India in the WTO

Here is an interesting SSRN paper on the issue of the status of WTO law within the Indian legal system.

Chowdhury, Nupur,The (Absence of) Direct Effect of WTO Law – Current Developments within the Indian Legal System(May 20, 2008). Available at SSRN: http://ssrn.com/abstract=1136585

Abstract:
This chapter gives an overview of the status of international law under the Indian Constitution and its implications for the status of the WTO Agreement and the covered agreements within the Indian legal system. The Indian legal system is dualistic and international legal instruments ratified by the country become part of the national system only when it is transposed into national law. However such a strict interpretation has often been circumvented by the Courts in favor of a direct applicability of international law on the basis of the principle of consistent interpretation as provided for in the Constitution. In that sense it is interesting to note that notwithstanding the dualistic nature of the legal system, the Courts have applied the consistent interpretation, supremacy and the (in)direct effect principles in a varied number of cases to strengthen the conformity of national law with international law. In that sense, the relationship between these principles is dynamic and can be temporally located within the different trends of judicial activism in the Indian courts. Amongst the WTO agreement it is the TRIPS agreement that has been at the center of most legal disputes. Given the considerable economic interests of the Indian biotechnology sector (drugs and pharmaceuticals) and therefore the high stakes, in concomitance with the considerable textual ambiguity, which the TRIPS amendment has created, this is not surprising. It also underlines the currency of such a debate on the application of the principle of direct effect in the present context of the Indian legal system.

I found an extremely interesting paper on SSRN on this topic that examines the historical relationship between trading institutions and religious violence in India.

See  Jha, Saumitra,Trade, Institutions and Religious Tolerance: Evidence from India (January 10, 2008). Stanford University Graduate School of Business Research Paper No. 2004. Available at SSRN: http://ssrn.com/abstract=948734. The full-text is available for download.

Jha examined the prevalence of Hindu-Muslim religious riots in India during the period 1850 –1950 and found that trading ports had 25% less religious riots than other Indian towns. He also found that trading ports in Gujarat dating back to medival times, were less afflicted by the 2002 Gujarat riots. Jha explains this difference as due to the persistence of institutional mechanisms that developed to support inter-religious medieval trade. These institutions encouraged specialization, inter-ethnic complementarity, and the mitigation of incentives for ethnic violence by allowing the gains from inter-ethnic trade to be shared between religious groups. Mechanisms for sharing the gains from trade included joint ventures, voluntary provision of public goods and direct inter-group transfers.

Jha’s paper demonstrates the effects of social institutions in preserving social capital  and draws attention to how policy interventions are required for trade to contribute to peace.  It provides a good example of John Ruggie’s “embedded liberalism” idea, the need for trade liberalization to be embedded in the social community. 

The USTR has released its 2009 Trade Policy Agenda and 2008 Annual Report (these can be accessed here) and the section on India would be of interest to this blog’s readers. This is extracted below: 

5. India

a. General

The United States and India completed another year of active dialogue on trade policy in 2008. The bilateral trade agenda continued to expand to support the significant opportunities for bilateral trade and investment that U.S. and Indian companies are pursuing. The Civil Nuclear Agreement signed on October 10, 2008, opens the door even wider for U.S. exports to help India meet its tremendous energy needs. That said, many challenges to trade and investment in India persist, and USTR continued to work with the Indian government to address such concerns as India’s tariff and tax regime, intellectual property rights policies, investment climate and regulatory hurdles. India continues to limit market access in various sectors through non-tariff barriers such as high border taxes and tariffs, foreign direct investment caps, non-transparent procedures, and discriminatory treatment of imports. Despite these barriers, trade expanded rapidly. In 2008, bilateral goods trade totaled $45 billion. Bilateral services trade totaled $19 billion in 2007.

b. Trade Dialogue

Ambassador Schwab and India’s Minister of Commerce and Industry Kamal Nath convened the fifth ministerial-level meeting of the United States-India Trade Policy Forum (TPF) in February 2008 in Chicago, Illinois. The discussions under the TPF cover bilateral trade, investment and related issues and also address multilateral issues such as the ongoing WTO Doha Round negotiations. The TPF is part of the overall Economic Dialogue between India and the United States. Through regular dialogue under the TPF, the United States and India seek to remove impediments to bilateral trade and investment by anticipating potential trade problems and jointly resolving concerns.

The TPF serves as the umbrella for five Focus Groups: Agriculture, Tariff and Non-Tariff Barriers, Services, Investment, and Innovation and Creativity (focusing on intellectual property rights issues). Ongoing Focus Group discussions in 2008 addressed priority issues such as foreign direct investment caps, intellectual property rights protection and enforcement, restrictive Indian telecommunications policies and market access for a wide range of manufactured and agricultural products and services. Noteworthy developments in 2008 included the agreement to launch negotiations on a bilateral investment treaty and India’s withdrawal of certain import restrictions on fresh fruit.

Another development in the 2008 bilateral U.S.-India trade dialogue was the Private Sector Advisory Group’s (PSAG) identification of key policy issues on which it would provide strategic recommendations and insights to the TPF. The membership of the PSAG includes trade experts and representatives of private sector organizations in the United States and India with in-depth knowledge of international economic and trade policy. The PSAG identified completion of a bilateral investment treaty as its top recommendation.

