ASSIGNMENT-

EFFECT OF WTO ON INDIA

Guided By: Submitted By:

HARSHVARDHAN SIR SACHINDRA

KUMAR SINGH
GENERAL AGREEMENT ON TRADE IN SERVICES

The General Agreement on Trade in Services (GATS) of the World Trade Organisation (WTO) covers all
services, classified under 12 broad sectors, viz., Business Services, Communication Services, Construction
and Related Engineering Services, Distribution Services, Educational Services, Environmental Services,
Financial Services, Health Related and Social Services, Tourism and Travel related Services, Recreational,
Cultural and Sporting Services, Transport Services and Other Services not included elsewhere. The
ongoing negotiations mandated under GATS and subsequently under the Doha Development Agenda aim
at progressively liberalising trade in services, following a positive approach wherein member countries
have the right to choose sectors and modes of supply in which they would be in position to undertake
commitments.
Commitments taken by most developed countries for movement of natural persons are linked to
establishment of commercial presence and are subject to a number of limitations and administrative
hurdles such as visa and immigration procedures, Economic Needs Tests, Work permit norms, Non-
recognition of qualifications etc. In order to address these barriers in the free movement of natural
persons, India has taken several initiatives, which include engaging in negotiations with trading partners
at bilateral, plurilateral and multilateral levels and tabling proposals alongwith groups of countries, at the
WTO for addressing these issues as well as suggesting strategies to achieve meaningful liberalisation in
this mode of supply of services.
The principles of GATS are applicable only for temporary movement of natural persons for supply of
services and do not apply to measures affecting natural persons whether skilled or unskilled seeking
access to employment market in any member country. Government of India 's efforts in negotiating with
its trading partners are with the objective of reducing barriers in such temporary movements and
obtaining more access in their markets.

• LEGAL SERVICES
India has not undertaken any commitments in Legal Services in the World Trade Organisation (WTO)
under the General Agreement on Trade in Services (GATS), during the Uruguay Round. Under the ongoing
Doha Round of negotiations also, no commitments have been offered in Legal Services in India 's Initial
Offer. A team of Indian and United Kingdom (UK) lawyers are expected to exchange views on the status of
the legal services and issues that are required to be tackled before legal services are opened up.

• EFFECT OF WTO ON SMALL AND BIG INDUSTRIES

The World Trade Organisation has established a global rule-based, transparent and predictable multilateral
trading system. India 's membership of World Trade Organisation, since 1995, has provided an
opportunity to multilaterally negotiate trade issues and to put in place permissible measures such as
import licensing and trade defence mechanisms like safeguard action and anti-dumping which are aimed
at ensuring a fair and transparent trading regime. Measures taken by government to make indigenous
industry competitive inter alia include cluster development, availability of institutional credit, assistance
for adoption of modern management practices, use of Information Technology and a new scheme known
as the "Manufacturing Competitiveness Programme" that has been formulated in the Union Budget of
2005-06.
• EFFECT OF WTO NORMS
India had joined the WTO in 1995 after detailed domestic consultations. Membership in WTO results in
rights and obligations for its Members, including India . Such rights and obligations accruing to a Member
of WTO, include national treatment and most favored nation treatment for a Member's goods and services
in other WTO Member countries. Each Member is also expected to undertake specific commitments under
different agreements of the WTO and these Agreements have benefited India and other developing
countries in as much as a rule based, transparent and predictable multilateral trading system facilitates
trade. The rule-based system provided by WTO also protects Members from unilateral action by stronger
trading partners. WTO rules are applied in a size neutral manner on producers in Member countries.
However, flexibilites are available to provide support to the small scale sector by way of subsidies based
on objective economic criteria related to size, like asset or turnover. The Agreement on Agriculture also
recongnizes the problems faced by resource poor farmers, and support to such farmers are excluded for
calculation of domestic support. Developing countries like India are also eligible to extend export subsidies
for transportation and handling of agricultural products destined for exports. It is not possible to isolate
the impact of WTO rules on different sectors or even the economy as a whole, because trade liberalisation
was undertaken by India autonomously under WTO in a phased manner, and such liberalization was also
part of an economic reform process encompassing besides trade, investment, industrial and exchange rate
policies.

• TRADE LIBERALISATION IN AGRICULTURE

From time to time, the Government has been taking necessary measures to ensure that our agricultural
trade improves to take advantage of the trade liberalisation in agriculture. The Government has
introduced Vishesh Krishi Upaj Yojana (Special Agricultural Produce Scheme) with the objective to
promote export of fruits, vegetables, flowers, minor forest produce, dairy, poultry and their value added
products, by incentivising exporters of such products. The Agricultural and Processed Food Products Export
Development Authority, Spices Board and Export Inspection Council etc. are also engaged in sensitising
exporters about the requirements of international trade in agriculture including Sanitary and Phyto-
Sanitary standards to be met. India's objectives in the on going negotiations on World Trade Organisation
(WTO) Agreement on Agriculture include removal of export subsidies and substantial reduction in all forms
of distortions in agricultural products caused by high levels of support and protection provided to their
agriculture by developed countries while ensuring that developing countries are able to address their rural
development, livelihood and food security concerns through appropriate instruments and measures. India
has been making all efforts in the negotiations to ensure that the outcome of the negotiations is consistent
with its objectives, including by building coalitions with other Members of the WTO holding similar
interests and concerns. The negotiations are scheduled to end by 31st December 2005 . India 's engaged
in bilateral and regional free trade agreements with some of its trading partners with the objective of
expanding its export market to those countries. India has a Free Trade Agreement with Sri Lanka with
effect from March 2000.

