on the issue of information exchange and observership between the MEAs and the WTO, the US and the EC proposed regular procedure for information exchange sessions and document exchange between MEAs and WTO.

On para 31(iii) on the issue of market access for environmental goods and services, the US has proposed that the APEC list of environmental goods should be taken as the starting basis. This has not been agreed to by other Members. The developing countries have stated that the APEC list lacks balance for them. Countries other than EC and Switzerland have opposed inclusion of products based on non-product related Process and Production Method (npr-PPM).

In para 32(i) India made a submission (WT/CTE/W/207) on "The effects of environmental measures on market access, especially in relation to developing countries in particular the least-developed among them, India and other developing countries have been raising this issue and there is a consensus amongst WTO members that the adverse implication on market access of developing countries should be minimised.

Under Para 32(iii) regarding eco-labelling, EC proposed that the Cancun Ministerial Conference should give a fresh mandate to the CTE to carry out work on voluntary eco-labeling schemes. This has not been agreed to.

Future Work

As mandated by the Ministers at Cancun, a meeting of the WTO General Council was held at Senior Officials' level in Geneva during 15-16 December 2003 with a view to achieving progress in the ongoing negotiations under the Doha Work Programme. In their opening statements, the Chairman of the General Council and the Director General, WTO reported progress towards getting the negotiations on track and that there was a firm commitment to do so by all Members. In this regard, they called for the WTO negotiating bodies to be reactivated with a view to taking action necessary to move towards a successful and timely conclusion of the negotiations. In the meeting, India reiterated its commitment to successful and timely completion of the Doha Development Agenda based on the fulfillment of the mandate agreed to at Doha. On agriculture, it supported the G-20 position that in line with the Doha mandate, the modalities to be adopted should be capable of ensuring that negotiations on agriculture would result in substantial reductions in domestic support, substantial increase in market access, phasing out of all forms of export subsidies and operational and effective special and differential treatment that took into account rural development and food security concerns of developing countries, besides effectively addressing the particular concerns of recently acceded countries. On non-agricultural market access, it favoured a framework that fully reflected the principles laid down in the Doha mandate, especially the principle of `less than full reciprocity' in reduction commitments for developing countries. The modalities for negotiations should incorporate suitable special and differential provisions for developing countries with a degree of flexibility in respect to Sensitive Products (SP). Further, sectoral initiatives with regard to zero or uniform tariff should be voluntary rather than mandatory for developing  countries. India also wanted the non-tariff barriers to be adequately dealt with in the on-going negotiations. On Singapore issues, India wanted three of the four issues other than Trade Facilitation to be completely dropped from the WTO agenda while on Trade Facilitation, clarificatory work could continue subject to final decision on modalities of negotiations being decided by explicit consensus of all Members. Finally, India emphasised the need for concerted and conscious efforts of Members to ensure that the development dimension of the negotiations was not diluted , but continued to occupy centre stage as this alone would ensure progress of trade liberalization on a sustained basis.

The negotiations slowly returned back to track with the General Council deciding on the Chairpersons of the various WTO bodies including the negotiating groups for the year 2004 at its meeting on 11 February 2004. Negotiations under the Doha Work Programme resumed in the specific negotiating bodies in March 2004.

Sixth Ministerial Conference

It has been decided by the General Council that the Sixth Ministerial Conference of the WTO would be held at Hong Kong China, with the dates yet to be decided.

Important Disputes Involving India At The WTO

(a) EC - Bed Linen Compliance Dispute

In the EC-Bed Linen Compliance dispute, the Appellate Body of the WTO concluded that EC has failed to act consistently with provisions of Anti-Dumping Agreement while implementing the rulings and recommendations of the WTO's Dispute Settlement Body (DSB) in an earlier dispute with India regarding imposition of anti-dumping duty on bed linen imports. The finding of the Appellate Body circulated on 8th April 2003 is linked with a previous dispute against EC in which it had been held that EC had failed to comply with requirements of the Anti-Dumping Agreement while imposing anti-dumping duty on bed linen imports from India in November 1997. On 7 August 2001 the Council of the European Union adopted Regulation 1644/2001 amending the original definitive anti-dumping duties on bed linen from India, purporting to comply with the DSB's recommendations and rulings in the original dispute, whilst simultaneously suspending its application. India strongly disagreed that this re-determination complied with the rulings of the DSB and sought the establishment of a Compliance Panel to examine the existence or consistency of action taken by the EC to implement the DSB decision in the dispute. The Compliance Panel concluded that EC had complied with the DSB decision in the original dispute. India subsequently appealed certain issues of law and legal interpretations developed by the Compliance Panel. While reversing a new finding of the Compliance Panel, the Appellate Body held that EC's determination of volume of dumped imports for purposes of making a determination of injury was not based on an objective examination.

At its meeting on 24th April 2003, the DSB adopted the Appellate Body Report and the Panel Report in this Compliance dispute.

(b) US - Rules of Origin

The United States included in its legislation implementing the results of the Uruguay Round negotiations, new rules for the determination of the origin of textiles and apparel products that changed the criteria to determine the origin of products. At India's request, a WTO panel was established on 24 June 2002, to consider India's claims regarding the new rules of origin for textiles and apparel products implemented by the United States.

