1. INTERNATIONAL BUSINESS
MANAGEMENT
By,
–Kartikeya Singh
–Assistant Professor
–Dewan Institute of Management
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2. Syllabus:-
Unit I - International Business Environment – Globalisation forces, Meaning, dimensions and
stages in Globalisation. Introduction to theories of international trade.
Unit II - Country Risk Analysis :- Political Social and Economic Cultural and ethical practices,
Hallstead Model. Responsibilities of International Business.
Unit III - Managing Multinational Enterprises :- Problems and Potential, Multinational Service
Organisations, Indian Context – Potential, Need, Problems.
Unit IV - Introduction to International Finance Management:- Balance of trade and balance of
payment, International Monitory Fund, Asian Development Bank, and World Bank, Financial
Markets and Instruments, Introduction to Export and Import Finance, Methods of Payment in
international trade, Introduction to Current EXIM policy.
Unit V - Bilateral and Multilateral Trade Laws :- World trade organisation (WTO), IPR,
TRIPS,TRIMS,GATS –Ministerial Conferences, Global Sourcing and its impact on Indian Industry
– Globalisation and Internal reform Process. India’s Competitive advantage in industries like IT,
Textiles, Gems and Jewellary etc. – Potential and Threat.
Case studies.
Suggested Readings:-
– 1. International Business Environment – Sundaram and Black
– 2. International Business Environment – Bhalla and Raju.
– 3. International Business – Rao and Rangachari
– 4. International Business Management – Mrs. Jotwani.
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3. Unit I - International Business
Environment
Unit I - International
Business Environment –
Globalisation forces,
Meaning, dimensions and
stages in Globalisation.
Introduction to theories of
international trade.
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4. Unit I - International Business
Environment
Globalisation –
– Charles Hills defines globalization as "The shift towards a more integrated
and interdependent world economy". Globalization has two main components
- the globalization of markets and the globalization of production.
– According to International Monetary Fund, globalization means "the growing
economic interdependence of countries worldwide through increasing volume
and variety of cross border transactions in goods and services and of
international capital flows and also through the more rapid and widespread
diffusion of technology. Interdependency and integration of individual
countries of the world is also called as globalization. Globalization integrates
not only economies but also societies. The globalization process includes :
Globalization of markets,
Globalization of production,
Globalization of technology,
Globalization of investment.
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5. Unit I - International Business
Environment
Characteristics of Globalization :
– Difference between domestic market and foreign market tends to
disappear.
– Expand the business activities throughout the world.
– Buying and selling of goods takes place from and to any country of
the world.
– Decision to make any product takes place by considering entire
world as a market.
– Necessary inputs are obtained from the entire world.
– Formulation of strategies, is based on global approach
– It results into rapid increase in interdependence between different
countries in the world.
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6. Unit I - International Business
Environment
Characteristics of Globalization
– On account of global markets, Customers tend to get highest
value for money.
– Globalization promotes formation of trade blocks
– On account of liberalization, the focus will be shifted from the
bureaucrat to the businessmen.
– Rapid increase in mobility of resources takes place under
globalization.
– It tends to remove international trade barriers.
– It tends to drive out sick and inefficient companies, but provides
tremendous scope for sound companies.
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7. Unit I - International Business
Environment
Advantages or Merits of Globalization :
– Affirmation of citizen power .
– Access of less developed countries to international market .
– The worldwide growing identity crisis .
– The emergence of transnational market segments.
– Growing power of the large international distributors
– The adoption of the socio-ecological view of consumption.
– The emergence of an inter-connected Global Economy.
– The development of good Corporate Citizenship behavior .
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8. Unit I - International Business
Environment
Disadvantages or Demerits of Globalization
– It kills domestic business.
– It exploits human resources.
– It leads to unemployment and under-employment.
– It results into decline in demand for domestic products.
– It may result into decrease in income.
– It widens gap between rich and poor.
– It may result into exploitation of natural resources in under-
developed countries.
– It may lead to national sovereignty at stake.
– It may result into commercial and political colonization.
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9. Unit I - International Business
Environment
Stages in Globalisation.
– Domestic Company (Stage-
I)
– International Company
(Stage-II)
– Multinational Company
(MNC) (Stage-III)
– Global Company (Stage-
IV)
– Transnational Company
(TNC) (Stage-V)
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10. Unit I - International Business
Environment
Theories of International Business
– Adam Smith's Theory of International Trade.
– Ricardian Theory of International Trade.
– Hecksher Ohlin Theory of International Trade.
– Adam Smith Theory Vs Ricardian Theory
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11. Unit I - International Business
Environment – Adam Smith Theory
Country Commodity X Commodity Y
A 10 5
B 5 10
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12. Unit I - International Business Environment -
Ricardian Theory of International Trade
Figure pending
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13. Unit II - Country Risk Analysis
Unit II - Country Risk Analysis :- Political Social
and Economic Cultural and ethical practices,
Hafstead Model. Responsibilities of International
Business.
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14. Unit II - Country Risk Analysis
Country analysis basically examines the economic strategy of a
particular country.
It takes holistic approach to understand how a country and
particularly its government behaved in the past and is behaving and
how it will behave in future.
As the government is responsible for providing the framework its
working needs to be monitored.
The country analysis basically studies HOW A PARTICULAR
GOVERNMENT DOES ITS JOB.
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15. Unit II - Country Risk Analysis
The Concept of Risk : The Oxford English
Dictionary defines `risk' as "exposure to a peril".
From investor's point of view, risk is exposure to
loss.
– Country risk may be defined as, an exposure to a loss
in cross border lending, caused by events in a
particular country. These events must be at to some
extent, under the control of government of that
country.
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16. Unit II - Country Risk Analysis
Need for Country Risk Analysis :
– To anticipate the behavior of a country.
– Estimating the future of any countries prospect.
– Try to utilise the opportunity available in the country
otherwise it would be an opportunity loss.
– Policy makers also need to do this to attract foreign
investment.
– Lending firms usually do this to secure their lending.
– Consultant Firms also do this and give rating to the country
and as per their rating firms tend to invest.
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17. Unit II - Country Risk Analysis
Factors Essential for Proper Assessment of
Country Risk :
– Conceptual awareness of the factors that have a bearing on
country risk.
– Analytical ability to access how these factors work.
– Detailed knowledge of the country understudy.
– Specialised expertise to predict political variables.
– Expertise in using economic forecasting technique to make
short-term and long-term projections.
– Skill and experience to draw conclusions about debt
servicing
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18. Unit II - Country Risk Analysis
Political, Social, Cultural and Economical Practices
affecting Country Risk Analysis.
Political Factors
Domestic International
A) Political system A) Possibility of system disrupting
B) The political party in power conflict arising from outside the
C) Opposition parties country
D) The government system (i) Due to country's own
problems.
(ii) Due to treaty and other
complications
B) Relations with major trading
Partners.
C) Relations of the company's home
country
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19. Unit II - Country Risk Analysis
Socio Cultural Factors
Domestic International
A. Social Groups A. Cross Border Ties.
I. Homogeneity of population I. Ethnic
a) Ethnic II. Religious
b) Religious
III. Linguistic
c) Linguistic
d) Class IV. Historical.
II. Extent of Cohesiveness or B. Cross Border Threats
diversiveness. C. Economic Factors
B. General psychology of population. I. Recession.
C. Unemployment. II. Strikes.
D. Political Division of Population. III. Lockouts.
E. Extent of social unrest. IV. Rapid increase in costs of
production,
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20. Unit II - Country Risk Analysis
Economic Factors Affecting Country Risk :
Domestic International
A. Growth of economy. A. Balance of payments.
B. Trends of investments and savings. B. International Trade.
C. Frequency of business cycles. I. Importance of foreign trade in
D. Extent of economic diversification. GDP.
E. Inflation II. Stability of Trade Earnings.
I. Monetary policy. a) Diversity of exports
II. Fiscal policy. b) Elasticity of Export
F. Strength of local Financial market. Demand.
c) Elasticity of import
Demand.
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21. Unit II - Country Risk Analysis
Economic Factors :
International Capital :
A. Currency : (a) Strength, (b) Stability, (c) Quality of exchange markets, (d)
Depth of exchange markets, (e) Extent of controls over exchange markets.
B. Debt : (a) Total, (b) Short-term as percentage of total debt, (c) Debt Service
ratio,(d) Debt-Service schedule.
C. International Financial Resources :
a) International Revenues,
b) International Borrowing capacity.
a) History of depth repayment,
b) Credit rating,
c) Autonomous capital inflows.
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22. Case Study :-
Tata Motors is going places. The company is in the process of becoming a global player. The initiative in this
strategy followed by the company is unique as far as Indian industry is concerned.
The company has signed an agreement with Rovers U.K. to sell 1,00,000 cars to them in the next five years to
be sold under the brand name of Rovers. At the same time, the company is going to sell Indica cars in the
European markets under its own brand name as well. Selling cars in Europe is a tough job as it is a well-
Unit II - Country Risk Analysis
developed market. Tata's are however confident that this strategy that they are following will definitely work.
They have presence in Europe and have been selling Tata Safari and other cars in these markets for sometime
now and have a dealer's network and service back up in some countries in this region.
On the other hand, the company has just acquired the unit of Daewoo Motors in Korea for making trucks.
The acquisition is the first of its kind for the company. This gives the company unrestricted use of Daewoo's
brand name, which is popular in China and the South East Asian countries. This acquisition will also help the
company take on the challenge posed in the Indian markets by Volvo in truck and passenger bus segments.
The company can import the higher range vehicles to India from this Korean facility. The Indian market is on
the threshold of growth due to the road projects that are being implemented in the country and also due to the
fact that old vehicles are being phased out due to the environmental problems.
The company also is seriously planning to enter Chinese markets soon and is negotiating a big tender for
supply of trucks to South Africa.
Following facts give an idea as to what the company is up to :
New-age Tata trucks to roll out in a range of emerging markets like South Africa, China, Brazil and
Indonesia. Global sales to contribute 10% of total commercial vehicle business by 2010.
Low cost manufacturing base to be leveraged to offer models at prices that are expected to be atleast 25%
lower than offered by global majors. On fuel efficiency, A six member team with Italian experts is working on
a new design for the cabins. something that European Focus manufacturers do not focus on. Offerings will
be in the range of 9 to 49 tones payloads. Acquisition of local companies wherever required. Thus, Tata
Motors has developed strategies to be a global player in the near future.
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23. Questions :
1. Analyse the case and state what it means to Indian
industries at large.
2. Comment on the strategies of the company. Do you
think that these strategies will be successful ? Why ?
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24. Unit II – Hofsteade Model
Hofstede's Model of National
Culture:
– There is no such thing as a universal
management method or management
theory, valid across the whole world.
– Even the word management has different
origins and meanings in countries
throughout the world.
– Management is not a phenomenon that
can be isolated from other processes
taking place in the society.
– It interacts with what happens in the
family, at school, in politics and
government.
– It is obviously also related to religion and
to beliefs about science.
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25. Unit II – Hofstede Model
The Five Cultural Dimensions of Hofstede :
1. Power distance
2. Individualism versus collectivism
3. Masculinity versus femininity
4. Uncertainty avoidance.
5. Long-term versus Shortrterm orientation
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26. Unit II – Hofstede Model
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27. Case incident – 2
Seven months after taking over as President of General Motors Asia Pacific,
Frederick Henderson came for a visit to India and announced, that his dream
was to turn the world's biggest car manufacturer into the biggest car marketer in
India. G. M. India is a very small player in India right now. It has a plant to
produce 25,000 cars, but last fiscal sold only 8,473 cars. It seems to be struck in
the slow lane in India. In what will be a first in the Indian automotive industry, G.
M. Plans to use its 21 year old global alliance with Suzuki, and a more recent one
with Fiat to move into gear. What helps is that G. M. owns 20% stake in both the
companies. Combined in India, their purchasing will soar over Rs. 6,1000 crores a
year, the dealership and service network will jump to 360, and make it an alliance
with the widest range of passenger cars.
Apparently, the idea is to create an Indian version of the Global Alliance that the
three already have. They can now develop new products, sale each others cars in
various market source components together and even enter into joint ventures. In
India the alliance will form on the companies sharing each other's products,
buying components together in order to cut both components and souring costs,
working on the engines and transmissions together, and entering into cross
branding agreements.
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28. Ctd..
The Indian Automobile Industry is in for a big change. Under the new scheme of
things, three players out of 12 players would, for all practical purposes play the
game as one. The Alliance could bring to India the world's largest car marker's
vast portfolio of brands. And the volumes of Maruti will give the alliance the
leeway with vendors to source components cheap and expand markets through
Maruti's wide network. Fiat can help Maruti with its quest for Diesel engines, for
cars. G. M. and Fiat auto plan to invest $ 1.00 million at Fiat's Ranjangaon facility
in order to produce new models and power trains. The Equally Owned joint
venture, details of which are being worked out could also become a global ;source
of powertrains for small and mid-sized cars. There is little reason to doubt the
partnership rolling in India. The Asia-Pacific region is after all, the fastest
growing car market. Ravi Khanna, country President arid M. D. Delphi
Automotive Systems (INDIA), "Globally, the auto industry is now more agile as a
result of consolidation. In India, circumstances may be peculiar or unique, but the
pattern can be seen quite clearly.
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29. 1. Analyse the case from the Globalization point of view.
2. What opportunities do you see for Indian companies in
this ?
3. How do you think other MNC's in this market
will/should react to this development?
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30. Ans. 1.
G. M. India is a very small player in India right now. It has a plant to produce 25,000 cars,
but last fiscal sold only 8,473 cars. It seems to be struck in the slow lane in India.
In what will be a first in the Indian automotive industry, G. M. plans to use its 21 year old
global alliance with Suzuki, and a more recent one with Fiat to move into area. What helps
is that G. M, owns 20% stake in both the companies. Combined in India, their purchasing.
wi11 soar over Ps. 6,1000 crores a year, the dealership and service network will jump to
360, and make it an alliance with the widest range of passenger cars.
Apparently, the idea is to create an Indian version of the global alliance that the three
already have. They can now develop new products, sale each others. cars in various market
source components together and even enter into joint ventures. In India the alliance will
form on the companies sharing each other's products, buying components together in order
to cut both components and sourcing costs, working on the engines and transmissions
together, and
entering into cross branding agreements.
General Motor adopted this alliance strategy due to the various benefits of Globalization
offered to it., viz. (a) Access to wide range of markets. (b) Acquiring the benefits of
economies of large scale. (c) Specialised division of labour. (d) Optimum use of global
resources. (e) Eliminating the Stiff Competition. (f) Reduced impact of business cycles.
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31. Ans 2.
Opportunities for Indian Companies in this Alliance :
1.The Alliance could bring to India the world's largest car. maker's vast portfolio of
brands.
2.The Alliance could provide opportunities to the domestic companies in die form of
modern technology, market intelligence, product development, management expertise etc.
3.The Alliance could provide the competitive strength to the Indian companies.
4.The Alliance could provide sound base for the development of the ancillary industries in a
country like India in a significant way.
Ans 3.
Other MNCs in the Car Segment/Car Market definitely react to the strategic alliance of
General Motor with Maruti Suzuki and Fiat. Many other MNCs in this field may also
adopt the same strategy to expand their market base and to achieve the -following
objectives :
1.To meet the import needs.
2.To increase the production.
3.To reduce the cost drastically.
4.To finance the development plans and mobilization of domestic sources.
5.To have optimum utilization of resource etc.
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32. Unit II - Responsibilities of International Business
Global Markets
Global Technology
Markets
Global Production
Resources
Global Competition
Time based Global
Competition
Global Customers
Government Actions
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34. Unit III
Managing
Multinational
Enterprises :-
Problems and
Potential,
Multinational Service
Organisations, Indian
Context – Potential,
Need, Problems.
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35. Unit III - Multinational Enterprise/Multinational
Corporations (Meaning)
A multinational Enterprise is an
organization, which carries on
business activities in many
countries.
Multinational Enterprise are
giant enterprises, which have
headquarters in one country,
mostly in developed capitalist
country and their business
activities are spread not only
within the country of origin but
also in other countries
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36. Unit III – Nature and scope of
Multinational Enterprises.
Scarce Capital Adequate Achievement
Transfer of Technology Corporate Objectives
Core Sector lines which Increase Industrial
requires huge investment. Productions and National
Export oriented Productivity
production. Large Scale. Production
Employment Profit-making Enterprises
Opportunities Industrial Development
Latest Technology / Manpower Development
Increase in Standard of
Living
Potential of Diversification
Improvement in the
Development of
Balance of Payment Professionalism
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37. Unit III – Factors responsible for the
growth of multinational enterprises.
Product Innovation Market Superiorities
Technological
Financial
Superiority
a) Severe Competition
Superiorities
b) Solution for Expansion of
underdevelopment. market.
c) Insufficient resources
d) Inability to exploit
manpower, materials,
money etc.
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38. Unit III – Importance of multinational
enterprises.
Transfer of Capital.
Transfer of super
technology.
Effect on balance of
payment.
Linkage effects.
Development of Human
Resources Capital.
Employment
Opportunities.
Overall development of
the economy.
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39. Unit III - Problems of Multinational
Enterprises
Transfer of Technology
a Costly Affair
Profit Oriented
Production of Non-
essential Goods
Promote Regional
Disparities
Corrupt Practices
Exploitation of Labour
Exploitation of natural
resources.
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40. Unit III - Features of Multinational
Enterprises
Giant Size
Centralized
Management
Number of Activities
Undertaken
Dominate Global Trade
Governed by Local
Laws
Competitive Prices
Excellent Quality
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41. Unit III - Indian Companies Becoming
Multinational – Growth Story
A growth story :- See text box for the story…
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42. Unit III - Various Problems Faced by Indian
Companies while becoming Multinationals
1. Managing in Multinational Environment.
2. Heading Differences.
3. Adjusting Management Process.
a) Planning
b) Organising
c) Staffing
d) Controlling
e) Leadership
f) The Internationalization of Management
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43. Unit III – Multinational Service
Organisation.
Service Sector Entry Mode
Hotels, Restaurants, Fast food Management contract or Franchising
Engineering or Agricultural Services Partnership or Minority Joint Venture
Professional Services Like Accounting, Non – Equity arrangement like
Consulting or legal Services Partnership
Banking Services, Insurance Services. Franchising.
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44. Unit III – Relax – End of Unit III.
Relaaaaxxxxx…….
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45. Unit V – Bilateral and Multilateral Trade
Laws.
Bilateral and Multilateral
Trade Laws :- World trade
organisation (WTO), IPR,
TRIPS,TRIMS,GATS –
Ministerial Conferences
Global Sourcing and its
impact on Indian Industry –
Globalisation and Internal
reform Process. India’s
Competitive advantage in
industries like IT, Textiles,
Gems and Jewellary etc. –
Potential and Threat.
Case studies.
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46. Unit V – Bilateral and Multilateral
Trade Laws.
A bilateral trade agreement usually includes a
broad range of provisions regulating the conditions of
trade between the contracting parties. These include
– stipulations governing customs duties and other levies on
imports and exports,
– commercial and fiscal regulations,
– transit arrangements for merchandise,
– customs valuation bases,
– administrative formalities,
– quotas, and
– various legal provisions
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47. Unit V – Bilateral and Multilateral
Trade Laws.
Multilateral trade agreements are between
many nations at one time. For this reason,
they are very complicated to negotiate, but
are very powerful once all parties sign the
agreement. The primary benefit
– is that all nations get treated equally,
– and so it levels the playing field,
– especially for poorer nations that are less
competitive by nature.
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48. Unit V - Bilateral and Multilateral Trade Laws
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49. Unit V – GATT – General agreement on Tariff
and Trade.
The prolonged recession before the
World war II in the west was due to
the decades of protectionism followed
by the industrialized countries. This
led to conduct of negotiations in 1947
among 23 countries in order to
prevent the protectionist policies and
to revive the economies from the
recession. These negotiations of the
conferences resulted in the General
Agreement on Tariffs and Trade
(GATT) among the participating
countries. Thus GATT has its origin
in 1947 at the conference of Geneva.
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50. Unit V – GATT – General
agreement on Tariff and Trade.
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51. Unit V – GATT – General
agreement on Tariff and Trade.
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52. Unit V – GATT – General
agreement on Tariffs and Trade.
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53. Unit V – GATT – General
agreement on Tariff and Trade.
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54. Unit V – GATT – General
agreement on Tariff and Trade.
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55. URUGUAY ROUND
AND ARTHUR
DUNKEL PROPOSAL
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56. Unit V – Uruguay Round Package
The draft proposals proposed by Arthur Dunkel
in the Uruguay Round of GATT include
1. Market Access.
2. Agriculture.
3. Trade Related Intellectual Property
Rights(TRIPs).