• SUBSIDY
Any programme for the industry or exports by the Central or State Governments needs to be designed
and implemented taking into account commitments undertaken by India in the World Trade Organisation
(WTO). As per the WTO Agreement on Agriculture, all subsidies contingent upon export performance
(export subsidies) and/ or contingent upon the use of domestic over imported goods are prohibited.
However, this prohibition shall not apply to developing Members like India with per capita GNP of less than
US $ 1000 per annum, subject to fulfillment of other requirements in the Agreement on Subsidies and
Countervailing Measures. Most other subsidies, mainly production subsidies, fall in the 'actionable'
category. Actionable subsidies are not prohibited. However, they are subject to challenge either through
multilateral dispute settlement or through cointervailing actions, in the event they cause adverse effects
to the interest of other Member, in accordance with WTO disciplines. Some of the Government
schemes/programmes have been subject to countervailing actions. One of the duty neutralisation schemes
of the Government which has been subject to countervailing action by certain countries is the Duty
Entitlement Pass Book (DEPB) Scheme. The DEPB Scheme will continue to be operative until it is replaced
by a new scheme which will be drawn up in consulation with exporters.

• STEPS TO COUNTER NON-TARIFF BARRIERS

There are various procedural requirements, in addition to Customs tariffs, imposed by all countries on
international trade. Some times these procedural requirements act as barriers and are called non-tariff
barriers. Indian exporters face such barriers from time to time in several countries including the developed
countries. The problem arising due to non-tariff barriers are duly taken up with the concerned authorities
of the country concerned bilaterally with a view to their early and mutually satisfactory resolution. Certain
issues, that are not resolved this way, have been taken up for resolution through WTO's Dispute
Settlement Mechanism. In the WTO negotiations, India has co-sponsored proposals along with some other
developing countries to disallow use of measures by developed countries that make exports difficult for
developing countries.

• IMPACT OF PATENT LEGISLATION ON DRUG PRICES

The existing patent law in the country, which provides for a strong and comprehensive set of safeguards,
is fully equipped to deal with issues relating to non-availability of drugs and/or exploitative pricing. It
needs to be mentioned that the protective/public interest provisions of the patents law were
comprehensively reviewed by the Joint Committee of Parliament, which examined the provisions of the
Patents (Second Amendment) Bill, 1999. The Committee primarily focused on the efficacy of safeguards of
public interest and public health concerns. Taking note
of the Doha Ministerial Conference of WTO in 2001, the Committee restructured the provisions relating to
public interest, compulsory licensing, Government use, national security and public health and nutrition
with a view to enabling an appropriate, timely and efficient response to national and public interest
concerns. The recommendations of the Committee were accepted in their entirety and the Bill was passed
by the Parliament as the Patents (Amendment) Act, 2002. As a result there of , the existing law effectively
balances and calibrates intellectual property protection with public health, national security and public
interest concerns. The existing law has effective provisions:
a. To ensure availability of products at reasonable price through compulsory licence. [Section 84]
b. To deal with emergent situations or cases of public non-commercial use [section 92]
c. The provision relating to parallel import of patented product for ensuring availability of patented
products at cheaper price to the consumers [Section 107 A(b)]
d. To ensure import of medicines by Government [section 47 (4)]
e. The Bolar provision pertaining to act of making, constructing, using or selling a patented invention
merely for the purpose of submission of information to the regulatory authorities before the expiry of term
of patent so as to allow swift transition of the patented products into patent. This provision specially
safeguards the interest of generic manufacturers [Section 107 A(a)]
f. For acquisition of patent right by Government [section 102]
g. To enable use of patent for research, experiment and education purpose [section 47 (3)]
h. To enable use of invention for the purposes of
Government [section 100] i. For revocation of patent for non-working in
India [section 85] j. For revocation of patent in public interest
[section 66]
Majority of the drugs already in Indian market, including those in the National List of Essential Medicines
2003, are off-patent and their pricing/ availability would not get affected by the new patent regime.
Therapeutic equivalents of the patented medicines are also available generally. Coupled with the pressure
from prices of different drugs in the same therapeutic group, the paying capacity of Indian consumer is
also expected to keep a check on the prices of patented medicines. The new patent regime introduced
through the Patents (Amendment) Ordinance, 2004, inter-alia, for the pharmaceutical sector in the
context of globalization of India economy is expected to provide an impetus to growth in research and
development and enhancement in the capability of the Indian system to generate and protect the
intellectual property.