The U.S. rules of origin create trade restrictive effects because they entailed new quantitative restrictions on Indian products exported to third countries, which had previously never been subject to any restrictions. They create distorting effects because they shifted origin from a third country where the fabric was dyed and printed and subjected to two further finishing operations to the country where the greige fabric was formed and because they favoured products of export interest to the EC over products of export interest to developing countries. They create trade disruptive effects because of their sheer complexity and the arbitrary nature of the criteria used. The panel report has rejected all the claims made by India in this dispute. The DSB has adopted the panel report during its meeting held on 21st July 2003.

(c) EU GSP Dispute

A WTO dispute settlement panel established at India's request in January 2003 has upheld India's contention that the European Communities has violated its GATT/WTO obligations in granting tariff preferences to 12 countries under the "Drug Arrangements" window of its GSP scheme without extending these preferences to other developing countries. The Panel Report, circulated on 1st December 2003 has also ruled that the EC has failed to demonstrate that the Drug Arrangements are justified under the Enabling Clause, which otherwise allows the developed countries to grant tariff preferences to developing countries without allowing the same advantage to developed countries.

India's dispute with EC had arisen primarily because EC included Pakistan as beneficiary country under its Special Tariff Arrangement for Combating Drug Production and Trafficking under its GSP Scheme for the years 2002-04. Such a scheme was in operation even in earlier years with beneficiaries being restricted to ANDEAN and Central American countries. While the scheme, in India's view was not compatible with WTO rules even then, it had not agitated the matter in WTO since it was not significantly affected. India invoked dispute settlement proceedings of the WTO in this case with extreme reluctance and after having exhausted all available avenues for a negotiated settlement with the EC. The matter was taken up repeatedly with the EC at various levels including at the ministerial level. Even after initiating the dispute under WTO's dispute settlement procedures in March 2002, India continued its effort in seeking a bilateral solution to the problem with EC. However at no stage did EC respond positively to India's concerns.

The Panel has recommended that the Dispute Settlement Body requests the EC to bring its measure into conformity with its obligations under GATT 1994. The Panel Report has not yet been adopted by the DSB as the EC has, on 8 January 2004, appealed against the findings of the Report before the Appellate Body.

(d) India 27 Definitive Anti-dumping Measures

On 8th December 2003 the European Communities has requested consultations with India regarding definitive anti-dumping measures in 27 cases. The EC considers that in all of these cases the investigations were conducted and determinations made in violation of India's obligation under GATT 1994 and the Anti-Dumping Agreement. India has entered into consultations with the EC in this dispute.

(e) India Imposition of Anti-dumping duty on imports of Lead Acid Batteries from Bangladesh

On 28 January 2004 Bangladesh requested consultations with India regarding imposition by India of Anti-dumping duty on imports of Lead Acid Batteries from Bangladesh. Bangladesh is particularly concerned about certain aspects of the investigation leading to the imposition of the definitive anti-dumping duties which cannot be reconciled with Article VI of the GATT 1994 and various provisions of the Anti- Dumping Agreement. Furthermore according to Bangladesh, as a result of the imposition of anti-dumping duties in a manner not justified under Article VI of the GATT 1994 and the Anti-dumping Agreement, India may likewise be acting inconsistently with its obligations under Articles I:1 and II:1 of the GATT 1994. India and Bangladesh held consultations in this dispute on 26-27 February 2004.

Transparency & Interaction with Stakeholders

An institutionalized system of interaction with various concerned stakeholders has been set up. There have been detailed interactions with Apex industry associations as well as holding of joint Seminars/ Workshops on various issues related to WTO. Greater degree of integration has been achieved with academic institutions and a number of studies have been entrusted to them. Interaction with relevant administrative Ministries have also been institutionalized through inter-Ministerial groups and the formation of the WTO Coordinating Group of Secretaries chaired by Commerce Secretary. Expert groups have been set up in each of the sectors so that both academic and professional inputs are available to the Ministry on ongoing negotiating issues. A monthly newsletter devoted entirely to WTO issues is brought out by the Department, both in English and Hindi, and this is also available on the Department's Web-site. Separately, copies are sent to all the Indian Missions abroad, Chief Secretaries of all States and Union Territories and all Secretaries to the Government of India. Further, India's position on issues under negotiations has also been put on the Web-site for wide dissemination. Efforts have  also been made to disseminate information to State Governments especially in areas of interest to them like Agriculture.

UN-Economic and Social Commission for Asia and Pacific (ESCAP)

India is one of the founding members of UN-Economic and Social Commission for Asia and Pacific(ESCAP). The main activities of ESCAP include evaluation and execution of projects in the socio-economic fields with an aim for improving national capabilities to deliver effective social services and develop requisite infrastructural and environmental capabilities. ESCAP's major work during the year focussed on :-

i ) Regional Economic Cooperation.

ii) Poverty alleviation through economic growth and social development.

iii) Environment and sustainable development.

iv) Development of transport, communications, tourism and infrastructure development in the region, and

v) Enhancing capabilities of national Statistical Organisations.

The Second Phase of the 59th Annual Session of ESCAP held in Bangkok from 1-4 September, 2003 deliberated on the theme topic "Integrating economic and social concerns, especially HIV/AIDS, in meeting the needs of the region."

During the year 2003, Government of India was represented in the following ESCAP committee/Sessions:-

Sixth Session of the Special Body on Least Developed and Land Locked countries at Bangkok from 22-23 April, 2003.

19th Session of APDC General Council from 3-4 June, 2003 at Kuala Lumpur.

Sixth Session of the Special Body on Least Developed and Land Locked countries at Bangkok from 1-2 September, 2003.

First Session of Committee on Emerging Social Issues held from 4-6 September, 2003 at Bangkok.

