Economic and Financial Terminology Part 4 by Mr. Veeraragavan Ex. RBI officer
Economic and Financial Terminology Part 4
International Economic Institutions – IMF and World Bank – WTO – Regional Economic Co-operation.
The International Monetary Fund (IMF)is an international organization headquartered in Washington, D.C. It was established along with the International Bank for Reconstruction and Development (also known as World Bank), at the conference of 44 nations held at Bretton Woods, USA in July 1944 to build a framework for economic cooperation and also to avoid a repetition of the competitive devaluations that had contributed to the Great Depression of the 1930s. It came into formal existence in 1945 with 29 member countries and the goal of reconstructing the international payment system.
The organization is working on to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth and reduce poverty around the world.
IMF works on quota system, Countries contribute funds to a pool through a quota system from which countries experiencing balance of payments difficulties can borrow money. IMF is controlled and managed by a Board of Governors. Currently there are 24 Directors and each representing a single country or a group of countries. The transactions of IMF are expressed in Special Drawing Right (SDR) which is also known as Paper Gold. The IMF’s financial year is form May 1 to April 30.
India and IMF :
India is the founder member of the IMF and also among the top 10 members of IMF, along with the U.S, Japan, France, Germany, Italy, the United Kingdom, China and Russia. IMF has played an important role in Indian economy. IMF has provided economic assistance from time to time to India and has also provided appropriate consultancy in determination of various policies in the country. India was among the first five nations having the highest quota with IMF and due to this status India was allotted a permanent place in Executive Board of Directors.
Nauru became 189th member of IMF
The international monetary system (IMS) refers to the customs, rules, instruments, facilities, and organisations facilitating international (external) payments. Sometimes the IMS is also referred to as an international monetary order or regime.
Adjustment refers to the process by which the balance-of-payment (BoP) crises of the nations of the world (or the member nations) are corrected. A good IMS tries to minimise the cost of BoP and time for adjustment for the nations.
Liquidity refers to the amount of foreign currency reserves available to settle the BoP crises of the nations. A good IMS maintains as much foreign reserves to mitigate such crises of the nations without any inflationary pressures on the nations.
Confidence refers to the faith the nations of the world should show that the adjustment mechanism of the IMS is working adequately and that foreign reserves will retain their absolute and relative values. This confidence is based on the transparent knowledge information about the IMS.
INTERNATIONAL MONETARY FUND
came up in 1944
main objectives –
- exchange rate regulation,
- purchasing short-term foreign
- currency liabilities of the member nations from around the world,
- allotting special drawing rights (SDRs) to the member nations
- bailor to the member economies in the situation of any BoP crisis.
(i) to facilitate international monetary cooperation;
(ii) to promote exchange rate stability and orderly exchange arrangements;
(iii) to assist in the establishment of a multilateral system of payments and the elimination of foreign exchange restrictions; and
(iv) to assist member countries by temporarily providing financial resources to correct maladjustment in their balance of payments (BoPs).
The Board of Governors of the IMF consists of one Governor and one Alternate Governor from each member country. For India, Finance Minister is the Ex-officio Governor while the RBI Governor is the Alternate Governor on the Board.
Present Managing Director who is Chairman (currently, Ms Christine Lagarde) of the Board of Executive Directors.
Board of Executive Directors consists of 24 directors appointed/elected by member countries/group of countries – is the executive body of the IMF. India is represented at the IMF by an Executive Director ( currently Arvind Virmani), who also represents three other countries in India’s constituency – Bangladesh, Sri Lanks and Bhutan.
India’s Quota & Ranking
IMF reviews members’ quotas once in five years – last done in January 2016 –
After this India’s quota (together with its 3 constituency countries)
has increased to 2.75 per cent (from 2.44 per cent) and it has become the 8th (from 11th) largest quota holding country among the 24 constituencies. In absolute terms, India’s quota has increased to SDR 13,114.4 million (from SDR 5,821.5 million) which is an increase of app. US $ 11.5 billion or Rs. 56,000 crore).While 25 per cent of the quota is to be paid in cash (i.e. in ‘Reserve’ currency), the balance 75 per cent can be paid in securities.
Once a member nation has signed the EFF (Extended Fund Facility) agreement with the IMF, borrowings can be done by the member nation – India signed this agreement in the fiscal 1981-82.
