India and the WTO: objectives, functions, agreements and impact
Economic Development in India · Unit V · Topic 14 of 15 · 5 min read
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1. From GATT to the WTO
The General Agreement on Tariffs and Trade (GATT) was signed in 1947 by 23 countries, India among them, as a provisional arrangement after the proposed International Trade Organisation failed. GATT held eight rounds of negotiations that lowered tariffs. The eighth, the Uruguay Round (1986–1994), extended the rules to agriculture, services, intellectual property and investment measures. Its Final Act, signed at Marrakesh in April 1994, created the World Trade Organisation, which came into being on 1 January 1995 with its headquarters in Geneva. India is a founder member.
| GATT | WTO |
|---|---|
| A provisional agreement | A permanent organisation with legal personality |
| Trade in goods only | Goods, services, intellectual property |
| Weak dispute settlement | Binding dispute settlement with an appellate stage |
| “Contracting parties” | “Members” |
2. Objectives
The preamble of the Marrakesh Agreement lists: raising standards of living; ensuring full employment and a large and steadily growing volume of real income and effective demand; expanding production of and trade in goods and services; optimal use of world resources in accordance with sustainable development; and ensuring that developing countries, especially the least developed, secure a share in the growth of international trade.
3. Principles
- Most-favoured-nation treatment: a concession given to one member must be given to all (with exceptions for free trade areas and developing countries).
- National treatment: imported goods, once inside, must be treated no less favourably than domestic goods.
- Freer trade through negotiation; predictability through bound tariffs; fair competition (rules on dumping and subsidies); special and differential treatment for developing countries.
4. Functions
- Administering and implementing the multilateral and plurilateral trade agreements;
- providing a forum for trade negotiations;
- settling trade disputes under the Dispute Settlement Understanding;
- reviewing members’ trade policies through the Trade Policy Review Mechanism;
- technical assistance and training for developing countries; and
- co-operating with the IMF and the World Bank for coherence in global economic policy.
Structure. The Ministerial Conference, meeting at least once every two years, is the highest body. The General Council runs the WTO between conferences and also sits as the Dispute Settlement Body and the Trade Policy Review Body. Below it are the Councils for Trade in Goods, Trade in Services and TRIPS. A Director-General heads the Secretariat. Decisions are normally by consensus.
5. Main agreements
- GATT 1994: tariff reduction and binding on goods.
- Agreement on Agriculture (AoA): market access (converting quotas into tariffs), reduction of trade-distorting domestic support (the “amber box” measured by the Aggregate Measurement of Support, with a de minimis limit of 10 per cent of the value of production for developing countries), and reduction of export subsidies. “Green box” support (research, extension, environment) is allowed.
- TRIPS (Trade-Related Aspects of Intellectual Property Rights): minimum standards for patents (20 years, product and process), copyright, trademarks, geographical indications.
- TRIMS (Trade-Related Investment Measures): bans local-content and trade-balancing requirements on foreign investors.
- GATS (General Agreement on Trade in Services), covering four modes of supply: cross-border, consumption abroad, commercial presence, and movement of natural persons.
- Agreements on anti-dumping, subsidies and countervailing measures, safeguards, sanitary and phytosanitary measures, technical barriers to trade, and (2017) trade facilitation.
6. Impact of the WTO on the Indian economy
Agriculture. India’s product-specific support was within limits at the start, and India kept high bound tariffs on farm products. The concerns are the subsidies of rich countries that depress world prices, and the risk that minimum support price procurement for public stockholding breaches the AMS limit. The Bali Ministerial (2013) adopted a “peace clause” protecting public stockholding for food security from challenge until a permanent solution is found; India continues to press for that solution.
Industry and trade. India lowered its tariffs and removed quantitative restrictions on imports by 2001, after the USA won a dispute against India’s balance of payments restrictions. Indian industry gained wider markets and cheaper inputs but faced import competition; the end of the Multi-Fibre Arrangement (2005) opened textile and garment markets. Anti-dumping duties are now a common Indian tool against cheap imports.
Patents (TRIPS). India’s Patents Act, 1970 allowed only process patents for drugs, which built a strong generic industry. To comply with TRIPS India introduced a mailbox system (1999) and product patents for pharmaceuticals, food and chemicals from 1 January 2005 (Patents (Amendment) Act, 2005), with safeguards such as section 3(d) against “evergreening” and compulsory licensing. The Doha Declaration on TRIPS and Public Health (2001) confirmed members’ right to protect public health.
TRIMS. Local-content conditions (for example the phased manufacturing programme in automobiles) had to be dropped; disputes over local-content rules in India’s solar mission were lost.
Services. India’s strength in IT and professional services gives it an interest in GATS Mode 1 (cross-border supply) and Mode 4 (movement of professionals), where it seeks easier visa access.
Dispute settlement. India has used the system both as complainant and respondent, but the Appellate Body has been non-functional since December 2019, because the USA blocked appointments, weakening the system.
Overall. Membership has given India predictable access to world markets and has supported its export growth, but at the cost of reduced policy space in agriculture, patents and industrial policy. India’s position in negotiations stresses food security, special and differential treatment, and resistance to new issues such as investment facilitation. The Fourteenth Ministerial Conference at Yaoundé, Cameroon (March 2026) ended without agreement on most major issues, which were sent back to Geneva.
How this is examined
June/July 2025 (100 marks): “Explain the impact of WTO on various aspects of Indian economy” (16). June/July 2025 (80 marks): “Explain the objectives and functions of WTO” (10). January/February 2025: “WTO” (6). For objectives and functions, sections 1 to 4; for impact, a short introduction and section 6.
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