India in the WTO

Here’s another interesting paper by Julien Chaisse.

It has several themes. These include – implementation of WTO agreements in India; the “direct effect” of WTO law in India; compliance by India with adverse WTO dispute settlement rulings; overview of how domestic Indian law has been influenced by the WTO; and India’s integration into the WTO system.

See Julien L. Chaisse. Ensuring the Conformity of Domestic Law with World Trade Organisation Law – India as a case study. New Delhi (India): Rajdhani Press/CSH, 2005.
Available at: http://works.bepress.com/julien_chaisse/2

Abstract

The World Trade Organisation (WTO), established in 1995, provides a contractual framework within which Member States undertake to implement regulations and legislation for foreign trade which cover a wide range of sectors. The purpose of this study to examine why and how WTO rules tend to be effectively implemented and how much it has changed Indian laws. WTO-conformity of Indian law is made compulsory for two reasons. First, by saying that, “each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements”, the Agreement establishing WTO affirms the obligation for all the Members to ensure such compliance. The legal consequences of such an obligation are discussed in regards with effective adaptation of Indian domestic law. Secondly, WTO is equipped with a new dispute settlement system which controls the correct compliance of domestic law with WTO-conformity. The contribution of this mechanism in ensuring WTO-conformity is evaluated, in regards with India implication in disputes. On the theoretical aspect this study identifies the particular characteristics proper to the WTO which ensure implementations to its law and obliges India as other Members to comply with the international standard. On the practical aspect, it gives an overview of the recent innovations or changes in Indian laws which are presently applicable and simultaneously to assess India integration in international trade governance.

This looks like a very interesting paper on a subject where not much has been published.

See Julien Chaisse and Debashis Chakraborty. “Identifying Mutual Interest Areas at World Trade Organisation: a Sino Indian joint perspective” China Report 41.3 (2005): 267-288. Available at: http://works.bepress.com/julien_chaisse/4

Abstract

China and India, in spite of being signatory members of GATT (1948), witnessed a dissimilar experience in the arena of multilateral negotiations and trade. China lost its membership after the withdrawal of Taiwan from GATT in 1950, but gained steady access in the global market since late eighties. India, on the other hand, in spite of maintaining the membership of GATT, never focused on export promotion strategies before late eighties. Both the countries expect further growth in their exports in coming future, as the tariff and non-tariff barriers (NTBs) in member countries are likely to go down in the post-transitory phase of WTO, which started from January 1, 2005 onwards. However the WTO-compatibilities of several domestic polices of both China and India have been questioned by their trade-partners on various occasions and the debate is likely to continue in the future. Moreover, the exports of both of them are subject to various NTBs in principal markets, which are likely to intensify in the future. This bears serious implications on the export potentials of the two countries. Considering the domestic policies of China and India as well as the barriers on them, the paper attempts to identify material and institutional areas where the two countries could jointly negotiate at the multilateral forum. The paper argues that collective bargaining by the two countries on key issues is likely to provide them an edge in future negotiations.

The Financial Express reports:

… the US government has put India on its ‘Priority Watch List’, along with nine other countries, saying that the country’s failure to protect intellectual property rights (IPR) is putting the health, safety and jobs of its citizens at risk. India has been on this list for a number of years and its continued inclusion does not come as a surprise. Besides India, the US has put countries like China, Russia, Pakistan, Argentina, Chile, Israel, Thailand and Venezuela in the watch list.

Countries on the list will be the subject of close scrutiny during the coming year. In 2007, too, the US administration had put India on its watch list under “section 301” and threatened to impose trade sanctions for violating IPR. Earlier, the Indian government adopted a slew of measures to check violation of IPR, including strong patent laws. The Patent Act, 1970 was amended in 1999, 2002 and then in 2005 to conform to the Trade Related Aspects of Intellectual Property Right (TRIPS) Agreement of the World Trade Organisation (WTO).

The Hindu carried a report a few days ago on comments by eminent Indian agricultural scientist Dr. M. S. Swaminathan at a conference. He called for an “Indian Trade Organization” as a “national counterpart to the WTO”. The article does not say more about his ideas and what such an organization would look like or do. India does need trade policy making domestic institutional reform but its structure, functions and organization need to be carefully designed. And the Government has no such revamping plans at the moment. What would be the role of Parliament in such a set-up? Also, would there be a place for a more formalised public-private partnership in trade policy making and in market access enforcement?

