Activities relating to the World Trade Organization (WTO)

The membership of the WTO increased to 151, with Tonga joining it on 27 July 2007. On 18 December 2007, the General Council approved the accession of Cape Verde to the WTO. Before becoming the 152nd member of the WTO, Cape Verde would have to ratify the deal by 30 June 2008. The accession process will be completed 30 days after ratification.

The state of play of multilateral negotiations in the WTO on various issues covered by the Doha Work Programme is elaborated in the subsequent paragraphs.

Agriculture

Negotiations under the Doha Round have frequently got stalled because of wide gaps in the positions of WTO Members in the agriculture negotiations, particularly in respect of market access and domestic support issues. Progress in other areas of the multilateral trade negotiations, including Non-Agricultural Market Access (NAMA), Services and Rules, hinges on a convergence of positions in agriculture.

On 17 July, 2007, the Chair of the WTO Committee on Agriculture (Special Session) brought out Draft Modalities comprising proposals on the three pillars of the agriculture negotiations, namely, Domestic Support, Market Access and Export Competition. The Draft Modalities can be accessed on the WTO website (www.wto.org). Multilateral discussions in the WTO on the Draft Modalities commenced on 3 September, 2007 and continued till 11 January, 2008. The Chair brought out 16 Working Documents on different topics during this period. The Chair’s Revised Draft Modalities Text for Agriculture was issued on 8 February 2008. This can also be accessed on the WTO website (www.wto.org). Discussions on the revised draft modalities commenced from 18 February, 2008.

Domestic Support

The Revised Draft Modalities text proposes a tiered formula for reduction of overall trade-distorting domestic support (OTDS), which is the sum of the Amber Box, Blue Box and de minimis support. The text also suggests a range of cuts in each tier. This implies reductions in OTDS by the EC and the US by 75%-85% and 66%-73% respectively. Developed countries in the two higher tiers have to take an initial cut of one-third and developed countries in the third tier have to take an initial cut of 25% in their OTDS. The remaining reductions would be implemented in five equal steps. The text further proposes higher cuts by developed countries which have high OTDS of 40% or more of the total value of their agricultural production. For developing countries with Aggregate Measurement of Support (AMS) commitments, the applicable reduction for OTDS would be two-thirds of the reductions proposed for other developed countries, over a longer implementation period. Developing countries such as India with no AMS commitments would be exempt from any reduction commitments in OTDS.

The OTDS bands and cuts proposed by the G-20 implied cuts of 80% and 75% for the EC and the US respectively. While the cuts proposed in the Draft Modalities text for the EC are more or less in conformity with the G-20 position, there has been an attempt to accommodate the sensitivities of some developed countries by proposing cuts for these countries at somewhat lower levels.

India, together with its partners in the G-20, has consistently taken the position that there must be substantial and effective reductions in OTDS. The Draft Modalities text provides an opening to achieve effective cuts; it is now for the WTO membership to work constructively and negotiate to arrive at an outcome which is in keeping with the mandate.

The Draft Modalities text proposes a tiered formula for cuts in the final total bound AMS (Amber Box) also. This implies reductions in AMS by the EC and the US by 70% and 60% respectively, with lower cuts for other countries. According to the G-20 proposals, the EC and the US should undertake larger cuts of 80% and 70% respectively in their AMS.

The reduction in OTDS and AMS are not likely to have the desired impact in reducing the domestic support by developed countries unless they are coupled with effective product specific disciplines. These disciplines are in the form of product specific AMS caps for which the average applied support provided during the Uruguay Round implementation period (1995-2000), have been proposed for countries other than the US. For the US, it will be the resultant of applying the average distribution of product specific support in the 1995-2004 period to the total AMS in the Uruguay Round implementation period (1995-2000). The G-20 proposal envisaged all countries using 1995-2000 as the base period.

The Draft Modalities text also proposes that the Blue Box, which comprises less trade distorting subsidies than the AMS, should not exceed 2.5% of the value of production during the base period. Within the Blue Box, the product specific support for a particular crop should not exceed the average value of support provided during 1995-2000. It has been proposed that for the US, there would be a head room of 10%-20% in the product specific caps.