Ninth Session of the Governing Board of Statistics Institute for Asia and Pacific in Japan from 14-15 November, 2003.

Second Session of the Governing Board of the Asian and Pacific Centre for Agricultural Engineering and Machinery (APCAEM) from 26-27 November, 2003 at Beijing.

Apart from the above Intergovernmental meetings, Government of India's representatives and experts participated in various other activities sponsored by ESCAP such as Expert Group Meetings, Seminars, Workshops, Training Programmes etc. organised by ESCAP Secretariat in Bangkok and other places.

India worked in close cooperation with ESCAP during the year with active participation in ESCAP initiatives. Under the New Delhi Action Plan, India is implementing certain infrastructure projects including Asian Land Transport and Infrastructure Development (ALTID) project, which is of interest to India. The three components, of this project namely Asian Highway Project, Trans-Asian Railway Project and Accession to International Conventions on Land Transport Facilitation are being implemented by Ministry of Road Transport and Highways, M/o Railways, M/o Finance (D/o Revenue) respectively.

UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT (UNCTAD)

Established by the UN General Assembly in December 1964, United Nations Conference on Trade and Development (UNCTAD) serves as the focal point within the United Nations for deliberation and negotiations in the field of international trade and related issues of international economic cooperation. The Ministerial conference which meets every four years, is UNCTAD's highest decision making body and sets priorities and guidelines for the organization and provides an opportunity to debate and evolve policy consensus on key economic and development issues. The last conference was UNCTAD-X, which was held in February, 2000 in Bangkok, Thailand. The UNCTAD-X adopted Plan of Action for the years 2000-2004. UNCTAD XI is scheduled to be held in Sao Paulo, Brazil during 13-18 June, 2004

UNCTAD XI 

UNCTAD XI is scheduled to be held in Sao Paulo, Brazil on 13-18 June, 2004. UNCTAD XI is taking place at a crucial juncture. Apart from the failure of  the Cancun WTO Ministerial Conference, the delay in reviving the WTO process due to the important factors such as the reluctance of US administration to consider new disciplines till a new Administration is installed in 2005 and the imminent expansion of the European Union, point towards little or no hope of resurrecting the negotiating process and concluding Doha process of WTO, as per schedule by the end of 2005. UNCTAD Conference, has in this background, a real potential for filling void created by the post-Cancun scenario.

The theme of UNCTAD XI is "Enhancing coherence between national strategies and the global economic processes towards economic growth and development, particularly of developing countries". This theme will be dealt in the following four sub themes:

u Developing strategies in a globalising world economy;

u Building productive capacity and international competitiveness;

u Assuring development gains from the international trading system and trade negotiations; and

u Partnership for development.

A Preparatory Committee (Prepcom) has been established by the Trade and Development Board of UNCTAD for the preparations of the UNCTAD XI. The PrepCom and its Working Groups, set up for each of the sub themes mentioned above are having the consultations and meetings in Geneva to negotiate the Pre-Conference Text. Permanent Mission of India at Geneva is participating in these negotiations by the Geneva based delegations.

In the run-up to UNCTAD XI, most debate on the them and sub-themes is expected to address two key questions. First, what kind of international arrangements will be needed to give developing countries the policy space and the concrete opportunities, the trade opportunities, to address the basic issues of poverty alleviation and closing the income gap? And second, what kind of domestic policy and institutions will be needed to generate the capacity to meet these challenges? While developed countries would like to see that the outcome largely focus on the latter by highlighting issues related to supply side capabilities, productive capacity and competition policies, India along with the G-77 and China will be putting emphasis on the need for mainstreaming of development in international trade, financial and monetary policies.

During the consultations in Geneva, India's delegation had highlighted that UNCTAD could focus on some of the aspects such as enhanced and predictable market access for agriculture and better terms of trade, removal of market entry barriers to trade, financial support, volatility in the capital market, trade diversification and moving up the value chain into technology intensive manufactured exports, greater policy space to develop local industries, strengthening of technological capacity, the need for a more benign and development sensitive international technology and Intellectual Property Rights (IPR) regime.

During the Prepcom meeting, India presented the need for a success in terms of the outcome of UNCTAD XI to impart the much needed feel good to all participants and provide a shot in the arm to the Multilateral Trading System. UNCTAD XI can address the legitimate doubts and concerns of developing countries in respect of the WTO process. As a forum, it can complement and supplement WTO and can also go much further to provide a firmly substantial treatment to those new and complex issues. UNCTAD as an institution is best suited for this kind of work. It already has well-established expertise in such areas as investment, competition and trade facilitation.

UNCTAD XI is expected to adopt a Plan of Action for the Organisation for the next four years (2004-2008) and this Plan of Action would form a part of the Conference text to be adopted by the Conference.

Role of UNCTAD: India's Perception

India perceives UNCTAD as the most visible symbol of the United Nations assurance to promote the economic and social advancement of all people of the world and this remains equally relevant in the changing world economic order. UNCTAD continues to be an important resource base for the South and it provides a forum for us to network and form issue based coalitions with like-minded countries specially the developing countries. We see UNCTAD's educative, early warning and watch-dog role vis-a- vis developing countries' interests in the working of WTO as very valuable. We feel that with its wide membership UNCTAD is ideally suited to play an important role of analyzing and examining new trade issues from the development perspective before they are ripe for negotiations in the contractual context of WTO. UNCTAD has acted as a conscience keeper of the world economic system and should continue to speak objectively and fearlessly for developing countries and their integration into the international trade.