India has been borrowing from the IMF due to critical balance of payment (BoP) situations – once between 1981-84 (SDR 3.9 billion) and next during 1991 (SDR 3.56 billion). All the loans taken from the IMF have been repaid.
India is now a contributor to the IMF as it participates in the Financial Transactions Plan (FTP) of the IMF since September 2002 – at this time India was in strong balance of payment situation and in a comfortable forex reserves position.
WORLD BANK consists of five closely associated institutions
1. IBRD International Bank for Reconstruction and Development is the oldest of the World Bank institutions
– started functioning (1945) in the area of reconstruction of the war-ravaged regions (World War II) and
– later for the development of the middle-income and creditworthy poorer economies of the world.
– Human development was the main focus of the developmental lending with a very low interest rate (1.55 per cent per annum)—the areas of focus being agriculture, irrigation,urban development, healthcare, family welfare, dairy development, etc. It commenced lending for India in 1949.
2. International Development Agency (IDA) is the soft window of the WB was set up in 1960
– aim of developing infrastructural support among the member nations,
– long-term lending for the development of economic services.
– Its loans, known as credits are extended mainly to economies with less than $895 per capita income. The credits are for a period of 35–40
years, interest-free, except for a small charge to cover administrative costs. Repayment begins after a 10-year grace period. There was no human angle to its lending. But now there remain no hard and fast differences between the purposes for the IBRD and IDA lending.
3. IFC The International Finance Corporation was set up in 1956 also known as the private arm of the WB.
– lends money to the private sector companies of its member nations. The interest rate charged is commercial but comparatively low.
– finances and provides advice for private public ventures and projects in partnership with private investors
– through its advisory work, helps governments of the member nations to create
conditions that stimulate the flow of both domestic and foreign private savings and investment.
– focuses on promoting economic development by encouraging the growth of productive enterprises and efficient capital markets in its member countries.
4. MIGA The Multilateral Investment Guarantee Agency set up in 1988 encourages foreign investment in developing economies by offering insurance (guarantees) to foreign private investors against loss caused by non-commercial (i.e. political) risks, such as currency transfer, expropriation, war and civil disturbance. It also provides technical assistance to help countries disseminate information on investment opportunities.
5. ICSID International Centre for Settlement of Investment Disputes (ICSID), set up in 1966 is an investment dispute settlement body whose decisions are binding on the parties. India is not its member (that is why the Enron issue was out of its preview).
BIPA are Bilateral Investment Promotion & Protection Agreement (BIPAs) in order to promote and protect on reciprocal basis investment of the investors. Government of India have, so far, (as by July 2012) signed BIPAs with 82 countries out of which 72 BIPAs have already come into force and the remaining agreements were in the process of being enforced.
ASIAN DEVELOPMENT BANK (ADB), with an international partnership of 63 member countries, was established in 1966 and has headquarters at Manila, the Philippines. India is a founder member of ADB.
– engaged in promoting economic and social progress of its developing member countries in the Asia-Pacific region. Its principal functions are as follows:
(i) loans and equity investments for the economic and social advancement of its developing member countries;
(ii) provide technical assistance for the preparation and execution of development projects and programmes and advisory services;
(iii) to respond to the requests for assistance in coordinating development policies and plans in developing member countries; and
(iv) to respond to the requests for assistance and coordinating development policies and plans of developing member countries.
- India’s subscription to the Bank’s capital stock is 7.190 per cent with a voting power of 6.050 per cent (as per the ADB Annual Report, 2010), as quoted by India 2013.
- India started borrowing from ADB’s Ordinary Capital Resources(OCR) in 1986. The Bank’s lending has been mainly in the Energy, Transport and Communications, Finance, Industry and Social Infrastructure sectors.
- The Bank has extended technical assistance to India in addition to loans from its OCR window. The technical assistance provided include support for institutional strengthening, effective project implementation and policy reforms as well as for project preparation.
- India holds the position of Executive Director on the Board of Directors of the Bank—its Constituency comprises India, Bangladesh, Bhutan, Lao PDR and Tajikistan.
- The Finance Minister is India’s Governor on the Board of Governors of the Asian Development Bank and Secretary (EA) is the Alternate Governor.