In addition to the February 2008 TPF meeting, Ambassador Schwab and Minister Nath met a number of times in the context of the Doha Round negotiations in an effort to find common ground in the pursuit of an ambitious outcome.

With regard to intellectual property rights, the United States has been working constructively with India to improve its IPR regime. The U.S. dialogue with India takes place through the TPF’s Focus Group on Innovation and Creativity, the Commerce Department-led High-Technology Cooperation Group, and work by the U.S. Government’s Intellectual Property attaché stationed in New Delhi and other government officials from multiple U.S. Government agencies. There has been some progress in India’s protection of intellectual property rights, including through the introduction of the proposed Drugs and Cosmetics (Amendment) Bill 2008 that will increase penalties for spurious and adulterated pharmaceuticals, and create a Customs recordation system. However, India still needs to improve its copyright regime to address issues related to protection of digital works on the Internet, strengthen its patent regime, including by clarifying the scope of patentable subject matter, provide effective data protection for pharmaceutical and agricultural chemicals, and increase enforcement against piracy and counterfeiting.

The new Annual Supplement to India’s foreign trade policy was released by commerce minister Kamal Nath on 26 February.

His speech on the occasion can be accessed here. It provides an interesting insight into the trade policy priorities of the Indian government. Incidentally there is no mention of the stalled Doha round and the WTO  finds mention only in passing (the Minister quotes the WTO to warn about how the growth rate in global trade in goods and services is expected to decline from 7.2% in 2007 to 4.6% in 2008 and further to 2.1% in 2009).

On Indian FTAs the Minister had this to say:

We concluded a Comprehensive Economic Cooperation Agreement (CECA) with Singapore in 2004. It is India’s first CECA with any country covering goods, services, investment and other areas of cooperation. We are in an advanced stage of negotiations with ASEAN, Korea and Japan and are engaging significantly with SAARC, EU, EFTA and Thailand. These efforts have increased our confidence for a deeper engagement with other trading partners and also to understand their markets for promotion of trade in both goods and services.

The annual supplement with the trade facilitation measures can be accessed here while the Foreign Trade Policy 2004-2009 can be accessed here.

A new full year policy for 2009-2010 will be issued by the new government constituted after elections this year.

Business Line published an article recently that discusses ministerial turf battles in the way trade policy is made in India. Here is the article in full with items of interest highlighted for those interested in trade policy formulation issues:

Harish Damodaran

New Delhi, Jan. 15 The Centre has rejected the proposal to accord statutory status to the Commission for Agricultural Costs and Prices (CACP) while also extending its mandate to provide advice on tariff policy and other trade-related matters.

The Cabinet Committee on Economic Affairs (CCEA), which met here on Thursday, did not accept the recommendation by an Expert Committee under Prof Y.K. Alagh to confer statutory status to the CACP.

The proposal, had it gone through, would have made it mandatory for the Centre to fix the minimum support prices (MSP) for various crops at levels recommended by the CACP. The underlying idea here was to insulate fixation of MSPs from political pressures and subject these, instead, to rational economic principles.

But the Expert Committee’s suggestion was rejected by the Cabinet, ostensibly at the instance of the Union Agriculture Ministry. The latter held that the CACP recommends MSPs well before the start of the cropping season, whereas the crop gets harvested much later.

‘No flexibility’

If the Centre was bound by the MSPs recommended by the CACP, there would be no flexibility to respond to changing market conditions and fix procurement prices accordingly. In such a situation, it was felt that the CACP’s present status as a purely ‘recommendatory body’ be maintained, official sources told Business Line.

The CCEA also rejected the Expert Committee’s proposal to extend the CACP’s terms of reference so as to include, “To advice from time to time on the tariff structure and other measures relating to imports and exports of agricultural commodities and their processed products”.

This would, in effect, have made it mandatory for the Centre to consider the CACP’s views regarding increases or decreases in import tariffs for any agri-commodity and measures to restrict or ban export/import of particular products.

“The opposition in this case came mainly from the Commerce Ministry, which expressed reservations on any role for the CACP to advice on trade and tariff matters, so as to integrate these with MSP policy,” the sources said.

“The Commerce people felt the CACP cannot be authorised to advice on what the tariff levels for individual commodities should be, so as to maintain the MSPs recommended by it. This may result in trade distortions which go against the basic economic principles of free trade,” they pointed out.

The Commerce Ministry, on the contrary, held that the CACP incorporate a member representing the Ministry. This would, in turn, ensure that the CACP would recommend MSPs and related actions that “do not come in conflict with broad trade objectives” and “are compatible with the World Trade Organisation and other bilateral and multilateral arrangements,” the sources added.

The CCEA also rejected the Expert Committee’s suggestion to expand the coverage of MSP and the official cost of Cultivation Scheme to horticulture crops, i.e. fruits and vegetables.

