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International Trade and Finance

Notes negotiations.
Thus, the Uruguay Round (UR) contained the mandate to have negotiations in 15 areas. In Part I,
negotiations on Trade in Goods were to be conducted in 14 areas and in Part II negotiations on Trade
in services were to be carried out.
Part I (Trade in Goods) declaration in UR contained the following : (1) Tariffs, (2) Non-tariff measures,
(3) Tropical products, (4) Natural resource-based products, (5) Textiles and clothing, (6) Agriculture,
(7) GATT articles, (8) Safeguards, (9) MTN (Multilateral Trade Negotiations) agreements and
arrangements, (10) Subsidies and countervailing measures, (11) Dispute settlement, (12) Trade Related
Aspects of Intellectual Property Rights (TRIPs), (13) Trade Related Investment Measures (TRIMs)
(14) Functioning of the GATT systems (FOGS).
Thus, besides the traditional GATT subjects such as tariff and non-tariff barriers and improvement in
GATT rules and disciplines on subsidies and countervailing measures, anti-dumping measures etc.,
certain new areas such as Trade Related Aspects of Intellectual Property Rights (TRIPs), Trade Related
Investment Measures (TRlMs) and Trade in Services were included for the first time for negotiations.
These negotiations were expected to be concluded in four years, but on account of differences in
participating countries on certain critical areas, such as agriculture, textiles, TRIPs and anti-dumping
measures, agreement could not be reached. To break this deadlock, Mr. Arthur Dunkel, Director
General of GATT compiled a very detailed document, popularly known as Dunkel Proposals and
presented it before the member-countries as a compromise document. The Dunkel Proposals
culminated into the Final Act on December 15, 1993 and India signed the agreement along with 117
nations on April 15, 1994.
29.1 Impact of WTO on Various Aspects of Indian Economy

India, being a founder member of the WTO, has been following the WTO decisions, but as a
consequence, certain effects on the Indian economy have become evident.
1. Effects on Indian Industry
WTO has been urging India to lower import duties, remove controls on consumer goods imports,
reduce quantitative restrictions, etc. Under the Uruguay Round Agreement, India offered to
reduce tariffs on capital goods, components, intermediate goods and industrial raw materials
to 40% in case our tariffs were above that percentage; to 25% in case our tariffs were between 25
to 40 per cent and to bind the tariff ceiling at 25 per cent in case our tariffs were below that
percentage. This reduction in tariffs was to be achieved by the year ending 2000.
Since India scrupulously followed the agreement, the tariffs have been reduced year after year
to conform with the WTO provisions. As the protection afforded by import duties gradually
disappeared, Indian industry had to face increasing competition from foreign goods.
Confederation of Indian Industry (CII), the apex body expressed its disapproval against duty-
free status of capital goods sector. As a result, CII estimated that indigenous capital goods
industry on a conservative estimate lost orders worth ` 5,000 crores from foreign countries.
Instead of ensuring level playing field, indigenous industry has to pay excise, sales tax, octroi,
turnover tax while imported goods are allowed duty-free access to our market. Not only the
entire manufacturing industry is faced with a crisis, even machine tools industry, gensets and
boiler producers are put at a serious disadvantage. Consequently, imports of finished products
are displacing indigenously produced products. As a result, many industrial units are being
closed and cheap imports have become an important cause of recession in Indian industry.
India was maintaining quantitative restrictions in the form of quotas, import and export licences
on 2,700 agricultural commodities, textile and industrial products. United States along with
Australia, New Zealand, Switzerland, European Economic Community and Canada complained
to the WTO Dispute Settlement Machinery that these QRS were inconsistent with WTO norms.
The dispute settlement panel gave its verdict against India. India went in appeal, but the WTO
rd
panel on 23 August 1999 rejected India’s appeal against QRs.
As a result, although India could continue QRRs till March 2003, the process was hastened and

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