WTO

1 WTO

2020-06-09 18:56 :33

1 WTO
2 Bretton Woods : International Monetary Fund
- 2.1.1 IMF
  - 2.1.1.1 Criticism of IMF
2.2 World Bank Group
3 Other Development Institutions

WTO provides for a rules based, transparent and predictable multilateral trading system -> established in the Marrakesh Agreement (1994) the agmt highlighted concerns over fragmentation of multilateral rules.
WTO has currently 164 members and 25 observers. Observers must start accession negotiations within 5 years of becoming observers.

1.1.1 GATT

General Agreement on Trade and Tariffs GATT 1948 to remove trade barriers like tariffs and non-tariff restrictions.
It became WTO in 1995
- 5th ministerial round at Cancun, Mexico the G-20 was formed
- Meets are held interval of 2 yrs
- HQ in Geneva, Director General term 4 yr
- Members can be non-sovereign entities like EU
- Iran is not a mem
- One country one vote

GATT	WTO
Treaty	Organisation
Concerned with traditional trade issues	Encompasses more areas
No dispute settlement process	Present
Small secretariat	Global

Ministerial Conference : they highest decision making body of WTO which has to meet at least once in 2 years. There have been a total of 12 such conferences the latest one being Geneva.
- General Council, Dispute Settlement Body DSB and Trade Policy Review Body - Councils of Trade
No punishment for erring/non-compliant countries and poor countries cannot retaliate against rich countries
Trump has disallowed appointment to the appellate body

1.1.2 Foundational Principles of WTO

National treatment - prohibits discrimination b/w locally produced goods and imported ones
Most Favoured Nation MFN :
Special and Differential treatment
Certain exception to this are regional/bilateral trade agreements, Generalised system of preference, special agreement b/w India and Pakistan
Under GSP developing countries and least dev countries are given exemptions
Special and differential treatment S&D provision allows developed countries to treat developing countries in a more favourable manner, more time to implement agreements & commitments etc

Previous Conferences and Their Outcomes

Singapore 1996
Geneva 1998
Seattle 1999
Doha 2001
Cancun 2003
Hong Kong 2005
Geneva 2009
Geneva 2011
Bali 2013
Nairobi 2015
- Reflected divergence amongst members on relevance of Doha Development Agenda DDA
- India wanted the reaffirmation of the DDA along with many other developing and LDCs.
- Other developing countries were also seeking Special Safeguard Mechanism SSM for agricultural products.
- It was agreed to the elimination of agricultural export subsidies subject to preservation of specail and differential treatment for developing countries.
- Prevent evergreening of patents in pharmaceutical countries.
- India supported enhanced preferential rules of origin for LDCs and preferential treatment for LDC services providers.
Buenos Aires 2017
- USA did not wanted agricultural reforms which led to a deadlock without any outcome on agriculture.
- Work program on disciplines on fisheries subsidies.
Geneva 2021

1.1.2.1 Agreement on Agriculture

Domestic Support : viz subsidies given to farmers
- Green Box : are not trade distorting, subsidies under this are govt funded not by charging consumers higher prices or through price support. Ex research funding, [[3.2 Ocean Acidification and Ocean Depletion]] programs etc.
- Amber Box : trade distorting given for welfare, 5% of value of production for developed countries and 10% for developing ones
  - MSP comes under Amber box, problem is that WTO calculates [[006 Inflation#Inflation |Inflation]] with 1986-88 as base date with lower numbers and leads to data variation b/w IN and them
- Blue Box : subsidies are direct payments for production limiting
- S&D Box : Social and Development box that allows developing countries for some subsidies to agriculture sector under certain condition revolving around human development issues ex poverty.
Export Subsidies : limiting them to control prices, being phased out
Market Access : reduce tariff and remove non-tariff barriers
Special Products : are exempted from tariffs
Special Safeguard Mechanism SSM - impose tariff on certain goods for certain period of time
Safeguard duty : emergency action against increased import to particular products that may have harmed domestic industry. Ex dumping of Steel by JP, CN, SKR in India
Countervailing duties : against products whose exports are heavily subsidised by exporting countries
Anti-Dumping Duty :
TRIPS - for protection of IP, Designs, patents etc ![[Pasted image 20230112132658.png]]
Patents Amendment Act 2005 - For foods, chemicals and pharmace8/uticals
Compulsory licensing is when gov can ask for production and sale of drugs at concessional rates during public [[Health]] crisis by temporary overriding a patent and giving license to other country
Parallel importing when it does not have manufacturing capacity
Incremental innovation/ ever-greening
Voluntary licensing - allows selling/manufacture of drugs by Indian companies in any of the 91 voluntary license companies
Sui generis means generating by itself or of itself, companies can protect their patents under either TRIPS of any other domestic system
GI system
Agricultural and Processed Food Products Export Development Authority APEDA can protect intellectual property
Protection of Plant Variety and Farmers Act 2001 - civil and criminal remedies for enforcement of breeders rights, compensation for village/rural communities.

