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ISSUES AND POLICY OPTIONS FOR TRADE RELATED INTELLECTUAL PROPERTY RIGHTS AND INDIAN ECONOMY

(ABSTRACT)

Dr. B. M. Jani
Professor of Economics
Saurashtra University
RAJKOT-360 005.

World Trade Organization (WTO) has provided guidelines for Agreement on Trade Related Investment measures (TRIMs) and the Trade Related Intellectual Property Rights (TRIPs). There are several economic, Social, Political and Legal remifications. The present paper tries to sort out major issues on the basis of review of latest literature on the subject and offers policy options related with the subject. It is necessary to examine TRIPs on different sectors of Indian economy like Agriculture, Industry and Service sector. For this, Doha Ministerial Declaration needs to be evaluated with reference to the developing countrties in general and India in particular. Similarly, visions and provisions of WTO for the developing countries also need rethinking. The main Ministerial declaration at Doha elaborated on the objectives and timetable for the curent negotiations in agriculture and services, negotiations industrial tariffs, trade and investment and competition policy. Periodical changes are necessary in favour of ther developing countries.

 This paper is divided into three parts: the first one reviews literatire so as to sort out issues of discussion, the second one analyses visions and provisions of WTO for TRIMs and TRIPs for the developing countries,whereas, the third one offers policy options for multilateral trade development for Indian economy under new quasi-judiciary system WTO.

***************************************
                                   

Dear Mr. Sai,

I am highly thankful for your kind invitation to our department to contribute a paper for conference on TRIPs – Next Agenda for developing countries during 11-12 October 2002. In order to encourage such national level academic event, I enclose an abstract of my possible paper on “ISSUES AND POLICY OPTIONS FOR TRADE RELATED INTELLECTUAL PROPERTY RIGHTS AND INDIAN ECONOMY” to be read at the national conference. I will submit full text of my paper before 15th of September 2002 in a floppy and one hard copy.

I teach subjects like International Economics at M.A. Level and International Marketing at MBA classes for the last several years. I am sure that my participation will surely broaden horizon of my knowledge as well as substantially contribute to the conference.

A line of reply will highly be appreciated

Yours Sincerely,

B. M. Jani

Encl.: 1. Registration form
          2.An abstract of my paper

ISSUES AND POLICY OPTIONS FOR TRADE RELATED
INTELLECTUAL PROPERTY RIGHTS AND INDIAN ECONOMY

Dr. B. M. Jani
Professor of Economics
Saurashtra University
RAJKOT-360 005.                 

World Trade Organization (WTO) has provided guidelines for Agreement on Trade Related Investment measures (TRIMs) and the Trade Related Intellectual Property Rights (TRIPs). There are several economic, Social, Political and Legal remifications. The present paper tries to sort out major issues on the basis of review of latest literature on the subject and offers policy options related with the subject. It is necessary to examine TRIPs on different sectors of Indian economy like Agriculture, Industry and Service sector. For this, Doha Ministerial Declaration needs to be evaluated with reference to the developing countrties in general and India in particular. Similarly, visions and provisions of WTO for the developing countries also need rethinking. The main Ministerial declaration at Doha elaborated on the objectives and timetable for the curent negotiations in agriculture and services, negotiations industrial tariffs, trade and investment and competition policy. Periodical changes are necessary in favour of ther developing countries.

                    This paper is divided into three parts: the first one reviews literatire so as to sort out issues of discussion, the second one analyses visions and provisions of WTO for TRIMs and TRIPs for the developing countries, whereas, the third one offers policy options for multilateral trade development for Indian economy under new quasi-judiciary system WTO.

RETROSPECT :

There are several studies carried out by the scholars in area of WTO and India. These  include,  Chadha (2000)1, Panchmukhi (2000)2, Alagh (2001)3 Mishra (2001)4, FICCI(2000)5, Deodhar (1999)6 Gulati (2000)7, Mukhopadhyaya (2000)8 and others. These scholars examined impact of Urugway Rounds Agreements (URA) on global Trade and the impact of URA on Indian trade with respect to agriculture, industrial and service sector trade growth in 21st century.
              
                         Moreover, serious attempt is made by institutions and individuals to view the role of WTO with reference to sectoral impact due to WTO and guidelines pertaining to the developing countries in general and India in particular. These include, Bhalla (1996) 9, Ronalnd (1990)10, Sahota (1999)11, Srivastava and Sen (1997)12, UNDP (1999)13, World Bank(1999)14, Palit (1997)15, National Working Group on Patent Laws (1993)16 Panagariya (1998)17 . All these studies have explored potentiality for further growth of Indian trade under the WTO regimes considering various sectors of the economy.

However, very scant attention is paid by the scholars to offer policy options for the Government of India to negotiate in the next round of the WTO. This paper brides the gap to show ways and means with different policy options so as to increase the share of India in aggregate World trade.

