Agenda for India on International Trade Policy

AGENDA FOR INDIA ON INTERNATIONAL TRADE POLICY

As the world moved from autarky to globalisation, international trade policy is now designed at Geneva under the auspices of the World Trade Organisation, with some influence from the other two Bretton Woods institutions: The World Bank and the International Monetary Fund. These are pursuing economic reforms in developing countries, of which trade liberalisation is an important part. Partly as a result of these persuasions and otherwise, the WTO resulted from a hectic 7-years’ negotiation under the General Agreement on Tariffs & Trade, also known as the Uruguay Round. This concluded in 1995 as a decision of the 124 members of the GATT community.

The GATT was founded in 1948 as an arrangement to govern trade relations between member countries. Of the 23 founding members, India is one. She is also a founding member of the WTO.

The new GATT, 1994 is a much larger agreement covering many new areas, other than tariffs alone, for which agreements have been also entered into. Two new areas to the GATT discipline are agriculture, and textiles and clothing, both affecting consumers directly. Three issues entirely new to the GATT discipline are Trade Related aspects of Intellectual Property Rights (TRIPs), Trade Related Investment Measures (TRIMs) and the General Agreement on Trade in Services (GATS). All these also have a direct bearing on consumers and their welfare. TRIPs in particular has been a subject of much controversy, because of the provision of patents which has the potential of creating monopolies on consumer goods like pharmaceuticals, and on agricultural goods like seeds and fertilizers. Exploitation by such monopolistic or oligopolistic market structures can increase the cost of production, and thus affect consumer welfare directly.

The WTO agreements have had both good and bad effects on people of India. In some cases opportunities have increased leading to growth and thus creating more jobs, while in some cases it has had adverse effects. However the economy as a whole has gained.

In the WTO agreement there is a provision to review the progress at the Ministerial level every two years. The first review meeting was held in Singapore in December 1996, which threw up several ‘new’ issues for being examined by the members, and deliberated whether there is a need to incorporate them into the WTO acquis: investment policy, competition policy, transparency in government procurement and trade facilitation. However a plurilateral agreement on Information Technology Products was launched, to which India is also a party.

The second ministerial meeting was held at Geneva in May 1998 to coincide with the golden jubilee of the multilateral trading system, which did not throw up any new issue, except an understanding on studying e-commerce while agreeing to not levy any new taxes on it. The third ministerial meeting was held in Seattle though nothing was concluded in it.

In the recently held fourth Ministerial meeting in Doha, India secured major gains in several areas of the hard fought agenda. A dispassionate analysis of the Ministerial Declaration from the perspective of India’s basic trade interests reveals that India bargained hard on agriculture, implementation, TRIPs and trade & transfer of technology among other areas and got a fair amount of success. However we have to keep in mind that environment is now in the agenda and the issue of labour standards is also not dead as understood by some. On the other hand we will have to gear up to tackle the Singapore issue as well, in future.

Having said that CUTS feel that India will have to do some major restructuring in current trade policy formulation process, as it is an integral component of the overall economic policy of any government. The government will have to make the system more professional, by bringing in trade experts rather than depending on transferable civil servants.

CUTS has prepared the following agenda for India to be pursued both at international as well as domestic level. The international agenda talks about what India should do at the international forums, in the best interest of its people in the context of the WTO. There is a domestic agenda too, which requires our Government to take note of, in implementing our commitments under the WTO as also to make the best out of it. We have to attend this huge domestic agenda before we can reap any perceived gains that future negotiations can throw up.

CUTS also wants to attract attention of the members of the advisory committee towards para. 10 of the Doha Declaration, wherein we have agreed to ensure more effective and prompt dissemination of information related to WTO, and to improve dialogue with the public. We also agreed to promote a better public understanding about the WTO and to communicate the benefits of a liberal, rule bases multilateral trading system.

1. STRATEGIC ISSUES

Certain strategic issues are to be taken into account while putting forward an agenda. They cut across the board, and their importance lie in facilitating the process.
The civil society is now in the mainstream of international economic policy making. NGOs in the North have enough resources and endowed, and are thus very effective.
Besides being well funded, NGOs in many of the Northern countries are represented in, the consultative mechanisms of their governments and also participate in official delegations to WTO meetings.
On the other hand, while many in the South are also resourceful, it is through donors or governments in the North, and it is always a tight situation. Besides, they are ‘accused’ of singing the donor’s tune.
Therefore, the following strategic issues are important.

