India and the WTO: A Relationship with Fissures

• India is one of the primary players responsible for power shifts in the WTO in recent years as it played a significant role in building developing country coalitions, such as the G20 and the G33.
• Concerns are being raised in the WTO that many countries are providing direct tax concessions or tax holidays to support their exports/international trade.
• India has opposed expanding trade rules into areas such as labour standards, competition policy, government procurement, trade in investment and trade facilitation agreements.
• India has also raised its voice against rules that favour developing countries and are not in favour of developing and undeveloped countries.

India was one of the 23 original signatories to the General Agreement on Tariffs and Trade (GATT) concluded in 1947. When GATT’s successor, the World Trade Organisation (WTO), was formed in 1995, India became a founding member, and in the Doha WTO conference that took place in 2001, India emerged as the most outspoken advocate for the developing bloc.

The meeting was declared a success, as the delegates of 142 countries agreed to a new round of trade talks, including topics such as environment, competition, and investment. WTO and its impact on the Indian economy has been huge. As India is integrating with the world economy and increasing its trade with countries around the world, there is a growing need for India to align itself with the World Trade Organisation (WTO).

India’s Initiatives In WTO

India is one of the primary players responsible for power shifts in the WTO in recent years. It played a significant role in building developing country coalitions, such as the G20 and the G33. India has also been leading efforts to reform WTO subsidy rules to enable developing countries to engage in public food stockholding for food security purposes. It also calls for making the multilateral trading system fairer and more inclusive. With other emerging powers such as Brazil and China, India led the developing countries in securing some significant special and differential treatment (SDT) provisions. While India continues to advocate for developing and least-developed countries, it has softened its stance on several issues. India, for example, backed the first-ever multilateral trade facilitation agreement at the Bali Ministerial Conference in 2013. India has been asking for a more equitable and inclusive multilateral trading system. In this context, India and South Africa filed a proposal to the World Trade Organisation (WTO) that called for development-oriented changes. The proposal also emphasised the growing trade tensions and the need to modernise the WTO’s dispute resolution structure. India, on the other hand, is opposed to modifying the WTO’s consensus-driven nature, which could be detrimental to the country’s Working Principles of the WTO

The WTO establishes a framework for trade policies; it does not define or specify outcomes. That is, it is concerned with setting the rules of “trade policy.” Five principles are of particular importance in understanding both the pre-1994 GATT and the WTO:

Non-discrimination: It has two major components: the most favoured nation (MFN) rule and the national treatment policy. The MFN rule requires that a WTO member must apply the same conditions on all trade with other WTO members. National treatment means that imported goods should be treated no less favourably than domestically produced goods.

Reciprocity: It reflects both a desire to limit the scope of free-riding that may arise because of the MFN rule and a desire to obtain better access to foreign markets. 

Binding and enforceable commitments: The tariff commitments made by WTO members in multilateral trade negotiation and on accession are enumerated in a schedule (list) of concessions. These schedules establish “ceiling bindings”: a country can change its bindings, but only after negotiating with its trading partners.

Transparency: The WTO members are required to publish their trade regulations, to maintain institutions allowing for the review of administrative decisions affecting trade, to respond to requests for information by other members, and to notify changes in trade policies to the WTO.

Safety values: In specific circumstances, governments can restrict trade. The WTO’s agreements permit members to take measures to protect not only the environment but also public health, animal health and plant health

What is the WTO’s Ministerial Conference?

The Ministerial Conferences are at the very top of WTO’s organizational chart. It meets once every two years and can make decisions on all matters under any multilateral trade agreement. Unlike other organizations, such as the International Monetary Fund or World Bank, WTO does not delegate power to a board of directors or an organizational chief. interests.

Impact of WTO Rule on India

“Subsidies” are defined by the World Trade Organisation (WTO) as “Grants, loans, equity infusions, loan guarantees, fiscal incentives, the provision of products or services, and the purchase of goods are the only options available. They do not include any trade-distorting indirect structural subsidy in the form of “revenues forgone.” “—lower (than cost recovery) utility tariffs, low land prices, a stifled labour market, artificially low capital, and so on—all of which are universal and give China an advantage over India. The China Development Bank granted $30 billion in low-cost loans to the top five domestic solar panel manufacturers in 2010, although countries like India cannot afford to subsidise their producers. As a result, they want to defend their domestic sector through legislative hurdles such as tariffs and domestic content requirements.

