WTO & India’s Trade Policy
🟠 Topic 66: WTO & India’s Trade Policy
📌 Introduction
The World Trade Organization (WTO) is the global body that governs international trade rules, ensuring free, fair, and predictable trade flows between nations. India, as a founding member, actively engages with the WTO to protect its developmental interests, especially in areas like agriculture, services trade, and intellectual property rights (IPR). India’s foreign trade policy (FTP) aligns with WTO commitments while pursuing export promotion and import rationalization.
🔹 What is WTO?
📖 Definition
The World Trade Organization (WTO) is an international organization that sets rules for global trade, resolves trade disputes, and facilitates negotiations on trade agreements.
Established
- Year: 1995 (Replaced GATT – General Agreement on Tariffs and Trade, 1948)
- Headquarters: Geneva, Switzerland
Membership
- 164 members (India is a founding member)
🔹 Key Principles of WTO
| Principle | Description |
|---|---|
| Most Favoured Nation (MFN) | Treat all WTO members equally in trade policies |
| National Treatment | Treat imported goods/services no less favourably than domestic |
| Transparency | Publish all trade rules and regulations |
| Free and Fair Trade | Reduce trade barriers, prevent unfair practices |
🔹 Structure of WTO
| Body | Function |
|---|---|
| Ministerial Conference | Top decision-making body (meets biennially) |
| General Council | Supervises daily operations |
| Dispute Settlement Body (DSB) | Resolves trade disputes |
| Trade Policy Review Body | Monitors member policies |
🔹 WTO Agreements – Key Areas
1️⃣ Agreement on Agriculture (AoA)
| Component | Focus |
|---|---|
| Market Access | Reduce tariffs & quotas on farm goods |
| Domestic Support | Limit trade-distorting farm subsidies |
| Export Subsidies | Gradual reduction of export subsidies |
🔔 India’s Stand: Protect food security programs (like MSP & PDS) under Special Safeguard Mechanism (SSM).
2️⃣ General Agreement on Trade in Services (GATS)
- Governs trade in services sectors (IT, tourism, finance, education).
- Members liberalize services trade gradually.
- Covers mode-wise trade: ✔️ Cross-border (IT outsourcing).
✔️ Consumption abroad (medical tourism).
✔️ Commercial presence (Indian banks abroad).
✔️ Movement of natural persons (Indian professionals working abroad).
🔔 India’s Focus: Easier visa regimes, mutual recognition of professional qualifications.
3️⃣ Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
- Sets minimum standards for IP protection (patents, copyrights, trademarks).
- Balances innovation incentives with public health.
🔔 India’s Stand: Flexibilities for compulsory licensing (pharmaceuticals) to protect public health.
4️⃣ Agreement on Trade Facilitation (TFA)
- Simplifies customs procedures.
- Enhances transparency and efficiency in cross-border trade.
🔔 India’s Implementation: Faster clearance processes, paperless trade via ICEGATE & DGFT portal.
5️⃣ Agreement on Subsidies & Countervailing Measures (SCM)
- Discourages trade-distorting subsidies.
- Allows countervailing duties to offset unfair subsidies.
🔔 India’s Concern: Ensuring space for legitimate support to farmers and MSMEs.
🔹 India’s Key Interests at WTO
1️⃣ Food Security & Agriculture
- Protect MSP & PDS from WTO challenges.
- Demand permanent solution for public stockholding programs.
2️⃣ Services Trade Liberalization
- Push for liberalized visa regimes for Indian professionals.
- Greater access for IT, education, healthcare exports.
3️⃣ Technology Transfer
- Advocate for TRIPS flexibilities to access green and pharmaceutical technologies.
- Support developing countries’ right to compulsory licensing.
4️⃣ Special & Differential Treatment (S&DT)
- Demand longer implementation periods and technical assistance.
- Ensure developing countries get policy space for industrial and digital growth.
5️⃣ Dispute Settlement Reform
- Dispute Settlement Body (DSB) facing crisis due to Appellate Body vacancies.
- India supports a transparent, timely, and unbiased dispute resolution mechanism.
Case Study – Solar Panel Dispute (India vs USA)
- USA challenged India’s local sourcing requirement in solar energy projects.
- WTO ruled against India, citing violation of TRIMS (Trade-Related Investment Measures).
- Highlighted tension between climate goals and trade rules.
🔹 India’s Export Promotion Policies Aligned with WTO
| Scheme | WTO Compatibility |
|---|---|
| RoDTEP (Remission of Duties and Taxes on Exported Products) | Compliant – refunds embedded taxes |
| Production Linked Incentive (PLI) | Compliant if linked to domestic production, not exports |
| Special Economic Zones (SEZs) | Needs re-alignment to comply with WTO rules |
WTO Consistent Trade Facilitation
✔️ Single-window clearance (ICEGATE).
✔️ Electronic certificates of origin.
✔️ Risk-based customs inspections.
🔹 India & WTO Disputes – Key Examples
| Case | Issue | Outcome |
|---|---|---|
| US vs India – Solar Panels | Local content requirement | WTO ruled against India |
| India vs US – Steel Tariffs | US raised tariffs citing security | Ongoing |
| India vs EU – Pharma Exports | Seizure of Indian generics in EU ports | Resolved |
🔹 WTO Reforms – India’s Proposals
1️⃣ Restore Appellate Body
- Fill vacant positions.
- Ensure timely resolution of disputes.
2️⃣ Review Special & Differential Treatment (S&DT)
- Retain S&DT flexibilities for developing countries.
3️⃣ Digital Trade Regulation
- Address issues like: ✔️ Cross-border data flows. ✔️ Data localization. ✔️ E-commerce taxation.
4️⃣ Balance Trade & Environment
- Ensure climate action measures (carbon border tax) do not discriminate against developing countries.
🔹 Role of WTO in Indian Trade Policy
✔️ Provides predictable global trade framework.
✔️ Ensures dispute settlement for trade conflicts.
✔️ Facilitates market access for Indian exports.
✔️ Promotes rule-based trade, enhancing investor confidence.
📚 Practice MCQ
1️⃣ Which of the following principles is fundamental to the WTO system?
- Most Favoured Nation (MFN)
- Special & Differential Treatment (S&DT)
- National Treatment
✅ Options:
(a) 1 and 2 only
(b) 1 and 3 only
(c) 1, 2, and 3
(d) 2 and 3 only
2️⃣ Under which WTO agreement are patents and copyrights covered?
✅ Options:
(a) AoA
(b) GATS
(c) TRIPS
(d) TFA
3️⃣ Which body is the highest decision-making authority in WTO?
✅ Options:
(a) General Council
(b) Ministerial Conference
(c) Appellate Body
(d) Dispute Settlement Body