4. Trade Related Investment Measures (TRIMs)
5. Trade in Services.
6. Textile.
7. Institutional Matter.
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57. Unit V – Uruguay Round Package –
1.Market Access
– Arthur Dunkel suggested that the Government control in
marketing activities and operation will have to be
slackened. The member Governments will have to abolish
the barriers related to the market access.
– First, Both developing and developed countries agreed to
significantly increase their share of industrial product
imports.
– Second, The average tariff on developed countries’
imports of industrial products was cut by 40 per cent on
imports from all sources, and by 37 per cent on imports
from developing countries.
– Third, substantial progress was made with regard to non-
tariff barriers
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58. Unit V – Uruguay Round Package
– 2. Agriculture
Member Government are suggested to reduce the
subsidy on fertilizers, seeds and other inputs and
eliminate the administered pricing in respect to
agricultural sector.
The proposal include :-
How a country can remove his subsidy in different phases.
A supplementary agreement on the modalities by which
subsidy would be removed.
A decision on application of sanitary and phycosanitary
measures and
A declaration on measures to assist for food importing
countries.
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59. Unit V – Uruguay Round Package
– 2. Agriculture
Total Aggregate Measurement
of Support (AMS)
De Minimis –Minimum Limit
5% - Developed Countries
10% - Developing Countries
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60. Unit V – Uruguay Round Package - 3. TRIPs
Trade Related Intellectual Property Rights
Dunkel proposal regarding trade intellectual
property rights (TRIPs) in respect of business
and commerce include :
– Protection of patents – 20 years
– Copy rights – 50 years
– Design – 10 years
– Trade Marks – 7 years
– Trade Secrets -
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61. Unit V – Uruguay Round Package – 4. TRIMS
- Trade Related Investment Measures
– Abolition of Restrictions imposed on foreign capital.
– Offering equal rights to the foreign investor equal to
those of the domestic investor.
– No restriction on investment
– No limitations or ceiling on the quantum of foreign
investment.
– Granting of permission without restrictions to import
raw materials and other companies.
– No force on the foreign investors to use total products
or materials.
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62. Unit V – Uruguay Round Package
– 5. Trade in Services.
Trade in services like, insurance, travel,
tourism, hotel, banking, maritime,
transportation, mobility of human resources
etc. have been included in the proposal
GATS – General agreement in Trade in
services provides a multilateral framework of
principles and services.
GATS governs trade in services.
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63. Unit V – Uruguay Round Package
– 6. Textile.
An attempt was made to Strategies for Textile
re-integrate textile into firms.
GATT in order to do away – Product Specialization
with Multi Fiber – Cross-border cooperation
Arrangement.(MBA). – Improve sourcing skills
Textile was included in – Focus on higher value
Dunkel Proposal products
Developed countries – More flexible rules of
dismantled the import origin
quotas on garment and – Interregional Cooperation
textile from 1st January, – Creation of Conducive
2005. Environment.
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64. Unit V – Uruguay Round Package
– 7. Institutional Matter.
Ithandles the grievances of two participating
nations.
Try to remove barriers to trade
Try to implement guidelines of the
WTO/GATT.
Takes care of the breach of the law.
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66. Unit V – WTO – 1st Ministerial
Conference
Singapore, 9th Work group for
December, 1996.(128 conducting a study on
countries) transparency in
Reaffirmation of government procurement
International labour practices,
organisation work. Establish a working group
to examine the relation
Rejected the use of between trade and
labour standards for investment.
projectionist purposes. Organise a meeting with
Understanding of UNCTAD(UN conference
dispute settlement on trade development), to
procedure. help developing countries.
Talks related to TRIMs
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67. Unit V – WTO – 2nd Ministerial
Conference
Geneva, 18th May, 1998 (132
countries)
– Setting up of a mechanism to
ensure full and faithful
implementation of existing
multilateral agreements.
– Rejection of projectionist
measures and accepting for
open and transparent rule-
based trading system.
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68. Unit V – WTO – 3rd Ministerial
Conference
Seattle, 3rd December, 1999, (135
countries).
– This meeting was a failure.
– Dispute erupted on transparency and
imposition of the views of the rich countries.
– Major contention was of exploitation.
– Protestors called it a “wrong trade
organisation”.
– Reason for the failure:-
American reluctance on inclusion of labour
standards
European Union was reluctant to liberalise
agriculture.
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69. Unit V – WTO – 4th Ministerial
Conference
Doha, Qatar, 9-13 November, 2001,(142
countries).
Declaration included :
– Reduction in Industrial tariffs
– Phasing out of agriculture export subsidies.
– Promoting the trade in services
– Providing special and differential treatment
for developing countries.
– Negotiations on setting up a multilateral
agreement on transparency in government
procurement.
– Negotiations to further expedite movement,
release and clearance of goods.
11/30/12 Kartikeya Singh
70. Unit V – WTO – 5th Ministerial
Conference
Cancun, Mexico,
10 to 14 September 2003,
– TRIPS and public health
– Geographical indications in general
– Geographical indications: the
multilateral register for wines and
spirits
– Geographical indications: extending
the “higher level of protection”
beyond wines and spirits
– Reviews of TRIPS provisions.
– Non-violation complaints.
– Technology transfer
11/30/12 Kartikeya Singh
71. Unit V – WTO – 6th Ministerial
Conference
Hong Kong on December – 13-18, 2005.
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72. Unit V – WTO and the India.
A growth Story….
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73. Unit V – WTO and India
Favorable Impact :-
a) Increase in export earnings
• Growth in merchandise exports.
• Growth in Service exports.
a) Agricultural Export
b) Textile and clothing
c) Foreign Direct Investment
d) Multilateral rule and discipline.
11/30/12 Kartikeya Singh
74. Unit V – WTO and India
Unfavorable Impact :-
I. TRIPS
Pharma companies
Agricultural output.
Micro ornanism
I. TRIMS
II. GATS.
III. Trade and Non-Tariff Barrier
IV. LDC Exports..
11/30/12 Kartikeya Singh
75. Unit V – WTO and Anti Dumping
Measures.
Dumping :- The sale of goods abroad at a
price which is lower than the selling price of
same goods at the same time in the same
circumstances at home, taking account of
difference in transport costs.
Dumping means selling the product at below
the on going market price and or at the price
below the cost of production.
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76. Unit V – Impact of Globalisation
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77. Unit V – WTO members..
List of WTO Members
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Globalisation :- Globalization (Meaning and Definition) : The term globalization has been used by different authors in different ways. In simple terms, globalization refers to a process of integration of the world into one huge market. It calls for removal of all types of trade barriers among different countries. Even political and geographical barriers become irrelevant. Charles Hills defines globalization as "The shift towards a more integrated and interdependent world economy". Globalization has two main components - the globalization of markets and the globalization of production. According to International Monetary Fund, globalization means "the growing economic interdependence of countries worldwide through increasing volume and variety of cross border transactions in goods and services and of international capital flows and also through the more rapid and widespread diffusion of technology. Interdependency and integration of individual countries of the world is also called as globalization. Globalization integrates not only economies but also societies. The globalization process includes : Globalization of markets, Globalization of production, Globalization of technology, Globalization of investment. According to K. Aswathappa , at the company level, globalization means two things. These are - (a) The company consists itself heavily with several manufacturing locations around the world and offers products in several diversified industries, and (b) It also means ability to compete in domestic markets with foreign competitions. A global company views the world as one market, minimizes the importance of national boundaries, sources, raises capital and markets wherever it can do the job best. A global company has three characteristics : It is conglomerate of multiple units located in different parts of the globe but all linked by common ownership. Multiple units are drawn on a common pool of resources such as money, credit, information, patents, trade names and control system. The units respond to some common strategy.
Characteristics of Globalization : The main features of globalization may be stated as follows : As a result of globalization the difference between domestic market and foreign market tends to disappear. Globalization implies to expand the business activities throughout the world. Under globalization, buying and selling of goods takes place from and to any country of the world. In case of globalization, the decision of establishing, manufacturing and distribution facilities in any part of the world is taken on the basis of viability and feasibility rather than national considerations: While planning and developing the product, the whole world is considered as a market. Necessary inputs like raw materials, machinery, finance, technology, skills and human resources are obtained from the entire world. Formulation of strategies, developing organizational structure, organizational culture, managerial expertise, etc. is based on global approach. Developing the attitude to view the whole world as a single market. Globalization results into rapid increase in interdependence between different countries in the world. Thus, there is not only economic interdependence, but the welfare and prosperity of one country is also intimately inter-linked with the rest of the world. No nation can exist in isolation. Otherwise, burdens of debt servicing and balance of payments compel the economy to be open and free. Globalization tends to remove international trade barriers and proposes a new global co-operative arrangement and a redefinition of the roles of states and industry. As a result of increase in privatization, government interference in business decisions is significantly reduced. Globalization tends to drive out sick and inefficient companies, but provides tremendous scope for efficient, innovative and dynamic, cost-effective and quality-oriented companies. On account of liberalization, the focus will be shifted from the bureaucrat to the businessmen. Rapid increase in mobility of resources takes place under globalization. Labour, especially skilled labour and knowledge workers as well as capital become more mobile resulting into optimum uses of the world resources. On account of global markets, costs, quality, processing time and terms of business become dominant, competitive drivers. Consumer has full freedom to make a choice of products on the basis of the highest value for his money. Globalization promotes formation of trade blocks like European Common Market which in fact is a threat to free trade.
Jean Jacques Lambin has listed the following Benefits/Advantages of Globalization. Affirmation of citizen power : As a result of the cultural changes and better education, consumers tend to behave similar in different developed nations and represent a force of responsible citizen which business and government ignore. Consumer movement and vocal non governmental organizations are now well organized and listened to. Professional purchase behaviour as consumers are well educated and experienced have become smart shoppers and able to make trade off between brands, stores, advertising and recommendations of sales people. The consumers have given search for new values over materialistic needs and they demand an ethical attitude on the part of suppliers. This ' growing power of citizens generates new expectations which lead to the improvement in functioning and transparency of the market, liberty of choice, better information, pressure on prices, product safety, post-sales responsibility of manufacturers and ecologically and friendly products. New and more responsible relationship is emerging between consumers and producers Access of less developed countries to international market : At present, there is significant inequality between rich and poor countries which only education and information will help to eliminate. Globalization can play a key role in the development of electronic communication which facilitates the exchange of information at low cost anywhere and 'anytime. For example, during 1993-1997, per capita GDP growth has increased at an average 7.1 percent in the countries that globalize most quickly as against 2.2 percent for the slowest globalizers. The worldwide growing identity crisis: As globalization progresses, there arises explosion of identity crisis among nations, regions, religions, ethnic and linguistic groups. In today's world the urge to maintain one's own cultural identity is greater than ever and in future it will become a guiding principle of decision-making. For transnational issues like ecology, safety, terrorism, health, etc. forms of world governance are necessary. Global capitalism needs strong countervailing powers, which go beyond the power of national governments. Hence, the power of supranational organizations like WTO, IMF, IBRD etc. should be reinforced and new supranational organizations be created to deal with these transnational issues; otherwise, we may end up with a wilder form of capitalism. The emergence of transnational market segments : Globalization increases inter-dependence between markets and hence national markets do not remain separate entities but as integrated part of the regional or world market. What happens one-market influences the other markets as experienced by the impact of South-East Asia financial crisis on the Brazilian economy. The inter-dependence of markets results in cultural convergence and creates transnational market segments or groups of consumers present in each country having the same needs and expectations. Thus, globalization means that there are groups of consumers with the same profiles that can be approached with same brands and communication campaigns. The individual and the identity crisis forces companies to adopt a mass-customization strategy whereby goods and services are individually customized in high volumes but at relatively low cost. Growing power of the large international distributors : In the fast moving goods markets, the growing power of retailers has been a significant development during last ten years. From passive intermediaries, retailers are now active entrepreneurs developing new store concepts and own label brands designed for well targeted segments. Some of them are adopting rapid internationalization strategies The adoption of the socio-ecological view of consumption- ; The environmental movement and socio-ecological view of consumption reflects a new awareness of the scarcity of natural resources, the uncontrolled growth of waste and the social cost of consumption. It reflects a changed attitude towards consumption which is not held as end in itself but which must take, into account its up-stream (opportunity cost) and down stream (repair and prevention cost) implications. Globalization is positively disseminating this new culture as markets become inter-dependent and as procurement and production activities spread across the planet. The emergence of an inter-connected Global Economy : As a result of the electronic communication revolution, the economic factors like suppliers, sellers, buyers, distributors etc. are no longer institutions or abstract entities but millions of individuals who participate in one to one relationship. This communication revolution reinforces the transparency and the democratic nature of the market economy. The electronic communication has reduced interaction costs, i.e. administrative costs borne to get people to work together, to collect information, to co-ordinate activities and to exchange goods and services. These costs account for 55 percent of the total administrative costs of the companies operating in advanced economies. The reduction of telecommunication and transport costs, with its massive diffusion of cheaper and more powerful information, progressively eliminates barriers between markets and gives access to the international market to any individual having talent or ideas. The development of good Corporate Citizenship behavior : Under the pressure of the citizen movement, firms everywhere are embracing the concept of responsible management. The responsible company is an organization, which wishes to establish a long-term sustainable relationship w yvith the community where it lives and from which it gains its prosperity. It takes active part in combating social problems, in co-operation with public authorities. Now corporations are the most powerful forces for change in the modern world.
Disadvantages or Demerits of Globalization : It has been argued that globalization leads to commercial colonialism, which in turn leads to political colonialism, as India had experienced with the England. Globalization kills domestic business. It exploits human resources. It leads to unemployment and under-employment. It results into decline in demand for domestic products. It may result into decrease in income. It widens gap between rich and poor. It may result into exploitation of natural resources in under-developed countries. It may lead to national sovereignty at stake. It may result into commercial and political colonization.
Stages in Globalisation :- Domestic Company (Stage-I) : During this stage, a company has its operations and vision limited to the national boundaries. They plan to serve domestic customers, to exploit domestic market opportunities, raising funds from domestic finance institutions. They concentrate on analyzing domestic environment and try to take advantage of opportunities generated by the changes in national environment. Their sphere of activities lies within national boundaries. The domestic company prefers to remain domestic and never think of going for globalization. It may add new product lines, serve new local markets. Their whole planning is limited to national markets only. International Company (Stage-II) : Some ambitious efficient domestic companies after going beyond their domestic marketing capacities start thinking of expanding their operations in international markets. Even though they think of international markets, still they are of ethnocentric or domestic orientation. They believe that whatever practices were successful within the country, the same practices will also be successful in international markets because these practices, products and people of domestic business are superior to those of other countries. Thus, thinking of these companies is domestic although vision is international. These companies adopt the strategy of locating the branches of their companies in other countries and practice the same domestic operations in foreign markets, including the same promotion, price, product, etc. policies. These companies tend to keep their marketing mix constant, although they extend their operations in other countries. Multinational Company (MNC) (Stage-III) : After sometime, international companies realize that the domestic model and practices adopted through extension policies do not serve the purpose. The foreign customers may not prefer the products that are sold in domestic market. Hence, these companies respond to the needs of different customers in different countries and produce such goods and services that will satisfy them. Thus, they adjust their product's price and promotion policies to suit the circumstances prevailing in different countries. These companies are also called as " Multi-domestic Companies". They adopt different strategies for different markets. Thus their ethnocentric approach transforms into polycentric approach. Their branches or subsidiaries start functioning as domestic companies in different countries. Global Company (Stage-IV) : The global company adopts global strategy for marketing its products. It may produce either in the home country or in any other single country and market its products throughout the world. It may also produce the products globally and market them domestically. Transnational Company (TNC) (Stage-V) : Transnational company operates at the global level by way of utilizing global resources to serve the global markets. It has geocentric orientation and has integrated network. Its key assets are dispersed and every sub-unit of the company contributes towards achievement of the company objectives. It produces best quality raw materials from the cheapest source in the world, process them in the country wherever it is economical and sells the finished products in those markets where prices are favourable.
Theories of International Business Adam Smith's Theory of International Trade. Ricardian Theory of International Trade. Hecksher Ohlin Theory of International Trade. Adam Smith Theory Vs Ricardian Theory
Adam Smith's Absolute Cost Advantage Theory : This theory was put forward by Adam Smith. He was in favour of free trade which has the advantages of division of labour and specialisation both at the national and international levels. The division of labour at the international level requires the existence of absolute differences in costs. According to Adam Smith, every country should produce that commodity which it can produce more 'cheaply than others and trade it with other countries for the commodities which costs less in other countries. Smith demonstrated this by his two country two commodity model. This theory can be further illustrated through the following illustration. According to this illustration : YaXa is the production possibility curve for country A. It shows that it can produce either OXa of commodity X or OYa of a commodity Y. YbXb is the production possibility curve for country B and it shows that it can produceOXb of a commodity X or OYb of commodity Y. It clearly shows that country A has absolute advantage in the production ofl commodity X and country B has an absolute advantage in the production of commodity Y. Thus trade is mutually beneficial. (b)Equal Differences : When there is no comparative advantage in the production of a commodity and there are equal differences in production costs international trade cannot take place i.e. India can produce with 1 unit of labour either 2 unit of Jute or 2 unit of Cotton. Egypt can produce with 1 unit of labour either 1 unit of Jute or 1 unit of cotton. It shows that there is equal differences in the production costs of the, two countries and since there is no element of profit which is the foundation of international trade, no trade can take place. (c) Comparative Differences in Costs : David Ricardo put forward the idea that not absolute but the comparative cost differences in costs determine international trade (trade between two countries). The main reason behind comparative advantage is that due to difference in climate, natural resources, geographical situation and efficiency of the labour,country can produce one commodity at a lower cost than the other. The main idea in the theory is that each country specialises in the production of that commodity in which it's comparative costs is the least. Each country will specialise in the production of those commodities in which it has the greatest comparative advantage or the least comparative disadvantage.