For a profile of Dr. M S Swaminathan see here

Also see the M S Swaminathan Research Foundation

Mr. P. Chidambaram, Indian Finance Minister in a long interview to Tehelka has commented on the Indian growth story and on what’s going well, what’s going badly and his vision on how the Country can develop. Here are a few extracts on trade and investment related issues:

On diversion of food crops to biofuels –

“We grow food to consume it as food. We don’t grow food to be converted into fuel. Twenty percent of US corn is being diverted to fuel. Sugarcane is being diverted to fuel. Palm oil is being diverted to fuel and because of the high prices of fuel linked to the crude oil crisis, people are diverting land which is meant to grow food grain to grow crops for bio-fuels. How is this justified in a world where millions of people are still going without food? We are serious about making poverty history. We are serious about eliminating hunger and malnutrition. I think the first point everybody should agree on is that food should not be converted to fuel. If you want to produce bio-fuels using non-food, do so. Find other land to grow crops for producing bio-fuels.”

On urbanization as India’s future:

“Urbanisation cannot be stopped. It is an inexorable process. All you can do is mitigate the harmful effects of mindless urbanisation by building new cities, by limiting the size of cities, by creating more green and open spaces in cities. I don’t think it’s within the power of any country or people to stop this natural progression. We must try to manage it rather than interfere with it. My vision of a poverty-free India will be an India where a vast majority, something like 85 percent, will eventually live in cities. Not megalopolises but cities. In an urban environment it is easier and more efficient to provide water, electricity, education, roads, entertainment and security rather than in 6,00,000 villages. I also believe a significant number of Indians would want to live in the countryside and continue farming. That should be welcome and we should encourage it, but it would be a much smaller number than people who have moved to cities. My vision again is that we must continue to emphasise the imperative need of growth over a long period of time. We get weary easily. We have three to four years of high growth and we sit back as though it is a given. Growth is not a given. You have to work hard for it. We have to ensure that the growth process continues for the next 20-30 years. When we have eliminated poverty, illiteracy, some of the most debilitating diseases, when we have immunised every child, when we have eliminated very basic deficiencies like lack of drinking water, electricity, rural road connectivity — at that point of time, the process will become automatic and people will themselves ensure that growth continues at a fairly sustained pace. But for that that moment to arrive, to get rid of poverty in our lifetime, we need to work very hard to sustain a growth rate of nine percent moving up to 10 percent. If you want to get rid of poverty over the next hundred years, you can have a different model or system. But if you want to get rid of it in the next 20 years, we have to work very hard for it.”

On fixing the agricultural sector in India:

“This year, the latest assessment of 2008 by ICRA will show a growth rate of 4.5 to 4.7 percent in agriculture. We are going to end up with 227 to 230 million tonnes of food grains. So agriculture in itself is doing well. Yet farmers are poor because of the vast numbers dependent on agriculture. If the numbers were much smaller, let’s say half, you would say agriculture is doing very well in India. So I don’t think we should confuse the issue between agriculture doing well and farmers doing poorly. The way to fix agriculture is to address the five key inputs required for agriculture:water, power, seeds, fertiliser and credit.

I think we have done well on credits. We are beginning to do well on water, thanks to the massive outlays and irrigation projects. It will take some time, but when these projects are completed, we will do well on water. We have neglected seeds, we have got a completely distorted fertiliser subsidy regime, and we have failed miserably on the power front. But Gujarat has shown us the way on how to fix power for agriculture. With seeds, we made a beginning last year. We are trying to increase the replacement rate of seeds and, with fertilisers, there is a clear way out provided we are willing to bite the bullet. If all these five things come together, agriculture will grow at a very rapid rate of more than four percent a year. But even if it grows at four percent, farmers will continue to remain poor because of the large numbers dependent on agriculture. So the answer is to wean farmers away from agriculture into industrial services — not urban slums, just non-farm related activity. Do away with the romantic idea that we can continue to sustain 60 percent of our population on agriculture.”

On opening up retail to FDI:

“This is a genuine fear. There is no empirical evidence to show that mom and pop stores will be wiped out if retail chains come. For example, Walmart. I met its chairman the other day and he said their 47th store has opened in China and there’s no evidence that mom and pop stores in China are being wiped out. But still, the fear is genuine, and it is the duty of the government to allay that fear. And until it is completely removed, we are moving slowly and cautiously. We are not saying the fear is unjustified. That is why we have opened only wholesale, cash-and-carry and single brand retail to foreign investments. We have not yet opened multi-brand retail.”

AFP reports on how the Indian rupee has fallen against the dollar and has widened India’s trade deficit. Here is the report in full: 

India’s currency is feeling the pressure as world oil prices soar and foreign investors lose their “risk appetite” for emerging market assets amid global financial turmoil, analysts say.

The Indian rupee — which a few months ago was trading at 10-year highs — now looks poised to post its worst monthly decline in a decade, analysts say.

