India &the WTO
Issues of Current Importance - An Overview
The Uruguay Round of Multilateral Trade Negotiations, concluded on 15 December 1993 and the Final Act signed by member countries at a meeting in Marrakesh, Morocco, in April 1994 marked a watershed in the history of multilateral trade in more ways than one. This, the eighth in the series, was the most ambitious and complex of the trade rounds held since the inception of GATT in 1947. While GATT covered only trade in goods, the scope of multilateral trade negotiations under the Uruguay Round leading to the establishment of the World Trade Organisation (WTO) was extended to cover several new areas such as services, investment and intellectual property rights. Even in the area of goods, agriculture and textiles which were outside the ambit of GATT were brought into the fold of multilateral trade negotiations. The basic principle underlying these Agreements was to have an open trading system based on multilaterally agreed rules. The WTO Agreement incorporates some 29 individual texts – covering subjects ranging from agriculture to textiles & clothing; services, rules of origin and intellectual property rights. In addition, there were more than 25 ministerial declarations, decisions and understandings which spell out various obligations and commitments for WTO members. WTO-related issues of current importance in India relate mainly to rights and obligations emanating from these Agreements. A summary of these issues along with our official stand on each of them is outlined below
:Quantitative Restrictions (QRs)
Article XI of the General Agreement on Tariffs and Trade 1994 provides that no prohibitions or restrictions (other than duties i.e., tariffs) whether made through quotas, import or export licenses or other measures shall be maintained by any member of the WTO. However, under provisions of Article XVIII-B of GATT, we maintain quantitative restrictions on import of items in respect of 2400 tariff lines in the HS (Harmonised System) codes. In May 1997, India presented a plan for elimination of these restrictions on imports over a period of 9 years, which was considered at consultations held in the Committee on Balance of Payments Restrictions in June-July 1997. While the plan generally received the support of developing countries, the developed countries felt that the phase-out period was too long and that the number of items proposed for phase-out during the later years of the plan were too many. Although India agreed to reduce the phase-out period to 7 years, even this was not acceptable to the developed countries. Subsequently, the US, EC, Canada, Australia, New Zealand and Switzerland initiated dispute settlement proceedings against India and sought consultations under Article XXII of GATT. In the consultations that followed, India reached agreements with all countries except the US and entered into a phase-out period of 6 years starting from 1997. The US filed a dispute against India. A panel was constituted on 18th November, 1997 to examine the US allegations that the continued maintenance of QRs on imports by India was inconsistent with India’s obligations under the WTO agreement. The interim report of the panel has since been received and is being examined. Patents
The Agreement on Trade Related intellectual Property Rights (TRIPS) under the Uruguay Round pact required India to make certain provisions in the Patent Act to fulfil its obligations under Articles 70.8 and 70.9, notwithstanding the transition period allowed under the Agreement for switchover to product patents. These obligations relate to providing some means to receive product patent applications in the field of pharmaceutical and agro chemical products (Article 70.8) and grant of Exclusive Marketing Rights (EMR) on fulfillment of certain conditions (Article 70.9). The US filed a dispute against India at the WTO alleging that India had not complied with the provisions of Articles 70.8 and 70.9 of the TRIPs Agreement. A Panel set up by the Dispute Settlement Body (DSB) of the WTO ruled that India had not complied with its obligations. On an appeal made by India, the matter was considered by the Appellate Body of the WTO which also recommended that India take the necessary steps to comply with its obligations. It was subsequently determined that this be done by 19 April 1999. In order to comply with these rulings, a Bill, namely, Patents (Amendment) Bill 1998 was passed by the Rajya Sabha on 22 December 1998, but the Bill could not come up for consideration in the Lok Sabha. Meanwhile, in order to fulfil its obligations, the government promulgated an Ordinance – the Patents (Amendment) Ordinance, 1999 – on 8th January, 1999. The amendment has been made to provide a means in the Indian Patents Act of 1970 for filing of applications for product patents in the fields of agro chemicals and pharmaceuticals. The amended Act also provides for grant of Exclusive Marketing Rights to the applicant after a set of conditions have been fulfilled.