Ricardian Theory of International Trade (A)Concept : The economist David Ricardo in his book" Principles of Political Economy and Taxation" systematically represented the Comparative Cost Theory. He emphasized that countries can gain from trade not only if they had an absolute advantage as put forward by Adam Smith but also if they had a comparative advantage in production. Ricardo demonstrated that trade could take place even in the absence of absolute advantage provided there is a comparative advantage. The theory of comparative or (relative) advantage shows that relative costs are important in determining which products are imported and exported. A country wi11 export a product for which it has relatively low costs of production and will import products for which it has a relatively high cost of production. Comparative advantage is the ability of a country to produce a specific good at a lower opportunity cost than its trading partner. Opportunity cost refers to the most desired goods or services that are forgone in order to obtain something else. A country should produce and specialize in the good for which it has the lowest opportunity cost. By doing so the production forgone or sacrificed will be the lowest and world output will be maximized. An advanced country may be more efficient than an underdeveloped nation in every line of production but its degree of superiority may differ from one commodity to another. According to Ricardo, the advanced country is said to have a Comparative Advantage in the commodity in which the degree of superiority is higher and a comparative disadvantage in the good in which the degree of superiority is lower. General applicability of the comparative cost model or the logic of the argument can be understood with a simple example at a micro level. The logic can later be extended to international trade. A Chartered Accountant may be better than another individual X at auditing as well as maintaining books of account but he will still employ an accountant. Similarly, computer software professional may be better at his job as well as typing but he will still employ a typist who may be less efficient at typing. What is the reason for this? The answer is simple; the opportunity cost of spending time in the activity that pays less is too high. If the Chartered Accountant, the software professional spend one hour in writing accounts, typing they will have to forgo the earning in the other activity in which their degree of superiority is higher. Ricardo illustrates the comparative costs theory using a two country-two commodity model and shows that trade between two countries can be profitable even if one of the two nations can produce both the commodities more efficiently than the other nation. The necessary condition for this is that it should have a comparative advantage in the production of one of the commodities. This means that degree of superiority in the case of one good should be more than that for the other good. The time spent on the production of this good should more than make up for the loss of not producing the other good and importing it. (B) Ricardo Comparative Cost Model:- This is a two country two product model. Ricardo has taken England and Portugal as examples. The two goods that they produce in the example are wine and cloth as these were the main production areas in the two countries. He expresses the cost of production in labor time. The money value is introduced later. The student should clearly understand that less number of hours of work per unit of product represents a more efficient system. Labour cost of production in hours - 1 unit of wine; Labour cost of production in hours - 1 unit of cloth Portugal 80 90 England 120 100 In this model, Portugal had an absolute advantage in the production of both the commodities because it produces both the commodities with less labour. According to Adam Smith's theory there is no scope for trade. However Ricardo points out that the theory of comparative cost opens the possibility of trade beneficial to both the countries. Comparative Advantage of Portugal: Portugal not only has an absolute advantage (that is an advantage in terms of the absolute cost) but also has a comparative (relative) advantage in the production of wine. The degree of superiority in the production of wine is greater. It can produce one unit of wine with only 67% (80/120 * 100) of English effort. While it takes 90% (90/100 *100) of English effort to produce on unit of cloth. Therefore Portugal is more efficient in the production of wine than cloth. Comparative Advantage of England : Analogously England has an absolute disadvantage in the production of both wine and cloth, but it has a lesser disadvantage in the production cloth. It can produce wine with 150% (120/80 *100) of Portuguese effort. While it can produce one unit of cloth with 111% (100/90 * 100) of Portuguese effort. Hence, it is less inefficient in the production of cloth. Or has a lesser disadvantage in the production of cloth or one can say it has a comparative advantage in the production of cloth. Costs of Production in Isolation : If England and Portugal do not trade but produce and consume in isolation the prices of the products in the two countries will be determined by their respective local costs of production. In the model we express the cost of one commodity in terms of the other commodity. This has the advantage of considering the labour cost and expressing it in terms of the opportunity cost. If England takes 120 hours of labour to make one unit of wine and 100 hours to make one unit of cloth naturally wine will be more expensive than cloth. The price of one unit of wine in terms of cloth will be 120 divided by 100 (120 / 100) or 1.2 units of cloth. If Portugal takes 80 hours to produce one unit of wine and 90 hours to produce one unit of cloth, cloth will be more expensive than wine and one unit of wine will cost 80 divided by 90 (80/90) or 0.89 units of cloth. Country Cost of Wine in terms of Cloth Portugal 1 unit = 0.89 units of cloth England 1 unit = 1.2 units of cloth Benefits from trade to the participating countries : In a pre trade situation each country's consumption and cost of production depends upon the rate at which it can substitute one product for the other. This is determined by its level of technology and is represented by its production possibility curve. Suppose the possibility of trade is introduced, each country will be able to substitute one good for another at a more favourable rate. The rate at which it can acquire an imported good in exchange for the exported good represents the terms of trade. Terms of Trade = Total Quantity of Goods Exported Total Quantity Goods Imported Terms of trade indicate how much quantity of one domestic product must be exported to import one unit of a foreign good. It is the ratio between (Total Quantity of goods exported and Total Quantity of goods imported.). If more imports can be obtained with less exports in the country the terms of trade will be stronger.. The international terms of trade will be determined through the interaction of demand and supply. The terms of trade will depend upon the strength of each country in the international market. Each country will try to get the maximum possible import with a given amount of export. If England can import one unit of wine at price less than. 1.2 units of cloth it would gain, on the other hand if Portugal could import more than 0.89 units of cloth for one unit of wine it will benefit. If the international price is between 1.2 and 0.89 units of cloth both the countries will gain from trade. The equilibrium rate of exchange for the two goods will be determined between the two values mentioned above. Diagram is pending Vertical Axis represents production of wine. Horizontal axis re represents production of cloth. AE represents the production possibility curve of England AP represents the production possibility curve of Portugal. Distance PE is the area of mutual benefit. e) Gains from Trade : In the absence of any additional information about the strength of the countries, let us assume that the international price of one unit of wine is equal to one unit of cloth. With this rate of exchange, both countries will benefit. England will benefit because it is able to get one unit of wine for a price less than 1.2 units of cloth, which is its domestic exchange ratio with wine. Portugal will benefit because it is able to get more than 0.89 units of cloth for one unit of wine, which is its domestic ratio. Thus trade offers each country the possibility of specializing in the line of its comparative advantage and then exchanging these products for those in which it has a comparative disadvantage. Both countries can reallocate its factors of production to the line in which it has a comparative advantage and then export this product to import the one in which it has a comparative disadvantage. f) Law of Comparative Advantage : When each country specializes in the production of that commodity in which it has a comparative advantage, it leads to specialization and division of labour. With this the total world output of every commodity involved necessarily increases and all the countries involved become better off. In short each country can consume more by trading than it can by remaining in isolation and the total cost of production will be lower for the world economy. g) Lower Total Cost of Production for the World Economy under Comparative Cost : The total cost of production in the world economy will be much lower if both the countries produce the goods in which they have a comparative advantage. Let us look at both the cases. If the two countries do not trade with each other and produce one unit each of wine and cloth, the total cost of producing two units of wine and two units of cloth in terms of labour will be as shown below. On the other hand if the two countries trade on the basis of comparative cost theory the total cost of production of two units of each product will be as shown below. As seen above, the total labour cost is only 360 hours as against 390 when the two countries produced in isolation. This means that the same quantity of goods can be produced at a lower cost or a given amount of labour can produce a much higher level of output.
Country Risk Analysis (Meaning) : All international lending whether to government, a bank, private enterprise of an individual is exposed to country risk. The concept of country risk is broader than sovereign risk, which is the risk of lending to the government of a sovereign nation. Those events that are at least to some extent under the control of government can lead to the materialization of country risk. For example: a default caused by bankruptcy is a country risk, if it is the result of mismanagement of economy by the government, but it is a commercial risk if it is the result of mismanagement of the firm. In case of natural calamities, if they are unforeseeable they are not country risks. But if the past history shows that they have a tendency to secure periodically such as typhoons in South-East Asia, then government can maximize its effect so it will be covered by a country risk. Thus, for the purpose of defining: country risk, control by government is to be understood in a liberal sense. In other words, even if the government can control to some extent at least the impact of an adverse development, even though it cannot control the event itself, still such an event is country risk. Country analysis basically examines the economic strategy of the nation states. It takes holistic approach to understand how a country and particularly its government behaved in the past and is behaving and how it will behave in future. As the government is responsible for providing the framework or infrastructure of the rules of behaviour and institutions through which country develops its internal economic, political and social structure and relates it to its external environment. The country analysis basically studies HOW A PARTICULAR GOVERNMENT DOES ITS JOB.
The Concept of Risk : The Oxford English Dictionary defines `risk' as "exposure to a peril " . From investor's point of view, risk is exposure to loss. Country risk may be defined as, an exposure to a loss in cross border lending, caused by events in a particular country. These events must be at to some extent, under the control of government of that country. Country risk applied to assets only and not to liabilities. The liability risk is excluded from the definition for the sake of consistency. Among foreign assets, the definition of country risk includes only foreign loans. Need for Country Risk Analysis : The practice of country analysis is quite old in government sector as a way to anticipate the behaviour of the other governments. Some industries also need it. For example Petroleum firms used country analysis because their basic input, crude oil is a natural resource controlled by government. Since 1970 ' s, international bankers are I ncreasingly using country risk analysis for identifying and evaluating credi t : worthiness of prospective government borrowers and as a means of changes in interest rates. After World War-II, MNCs started making extensive use of country analysis on account of globalisation trend which made most of the economies of the world open for foreign investment, import and export of technology, etc. At present, before taking any decision about plant location, raising loan and marketing their products, MNCs find it beneficial to carry out country analysis, especially for estimating future prospects of each country. Otherwise, MNC managers may have to face risks of both losing the opportunity from which they could have profited and entering in a country in which they may suffer financially. Even economic policy makers also need country analysis to attract foreign investment to promote economic growth, employment and raise per capita income in the country. MNCs also find it profitable to produce in lower wage countries to keep cost of production at minimum for facing the competition. Recent developments indicate that just as stock market, the international financial market, in the short run, may be disastrously wrong in its collective evaluation of country risk. However, an individual hank may be ahead o the market in its evaluation of country risk, if it has insight based on information and analytical ability superior to the market average. The basic purpose in this case of country risk evaluation is to improve the performance of an individual bank relative to the market average. According to Bhalla and S. Shiva Ramu, "If the bank can, in the short term, access country risk more accurately than the market and can anticipate changes in the risk situation ahead of the market, it can move into countries where the risk is better than the market perception or where the bank perceives an improvement before its competitors, it can fund at the most favourable rates and have smaller losses".
Hofstede's Model of National Culture : According to Geert Hofstede, there is no such thing as a universal management method or management theory, valid across the whole world. Even the word management has different origins and meanings in countries throughout the world. Management is not a phenomenon that can be isolated from other processes taking place in society. It interacts with what happens in the family, at school, in politics and government. It is obviously also related to religion and to beliefs about science. The Five Cultural Dimensions of Hofstede : The cultural dimensions model of Geert Hofstede is a framework that describes five sorts (dimensions) of differences / value perspectives between national cultures : Power distance : The degree of inequality among people which the population of a country considers as normal. Individualism versus collectivism : The extent to which people feel they are supposed to take care for, or to be cared for by themselves, their families or organizations they belong to. Masculinity versus femininity : The extent to which a culture is conducive to dominance, assertiveness and acquisition of things, versus a culture which is more conducive to people, feelings and the quality of life. Uncertainty avoidance : The degree to which people in a country prefer structured over unstructured situations. Long-term versus Shortrterm orientation : Long term : values oriented towards the future, like saving and persistence. Short-term : values oriented towards the past and present, like respect for tradition and fulfilling social obligations.
Global Markets : These are the markets, for which a firm should think globally. Post World-War-Il, economic development created three areas of roughly equal economic size : United States, Canada, Europe and Japan with its neighboring countries. Each of these blocs represents roughly one-third of the world market. Hence, a company that sells only in U.S. is ignoring around two-third of the potential world market. Further, as markets grow more alike, especially in the developed countries, additional sales in Europe and Japan can be gained with a product that may have been initially designed for the U.S. market. As there is a convergence in national markets with European, Japanese and U.S. Markets for certain products displaying similar profiles, hence selling simultaneously to all these markets could maximize sales, especially if the company has introduced its products ahead of competition. Overhead costs can be spread out over a large volume-base, allowing lower price to be charged. Global Technology Markets Technology is a critical element of the value added chain and resources like raw materials and skilled labours. Technology is an essential factor for firms seeking to compete in the world markets using differentiated product strategy thrust. Technology is expensive to develop but patents can protect firm's investment, allowing it to recoup development costs and make a profit. Global Production Resources : Global sourcing of raw materials and scarce commodities can result in their timely delivery and reduced cost. A global strategy allows firm to plan manufacturing configuration across countries to take advantage of the availability of another resource, say, labour. Global Competition :. A global competitor who is strong and unchallenged in its home market can undercut its competitors in their strong markets by deliberately channeling resources into these markets. Such a competitor buys market share with price-cuts and by accepting low profits or even losses for a while. Such threats can be countered only by similar tactics from a similar global position. Time based Global Competition : Time is becoming an important factor in global competition. Speedy introduction of new products and rapid response to competitive actions are essential to maintain competitive strength. Global Customers : As customers themselves become global, their first impulse is to continue to do business with established suppliers. Government Actions : Government can strengthen competitive advantage by subsidising national firms. Government may also participate directly in competition through state-owned enterprises who do not have to worry about profits. Government's taxation policy also plays a key role.
Nature and Scope of Multinational Enterprises : An organisation becomes multinational only because of its operation in many countries. After independence in India many multinational corporations have gained ground. Many United States Companies also have entered and grab all Indian business. They have made number of collaborative agreements with Indian business houses. The great contribution made by Multinational Corporations to developing economics Multinational Corporations have tremendous scope in the country like India which can be evaluated as follows in terms of the contribution they make for the economic growth. Scarce Capital : Scarce capital is one of the main weaknesses of the developing countries like India multinational corporations with their extensive resources have very great potentiality to help the economic development by providing sufficient inflow of scarce capital resources. Transfer of Technology : Technological development and to manage successively with the social change and to replace the obsolete technology is essential for any country. In developing country technology transfer is a must. Multinational are the most effective bridge for technology transfer. Core Sector Lines : The core sector lines which require tremendous capital investment, latest technology, foreign investment, even for 100 % participation, multinational corporations have a very great role to play in this direction. Export Oriented industries and Latest Sophisticated Technology : Multinational corporations have very great capability to fair she in highly export oriented industries and latest sophisticated technology are left open as per the Industrial and Industrial Licensing Policies even for 100 % she of foreign investors. Employment Opportunities : Primary, secondary and tertiary sectors of Indian economy could not be provide adequate gainful employment opportunities to all those who are available for employment, due to this unemployment and full unemployment has become most intense problems of densely populated country like India. Multinational corporations helps with extensive capital and technological resources and are able to provide employment opportunities for unemployed manpower. Adequate Achievement : In modern age innovation and invention and mechanization, computerization are most important factors of industrial development. Multinational are able to gain all these adequate achievements with their vast resources. Corporate Objectives : Improvements of existing products and matching the supply of goods and services with the social and national needs for developed economies and developing economies due to new techniques and methods which leads to large-scale production of new products.Developed countries leads to definite approaches of business organisation to their business by trial and error method for the scope of research and development activities. For the achievement of corporate objective of their subsidiaries, multinationals with •extensive exposure to new methods and techniques are bound to make use of the same. Increase Industrial Productions and National Productivity : For the economic growth the growth of output is an essential prerequisite. To increase industrial production and national productivity multinational corporations can substantially help. Large Scale . Production : Multinational corporations have greater degree of economies of large-scale production. Profit-making Enterprises ' : Multinational Corporations are highly .profit-making enterprises they pay high rate of dividend against equity, due to this dilution principle stressed in India, Indian citizens make use of the opportunity to invest more in the business of multinational company. Industrial Development : Due to large scope of multinationals to help in a subsidiary way in India, which would help industrial development and better entrepreneur development. Latest Technology / Increase in Standard of Living : Multinational Corporations provides new and latest products into the market, and due to multinational corporations different extensive programme create an awareness to raise to a higher rank or help to sell which warns ultimately help to bring about improvement in the standard of living. Manpower Development : Multinational contributions can play fairly great role in development of the manpower. Improvement in the Balance of Payment : Multinationals undertake profit making so it can make considerable amount of contribution to national revenue (Government department) by way tax on certain goods or imports and different duties which have ability for the improvement of balance of payment position by increasing exports of the host countries. Potential of Diversification : Multinational corporations have great ability and capability of being developed or used for diversification. Development of Professionalism : Multinational corporations serve as a means for improvement of professionalism development in management
Product Innovations : In general, multinational corporation possess adequate research and development facilities. They are busy in the task to develop new products and superior designs of existing products. Hence, they have greater production opportunities than the national companies. Technological Superiorities Because of technological superiorities, multi-national corporations have been encouraged by the UDCs to take part in their industrial development. These countries consider transfer of technology useful on the following grounds : Severe competition : The UDCs have to face competition to sell their product in international markets. Solution for under development : Industrialization represents the most way out of under-development. Insufficient resources : The resources of these countries are insufficient to sustain the industrial progress on their own. Inability to exploit manpower, materials, money etc. : Local manpower, materials, local capital equipment etc. have to be optimally exploited and UDCs are unable to accomplish this task. Unless the products produced by underdeveloped countries earn quality specifications and standard, they have no demand in the international competitive markets. The multinational corporations help to promote marketing for such commodities. Market Superiorities : Multinational firms avail a number of market superiorities such as (i) Efficient warehousing facilities (ii) Market reputation; (iii) Reliable market information; (iv) Effective advertising; and (v) Sales promotion techniques etc. over the national companies. Financial Superiorities : Multinational corporation have also financial superiorities as compared to other national companies like; Easy assess to external capital market; international reputation; high level of funds utilization; huge financial resources etc. Expansion of Market : Multinational corporation expand its operation in a wider market and as a result, they earn the world wide advance which further seeks more and more extension of its activities beyond the physical boundaries of the country in which it is incorporated. Thus, urge for the expansion of business activities are greatly responsible for the growth of multi-national corporations.
Transfer of Capital : The MNCs have played significant role to help the developing countries to obtain capital from the advanced countries of the world. Hence, they transfer capital froth countries where it is abundant to the countries where it is scarce. Transfer of Superior 'technology : UDCs are technologically backward. They have inefficient resources to carry on research and development activities of their own. Thus, the MNCs serve as an agent to transfer the superior technology to their countries. Effect on Balance of Payment : The operations of MNCs there is a favourable effect on the balance of payment of a country due to they possess a global marketing organisations through which they can promote exports from developing countries. Linkage Effects : The UDC lack sufficient degree of linkage with other industries. Thus, the MNCs produce linkage effects in the host countries. They also help in the creation of linked industries which are of forward or backward type. Development of Human Resources Capital : MNCs are helpful in developing human resource capital. They are the carriers of knowledge and experience in different spheres. Thus, sophisticated technology, improved skill and knowledge to underdeveloped countries is provided by them. Employment Opportunities : Large scale employment opportunities are created by MNCs in the less developed countries. Basically, employment generation is a function of two variables viz. (i) Growth of investment, (ii) Nature of technology. Hence, the MNCs have encouraged investment in productive channels of underdeveloped countries, conversely, generate employment opportunities considerably.
Transfer of Technology a Costly Affair : The transfer of technology proves externally costly. They charge exorbitant fees, royalty and other Changes. Profit Oriented : The MNCs are primarily profit oriented. The overall economic development is out of their considering. They are reluctant to tolerance any obstacle that prevents them from maximising their profits. Production of Non-essential Goods : MNCs give preference to participate in the mass consumption and non-essential goods production. Promote Regional Disparities : The MNCs encourage regional economic disparities. They create inlands of development and prosperity in the ocean of underdevelopment. Corrupt Practices : There are undesirable and corrupt practices in their business operations of MNCs. Exploitation of Labour : MNCs establish ventures in UDC to exploit the cheap labour available there. Hence, they are interested in maintaining a gap between the wages prevailing in their home country and the host country. Exploitation of natural resources :
Giant Size : Multinational companies are large business organisations with huge capital. They have their origin in the developed countries and they conduct their business activities in many countries. e.g. The world's biggest producer of Macadamia nuts, Mauna Loa, which is a Hawaiin company has a turnover of $110 billion. Centralised Management : There exists centralisation of management in case of multinational companies. All important policy decisions are taken at the headquarters. The subsidiary companies function as per the directions given by the head office or the parent company. Number of Activities Undertaken ; Multinationals undertake a number of activities. These include manufacturing, research and development, marketing, transfer of technology and so on. They are mostly engaged in hi-tech and consumer goods industries. Dominate Global Trade : Multinational companies have played an important role in the expansion of world trade. They control between a quarter and world production. They also control around 40% of the world trade. Governed by Local Laws : Multinational corporations have to modify their functioning according to the laws prevailing in the country in which they operate e.g. liquor advertisements are not allowed on Doordarshan in India So the multinationals have to think of other media for promoting their product 'liquor‘. Competitive Prices : Multinational companies sell their products at a competitive price. This is possible as they undertake effective cost control measures. They avoid all unproductive expenses. e.g. Mobile handsets when introduced in India were available upwards of Rs. 60,000 however now the same are available from Rs. 5,000 onwards. Excellent Quality : Most of the multinationals are quality conscious. Many of them strive for getting an ISO certification. An ISO certified product is of international standard. Many a times they delegate manufacturing activities to the subsidiaries but before accepting the product, they adopt stringent quality control standards.
