Page 344 - DECO503_INTERNATIONAL_TRADE_AND_FINANCE_ENGLISH

International Trade and Finance

Notes TRIPS, Haldi and Neem
India’s ancient use of Haldi (Turmeric) was sought to be patented under the American Law in 1995.
Luckily for India, Dr. R. A. Mashelkar, Director General of Council of Scientific and Industrial Research
challenged it. The US patent office acknowledged its mistake and cancelled the patent on ‘Haldi’.
An American company has been granted a patent right for Neem as a pesticide. Basmati rice, which
was a universal variety in India, has been patented as Kasmati and Texmati. Danger lurks with
regard to Tulsi (Basil) plant. These are a few cases of biopiracy of India’s herbal wealth and to prevent
huge losses, India will have to undertake huge documentation about the use of its herbal wealth.

TRIMS and its Impact on India
Trade Related Investment Measures (TRIMs) were initiated by the US in 1980 since it was losing
ground in competition in goods to Japan and other newly industrialised nations of East Asia and
intended to recover its lost ground through trade in services. Although GATT had never discussed
the idea of trading in services as part of the earlier seven rounds of negotiations, the USA tried to sell
this idea in the 8th Round of GATT negotiations. The principal objective was to benefit the
Multinational Corporations (MNCs) so that they could undertake investment in financial services,
telecommunications, marketing so as to boost world trade.
The main provisions provided in the TRIMs text ensure that Governments shall not discriminate
against foreign capital. In other words, the TRIMs text compels member countries to give national
treatment to foreign capital. The main features of the TRIMs text are :
(i) All restrictions on foreign capital/investors/ companies should be scrapped.
(ii) The foreign investor shall be given the same rights in the matter of investment as a national
investor.
(iii) No restrictions will be imposed on any area of investment.
(iv) Nor will there be any limitation on the extent of foreign investment—even 100 per cent foreign
equity will be permitted.
(v) Imports of raw materials and components will be allowed freely.
(vi) Foreign investor will not be obliged to use local products and materials.
(vii) Export of part of the output will no longer be mandatory.
(viii) Restrictions on repatriation of dividend, interest and royalty will be eliminated.
(ix) There will be a complete exclusion of provisions like phased manufacturing programme which
is intended to increase the indigenous content in manufacture.
Textiles and Clothings
GATT agreement has made certain proposals to liberalise the trade of textiles and clothings. These
proposals are very important for developing countries since textile exports constitute the single most
important item of their export. Ironically, developed countries who claim to be the greatest champions
of free trade have imposed most comprehensive quota restrictions under the multi-fibre agreement
(MFA). The Act proposes to phase out MFA quotas over a ten year period (1993 to 2003) and to fully
liberalise the textile sector at the end of the ten year period.
The Act has divided the 10-year period into three phases of three, four and three years. In the first
phase 16 per cent of the textile exports to the developed countries will be liberalised, to be followed
by 17 per cent in the second phase and another 18 per cent in the third phase. Thus at the end of the
10-year period, only 51 per cent of textile market will be liberalised. Thus, a substantial portion
(49 per cent) shall have to wait for the second wave of liberalisation after 2003 AD. What is intriguing
is that textiles are defined in such a way that textile sector includes items that are not currently under
quota restrictions in developed countries. Thus, instead of creating real liberalisation and withdrawing
non-tariff restrictions, the myth of liberalisation has been created. The Ministry of Commerce has
made this point clear : “It is a fact that the textile agreement is not evenly balanced in the sense in the
initial years, there is minimal liberalisation and significant steps for liberalisation are left only to the

338 LOVELY PROFESSIONAL UNIVERSITY