Market Access

The Draft Modalities text proposes tariff cuts in four tariff bands each for developed and developing countries. For developing countries, the text proposes two-thirds of the tariff cuts to be undertaken by developed countries in the corresponding band. The bands are the same as proposed by the G-20 group of countries. However, the tariff cuts proposed for each band for the developed countries are somewhat lower than the G-20 proposals. In his revised text, the Chair has incorporated the G-20’s proposal of a maximum average cut of 36% for developing countries and a minimum average cut of 54% for developed countries although the numbers are bracketed, that is, these are to be decided through negotiation

As regards the Special Products (SPs), the Draft Modalities text proposes self-designation of SPs on the basis of indicators based on the criteria of food security, livelihood security and rural development. The revised text proposes a minimum entitlement of 8% lines as SPs with the maximum ranging from 12 to 20%. It is also proposed that a maximum of 8% of the lines would take no tariff cuts. All these proposals, however, have been left to be decided through negotiation.

It has been proposed in the revised text that the Special Safeguard Mechanism (SSM) would be restricted to 3-8 products corresponding to 4-8 tariff lines at the 6 digit HS for any particular year. The text states that the price and quantity based remedies should not be applicable at the same time to the same product. As an upper ceiling, it has been proposed that the safeguard duties should not cross the Uruguay Round bound levels, except for Least Developed Countries (LDCs). On the volume trigger, the text suggests atleast 5% increase in imports over the average imports of the past three years. On the price trigger, a specific quantitative trigger of 70% of the average monthly price for that product for the most recent three-year period has been suggested.

Export Competition

The revised text seeks parallel elimination of all forms of export subsidies and disciplines on all export measures with equivalent effect. Developed countries are required to eliminate their other export subsidies by the end of 2013, with at least 50% by end 2010 and the remaining in equal annual installments. Developing countries are required to eliminate their export subsidies in equal annual installments by the end of 2016.

For export credit, export credit guarantees or insurance programmes, the Draft Modalities have specified a set of disciplines to be applied from the first day of the implementation period of the Doha Round for developed countries. Similarly, for international food aid and agricultural exporting state trading enterprises, detailed disciplines have been specified in the annexes to the Draft Modalities.

Non-Agricultural Market Access (NAMA)

NAMA deals with negotiations on goods related to the manufacturing sector. The Chair of the negotiating group on Non-Agricultural Market Access (NAMA) came out with Draft Modalities on NAMA on 17 July 2007 (available at the website www.wto.org), which was discussed in the negotiating group till January 22, 2008. Based on these discussions, the Chair has brought out his revised draft text on 8 February 2008. The main elements under the NAMA negotiations are:-

Formula

Under the Doha mandate, the tariff reductions on bound rates would be effected through a Swiss formula which is a non-linear formula intended to eliminate high tariffs, tariff peaks and tariff escalation, especially on products of export interest for developing countries. However, the tariff reductions would follow the principle of less than full reciprocity (LTFR) in reduction commitments, wherein developing countries would undertake lower reduction commitments from bound rates than developed countries. India and its coalition partners in NAMA-11 have been advocating that any selection of Swiss coefficients must satisfy the LTFR mandateThe Chair has not modified the coefficient numbers in his draft modalities of 17 July, 2007 and has suggested coefficients in the range of 19-23 for developing countries and 8-9 for developing countries.

Unbound Tariff Lines

For the tariff lines where no binding commitments were taken earlier (also known as the unbound tariff lines), the mandate speaks of formula reductions being effected after taking a suitable non-linear markup on the applied customs tariffs of 2001. [In the revised modalities, the Chairman has suggested a range of 20-30 basis points for the markup on the applied customs tariff of 2001]

Flexibilities

This is an important tool available only for developing countries to subject [tentatively 10 per cent- to be negotiated] of their tariff lines (both in terms of number and trade coverage) to not less than 50 per cent of the formula cuts or keep [tentatively 5 per cent-to be negotiated] of their tariff lines (both in terms of number and trade coverage) either unbound or not subject to any formula cuts. This would address the domestic sensitivities of developing countries by enabling them to protect their sensitive tariff lines from formula reductions or bindings. The flexibilities are an essential part of the mandate. [In his revised Draft Modalities, the Chair has removed the numbers namely 10% and 5% of the tariff lines suggested in paragraph 8 of the Framework Agreement and his draft modalities of July, 2007. He has also proposed a lower Swiss coefficient of 3-5 basis points for developing countries not using the flexibilities

Sectoral Initiatives

A non-mandatory element of the NAMA negotiations is the sectoral initiative wherein the tariffs could be eliminated or harmonized at low levels in a specific sector that is of export interest to the country proposing the sector. Proposals have been made in sectors such as automotives and related parts; bicycles and related parts; chemicals; electronics/electrical products; fish and fish products; forest products; gems and jewellery; hand tools; healthcare products; raw materials; sports equipments; toys; and textiles and clothing.

