GATT & WTOIts Impact on Indian Foreign Trade

By:-• Aniruddh Tiwari• Binit Chouraria• Kaushik Basak• Prasad E. Prabhu• Shashank M.A.• Umamaheshwar Rao

Objective & Hypothesis

• Objective:1) To study the benefits of WTO & GATT on

Indian Foreign Trade.2) Analysis of three sectors namely Agriculture,

Textile & Service.

• Hypothesis(H0): Indian foreign trade unaffected by WTO Policies

Indian foreign trade: •Indian economic policy after independence was influenced by the colonial experience, which was seen by Indian leaders as exploitative,and by those leaders' exposure to democratic socialism as well as the progress achieved by the economy of the Soviet Union.

•Domestic policy tended towards protectionism, with a strong emphasis on import substitution, industrialization, state intervention, a large public sector, business regulation, and central planning,while trade and foreign investment policies were relatively liberal.

•India's economy was mostly dependent on its large internal market with external trade accounting for just 20% of the country's GDP.Until the liberalization of 1991, India was largely and intentionally isolated from the world markets, to protect its economy and to achieve self-reliance. Foreign trade was subject to import tariffs, export taxes and quantitative restrictions.

•India's exports were stagnant for the first 15 years after independence, due to the predominance of tea, jute and cotton manufactures, demand for which was generally inelastic. Imports in the same period consisted predominantly of machinery, equipment and raw materials, due to nascent industrialization.

•Since liberalization, the value of India's international trade has increased sharply. India's major trading partners are the European Union, China, the United States and the United Arab Emirates.

•In 2009–10, major export commodities included engineering goods, petroleum products, chemicals and pharmaceuticals, gems and jewellery, textiles and garments, agricultural products, iron ore and other minerals. Major import commodities included crude oil and related products, machinery, electronic goods, gold and silver.

•Its September 2010 exports were reported to have increased 23% year-on-year to US $18.02bn, while its imports were up 26.1% at $27.14bn. At US$13.06bn Augusts' trade gap was the highest in 23 months but the economy is well on the road to cross $200 billion mark in exports for the financial year 2010–11.

The General Agreement on Tariffs and Trade (typically abbreviated GATT) was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization (ITO). GATT was formed in 1948 and lasted until 1993, when it was replaced by the World Trade Organization in 1995.

GATT

GATT and WTO trade rounds

Name Start Duration Countries Subjects covered Achievements

Geneva April 1947 7 months 23 TariffsSigning of GATT, 45,000 tariff concessions affecting $10 billion of trade

Annecy April 1949 5 months 13 Tariffs Countries exchanged some 5,000 tariff concessions

Torquay September 1950 8 months 38 Tariffs

Countries exchanged some 8,700 tariff concessions, cutting the 1948 tariff levels by 25%

Geneva II January 1956 5 months 26 Tariffs, admission of Japan $2.5 billion in tariff

reductions

Dillon September 1960 11 months 26 Tariffs Tariff concessions worth

$4.9 billion of world trade

Kennedy May 1964 37 months 62 Tariffs, Anti-dumpingTariff concessions worth $40 billion of world trade

Tokyo September 1973 74 months 102Tariffs, non-tariff measures, "framework" agreements

Tariff reductions worth more than $300 billion dollars achieved

Uruguay September 1986 87 months 123

Tariffs, non-tariff measures, rules, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO, etc

The round led to the creation of WTO, and extended the range of trade negotiations, leading to major reductions in tariffs (about 40%) and agricultural subsidies, an agreement to allow full access for textiles and clothing from developing countries, and an extension of intellectual property rights.

Doha November 2001 ? 141

Tariffs, non-tariff measures, agriculture, labor standards, environment, competition, investment, transparency, patents etc

The round is not yet concluded.

WTO:

•The World Trade Organization (WTO) is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948.•The organization deals with regulation of trade between participating countries; it provides a framework for negotiating and formalizing trade agreements, and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements which are signed by representatives of member governments and ratified by their parliaments.• The WTO has 153 members representing more than 97% of total world trade and 30 observers, most seeking membership. The WTO is governed by a ministerial conference, meeting every two years; a general council, which implements the conference's policy decisions and is responsible for day-to-day administration; and a director-general, who is appointed by the ministerial conference. The WTO's headquarters is at the Centre William Rappard, Geneva, Switzerland.

INDIA AND WTO:

•India is one of the founding members of WTO along with 134 other countries. India's participation in an increasingly rule based system in governance of International trade, would ultimately lead to better prosperity for the nation. •Various trade disputes of India with other nations have been settled through WTO.•India has also played an important part in the effective formulation of major trade policies. By being a member of WTO several countries are now trading with India, thus giving a boost to production, employment, standard of living and an opportunity to maximize the use of the world resources.•According to the WTO Secretariat Report, along with the policy statement by the Government of India, India is expected to snatch most of the business deals that are presently catering the developed nations which includes major service based industries like telecom, financial services, infrastructure services such as transport and power. •The increase in availability and reduction in tariffs has prompted many developed nations to go for business with India especially in IT and ITeS industry. If the trend continues then by 2025, India is expected to cater to the software and services demands of major giants of the business world.