OECD Organisation for Economic Co-operation and Development (OECD) was officially born on September 30, 1961,
- 34 OECD member countries worldwide regularly turn to one another to identify problems, discuss and analyse them, and promote policies to solve them. The track record is striking.
- The US has seen its national wealth almost triple in the five decades since the OECD was created, calculated in terms of gross domestic product per head of population. Other OECD countries have seen similar, and in some cases even more spectacular, progress.
- The organisation has close relations with Brazil, China, India, Indonesia and South Africa through its “enhanced engagement” programme. Together with them, the OECD brings around its table 40 countries that account for 80% of world trade and investment, giving it a pivotal role in addressing the challenges facing the world economy.
- In May 2007, OECD countries agreed to invite Chile, Estonia, Israel, Russia and Slovenia to open discussions for membership of the Organisation and offered enhanced engagement to Brazil, China,India, Indonesia and South Africa.
World Trade Organisation (WTO)
- An international organization established in 1995 as a successor to GATT, to promote multilateral trade.
- GATT is a forum came into force, as an agreement short of an institution, in 1947.
- Objectives of GATT – to ensure free trade among world countries by way of reduction of tariff and other barriers to trade.
- Eight rounds of negotiations were held between 1986 and 94 among members to ensure free trade. The last one was Uruguay round.
- The Uruguay round included the service trade, intellectual property rights, textiles and agriculture in its negotiation. As a result of conclusion of Uruguay Round (8th round) WTO has been established. This brought many amendments to GATT. This amended version now forms the basis for WTO.
PRINCIPLES OF WTO
- Most Favoured Nation (MFN)- to treat all nations on equal footing and National Treatment (NT) – to treat all nations equally in import and export of goods and services.
STRUCTURE OF WTO
- Ministerial Conference,- the top level decision making body -meets once in two years. The trade and commerce ministers of member countries, form this council.
- Next level is the General Council- The ambassadors or other representatives appointed by member countries constitute this council.
- The general council also acts as Dispute Settlement Body (DSB) and Trade Policy Review Body.
– meets many times in a year as and when required.
– helps the member countries in solving their disputes arising out of trade.
– reviews the trade policies adopted by member countries to check if they are compatible with WTO’s agreements and their impact on trade.
- Council for Trade in Goods is called Goods Council.
– Looks after the working of GATT agreement.
– The Council for Trade in Service is called Service Council. It looks after implementation of General Agreement on Trade in Services (GATS).
– TRIPS Council looks after issues related with Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement implementation.
– Apart from this there are many working committees and working groups that enable smooth functioning of WTO and its agreements.
1. WTO Agreement established under Uruguay agreement- an Umbrella agreement. Other agreements are annexures to this agreement.
2. Agreement on Agriculture (AoA)
– calls for freeing agriculture trade.
– The commitments under this agreement are based on Special and Differential treatment.
– Special and Differential treatment means flexible and lesser commitment on the part of developing and less developed countries compared to developed countries in fulfilling the obligation under this agreement.
– has Special safeguard mechanism – option to countries to impose additional duties on imported products when there is surge in imports or products are imported at lower price.
– The main components of this agreement are Market access, Domestic support or Domestic subsidies and Export subsidies.
Peace Clause –AOA has a clause under Article 13 of AOA – restrains other countries from taking counter measure against some of the subsidies given like Green Box Subsidies.
– also calls for due restraint in taking action against export subsidies and product specific subsidies.
3. Market Access
– provision of access to imported agricultural goods in the member countries – two provisions – tariffication and tariff reduction & minimum market access.
– Tariffication – converting non tariff barriers into tariffs that ensures same level of protection.
– Tariff reduction calls for 36% tariff reduction by developed countries over 6 years period and 24% by developing countries over the period of 10 years.
– The least developed countries do not have any commitments.
– Minimum access calls for minimum of 5% of imported agriculture products in domestic consumption by the year 2000 in developed countries and 2004 in developing countries.
– The less developed countries are exempted from this obligation.
Swiss Formula calls for higher rate of reduction for countries which has higher initial tariff and lower rate for countries which has lower initial tariff.
4. Domestic Support or Domestic Subsidies
– calls for reduction of domestic subsidies called Amber Box Subsidies, that result in lower price of exported products and distort free trade.