Methodological issues

The Prof Alagh-headed Committee was constituted by the Agriculture Ministry on May 7, 2003 to study various methodological issues in fixing MSPs of crops. Its terms of reference also included examining the existing mandate of the CACP and whether or not to reposition its role so as to provide greater teeth to its recommendations.

The Committee submitted its report on May 31, 2005, which was then forwarded to other Ministries (Finance, Commerce, Food, Planning Commission) for seeking their views before being placed for the Union Cabinet’s consideration.

The author of the report in question, Prof Alagh discusses ministerial turf battles and the difficulties of policy coordination because of bureaucrats unwilling to give up power. See his comment in the Financial Express here. An excerpt:

Finally the real differences. Apparently the government, or parts of it, does not want tariffs to be integrated with price policy in agriculture. It therefore does not agree with the Alagh Committee’s real concern that integrated policy should be followed to give incentives for a competitive agriculture. The report takes crops, works out the efficient farmer set and shows how within tariff bounds, with some monetary policy built in (the Venugopal Reddy simulation), it is possible to hold the farmer’s hand for the transitional period in which he moves over to a lower cost per unit of output, not land, or in which global trade is modernised following Kamal Nath. The report describes this in terms of ‘efficiency pricing’ or other variants of long-range marginal cost pricing, fully aware that it is not talking of industry. Anybody who reasons against this needs to do serious home work.

There seem to be sections of government that don’t want this. We don’t know why. Turf battles could be one reason. Policy coordination is always easy in a textbook and a report but normal persons don’t like to give up power. Only the exceptional become more powerful by shedding power and coordinating for the larger good. Another reason could be the fear of rule based systems for these can dilute the power play in weak coalition regimes. There is a trend in not having a chapter on perspectives in the Eleventh Plan and not accepting the challenge of creating a medium term environment for competitive agriculture. But then you are in real trouble, for to have MSPs and separately free imports is like pouring water in a leaking bucket. You did this at great cost a few years ago in the grain crisis period. Finally there could be the fear of the unknown.

But we are traveling in uncharted territory. After the dithering of the nineties, we are doing a superb job in the WTO. I am sure whatever the first reaction, having accepted a trade dominated regime, we will finally accept the challenge of the rational transition to it. The friendly ghost of the Alagh Committee will keep on coming back and will be exorcised only when we are fully competitive in our agriculture.

Those interested in going deeper, can find out more about the Commission on Agricultural Costs and Prices (the CACP) here.

Castro and Arcuri have an interesting article titled “How Innovative is Innovative Enough? Reflections on the Interpretation of Article 27 TRIPS from Novartis v. Union of India’ on SSRN.

Access it here

Here is the abstract:

In 2006 a major lawsuit was initiated by Novartis AG against the Union of India. Novartis petitioned the High Court of Madras to declare Section 3(d) of the Indian Patents Act, as amended in 2005, to be non-compliant with the TRIPS Agreement and/or to be unconstitutional. Section 3 of the Patents Act identifies the cases of inventions which are not patentable and its letter (d), as amended in 2005, lists as such ‘the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.’ On August 6, 2007 the High Court of Madras reached a verdict rejecting all the petitioner’s requests. In relation to the non-compliance with the TRIPS Agreement, the Court did not enter into the merits of the question as it held to have no jurisdiction on this issue.

The present analysis begins where the verdict of the High Court of Madras ends; while the judgment invites reflection on a number of interesting issues related to the role of WTO law at national level, this paper focuses only on the substantive question (left almost entirely unaddressed by the Indian Court) about the compatibility between Section 3(d) of the Indian Patent Act and the TRIPS Agreement. The core of the question relates to the interpretation of Article 27 TRIPS, and in particular to its paragraph 1 where the criteria for patentability are set (i.e. an invention should be non-obvious, novel and useful); clearly, a narrow or a broad interpretation of these criteria is likely to have a significant impact on patents regimes worldwide. This paper builds an interdisciplinary theoretical framework to answer the compatibility question raised by Novartis AG; it does so by combing a purely legal analysis, based on the general interpretative canons used by the WTO Appellate Body to solve disputes, with an economic analysis that aims at showing the socio-economic impact of different interpretations of the above mentioned criteria. Finally, the paper shows the extent to which this theoretical framework could be applied should such a case ever be brought before the WTO DSB.

With national elections looming, the Indian government will issue a White Paper in October to explain to ordinary Indians and stakeholders what the Doha negotiations are all about, what is at stake and what is India’s negotiating position based upon.

The Financial Express in a report quoting a senior commerce ministry official discloses:

India would give another shot at taking forward the talks next month if the US gives positive signals and then the Centre would come out with the ‘white paper’ by October-end , a senior government official told FE. The ‘white paper’, devoid of all the jargon, would contain the nitty-gritty of the multilateral trade negotiations, India’s stance on all the issues on the table alongwith the positions of other countries as well as the reasons for the failure or success, the official added.

Once again, this proposal shows how trade policy making processes in India have evolved since the Uruguay Round. This move is commendable for promoting transparency about the WTO system at the domestic level. However, the government should encourage transparency in international trade negotiations through similar iniatiatives throughout the WTO negotiation rounds and not just before an election.

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.

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.”