MAJOR ISSUES DRAW ATTENTION :

On the basis of above-noted literature, one can safely draw following issues which need due discussion :

1.For India’s adjustment, strategy to World Trade in Agriculture can be through diversification and sustainable agriculture. In this regard what kind of strategy to be followed by policy-makers to increase India’s share in world exports  ?

2.What should be the nature of anti-dumping tariffs in era of dumping by China and other countries to damage agricultural and small industry products in Global competition  ?

3. The bringing of intellectual property rights (TRIPS) in the purview of WTO would also have serious effect on  Indian agriculture through patenting of seeds, sui-generis system.. Will WTO -regime not affect adversely to Indian agriculture ?

4. Market access of agricultural products and commodities manufactured by small scale industries in World trade need legal protection. Do we have legal reforms in India with respect to WTO and globalization of Indian trade  ?

5. Who will fund for technological advancement in agriculture, industrial and service sector products in global Indian trade so as to increase its share  ?

6. Multinational are selling technology as a commodity in global market and charging discrimately from country to country. In such a situation, what is a way out for developing country like India ?

7. As WTO being quasi-judicial body, is there any scope to have code of conduct for the developed countries to stop exploitation  ?

8.Technology and knowledge industry, including information technology  as the most competitive sector are core one in Indian economy. What kind of strategic policy initiatives should India take to strengthen domestic R & D activities so as to make the indigenous technology and knowledge-industries emerge as the most competitive sector in the next five years.

9. What should be India’s approach to wards new issues such as Multilateral Agreement on Investment, labour standards, child labour trade-environment linkages ?

10. What are the consequences of liberalization and globalization in the fields of the banking and insurance sectors on the domestic banking and insurance industries ? How should government monitor and control the instabilities that may be generated by the external shocks in this field  ?

11. Looking to mounting internal and external debt burden both governmental and private on average India, it is most necessary to monitor control such debts. Would it not affect adversely to competitive strength of India economy ?

12 What kind of global financial architecture should be evolved that volatility and instability of  capital markets and exchange rates can be controlled so as to manage Indian capital and forex markets under rule-based disciplines framework  ?

II

Visions and Provisions :

The Uruguay Round Agreement are launched from January 2000 and the WTO members will have to negotiate for trade liberalization in Agriculture and service trade. A New Millennium will force member of the WTO in round of multilateral trade negotiations.
Section 25 of Dunkel proposals reveal :  (I) Trade in Goods, (2) Trade in services, (3) Trade related aspects of Intellectual property rights including trade in counterfeit goods (4) Agreement establishing the Multilateral Trade organization to be executed by the WTO. TRIPS and TRIMS have drawn attention of WTO on what is  essentially non-trade agenda. The clearest of this approach is the attention given to the inclusion of labour and environment standards into the WTO agenda. It appears that non-trade issues are more important than that of pure trade issues. Free trade rise under the most favoured nations rule of game under General Agreement on Tariffs and Trade (GATT) now a key component of the WTO, a tariff reduction to trading partner must be granted to all GATT members. But on the other hand , this non-participation encouraged the developed countries to leave the sectors of great interest to the developing countries out of the liberalization exercise.
The second interest show that Post Uruguay round average tariff reduction would be around 3 to 4% by member countries which may virtually lead to free trade with respect to border measures. Apart from textiles, Asian developing countries can have interest in leather, rubber and foot wear by January 2005. Much liberalization process in developing countries continue to have high tariff on industrial products to engage developed countries in bargaining process. However, it should be noted here that the developed countries have much larger markets so 1% reduction in tariff by the former will lead to  reduction by the latter. In gain sharing exercise the developing countries may not be rich.
In formation Technology Agreement, telecommunication and financial service need to be successfully concluded for comprehensive negotiation round to cope with balance of payment situation. Thus,  sectoral negotiations can help India to gain from trade and raise its contribution in global; trade. WTO Ministerial conference at Singapore accepted that negotiation can proceed along sectoral line on piecemeal basis.

WTO has mandated changes in the Patents Acts which are to affected India in the so called Patentable subject matter so Trade related intellectual rights (Trips) need to be reviewed by mobilizing public opinion. Micro-organism in patentable subject  include patenting of life forms, patents on animals of all hues and patents of biotechnology as strategic field for country like India considering forest products.

Actually, there are three areas on which India should remain firm : (a ) Labour standards; (b) trade and environment; and Multilateral agreement on investment. 135 member  countries of the WTO debated these  issues at Seattle for negotiating agenda for the Millennium Round. It is expected that there would be $15 billion FDI inflow by 2005 with $5 billion worth of outward investment. The achieve them we need access markets. Multilateral investment OECD club could not frame such arrangements. No country should be discriminated against foreign direct investment once it has been established. Such pre-establishment right cannot be taken away in a multilateral framework. Thus, India need to be pro active member in the WTO.