– Aggregate Measurement of Support (AMS) is to be reduced by 20% over a period of 6 years by developed countries and 13% over a period of 10 years by developing countries over the base period of 1986-88.
– Aggregate Measurement of Support means the total of product specific subsidies (given to particular product) and non-product specific subsidies provided by a country in a year.
– AMS does not include subsidies within the de-minimis1 level (minimum level prescribed by AoA).
– The de-minimis level for developed countries – product specific subsidies is 5% of total value of that particular product produced in a year,- developing countries it is 10%.
-For non-product specific subsidies, it is 5% of total value of all agricultural products produced in that country in a year for developed countries and 10% for developing countries.
5. Other categories of subsidies not included in the calculation of AMS.
– Green Box Subsidies which don’t distort or distort the free trade or production very minimally – to provided through publicly funded government programme and no price support to the producer- examples of these kinds of supports are expenditure on agricultural research, training and pest control etc.
– Special and Differential Treatment Box (S & D Box) Subsidies are assistances essential for rural development and upliftment of poor farmers not available to developed countries
These subsidies are government assistance to encourage agricultural and rural development which is in the nature of rural development programmes of developing countries, agricultural investments subsidies to low-income or resource poor producers in developing countries.
– Blue Box Subsidies are direct payments under production limiting programmes.
– Export Subsidies are direct subsidies given by government or government agencies either in cash or in kind to producers of agriculture products against export performance and export of non-commercial agricultural product at lower price and transport subsidies etc.
– The developed member countries have to reduce subsidised export in value terms by 36% and in terms of volume by 21% over a period of 6 years below the level of 1986-90. For developing countries, it is 24% and 14% respectively over a period of 10years.
6. Agreement on the Application of Sanitary and Phytosanitary Measures sets basic rule to ensure food safety and life/health of plant and animals in member countries- member countries are allowed to set non discriminatory, scientifically justifiable and to the extent required and not prohibitive in nature, health and hygienic standards
7. Trade Related Intellectual Property Rights (TRIPS)- knowledge oriented creations, inventions and innovations.
– The WIPO (World Intellectual Property Organisation) observes as:
“Intellectual property (IP) refers to creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce”.
– The intellectual property rights refer to the recognised ownership of the intellectual property to creator, inventor and innovator.
– The ownership is ensured through copy rights, patents etc. TRIPS cover Copy right and related rights, trademarks including service marks, geographical indictors, industrial designs, patents, lay out designs (topographies) of integrated circuits, trade secrets.
8. Copy Right is related with literary and artistic works like books, lectures, sermons, music etc. – means the right conferred on creator, author and producer etc. The rights are protection rights (protection from being copied by others) and authorisation rights (right to author to allow others to reproduce, copy etc, against which he can claim pecuniary benefit.)
9. Trade Mark – the symbols that give unique identity to products of particular producer. The Trade Marks Act 1999 observes as follows “trade mark” means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others and may include shape of goods, their packaging and combination of colours”
– If trade mark rights are conferred to any one, others are prevented from
copying or using of that trade mark.
10. Geographical Indicator Geographical indicator – unique identity of a
particular product for the reason that particular product is produced in a particular geographical location.
– May be natural product or manmade product. Example, kancheepuram silk
sarees, Coimbatore wet grinder etc.
11. Geographical Indications of Goods (registration and protection) Act, 1999 observes “geographical indication”, in relation to goods, means an indication which identifies such goods as agricultural goods, natural goods or manufactured goods as originating, or manufactured in the territory of a country, or a region or locality in that territory, where a given quality, reputation or other characteristic of such goods is essentially attributable to its geographical origin and in case where such goods are manufactured goods one of the activities of either the production or of processing or preparation of the goods concerned takes place in such territory, region or locality as the case may be”
– If geographical indication is given to any product others cannot use that
name. For example, if Banaras silk saree is conferred with Geographical indication, others can produce silk but cannot claim that their saree is Banaras silk saree.
12. Industrial Designs – Designs when recognised as it belongs to anybody, others cannot use that design.
– The Designs Act, 2000 observes “design” means only the features of shape, configuration, pattern, ornament or composition of lines or colours applied to any article whether in two dimensional or three dimensional or in both forms, by any industrial process or means, whether manual, mechanical or chemical, separate or combined, which in the finished articles appeal to and are judged solely by the eye”6.