Section 3 of the TRIPs Agreement provides for mutual recognition of Geographical Indications (like Basmati Rice and Darjeeling Tea). The Agreement contains a provision (Article 22.3) that a member shall provide the legal means for interested parties to prevent the use of any means in the designation or presentation of a good that indicates or suggests that the good in question originates in a geographical area other than the true place of origin in a manner which misleads the public as to the geographical origin of the good. There is, however, no obligation under the Agreement (Article 24.9) to protect geographical indications which are not protected in their country of origin or which have fallen into disuse in that country. In India, we do not have any specific law on geographical indications. The need to enact a separate law on this subject has been recognised and separate legislation on geographical indications is being drafted in consultation with the concerned ministries and experts. (In a related development, India has circulated a paper in the TRIPs Council of the WTO justifying the necessity for extension of higher protection Under Article 24.2 of TRIPs – currently available only to wines and spirits- to the region-specific products of developing countries).
The Agreement on Agriculture is coming up for review in the year 2000. In the words of A.V. Ganesan, "the root cause of distortion of international trade in agriculture is the massive domestic subsidies given by industrialised countries to their agricultural sector over the decades. This has led to excessive production (as well as of import restrictions to keep out foreign agricultural products from their domestic markets) and its dumping in international markets. In order to minimise such dumped exports and to keep their markets open for efficient agricultural producers of the world, the starting point has to be the reduction of the domestic production subsidies given by the industrialised countries, followed by reduction of export subsidies and the volume of subsidised exports, and minimum market access opportunity for foreign agricultural producers". This being the rationale, the Agreement on Agriculture provided for (a) reduction of domestic subsidies, (b) reduction in export subsidies, and (c) tariff binding and progressive reduction of tariffs in agricultural commodities i.e., market access. Under the Uruguay Round, we have not made any commitments regarding market access, reduction of subsidies or tariffs since we are under a balance of payments cover. We were committed only to bind our tariffs which we have done, at 100% for primary products, 150% for processed products and 300% for edible oils. However, in course of time there may be pressure on developing countries including India to provide some market access as well as lower tariff bindings. We are studying the implications on the Agreement on Agriculture further and have been presenting papers reflecting our concerns in the process of Analysis and Information Exchange which is now ongoing in the WTO, as a run up to the fresh negotiations in Agriculture in the year 2000.We have, amongst other things, expressed our concerns regarding Food Security and safeguarding rural employment, for which we need some flexibility under the provisions for domestic support. We are also questioning the extremely high subsidies and tariff walls even now being maintained by the developed countries, although they are committed to reduction of both under the Uruguay Round. Better market access for our agricultural products is being sought by us. Broadly, India’s approach to the review of the Agreement on Agriculture is that it would give us an opportunity to have a fresh look at this area from the development perspective and the needs of developing countries, as a number of inequities still remained in the implementation of the Agreement.
Under Article XXVIII of GATT, we have already sought renegotiations of tariff bindings of certain critical agricultural products. Under the Uruguay Round, we had bound tariffs on these commodities at zero or very low levels. While seeking higher bindings for these commodities, we have to offer compensation to holders of initial negotiating rights and principal supplying interests by lower bindings in respect of other items of export interest to them. Initial negotiations have been held with the US, EC, Australia and Argentina.
