What is the Role of India in GATT?

Of course, it is out of question for India to have remained outside the mainstream of the GATT. By virtue of its membership in the GATT, India is automatically entitled to enjoy the benefit of the Most Favoured Nation (MFN) treatment from all the other participating members. Secondly, keeping aloof herself from the GATT, India would have had to undergo bilateral agreements with several countries for improving her trade relations and yet could not have assured the same what could have been yielded through the GATT. Today, even a country like China has been keen on joining the GATT.

In the whole bargaining process of the Uruguay Round, the Indian government, by and large, played merely a spectator’s role under the pretext that no clauses of the negotiations are seriously detrimental to the interests of the country. The only consolation is that, there was hardly and option available to us when the country is just wedded to economic liberalisation and the GATT multilateralism is a lesser evil than bilaterism.

Another argument was put forward that in view of the emerging regional trade blocs such as EFTA (European Free Trade Association), NAFTA (North American Trade Agreement), so also possibilities of other free trade blocs in the Asian and Pacific regions, it was in the interests of India that the government had to be pragmatic and positive enough in its approaches to the Uruguay Round’s decisions.

At this juncture, it is not easy to say with full confidence about India’s position as a net gainer or a loser from the new Treaty as there are both plus and minus points on several issues. A real picture of the URT’s implications will be revealed only through a close scrutiny of the provisions made in the 500-page document when it is signed and sealed in April 1994. Meanwhile, the present study, in brief, makes only a broad perception of the likely outcomes of the new treaty.

Agriculture has been a major subject of the URT. Under the new treaty, member countries are required to reduce their agro-export subsidies over the six years if these exceed 10 per cent of the value of agricultural production.

In the case of India, there is no need to fear about this clause, since our product and non-product specified agro-subsidies are already below 10 per cent of the total agro-output value. Member countries have agreed to reduce import duties on agricultural products by 36 per cent. Further, developed countries will have to import at least three per cent of their agro- output.

These provisions will give a boost to India’s agro-exports when European farm exports will tend to be more expensive in the world market. There is also the possibility of a rise in rice imports from Japan and Korea. India has to try its best to grab the opportunity and exploit its growth potential and enlarged agro-exports including margined products. Though, India is basically an agrarian economy, paradoxically she is a dwarf player in the agro-trade world market.

It is necessary to strengthen the country’s agricultural sector for quantitative improvement and high productivity. Unless there is a definite improvement in the quality of agro-products and sufficient marketable surplus is generated at competitive prices, Indian agricultural exports will remain a grey area in the emerging world economic order.

From India’s viewpoint, “Textiles” appears to be a green area of the GATT agreement. It is presumed that India’s textile exports should be boosted by the phase-out of the multifibre arrangement (MFA) under the new treaty. India’s textile exports have already doubled from Rs. 9,558 crores in 1990-91 to Rs. 18,643 crores in 1992-93. Of the total textile exports of India, 52 per cent of the total cotton textile exports and 77 per cent of readymade garments exports are to the quota countries. With the dismantling of the quota system, apparently, India will have a better access to the quota- countries markets for her textile exports, especially cotton piece goods, knitted fabrics and ready- made garments.

Indeed, under the liberalised environment of both domestic and external sectors, with abundant supplies of cotton, skilled labour force, improved technology and due mdoernisation, India should be in a position to emerge as a major force in the global textile markets, despite the stiff competition from countries like China, Malaysia, Taiwan and even Pakistan. The progressive opening of textile quotas under URT should strengthen India’s exports in areas where the country has a strong comparative advantage. A healthy and pragmatic textile policy in the country is the need of the hour.

Provisions for intellectual property rights (TRIPs) is a crucial area of the URT with far-reaching implications for developing countries including India. Uptil now only the process patent was protected. Under the new agreement, inventor’s rights widely cover patents, copyright, industrial design, trade marks as well as performing art.

The phasing-out period is specified as 10 years for drugs and agro- chemicals and 5 years for the rest. In the years to come, software packages will tend to become more expensive for our country.

India’s software industry may become stagnant, unless the government modifies the present duty structure on software and Indian companies are encouraged to develop specialised software packages. Moreover, the real outcome of gains will very much depend on how successfully the government would try to wangle more quotas and concessions in bilateral negotiations with other countries.