International Agenda
To advocate and ensure the formation of a viable political alliance between Northern consumers and Southern producers, so that our producers can take full advantage of their market access potential, and thus enhance sustainable development across the world.
To guarantee the transparency of the operations of the WTO and participation of international non-governmental organisations as well as non-governmental representatives from developing and least developed countries.
To develop a multilateral fund for giving financial assistance to participants from developing and least developed countries at international meetings.
To develop guidelines for regional and national consultations, including the establishment of national contact points to facilitate the access and input of civil society organisations into the trade debate.

Domestic Agenda
Government of India should provide resources and build capacity of NGOs in India so as to create a well-informed citizenry and a balancing force at international fora.
To ensure an effective interaction between the Indian business and consumer organisations so that they can take forward the concerns of India with their counterparts in developed countries.
The Ministry of Commerce & Industry should include representatives from consumer and other non-governmental organisations in trade delegations/missions.
To facilitate public debate on WTO issues by establishing focal points at sub-national/regional levels.
To promote rolling studies on WTO issues through research institutions, universities and civil society with the aim of providing policy guidelines to the government and for analysing different issues in a holistic manner.
Consumers’ interest should not be sidelined while dealing with anti-dumping issues.
The Government of India needs to fund NGOs who work on these issues to enhance their capacity. NGOs also need to develop accountability.
Financial assistance from the Consumer Welfare Fund should be made available to consumer organisations to work on trade policy issues.

2. TRADE-RELATED ASPECTS OF INTELLECTUAL PROPERTY RIGHTS

• The inclusion of intellectual property rights (IPRs) in the GATT is about restricting trade and guaranteeing profits for big business from developed countries at the cost of consumers.
• TRIPs goes against the principle of trade liberalisation as it facilitates the use of ‘limited monopolies’. Hence an agreement that conflicts with the objectives of the WTO needs to be revised.
• The introduction of product patents may imply significant social costs due to the higher prices charged for patented products, especially pharmaceutical and agro-based goods.
• The Declaration on TRIPS and Public Health at Doha Ministerial was a significant positive result for India. The Declaration reaffirms the primacy of public health and recognises the concern about the effect of intellectual property protection on the price of medicines.

International Agenda

• To advocate for lower protection periods especially in the area of patents. Currently the protection is for twenty years, which has no economic logic, and could result in exploitative monopolies.
• To advocate for a longer transition period in order to set up the requisite administrative machinery at the country level for facilitating the process of granting patents.
• To muster the necessary support on the positive interpretation of Article 27.3(b) which deals with having an effective sui generis system in place to protect plant varieties, and to make it compatible with the Convention on Biodiversity.
• To uphold the flexibility (under public health and morality provisions) allowed in the TRIPs agreement. For example, deny patenting of any substance relating to life forms on grounds of public order and environment.
• To demand the creation of a team of experts and a multilateral fund that could provide technical and financial assistance for developing and least developed countries to set up fully equipped patent offices.
• To seek improvements in the TRIPs Agreement (Articles 8 and 40) which would provide guidelines/create an understanding to provide for competition policy provisions in the domestic legislation.

Domestic Agenda

• To do the necessary homework on other IPRs like “geographical indications” so as to prepare and pass a comprehensive legislation in this regard.
• To set up/strengthen a fully equipped patent systems which will deal with the registration of IPRs such as patents, copy rights, trademarks, geographical indications, industrial designs, layout-designs, protection of undisclosed information and control of anti-competitive practices in contractual licences.
• To persuade Indian industries for investing a portion of their profits into R&D so that domestic consumers can benefit from lower prices and greater choice.
• To exploit complementarity between private and public R&D.
• To adopt a plant variety protection system with due consideration to farmers’ rights, community rights and plant breeders’ rights, and food security situation in the country.
• To incorporate provisions to regulate the anti-competitive effects of intellectual property protection in the newly proposed competition legislation.
• To commission a rolling study about the costs and benefits to the economy and consumers due to enhanced intellectual property rights provisions in specific product sectors like agro-based goods and medicines.
• To refuse patents to goods banned in India and to goods relating to life forms, naturally occurring organisms and plants.
• To set up a Patented Medicines Price Review Authority to monitor prices of patanted medicines and negotiate reductions.