A majority of externally oriented Indian firms continue to be exporters, selling to distribution channels abroad. Very few have set up own distribution or manufacturing facilities abroad. Although, some developing countries like South Korea and Taiwan, whose economic position has not been better than that of India, have made substantial FDI in other countries. Inspite of planned developments during last five decades, Indian companies have not made any significant foreign investment so far. Although Govt. of India's policy has been one of encouraging foreign investments by Indian companies subject to certain conditions, several factors including domestic economic policy and domestic economic situation have been obstacles to foreign investments by Indian.' companies. By restricting the areas of operations and growth, the government policy seriously constrained the potential of Indian companies to make entry into foreign countries through investment. Added to this was the attraction of the protected domestic market, which was the seller's market that made the Indian companies to ignore the foreign markets. As a result, international business continues to constitute an insignificant proportion of a company's business. Mostly it does not figure in the strategic plans for the future event. Secondly, by international standards, most Indian companies are small or medium size ones. For them capital is too scarce a commodity to be invested abroad. In addition, due to foreign exchange problems the Indian Government was not very enthusiastic about investment abroad. Even the risk perception of overseas investment is relatively higher. However, the liberalization policy since 1991, aiming at integrating Indian economy with global economy, it seeks to reverse the trend. Several major policy initiatives have been taken up. The government has notified the RBI as being the single window clearance authority for all FDI abroad upto 4 million dollars investment on a fast track basis, giving clearance within 21 days. By the end of 1991, a total of 66 wholly owned subsidiaries were established by Indian companies in 18 countries and total equity of these 66 subsidiaries was mere Rs. 73.84 crores. Out of these 66 foreign subsidiaries, only 44 were operational by the end of 1991. The remaining were under implementation. Out of these 44 subsidiaries 13 were in U.K., 11 in USA , 4 in Singapore, and 3 each in Germany and Switzerland and 2 in Hong Kong. At the end of 1991, there were also 245 Indian joint ventures abroad dispersed over 43 countries. The largest number of the Indian JVS is in Asia, Europe, America and Africa. Indian JVS are mostly in engineering, construction, consultancy, shipping, trading, textiles, electrical and chemicals. The new economic policy of India is expected to encourage foreign investments by Indian companies. The curb on growth, even by mergers and acquisitions has been removed. Financing restrictions have been eased, several areas of business are opened to the private sector companies and foreign tie-up policies have been liberalized. Further, domestic market is becoming increasingly competitive hence many firms are aiming at global competitiveness. For this purpose, international. business exposure as against mere exports, will be an important element of corporate growth strategy. Some firms, especially in consumers goods sector like textile, fabrics, molded luggage, bicycles, etc. have reached a production level where it will be necessary to move out to other markets. Further economies like Cambodia, Laos, Myanmar, Vietnam, etc. lack adequate import finance. Exploitation of these markets on long-term basis is possible only through setting up operations there only. At the same time, Indian firms in the newly emerging services sector, say software, finance, etc. need to have an overseas presence to ensure better customer satisfaction delivery without which market penetration may not be possible. Over last five decades of planned development, Indian industry has achieved considerable maturity in terms of technological and manpower skills. In addition, there is compulsion to earn valuable foreign exchange. Thus, the following motivating factors have influenced Indian companies to go abroad - Sharing of experience in fields where adequate capabilities have been developed in the home country. Setting up enterprises of a comparatively medium and small sizes industries in which MNCs have not shown much interest. Expansion of capacity utilization. Overcoming constraint of home market growth. Safeguarding of markets to which goods have been exported and using ventures of promoting exports. Diversifying business risks. The main resources of preferring joint venture approach by Indian companies rather than going for FDI are as follows : The JV partner can provide location's specific knowledge and valuable local contacts. Joining hands with locally influential companies can minimize political problems and risks. The up-front capital requirement becomes lower. Financial risks are shared. To take advantage of synergy in terms of complementary of each others strengths, for example, technology, brand equity, distribution channels Etc. In developing countries, where bureaucracy is strong an ally can better deal with it. Many times there is no option because local government may not allow any other routes. The total equity (Indian component) in operating 177 Indian JVs was Rs. 179.04 crores. The approved Indian equity in those 347 IJVs under implementation was approximately Rs. 1,398.96 crores. Among the 177 joint ventures 56% are engaged in manufacturing activities while 44% are in non-manufacturing area. In manufacturing include light engineering and allied products, chemicals, pharmaceuticals, food products, leather and rubber products, iron and steel, commercial vehicle, crushing and refining oil seeds, glass and glass products, paper and pulp, cement etc. Under the non-manufacturing sector generally includes hotels, trading, marketing consultancy, engineering and construction. These are dispersed over 60 countries although more than 70% of the approved IJVs are concentrated in 13 countries. Thus, India's capabilities for undertaking bold joint ventures in other LDCs have by now been well recognized all over. The main advantage that India offers for this , aspects of development planning are The intermediate technology offered by India is mostly labour intensive that easily meets the requirements of these co-developing countries. Not-so-sophisticated technology offered by India that basically works at lower volumes is preferred by the LDCs. Many cultural and ethnic affinities with the partner country make it easily assimilable and replicable in their particular socio-economic conditions. An inherent urge to reduce their perpetual dependence on the exploitative western agencies compels them to diversify their economic relations with other developing country partners. Continuing trade imbalances with the industrialized nations helps invoke greater south-south linkages. A relatively favourable image of India as a partner in progress for promoting new joint ventures.
Managing in Multinational Environment : Monitoring problems is more difficult in the international environment than in domestic environment. Similarly dealing with them is equally difficult. Each foreign country is different from the home country and also from another countries, where a firm might do business. As MNC enter more and more national markets it may lose its ability to attend to any one problem. Managers face difficulty in adjusting to the increased complexity, while some managers never do. Large domestic companies focus on those elements of their business environment that may change, similarly over the long run do multinational companies. When the company is new in foreign land it has to learn local laws, customs, languages etc. aspects of culture which do not change rapidly. Sometimes it is not so easy. MNCs must learn to deal with foreign patterns of economic growth, investment and inflation. They must also concern themselves with various aspects of international trade, such as the value of a country's currency relative to other currencies; or the foreign exchange rate and its balance of payments as well as the extent of controls on imports and exports, on foreign investors and on the repatriation of foreign earning to the home country of a MNC. All The firms that want to expand in foreign countries must also assess their political stability, the business attitude of their governments, ruling party and opposition and the effectiveness of its governments ' bureaucracy. Both a country's internal and foreign policies can influence the business environment. An MNC must adjust to a multinational legal environment that includes laws and regulations dealing with taxes, tariffs, quotas, copyright laws and currency exchange. Home country laws may also affect overseas operations. For example, the Foreign Corrupt Practices Act of 1977 makes it illegal for US firms to bribe foreign political decision makers, an accepted practice in many countries. Critics charge that the Act . hampers US business unduly since ours is the only nation that has passed such a law. To succeed in foreign country, business managers must know and adapt to. ...the nature of those societies, where they do business. Different cultures have different concepts of formalities and courtesy, even different ideas about..It is important to understand a nation's social structure, separate sub-groups based upon religion, ethnicity, language, sex, age and class. Multinational executives must adapt to the fact that the levels of technology vary largely among countries. Technological change may be resisted in under-developed countries hence support of host government is necessary in such cases. Handling Differences : Managers pay particular attention to national peculiarities when they are deciding whether to enter or stay in a particular country and are considering ways of reducing the risks of their ventures. National peculiarities are also important in day-to-day operations. Sometimes these differences are difficult to see but in other instances outsiders can spot opportunities in culture that take factors in their own business environment for granted. For example, Japanese stock traders attempt dividend capture which involves trading large blocks almost instantaneously to capture available dividends. The policy is perfectly legal but rarely practiced on such a large scale by American traders. MNCs must forecast economic condition in the countries they operate in, sell to or purchase from. Large companies have their own staff of economists but smaller firms rely on general knowledge of non-specialized Line Managers and on forecasts supplied by private companies, governments and banks. MNCs must know about any country where it does business what is the exchange rate between its currency and the currencies of other nations. When a company enters into a transaction with overseas customers or suppliers and it is not paid immediately, it is in effect gambling on the currency in which it will be paid. When millions of dollars change hands even small fluctuation can be significant. As a result, many MNCs hedge and cover their international financial transactions to protect themselves from possible fluctuations in currency exchange rates. Companies can try to cover themselves against losses by negotiating contracts that specify which currency will be used in payment as well as by taking out and making loans in foreign currencies. Adjusting Management Process : Operating in the international environment also affects the ways in which the basic management function of planning,, organizing, leading and controlling is carried out. Taking macro-basis what are the special steps needed in planning and control systems of MNCs. Let us briefly discuss these aspects. Planning : The general reasons that companies engage themselves in strategic planning are : The increasing rate of technological change. The growing complexity of both the managerial job and the external environment. The longer lead time between current decision and their future results. When MNC is concerned there are three additional factors that make strategic planning essential. The scope of the MNC's management task - the many varied tasks required running a global organization. The increase in the internationalization of the country, the greater distances between the firms' subsidiaries, the differences between their environment, and their complex interrelationships. The necessity of greater efficiency due to increased and more varied, competition. This desire for efficiency has led many organizations to institute worldwide marketing and production standards in an effort to reduce costs. II . Organising: Like other organizations, MNCs must accomplish basic-organizing functions. It is especially important for MNCs to strike an optimum balance between two basic organizational tasks that tend to inhibit one another. The first of their tasks is finding the most efficient manner to combine work into units that is departmentalization. This must be balanced against the second task, the co-ordination of the work so that the organization's overall objectives can be met. During the process of internationalization the MNCs go through frequent reorganization and experimentation with different organizational structures as the company seeks to balance the requirement of changing strategies, capabilities and environments. Even when the company has achieved a global orientation, its operations in many different environments make it difficult to decide which departmentalization method will work the best. Mostly the operations are partitioned according to either products or geography. Less frequently, departments will be created according to types of customers or organizational function such as production, marketing, finance, personnel, etc. No matter which form is chosen, there are going to be tough trade offs . Because of these trade offs, many MNCs adopt some form of matrix structure, but substantial managerial skill is required to make them work well and to be able to work within them. MNCs also have an organizational choice of joining a foreign firm or with several firms. They may do so to exploit opportunities in the other firms country, in the Third country or in both .The firms that forge these strategic alliances will try either to assume "leadership as low cost suppliers " or to come forward with the best possible product or service or both. III. Staffing : For MNCs, finding the right people for organizational companies. Talented employees are positions is more difficult than domestic often unwilling to relocate to another country. On the other hand MNCs have the whole world of talent to draw on. Most important aspects; selection and training of any personnel who will have a high level of international involvement, either by being stationed abroad or by interacting frequently with managers and other individuals from overseas. Many men felt that women were unsuitable for and uninterested in international jobs, particularly in countries with patriarchal social structures, which is not true although even today less than three percent of all international managers are women. International compensation is also tricky area for MNCs. Often there are conflicts within the organization between attempts to adopt to differences among countries and pressures to maintain uniform compensation policies and procedures throughout the organization as a whole. If an organization adopts inconsistent salary scales, it will have difficulty in moving managers from high paying countries to low paying ones. In addition, jealousy may arise among managers who receive different compensations for comparable jobs. Yet if company-wise uniform pay scales are decided on, the MNC will find itself paying well above the market level in some countries which can be considered as unnecessary expense. In other countries its salary scales may be below the country's norm and the MNC may have trouble attracting and retaining skilled managers. One solution that many companies have adopted is to pay a similar base salary and then add on various bonuses and allowances according to individual situations. An organization composed of individuals with a wide variety of backgrounds, nationalities and cultures, offers many possibilities for conflict and disagreement. Based on the theories of conflict management and its relationship to creativity, an MNC has an opportunity to capitalize on its diversity. Although poor resolution the of conflict will hurt potential to open up higher levels of performance, effective resolution creativity and performance. IV. Controlling : MNC can centralize all aspects of control and organizational decision-making at its headquarters but this would be extremely inefficient and impractical. It can be said of allowing all decision making at the business unit level. Generally, the decision-making and control processes are distributed between the company headquarters and its subsidiaries in each nation. The two central models used by MNCs at present are bureaucratic control and culture control. Bureaucratic control employs explicit rules and regulations that outline desired output and behaviour. Culture control, which is common with Japanese companies, utilizes implicit and informal direction based on a broad company culture. Such firms tend to train their managers extensively before they are sent overseas and give them more authority and autonomy and require fewer format reports. All MNCs need to have their affiliates report regularly on new technology, market developments and competitors' actions. Such reports help headquarters in vital task of developing and implementing an effective management evaluation system. The task of tracking events in the international environment and developing effective system for evaluating local management can be quite complex due to variety of circumstances under which each subsidiaries and its management operates. Leadership : The issue of leadership in MNC is mostly discussed and debated aspect of selecting a managerial approach. Hopstede study concluded that on account of differences between nations, it is unrealistic to expect that any single management approach to be applicable worldwide. For example, US theories on leadership are suitable for leading people in a culture that is high in individualism. Applying these theories to countries that are collectivist in nature, especially in third world countries, is likely to yield ineffective employer-employee relationship. However, the success of Japanese companies suggests that Japanese management practices may offer some guidelines toward effective management in general. The Internationalization of Management :The world today is a global village as advances in technology, in aerospace communications fiber optics and computers, link people from around the globe. In the context of internationalization of management, it may be stated that Japan, USA, or Korea but many other countries can contribute to managerial theory and practice. It has been observed that in an environment of global competition, only the best companies will succeed and survive and then the management will be an important factor for this success. Koontz and Weibrich observe that at present, the role of manager is steadily expanding. New approaches have to be developed to avoid managerial obsolensce and improve managerial productivity and efficiency. There is a need for more effective planning, flexible approaches to organizing, better managing of human resources, are environment favourable for motivation and methods for effective and efficient control that use the new information and technology. The field of management urgently requires intellectual and inspirational leadership around the world to make organization more productive for the benefit of humanity.
The Governments of the COMMONWEALTH OF AUSTRALIA, the KINGDOM OF BELGIUM, The UNITED STATES OF BRAZIL, BURMA, CANADA, CEYLON, the REPUBLIC OF CHILE, the REPUBLIC OF CHINA, the REPUBLIC OF CUBA, the CZECHOSLOVAK REPUBLIC, the FRENCH REPUBLIC, INDIA, LEBANON, the GRAND-DUCHY OF LUXEMBURG, the KINGDOM OF THE NETHERLANDS, NEW ZEALAND, the KINGDOM OF NORWAY, PAKISTAN, SOUTHERN RHODESIA, SYRIA, the UNION OF SOUTH AFRICA, the UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND, The UNITED STATES OF AMERICA
The boxes In WTO terminology, subsidies in general are identified by “boxes” which are given the colours of traffic lights: green (permitted), amber (slow down — i.e. be reduced), red (forbidden). In agriculture, things are, as usual, more complicated. The Agriculture Agreement has no red box, although domestic support exceeding the reduction commitment levels in the amber box is prohibited; and there is a blue box for subsidies that are tied to programmes that limit production. There are also exemptions for developing countries. Amber box All domestic support measures considered to distort production and trade (with some exceptions) fall into the amber box, which is defined in Article 6 of the Agriculture Agreement as all domestic supports except those in the blue and green boxes. These include measures to support prices, or subsidies directly related to production quantities. These supports are subject to limits: “de minimis” minimal supports are allowed (5% of agricultural production for developed countries, 10% for developing countries); the 30 WTO members that had larger subsidies than the de minimis levels at the beginning of the post-Uruguay Round reform period are committed to reduce these subsidies. The reduction commitments are expressed in terms of a “ Total Aggregate Measurement of Support” (Total AMS ) which includes all supports for specified products together with supports that are not for specific products, in one single figure. In the current negotiations, various proposals deal with how much further these subsidies should be reduced, and whether limits should be set for specific products rather than continuing with the single overall “aggregate” limits. Blue box This is the “amber box with conditions” — conditions designed to reduce distortion. Any support that would normally be in the amber box, is placed in the blue box if the support also requires farmers to limit production (details set out in Paragraph 5 of Article 6 of the Agriculture Agreement). At present there are no limits on spending on blue box subsidies. In the current negotiations, some countries want to keep the blue box as it is because they see it as a crucial means of moving away from distorting amber box subsidies without causing too much hardship. Others wanted to set limits or reduction commitments, some advocating moving these supports into the amber box. Green box The green box is defined in Annex 2 of the Agriculture Agreement. In order to qualify, green box subsidies must not distort trade, or at most cause minimal distortion (paragraph 1). They have to be government-funded (not by charging consumers higher prices) and must not involve price support. They tend to be programmes that are not targeted at particular products, and include direct income supports for farmers that are not related to (are “decoupled” from) current production levels or prices. They also include environmental protection and regional development programmes. “Green box” subsidies are therefore allowed without limits, provided they comply with the policy-specific criteria set out in Annex 2. In the current negotiations, some countries argue that some of the subsidies listed in Annex 2 might not meet the criteria of the annex’s first paragraph — because of the large amounts paid, or because of the nature of these subsidies, the trade distortion they cause might be more than minimal. Among the subsidies under discussion here are: direct payments to producers (paragraph 5), including decoupled income support (paragraph 6), and government financial support for income insurance and income safety-net programmes (paragraph 7), and other paragraphs. Some other countries take the opposite view — that the current criteria are adequate, and might even need to be made more flexible to take better account of non-trade concerns such as environmental protection and animal welfare. The conceptual framework The agricultural package of the Uruguay Round has fundamentally changed the way domestic support in favour of agricultural producers was treated under the GATT 1947. A key objective has been to discipline and reduce domestic support while at the same time leaving great scope for governments to design domestic agricultural policies in the face of, and in response to, the wide variety of the specific circumstances in individual countries and individual agricultural sectors. The approach agreed upon is also aimed at helping ensure that the specific binding commitments in the areas of market access and export competition are not undermined through domestic support measures. The main conceptual consideration is that there are basically two categories of domestic support — support with no, or minimal, distortive effect on trade on the one hand (often referred to as “Green Box” measures) and trade-distorting support on the other hand (often referred to as “Amber Box” measures). For example, government provided agricultural research or training is considered to be of the former type, while government buying-in at a guaranteed price (“market price support”) falls into the latter category. Under the Agreement on Agriculture, all domestic support in favour of agricultural producers is subject to rules. In addition, the aggregate monetary value of Amber Box measures is, with certain exceptions, subject to reduction commitments as specified in the schedule of each WTO Member providing such support. The Green Box The Agreement on Agriculture sets out a number of general and measure-specific criteria which, when met, allow measures to be placed in the Green Box (Annex 2). These measures are exempt from reduction commitments and, indeed, can even be increased without any financial limitation under the WTO. The Green Box applies to both developed and developing country Members but in the case of developing countries special treatment is provided in respect of governmental stockholding programmes for food security purposes and subsidized food prices for urban and rural poor. The general criteria are that the measures must have no, or at most minimal, trade-distorting effects or effects on production. They must be provided through a publicly-funded government programme (including government revenue foregone) not involving transfers from consumers and must not have the effect of providing price support to producers. Government service programmes The Green Box covers many government service programmes including general services provided by governments, public stockholding programmes for food security purposes and domestic food aid -as long as the general criteria and some other measure-specific criteria are met by each measure concerned. The Green Box thus provides for the continuation (and enhancement) of programmes such as research, including general research, research in connection with environmental programmes, and research programmes relating to particular products; pest and disease control programmes, including general and product-specific pest and disease control measures; agricultural training services and extension and advisory services; inspection services, including general inspection services and the inspection of particular products for health, safety, grading or standardization purposes; marketing and promotion services; infrastructural services, including electricity reticulation, roads and other means of transport, market and port facilities, water supply facilities, etc; expenditures in relation to the accumulation and holding of public stocks for food security purposes; and expenditures in relation to the provision of domestic food aid to sections of the population in need. Many of the regular programmes of governments are thus given the “green light” to continue. Direct payments to producers The Green Box also provides for the use of direct payments to producers which are not linked to production decisions, i.e. although the farmer receives a payment from the government, this payment does not influence the type or volume of agricultural production (“decoupling”). The conditions preclude any linkage between the amount of such payments, on the one hand, and production, prices or factors of production in any year after a fixed base period. In addition, no production shall be required in order to receive such payments. Additional criteria to be met depend on the type of measure concerned which may include: decoupled income support measures; income insurance and safety-net programmes; natural disaster relief; a range of structural adjustment assistance programmes; and certain payments under environmental programmes and under regional assistance programmes. Other exempt measures In addition to measures covered by the Green Box, two other categories of domestic support measures are exempt from reduction commitments under the Agreement on Agriculture (Article 6). These are certain developmental measures in developing countries and certain direct payments under production-limiting programmes. Furthermore, so-called de minimis levels of support are exempted from reduction. Developmental measures The special and differential treatment under the Green Box aside, the type of support that fits into the developmental category are measures of assistance, whether direct or indirect, designed to encourage agricultural and rural development and that are an integral part of the development programmes of developing countries. They include investment subsidies which are generally available to agriculture in developing country Members, agricultural input subsidies generally available to low-income or resource-poor producers in developing country Members, and domestic support to producers in developing country Members to encourage diversification from growing illicit narcotic crops. Blue Box Direct payments under production limiting programmes (often referred to as “Blue Box” measures) are exempt from commitments if such payments are made on fixed areas and yield or a fixed number of livestock. Such payments also fit into this category if they are made on 85 per cent or less of production in a defined base period. While the Green Box covers decoupled payments, in the case of the Blue Box measures, production is still required in order to receive the payments, but the actual payments do not relate directly to the current quantity of that production. De minimis All domestic support measures in favour of agricultural producers that do not fit into any of the above exempt categories are subject to reduction commitments. This domestic support category captures policies, such as market price support measures, direct production subsidies or input subsidies. However, under the de minimis provisions of the Agreement there is no requirement to reduce such trade-distorting domestic support in any year in which the aggregate value of the product-specific support does not exceed 5 per cent of the total value of production of the agricultural product in question. In addition, non-product specific support which is less than 5 per cent of the value of total agricultural production is also exempt from reduction. The 5 per cent threshold applies to developed countries whereas in the case of developing countries the de minimis ceiling is 10 per cent. Reduction commitments Twenty-eight Members (counting the EC as one) had non-exempt domestic support during the base period and hence reduction commitments specified in their schedules. The reduction commitments are expressed in terms of a “Total Aggregate Measurement of Support” (Total AMS) which includes all product-specific support and non-product-specific support in one single figure. Members with a Total AMS have to reduce base period support by 20 per cent over 6 years (developed country Members) or 13 per cent over 10 years (developing country Members). In any year of the implementation period, the Current Total AMS value of non-exempt measures must not exceed the scheduled Total AMS limit as specified in the schedule for that year. In other words, the maximum levels of such support are bound in the WTO. In the case of Members with no scheduled reduction commitments, any domestic support not covered by one or another of the exception categories outlined above, must be maintained within the relevant “product-specific” and “non-product-specific” de minimis levels.