The Uruguay Round brought the services sector, for the first time, into the fold of multilateral trade negotiations. According to the General Agreement on Trade in Services (GATS) the Most Favoured Nation (MFN) and "transparency" (viz., publication of all laws and regulations) are the 2 obligations that apply to all services. The commitments, viz., market access and national treatment apply to services that are to be opened up according to specific negotiated commitments only, subject to conditions incorporated in the schedule of commitments. The Agreement covered all the 4 modes of delivery of a service, including cross-border supplies, "commercial presence" and "movement of natural persons". The General Agreement on Trade in Services is coming up for review in the year 2000. Preparations for the negotiations would involve deciding the market access that the we can give and the market access that our services would like to have in other countries. This involves filing of schedules in respect of 12 major sectors and 161 sub-sectors. Preparatory work in this regard has already been initiated. Movement of natural persons (for supply of manpower services in the industrialised countries) is of special importance to us as India enjoys a distinct comparative advantage in this area covering a whole range of services from computer and related services to hotel, health, engineering, construction and other professional services. The process of economic liberalisation involving opening up of capital intensive services such as banking, telecommunications etc., must be matched by increased access for the temporary movement of our skilled and professional people in services of export interest to us. However, hardly any commitments have been made by developed countries in regard to the fourth mode for delivery of services under GATS i.e., movement of natural persons. Negotiations on this will also form part of GATS negotiations in 2000. Implementation issues
a. Special and differential treatment for developing countries
: For some months now, India has been articulating the view that special and differential provision of WTO Agreements for developing countries should be more clearly defined and implemented fully by the developed countries, so that the full benefits of the multilateral trading system accrue to the developing countries. For creating a consensus on this issue in the WTO, a Symposium of G-15 Group was also held in New Delhi on 10-11 December 1998. Specific examples have been cited by India to show that intentions of the negotiators have not been translated into practice: In respect of the Agreement on Textiles and Clothing (ATC), while the provisions have been implemented in letter, meaningful market access has not accrued to the developing countries. Another example relates to Article XVIII:B of the GATT’94 dealing with Quantitative Restrictions on Imports maintained by developing countries for BOP considerations, which is distinguished from Article XII by the fact that it explicitly provides for assessment of the adequacy of foreign exchange reserves after taking into account the long-term development needs of a developing country. In actual practice, however, Article XVIII:B and Article XII are treated similarly. Again, Article 15 of the Agreement on Implementation of Article VI of GATT (1994), which related to anti-dumping, urges developed countries to seek constructive remedies before imposing Anti-dumping measures against developing countries. In actual practice, anti-dumping measures are virtually being used by certain developed countries to deny access to the products of developing countries, with repeated anti-dumping proceedings being initiated on the same commodity, as with some textile export items in the EU. Similarly, the injunctions to advanced countries contained in Article 10 of the Agreement on Sanitary and Phytosanitary Measures and that contained in Article 12 of the Agreement on Technical Barriers to Trade for taking into account the special needs of developing countries in their formulation and application of standards, are hardly ever honoured in implementation. Similar insenstitivity to the constraints of the developing countries mark the Agreement on Subsidies and Countervailing Measures, which considers non-actionable the subsidies used by developed countries, but considers actionable the kinds of subsidies usually deployed by developing countries for development, diversification and upgradation of their industry. The Understanding on the Settlement of Disputes is another instrument where provisions for special and more favourable treatment of developing countries remain at the level of ‘best endeavour’ type of provisions. There is no way to ensure that preferential treatment is accorded to developing countries in practice. India has emphasised that procedures must be developed to make sure that the interests of developing countries are protected and that developed countries do not use dispute settlement proceedings as instruments for coercion of less privileged member countries.
b. Other implementation issues
highlighted by India related to food security concerns of developing countries like India vis-a-vis the Agreement on Agriculture; concerns about Unilateral Trade Restrictions imposed by countries which are inconsistent with their WTO obligations; provisions relating to Regional Trading Arrangements that are tending to threaten the thrust towards global free trade; imbalances in the TRIPs Agreement; the question of transfer of technology at fair and reasonable cost in the context of Trade and Environment, the Agreements on Sanitary and Phytosanitary Measures and Technical Barriers to Trade, and also in connection with the new subject of Electronic Commerce; national regulations on rules of origin threatening the market access of developing countries particularly in the area of textiles; the pressure on developing countries to liberalise areas of interest to the industrialised world, while delaying meaningful market access in areas of comparative advantage to developing countries, such as Textiles and on the matter of movement of professionals and skilled personnel.Trade and Investment Policy/Trade and Competition Policy
Working Groups on Trade and Investment and Trade and Competition Policy have been set up by the WTO in pursuance of the decision taken at the Singapore Ministerial Conference in December 1996. A Working Group on Government Procurement has also been set up by the WTO following a decision taken at the Singapore Ministerial. The Working Groups are mandated to undertake only an educative process and the educative process in the sphere of Trade and Investment, Trade and Competition Policy and Transparency in Government Procurement is continuing. India is participating in the educative process and has been of the view that a deeper understanding of issues is necessary before determining whether multilateral trade agreements in each of these spheres is necessary. We are of the view that the Working Groups should fully take into account the needs, interests and concerns of the developing countries and not lose sight of the development dimension. The government had set up Expert Groups including one headed by A.V. Ganesan (Trade and Investment) as also an Inter-ministerial Consultation Group on Government Procurement to prepare ourselves fully for the discussions.