13. Patents – recognition of invention and conferment of certain exclusive rights to inventor.
– The exclusive right means the right for production and marketing only by inventor and, if he wishes, to authorise others to produce the product using the invention made by him.
– The patents are of two types- The Product patent means the right to produce the product and right to authorise others to produce that particular product is available only to inventor. Others cannot produce that product without authorisation.
– The process patent means the inventor has sole right regarding processing method and not for the product. Others can produce the product using different processing method.
14. Topographical Design (Integrated Circuit Lay Out Design)Layout design means design of integrated circuits, transistors and other circuits. If recognized and the right is conferred to designer, others cannot reproduce it, import it and distribute it.
15. Trade Secret Trade secret means the information regarding process, formula etc. The WIPO observes “Broadly speaking, any confidential business information which provides an enterprise a competitive edge may be considered a trade secret. Trade secrets encompass manufacturing or industrial secrets and commercial secrets ”7. For example, a company may use an efficient method of production that leads to cost reduction. It is a trade secret.
16. Trade Related Aspects of Investment Measures (TRIMS) are essentially to promote investment and equality among countries in the sphere of foreign investment.
– It calls for countries to avoid unnecessary conditions attached with foreign investments like employment opportunities for local people, limit to imported contents of products produced etc.
17. General Agreement on Trade in Services (GATS) -liberalisation of trade
in service sector. This is counterpart of GATT which covers merchandise trade. This agreement covers only commercial service excluding air transport services which are not in the commercial nature. The services are classified into four models
(Cross border supply): Cross border supply means export of service across border from domestic country like BPO and Banking services through e-media etc.
(Consumption abroad): Consumption abroad means the services availed by citizens of one country in another country like foreign tour, medical treatment in foreign country, study abroad etc.
(Commercial presence): It means the commercial establishments that provide service in foreign country by establishing subsidiary or holding company in foreign country.
(Movement of Natural Person): It means, the services provided by professionals like Doctors, Accountants, and Lawyers etc with their physical presence abroad.
This agreement calls for non-discriminatory non-prohibitory and transparent policies related to service trade. This also calls for minimum market access as agreed by member countries.
18. WTO ROUNDS
– a new round of negotiation was started and named as Doha Round in the year
2001 but declaration and decisions were made in Doha ministerial conference and named after Doha development round.
– This round is continuing. This round is concerned with implementation of agreements made in the Uruguay round of negotiation. It covers a whole range of issues from agriculture to e-commerce.
India and WTO
India is a founder-member of both GATT and WTO. The WTO provides a rule based, transparent and predictable multilateral trading system. The WTO rules envisage non-discrimination in the form of National Treatment and Most Favoured Nation (MFN) treatment to India’s exports in the markets of other WTO Members. National Treatment ensures that India’s products once imported into the territory of other WTO Members would not be discriminated vis-à-vis the domestic products in those countries. MFN treatment principle ensures that members do not discriminate among various WTO Members. If a Member country believes that the due benefits are not accruing to it because of trade measures by another WTO Member, which are violative of WTO rules and disciplines, it may file a dispute under the Dispute Settlement Mechanism (DSM) of the WTO. There are also contingency provisions built into WTO rules, enabling member countries to take care of exigencies like balance of payment problems and situations like a surge in imports. In case of unfair trade practices causing injury to the domestic producers, there are provisions to impose Anti-Dumping or Countervailing duties as provided for in the Anti-Dumping Agreement and the Subsidies and Countervailing Measures Agreement.
WTO NEGOTIATIONS AND INDIA
DOHA round of discussions did not make much progress till 2011.
The focus then shifted to the possibility of selecting some issues of particular importance to least developed countries (LDCs). However, these attempts did not meet with any success and proved not only unproductive but very divisive as well.
The LDC issues include:
(i) duty free quota free (DFQF) market access;
(ii) the rules of origin for DFQF market access;
(iii) LDC waiver in services; and
(iv) issues relating to cotton (domestic and export subsidies for cotton and tariffs).