There is also an agreement proposing an overall reduction of tariffs on manufactured products and the phasing out of the quantitative restrictions over time which can lead to the going out of business of small non-competitive firms and so this way WTO and its impact on the Indian economy can be negative.

India’s purist approach to the multilateral trading system – a fair, open, transparent and balanced trading regime is in the interest of developing countries and has always remained in WTO negotiations. 

Concerns are being raised in the WTO that many countries are providing direct tax concessions or tax holidays to support their exports/international trade. Disputes related to taxation have become more frequent involving conflicts between WTO agreements and respective country tax laws.

WTO also forbids the host country to discriminate against investments from abroad vis-a-vis domestic investment i.e. agreement requires investment to be freely allowed by nations but India has been using this to block China’s Investment in India.

Safeguarding duties are responsibilities that countries have against imports to protect domestic manufacturers. Still, WTO does not allow them, and when a country restricts imports to safeguard its domestic producers, in principle it must give something in return. This law also hurts developing countries as they are unable to protect domestic players against their biggest trade partners.

The Sanitary and Phyto-sanitary Measures Agreement (SPM) deals with restricting exports from any country that does not meet international standards for germs/bacteria and other cleanliness-related standards, which can hurt industries ranging from pharma to manufacturing to agriculture, as regions and countries such as the EU and the United States have extremely high standards.

TRIPs, which seek to safeguard and grant legal recognition to the author or creator of intangible work, and protect against illegal use of his creation, the negative impact of WTO, due to this will be on India’s pharma, biotechnology, and technology sectors, as it will restrict technological transfer.

If a company exports a product at a price lower than the price it normally charges on its home market, it is said to be “dumping” the product. These countries often apply anti-dumping duties, and these protect developing countries as other countries cannot dump their low-quality goods here, as China was dumping steel and solar panels in India, so the Indian government levied anti-dumping duties to protect domestic producers.

Agreement on Agriculture (AOA) deals with giving market access, reducing export subsidies and government subsidies on agricultural products, and will hurt the entire farming sector.

India Moves Against WTO Principles?

The Indian government’s proposed plans to level the playing field for domestic thermal and solar power generation equipment producers in the face of unfair Chinese competition have been questioned due to their compliance with WTO regulations. Local content restrictions imposed on solar generators for qualifying under the national solar mission, in particular, appear to violate these principles.

India has also asked for a clear dispute resolution mechanism in the global agreement to end harmful fisheries subsidies, and members are currently negotiating disciplines to eliminate subsidies for illegal, unreported, and unregulated (IUU) fishing, as well as to prohibit certain types of fisheries subsidies that contribute to overcapacity and overfishing, as leaving this issue unattended is causing the negative impact of WTO, on the natural ecosystem.

India appealed against a ruling of the World Trade Organisation (WTO), which ruled that the country’s domestic support measures for sugar and sugarcane are inconsistent with global trade norms, and is still providing sugarcane farmers government support, this issue especially led many people to think about the negative impact of WTO.

The WTO has also to set up a dispute panel against India on the request of Japan and Taiwan, over the import duties imposed on certain electronic goods, parts of telephone sets, telephones for cellular networks;  conversion and transmission or regeneration of voice, machines for the reception, images or other data, and the panel would determine whether India’s customs duties on imports of certain information and communications technology (ICT) products infringe WTO norms or not.

Conclusion

India’s purist approach to the multilateral trading system – a fair, open, transparent and balanced trading regime is in the interest of developing countries and has always remained in WTO negotiations. India has also been opposed to expanding trade rules into areas such as labour standards, competition policy, government procurement, trade in investment and trade facilitation agreements. India has also raised its voice against rules that favour developing countries and are not in favour of developing and undeveloped countries. India has also been impacted negatively by a lot of rules that the WTO has proposed and many cases that are ongoing against it. But WTO being an international institution keeping an eye on world trade and trade practices, to some extent safeguards the interest of developing and non-developing countries.

_{(The author is a PhD scholar at RIMT University, Punjab. Views expressed are the author’s own)}

References:

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Bhagyashree Gupta