Information Technology Agreement - ITA
India was among the participants of the ITA-I and India’s schedule of reduction in tariffs up to the year 2001 has been accepted by consensus by the other participants. In all, India bound 217 tariffs lines at the six digit level - tariffs on 95 tariff lines by 2003, 2 tariff lines by 2004 and the balance 116 lines in the year 2005. India also participated in the ITA-II talks during 1998. The proposals under ITA-II were examined with the concerned Departments in consultation with the industry. India has reservations regarding coverage under ITA-II of certain products which are of strategic and defense importance and certain items which are of dual use or multi-use, as also regarding non-Information Technology consumer products.
A Declaration on Electronic Commerce was adopted at the Second Ministerial Conference of the WTO in Geneva in May 1998 in recognition of the fact global electronic commerce is growing and creating new opportunities for trade. The Declaration launched a work programme on the subject in the WTO for making recommendations to the next ministerial conference of the WTO due in late 1999. The Declaration clearly stated that the work programme would take into account the development needs of developing countries. The declaration provides for a stand still on customs duties imposed on electronic transmissions so that the benefits of growth in this new area are equitably distributed, thus strengthening trade flows of all member countries. India made a detailed intervention on Electronic Commerce at the Special Session of the WTO General Council in September 1998 and is taking active part in the work programme on E-Commerce which is going on in the TRIPs Council, the Committee on GATS and the Committee on Trade and Development of the WTO.
The European Communities and some of other developed countries have put forward the idea of a comprehensive round of negotiations in the year 2000 ("Millennium Round"). At the special session of the General Council of the WTO held in Geneva in September 1998 marking the start of the process leading to the Third Ministerial Conference, our perception was conveyed that such initiatives - whether of a Multilateral Agreement on Investment (MAI) or a Millennium Round - were premature, as developing countries are in the process of implementing the obligations arising out of the Uruguay Round Agreements and time was needed to assess the impact of taking on these commitments before entering into any new obligations. India is still in the processing of implementing the last round of tariff negotiations which will go on at least till the year 2000. Similarly, in many spheres India like other developing countries has transition periods even up to 2005 as in the TRIPs Agreement. Overloading the WTO agenda at this point, therefore, may not be realistic. India is in constant contact with other developing countries to develop common positions on this subject. Consultations are also being held with other Ministries and industry associations to finalise a position that would yield maximum advantage to the country.
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Papers circulated by India in WTO
(on Customs Valuation).
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The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), which is part of the WTO Agreement, provides for norms and standards in respect of seven categories of intellectual property rights, including patents. Out of these 7 categories, India provides for laws in four areas and is required to develop laws in the balance categories. In the categories for which India has laws i.e., Copy Rights, Patents, Trade Marks and Industrial Designs, India is required to examine its laws to align them with the Trips Agreement.
In the area of Patents, TRIPs requires product patents to be given in all fields of technologies; the duration of the patent to be at least 20 years; compulsory license to be given on individual merits of the case but only after approaching the patent owner for obtaining a license on reasonable terms and conditions. The Patents Act. 1970 provides for product patents in all areas except food, pharmaceuticals and chemicals where only process patents are given. The duration of patents in India is 14 years in all sectors except food and pharmaceuticals where it is only seven years. The Act also provides for compulsory licensing and licenses of right.