Non-tariff barriers

On non-tariff barriers (NTBs), specific textual proposals cutting across sectors (known as horizontal proposals) have been made on export duties, export taxes and remanufactured goods. On the other hand, proposals pertaining to specific sectors (known as vertical proposals) are being negotiated on electronics/electrical goods; forest products; fireworks and lighters; and labeling in textiles, apparel, footwear and travel goods. A joint proposal for an expeditious, economical and expert led informal mechanism for providing trade solutions to NTBs, has been submitted by the African Group, the European Communities, the LDC Group, NAMA-11, Norway, Pakistan and Switzerland, which is under negotiation.

Services

The Hong Kong Ministerial Declaration of December 2005 mandated the adoption of a plurilateral ‘Request Offer’ approach as a method complementary to the traditional bilateral request-offer approach to services negotiations. Several rounds of plurilateral and bilateral meetings in services have been held at the WTO in 2007.

India has been a demandeur in services. India’s major interests in services negotiations lie in the liberalization of Mode 1 (Cross Border Supply) and 4 (Movement of Natural Persons).The core interest of most of India’s trading partners as evident from their Requests, is in Mode 3, in which the request is either for binding the presently applicable FDI policy, or for offering a more liberal policy than is currently prevailing and for opening up new sectors. Developed countries, have on the other hand, not been forthcoming in offering substantial openings to our professionals in Mode 4 and Mode 1.

In order to take the negotiations forward, a fresh round of Offers would need to be tabled at the WTO by Member countries. A timeline for the submission of the second Revised Offer in Services would be decided after a breakthrough is achieved in Agriculture and NAMA.

Discussions are at present underway at the WTO in the Council for Trade in Services (Special Session) on a Services text, which would provide guidance for the members of the WTO at the time of their tabling the second Revised Offers. India has stated that the Services text should be based on Annex C of the Hong Kong Ministerial Declaration.

Rules

The Chair’s text on Rules has come out on 30 November 2007 and discussions on Rules have been held from 12 to 14 December 2007, 21 January to 1 February, 2008 and from 11 to 19 February 2008. There is some doubt as to the circulation of a revised text on Rules.

The draft text contains proposals on Anti-dumping and the Agreement on Subsidies and Countervailing Agreement (ASCM), with a new Annex proposed on Fisheries Subsidies in the ASCM. The text on anti-dumping lacks balance in respect of the amendments proposed on the zeroing issue. It does not reflect the views of a large majority of members. The lesser duty rule has been dropped from the text even though it was required of Members only on a voluntary basis.The text proposes stronger rules on reviews including sun set reviews, changed circumstances reviews and new shipper reviews in anti-dumping. The proposals on Fisheries Subsidies do not adequately address the livelihood concerns of small artisanal fishing communities in the developing countries. India along with the African

Caribbean Pacific (ACP) group of countries has asked for an extensive revision of the proposed disciplines on Fisheries Subsidies in order to take these concerns on board.

TRIPS Related Issues

TRIPS – CBD

India and other developing countries have been raising the issue of protection of traditional knowledge and the relationship between the (Convention on Bio-Diversity) CBD and the TRIPS Agreement for the last few years in the WTO. India has submitted a proposal to amend the TRIPS agreement by incorporating a new provision, Article 29 bis that would make it mandatory for patent applicants to disclose the use of any biological resources or associated traditional knowledge (TK) in their invention. The thrust areas of the proposal are:

• Source and country of origin of the biological resource and of the traditional knowledge used in the invention should be disclosed;
• Evidence to be furnished of prior informed consent (PIC) under the relevant national regime;
• Evidence to be furnished of benefit sharing (BS) under the relevant national regime.