India’s ImpEx Before Liberalization

Year to Exports(Rs in million)(including re-exports)

Imports(Rs in million) Trade Balance Rate of Exchange

Export Import

1949-50 485 617 -132 na na

1950-51 606 608 -2 24.9 -1.5

1951-52 716 890 -174 18.2 46.4

1952-53 578 702 -124 -19.3 -21.1

1953-54 531 610 -79 -8.1 -13.1

1954-55 593 700 -107 11.7 14.8

1955-56 609 774 -165 2.7 10.6

1956-57 605 841 -236 -0.7 8.7

1957-58 561 1035 -474 -7.3 23.1

1958-59 581 906 -325 3.6 -12.5

1959-60 640 961 -321 10.2 6.1

1960-61 642 1122 -480 0.3 16.8

1961-62 660 1090 -430 2.8 -2.9

1962-63 685 1131 -446 3.8 3.8

1963-64 793 1223 -430 15.8 8.1

1964-65 816 1349 -533 2.9 10.3

1965-66 810 1409 -599 -0.7 4.4

1966-67 1157 2078 -921 42.8 47.5

1967-68 1199 2008 -809 3.6 -3.4

1968-69 1358 1909 -551 13.3 -4.9

1969-70 1413 1582 -169 4.1 -17.1

1970-71 1535 1634 -99 8.6 3.3

1971-72 1608 1825 -217 4.8 11.7

1971-72 1608 1825 -217 4.8 11.7

1972-73 1971 1867 104 22.6 2.3

1973-74 2523 2955 -432 28 58.3

1974-75 3329 4519 -1190 31.9 52.9

1975-76 4036 5265 -1229 21.2 16.5

1976-77 5142 5074 68 27.4 -3.6

1977-78 5408 6020 -612 5.2 18.6

1978-79 5726 6811 -1085 5.9 13.1

1979-80 6418 9143 -2725 12.1 34.2

1980-81 6711 12549 -5838 4.6 37.3

1981-82 7806 13608 -5802 16.3 8.4

1982-83 8803 14293 -5490 12.8 5.0

1983-84 9771 15831 -6060 11 10.8

1984-85 11744 17134 -5390 20.2 8.2

1985-86 10895 19658 -8763 -7.2 14.7

1986-87 12452 20096 -7644 14.3 2.2

1987-88 15674 22244 -6570 25.9 10.7

1988-89 20232 28235 -8003 29.1 26.9

1989-90 27658 35328 -7670 36.7 25.1

1990-91 32553 43198 -10645 17.7 22.3

1991-92 44041 47851 -3810 35.3 10.8

1949-50

1951-52

1953-54

1955-56

1957-58

1959-60

1961-62

1963-64

1965-66

1967-68

1969-70

1971-72

1973-74

1975-76

1977-78

1979-80

1981-82

1983-84

1985-86

1987-88

1989-90

0

5000

10000

15000

20000

25000

30000

35000

Exports

Exports

1951-52

1954-55

1957-58

1960-61

1963-64

1966-67

1969-70

1972-73

1975-76

1978-79

1981-82

1984-85

1987-88

1990-91

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

Imports 43198

Imports

Imports 96-97 Imports in 2009-10

Exports in 1996-97 Exports in 2009-10

EXPORT OF PRIMARY PRODUCTS IN 96-97

TOTAL: Quantity 7551913.8 mts Value 7915.12 Crs

EXPORT OF PRIMARY PRODUCTS IN 06-07

TOTAL: Quantity 12099516 mts Value 21150.4 Crs

India’s Import & Export post reform

96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-100

10000000

20000000

30000000

40000000

50000000

60000000

70000000

80000000

90000000

Exports

Axis Title

96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-100

20000000

40000000

60000000

80000000

100000000

120000000

140000000

160000000

Imports

Axis Title

96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10

Consolidated

Exports

96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10

Imports

Exports

Consolidated

ImportsExports

Meat &

Fish

Dairy P

roducts

Fores

t produce

(inc p

aper)

Agricultu

re

Chemica

ls & Fe

rtilize

rs

Pharmace

utical Products

Books Silk

Animal p

roducts

Clothings

Metals &

Minera

ls

Heavy M

achinery Misc

0

5000000

10000000

15000000

20000000

25000000

30000000

Standard Deviation

Further Work• To project the increase in imports and exports

over the next 10 years

• To study the non trade barriers to trade and its effect on India

• Analysis of WTO provisions on three sectors namely agriculture , textile and services.

References• Dhar, Biswajit and Kallummal, Murali (2007), Non Trade

Barriers in Doha Round- Is a Solution In Sight?• Acharyya, Rajat (2006), Trade Liberalization, Poverty and

Income Inequality in India• Mehta, Rajesh (2006), Nontrade Barriers Affecting India’s

Exports• Singh, S.P. (2004), Post WTO Era: Impact on Export Prospects

of Livestock Products• Kathuria, Monika (2010), Doha Round of Multilateral Trade

Negotiations- Critical Issues in Trade Development Pertaining to India

• Pathak, Shubhangi (2006), Liberalization of Financial Services Under The WTO

• Sachs, Jeffrey D., Bajpai, Nirupam and Ramiah, Ananthi (2001), Understanding Regional Economic Growth in India

• Srinivasan, T.N., (2002), Economic Reforms and Global Integration

• Goldar, Bishwanath (2005), Impact on India of Tariff and Quantitative Restrictions Under WTO

• Gupta, R.K., (2005), WTO and Implications for Indian Economy- A Review

• Ministry of Commerce website (http://commerce.nic.in)• Indian Statistical Institute (http://isical.ac.in)• Reserve Bank of India website (http://rbi.org.in)• Miscellaneous sources from the internet