Technical Cooperation Programmes of UNCTAD

UNCTAD's technical cooperation programmes in trade efficiency, Trade points, harmonisation of customs procedure, database on trade information (TRAINS), debt management programmes etc. have been found extremely useful by the developing countries. India has made a contribution of US $ 1,00,000.00 to the UNCTAD Trust Fund for LDCs, and US $ 20,000 to UNCTAD/ICC project on Investment Guides and Capacity Building for LDCs.

COMMON FUND FOR COMMODITIES

Common Fund for Commodities (CFC) was established in1989 in pursuance of the Agreement Establishing the Common Fund for Commodities negotiated in the United Nations Conference on Trade and Development (UNCTAD) in the 1970s.

The objectives of the Common Fund for Commodities are:-

a) to serve as a key instrument in attaining the agreed objectives for the Integrated Programme for commodities adopted by UNCTAD and

b) to facilitate the conclusion and functioning of ICAs (International Commodity Agreements) particularly concerning commodities of special interest to developing countries.

In order to fulfill these objectives, the Fund has been authorized to exercise the following functions:

(a) To contribute, through its First Account to the financing of international buffer stocks and internationally coordinated national stocks, all within the framework of ICAs;

(b) To finance, through its Second Account, measures in the field of commodities other than stocking,

(c) To promote coordination and consultation through its Second Account with regard to measures in the field of commodities other than stocking, and their financing, with a view to providing commodity focus.

Since the conception of the Fund in the 1970s, certain elements of commodity trade have changed dramatically, in particular the shift away from market regulating instruments to a liberalised system of market forces. Due to this the Common Fund has not been able to operationalise the First Account capital, which was primarily meant for the financing of international buffer stocks and internationally coordinated national stocks within the framework of International Commodity Agreements (ICAs).

The resources of the Common Fund are derived from subscription of Shares of directly contributed capital paid in by Member Countries in accordance with Schedule A of the Agreement Establishing the Common Fund for Commodities. This capital is paid half in cash and half in Promissory Notes.

The interest earned by the capital of the First Account is used to finance projects under the First Account Net Earnings Initiative and to cover the administrative expenses of the Fund. Therefore, Member Countries do not need to pay annual membership fees. Commodity development measures of the Common Fund are financed by either loans or grants or a combination of both. The capital resources of the Second Account can only be used for loans whereas the voluntary contributions are available for grants and/or loans.

On the other hand, the Common Fund for Commodities has been active in implementing projects under the Second Account. As of December, 2003 a total of 178 projects including 54 Fast Track projects have been approved at a total cost of US $ 366 million. These projects will directly benefit 80 developing countries.

The First Five year Action Plan for CFC was approved in the Ninth Annual Meeting of the Governing Council held in December, 1997. The Action Plan which was implemented during 1997-2002 directed the work of the Fund on the least developed countries and other developing countries. The Second Five Year Plan for the period 2003-2007 which is under implementation emphasizes, the chain management concept in the context of sustainable development, impact orientation of projects, diversification, wide dissemination of project results, facilitation of access to information on commodities and the advocacy role of the Common Fund in commodity related matters. On the basis of a decision taken in 1995 a part of the Accumulated Net Earnings of the First Account has also been used to finance projects designed to support developing countries, particularly the Least Developed and Land-Locked as well as countries in transition.

Governing Council is the apex executive body of the Fund. Commerce Secretary is the Governor representing India in the Governing Council of CFC, which meets once in a year. Executive Board is the decision making body of the Fund. India, Pakistan and Sri Lanka together with the former Yugoslavia form one constituency and are represented by one Executive Director and an Alternate Executive Director on the 28 member Executive Board. As per an arrangement arrived at by these three countries the position of Executive Director (ED) and Alternate ED are held on a rotation basis. India has been elected as the Executive Director representing the constituency India, Pakistan, Sri Lanka and Serbia and Montenegro for the biennium 2004-2005.

GLOBAL SYSTEM OF TRADE PREFERENCES (GSTP) AMONG DEVELOPING COUNTRIES.

The Agreement establishing the Global System of Trade Preferences (GSTP) among Developing countries was signed on 13th April, 1988 at Belgrade following conclusion of the First Round of Negotiations. The GSTP establishes a framework for the exchange of trade concessions among the members of the Group of 77. It lays down rules, principles and procedures for conduct of negotiations and for implementation of the results of the negotiations. The coverage of the GSTP extends to arrangements in the area of tariffs, para-tariff, non-tariff measures, direct trade measures including medium and long-term contracts and sectoral agreements. One of the basic principles of the Agreement is that it is to be negotiated step by step improved upon and extended in successive stages. 

The 16th Session of the GSTP Committee of Participants (COP) was held in Geneva on 10th December, 2003. A special significance was attached to this meeting as it was taking place after the Cancun impasse and the current state of affairs in the multi-lateral trade negotiations in Geneva. The COP was, therefore, seen as an opportunity to revitalize the GSTP in the current context. The Agreement as it stands today is too modest, the concessions in scope and quality are few, limited, insufficiently attractive to motivate greater trade among countries of the South. Additional efforts, additional instruments, additional participating countries, additional stimulus and concessions were, therefore, required for the system to fully gain ground. He therefore suggested that starting a new round of meaningful negotiations would, therefore, be a possible way forward. The Committee, therefore, decided to constitute an Ad-hoc Technical Working Group with the following Terms of Reference:

u To comprehensively review the operations of the GSTP Agreement in the light of its objectives and determine its achievements and problems, including in respect to other trade liberalization arrangements, since its entry into force;

u To study the technical feasibility of the possible means of invigorating and furthering the objectives of the GSTP Agreement with emphasis on the principle of mutuality of advantages in such a way as to benefit equitably all participants and;

u To make recommendations for concrete actions to be taken to strengthen the effectiveness of GSTP without excluding the possibility of a new round of negotiations to enhance trade among participants.