India, as a developing country, has a transition period of 5 years i.e. till January 2000 to apply the provisions of the TRIPs agreement. An additional transition period of 5 years i.e., till January 1, 2005 is also available for extending product patent protection to areas of technology not protected namely, food, pharmaceuticals and chemicals. Notwithstanding these periods, Member States are required to take steps to provide for receipt of product patent applications in the field of pharmaceutical and agricultural chemicals and on fulfillment of certain conditions for the grant of Exclusive Marketing Rights (EMRs). These rights are to be granted for a period of five years or till the patent is granted or rejected whichever is earlier. This interim arrangement had to be in place from 1st January, 1995.
As the Indian Patents Act 1970 does not provide for grant of product patents in the field of agro chemicals and pharmaceuticals and as India has decided to avail of the full transition period, provisions had to be made to meet our obligations by 1st January 1995. Accordingly, amendments were made through an Ordinance on 31st December, 1994. Subsequently, the Patents (Amendment) Bill 1995 was introduced in the lower House or the Lok Sabha in March 1995. The Bill was passed by the Lok Sabha and then introduced in the Rajya Sabha where it was referred to the select committee of the House. As the select committee did not submit its report before the dissolution of the 10th Lok Sabha, the Bill lapsed. Meanwhile, the US made a complaint at the WTO. After consideration of the case, the dispute settlement body of the WTO ruled that India should take necessary steps to fulfil the obligations by 19th April, 1999. The obligations had to be fulfilled through an amendment of the Patents Act.
In order to comply with the rulings, the Patents (Amendment) Bill 1998 was passed by the Rajya Sabha in December 1998. However, the Bill could not come up for consideration in the Lok Sabha.
Meanwhile, in order to fulfil its obligations, the government promulgated the Patents (Amendment) Ordinance 1999 on 8th January, 1999 to amend the Indian Patents Act of 1970 in line with the country’s WTO obligations. The amendment, inter-alia, is meant to (a) provide a means in the Act for filing of applications for product patents in the field of agricultural chemicals and pharmaceuticals; and (b) to provide for grant of Exclusive Marketing Rights (EMRs) for the applicant after a set of conditions have been fulfilled.
While taking steps to amend the Patents Act, 1970 to fulfil our obligations under the TRIPs Agreement, measures have been incorporated to ensure that the government’s ability to intervene in the public interest is preserved. Such safeguards relate to public non-commercial use, price fixation, compulsory licensing, security related provisions and Indian systems of medicine.
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Article XI of the GATT provides for the general elimination of quantitative restrictions (QRs) on imports, stipulating that imports may be controlled only through tariffs.
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There are, however, a number of exceptions to the stipulations against QRs in Article XI. One important exception is a situation where a country has to safeguard its external finance position as elaborated in Article XII (used by developed countries) and Article XVIII:B (used by developing countries).
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Article XVIII:B, which is invoked by India, recognises that members whose economies can only support lower standards of living and are in the earlier stages of development may "apply quantitative restrictions for Balance of Payments Position...(and)...shall be free to deviate temporarily from the provisions of the other Articles of this Agreement as provided in Sections A, B & C". Para 9 of Section B provides that such member countries may control the general level of imports by restricting the quantity or value of merchandise permitted to be imported, provided that the import restriction shall not exceed those necessary: (a) to forestall the threat of, or to stop, a serious decline in its monetary reserves; or (b) in the case of a contracting party with inadequate monetary reserves, to achieve a reasonable rate of increase in its reserves.
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The provisions relating to balance of payments also provide that a member has to announce publicly time-schedules for the elimination of QRs maintained for balance of payments purpose. A member taking recourse to Article XVIII:B is also required to have periodic consultations with the Committee on Balance of Payments Restrictions in the WTO.