3. TRADE IN SERVICES

• The inclusion of services in the multilateral trade negotiations has provided an opportunity for equitable growth, and would help consumers to gain access to basic services like telecommunications, insurance etc at lower prices.
• General Agreement on Trade in Services (GATS), which provides a window for developing countries to export their skilled and unskilled labour is a question that needs to be answered. This will increase the overall income levels and will also have its positive spillover for other sectors. It would make the global services trade equitable and efficient; from sustainability as well as consumer satisfaction points of view.
• New negotiations on progressive liberalisation of services trade (to increase the general level of specific commitments) will start from January 1, 2000.
• Indian consumers will benefit from progressive liberalisation of services sectors, i.e. through enhancement of domestic competition.

International Agenda

• To propagate the movement of natural persons (human capital) and seek a stand-alone agreement at the WTO.
• To advocate for an institutionalised international regulatory body to monitor global trade in services, and for effective market access for developing countries, based on equity and efficiency.
• To seek an independent agreement on software and services that deals with intellectual property rights concerns, movement of skilled labour, data privacy, consumer protection etc.
• To remove qualitative as well as quantitative barriers which is an imperative for effective and institutionalised regulatory mechanism within the purview of the GATS. The reason is to acknowledge the consumers’ right to choice with respect to less costly, greater variety and sustainable use of services products.
• The bottoms-up approach of the GATS should be retained to ensure that developing and least developed countries can liberalise sectors as appropriate for their pace of development.

Domestic Agenda

• To identify and develop sectors where the export of natural persons would result in economic gains and long-term economic development.
• To remove labour market distortions, as far as possible.
• To exploit the potential of the Indian service sector comprehensive reforms are required in insurance sector, banking etc.
• To adopt independent regulatory mechanisms that would regulate unfair practices in trade etc vis-à-vis services sectors so as to protect vulnerable consumers in the initial years of privatised services.

4. TRADE AND ENVIRONMENT

• The WTO Committee on Trade and Environment (CTE) has been discussing its ten point agenda for more than over six years now. India has been actively participating in CTE discussions but at the same time opposing any trade-environment linkages.
• However despite developing countries unwillingness Trade and environment has been for the first time included in the negotiating agenda of the WTO in Doha Ministerial conference.
• The Doha declaration, primarily talks about the relationship between WTO rules and specific trade obligations set out in Multilateral Environmental Agreements (MEAs); proper information exchange between MEA secretariats and relevant WTO committees, and the criteria for the granting of observer status; and the reduction, or as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services.
• However it also instructs the CTE to give particular attention to effect of environmental measure on market access, relevant provisions of TRIPS and labelling requirements.

International Agenda

• To create a multilateral fund, on the lines of the Multilateral Fund under the Montreal Protocol for helping developing and least developed countries to acquire environmentally sound (patented) technologies and practices.
• To participate in negotiation aimed at clarifying relationship between MEAs and WTO rules and ensure that trade measure for environmental reasons are taken in accordance with multilaterally recognised norms, not unilaterally.
• To involve the Northern civil society in discussions on issues of Southern agenda for trade, environment and sustainable development, with the help of the Southern NGOs. In particular, the Northern civil society should pay more attention to their over-consumption (and consequent consumption of environmental space of the South), and encourage, without compulsion, evolution of higher environmental standards in developing countries.
• To pursue well-argued debates against the use of tariff escalation and tariff peaks which tax development and environment, and create a global no-win situation.
• To pursue a ban on exports of domestically prohibited goods and trade in toxic waste in order to protect Southern consumers from harmful products.
• To increase transparency in the notification procedures of setting international standards for goods and services so that developing and least developed countries’ exports are compatible with international standards.

Domestic Agenda

• To persuade domestic industry and the government to invest in R&D to develop environmentally sound technologies and practices indigenously. They must be given fiscal and monetary incentives to start producing eco friendly products To do a rolling study (at least for five years) on non-tariff (environmental) barriers to Indian exports so as to evolve a comprehensive long-term strategy in this regard.
• To promote the Indian ‘ecolabelling’ scheme, so that consumer and producer awareness on sustainable consumption and production practices is generated in the country.
• Like the success of the ISI mark, government should procure only ecomarked products.
• The status of the Consultation Group on Trade and Environment under the aegis of the Ministry of Commerce should be raised to that of a Standing Committee, which will discuss and prepare concrete recommendations. The Committee should involve the Ministry of Environment & Forests also.
• The impact of trade liberalisation on domestic environment needs to be studied on a continuing basis.