“After having appreciated pretty much continuously against a soft US dollar since August 2006, the tide has turned for the rupee,” said HSBC economist Robert Prior-Wandesforde.

After touching a peak in early February of 39.4 to the dollar, the rupee has fallen by 9.5 percent, nearly wiping out last year’s 12 percent gain. It traded against the greenback Thursday at 43.15.

Its slide has been greased by fears a 40 percent jump in oil prices this year and rises in other global commodity prices along with a tight monetary policy to tame inflation will depress growth and boost India’s already soaring current account deficit, a measure of trade and investment flows.

The problem of oil prices, which catapulted above 135 dollars a barrel for the first time on Thursday on fears about rampant demand exceeding supply, is particularly acute for India as it imports 70 percent of its crude needs.

India’s trade deficit has widened 20.5 billion dollars this year with oil imports 10 billion dollars higher in the last quarter than the previous quarter.

“Unless either global crude oil prices ease or there’s a sharp improvement in global risk appetite that increases capital inflows into India” the rupee will remain under pressure, said JP Morgan analyst Rajeev Malik.

Many companies which took foreign loans and “kept the proceeds unhedged assuming super-optimistic scenarios for the rupee should be losing some sleep,” Malik added. Hedging involves making provision for adverse price movements.

Still, there is a silver lining in the rupee’s fall for India’s flagship software industry and other export-oriented sectors like textiles which sell mainly to the United States and whose profits had been hit.

The rupee’s fall has been exacerbated by official data last week showing industrial production rose by just three percent in March, its slowest pace in six years, as tighter credit to stem strong inflation hurt manufacturing.

Some private economists forecast growth in Asia’s third-biggest economy could decelerate to around seven percent in the fiscal year to March 2009. Even Finance Minister Palaniappan Chidambaram is projecting growth of just eight percent, the slowest pace since 2005.

The economy grew by an estimated 8.7 percent in the fiscal year ending March 31, 2008, down from 9.6 percent the previous year.

“We expect the Reserve Bank of India to intervene in the near term checking the volatility, but the direction of the rupee is unlikely to change” if the dollar continues its rise, said Morgan Stanley economist Chetan Ahya in a research note.

The rupee gloom is a far cry from bullish sentiment earlier this year when analysts were expecting the currency to strengthen to around 38 to the dollar by mid-2008.

But foreign investors’ ardour for Indian assets has been waning with risk appetite declining amid the global credit crunch.

Foreign fund share sales have totalled a net 2.51 billion dollars so far this year, compared with purchases of 2.87 billion dollars during the same period in 2007.

Still, foreign direct investment inflows remain strong “underscoring the fact that the medium-term (firm growth) story for India remains intact,” said HSBC’s Prior-Wandesforde.

According to The Australian, Minister Kamal Nath would like India to conclude an FTA with Australia by 2010. India and Australia are carrying out a joint feasibility study for an FTA. Here’s an extract from this report:

In an interview with The Australian, Mr Nath said that because the Indian and Australian economies were so complementary, an FTA should be relatively easy to achieve.

He believed it should cover trade in merchandise and services and two-way investment.

“We should try and conclude it by mid-2010, or even by the end of next year,” Mr Nath said.

India also wants Australian Uranium for its civil nuclear energy program and Nath touched on this issue as well.

Mr Nath also wants Australia to sell uranium to India, although the Rudd Government has reversed Howard government policy and said it will not sell uranium to India, even if India completes its nuclear energy deal with the US and wins approval for this from the International Atomic Energy Association.

“We do ask Australia to take a practical and realistic view (of uranium sales),” Mr Nath said.

“Australia is not the only source of uranium for India, but (it should be viewed) in the larger context of global warming and the larger relationship between Indian and Australia.”

And what do we make of this comparison with China. (It always used to be India versus Pakistan and now comparisons with China are common.)

Mr Nath said he wanted a much stronger relationship between India and Australia.

The New Delhi Government is known to believe the Rudd Government is obsessed with China and has an unbalanced foreign policy. Mr Nath would not be drawn on such subjects, but said: “The China story is an old story, while the India story is a new story. China opened up earlier so it obviously got a head start.”

As is now clear, India has emerged as a major player in the WTO and its role in the Doha round is significant. And no doubt, many books, papers, and theses are being planned (once the round gets over) on questions like – How India negotiated? What influence did India exert? Did India adopt a successful negotiating strategy? Did India manage to protect its interests? Has India moved away from representing broad developing country interests to a more self-interested negotiating strategy? How did India define its interests? And was there adequate stakeholder consultation and involvement?  What were the turning points when deals were made? And in all this, how did India compare with other important players?