PATENT - The word patent originates from the Latin patere, which means "to lay open" (i.e., to make available for public inspection). More directly, it is a shortened version of the term letters patent, which was a royal decree granting exclusive rights to a person, predating the modern patent system. Similar grants included land patents, which were land grants by early state governments in the USA, and printing patents, a precursor of modern copyright. COPY RIGHTS - Copyright is a form of protection provided to the authors of " original works of authorship " including literary, dramatic, musical, artistic, and certain other intellectual works, both published and unpublished. The 1976 Copyright Act generally gives the owner of copyright the exclusive right to reproduce the copyrighted work, to prepare derivative works, to distribute copies or phonorecords of the copyrighted work, to perform the copyrighted work publicly, or to display the copyrighted work publicly. The copyright protects the form of expression rather than the subject matter of the writing. For example, a description of a machine could be copyrighted, but this would only prevent others from copying the description; it would not prevent others from writing a description of their own or from making and using the machine. Copyrights are registered by the Copyright Office of the Library of Congress. TRADE MARKS - A trademark is a word, name, symbol or device which is used in trade with goods to indicate the source of the goods and to distinguish them from the goods of others. A service mark is the same as a trademark except that it identifies and distinguishes the source of a service rather than a product. The terms " trademark " and " mark " are commonly used to refer to both trademarks and servicemarks. Trademark rights may be used to prevent others from using a confusingly similar mark, but not to prevent others from making the same goods or from selling the same goods or services under a clearly different mark. Trademarks which are used in interstate or foreign commerce may be registered with the Patent and Trademark Office. The registration procedure for trademarks and general information concerning trademarks is described in a separate pamphlet entitled " Basic Facts about Trademarks ". DESIGN - is the creation of a plan or convention for the construction of an object or a system (as in architectural blueprints, engineering drawing, business process, circuit diagrams and sewing patterns). Design has different connotations in different fields (see design disciplines below). In some cases the direct construction of an object (as in pottery, engineering, management, cowboy coding and graphic design) is also considered as design. TRADE SECRETS - trade secret is a formula, practice, process, design, instrument, pattern, or compilation of information which is not generally known or reasonably ascertainable, by which a business can obtain an economic advantage over competitors or customers. In some jurisdictions, such secrets are referred to as "confidential information", but should not be referred to as "classified information", due to the nature of the word "classified" in the USA Some additional differences between a copyright and a trademark are as follows: 1. The purpose of a copyright is to protect works of authorship as fixed in a tangible form of expression. Thus, copyright covers: a) works of art (2 or 3 dimensional), b) photos, pictures, graphic designs, drawings and other forms of images; c) songs, music and sound recordings of all kinds; d) books, manuscripts, publications and other written works; and e) plays, movies, shows, and other performance arts. 2. The purpose of a trademark is to protect words, phrases and logos used in federally regulated commerce to identify the source of goods and/or services. 3. There may be occasions when both copyright and trademark protection are desired with respect to the same business endeavor. For example, a marketing campaign for a new product may introduce a new slogan for use with the product, which also appears in advertisements for the product. However, copyright and trademark protection will cover different things. The advertisement's text and graphics, as published in a particular vehicle, will be covered by copyright - but this will not protect the slogan as such. The slogan may be protected by trademark law, but this will not cover the rest of the advertisement. If you want both forms of protection, you will have to perform both types of registration. 4. If you are interested in protecting a title, slogan, or other short word phrase, generally you want a trademark. Copyright law does not protect a bare phrase, slogan, or trade name. 5. Whether an image should be protected by trademark or copyright law depends on whether its use is intended to identify the source of goods or services. If an image is used temporarily in an ad campaign, it generally is not the type of thing intended to be protected as a logo. 6. The registration processes of copyright and trademark are entirely different. For copyright, the filing fee is small, the time to obtain registration is relatively short, and examination by the Copyright Office is limited to ensuring that the registration application is properly completed and suitable copies are attached. For trademark, the filing fee is more substantial, the time to obtain registration is much longer, and examination by the Trademark Office includes a substantive review of potentially conflicting marks which are found to be confusingly similar. While copyright registration is primarily an administrative process, trademark registration is very much an adversarial process. 7. Copyright law provides for compulsory licensing and royalty payments - there is no analogous concept in trademark law. Plus, the tests and definition of infringement are considerably different under copyright law and trademark law.
An attempt was made to re integrate textiles in GATT in order to away with multi fibers arrangement (MFA). Textile has been included in the Dunkel proposal. According to the Uruguay Round agreement textile sector is fully integrated in the GATT from 1 st January,2005. Developed countries dismantled the import quotas on garment and textile from 1 st January, 2005. Quota Abolition in Textiles :- WTO members abolished quotas on trade in textiles and clothing on 1january,2005. Consequently, prices started declining and the major buyers are narrowing their sources. Large Asian countries with vertically integrated industries are becoming the worlds leading suppliers. Signs of Industry consolidation are visible particularly in smaller and African countries. Lease developed countries and small vulnerable countries like Cambodia, Haiti and Lesotho, with their low value products, fragmented industries would be adversely affected by the abolition of quota system. As such, they should make strategies to integrate with the industry in larger countries.
1. The multilateral trading system embodied in the World Trade Organization has contributed significantly to economic growth, development and employment throughout the past fifty years. We are determined, particularly in the light of the global economic slowdown, to maintain the process of reform and liberalization of trade policies, thus ensuring that the system plays its full part in promoting recovery, growth and development. We therefore strongly reaffirm the principles and objectives set out in the Marrakesh Agreement Establishing the World Trade Organization, and pledge to reject the use of protectionism. 2. International trade can play a major role in the promotion of economic development and the alleviation of poverty. We recognize the need for all our peoples to benefit from the increased opportunities and welfare gains that the multilateral trading system generates. The majority of WTO members are developing countries. We seek to place their needs and interests at the heart of the Work Programme adopted in this Declaration. Recalling the Preamble to the Marrakesh Agreement, we shall continue to make positive efforts designed to ensure that developing countries, and especially the least-developed among them, secure a share in the growth of world trade commensurate with the needs of their economic development. In this context, enhanced market access, balanced rules, and well targeted, sustainably financed technical assistance and capacity-building programmes have important roles to play. 3. We recognize the particular vulnerability of the least-developed countries and the special structural difficulties they face in the global economy. We are committed to addressing the marginalization of least-developed countries in international trade and to improving their effective participation in the multilateral trading system. We recall the commitments made by ministers at our meetings in Marrakesh, Singapore and Geneva, and by the international community at the Third UN Conference on Least-Developed Countries in Brussels, to help least-developed countries secure beneficial and meaningful integration into the multilateral trading system and the global economy. We are determined that the WTO will play its part in building effectively on these commitments under the Work Programme we are establishing. 4. We stress our commitment to the WTO as the unique forum for global trade rule-making and liberalization, while also recognizing that regional trade agreements can play an important role in promoting the liberalization and expansion of trade and in fostering development. 5. We are aware that the challenges members face in a rapidly changing international environment cannot be addressed through measures taken in the trade field alone. We shall continue to work with the Bretton Woods institutions for greater coherence in global economic policy-making. 6. We strongly reaffirm our commitment to the objective of sustainable development, as stated in the Preamble to the Marrakesh Agreement. We are convinced that the aims of upholding and safeguarding an open and non-discriminatory multilateral trading system, and acting for the protection of the environment and the promotion of sustainable development can and must be mutually supportive. We take note of the efforts by members to conduct national environmental assessments of trade policies on a voluntary basis. We recognize that under WTO rules no country should be prevented from taking measures for the protection of human, animal or plant life or health, or of the environment at the levels it considers appropriate, subject to the requirement that they are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, and are otherwise in accordance with the provisions of the WTO Agreements. We welcome the WTO´s continued cooperation with UNEP and other inter-governmental environmental organizations. We encourage efforts to promote cooperation between the WTO and relevant international environmental and developmental organizations, especially in the lead-up to the World Summit on Sustainable Development to be held in Johannesburg, South Africa, in September 2002. 7. We reaffirm the right of members under the General Agreement on Trade in Services to regulate, and to introduce new regulations on, the supply of services. 8. We reaffirm our declaration made at the Singapore Ministerial Conference regarding internationally recognized core labour standards. We take note of work under way in the International Labour Organization (ILO) on the social dimension of globalization. 9. We note with particular satisfaction that this conference has completed the WTO accession procedures for China and Chinese Taipei. We also welcome the accession as new members, since our last session, of Albania, Croatia, Georgia, Jordan, Lithuania, Moldova and Oman, and note the extensive market-access commitments already made by these countries on accession. These accessions will greatly strengthen the multilateral trading system, as will those of the 28 countries now negotiating their accession. We therefore attach great importance to concluding accession proceedings as quickly as possible. In particular, we are committed to accelerating the accession of least-developed countries. 10. Recognizing the challenges posed by an expanding WTO membership, we confirm our collective responsibility to ensure internal transparency and the effective participation of all members. While emphasizing the intergovernmental character of the organization, we are committed to making the WTO's operations more transparent, including through more effective and prompt dissemination of information, and to improve dialogue with the public. We shall therefore at the national and multilateral levels continue to promote a better public understanding of the WTO and to communicate the benefits of a liberal, rules-based multilateral trading system. 11. In view of these considerations, we hereby agree to undertake the broad and balanced Work Programme set out below. This incorporates both an expanded negotiating agenda and other important decisions and activities necessary to address the challenges facing the multilateral trading system. WORK PROGRAMME Implementation-related issues and concerns 12. We attach the utmost importance to the implementation-related issues and concerns raised by members and are determined to find appropriate solutions to them. In this connection, and having regard to the General Council Decisions of 3 May and 15 December 2000, we further adopt the Decision on Implementation-Related Issues and Concerns in document WT/MIN(01)/17 to address a number of implementation problems faced by members. We agree that negotiations on outstanding implementation issues shall be an integral part of the Work Programme we are establishing, and that agreements reached at an early stage in these negotiations shall be treated in accordance with the provisions of paragraph 47 below. In this regard, we shall proceed as follows: (a) where we provide a specific negotiating mandate in this declaration, the relevant implementation issues shall be addressed under that mandate; (b) the other outstanding implementation issues shall be addressed as a matter of priority by the relevant WTO bodies, which shall report to the Trade Negotiations Committee, established under paragraph 46 below, by the end of 2002 for appropriate action. Agriculture 13. We recognize the work already undertaken in the negotiations initiated in early 2000 under Article 20 of the Agreement on Agriculture, including the large number of negotiating proposals submitted on behalf of a total of 121 members. We recall the long-term objective referred to in the Agreement to establish a fair and market-oriented trading system through a programme of fundamental reform encompassing strengthened rules and specific commitments on support and protection in order to correct and prevent restrictions and distortions in world agricultural markets. We reconfirm our commitment to this programme. Building on the work carried out to date and without prejudging the outcome of the negotiations we commit ourselves to comprehensive negotiations aimed at: substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support. We agree that special and differential treatment for developing countries shall be an integral part of all elements of the negotiations and shall be embodied in the schedules of concessions and commitments and as appropriate in the rules and disciplines to be negotiated, so as to be operationally effective and to enable developing countries to effectively take account of their development needs, including food security and rural development. We take note of the non-trade concerns reflected in the negotiating proposals submitted by Members and confirm that non-trade concerns will be taken into account in the negotiations as provided for in the Agreement on Agriculture. 14. Modalities for the further commitments, including provisions for special and differential treatment, shall be established no later than 31 March 2003. Participants shall submit their comprehensive draft Schedules based on these modalities no later than the date of the Fifth Session of the Ministerial Conference. The negotiations, including with respect to rules and disciplines and related legal texts, shall be concluded as part and at the date of conclusion of the negotiating agenda as a whole. Services 15. The negotiations on trade in services shall be conducted with a view to promoting the economic growth of all trading partners and the development of developing and least-developed countries. We recognize the work already undertaken in the negotiations, initiated in January 2000 under Article XIX of the General Agreement on Trade in Services, and the large number of proposals submitted by members on a wide range of sectors and several horizontal issues, as well as on movement of natural persons. We reaffirm the Guidelines and Procedures for the Negotiations adopted by the Council for Trade in Services on 28 March 2001 as the basis for continuing the negotiations, with a view to achieving the objectives of the General Agreement on Trade in Services, as stipulated in the Preamble, Article IV and Article XIX of that Agreement. Participants shall submit initial requests for specific commitments by 30 June 2002 and initial offers by 31 March 2003. Market access for non-agricultural products 16. We agree to negotiations which shall aim, by modalities to be agreed, to reduce or as appropriate eliminate tariffs, including the reduction or elimination of tariff peaks, high tariffs, and tariff escalation, as well as non-tariff barriers, in particular on products of export interest to developing countries. Product coverage shall be comprehensive and without a priori exclusions. The negotiations shall take fully into account the special needs and interests of developing and least-developed country participants, including through less than full reciprocity in reduction commitments, in accordance with the relevant provisions of Article XXVIII bis of GATT 1994 and the provisions cited in paragraph 50 below. To this end, the modalities to be agreed will include appropriate studies and capacity-building measures to assist least-developed countries to participate effectively in the negotiations. Trade-related aspects of intellectual property rights 17. We stress the importance we attach to implementation and interpretation of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) in a manner supportive of public health, by promoting both access to existing medicines and research and development into new medicines and, in this connection, are adopting a separate declaration. 18. With a view to completing the work started in the Council for Trade-Related Aspects of Intellectual Property Rights (Council for TRIPS) on the implementation of Article 23.4, we agree to negotiate the establishment of a multilateral system of notification and registration of geographical indications for wines and spirits by the Fifth Session of the Ministerial Conference. We note that issues related to the extension of the protection of geographical indications provided for in Article 23 to products other than wines and spirits will be addressed in the Council for TRIPS pursuant to paragraph 12 of this declaration. 19. We instruct the Council for TRIPS, in pursuing its work programme including under the review of Article 27.3(b), the review of the implementation of the TRIPS Agreement under Article 71.1 and the work foreseen pursuant to paragraph 12 of this declaration, to examine, inter alia, the relationship between the TRIPS Agreement and the Convention on Biological Diversity, the protection of traditional knowledge and folklore, and other relevant new developments raised by members pursuant to Article 71.1. In undertaking this work, the TRIPS Council shall be guided by the objectives and principles set out in Articles 7 and 8 of the TRIPS Agreement and shall take fully into account the development dimension. Relationship between trade and investment 20. Recognizing the case for a multilateral framework to secure transparent, stable and predictable conditions for long-term cross-border investment, particularly foreign direct investment, that will contribute to the expansion of trade, and the need for enhanced technical assistance and capacity-building in this area as referred to in paragraph 21, we agree that negotiations will take place after the Fifth Session of the Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that session on modalities of negotiations. 21. We recognize the needs of developing and least-developed countries for enhanced support for technical assistance and capacity building in this area, including policy analysis and development so that they may better evaluate the implications of closer multilateral cooperation for their development policies and objectives, and human and institutional development. To this end, we shall work in cooperation with other relevant intergovernmental organisations, including UNCTAD, and through appropriate regional and bilateral channels, to provide strengthened and adequately resourced assistance to respond to these needs. 22. In the period until the Fifth Session, further work in the Working Group on the Relationship Between Trade and Investment will focus on the clarification of: scope and definition; transparency; non-discrimination; modalities for pre-establishment commitments based on a GATS-type, positive list approach; development provisions; exceptions and balance-of-payments safeguards; consultation and the settlement of disputes between members. Any framework should reflect in a balanced manner the interests of home and host countries, and take due account of the development policies and objectives of host governments as well as their right to regulate in the public interest. The special development, trade and financial needs of developing and least-developed countries should be taken into account as an integral part of any framework, which should enable members to undertake obligations and commitments commensurate with their individual needs and circumstances. Due regard should be paid to other relevant WTO provisions. Account should be taken, as appropriate, of existing bilateral and regional arrangements on investment. Interaction between trade and competition policy 23. Recognizing the case for a multilateral framework to enhance the contribution of competition policy to international trade and development, and the need for enhanced technical assistance and capacity-building in this area as referred to in paragraph 24, we agree that negotiations will take place after the Fifth Session of the Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that session on modalities of negotiations. 24. We recognize the needs of developing and least-developed countries for enhanced support for technical assistance and capacity building in this area, including policy analysis and development so that they may better evaluate the implications of closer multilateral cooperation for their development policies and objectives, and human and institutional development. To this end, we shall work in cooperation with other relevant intergovernmental organisations, including UNCTAD, and through appropriate regional and bilateral channels, to provide strengthened and adequately resourced assistance to respond to these needs. 25. In the period until the Fifth Session, further work in the Working Group on the Interaction between Trade and Competition Policy will focus on the clarification of: core principles, including transparency, non-discrimination and procedural fairness, and provisions on hardcore cartels; modalities for voluntary cooperation; and support for progressive reinforcement of competition institutions in developing countries through capacity building. Full account shall be taken of the needs of developing and least-developed country participants and appropriate flexibility provided to address them. Transparency in government procurement 26. Recognizing the case for a multilateral agreement on transparency in government procurement and the need for enhanced technical assistance and capacity building in this area, we agree that negotiations will take place after the Fifth Session of the Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that session on modalities of negotiations. These negotiations will build on the progress made in the Working Group on Transparency in Government Procurement by that time and take into account participants’ development priorities, especially those of least-developed country participants. Negotiations shall be limited to the transparency aspects and therefore will not restrict the scope for countries to give preferences to domestic supplies and suppliers. We commit ourselves to ensuring adequate technical assistance and support for capacity building both during the negotiations and after their conclusion. Trade facilitation 27. Recognizing the case for further expediting the movement, release and clearance of goods, including goods in transit, and the need for enhanced technical assistance and capacity building in this area, we agree that negotiations will take place after the Fifth Session of the Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that session on modalities of negotiations. In the period until the Fifth Session, the Council for Trade in Goods shall review and as appropriate, clarify and improve relevant aspects of Articles V, VIII and X of the GATT 1994 and identify the trade facilitation needs and priorities of members, in particular developing and least-developed countries. We commit ourselves to ensuring adequate technical assistance and support for capacity building in this area. WTO rules 28. In the light of experience and of the increasing application of these instruments by members, we agree to negotiations aimed at clarifying and improving disciplines under the Agreements on Implementation of Article VI of the GATT 1994 and on Subsidies and Countervailing Measures, while preserving the basic concepts, principles and effectiveness of these Agreements and their instruments and objectives, and taking into account the needs of developing and least-developed participants. In the initial phase of the negotiations, participants will indicate the provisions, including disciplines on trade distorting practices, that they seek to clarify and improve in the subsequent phase. In the context of these negotiations, participants shall also aim to clarify and improve WTO disciplines on fisheries subsidies, taking into account the importance of this sector to developing countries. We note that fisheries subsidies are also referred to in paragraph 31. 29. We also agree to negotiations aimed at clarifying and improving disciplines and procedures under the existing WTO provisions applying to regional trade agreements. The negotiations shall take into account the developmental aspects of regional trade agreements. Dispute Settlement Understanding 30. We agree to negotiations on improvements and clarifications of the Dispute Settlement Understanding. The negotiations should be based on the work done thus far as well as any additional proposals by members, and aim to agree on improvements and clarifications not later than May 2003, at which time we will take steps to ensure that the results enter into force as soon as possible thereafter. Trade and environment 31. With a view to enhancing the mutual supportiveness of trade and environment, we agree to negotiations, without prejudging their outcome, on: (i) the relationship between existing WTO rules and specific trade obligations set out in multilateral environmental agreements (MEAs). The negotiations shall be limited in scope to the applicability of such existing WTO rules as among parties to the MEA in question. The negotiations shall not prejudice the WTO rights of any Member that is not a party to the MEA in question; (ii) procedures for regular information exchange between MEA Secretariats and the relevant WTO committees, and the criteria for the granting of observer status; (iii) the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services. We note that fisheries subsidies form part of the negotiations provided for in paragraph 28. 32. We instruct the Committee on Trade and Environment, in pursuing work on all items on its agenda within its current terms of reference, to give particular attention to: (i) the effect of environmental measures on market access, especially in relation to developing countries, in particular the least-developed among them, and those situations in which the elimination or reduction of trade restrictions and distortions would benefit trade, the environment and development; (ii) the relevant provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights; and (iii) labelling requirements for environmental purposes. Work on these issues should include the identification of any need to clarify relevant WTO rules. The Committee shall report to the Fifth Session of the Ministerial Conference, and make recommendations, where appropriate, with respect to future action, including the desirability of negotiations. The outcome of this work as well as the negotiations carried out under paragraph 31(i) and (ii) shall be compatible with the open and non-discriminatory nature of the multilateral trading system, shall not add to or diminish the rights and obligations of members under existing WTO agreements, in particular the Agreement on the Application of Sanitary and Phytosanitary Measures, nor alter the balance of these rights and obligations, and will take into account the needs of developing and least-developed countries. 