At the Eighth Ministerial Conference from 15 to 17 December 2011, ministers adopted a number of decisions on intellectual property (IP), electronic commerce, small economies, LDCs’ accession, a services waiver for LDCs, and trade policy reviews.
Fifth Trade Policy Review (TPR) of India
In order to promote transparency and provide better understanding of the trade policies and practices of its members, the WTO has a mechanism for regular review of their trade policies. Depending upon its share in world trade, each member’s trade policy is reviewed by the WTO at fixed periodic intervals. India’s TPR is carried out every four years. The TPR offers an opportunity to other WTO members to ask questions and raise concerns on different aspects of policies and practices of the country under review.
The Fifth TPR of India was held on 14 and 16 September 2011 in the WTO. Concerns were raised in certain areas, namely tariffs and duties, licensing and restrictions, trade defence measures (anti-dumping), government procurement, incentive schemes to promote investments and exports and protect agriculture, tariff protection on agriculture, services and investments. Responses to the issues raised were provided in
India’s Closing Statement on September 16, 2011 which are as follows:
1. Openness of India’s Trade Regime
Openness of India’s trading regime. year after year, India’s imports had outpaced exports. In terms of percentage of GDP, the country’s merchandise trade deficit is one of the highest in the world. India has been autonomously reducing its tariffs over the years. The simple average most favoured nation (MFN) tariff rate declined from 15.1 per cent in 2006-7 to 12 per cent in 2010-11. Both the average agricultural and industrial average tariffs have declined over time. The tariffs on 71 per cent of Indiafs tariff lines are between 5 and 10 per cent.
2. Gap between Rates on Agri Products
Large gap between India’s bound and applied rates on agricultural Products reflected India’s steady and continued autonomous tariff liberalization. During the four years since the last TPR, the tariffs on some agricultural commodities had to be adjusted in the face of high volatility in food prices. In most cases, tariffs have been brought down and have stayed down. In a few instances, they have been raised again but never above their original levels.
3. Export Incentives
India’s export promotion schemes are based on the concept of duty neutralization and providing a level playing field.
4. FDI Policy
Since India’s last TPR in 2007, India has been on making the FDI policy more liberal and investment friendly. The FDI guidelines have been significantly rationalized, simplified, and consolidated, with the aim of providing a single policy platform for reference of foreign investors. Several new sectors, such as petroleum and natural gas and civil aviation were either opened up to foreign investment or significantly liberalised during this period. Efforts were also being made to streamline and simplify the business environment and make regulations conducive to business.
The changes proposed in the Copyright and Trademark Acts would enhance protection to intellectual property rights (IPRs) in digital technology particularly with regard to the dissemination of protected material over digital networks.
The provisions on IP protection in these laws are further supplemented by broader measures to prevent the import of goods involving copyright piracy and counterfeit trademarks. Another initiative taken by Indian customs is the facility for online registration by the right holders through the web-based Automatic Recordation and Targeting for IPR Protection System.
6. Government Procurement
On this subject, India explained that the procurement of high tech items and high value tenders, above US$ 50,000 is generally open to international bidders. Major reforms are on the anvil for increasing coverage, improving transparency and efficiency, and better enforcement, which are triggered by domestic concerns relating to enhancing the value for money. An omnibus procurement law applicable to the entire country and to all procuring entities, including public-sector enterprises, is being deliberated upon.
7. Sanitary & Phyto-sanitary (SPS) and Technical Barriers to Trade (TBT)
India explained that specific trade concerns raised against India have been largely addressed. Regulations adopted in the past have been on the basis of scientific risk analysis.
8. Export Restrictions
Export restrictions have been used on some occasions for purposes of domestic supply management, but these have been purely on a temporary basis.
The ban on the export of rice and wheat had to be extended in 2009 due to a dislocation in production and again in 2010 due to the severest drought in the country in the last forty years. However, the export of wheat and non-basmati rice is now completely free. The export of basmati rice is and has always been free. Restrictions on cotton exports were imposed for only a brief period last year. Cotton yarn exports have been made completely free. Similarly, cotton is also freely exportable.