GENERALISED SYSTEM OF PREFERENCES (GSP)

The Generalised System of Preferences (GSP) is a non-contractual instrument by which Industrialized (developed) countries unilaterally and on the basis of non-reciprocity extend tariff concessions to developing countries. The Generalised System of Preferences (GSP) was formally accepted in 1968 by the Members of the UN at the second UNCTAD Conference in New Delhi. The underlying principles of the scheme are Generally, Non-discrimination and Non-Reciprocity.

The GSP offers developing countries tariff reductions or in some cases duty free concessions for their manufactured exports and certain agricultural exports as well. It is a tariff instrument, autonomous and is complementary to GATT. Its aim is to grant the developing countries tariff preferences over the developed countries, thus allowing their exports easier access to the market of the developed countries.

EU GSP Scheme

European Economic Community (Now the European Union) was the first to grant tariff preferences under GSP.

From 1st January, 2002 the European Commission has brought into force a revised GSP scheme for the year 2002 to 2004. Under the new scheme, EU grants duty free access (imports are zero duty) or all `non-sensitive' products. Another category belong to `sensitive' where the export products get a tariff concession at a flat rate reduction of 3.5% on the MFN tariff rate. The remaining items are the one on which no tariff concession is available. The EU GSP Scheme provides a mechanism of graduation by which tariff concessions are withdrawn. The graduation mechanism prescribed for a country (based on its development index) or a sector (based on its exports from one country. Under this scheme, eligibility of the beneficiary countries would be assessed on an annual basis and measured on their performance over three consecutive years.

The current scheme with minor amendments is proposed to be extended till 31.12.2005. Under this review, India which had earlier graduated in the leather hides and skin sector will now get GSP preferences from 2006. This will, however, be applicable only after 2005 i.e. after the expiry of the extended scheme.

Special Incentive Scheme

The tariff concessions are to be doubled for countries that can demonstrate adherence to environmental and social conditions prescribed under the scheme. The beneficiary countries are required to apply for grant of these incentives by the Community. The scheme also has a provision for `special arrangements for combating drug trafficking', which is applicable to 11countries belonging to Andean Group and Central American Common Market and Pakistan. Custom duty of the specified products is entirely suspended (i.e. zero duty market access) for these countries. Above-mentioned countries other than Pakistan were eligible for this benefit under the erstwhile EU GSP scheme, while Pakistan was included afresh.

As the bilateral consultations with EU held in February 2002 EU did not succeed in addressing our concerns India had sought formal consultations with EU under the WTO Dispute settlement mechanism to address the issue.

US GSP Scheme

The U.S. GSP provides preferential duty-free entry for more than 4,650 products from approximately140 designated beneficiary countries and territories. The GSP program was instituted on January 1, 1976, and authorized under Title V of the Trade Act of 1974 (19 U.S.C. 2461 et seq.) for a 10-year period. The authorization was extended from time to time and was valid up to 30th September, 2001 and the re-authorisation of the scheme was done only on 6th August, 2002. Most textiles, watches, footwear, hand bags, luggage, work gloves and other leather garments, steel, glass and electronic goods are excluded from the scheme.

Though the scheme is meant to be non-reciprocal and non-discriminatory, United States Trade Representative (USTR) has been accepting petitions for withdrawal of GSP benefits to India on grounds extraneous to the GSP scheme.

A number of Chemical and Pharmaceutical products and agricultural and pharmaceutical chemicals were removed from GSP benefits in 1992 by the US ostensibly due to India's inadequate IPR protection. Similarly, GSP benefits for certain minor items, including certain amino resins, certain types of jute yarn, certain handloom fabrics and some types of floor coverings (not fibres) had been removed since Indian exports to the US in these items had crossed the competitive needs percent limits.

BILATERAL PREFERENTIAL TRADING AGREEMENT WITH AFGHANISTAN

The Preferential Trade Agreement between India and Afghanistan, which is being signed on 6th March, 2003 provide for free movement of specified goods as agreed to between the two countries through reduction of tariffs. The objective is to provide for grant of concessions on a range of products of export interest to Afghanistan, as a part of India's endeavour to give an impetus to strengthening of trade and economic relations between the two countries. The Agreement is WTO compatible.

Products covered under the Agreement shall be eligible for preferential treatment provided they satisfy the Rules of Origin laid down under the Agreement.

India is granting 50-100% tariff concession on 38 items of dry fruits, fresh fruits, seeds, medicinal herbs and precious stones and in turn India is receiving duty free access on 8 tariff lines of our export interest, which include Black tea, pharmaceutical products, Ayurvedic and Homeopathic medicines, refined sugar, cement etc.

Indo-Sri Lanka Free Trade Agreement

A Free Trade Agreement between India and Sri Lanka was signed on 28th December, 1998 in New Delhi. The Agreement envisages phasing out of tariffs on all products except for a limited number of items in the Negative List over a period of time. The implementation of the Agreement started in February/March, 2000. As prescribed in the Agreement, India has eliminated tariffs on all items other than those in the Negative List or under Tariff Rate Quota (TRQ) with effect from 18th March, 2003. In case of Sri Lanka, the tariffs will be phased out to zero by the year 2008 except for items in the Negative List.