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India presented a case for the removal of QRs for the period 9 years initially in May 1997, subsequently reduced to 7 years. As even 7 year phase-out period was not acceptable to developed countries and the US, EC, Canada, Australia, New Zealand and Switzerland (with Japan seeking third party status in the dispute) initiated disputed settlement proceedings against India. India has reached an agreement with all countries except the US. Under the mutual solution reached with the 6 major trading partners, India has entered into a phase-out programme of 6 years starting from 1997-i.e., 2003. Regarding the dispute filed by US, the interim report of the panel is under examination.
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Safeguard measures to protect domestic industry following the gradual phase-out of QRs on imports are proposed to be utilised effectively. These measures available under the WTO regime include protection through tariffs, anti-dumping and countervailing measures and safeguard measures to prevent damage to domestic production on account of surge in imports. Non-tariff barriers in countries for products of export efforts to India are taken up bilaterally or through the WTO dispute settlement mechanism for appropriate action.
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"It is but natural that in the turbulence of world markets, in the new emerging regime of the World Trade Organisation, our principal responsibility should be to safeguard and promote the country’s interests. There is no need to be shy in this regard - that is what governments the world over are pursuing in the era of globalisation. Promoting the country’s interests, strengthening its own abilities does not mean isolating ourselves from the world. It means meeting its challenges after thorough preparation. And a major part of the preparation, to which my government is deeply committed, is speedy internal liberalisation of the economy, freeing it from all the growth-hindering bureaucratic and government controls. Therefore, let us not fear the new regimes of trade. Let us put them to work. It is right that we should raise our voice when products that are generic to India - haldi, basmati - should be patented abroad. But the real remedy is to take all those initiatives that will enable India and Indians to overtake others in acquiring world-class patents. That is how my government will view the new economic order and that is how I believe all of us should face it."
(Prime Minister Atal Behari Vajpayee’s
Address to the Nation on March 22, 1998)
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"We are concerned that the comparative advantage of our professionals is not allowed to be exploited in full measure, while, at the same time, there is unabating pressure on us to open markets to goods and services in which the developed world has a comparative advantage".
(Excerpted from the Address by Commerce Minister,
Ramakrishna Hegde at the Second Ministerial Conference of the WTO in Geneva on 18th May, 1998)
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"Deciding the contents of international trade diplomacy will constitute the nation’s more absorbing challenge. The rich countries have already served notice that their activism within the WTO will soon gravitate towards issues related to agriculture and services.... The WTO also proposes to add to the agenda issues concerning trade-related investment. Negotiations on behalf of the poor countries without question have to be conducted with skill and speed. But the greater need is to seek to rebuild the cohesion which the Group of 77 was wont to display... in the past and which disintegrated, for, whatever reason, in the late 1980’s. Since unity is strength, a rapprochement between the developing countries on the basis of a common minimum programme should be of vital importance to each of them. In the changed circumstances, Japan and some of the erstwhile Asian Tigers, could also be interested in such a regrouping."
(The 35th Report of the Parliamentary Standing Committee on
Commerce on India and the WTO, 4th December, 1998).
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Schedule of Meetings at the WTO : February 1999 *04.02.1999 : Committee on Trade in Financial Services 05.02.1999 : Council for Trade in Goods 09.02.1999 : Working Party on Professional Services 10.02.1999 : General Council 10-12.02.1999: Committee on Regional Trade Agreements 12.02.1999 : Committee on Import Licensing 15.02.1999 : Committee on Specific Commitments 16.02.1999 : Working Party on GATS Rules 16-17.02.1999: Council for TRIPs 18-19.02.1999: Committee on Trade and Environment 18.02.1999 : Working Party on State Trading Enterprises 22-23.02.1999: Committee on Government Procurement 22-23.02.1999: Council for Trade in Services 22.02.1999 : Committee on Rules of Origin 23.02.1999 : Special Committee on Import Licensing 24.02.1999 : Dispute Settlement Body 24-25.02.1999: Working Group on Transparency in Government Procurement 25-26.02.1999: Special Session of the General Council for the Third Ministerial Conference 25-26.02.1999: TPRB (Guinea) 26.02.1999 : Committee on Rules of Origin |
Source WTO : As on 22/1/99
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