There have been discussions on the proposals submitted in this regard by various countries including India. Other developing countries, including Ecuador, Sri Lanka, Kenya, Colombia, Bolivia, Turkey and Philippines have expressed support for the Disclosure Group’s proposal on Article 29 bis. Among the developed countries, Norway and to some extent Switzerland and the European Community have expressed their willingness to explore a text mandating disclosure requirements in the TRIPS Agreement. However the US, Japan, Korea, Australia, New Zealand and Canada have strongly opposed the proposal and, in general, the idea of a disclosure amendment to the TRIPS Agreement. Their argument is that a new disclosure requirement would not help prevent the issuance of “bad” patents that incorporate genetic resources without proper recognition of the source or access agreements.

The US also argues that the disclosure requirement could generate burdensome procedures and additional costs on patent offices. The US and Japan maintain that countries should develop their own databases for biological resources and TK, and use these as a basis for tracking and challenging any patents that may erroneously be granted on the basis of existing knowledge.

Geographical Indications (GI)

The “Friends of GIs Group” (India Switzerland, the EC, Sri Lanka, etc.) have been demanding the removal of the disparity between two types of protection for GIs for wines and spirits, on the one hand, and all other products, on the other. They have been demanding an expansion of the scope of protection available under Article 23 of the TRIPS Agreement to products other than wines and spirits. The basic idea behind seeking extension of Article 23 protection to all other products is that GIs can be used to promote the export of valuable products and prevent misappropriation.

Informal consultations are taking place at the WTO on the issues around the GI Register. In the meeting convened on 24 October, 2007, the EC had proposed a new proposal on GIs. In these discussions, India’s stand has been as given below.

Trade and Environment

The Doha Ministerial Declaration had provided a negotiating mandate on certain issues relating to trade and the environment. The discussions so far in the WTO Committee on Trade & Environment (Special Session) have been on submitting national experiences, so as to come up with a “bottoms-up” approach to the subject. Though a number of countries have presented their experiences, no actual conflict between existing WTO rules and specific trade obligations set out in Multilateral Environmental Agreements (MEAs), has been brought out in the discussions so far.

On the other important issue of identifying environmental goods and services, the developed countries had submitted a list of environmental goods. The list focuses only on goods, and does not address the issue of environmental services. Moreover, most of the goods in the “list” have dual or multiple uses.

India has submitted an alternative approach, called the “Environmental Project Approach” which clearly identifies environmental benefits and eliminates, or at least reduces, benefits from accruing to dual or multiple use products. It brings in synergy between environmental goods and services, and by linking tariff concessions to a particular project, mitigates the apprehensions caused by the “list” approach, of misuse. The approach has been supported by some developing countries. India and Argentina have recently submitted an integrated approach, essentially keeping the essence of the project approach along with an element of the list approach, which has received the support of some countries. Brazil has also recently submitted a paper based on the request and offer approach to identify environmental goods. Some developed countries, including the US, and some developing countries like Peru and China have broadly supported the Brazilian proposal but the EC has not supported it.

Trade Facilitation

The modalities for the negotiations are set out in Annex D of the July Framework. A large number of proposals have been submitted for the negotiations by both the developed as well as the developing countries. The proposals cover a wide range of issues connected with the import, export and transit procedures and the connected requirements of documentation and fees. These negotiations aim to modernize and harmonize across administrations, to the extent possible, the border control systems.

The outcome of the negotiations is expected to contribute towards a more transparent and modernized international trading environment which would provide more efficient procedures for the movement of imports, exports and goods in transit. It is also expected that the negotiations would take into account the limited administrative capabilities of the developing countries , especially the least developed countries.

India has been active in these negotiations and has taken the lead in presenting its own proposals. It has presented an important proposal for establishing a multilateral mechanism for information exchange between Customs Administrations. It has raised several questions to clarify the scope of the proposals presented so far.

Negotiations under the Dispute Settlement Understanding (DSU)

The work of the DSU (Special Session) during the year has been primarily based on efforts by Members to work among themselves and develop areas of convergence. India and other developing countries have been reiterating their intentions for a development oriented review of the Dispute Settlement Procedures under the DDA. The Like Minded Group (LMG) had an extensive outreach programme in different settings i.e., bilateral and plurilaterals aimed at explaining the paper, its substantive contents and reasoning.

Dispute Settlement is the central pillar of the rules based multilateral trading system and the WTO’s unique contribution to the stability of the global economy. It underscores the rule of law and makes the trading system more secure and predictable. The salient features of the system are:

• It is based on clearly-defined rules,
• There are timelines for completing a case,
• Provisions exist for consultations, good offices, conciliation and mediation.
• Rulings are first made by a panel and endorsed (or rejected) by the WTO’s full membership.
• Appeals based on points of law are possible.
  