1.1.2.2 General Agreement on Trade in Services GATS

regulations that govern trade in services is one of the 3 agreements along with AoA and TRIPS. Covers 4 modes of supply :
- Cross border supply
- Consumption abroad
- Commercial Presence
- Presence of natural person
Rich nations in the WTO are trying to frame regulations for e-commerce. IN is opposing due to data localisation issues, bad for MSMEs, [[004 Taxation in India]] of digitally traded goods

1.1.2.3 Bilateral Investment Treaty BIT

established terms and conditions for private investment, allow for an alternative dispute resolution mechanism.
India terminated BITs signed with 58 countries
New BIT was to be negotiated where appellate would be local first then international
Earlier Companies filed many international complaints
Also IN is not a member of International Centre for settlement of Investment Dispute ICSID World Bank
Solar Panel issue - IN wanted developers of power project to source from locally manufacturers. US challenged and won against this
H1B and L1 visa fees were hiked by USA - IN objected against it being against MFN norms under GATS.
Generalised System of Preference GSP - duty free entry to products from LDCs
US objected to restriction in trade to their medical device and dairy industry

1.1.2.4 Rules of Origin ROO

determine country of origin
Preferential ROO are part of FTAs so that benefit is not enjoyed by a third party
Non-Preferential is for imposition of quotas, anti-dumping duties

1.1.2.5 Regional Trade Agreements

Advantages	Problems
Better co-ordination among regional members	Trade diversion instead of creation
More trade is created	Loss of revenue due to tariffs
Higher production/greater efficiency
Beginning towards globalisation
Help towards peaceful relations

1.1.2.6 Various Regional Trading Arrangements Are :

Trans Pacific Partnership TPP
RCEP is an FTA for 10 ASEAN and its FTA partners
African Continental FTA
US-Mexico-Canada USMCA or NAFTA 2.0
European Free Trade Association EFTA
South Asian FTA
Mercosur b/w Brazil, Argentina, Uruguay and Paraguay
Andean Community of Nations CAN - South America Bolivia, Colombia, Ecuador and Peru
Economic Community of West African States ECOWAS
Southern African Dev Community

1.1.2.7 India and WTO

India is putting forward concerns with the Dispute Settlement system of WTO
Emphaised the importance of special and differential treatment provisions as being essential for better integration of the developing world.

For	Against
MFN status with 164 bodies	TRIPS work against affordable medicine
One country one voting is good	MNCs undue influence
Rule based trading	Farmers may lose livelihood
Impartial trade dispute settlement	Rich countries not following treaty obligations
R&D investment, MNC growth, Service sector

1.1.2.8 Other Organisations

G - 10 : major food importing economies
G -20 : bloc of developing countries with exporting and defensive interests
G - 33 : developing countries that need to protect farmers interest (defensive)
G -90 : Least Dev. Countries

1.1.2.9 Protectionism Types:

Protect companies in their infant stage
For public interest and social good
Economy is in crisis and politically becomes necessary to