• PATENTING OF PLANTS
Patents are sought and obtained by applicants and inventors, both Indian and foreign, in different
countries to safeguard and promote their commercial and other interests. Such patents are granted under
the sovereign prerogative of countries according to their respective patent laws and have territorial effect,
that is, they are effective only in the country of grant. In order to qualify for grant of patent, an invention
whether product or process, has to meet the universally accepted criteria of patentability, namely,
novelty, inventiveness and industrial applicability. Foodgrains and medicinal plants, existing in nature,
would not meet the criteria of patentability. These are also not patentable under the Indian Patents Act,
1970. However, patents have reportedly been sought by both foreigners and Indians on preparation and
compositions based on properties of certain plants. Data on such patents granted worldwide is not
maintained.

• PATENTING OF MEDICINES
Patents are granted under the sovereign prerogative of countries according to their respective Patent Laws
and only have territorial effect. Accordingly, the availability of medicines in India which are patented
abroad is not affected unless a patent for the same exists in India . As per the new patent regime
introduced through the Patents (Amendment) Ordinance, 2004, effective from 1st January, 2005 , patent
rights to applications for medicines or drugs filed under Section 5(2) of the Patents Act shall accrue only
from the date of grant of patent in India . Thus, the Indian manufacturers can continue to manufacture
such drugs for which patent protection is not valid in India .

• MODIFICATION OF PRESS NOTE 18 OF 1998

Government has, on review of the guidelines notified vide Press Note 18 (1998 series) which required
prior approval of the Government for new proposals for foreign investment/technical collaboration where
the foreign investor has or had any previous joint venture or technology transfer/trademark agreement in
the same or allied field in India , issued fresh guidelines vide Press Note 1 (2005 series) dated 12th
January 2005 . These guidelines inter alia. Provide that prior Government approval for new proposals
would be required in cases where the foreign investor has an existing joint venture or technology transfer/
trademark agreement in the 'same' field. Even in such cases, prior Government approval will not be
required in the following cases:
a. Investment to be made by venture Capital Funds registered with the Security and Exchange Board of
India (SEBI); or
b. Where in the existing joint-venture investment by either of the parties is less than 3%; or
c. Where the existing venture/collaboration is defunct or sick.
The guidelines further provide that joint ventures to be entered into after the issue of Press Note 1 (2005
Series) might embody a 'conflict of interest' clause in their joint venture agreement to safeguard the
interests of joint venture partners in the event of one of the partners desiring to set up another joint
venture or a wholly owned subsidiary in the 'same' field of economic activity.
The Foreign Direct Investment policy is reviewed on an ongoing basis with a view to make the investment
climate more attractive, simplify procedures, and to enhance FDI inflow into the country.

• INDUSTRIAL TARIFFS
It is India 's constant endeavour to build consensus amongst like-minded developing countries on
negotiating issues, including industrial tariffs, in the WTO. Consensus building amongst like-minded
developing countries on industrial tariffs, including the changes to the Girard formula for tariff reduction, is
an ongoing process which has not reached a conclusion.

• TRADE PACTS

India has signed trade pacts with Afghanistan, Argentina, Angola, Armenia, Austria, Azerbaijan,
Bangladesh, Belarus, Bhutan, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, Burkina Faso,
Cameroon, China, Croatia, Cyprus, Czech Republic, Democratic peoples Republic of Korea, Estonia,
Ethiopia, France, Georgia, Ghana, Hungary, Italy, Ivory Coast, Japan, Kazakhstan, Kenya, Kyrgyzstan,
Latvia, Liberia, Lithuania, Maldives, Mongolia, Mauritius, Moldova, Mozambique, Namibia, Nepal, Nigeria,
Paraguay, Poland, Portugal, Republic of Korea, Romania, Russian Federation, Rwanda, Senegal,
Seychelles, Slovak Republic, South Africa, Sri lanka, Swaziland, Tajikistan, Tanzania, Turkmenistan,
Uganda, Ukraine, United Kingdom, Uruguay, Uzbekistan, Zaire, Zambia and Zimbabwe. The bilateral trade
agreements broadly provide for Most Favoured Nation (MFN) treatment on reciprocal basis, co-operation
for mutual benefits with a view to expanding trade and strengthening economic co-operation, validity of
the agreements, exchange of information, counter trade, exchange of business delegation, co operation in
the various spheres of mutual interest, specifying the currency for payment purpose, providing safeguard
clauses, creation of forum like Joint Trade Committee to monitor the implementation of Trade Agreement.
These pacts are expected to facilitate expansion of bilateral trade and economic cooperation of a long term
and stable basis and to provide appropriate format for the trade and industry to identify economic
opportunities and to develop business relations.