33. We recognize the importance of technical assistance and capacity building in the field of trade and environment to developing countries, in particular the least-developed among them. We also encourage that expertise and experience be shared with members wishing to perform environmental reviews at the national level. A report shall be prepared on these activities for the Fifth Session. Electronic commerce 34. We take note of the work which has been done in the General Council and other relevant bodies since the Ministerial Declaration of 20 May 1998 and agree to continue the Work Programme on Electronic Commerce. The work to date demonstrates that electronic commerce creates new challenges and opportunities for trade for members at all stages of development, and we recognize the importance of creating and maintaining an environment which is favourable to the future development of electronic commerce. We instruct the General Council to consider the most appropriate institutional arrangements for handling the Work Programme, and to report on further progress to the Fifth Session of the Ministerial Conference. We declare that members will maintain their current practice of not imposing customs duties on electronic transmissions until the Fifth Session. Small economies 35. We agree to a work programme, under the auspices of the General Council, to examine issues relating to the trade of small economies. The objective of this work is to frame responses to the trade-related issues identified for the fuller integration of small, vulnerable economies into the multilateral trading system, and not to create a sub-category of WTO Members. The General Council shall review the work programme and make recommendations for action to the Fifth Session of the Ministerial Conference. 36. We agree to an examination, in a Working Group under the auspices of the General Council, of the relationship between trade, debt and finance, and of any possible recommendations on steps that might be taken within the mandate and competence of the WTO to enhance the capacity of the multilateral trading system to contribute to a durable solution to the problem of external indebtedness of developing and least-developed countries, and to strengthen the coherence of international trade and financial policies, with a view to safeguarding the multilateral trading system from the effects of financial and monetary instability. The General Council shall report to the Fifth Session of the Ministerial Conference on progress in the examination. 37. We agree to an examination, in a Working Group under the auspices of the General Council, of the relationship between trade and transfer of technology, and of any possible recommendations on steps that might be taken within the mandate of the WTO to increase flows of technology to developing countries. The General Council shall report to the Fifth Session of the Ministerial Conference on progress in the examination. Technical cooperation and capacity building 38. We confirm that technical cooperation and capacity building are core elements of the development dimension of the multilateral trading system, and we welcome and endorse the New Strategy for WTO Technical Cooperation for Capacity Building, Growth and Integration. We instruct the Secretariat, in coordination with other relevant agencies, to support domestic efforts for mainstreaming trade into national plans for economic development and strategies for poverty reduction. The delivery of WTO technical assistance shall be designed to assist developing and least-developed countries and low-income countries in transition to adjust to WTO rules and disciplines, implement obligations and exercise the rights of membership, including drawing on the benefits of an open, rules-based multilateral trading system. Priority shall also be accorded to small, vulnerable, and transition economies, as well as to members and observers without representation in Geneva. We reaffirm our support for the valuable work of the International Trade Centre, which should be enhanced. 39. We underscore the urgent necessity for the effective coordinated delivery of technical assistance with bilateral donors, in the OECD Development Assistance Committee and relevant international and regional intergovernmental institutions, within a coherent policy framework and timetable. In the coordinated delivery of technical assistance, we instruct the Director-General to consult with the relevant agencies, bilateral donors and beneficiaries, to identify ways of enhancing and rationalizing the Integrated Framework for Trade-Related Technical Assistance to Least-Developed Countries and the Joint Integrated Technical Assistance Programme (JITAP). 40. We agree that there is a need for technical assistance to benefit from secure and predictable funding. We therefore instruct the Committee on Budget, Finance and Administration to develop a plan for adoption by the General Council in December 2001 that will ensure long-term funding for WTO technical assistance at an overall level no lower than that of the current year and commensurate with the activities outlined above. 41. We have established firm commitments on technical cooperation and capacity building in various paragraphs in this Ministerial Declaration. We reaffirm these specific commitments contained in paragraphs 16, 21, 24, 26, 27, 33, 38-40, 42 and 43, and also reaffirm the understanding in paragraph 2 on the important role of sustainably financed technical assistance and capacity-building programmes. We instruct the Director-General to report to the Fifth Session of the Ministerial Conference, with an interim report to the General Council in December 2002 on the implementation and adequacy of these commitments in the identified paragraphs. Least-developed countries 42. We acknowledge the seriousness of the concerns expressed by the least-developed countries (LDCs) in the Zanzibar Declaration adopted by their ministers in July 2001. We recognize that the integration of the LDCs into the multilateral trading system requires meaningful market access, support for the diversification of their production and export base, and trade-related technical assistance and capacity building. We agree that the meaningful integration of LDCs into the trading system and the global economy will involve efforts by all WTO members. We commit ourselves to the objective of duty-free, quota-free market access for products originating from LDCs. In this regard, we welcome the significant market access improvements by WTO members in advance of the Third UN Conference on LDCs (LDC-III), in Brussels, May 2001. We further commit ourselves to consider additional measures for progressive improvements in market access for LDCs. Accession of LDCs remains a priority for the Membership. We agree to work to facilitate and accelerate negotiations with acceding LDCs. We instruct the Secretariat to reflect the priority we attach to LDCs’ accessions in the annual plans for technical assistance. We reaffirm the commitments we undertook at LDC-III, and agree that the WTO should take into account, in designing its work programme for LDCs, the trade-related elements of the Brussels Declaration and Programme of Action, consistent with the WTO’s mandate, adopted at LDC-III. We instruct the Sub-Committee for Least-Developed Countries to design such a work programme and to report on the agreed work programme to the General Council at its first meeting in 2002. 43. We endorse the Integrated Framework for Trade-Related Technical Assistance to Least-Developed Countries (IF) as a viable model for LDCs’ trade development. We urge development partners to significantly increase contributions to the IF Trust Fund and WTO extra-budgetary trust funds in favour of LDCs. We urge the core agencies, in coordination with development partners, to explore the enhancement of the IF with a view to addressing the supply-side constraints of LDCs and the extension of the model to all LDCs, following the review of the IF and the appraisal of the ongoing Pilot Scheme in selected LDCs. We request the Director-General, following coordination with heads of the other agencies, to provide an interim report to the General Council in December 2002 and a full report to the Fifth Session of the Ministerial Conference on all issues affecting LDCs. Special and differential treatment 44. We reaffirm that provisions for special and differential treatment are an integral part of the WTO Agreements. We note the concerns expressed regarding their operation in addressing specific constraints faced by developing countries, particularly least-developed countries. In that connection, we also note that some members have proposed a Framework Agreement on Special and Differential Treatment (WT/GC/W/442). We therefore agree that all special and differential treatment provisions shall be reviewed with a view to strengthening them and making them more precise, effective and operational. In this connection, we endorse the work programme on special and differential treatment set out in the Decision on Implementation-Related Issues and Concerns. Organization and management of
TRIPS and public health An issue that has arisen recently is how to ensure patent protection for pharmaceutical products does not prevent people in poor countries from having access to medicines — while at the same time maintaining the patent system’s role in providing incentives for research and development into new medicines. Flexibilities such as “compulsory licensing” are written into the TRIPS Agreement — governments can issue compulsory licenses to allow a competitor to produce the product or use the process under licence, but only under certain conditions aimed at safeguarding the legitimate interests of the patent holder. Parallel importing is also possible. This is where a product sold by the patent owner more cheaply in one country is imported into another without the patent holder’s permission. Countries’ laws differ on whether they allow parallel imports. The TRIPS Agreement simply states that governments cannot bring legal disputes to the WTO on this issue. (These flexibilities do not have to be put into practice. They are sometimes used as a means of bargaining. For example the threat of a compulsory licence can encourage a patent holder to reduce the price.) But some governments were unsure of how these flexibilities would be interpreted, and how far their right to use them would be respected. The African Group (all the African members of the WTO) were among the members pushing for clarification. The Doha mandate A large part of this was settled when WTO ministers issued a specialDeclaration on TRIPS and Public Health at the Doha Ministerial Conference in November 2001. In the main declaration, they stressed that it is important to implement and interpret the TRIPS Agreement in a way that supports public health — by promoting both access to existing medicines and the creation of new medicines. In the separate declaration, they agreed that the TRIPS Agreement does not and should not prevent members from taking measures to protect public health. They underscored countries’ ability to use the flexibilities that are built into the TRIPS Agreement, in particular compulsory licensing and parallel importing. And they agreed to extend exemptions on pharmaceutical patent protection for least-developed countries until 2016. (The TRIPS Council completed the legal drafting task on this in mid—2002.) On one remaining question, they assigned further work to the TRIPS Council — to sort out how to provide extra flexibility, so that countries unable to produce pharmaceuticals domestically can import patented drugs made under compulsory licensing. (This is sometimes called the “Paragraph 6” issue, because it comes under that paragraph in the separate Doha declaration on TRIPS and health.) The issue arises because Article 31(f) of the TRIPS Agreement says products made under compulsory licensing must be “predominantly for the supply of the domestic market”. This applies directly to countries that can manufacture drugs — it limits the amount they can export when the drug is made under compulsory licence. And it has an indirect impact on countries unable to make medicines and therefore wanting to import generics. They would find it difficult to find countries that can to supply them with drugs made under compulsory licensing. The TRIPS Council had to find a solution and report to the General Council on this by the end of 2002. Since then … After almost a year of discussion and negotiation, the TRIPS Council considered a draft decision at the end of December 2002. The draft received very wide support. But there was no consensus and at the time of writing the issue remains unresolved. The 16 December 2002 draft takes the form of a waiver. It would allow countries that can make drugs to export drugs made under compulsory licence to countries that cannot manufacture them. The waiver would last until the TRIPS Agreement is amended. It would include provisions on transparency (which would give a patent-owner some opportunity to react by offering a lower price), and special packaging and other methods to avoid the medicines being diverted to rich-country markets. An annex would describe what a country needs to do in order to declare itself unable to make the pharmaceuticals domestically. And over 20 developed countries would announce that they would not import under this decision. Almost all members said that in the spirit of compromise they could join a consensus supporting the 16 December 2002 draft, even though most of them felt the text was far from ideal. Developing countries had various concerns, mainly about what they considered to be burdensome conditions, such as on transparency and preventing the medicines being diverted to the wrong markets. Developed countries were concerned that the decision did not go far enough in preventing the medicines being diverted to the wrong markets. Some said they would have preferred a different legal route. At least one country, the United States, said the draft was too open-ended on the range of diseases the decision would cover. The draft decision refers to drugs needed to address the public health problems recognized in Paragraph 1 of the original declaration that ministers issued in Doha. This says: “We recognize the gravity of the public health problems afflicting many developing and least-developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria and other epidemics.” Further attempts to break the deadlock took place in January and February 2003, but they failed. Since then, discussions have taken place outside the WTO. The issue remained on the TRIPS Council’s agenda, and at the 4—5 June 2003 meeting, the chairperson concluded that he intended to remain in close contact with delegations, with a view to resuming consultations as soon as developments show that this would be useful. He urged delegations to continue to dialogue with each other, and to look for ways of resolving the final problems in the text of 16 December 2002. He stressed the desirability of finding a multilateral solution before the Cancún Ministerial Conference, preferably in time for the 24 July General Council meeting, when the TRIPS Council, like other subsidiary bodies, was expected to report, before the Ministerial Conference. Geographical indications in general Geographical indications are place names (in some countries also words associated with a place) used to identify the origin and quality, reputation or other characteristics of products (for example, “Champagne”, “Tequila” or “Roquefort”). Protection required under the TRIPS Agreement is defined in two articles. All products are covered by Article 22, which defines a standard level of protection. This says geographical indications have to be protected in order to avoid misleading the public and to prevent unfair competition. Article 23 provides a higher or enhanced level of protection for geographical indications for wines and spirits (subject to a number of exceptions, they have to be protected even if misuse would not cause the public to be misled). A number of countries want to extend this level of protection to a wide range of other products, including food and handicrafts. Among the exceptions that the agreement allows are: when a name has become a common (or “generic”) term (for example, “cheddar” now refers to a particular type of cheese not necessarily made in Cheddar, in the UK), and when a term has already been registered as a trademark (for example, in Italy “Parma” is a type of ham from the region of the city of Parma, but in Canada it is a registered trademark for ham made by a Canadian company). Information that members have supplied during a fact-finding exercise shows that countries employ a wide variety of legal means to protect geographical indications: ranging from specific geographical indications laws to trademark law, consumer protection law, or common law. The TRIPS Agreement and current TRIPS work in the WTO takes account of that diversity. Two issues are debated under the Doha mandate: creating a multilateral register for wines and spirits; and extending the higher (Article 23) level of protection beyond wines and spirits. Both are as contentious as any other subject on the Doha agenda. Geographical indications 1:the multilateral register for wines and spirits This negotiation, which takes place in dedicated “special sessions” of the TRIPS Council, deals with wines and spirits, which are given a higher level of protection for geographical indications (TRIPS Article 23) than other products (which are protected under Article 22). This means the wines’ and spirits’ names should, in principle, be protected even if there is no risk of misleading consumers or of unfair competition. The negotiations for creating a multilateral register for geographical indications for wines and spirits are required under Article 23.4 of the TRIPS Agreement. Work began in July 1997, but the negotiations are now under the Doha Agenda (the Doha Declaration’s paragraph 18). They are separate from the question of whether the higher level of protection given to wines and spirits should be extended to other products, although some countries have said they want the higher level of protection to be extended to other products and the register to cover those other products. The Doha mandate The WTO TRIPS Council had already started work on a multilateral registration system for geographical indications for wines and spirits over four years before the Doha meeting. The Doha Declaration sets a deadline for completing the negotiations: the Fifth Ministerial Conference in 2003. Since then … Two sets of proposals have been submitted over the years, representing the two main lines of argument in the negotiations. The latest are (documents downloadable from Documents Online http://docsonline.wto.org on the WTO website): The “ joint paper ”, documents: TN/IP/W/5 from Argentina, Australia, Canada, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Japan, Namibia, New Zealand, the Philippines, Chinese Taipei and the US; and TN/IP/W/6 , a communication from Argentina, Australia, Canada, Chile, New Zealand and the US. This group proposes a voluntary system where notified geographical indications would be registered in a database. Those governments choosing to participate would have to consult the database when taking decisions on protection in their countries. Non-participating members would be “encouraged” but “not obliged” to consult the database. The “ EU proposal ” (document IP/C/W/107/Rev.1 ) whose objectives have been supported in document TN/IP/W/3 signed by Bulgaria, Cyprus, the Czech Republic, the EU, Georgia, Hungary, Iceland, Malta, Mauritius, Moldova, Nigeria, Romania, the Slovak Republic, Slovenia, Sri Lanka, Switzerland and Turkey. This proposes that the registration would establish a “presumption” that the geographical indication is to be protected in all other countries — a presumption that can be challenged on certain grounds. The TRIPS Agreement allows some exceptions to the obligation to protect geographical indications, for example if a term has become generic or if it does not fit the definition of a geographical indication. Under the EU proposal, once a term has been registered, no country could refuse protection on these grounds, unless it had challenged the term within 18 months. Hungary has a slightly modified proposal with an arbitration system to settle differences (document IP/C/W/255 ) Hong Kong, China has recently proposed a compromise in which registering a term would enjoy a less limited “presumption” in participating countries than under the EU proposal (document TN/IP/W/8 ). The Secretariat has produced a document compiling the various positions so far: TN/IP/W/7/Rev.1 , dated 23 May 2003 (with a correction, TN/IP/W/7/Rev.1/Corr.1 dated 20 June), also available on Documents Online (http://docsonline.wto.org). At the heart of the debate are a number of key questions. What legal effect, if any, would a registration system need to have within member countries, if the register is to serve the purpose of “facilitating protection” (the phrase used in Article 23.4)? And to what extent, if at all, should the effect apply to countries not participating in the system. There is also the question of the administrative and financial costs for individual governments and whether they would outweigh the possible benefits. Opinions are strongly held on both sides of the debate, with some highly detailed arguments presented by both sides. The draft text The chairperson circulated a “draft text” on 16 April 2003. This was discussed for the first time at the 29—30 April meeting and continued in June and July. Where members differ strongly, the text includes options, A, B, and B1 and B2. “ A” represents the “joint paper” (TN/IP/W/5) by the US, Canada, Australia, Chile, Argentina, Japan and others (full list above). “ B” represents the Europeans. This is further split into two variants: “ B1”: the EU version, where a challenge is handled by bilateral consultations. If the question remains unresolved, the challenging country does not have to protect the geographical indication. “ B2”: the Hungarian proposal (supported by Switzerland), which proposes settling unresolved challenges by arbitration. As an idea of what the paper contains, its headings are: Preamble Participation Notification (substantive conditions, contents, language, form, circulation and publication) Registration (with options A, B, B1 and B2 on challenge, etc) Legal effects in participating members (with options A, B, B1 and B2) Legal effects in non-participating members (with options A, B, B1 and B2) Legal effects in least-developed country members Modifications of notifications and registrations Withdrawals Fees and costs Contact point Headings not yet containing draft text deal with: the committee or other body responsible for the system, the administering body (e.g. the WTO or WIPO Secretariat), how to withdraw from the system, reviews, and when the system would start to operate. Since the June meeting, the chairperson has continued consultations. The deadline for agreement is the Cancún Ministerial Conference. Geographical indications 2:extending the “higher level of protection” beyond wines and spirits back to top A number of countries want to negotiate extending to other products the higher level of protection (Article 23) currently given to wines and spirits. Others oppose the move, and the debate in the TRIPS Council has included the question of whether the Doha Declaration provides a mandate for negotiations. The issue is linked to the agriculture negotiations. Some countries have said that progress in this aspect of geographical indications would make it easier for them to agree to a significant deal in agriculture. Others reject the view that the Doha Declaration makes this part of the balance of the negotiations. At the same time, the European Union has also proposed negotiating the protection of specific names of specific agricultural products as part of the agriculture negotiations. The Doha mandate The Doha Declaration notes that the TRIPS Council will handle this under the declaration’s paragraph 12 (which deals with implementation issues). Paragraph 12 says “negotiations on outstanding implementation issues shall be an integral part” of the Doha work programme. Where there is not a specific negotiating mandate in the Doha Declaration, implementation issues “shall be addressed as a matter of priority by the relevant WTO bodies, which shall report to the Trade Negotiations Committee [TNC], established under paragraph 46 below, by the end of 2002 for appropriate action.” Delegations interpret Paragraph 12 differently. Many developing and European countries argue that the so-called outstanding implementation issues are already part of the negotiation and its package of results (the “single undertaking”). Others argue that these issues can only become negotiating subjects if the Trade Negotiations Committee decides to include them in the talks — and so far it has not done so. Reviews of TRIPS provisions: particularly Art.27.3(b), biodiversity and traditional knowledge Two reviews have been taking place in the TRIPS Council, as required by the TRIPS Agreement: a review of Article 27.3(b) which deals with patentability or non-patentability of plant and animal inventions, and the protection of plant varieties, and a review of the entire TRIPS Agreement (required by Article 71.1). Article 27 of the TRIPS Agreement defines the types of inventions which have to be eligible for patent protection and those which can be exempt. These include both products and processes, and they generally cover all fields of technology. ‘ Patentable inventions’ In general, inventions eligible for patenting must be new , involve an inventive step (or be non-obvious ) and be capable of industrial application (or be useful ). Article 27 also lists inventions which governments do not have to make eligible for patent protection. Part (b) of paragraph 3 (i.e. Article 27.3(b) ) covers biotechnological inventions. It is currently under review in the TRIPS Council, as required by the TRIPS Agreement. Some countries have broadened the discussion to cover biodiversity and traditional knowledge. The Doha Declaration has linked these issues. Broadly speaking, Article 27.3(b) allows governments to exclude plants, animals and “essentially” biological processes (but micro-organisms, and non-biological and microbiological processes have to be eligible for patents). However, plant varieties have to be eligible either for patent protection or through a system created specifically for the purpose (“sui generis”), or a combination of the two. For example, many countries have enact a plant varieties protection law based on a model of the International Union for the Protection of New Varieties of Plants (UPOV). The review of the TRIPS Agreement (under Article 71.1) There has been very little discussion and no proposals on this under the Doha agenda. Non-violation complaints (Article 64.2) In principle, disputes in the WTO involve allegations that a country has violated an agreement or broken a commitment. Under the goods agreement (GATT) and the services (GATS) specific commitments, countries can complain to the Dispute Settlement Body if they can show that they have been deprived of an expected benefit because of some governmental action (for example a new production subsidy on an item on which a tariff concession has been made), or because of any other situation — even if these do not violate an agreement. The purpose of allowing these “non-violation” cases is to preserve the balance of benefits (such as market-access opportunities) struck during multilateral negotiations. The TRIPS Agreement (Article 64.2) temporarily banned non-violation disputes. It says non-violation complaints cannot be brought to the WTO dispute settlement procedure during the first five years of the WTO Agreement (i.e. 1995—99). (This was extended in Doha.) At the same time, the TRIPS Council has discussed whether non-violation complaints should be allowed in intellectual property, and if so, to what extent and how (“scope and modalities”) they could be brought to the WTO’s dispute settlement procedures. At least two countries (the US and Switzerland) say non-violation cases should be allowed in order to discourage members from engaging in “creative legislative activity” that would allow them to get around their TRIPS commitments. Most would like to see the ban continued or made permanent. Some have suggested additional safeguards. The Doha mandate The Doha Decision on Implementation-Related Issues and Concerns (in Paragraph 11.1) instructs the TRIPS Council to make a recommendation to the Cancún Ministerial Conference. Until then, members have agreed not to file non-violation complaints under TRIPS. In May 2003, the TRIPS Council chairperson listed four possibilities for a recommendation: ( 1 ) banning non-violation complaints in TRIPS completely, ( 2 ) allowing the complaints to be handled under the WTO’s dispute settlement rules, ( 3 ) allowing non-violation complaints but subject to special “modalities” (i.e. ways of dealing with them), and ( 4 ) extending the moratorium. In response, most members favoured banning non-violation complaints completely (option 1), or extending the moratorium (option 4). However, no consensus was possible, and further work is need to prepare for a decision in Cancún. Technology transfer Developing countries, in particular, see technology transfer as part of the bargain in which they have agreed to protect intellectual property rights. The TRIPS Agreement includes a number of provisions on this. For example, it requires developed countries’ governments to provide incentives for their companies to transfer technology to least-developed countries (Article 66.2). Least-developed countries want this requirement to be made more effective. In Doha, ministers agreed that the TRIPS Council would “put in place a mechanism for ensuring the monitoring and full implementation of the obligations”. The council adopted a decision setting up this mechanism in February 2003. It details the information developed countries are to supply by the end of the year, on how their incentives are functioning in practice. This is now being implemented, and will be reviewed in full when the TRIPS Council meets in November 2003. At the same time, the question of technology transfer continues to be raised under various TRIPS headings such as TRIPS and Public Health.