1.1.2.10 Threats to WTO :

US opposition : blocking appointment to DSB, unilateral trade and tariffs
Growing protectionism
Anti-Globalisation feelings
Asian Clearing Union : facilitate payments through a common unit of account the Asian Monetary Units
ACP countries - 70 developing countries that have preferential access to EU market
AMS - Aggregate Measure of Support shows the extent of support provided by gov to [[Static - Agriculture|agriculture]] sector
Beggar thy neighbour is a policy where one nation develops at the expense of others
Cairns group - 17 mem dedicated to agricultural trading system
NAMA : Non-agricultural market access like industrial goods is part of WTO provision that deals with idea of encouraging market reach of non agri goods. Many developing countries have opposed this.
Non-tariff barriers - quantitative, import licensing, standards and conformance
Tariff escalation - inc with each level of processing
Tariff peaks - done on particular products are significantly high,
Tariff quotas - lower tariff on certain volume of product
- Countries designate themselves as developed, developing or Least Developed. This can be challenged by other countries.
- WTO recognises LDCs as those that have been designated so by UN.
- Advantages of ‘Developing’ status :
  - Some WTO agreements provide them with longer transition periods to fully implement agreements.
  - Helps other members decide on giving GSP preferences.
Swiss Formula : prescribes higher/ steeper cut for higher tariffs and lower cuts on lower tariff this is a non linear form of tariff reduction. Developing countries that have high tariff are at disadvantageous position.

![[4.3 International Bodies, their structure, mandate etc#WTO]]

2 Bretton Woods : International Monetary Fund

2020-06-09 18:57:04

Set up in 1944 led to formation of IBRD/World Bank and IMF (promote and maintain monetary stability) by USA, UK and other 42 countries.
They were also known as Bretton Woods twins having HQ at Washington DC, USA.

2.1.1 IMF

Board of Governors is the highest decision making body it consists of 1 Governor and 1 Alternate Governor from each member country. For India Finance Minister is Ex-officiao Governor while RBI Governor is alternate governor.
Day to day mgt of IMF is carried out by MD who is Chairman of Board of Executive Directors -> this board has 24 directors appt/electre
International Monetary and Financial Committee IMFC : provides strategic direction to work and policies
Development Committee : advise on critical development and on financial resources
Main function is to facilitate international monetary cooperation, promote exchange rate stability, assist in estd of multilateral system of payments and elimination of forex restrictions.
to lend during BoP crisis, surveillance of development etc, check money laundering
Problem of having US dominate a global reserve system is that it can lead to global volatility during times of crisis also US monetary policy change impacts the whole world
IMF reviews members quota every 5 years. India’s quota as mentioned below accounts to about SDR 13,114.4 million of which 25% is paid through cash and 75% in securities. ![[Pasted image 20220313112448.png |500]]
FATF works to generate necessary political will to bring legislative and regulatory change
India needs IMF for technical training, capacity building, diversify its forex for greater safety.

2.1.1.1 Criticism of IMF

One policy for all countries
Conditionality with borrowing
Failed to predict global recession in 2008

Chiang Mai initiative is a currency reserve pool of ASIAN, China, Japan, Hong Kong and South Korea to manage regional short term liquidity problem
BRICS Contingent Reserve Arrangement CRA currency reserve arrangement, capital of $100bil
G-10 countries that have agreed to participate in the General Arrangement to Borrow GAB
G-15 cooperation in the areas of investment trade and opportunity. India is founding mem
G-20
G-24
G-77 - developing countries

2.2 World Bank Group

2020-06-09 18:57:12

Is a group of 5 international organisations :

IBRD and IDA make the World Bank

2.2.1 International Development Agency IDA

1960 - long term interest free loans to 80 poorest countries and to develope infrastructural support among the member nations, long term lending for development of economic services.
Loans are mostly give to countries with per capital less than $895 for a period of 35-40 yrs, interest free.
Funds from richer countries, size of $75bil

2.2.2 International Finance Corporation IFC

Was set up in 1956 and is aka private arm of WB
Promotes private sector investment particularly developing countries
floated the Masala bond in the global credit market to fund Indian companies

2.2.3 MIGA Multilateral Investment Guarantee Agency-

Set up in 1988
insures investors against non-commercial and political risk thereby encouraging foreign investment in developing economies.
It also provides technical assistance to help countries disseminate information on investment opportunities.