5. TRADE AND COMPETITION POLICY

• There is no multilateral agreement on trade and competition policy. The WTO Working Group on Trade and Competition Policy is working on a checklist of issues. Three main objectives of a competition policy are: maximisation of economic efficiency, maximisation of consumer welfare, and to keep a check on concentration of economic power, by keeping public interest in mind.
• In this era of globalisation and liberalisation there are several types of cross-border anti-competitive practices, which maybe beyond the capacity of developing countries to handle.
• Another issue is extra-territorial mergers between parent companies (in the same product or a differentiated product, i.e. a similar product). This could give rise to monopolies/oligopolies market regime in countries where their subsidiaries are located.
• The current Indian competition legislation in the form of the Monopolies and Restrictive Trade Practices Act,1969 is inadequate in many ways to protect consumers against anti-competitive practices. For instance, the existing legislation does not empower the MRTP Commission to perform “pre-merger scrutiny” to find out the possible anti-competitive effects of a proposed merger, or even penalise cartels. However, a new Competition Bill has already been drafted and is a significant improvement over MRTP. But there is a scope for further improvement.
• The Doha Declaration agrees for negotiations on trade and competition policy after the fifth ministerial conference on the basis of a decision taken, by explicit consensus on the modalities of negotiations.

International Agenda

• To adopt concrete mechanisms at an international level to control anti-competitive and restrictive business practices of trans-national corporations, in particular hard-core cartels.
• To advocate multilateral mechanisms to control and review the increasing number of cross-border mergers, acquisitions and alliances, especially if they lead to dominant market position.
• To examine whether developing and least developed countries will benefit from a multilateral competition policy, given their varying levels of development.
• To advocate for prohibition of export cartels.
• To persuade countries to enter into mutual cooperation agreements in this regard.

Domestic Agenda

• To draft and adopt a national competition policy in consultation with consumer and business organisations and such other stakeholders, which will address all possible hindrances to efficient functioning of market with regard to public interest considerations.
• To ensure division of responsibilities like investigation, prosecution and adjudication and transparency in the functioning of the competition authority, and to its independence. The proposed Competition Bill pending in the parliament is not very clear on autonomy of the Competition Authority.
• To make adequate provisions in the Competition Act so that it can take care of abuse of dominant position arising out of IPRs. TRIPs allows the members to take appropriate action in this regard, but that will require suitable provisions in the Competition Act.
• To make adequate provisions for carrot and stick approach and criminal personal liability in offences like hard-core cartels.
• To form independent regulatory authorities, particularly in services sectors, by taking into account the consumer and public interests.
• To develop proper understanding about the objectives and role of competition and regulatory bodies among the policy makers and their implementers. It should be clearly understood that these bodies are not like any other court but essential components of economic governance in the country.
• To set up a price monitoring mechanism to stimulate price competition and enhancing of the price awareness of consumers.
• Before deciding its stand on the issue of Competition Policy in WTO, the Ministry of Commerce and Industry needs to consult with the relevant ministry as well as the competition authority of the country.

6. TRADE AND INVESTMENT POLICY

• There is no multilateral agreement on investment policy. The WTO Working Group on Trade and Investment Policy is working on a checklist of issues under three broad heads: implications of the relationship between trade and investment for development and economic growth, the economic relationship between trade and investment, and stocktaking and analysis of existing international instruments and activities regarding trade and investment.
• Investment regulations have been included in the WTO Agreements on Trade Related Investment Measures (TRIMs) and, to a certain extent, the Trade-Related Aspects of Intellectual Property Rights (TRIPs), and the General Agreement on Trade in Services (GATS).
• India lacks a predictable policy climate to attract foreign direct investment (FDI) as compared to the large size of its market and abundant supply of natural and human resources. This deprives the consumer from exploiting the benefits of competitive pricing.
• The Doha Declaration agrees for negotiations on trade and investment policy after the fifth ministerial conference on the basis of a decision taken, by explicit consensus on the modalities of negotiations.

International Agenda

• To analyse whether there is a need for a multilateral agreement on investment, when cross-border investment is flowing steadily without any multilateral agreement.
• To examine how specific obligations can be included in a possible multilateral investment agreement. If such agreement is necessary, then to take a minimalist approach.
• To advocate for developing a binding code of rights and responsibilities in the conduct of international trade and investment. The code should incorporate the core standards of the draft United Nations Code of Conduct for TNCs, 1991.
• To advocate the establishment of an international commission of eminent persons and appointment of ombudsmen to look into violations and abuses of the proposed codes, and to suggest corrective measures.