Resolve to complete the Doha Work programme fully, and to conclude negotiations in 2006. To Establish modalities in agriculture and non-agriculture market access (NAMA) by April 30, 2006 and prepare draft Schedules by July 31, 2006. To Eliminate export subsidies in agriculture by 2013, with a substantial part in the first half of the implementation period. Developing countries without Aggregate Measurement of Support (AMS), such as India, will be exempt from reductions in de minimis and the overall cut in trade distorting domestic support, consisting of AMS, the Blue box and De minimis, that is entitlement to provide
One of the most dramatic events that have taken place in later part of 20 th century was culmination of GATT 1947 into WTO (The world Trade organization), which came into being on 1 st January 2005. This WTO has set expectations high in various member countries (by now 149 including latest addition of Saudi Arabia) regarding spurt in world trade where India has insignificant share in the pie-Only 0.75% at the most. Even in IT exports the share of Indian exporters is just peanuts in view of overall world market. Since formation of WTO there have been regular meetings of Ministerial Conferences (Highest Policy level body of WTO) religiously every 2 years and 8 such meetings have taken place while world prepares for the 9 th conference will take place shortly. While 5 th meet at Cancun, Mexico was more or less failure, the earlier one at Seattle, USA was received with brickbats from environmentalist and Labor union Groups protesting against WTO regime. It is statistical fact that world trade has definitely grown since 1995 thereby giving indicators that international trade reforms do play important role in boosting economic development of various countries. Problems facing India in WTO & its Implementation: But there are several problems facing these Multilateral Trade agreements: - Predominance of developed nations in negotiations extracting more benefits from developing and least developed countries - Resource and skill limitations of smaller countries to understand and negotiate under rules of various agreements under WTO - Incompatibility of developed and developing countries resource sizes thereby causing distortions in implementing various decisions - Questionable effectiveness in implementation of agreements reached in past and sincerity - Non-tariff barriers being created by developed nations. - Regional cooperation groups posing threat to utility of WTO agreement itself, which is multilateral encompassing all member countries - Poor implementation of Doha Development Agenda - Agriculture seems to be bone of contention for all types of countries where France, Japan and some countries are just not willing to budge downwards in matter of domestic support and export assistance to farmers and exporters of agriculture produce. - Dismantling of MFA (Multi Fiber Agreement) and its likely impact on countries like India - Under TRIPS question of high cost of Technology transfer, Bio Diversity protection, protection of Traditional Knowledge and Folk arts, protection of Bio Diversities and geographical Indications of origin, for example Basmati, Mysore Dosa or Champagne. The protection has been given so far in wines and spirits that suit US and European countries. Implications for India It appears that India does not stand to gain much by shouting for agriculture reforms in developed countries because the overall tariff is lower in those countries. India will have to tart major reforms in agriculture sector in India to make Agriculture globally competitive. Same way it is questionable if India will be major beneficiary in dismantling of quotas, which were available under MFA for market access in US and some EU countries. It is likely that China, Germany, North African countries, Mexico and such others may reap benefit in textiles and Clothing areas unless India embarks upon major reforms in modernization and up gradation of textile sector including apparels. Some of Singapore issues are also important like Government procure, Trade and Investment, Trade facilitation and market access mechanism. In Pharma-sector there is need for major investments in R &D and mergers and restructuring of companies to make them world class to take advantage. India has already amended patent Act and both product and Process are now patented in India. However, the large number of patents going off in USA recently, gives the Indian Drug companies windfall opportunities, if tapped intelligently. Some companies in India have organized themselves for this. Excerpts from Speech of Ramkrishna Hegde, the then Minister, at Geneva in 1998- "In order to make WTO an effective multilateral body, which serves the objectives for which it was set up, it is necessary to go back to the basic principles. The Uruguay Round negotiators had stated their intentions quite clearly in the Preamble to the Marrakesh Agreement establishing the WTO. They recognised "that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development. They recognized also "that there is need for positive efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in the growth in international trade commensurate with the needs of their economic development". The Objective of WTO Reiterated: It is very clear that the intention of the negotiators was to use trade as an instrument for development, to raise standards of living, expand production, keeping in view, particularly, the needs of developing countries and least-developed countries. The WTO must never lose sight of this basic principle. Every act of implementation and of negotiation, every legal decision, has to be viewed in this context. Trade, as an instrument for development, should be the cornerstone of all our deliberations, decisions and actions. Besides, the system should be seen to be equitable and fair. It must be used in such a manner that the letter and spirit of the Agreements is fully observed. The WTO Members must mutually support and encourage each other to achieve the final goal. It must be recognized that all Members should assume a negotiating rather than an adversarial posture. It should also be recognized that different economies have different features and structures, different problems, different cultures. The pace of change must be carefully calibrated to take into account such differences. All Members should guard against unilateral action that cuts at the root of multilateral agreement and consensus. Developing countries have generally been apprehensive in particular about the implementation of special and differential treatment provisions (S&D) in various Uruguay Round Agreements. Full benefits of these provisions have not accrued to the developing countries, as clear guidelines have not been laid down on how these are to be implemented . " The first Ministerial Conference held in 1996 in Singapore saw the commencement of pressures to enlarge the agenda of WTO. Pressures were generated to introduce new Agreements on Investment, Competition Policy, Transparency in Government Procurement and Trade Facilitation. The concept of Core Labor Standards was also taken up for introduction. India and the developing countries, which were already under the burden of fulfilling the commitments undertaken through the Uruguay Round Agreements, and who also perceived many of the new issues to be non-trade issues , resisted the introduction of these new subjects into WTO. They were partly successful. The Singapore Ministerial Conference (SMC) set up open-ended Work Program to study the relationship between Trade and Investment; Trade and Competition Policy; to conduct a study on Transparency in Government Procurement practices; and do analytical work on simplification of trade procedures (Trade Facilitation ). Most importantly the SMC clearly declared on the Trade-Labor linkage as follows: " We reject the use of labor standards for protectionist purposes, and agree that the comparative advantage of countries, particularly low-wage developing countries, must in no way be put into question . In this regard we note that the WTO and ILO Secretariat will continue their existing collaboration ". Not many people in this country are aware that there is a dispute settlement system in the WTO. This is at the heart of the WTO and sets it apart from the earlier GATT. Countries like the USA and the European Union have brought cases against us and won these cases like in pharmaceutical patents. India too has complained against the US and Europe and it too has won its fair share of disputes in areas like textiles. India must effectively use this mechanism to extract fair share in world markets. It would be advantageous for India to give concrete shape to SAARC economic forum or Free market and align itself with ASEAN. What India should do? The most important things for India to address are speed up internal reforms in building up world-class infrastructure like roads, ports and electricity supply. India should also focus on original knowledge generation in important fields like Pharmaceutical molecules, textiles, IT high end products, processed food, installation of cold chain and agricultural logistics to tap opportunities of globalization under WTO regime. India's ranking in recent Global Competitiveness report is not very encouraging due to infrastructure problems, poor governance, poor legal system and poor market access provided by India. Our tariffs are still high compared to Developed countries and there will be pressure to reduce them further and faster. India has solid strength, at least for mid term (5-7 years) in services sector primarily in IT sector, which should be tapped and further strengthened. India would do well to reorganize its Protective Agricultural policy in name of rural poverty and Food security and try to capitalize on globalization of agriculture markets. It should rather focus on Textile industry modernization and developing international Marketing muscle and expertise, developing of Brand India image, use its traditional arts and designs intelligently to give competitive edge, capitalize on drug sector opportunities, and develop selective engineering sector industries like automobiles & forgings & castings, processed foods industry and the high end outsourcing services. India must improve legal and administrative infrastructure, improve trade facilitation through cutting down bureaucracy and delays and further ease its financial markets. India has to downsize non-plan expenditure in Subsidies (which are highly ineffective and wrongly applied) and Government salaries and perquisites like pensions and administrative expenditures. Corruption will also have to be checked by bringing in fast remedial public grievance system, legal system and information dissemination by using e-governance. The petroleum sector has to be boosted to tap crude oil and gas resources within Indian boundaries and entering into multinational contracts to source oil reserves. It wont be a bad idea if Indian textile and garment Industry go multinational setting their foot in western Europe, North Africa, Mexico and other such strategically located areas for large US and European markets. The performance of India in attracting major FDI has also been poor and certainly needs boost up, if India has to develop globally competitive infrastructure and facilities in its sectors of interest for world trade.
INTRODUCTION : The World Trade organization was established to deal with all the major aspects of international trade and it had far reaching effects not only on India’s foreign trade but also on its internal economy. The impact of the WTO on the Indian economy can be analysed on the basis and general concepts. • IMPACT : The WTO has both favourable and non-favourable impact on the Indian economy. • FAVOURABLE IMPACT : 1) Increase in export earnings : Increase in export earnings can be viewed from growth in merchandise exports and growth in service exports : • Growth in merchandise exports : The establishment of the WTO has increased the exports of developing countries because of reduction in tariff and non-tariff trade barriers. India’s merchandise exports have increased from 32 billion us $ (1995) to 185 billion u $ (2008-09). • Growth in service exports : The WTO introduced the GATS (general Agreement on Trade in Services ) that proved beneficial for countries like India. India’s service exports increased from 5 billion us $ (1995) to 102 billion us $ (2008-09) (software services accounted) for 45% of India’s service exports) 2) Agricultural exports : Reduction of trade barriers and domestic subsidies raise the price of agricultural products in international market, India hopes to benefit from this in the form of higher export earnings from agriculture 3) Textiles and Clothing : The phasing out of the MFA will largely benefit the textiles sector. It will help the developing countries like India to increase the export of textiles and clothing. 4) Foreign Direct Investment : As per the TRIMs agreement, restrictions on foreign investment have been withdrawn by the member nations of the WTO. This has benefited developing countries by way of foreign direct investment, euro equities and portfolio investment. In 2008-09, the net foreign direct investment in India was 35 billion us $. 5) Multi-lateral rules and discipline : It is expected that fair trade conditions will be created, due to rules and discipline related to practices like anti-dumping, subsidies and countervailing measure, safeguards and dispute settlements. Such conditions will benefit India in its attempt to globalise its economy. • UNFAVOURABLE IMPACT : 1) TRIPs Protection of intellectual property rights has been one of the major concerns of the WTO. As a member of the WTO, India has to comply with the TRIPs standards. However, the agreement on TRIPs goes against the Indian patent act, 1970, in the following ways: • Pharmaceutical sector : Under the Indian Patent act, 1970, only process patents are granted to chemicals, drugs and medicines. Thus, a company can legally manufacture once it had the product patent. So Indian pharmaceutical companies could sell good quality products (medicines) at low prices. However under TRIPs agreement, product patents will also be granted that will raise the prices of medicines, thus keeping them out of reach of the poor people, fortunately, most of drugs manufactured in India are off –patents and so will be less affected. • Agriculture Since the agreement on TRIPs extends to agriculture as well, it will have considerable implication’s onIndian agriculture. The MNG, with their huge financial resources, may also take over seed production and will eventually control food production. Since a large majority of Indian population depends on agriculture for their divelihood, these developments will have serious consequences. Micro-organisms : Under TRIPs Agreement, patenting has been extended to micro-organisms as well. This mill largely benefit MNCs and not developing countries like India. 2) TRIMS : The Agreement on TRIMs also favours developed nations as there are no rules in the agreement to formulate international rules for controlling business practices of foreign investors. Also, complying with the TRIMs agreement will contradict our objective of self – reliant growth based on locally available technology and resources. 3) GATS: The Agreement on GATS will also favour the developed nations more. Thus, the rapidly growing service sector in India will now have to compete with giant foreign firms. Moreover, since foreign firms are allowed to remit their profits, dividends and royalties to their parent company, it will cause foreign exchange burden for India. 4) TRADE AND NON – TARIFF Barriers : Reduction of trade and non-tariff barriers has adversely affected the exports of various developing nations. Various Indian products have been hit by. Non- tariff barriers. These include textiles, marine products, floriculture, pharmaceuticals, basmati rice, carpets, leather goods etc. 5) LDC exports : Many member nations have agreed to provide duty – frce and quota – frce market access to all products originating from least developed countries. India will have to now bear the adverse effect of competing with cheap LDC exports internationally. Moreover, LDC exports will also come to the Indian market and thus compete with domestically produced goods. • CONCLUSION : Thus the WTO is a powerful body that will enact international laws on various matters . It will also globalise many countries and help them to develop their competitive advantages and seek benefits from advanced technology of other nations. Though countries like India will face serious problems by complying to the WTO agreements, it can also benefit from it by taking advantage of the changing international environment.