In the sixth TPR held in June 2015 concerns were raised in some areas. They include managing agriculture subsidies, reducing the recourse to sanitary and phyto-sanitary measures and technical barriers to trade, rationalizing the complex structure for import and domestic tariffs, enhancing the transparency in the regulatory bodies, and lowering the use of anti-dumping measures. “Overall, members welcomed India’s trade and economic policies,
BILATERAL AND REGIONAL COOPERATION
India has always stood for an open, equitable, predictable, non-discriminatory, and rule-based international trading system. Considering that regional and bilateral trade and economic cooperation agreements serve as building blocks towards achieving the multilateral trade liberalisation objective,
India is actively engaging in regional and bilateral negotiations with her trading partner countries/blocs to diversify and expand the markets for its exports. Some of the recent developments related to major Free Trade Agreements (FTAs) are the following:
(i) India-Japan Comprehensive Economic Partnership Agreement (CEPA)
(ii) India-Malaysia Comprehensive Economic Cooperation Agreement (CECA)
(iii) India-ASEAN Trade in Goods Agreement
(iv) India-EU Trade and Investment Agreement Negotiations
(v) India-European Free Trade Association (EFTA)
(vi) BTIA (Iceland, Norway, Liechtenstein, and Switzerland)
(vii) India-New Zealand FTA/CECA
Other Recent Developments:
1. In January 2016 Cabinet cleared India’s stance in the Nairobi Conference. The outcomes of the conference, referred to as the ‘Nairobi Package’ include Ministerial Decisions on agriculture covering a Special Safeguard Mechanism (SSM) for developing countries (to counter import surges of farm items), public stockholding for food security purposes, a commitment to abolish export subsidies for farm exports and measures related to cotton.
2. India is the 76th WTO member to accept the Trade Facilitation Agreement in April 2016 which sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues.
– These objectives are in consonance with India’s ‘Ease of Doing Business’
– TFA will enter into force once two-thirds of WTO members have completed their domestic rectification process.
3. The conflict between free trade on industrial goods and services but retention of protectionismon farm subsidies to domestic agricultural sector (requested by developed countries) and the substantiation of fair trade on agricultural products (requested by developing countries) remain the major obstacles in the progress of DOHA subjects
4. The WTO’s current Director-General is Roberto Azevêdo, who leads a staff of over 600 people in Geneva, Switzerland. A trade facilitation agreement known as the Bali Packagewas reached by all members on 7 December 2013, the first comprehensive agreement in the organization’s history.
5. The Bali Packageis a trade agreement resulting from the Ninth Ministerial Conference of the World Trade Organization in Bali, Indonesia on 3–7 December 2013. It is aimed at lowering global trade barriers and is the first agreement reached through the WTO that is approved by all its members.[The package forms part of the Doha Development Round, which started in 2001
6. Developed countries are pushing for a comprehensive agenda like rules on investment, environment, competition policy, trade facilitation, transparency in government procurement, labour standards etc. They are pressing for incorporating non-trade issues of environment and labour standards.
7. India’s Stance includes
– Ensuring food and livelihood security is critical, particularly for a large agrarian economy like India. India’s proposal in ongoing negotiations includes suggestions like allowing developing countries to maintain appropriate level of tariff bindings, commensurate with their developmental needs and the prevailing distortions in international markets.
– also seeking a separate safeguard mechanism including provision for imposition of quantitative restrictions under specified circumstances, particularly in case of a surge in imports or decline in prices;
– exemptions for developing countries from obligations to provide minimum market access;
– exemptions of all measures taken by developing countries for poverty alleviation, rural development and rural employment.
– also strongly favour extension of higher levels of protection to the geographical indications for products like Basmati rice, Darjeeling tea, and Alphonso mangoes at par with that provided to wines and spirits under the Trade-related Aspects of Intellectual Property Rights (TRIPS) agreement.
– In the TRIMS (Agreement on Trade-Related Investment Measures) review we want flexibility for developing countries in adopting appropriate domestic policy while permitting foreign investment.
– In the Nairobi Conference India took the stand that the DDA (Doha Development Agenda – to improve the trade prospects of developing and poor nations) must continue after the Nairobi Conference and no new issues must be introduced into the WTO agenda until the DDA has been completed. The Nairobi Ministerial Declaration acknowledges that members “have different views” on how to address the future of the Doha Round negotiations but noted the “strong commitment of all Members to advance negotiations on the remaining Doha issues.”