Domestic Agenda

• To analyse stands taken by developed and developing countries on the issue of investment liberalisation and, particularly, of sectors sensitive to India’s investment need.
• To create an enabling and coherent co-ordination mechanism between different ministries and departments so that the investments cleared by the Foreign Investment Promotion Bureau (FIPB) actually come into India.
• To conduct a public debate to address questions raised by people about the negative effects of FDI, which would also address the ‘potato chips’ vs ‘silicon chips’ argument.
• To uphold the sovereignty of the nation in choosing its own standards and regulations for the protection of the interests of people and the environment vis-à-vis foreign direct investment.

7. TRADE IN TEXTILES AND CLOTHING

• ‘Backloading’ of commitments made by the importing countries (under the Agreement on Textiles and Clothing) has a negative impact on the employment and income levels of labour in the textiles and clothing sector as well as on reforms of the Indian textiles and clothing sector.
• The phase-out of import quotas in rich countries under the Agreement on Textiles and Clothing will be completed in 2004 This protectionism adversely affects the interest of consumers in the North.
• Lack of structural reforms in this sector also affects price reforms, which hurts Indian consumers as well as Northern consumers.

International Agenda

• To lobby with the governments, which are major textiles importers in alliance with consumer organisations in those countries, to put forward a proposal at the WTO General Council for a comprehensive review of the implementation of the Agreement on Textiles and Clothing, including an earlier phase-out.
• To advocate for flexibility in the application of rules of origin agreement so that it does not hinder developing countries’ market access potential.
• To scrutinise all types of non-tariff barriers through an appropriate multilateral mechanism and be referred to an ombudsman or a balanced panel of eminent persons for binding decisions on their validity or invalidity.
• To advocate with the governments and consumer organisations of importing countries for structural adjustments in domestic textile and clothing industries, and thus reducing the costs which the Northern consumers are paying due to the protectionist policies.

Domestic Agenda

• To encourage the industry for creation of a data bank especially in the area of prices so as to face dumping enquiries more effectively.
• To study the subsidies given to domestic industry and take appropriate measures as many of these subsidies may be ‘actionable’ in the near future.
• To study the subsidies given to the industry in developed countries, and how are they affecting India’s competitiveness in the global market and approach the WTO for taking appropriate measures.
• To reform production patterns, including diversification in sectors like ready-made garments that have a dominant presence of unorganised sector and, at the same time, high potentiality for employment generation.
• To ensure access to modern technologies through domestic R&D, technology diffusion and skills training exercise.

8. TRADE IN AGRICULTURE

• The WTO Agreement on Agriculture is aimed for achieving stability and equilibrium in world agricultural market, not for free trade per se.
• An increasing number of non-tariff barriers and the existence of tariff peaking and tariff escalation are hindering the market access potential of agricultural exporting countries.
• The structure of the Indian agriculture is distorted, affecting its potentiality to be a major player in the world agricultural trade.
• Indian consumers are paying the price of domestic regulations regarding the movement of agricultural commodities.
• Consumers in the rich countries are also paying a high price due to protectionism.
• The Doha Declaration though does have a mention of phasing out of export subsidies but there is no categorical assurance in this regard. The battle for getting agreement on elimination of these subsidies will have to be fought afresh during the negotiations.

International Agenda

• To lobby at the WTO to analyse export subsidies and domestic support to agriculture as practised by the rich countries.
• To explore the possibility of arriving at a commodity-specific negotiation during the review of the Agreement on Agriculture. If not, then arrive at the commodity-specific measurement of subsidies, including trade-related as well as income subsidies.
• To insulate single (agricultural) commodity export dependent economies from the volatility of international price levels by creating a special contingency fund.
• To pay greater attention and take concrete measures on non-trade concerns vis-à-vis trade in agriculture.
• To address the issue of food security (especially for the net food importing developing countries) at the disaggregated level, and from the viewpoint of sustainability. In this regard, to draw attention to the Special Marrakesh Decision of 1994 on food security.
• To advocate for flexibility in the agreement to maintain food security and protect rural employment.
• To create an international institutional mechanism for the developing and least developed countries to adopt and diffuse agricultural technology for the purpose of diversification.

Domestic Agenda

• To diversify Indian agriculture according to the needs of the consumers and future export potential.
• To adopt innovative methods to induce public as well as private investment in agriculture, including investments in R&D on biotechnology.
• To do a rolling study on non-tariff barriers facing Indian agricultural exports.
• To remove domestic regulations on movement of agricultural commodities, but with due regard to local level food security situation.