2.2.4 International Centre for Settlement of Investment Disputes ICSID

It was set up in 1966 is an investment dispute settlement body whose decisions are binding on the parties.
Once parties have consented to arbitration they cannot withdraw consent unilaterally.
IN is not a mem

2.2.5 International Bank for Reconstruction and Development IBRD

started functioning in 1945.
Oldest WB institution focused on post war development and later in dev of middle income and credit worthy poorer economies.
Human Dev was the main focus with a very low interest rate. India is the 7th largest share holder with voting power of 2.91%
Indian constitution does not allow external borrowing by state so centre borrows and lends to them
To be a member of WB it is necessary to be a mem of IMF
WB is a development institution and IMF seeks to maintain an orderly system of payment and receipts b/w nations

2.2.6 Changes Required Post-recession in WB and IMF

In World Bank

Democratise IBRD and IDA
Merit based appointment of head of IMF irrespective of nationality
Need to replenish capital base of soft loans of IDA that disburses soft loand and IBRD that gives out concessional ones.
Merit based selection of WB president
Overhauling operational criteria

In IMF

Expand role of IMF and increase its resource base
Made SDR more central to global monetary system
Reorient global trade agenda
Eliminate the veto of US in key decisions
Broadening application of double majority voting as way to inc role of smaller mem
Revising the rule of quota and vote distribution
Transforming the Board of Directors from bureaucratic body to high level policy decision making forum of ministers.

3 Other Development Institutions

3.1 Asian Development Bank ADB

![[Pasted image 20220313121136.png]]

HQ - Manila, PHI est din 1966 it is a regional dev. bank.
Admits members from UNESCAP UN Economic and Social Commission for Asia and the Pacific and non-regional developed countries.
Has 68 members, 49 from Asia 19 from outside
Japan = USA > China > India > Australia are largest holder of shares.
India voting share is 6.331% with a voting power of 5.363%.
Oridnary Capital Resources OCR that is part of the ADB which grants loans to countires.
India holds the positions of Executive Director on the Board of Directors of the Bank.
Finance Minister is India’s governor on the Board of governors of the ADB and Secy is Alternate Governor.
Eurozone - 19 of the 27 EU members make a monetary union

3.2 OECD

![[Pasted image 20220313122454.png]]

Post war Organisation for European Economic Cooperation OEEC was estd in 1947 to run the Marshall Plan.
After the sucess of OEEC and realising the importance of interdependence the OECD was formed in 1960.
OECD has a total of 38 members
India is not a member and Turkey and Japan are the only 2 members from Asia

3.3 New Development Bank NDB/ BRICS Bank

![[Pasted image 20220406105212.png]]

Fortaleza declaration. The declaration also brought one nation one vote prescription for the proposed bank.
Initial subscribed capital was $50billion that was to be raised to Authorised capital of $100bil, equally distributed.
Capital base was to be used to fund infrastrcuture and sustainable development projects in BRICS countries.
Contingent Reserve Arrangement CRA of $100bill to be created to provide additional liquidity protection to mem nations BoP problems.
- CRA funded 41% by China, 18% each from Brazil, India and Russia and 5% from South Africa.
HQ in Shanghai
In 2018 got observer status in UNGA, Votes based on shares no Veto

3.4 Asian Infrastructure Investment Bank AIIB since 2016

Officially launched in 2014 China and 21 other Asian nations as founding members. India is also a founding member.
HQ in Beijing aims to improve social and economic outcomes in Asia and beyond.
China holds heighest 26.61% share, India holds 7.6%, Russia 6.01%.
Regional Countries have 75% of total voting power.
Has 105 members. 57 founding members.
Starting capital was $100billion with an aim of commercial financing of infrastructure.
Main organ is the Board of Governors and Board of Directors.

3.5 EBRD European Bank for Reconstruction and Development

HQ in London, only helps countries with multi party democracies
Members from all over, total 69 countries and EU + European Investment Bank
India joined as the 69th member in 2018 as a shareholder but will not accept financing