Trade Policy Review of India

In order to promote transparency and provide a better understanding of the trade policies and practices of the Member countries, WTO has a mechanism for a regular review of the trade policies of its Member countries. Depending upon their share in world trade, each member country’s trade policy is reviewed after a fixed period of time. India’s Trade Policy Review (TPR) is carried out once every four years.

The fourth TPR of India was conducted in the meeting of the Trade Policy Review Body (TPRB) held on 23 and 25 May 2007. The TPR was conducted on the basis of a Report prepared by the WTO Secretariat on Indian trade policies as well as a Report submitted by the Government of India. During the TPRB Meeting, the economic performance of India and the policy reforms undertaken by India since the last TPR (which was in 2002) were lauded by the participating Members. It was also noted by the WTO Members that continued economic reforms would be required to meet the long term goal of annual growth of between 8% and 10%.

In his concluding remarks, the Chairperson of the TPRB observed that the fourth Trade Policy Review of India had greatly improved the Members’ understanding of India’s trade and trade-related policies and the challenges it faces in sustaining and accelerating its economic growth. All Members agreed that India’s economic performance had been impressive with the GDP growth averaging over 7% between 2001-02 and 2006-07. The Members attributed this impressive performance mainly to structural reforms, including unilateral trade liberalization, such as reductions in applied tariffs.

Economic and Social Commission for Asia and the Pacific (ESCAP)

India is one of the founding members of ESCAP. Its mandate is to foster cooperation between its 53 members and 9 associate members. It provides the strategic link between global and country-level programmes and issues. The major areas of work of ESCAP are:

• Regional Economic Cooperation;‘
• Poverty Alleviation through Growth and Social Development;
• Environment and Sustainable Development;
• Development of Transport, Communications, Tourism and Infrastructure in the region; and
• Enhancing capabilities of National Statistical Organizations.

The 63rd Annual Session of ESCAP was held in Almaty, Kazakhstan between 17 and 23 May, 2007 on the theme – “Health Systems Development in Asia and the Pacific”. Delegates from 50 member countries and associate member countries attended the meeting. The Indian delegation was led by Shri Ashwani Kumar, Hon’ble Minister of State for Industry. In the Senior Officials Meetings, the issues deliberated were poverty reduction, emerging economic and social issues, institutional reform, managing migration, development of health systems etc.

The 64th Annual Session of ESCAP is scheduled to be held in Bangkok, Thailand from 24th March to 30th April 2008. The theme of the Session will be “Energy security and sustainable development in Asia and the Pacific”.

United Nations Conference on Trade and Development (UNCTAD)

The United Nations Conference on Trade and Development (UNCTAD) aims at development-friendly integration of developing countries into the world economy. UNCTAD serves as the focal point within the United Nations for the integrated treatment of trade and development and the interrelated issues in the areas of finance, technology, investment and sustainable development. The three pillars of UNCTAD’s existing mandate are: (a) independent policy analysis; (b) consensus building; and (c) technical assistance.

The Ministerial Conference, which meets every four years, is the UNCTAD’s highest decision making body. Eleven Conferences of UNCTAD have taken place so far. The UNCTAD XI was held in Sao Paulo, Brazil on 13-18 June, 2004 with a Theme: “Enhancing coherence between national strategies and the global economic processes towards economic growth and development, particularly of developing countries”. The Indian delegation was led by Shri Kamal Nath, Hon’ble Minister for Commerce & Industry. A major achievement of the Conference was the launching of the Third Round of Negotiations under the Global System of Trade Preferences among Developing Countries (GSTP). The 12th Ministerial Conference of UNCTAD is scheduled to be held in Accra, Ghana from 20 to 25 April 2008.

Global System of Trade Preferences (GSTP)

The Agreement establishing the Global System of Trade Preferences (GSTP) among developing countries was signed on 13 April, 1988. The GSTP establishes a framework for the exchange of tariff concessions among the members of the Group of 77. It lays down rules, principles and procedures for the conduct of negotiations and for implementation of the results of the negotiations. So far, only two Rounds of negotiations have been held under GSTP. The third round of negotiations is underway.