The Rules of Origin specify that domestic value addition requirement should be 35% for products to qualify for preferential treatment under the Agreement. If the raw material/inputs are sourced from each others' country the value addition requirement is reduced to 25% within the overall limit of 35%. The criterion of "substantial transformation" has been provided in the Rules. The goods must undergo transformation at 4 digit level of Harmonised System.

The Agreement provides for establishment of a Joint Committee at the Ministerial level which shall meet at least once a year to review the progress made in the implementation of this Agreement and to ensure that the benefits of trade expansion emanating from this Agreement accrue to both countries equitably. The second Commerce Secretary level talks were held between India and Sri Lanka on 18-19th July, 2003 in New Delhi to discuss various issues relating to the India-Sri Lanka Free Trade Agreement.

India and Sri Lanka have also agreed to enter into a Comprehensive Economic Partnership Agreement based on the recommendations of the Joint Study Group.

SAARC PREFERENTIAL TRADING ARRANGEMENT (SAPTA)

The Agreement establishing the SAARC Preferential Trading Arrangement (SAPTA) was signed on 11th April, 1993 at the Seventh SAARC Summit held in Dhaka. The Agreement was signed by all seven SAARC countries namely, India, Pakistan, Nepal, Bhutan, Bangladesh, Sri Lanka and the Maldives. SAPTA provides a framework for the exchange of tariff concessions with a view to promoting trade and economic cooperation among the SAARC member countries. The coverage of SAPTA extends to arrangements in the area of tariffs, Para-tariff and non-tariff measures, and direct trade measures.

Since the coming into force of the SAPTA Agreement in December, 1995, four Rounds of negotiations have been concluded for exchanging tariff concessions between the Member States. Up to the Third Round, India has provided concessions on a total of 2565 tariff lines. The Fourth Round of trade negotiations under SAPTA concluded on 1st November, 2002 with India granting concessions to Bangladesh on a total of 107 tariff lines which includes deepening of concessions on some items on which concessions had been granted in the previous Rounds as well as concessions on fresh items. Maldives requested for tariff concessions on 4 tariff lines ( relating to tuna fish) which was agreed to during the meeting. India in turn got tariff concessions on 29 tariff lines from Bangladesh and on 4 items from Maldives.

Bilateral negotiations with Pakistan for exchange of tariff concessions under the Fourth Round of SAPTA remained inconclusive during the 2nd Inter-Governmental Group Meeting (IGG) in November,2002 in Kathmandu, since Pakistan was non-committal on the principle that it would allow free importability on all tariff lines on which concessions are made available to India under SAPTA. Pursuant to the understanding reached during Fourth Special Session of SAARC Standing Committee held in Kathmandu on 9-10th July,2003, the bilateral negotiations between India and Pakistan under the 4th Round were revived and concluded on 2-3rd December,2003 at SAARC Secretariat, Kathmandu. Pakistan agreed to the principle of free importability wherever concessions are granted to India under SAPTA. During this Round, India has granted concessions to Pakistan on a total of 262 tariff lines ranging from 10-25% while Pakistan has agreed to grant concessions on 223 tariff lines ranging from 10-20%.

SOUTH ASIAN FREE TRADE AREA (SAFTA)

The Agreement on South Asian Free Trade Area (SAFTA) was signed by the members of SAARC during the 12th Summit held in Islamabad on 4-6th January, 2004 . The Agreement provides for free trade in goods among SAARC member countries. The highlights of the Agreement are as under: -

a. Trade Liberalisation Programme (TLP) The Agreement provides for the following schedule of tariff reductions:

(i) Non-Least Developed Country (Non-LDC) Members of SAARC (India, Pakistan and Sri Lanka) : Non-LDC countries would reduce their existing tariffs to 20% within a time frame of two years from the date of coming into force of the Agreement. If the actual tariff rates are below 20% then there shall be an annual reduction of 10% on Margin of Preference basis for each of the two years. The subsequent tariff reductions from 20% or below to 0-5% shall be done within a period of five (for Sri Lanka it is six ) years, beginning from the third year from the date of coming into force of the Agreement.

(ii) Least Developed Country (LDC) Members of SAARC (Bangladesh, Bhutan, Maldives and Nepal): The LDC Member countries would reduce their existing tariff to 30% within a time frame of two years from the date of coming into force of the Agreement. If actual tariff rates are below 30% there will be an annual reduction of 5% on Margin of Preference basis for each of the two years. The subsequent tariff reductions from 30% or below to 0-5% shall be done within a period of eight years, beginning from the third year from the date of coming into force of the Agreement.

Notwithstanding the above provisions the Non-LDC member States shall reduce their tariffs to 0-5% for the products of the LDC member States within a period of three years beginning from the date of coming in to force of the Agreement.

(iii) Sensitive List: Tariff reduction shall be done on the basis of Negative List approach. Keeping in mind the interests of the domestic stakeholders, the Agreement provides for a Sensitive List to be maintained by each country (subject to a maximum ceiling) which will be finalised after negotiations among the contracting States with provision that the LDC contracting states may seek derogation in respect of products of their export interest. The Sensitive Lists are subject to review after every four years or earlier with a view to reducing the number of items which are to be traded freely among the SAARC countries.