India’s participation in the Doha round could not be more different from its participation in the Uruguay round. And the differences are a result of many changes – India’s growth story; the tectonic shifts in global power; the shifts in power within the WTO; and of course everyone’s favourite “cryptic” Globalisation.

What is certain is that those interested in such themes will face no shortage of material, given the media coverage of the round, and given how contemporaneous examination of India’s role is the subject of seminars and discussion all over the world and perhaps, more importantly, within the country. I keep wanting to archive all this material, but just don’t have the time. However, I am sure someone’s doing this. In any case, the reason for this post was more such media coverage. Here are some extracts and headlines from the last few weeks.

Moneycontrol has this today:

GK Pillai, Commerce Secretary, said, “The next 30 days are going to be crucial, because of the considerable differences, there has to be a considerable hardening of stand on our part.”

But it’s not just the government who will be talking. This time Indian negotiators at the WTO want states and corporates to lobby directly just as industry bodies do in the United States and the European Union.

The Commerce Secretary said, “We will be appealing to industry as well as agriculture to support us in our negotiations. We will try to get all states sensitised to our agri position and will try and get the agri ministry on board.”

The Hindu wrote Lamy’s prognosis on food crisis finds support in India 

The Economic Times wrote India ask US, EU to show leadership in Doha talks and Nath to tour Indonesia, New York to sort differences in trade deals and India needn’t rush for an unfair Doha deal

This could go on and on … An article could be written just on the media coverage of the Doha round in India. A list of quotable quotes from this round would also make interesting reading and mark the important milestones and turning points. Remember Susan Schwab’s teen driver quote to describe India and Brazil.

Another interesting India related paper on SSRN:

Julien Chaisse, Debashis Chakraborty, Arup Gupta, “Prospects for a Multilateral Framework on Investment – The Indian Bolt” NCCR Trade Regulation Working Paper No. 2007/37

Abstract:
The potential inclusion of a multilateral framework for investment at the WTO aims to coordinate the global regulation on trade and investment. In addition to the difficulties arising during these negotiations, one major concern is the fact that certain countries like India do not have an interest to go for a full-scale Capital Account Convertibility. As a part of the G4, India is currently a major player in the trade-related international regulatory framework. It is argued here that the question of a multilateral framework for investment cannot be solved without taking into account the Indian reluctance to a freer investment regime. There is a historical reluctance of developing countries to establish freer investment regimes. The project on a New International Economic Order already put as a pre-eminent point the sovereignty of States and their necessary control of the private sector notably of foreign capital. But that political approach is reinforced by objective arguments analysed here. First we briefly discuss the debate on having a freer investment framework and foreign investment regime in India. India’s submissions to the WTO on this front are reviewed next. Finally in order to evaluate the legitimacy of India’s concerns, through an empirical model the potential impact of a destabilizing shock on her capital account is analysed. Finally based on the findings, the policy lessons are drawn.

Look forward to reading this, (the paper contains case-studies for marine products and tea) and will comment on it later:

Pavel Chakraborty ad Nidhi Srivastava, “Environmental Standards and India’s Market Access Concerns” Icfai Journal of Environmental Law, Vol. 7, No. 2, pp. 11-21, April 2008 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1114038

Abstract:
Trade liberalization and improved access to the world’s markets lie at the heart of the sustainable development paradigm for developing countries. It can be growth in aggregate income and its distribution across various economic segments of society, efficiency in allocation of resources, generation of finances for development, or transfer and application of improved technologies and best practices. The expansion and diversification of export opportunities, including diversification into higher value products, also intensified the debate regarding the environmental protection measures and the international trade. The debate on the impact of trade liberalization has intensified with a growing literature on the effects of international trade on the environment. Many participants in the trade and environment debate fear that there could be conflicts between trade liberalization and environmental concerns. The issues of environmental regulation and international competitiveness revolve around the question of harmonization of standards and it is generally observed that competitive deregulation could lead to downward harmonization of environmental standards. This paper addresses reconciliation of these two – somewhat disparate – points of view. It discusses the key issues related to market access, particularly the impact of environmental measures on the access from an Indian perspective in case of two products: (1) marine products, and (2) tea. This paper covers a canvas that includes a background discussion on market access issues related to environmental requirements, emergence of environment-related issues in the WTO agenda, environmental provisions in various agreements that could pose a non-tariff barrier, discussion on experiences with specific non-tariff barriers that have posed a market access concern in individual exportable sectors of India, along with developments in domestic regulation often in response to external requirements. This paper concludes by recapitulating India’s past submissions on Item 6 of the CTE agenda relating to market access issues and providing the way forward. Clearly, the thrust is on developing a position or stand for India that is based on sound logic and concrete experiences from specific export-oriented industries.