Introduction:- Indian economy had experienced major policy changes in early 1990s. The new economic reform, popularly known as, Liberalization, Privatization and Globalization (LPG model) aimed at making the Indian economy as fastest growing economy and globally competitive. The series of reforms undertaken with respect to industrial sector, trade as well as financial sector aimed at making the economy more efficient. With the onset of reforms to liberalize the Indian economy in July of 1991, a new chapter has dawned for India and her billion plus population. This period of economic transition has had a tremendous impact on the overall economic development of almost all major sectors of the economy, and its effects over the last decade can hardly be overlooked. Besides, it also marks the advent of the real integration of the Indian economy into the global economy. This era of reforms has also ushered in a remarkable change in the Indian mindset, as it deviates from the traditional values held since Independence in 1947, such as self reliance and socialistic policies of economic development, which mainly due to the inward looking restrictive form of governance, resulted in the isolation, overall backwardness and inefficiency of the economy, amongst a host of other problems. This, despite the fact that India has always had the potential to be on the fast track to prosperity. Now that India is in the process of restructuring her economy, with aspirations of elevating herself from her present desolate position in the world, the need to speed up her economic development is even more imperative. And having witnessed the positive role that Foreign Direct Investment (FDI) has played in the rapid economic growth of most of the Southeast Asian countries and most notably China, India has embarked on an ambitious plan to emulate the successes of her neighbors to the east and is trying to sell herself as a safe and profitable destination for FDI. Globalization has many meanings depending on the context and on the person who is talking about. Though the precise definition of globalization is still unavailable a few definitions are worth viewing, Guy Brainbant: says that the process of globalization not only includes opening up of world trade, development of advanced means of communication, internationalization of financial markets, growing importance of MNCs, population migrations and more generally increased mobility of persons, goods, capital, data and ideas but also infections, diseases and pollution. The term globalization refers to the integration of economies of the world through uninhibited trade and financial flows, as also through mutual exchange of technology and knowledge. Ideally, it also contains free inter-country movement of labor. In context to India, this implies opening up the economy to foreign direct investment by providing facilities to foreign companies to invest in different fields of economic activity in India, removing constraints and obstacles to the entry of MNCs in India, allowing Indian companies to enter into foreign collaborations and also encouraging them to set up joint ventures abroad; carrying out massive import liberalization programs by switching over from quantitative restrictions to tariffs and import duties, therefore globalization has been identified with the policy reforms of 1991 in India. The Important Reform Measures (Step Towards liberalization privatization and Globalization) Indian economy was in deep crisis in July 1991, when foreign currency reserves had plummeted to almost $1 billion; Inflation had roared to an annual rate of 17 percent; fiscal deficit was very high and had become unsustainable; foreign investors and NRIs had lost confidence in Indian Economy. Capital was flying out of the country and we were close to defaulting on loans. Along with these bottlenecks at home, many unforeseeable changes swept the economies of nations in Western and Eastern Europe, South East Asia, Latin America and elsewhere, around the same time. These were the economic compulsions at home and abroad that called for a complete overhauling of our economic policies and programs. Major measures initiated as a part of the liberalization and globalization strategy in the early nineties included the following: Devaluation: The first step towards globalization was taken with the announcement of the devaluation of Indian currency by 18-19 percent against major currencies in the international foreign exchange market. In fact, this measure was taken in order to resolve the BOP crisis Disinvestment -In order to make the process of globalization smooth, privatization and liberalization policies are moving along as well. Under the privatization scheme, most of the public sector undertakings have been/ are being sold to private sector Dismantling of The Industrial Licensing Regime At present, only six industries are under compulsory licensing mainly on accounting of environmental safety and strategic considerations. A significantly amended locational policy in tune with the liberalized licensing policy is in place. No industrial approval is required from the government for locations not falling within 25 kms of the periphery of cities having a population of more than one million. Allowing Foreign Direct Investment (FDI) across a wide spectrum of industries and encouraging non-debt flows. The Department has put in place a liberal and transparent foreign investment regime where most activities are opened to foreign investment on automatic route without any limit on the extent of foreign ownership. Some of the recent initiatives taken to further liberalize the FDI regime, inter alias, include opening up of sectors such as Insurance (upto 26%); development of integrated townships (upto 100%); defense industry (upto 26%); tea plantation (upto 100% subject to divestment of 26% within five years to FDI); enhancement of FDI limits in private sector banking, allowing FDI up to 100% under the automatic route for most manufacturing activities in SEZs; opening up B2B e-commerce; Internet Service Providers (ISPs) without Gateways; electronic mail and voice mail to 100% foreign investment subject to 26% divestment condition; etc. The Department has also strengthened investment facilitation measures through Foreign Investment Implementation Authority (FIIA). Non Resident Indian Scheme the general policy and facilities for foreign direct investment as available to foreign investors/ Companies are fully applicable to NRIs as well. In addition, Government has extended some concessions especially for NRIs and overseas corporate bodies having more than 60% stake by NRIs Throwing Open Industries Reserved For The Public Sector to Private Participation. Now there are only three industries reserved for the public sector Abolition of the (MRTP) Act, which necessitated prior approval for capacity expansion The removal of quantitative restrictions on imports. The reduction of the peak customs tariff from over 300 per cent prior to the 30 per cent rate that applies now. Wide-ranging financial sector reforms in the banking, capital markets, and insurance sectors, including the deregulation of interest rates, strong regulation and supervisory systems, and the introduction of foreign/private sector competition. Impact of Globalization of Indian Economy The novel Tale of Two Cities of Charles Dickens begins with a piquant description of the contradictions of the times: It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity; we had everything before us, we had nothing before us At the present, we can also say about the tale of two Indias: We have the best of times; we have the worst of times. There is sparkling prosperity, there is stinking poverty. We have dazzling five star hotels side by side with darkened ill-starred hovels. We have everything by globalization, we have nothing by globalization. Though some economic reforms were introduced by the Rajiv Gandhi government (1985-89), it was the Narasimha Rao Government that gave a definite shape and start to the new economic reforms of globalization in India. Presenting the 1991-92 Budget, Finance Minister Manmohan Singh said: After four decades of planning for industrialization, we have now reached a stage where we should welcome, rather fear, foreign investment. Direct foreign investment would provide access to capital, technology and market. In the Memorandum of Economic Policies dated August 27, 1991 to the IMF, the Finance Minister submitted in the concluding paragraph: The Government of India believes that the policies set forth in the Memorandum are adequate to achieve the objectives of the program, but will take any additional measures appropriate for this purpose. In addition, the Government will consult with the Fund on the adoption of any measures that may be appropriate in accordance with the policies of the Fund on such consultations. The Government of India affirmed to implement the economic reforms in consultation with the international bank and in accordance of its policies. Successive coalition governments from 1996 to 2004, led by the Janata Dal and BJP, adopted faithfully the economic policy of liberalization. With Manmohan Singh returned to power as the Prime Minister in 2004, the economic policy initiated by him has become the lodestar of the fiscal outlook of the government. The Bright Side of Globalization The rate of growth of the Gross Domestic Product of India has been on the increase from 5.6 per cent during 1980-90 to seven per cent in the 1993-2001 period. In the last four years, the annual growth rate of the GDP was impressive at 7.5 per cent (2003-04), 8.5 per cent (2004-05), nine per cent (2005-06) and 9.2 per cent (2006-07). Prime Minister Manmohan Singh is confident of having a 10 per cent growth in the GDP in the Eleventh Five Year Plan period. The foreign exchange reserves (as at the end of the financial year) were $ 39 billion (2000-01), $ 107 billion (2003-04), $ 145 billion (2005-06) and $ 180 billion (in February 2007). It is expected that India will cross the $ 200 billion mark soon. The cumulative FDI inflows from 1991 to September 2006 were Rs.1, 81,566 crores (US $ 43.29 billion). The sectors attracting highest FDI inflows are electrical equipments including computer software and electronics (18 per cent), service sector (13 per cent), telecommunications (10 per cent), transportation industry (nine per cent), etc. In the inflow of FDI, India has surpassed South Korea to become the fourth largest recipient. India controls at the present 45 per cent of the global outsourcing market with an estimated income of $ 50 billion. In respect of market capitalization (which takes into account the market value of a quoted company by multiplying its current share price by the number of shares in issue), India is in the fourth position with $ 894 billion after the US ($ 17,000 billion), Japan ($ 4800 billion) and China ($ 1000). India is expected to soon cross the trillion dollar mark. As per the Forbes list for 2007, the number of billionaires of India has risen to 40 (from 36 last year) more than those of Japan (24), China (17), France (14) and Italy (14) this year. A press report was jubilant: This is the richest year for India. The combined wealth of the Indian billionaires marked an increase of 60 per cent from $ 106 billion in 2006 to $ 170 billion in 2007. The 40 Indian billionaires have assets worth about Rs. 7.50 lakh crores whereas the cumulative investment in the 91 Public Sector Undertakings by the Central Government of India is Rs. 3.93 lakh crores only. The Dark Side of Globalization On the other side of the medal, there is a long list of the worst of the times, the foremost casualty being the agriculture sector . Agriculture has been and still remains the backbone of the Indian economy . It plays a vital role not only in providing food and nutrition to the people, but also in the supply of raw material to industries and to export trade. In 1951, agriculture provided employment to 72 per cent of the population and contributed 59 per cent of the gross domestic product. However, by 2001 the population depending upon agriculture came to 58 per cent whereas the share of agriculture in the GDP went down drastically to 24 per cent and further to 22 per cent in 2006-07. This has resulted in a lowering the per capita income of the farmers and increasing the rural indebtedness. The agricultural growth of 3.2 per cent observed from 1980 to 1997 decelerated to two per cent subsequently. The Approach to the Eleventh Five Year Plan released in December 2006 stated that the growth rate of agricultural GDP including forestry and fishing is likely to be below two per cent in the Tenth Plan period. The reasons for the deceleration of the growth of agriculture are given in the Economic Survey 2006-07: Low investment, imbalance in fertilizer use, low seeds replacement rate, a distorted incentive system and lo post-harvest value addition continued to be a drag on the sectors performance. With more than half the population directly depending on this sector, low agricultural growth has serious implications for the inclusiveness of growth. The number of rural landless families increased from 35 per cent in 1987 to 45 per cent in 1999, further to 55 per cent in 2005. The farmers are destined to die of starvation or suicide. Replying to the Short Duration Discussion on Import of Wheat and Agrarian Distress on May 18, 2006, Agriculture Minister Sharad Pawar informed the Rajya Sabha that roughly 1, 00,000 farmers committed suicide during the period 1993-2003 mainly due to indebtedness. In his interview to The Indian Express on November 15, 2005, Sharad Pawar said: The farming community has been ignored in this country and especially so over the last eight to ten years. The total investment in the agriculture sector is going down. In the last few years, the average budgetary provision from the Indian Government for irrigation is less than 0.35 percent. During the post-reform period, India has been shining brilliantly with a growing number of billionaires. Nobody has taken note of the sufferings of the family members of those unfortunate hundred thousand farmers. Further, the proportion of people depending in India on agriculture is about 60 % whereas the same for the UK is 2 %, USA 2 %and Japan 3 %. The developed countries, having a low proportion of population in agriculture, have readily adopted globalization which favors more the growth of the manufacturing and service sectors. About the plight of agriculture in developing countries, Nobel Prize-winning economist Joseph Stiglitz said: Trade agreements now forbid most subsidies excepted for agricultural goods. This depresses incomes of those farmers in the developing countries who do not get subsidies. And since 70 per cent of those in the developing countries depend directly or indirectly on agriculture, this means that the incomes of the developing countries are depressed. But by whatever standard one uses, todays international trading regime is unfair to developing countries. He also pointed out: The average European cow gets a subsidy of $ 2 a day (the World Bank measure of poverty); more than half the people in the developing world live on less than that. It appears that it is better to be a cow in Europe than to be a poor person in a developing country. Demoting Agriculture The Economic Survey reports released till 1991 contained the Chapters in the following order: (1) Introduction, (2) Agricultural Production, (3) Industrial Performance and Policies, (4) Infrastructure, (5) Human Resources, (6) Prices, Price Policy and Public Distribution System, (7) Fiscal Policy and Government Budget, (8) Monetary and Credit Developments, (9) The External Sector and (10) Problems and Prospects. In the Economic Survey 1991-92, Finance Minister Manmohan Singh recast the Chapters in the following order: (1) Introduction, (2) Public Finance, (3) Money and Credit, (4) Prices and Distribution, (5) Balance of Payments, (6) Industry, (7) Agriculture, (8) Infrastructure and (9) Social Sectors. It is not known as to why the Finance Minister demoted the importance of agriculture that has about 90 per cent population from the second place to the seventh in the annual Economic Survey of the country. In a way does it symbolize the low importance deliberately given to the growth of the agriculture sector in the scheme of globalization? Strategy of Globalization In the Report (2006) East Asian Renaissance, World Bank Advisor Dr Indermit Gill stated: Cities are at the core of a development strategy based on international integration, investment and innovation. East Asia is witnessing the largest rural-to-urban shift of population in history. Two million new urban dwellers are expected in East Asian cities every month for the next 20 years. This will mean planning for and building dynamic, connected cities that are linked both domestically and to the outside world so that economic growth continues and social cohesion is strengthened. The market economy seems to be more concerned with the growth of consumerism to attract the high income groups who are mostly in the cities in the developing countries. Rural economy and the agricultural sector were out of focus in the strategy of globalization. Growth of UnemploymentPoverty The proportion of the unemployed to the total labor force has been increasing from 2.62 per cent (1993-94) to 2.78 per cent (1999-2000) and 3.06 per cent (2004-05). In absolute figures, the number of unemployed had been in those years 9.02 million, 10.51 million and 13.10 million respectively. (Economic Survey 2006-07, Table 10.4) In reply to a question, the Minister for Labor and Employment informed the Lok Sabha on March 19, 2007, that the enrolment of the unemployed in the Employment Exchanges in 2006-07 was 79 lakhs against the average of 58 lakhs in the past ten years. About the impact of globalization, in particular on the development of India, the ILO Report (2004) stated: In India, there had been winners and losers. The lives of the educated and the rich had been enriched by globalization. The information technology (IT) sector was a particular beneficiary. But the benefits had not yet reached the majority, and new risks had cropped up for the losersthe socially deprived and the rural poor. Significant numbers of non-perennial poor, who had worked hard to escape poverty, were finding their gains reversed. Power was shifting from elected local institutions to unaccountable trans-national bodies. Western perceptions, which dominated the globe media, were not aligned with local perspectives; they encouraged consumerism in the midst of extreme poverty and posed a threat to cultural and linguistic diversity. Social Services About the quality of education given to children, the Approach to the Eleventh Five Year Plan stated: A recent study has found that 38 per cent of the children who have completed four years of schooling cannot read a small paragraph with short sentences meant to be read by a student of Class II. About 55 per cent of such children cannot divide a three digit number by a one digit number. These are indicators of serious learning problems which must be addressed. The Approach paper added further: Universalisation of education will not suffice in the knowledge economy. A person with a mere eight years of schooling will be as disadvantaged in a knowledge economy by ICT as an illiterate person in modern industry an services. The less said about the achievements in health the better. The Approach to the Eleventh Plan concedes that progress implementing the objectives of health have been slow. The Report gave the particulars of the rates of infant mortality (per 1000 live births) for India as 60 against Sri Lanka (13), China (30) and Vietnam (19). The rate of maternal mortality (per 1, 00,000 deliveries) of India is 407 against Sri Lanka (92), China (56) and Vietnam (130). Growth of Slum Capitals In his 2007-08 Budget Speech, Finance Minister Chidambaram put forth a proposal to promote Mumbai as a world class financial centre and to make financial services the next growth engine of India. Of its 13 million population, Mumbai city has 54 per cent in slums. It is estimated that 100 to 300 new families come to Mumbai every day and most land up in a slum colony. Prof R. N. Sharma of the Tata Institute of Social Science says that Mumbai is disintegrating into slums. From being known as the slum capital of India and the biggest slum of Asia, Mumbai is all set to become the slum capital of the world. The FDI inflows have in no way assisted in improving the health and environment conditions of the people. On the other hand, the financial capital of India and the political capital of India are set to become the topmost slum cities of the world. Victims of Globalization IN his Making Globalization Work, Nobel Laureate Stiglitz wrote: Trade liberalizationopening up markets to the free flow of goods and services was supposed to lead to growth. The evidence is at best mixed. Part of the reason that international trade agreements have been so unsuccessful in promoting growth in poor countries is that they were often unbalanced. The advanced industrial countries were allowed to levy tariffs on goods produced by developing countries that were, on average, four times higher that those on goods produced by other advanced industrial countries. In his foreword to The Dynamics and Impact of Globalization by Dr. M. V. Louis Anthuvan, Justice V. R. Krishna Iyer pointed out pithily: The New World Order is the product of what is now familiarly described as globalization, liberalization and privatization. The weaker sectors like the Asian and African countries are victims, whose economic welfare is slavery, at the disposal of the White world. When World War II came to a close, commercial conquest and trade triumph became the major goal of the United States and the other giant trade powers. Indeed, these mighty countries and companies even made world hunger as Big Business. The poorer countries with natural resources have been made banana republics and cucumber vassals. The Human Development Report 2006 recorded: Globalization has given rise to a protracted debate over the precise direction of trends in global income distribution. What is sometimes lost sight of is the sheer depth of inequalityand the associated potential for greater equity to accelerate poverty reduction. Measured in the 2000 purchasing power parity (PPP) terms, the gap between the incomes of the poorest 20 per cent of the worlds population and the $ 1 a day poverty line amounts to about $ 300 billion. That figure appears large, but it is less than two per cent of the income of the worlds wealthiest 10 per cent. To make Globalization Work Under the phenomenal growth of information technology which has shrunk space and time and reduced the cost of moving information, goods and capital across the globe, the globalization has brought unprecedented opportunities for human development for all, in developing as well as developed countries. Under the commercial marketing forces, globalization has been used more to promote economic growth to yield profits to some countries and to some groups within a country. India should pay immediate attention to ensure rapid development in education, health, water and sanitation, labor and employment so that under time-bound programmes the targets are completed without delay. A strong foundation of human development of all people is essential for the social, political and economic development of the country. Though at present India appears to be dominant in some fields of development as in IT-ITES, this prosperity may be challenged by other competing countries which are equipping themselves with better standards of higher education. As detailed earlier, our progress in education has been slow and superficial, without depth and quality, to compete the international standards. The government should take immediate steps to increase agricultural production and create additional employment opportunities in the rural parts, to reduce the growing inequality between urban and rural areas and to decentralize powers and resources to the panchayati raj institutions for implementing all works of rural development. Steps should be taken for early linking of the rivers, especially in the south-bound ones, for supply of the much-needed water for irrigation. It should be remembered that without a sustainable and productive growth of the agricultural sector, the other types of development in any sphere will be unstable and illusory. Despite the concerted development in manufacturing and service sectors, despite the remarkable inflow and overflow of foreign reserves, agriculture is still the largest industry providing employment to about 60 per cent of the workforce in the country. Mere growth of the GDP and others at the macro level in billions does not solve the chronic poverty and backward level of living norms of the people at the micro level. The growth should be sustainable with human development and decent employment potential. The welfare of a country does not percolate from the top, but should be built upon development from the bottom. During dry weather these slum dwellers use open areas around their units for defecation and the entire human waste generated from the slums along with the additional wastewater from their households is discharged untreated into the river Yamuna. The cumulative FDI inflows (until September 2006) to the New Delhi region was of Rs. 27,369 crores and to Mumbai Rs. 24,545 crores . The two spots of New Delhi and Mumbai received 46 per cent of the total FDI inflows into India.
Albania 8 September 2000 Angola 23 November 1996 Antigua and Barbuda 1 January 1995 Argentina 1 January 1995 Armenia 5 February 2003 Australia 1 January 1995 Austria 1 January 1995 Bahrain, Kingdom of 1 January 1995 Bangladesh 1 January 1995 Barbados 1 January 1995 Belgium 1 January 1995 Belize 1 January 1995 Benin 22 February 1996 Bolivia, Plurinational State of 12 September 1995 Botswana 31 May 1995 Brazil 1 January 1995 Brunei Darussalam 1 January 1995 Bulgaria 1 December 1996 Burkina Faso 3 June 1995 Burundi 23 July 1995 Cambodia 13 October 2004 Cameroon 13 December 1995 Canada 1 January 1995 Cape Verde 23 July 2008 Central African Republic 31 May 1995 Chad 19 October 1996 Chile 1 January 1995 China 11 December 2001 Colombia 30 April 1995 Congo 27 March 1997 Costa Rica 1 January 1995 Côte d'Ivoire 1 January 1995 Croatia 30 November 2000 Cuba 20 April 1995 Cyprus 30 July 1995 Czech Republic 1 January 1995 Democratic Republic of the Congo 1 January 1997 Denmark 1 January 1995 Djibouti 31 May 1995 Dominica 1 January 1995 Dominican Republic 9 March 1995 Ecuador 21 January 1996 Egypt 30 June 1995 El Salvador 7 May 1995 Estonia 13 November 1999 European Union (formerly European Communities) 1 January 1995 Fiji 14 January 1996 Finland 1 January 1995 France 1 January 1995 Gabon 1 January 1995 The Gambia 23 October 1996 Georgia 14 June 2000 Germany 1 January 1995 Ghana 1 January 1995 Greece 1 January 1995 Grenada 22 February 1996 Guatemala 21 July 1995 Guinea 25 October 1995 Guinea-Bissau 31 May 1995 Guyana 1 January 1995 Haiti 30 January 1996 Honduras 1 January 1995 Hong Kong, China 1 January 1995 Hungary 1 January 1995 Iceland 1 January 1995 India 1 January 1995 Indonesia 1 January 1995 Ireland 1 January 1995 Israel 21 April 1995 Italy 1 January 1995 Jamaica 9 March 1995 Japan 1 January 1995 Jordan 11 April 2000 Kenya 1 January 1995 Korea, Republic of 1 January 1995 Kuwait, the State of 1 January 1995 Kyrgyz Republic 20 December 1998 Latvia 10 February 1999 Lesotho 31 May 1995 Liechtenstein 1 September 1995 Lithuania 31 May 2001 Luxembourg 1 January 1995 Macao, China 1 January 1995 Madagascar 17 November 1995 Malawi 31 May 1995 Malaysia 1 January 1995 Maldives 31 May 1995 Mali 31 May 1995 Malta 1 January 1995 Mauritania 31 May 1995 Mauritius 1 January 1995 Mexico 1 January 1995 Moldova, Republic of 26 July 2001 Mongolia 29 January 1997 Montenegro 29 April 2012 Morocco 1 January 1995 Mozambique 26 August 1995 Myanmar 1 January 1995 Namibia 1 January 1995 Nepal 23 April 2004 Netherlands 1 January 1995 New Zealand 1 January 1995 Nicaragua 3 September 1995 Niger 13 December 1996 Nigeria 1 January 1995 Norway 1 January 1995 Oman 9 November 2000 Pakistan 1 January 1995 Panama 6 September 1997 Papua New Guinea 9 June 1996 Paraguay 1 January 1995 Peru 1 January 1995 Philippines 1 January 1995 Poland 1 July 1995 Portugal 1 January 1995 Qatar 13 January 1996 Romania 1 January 1995 Russian Federation 22 August 2012 Rwanda 22 May 1996 Saint Kitts and Nevis 21 February 1996 Saint Lucia 1 January 1995 Saint Vincent & the Grenadines 1 January 1995 Samoa 10 May 2012 Saudi Arabia, Kingdom of 11 December 2005 Senegal 1 January 1995 Sierra Leone 23 July 1995 Singapore 1 January 1995 Slovak Republic 1 January 1995 Slovenia 30 July 1995 Solomon Islands 26 July 1996 South Africa 1 January 1995 Spain 1 January 1995 Sri Lanka 1 January 1995 Suriname 1 January 1995 Swaziland 1 January 1995 Sweden 1 January 1995 Switzerland 1 July 1995 Chinese Taipei 1 January 2002 Tanzania 1 January 1995 Thailand 1 January 1995 The former Yugoslav Republic of Macedonia (FYROM) 4 April 2003 Togo 31 May 1995 Tonga 27 July 2007 Trinidad and Tobago 1 March 1995 Tunisia 29 March 1995 Turkey 26 March 1995 Uganda 1 January 1995 Ukraine 16 May 2008 United Arab Emirates 10 April 1996 United Kingdom 1 January 1995 United States of America 1 January 1995 Uruguay 1 January 1995 Vanuatu 24 August 2012 Venezuela, Bolivarian Republic of 1 January 1995 Viet Nam 11 January 2007 Zambia 1 January 1995 Zimbabwe 5 March 1995
Afghanistan Albania Algeria American Samoa Angola Antigua and Barbuda Argentina Armenia Azerbaijan Bangladesh Belarus Belize Benin Bhutan Bolivia Bosnia-Herzegovina Botswana Brazil Bulgaria Burkina Faso Burundi Cambodia Cameroon Cape Verde Central African Republic Chad Chile China Colombia Comoros Congo, Dem. Rep. Congo, Rep. Costa Rica Cote d'Ivoire Croatia Cuba Djibouti Dominica Dominican Republic Ecuador Egypt El Salvador Eritrea Ethiopia Fiji Gabon Gambia Georgia Republic Ghana Grenada Guatemala Guinea Guinea-Bissau Guyana Haiti Honduras India Indonesia Iran Iraq Jamaica Jordan Kazakhstan Kenya Kiribati Korea, Dem. Rep. Kyrgyzstan Laos Latvia Lebanon Lesotho Liberia Libya Lithuania Macedonia Madagascar Malawi Malaysia Maldives Mali Marshall Islands Mauritania Mauritius Mayotte Mexico Micronesia Moldova Mongolia Montenegro Morocco Mozambique Myanmar Namibia Nepal Nicaragua Niger Nigeria Pakistan Palau Panama Papua New Guinea Paraguay Peru Philippines Poland Romania Russia Rwanda Saint Kitts and Nevis Saint Lucia Saint Vincent Samoa Sao Tome and Principe Senegal Serbia Seychelles Sierra Leone Solomon Islands Somalia South Africa Sri-Lanka Sudan Suriname Swaziland Syria Tajikistan Tanzania Thailand Timor Togo Tonga Trinidad and Tobago Tunisia Turkey Turkmenistan Tuvalu Uganda Ukraine Uruguay Uzbekistan Vanuatu Venezuela Vietnam Yemen Zambia Zimbabwe