(iv) Non-tariff barriers: It also provides for elimination of non-tariff and para-tariff barriers with a view to facilitate trade among members.

b. Trade Facilitation: Keeping in view the increasing importance of trade facilitation measures, the Agreement provides for harmonisation of standards, reciprocal recognition of tests and accreditation of testing laboratories, simplification and harmonisation of customs procedures, customs classification of HS coding system, import licensing and registration procedures, simplification of banking procedures for import financing, transit facilities for efficient intra-SAARC trade, micro economic consultations, development of communication systems and transport infrastructure and simplification of business visas.

c. The Agreement also provides for an institutional mechanism to facilitate implementation of its provisions; Safeguard Measures in case of surge in imports of product(s) covered under SAFTA concessions causing or threatening to cause  serious injury to the domestic industry; and a Dispute Settlement Mechanism for the interpretation and application of the provisions of this Agreement or any instrument adopted within its framework concerning the rights and obligations of the contracting States.

d. Special Provisions :- The Agreement provides for Special Provisions for LDCs such as longer phase-out schedule, longer sensitive lists, revenue compensation mechanism for LDCs, providing for special regard to the situation of the LDCs while considering the application of anti-dumping and/or countervailing measures. Maldives has been given special dispensation to retain the special provisions accorded to LDCs even after its graduation, and Sri Lanka has been given one year more for its TLP.

e. Implementation: The Agreement on SAFTA will enter into force on 1st January, 2006 upon completion of negotiations on Sensitive Lists, Rules of Origin, Revenue loss Compensation Mechanism for LDCs.

Framework Agreement for establishing Free Trade between India and Thailand

In November 2001, the Prime Minister of Thailand, Dr. Thaksin Shinawatra and the Prime Minster of India agreed to set up a Joint Working Group (JWG) to undertake a feasibility study on a Free Trade Agreement between India and Thailand. The Joint Working Group observed that the present policy regimes in both the countries are quite conducive to more intensive bilateral economic integration and a Free Trade Agreement could prove to be a building block for other sub-regional, regional and global economic integration process of which both countries are a part. Having observed rich potential of trade expansion, the study concluded that the proposed Free Trade Agreement between India and Thailand is feasible, desirable and mutually beneficial. Accordingly, a Joint Negotiating Group was set up to draft the Framework Agreement on India-Thailand FTA. Six meetings of the Joint Negotiating Group have been held since December 2002. The last meeting was held in Bangkok on 30th September 1st October, 2003 where the negotiating teams from both the sides finalised the contours of the Framework Agreement. 

The Framework Agreement for establishing Free Trade Area between India and Thailand was signed on 9th October, 2003 in Bangkok, Thailand. The key elements of the Framework Agreement cover FTA in Goods, Services and Investment, and Areas of Economic Cooperation. The Framework Agreement also provides for an Early Harvest Scheme (EHS) under which common items have been agreed for elimination of tariffs on a fast track basis.

The highlights of various components of the Framework Agreement are as follows:-

(i) FTA in Goods

Ø Negotiations to commence in January, 2004 and concluded by March 2005.

Ø Establishment of Free Trade Area (zero duty imports) by 2010.

(ii) FTA in Services

Ø Negotiations to commence in January 2004 and concluded by January 2006.

(iii) FTA in Investments

Ø Negotiations to commence in January 2004 and concluded by January 2006.

(iv) Areas of Economic Cooperation

Ø Areas of economic cooperation to include trade facilitation measures; sectors identified for cooperation; and trade & investment promotion measures.

(v) Early Harvest Scheme (EHS)

Ø Both sides have agreed to have a common list of 84 items (6 digit HS level) for exchange of tariff concessions.

Ø Tariffs on these items will be phased out in 2 years timeframe starting from 1st March, 2004.

The implementation of the EHS has been deferred to 1st July, 2004 since the Interim Rules of Origin for implementation of the same has not been finalized.

The India-Thailand Trade Negotiating Committee (TNC) shall carry out the process of negotiations for establishing FTA between India and Thailand. The First meeting of the India-Thailand TNC was held on 8-9 April, 2004 in New Delhi, India.

Framework Agreement on Comprehensive Economic Co-operation between the Association of South East Asian Nations (ASEAN) and India.

India has had close cultural and economic ties with Southeast Asian countries throughout history. ASEAN's political and strategic importance in the larger Asia-Pacific region and its potential to become a major partner of India in the area of trade and investment have encouraged India to seek closer linkages with these countries.

The First ASEAN Economic Ministers (AEM) India consultations were held in Brunei on 15th September,2002. It was decided that ASEAN-India Economic Linkages Task Force (AIELTF) should be established which should submit its recommendations including a draft Framework Agreement to the next AEM-India consultations in 2003 through senior Economic Officials for further consideration and follow up action. Another important decision emanated from the First AEM-India consultations that Regional Trade and Investment Area (RTIA) should be the long term objective.

The AIELTF was co-chaired by India and Malaysia and it prepared the Framework Agreement on Comprehensive Economic Cooperation between India and ASEAN. The draft was considered at the Second AEM India Consultations in Phnom Penh, Cambodia on 3rd September, 2003.

The Framework Agreement on Comprehensive Economic Co-operation between ASEAN and India was signed on 8th October, 2003 during the Second ASEAN-India Summit in Bali, Indonesia. The highlights of the Framework Agreement are as follows:-

(I) FTA in Goods

Ø Negotiations to commence from January, 2004 and to be concluded by 30th June, 2005.