The Indian software professionals are also expected to seek overseas assignments on an increasing scale with the easing of restrictions on their movement in the US and other developed countries. After TRIPs, the software piracy is expected to come down throughout the world.

This would also provide more opportunities for the Indian professionals to develop new original software packages to sell in the global markets. Of course, with the growing R&D everywhere, competition will be intensified and only the best will survive. Official claims put Indian benefits from skilled manpower exports to go up from $ 1.2 billion at present to $ 5 billion per annum by the end of this century.

The TRIPs are likely to create some adverse effect on pharmaceutical industry in India, when the new discoveries would become available at very heavy costs of royalties. According to the new agreement, when the product patents will be brought into force in the year 2005 in the developing countries including India, drug prices will zoom.

The indigenous pharmaceutical industry following the process patent will be in an adverse position. Pranab Mukherjee, then Union Commerce Minister, however, felt that the government could deal with the situation of rising drug prices by instituting price control, since the government retained such right. But the industrialists feared that, such a policy will prove detrimental to the Indian drug companies.

Only a pragmatic drug policy by the government can help. Decontrol is essential for growth of the Indian drug industry. Product-wise price control should be scrapped so that adequate returns are yielded by the industry which can be used for R&D to combat the product patent challenge. Further, efforts should be made in exploring the potential in western markets for generic products, that is, products whose patents have expired.

Indian drugs also need to have their focus in finding new chemical molecules useful for treatment of tropical diseases like malaria, cholera and typhoid. Indian pharmacists should try to develop Ayurvedic drugs as an alternative form of medicine. Under the GATT agreement then India can hope to increase her exports of generic, tropical and ayurvedic drugs to many countries. This obviously calls for a rational and pragmatic drug policy on the part of the government.

Under the TRIPs, seeds will be patented. Indian farmers’ inputs costs will be enhanced due to royalties on seeds to be paid. Similarly, agro-chemicals of patented manufacture will be more expensive. As a result, foodgrain prices will go up and the average Indian consumer will be adversely affected. Effective and subsidised public distribution system (PDS) can only rescue the poor. But, this would pose an added fiscal burden on the government.

Regarding services, the new treaty provides for fair trade and non-discrimination, easing entry restrictions on specialised and skilled labour. This will help India to some extent as her consultancy exports will get a boost.

Further, on account of the anti-dumping strategy and rules adopted in the URT, India’s local chemical industry can be protected. Similarly, using the same clause the US Government can also prevent India’s textile exports when its quota region is over.

India has to be the least worried about her financial sector, since the TRIMs provisions exclude banking and insurance, and the country has the right to formulate its own investment policy. In financial services, the entry of some well-known international players will, however, induce competition which will force the Indian players to improve. Similarly, the entry of well-known firms in tourism, telecommunication and consultancy will be beneficial to the Indian consumers when they will be in a position to enjoy quality products.

According to a World Bank-OECD Study, as an impact of URT, India’s trade is expected to reach a level of 4.6 billion dollars by 2002. Government economists in India, including Pranab Mukherjee, have rather a conservative estimate of the gain amount to be around 2 billion dollars. But these are just expectations. Real happening depends on many factors, which time along can tell.

Of course, with the rationalised energy prices, a clear and just export policy, improved infrastructure and financial sector reforms, along with, liberalised industrial and trade policies, India must make all efforts to increase its share in the expanding global trade under the emerging new order.

India’s share in global exports, at present, is just around 0.5 per cent as against that of 1.9 per cent in 1950. The positive side of the URT and the export optimism prevailing in the country should be exploited for improving India’s export scenario on world’s front. All efforts must be made to see that our exports expand by at least 15 per cent per annum in US dollar terms.

Internal restrictions on exports need to be removed. To sustain the export-led growth strategy of the country steps should the taken to provide an aggressive export push. An important feature of India’s expert-led growth strategy is the degree to which the country can supply exportables that prove acceptable to customers in the world markets. Good design and better quality at competitive prices are highly significant factors.

In this respect, foreign collaborations with multinational corporations may prove important for the Indian economy, provided there is a clear understanding on this issue. The country has yet to build a reputation for the; ‘Indian’ as symbol of quality trade mark in the global markets.