Ø The tariff reductions will start from 1st January, 2006 and Most Favoured Nations (MFN) tariff rates to be gradually eliminated. While India will eliminate tariffs in 2011 for Brunei Darussalam, Cambodia, Lao PDR, Indonesia, Malaysia, Myanmar, Singapore, Thailand and Vietnam; Brunei Darussalam, Indonesia, Malaysia, Singapore and Thailand will eliminate in 2011 and new ASEAN Member States i.e. CLMV will eliminate in 2016 for India. Due to some problems expressed by Philippines it was also agreed that India and Philippines will eliminate tariffs for each other on a reciprocal basis by 2016.

(II) FTA in Services

Ø Negotiations to commence in 2005 and be concluded by 2007

Ø The identification, liberalisation etc. of the sectors of services to be finalised for implementation subsequently.

(III) FTA in Investments

Ø Negotiations to commence in 2005 and be concluded by 2007.

Ø The identification, liberalisation etc. of the sectors of investment to be finalised for implementation subsequently.

(IV) Areas of Economic Cooperation

Ø Areas of economic cooperation to include trade facilitation measures; sectors of cooperation; and trade & investment promotion measures.

(V) Early Harvest Programme (EHP)

Ø The Agreement provides for a Early Harvest Programme which is to be implemented as under :-

Ø Exchange of tariff concessions and elimination of tariffs on agreed common list of items (105 tariff lines under HS Code at 6 digit level) based on full reciprocity between India and ASEAN 6 within three years. While India will remove tariffs on these items within three years for Cambodia, Laos, Myanmar and Vietnam, they will do so for India in six years.

Ø India's unilateral tariff concessions to Cambodia, Laos, Myanmar and Vietnam on 111 tariff lines under HS Code at 6 digit level within three years. (based on Hon'ble PM's announcement at the First India ASEAN Summit that India will extend Special & Differential Treatment to ASEAN countries, based on their levels of development to improve their market access to India).

Ø The EHP will be implemented from 1st November, 2004.

ASEAN India Trade Negotiating Committee (TNC)

The ASEAN India Trade Negotiating Committee has been set up to carry out the programme of negotiations of necessary Agreements and other instruments thereof to establish the ASEAN India Regional Trade & Investment Area (RTIA) in accordance with the provisions set out in the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and India. The First Meeting of the ASEAN India Trade Negotiating Committee (TNC) was held on 7th March, 2004 at ASEAN Secretariat, Jakarta. During the First meeting of the ASEAN-India TNC, the Terms of Reference for the TNC were finalized.

BIMST-EC

The initiative to establish Bangladesh-India-Sri Lanka-Thailand Economic Cooperation (BIST-EC) was taken by Thailand in 1994 to explore economic cooperation on a sub regional basis involving contiguous countries of South East & South Asia grouped around the Bay of Bengal. Myanmar was admitted in December,1977 and the initiative was renamed as BIMST-EC. BIMST-EC is an important element in India's "Look East" strategy and adds a new dimension to our economic cooperation with South East Asian countries. It may be mentioned that the initiative involves 3 members of SAARC (India, Bangladesh & Sri Lanka) and 2 members of ASEAN (Thailand, Myanmar).

The first meeting of Economic/Trade Ministers of BIMST-EC which was held in Bangkok in August,1998 imparted a new dimension to economic cooperation between the member states. It was agreed that BIMST-EC should aim and strive to develop into a  free Trade Agreement, and should focus on activities that facilitate trade, increase investment & promote technical cooperation among member countries. It was further reiterated that BIMST-EC activities should be designed too form a bridge linking ASEAN and SAARC. Six areas were identified for cooperation, namely, trade and investment, technology, transportation and communication, energy, tourism and fisheries.

At the 4th BIMST-EC Trade & Economic Ministers Meeting held in Colombo on 7th March, 2003, the Ministers also decided to appoint a Group of Experts (GOE) for drafting the Framework Agreement of BIMST-EC Free Trade Area (FTA).

Accordingly, the GOE prepared the text of the draft Framework Agreement on BIMST-EC FTA which was considered at the Fourth Senior Trade and Economic Officials Meeting (STEOM) held in Bangkok on 14-15th January, 2004. The Framework Agreement on the BIMST-EC FTA was signed on 8th February, 2004 in Phuket, Thailand by Bhutan, India, Myanmar, Nepal, Sri Lanka and Thailand. The Framework Agreement includes provisions for negotiations on FTA in goods, services and investment. The major highlights of the Framework Agreement are as follows:-

(i) FTA in Goods

The negotiations for tariff reduction/elimination for FTA in goods shall commence in July 2004 and be concluded by December 2005 .

Ø Fast Track: Products listed in the Fast Track by a Party on its own accord shall have their respective applied MFN tariff rates gradually reduced/eliminated in accordance with specified rates to be mutually agreed by the Parties, within the following timeframe:

Ø Normal Track: Products listed in the Normal Track by a Party on its own accord shall have their respective applied MFN tariff rates  gradually reduced/eliminated in accordance with specified rates to be mutually agreed by the Parties, within the following timeframe :

(ii) FTA in Services and Investments

Ø For trade in services and trade in investments, the negotiations on the respective Agreements shall commence in 2005 and be concluded by 2007.

Ø The identification, liberalisation, etc., of the sectors of services/investments shall be finalized for implementation subsequently in accordance with the timeframes to be mutually agreed; (a) taking into account the sensitive sectors of the Parties; and (b) with special and differential treatment and flexibility for the LDC Parties.

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