Being the World’s second largest emerging market, India is important destination to business organizations from other countries and Indian companies will have to understand our import regulations and the rules for foreign investments and companies set up office here and/or hires the best Indian consultants/NGOs. WTO system allows this facility to all members. We should come out with better arguments than the opposite side of modifying the regulations. However, economists have argued that intra-bloc exports have notably increased due to regional trade arrangements (RTA). Within the RTA, the ratio of World exports from 74% in 1990 to 86% in 1999. The following table provides the fact :

Intra-bloc Exports : Pre-WTO and Post- WTO period
                                              ( in billion of Dollar )

Bloc

1970                             

1980

1990

1999

APEC

58.6

357.7

901.6

1904.9

EU

76.5

456.9

981.3

1376.3

NAFTA

22.1

102.2

26.3

581.2

ASEAN

1.5

13.4

28.6

81.9

EAEC

9.2

98.5

282.4

621.6

Bangkok
Agreement

0.1

1.5

4.5

15.4

SAARC

0.1

0.6

0.9

2.7

Source : World Development Indicators, World Bank, 2001.

It can be observed from the table that the share of the blocs representing the developed countries rose very fast during 1990 to 1999, whereas, in the case of SAARC , it is not satisfactory. As against this, the share of ASEAN trade bloc can be consider better than SAARC and Bangkok agreement blocs. This means that SAARC countries will have to increase their bargaining capacity to raise their share in global trade and  during the next round of the WTO, the countries of the bloc will have to go in for policy options as indicated in the next part of this paper. As a collorary, WTO will have to tackle spread of regionalism considering the fact of the table.

The WTO agreement on anti-dumping measures stipulates a rigorous framework for dealing with the problem of dumping. China has already started dumping in critical inputs and raw material items The anti-dumping measures as per the agreement, can be initiated only when  (a) an existence of dumping is identified,  (b) injury to industry is measured and  (c ) casual link between dumping and injury to industry is established. All these steps need technical analytical support. Dumping of goods in a general sense means sending goods that are unsaleable because of high prices, they have in the home market to a foreign market for sale at low prices.

The formula for anti-dumping duties to offset or prevent dumping are :

  1. The anti-dumping duty shall not be greater than the margin of dumping.
  2. No anti-dumping duty shall be levied by reason of exemption from or refund of duties for taxes born by a product when destined domestic consumption in the exporting country.
  3. No anti-dumping duty shall be  levied unless it is determined that the effect of dumping such as to cause material injury to an established industry.

The lessons from India’s experiments with Quantitative restrictions in the WTO are clear enough. There are risk in hiding behind exemptions and India approach of delaying the inevitable can have its costs. There must be greater awareness of the decisions taken in the WTO if the Indian economy is to be able to respond to changing trade conditions.

TRIPs exercise includes technological protectionism. These include information technology and technology related with manufacturing items. Due to low labour cost, Indian labour need to be protection. This so as cyber law has demanded new labour laws. Multinationals are charging for technology as a commodity and also multinationals in charging the cost of the technology. The key value of technology as a competitive asset the globalization has led mainly of economy and the threat from new industrialized countries in the united states to a set of measures aiming at restriction of the access of new technology and even scientific developments. Biotechnology has opened great opportunities for the commercial exploitation of genetic resources in various fields. The TRIPs agreement provides a basis for the appropriation through Patent Rights of micro organisms and cells while admits the non-patentability of plants and animals unless it is revised. Implications of appropriability through patent rights of the parts of nature are far reaching not only in economic but also in ethical and socio-political terms.

III

Policy Options to be followed:

1.The Government of India will have to make provision in legal framework to stop exploitation of women and child laborers, whereas, relaxation is required for people engaged in Information Technology areas from labour laws point of view, as internet business go in for 24hours a day.

2.Liberalization and globalization are inevitable stages in the process enhancing the economic opportunities with active participation of all countries with capacity building in areas of humanizing the process of economic development. It is most necessary to improve social opportunities and human capability to boost our global trade.

3.WTO has mandated changes in the Patents Act.  For 20 years protection, it is most necessary for the government of India to revise Indian Patents Act of 1970, under which Pharmaceuticals and agro-chemical patents are given shorter period like five to seven years. Our Pharmaceuticals industry , chemicals and Petro-chemical industry need strong ethical brands to cope with globalization process.

4.The government of India will have to plan for Information Technology Agreement and agreement on basic infrastructure like telecommunication and financial services to boost the markets. This is so as India is dominating in Internet business and in software exports in order to protect our people in global market.

5.The WTO working Group on trade and labour standard must ensure non-tariff barrier, international NGOs and trade unions on our side in era of competition. The government must change focus on centralized bargaining in the interest of unorganized markets unorganized labours flexibility in labour markets.

6.The government India will have to lower tariffs to benefit from WTO negotiations and it is equally necessary to care for domestically prohibitive goods and products banned. A recent study by WHO identified 270 medicines capable of meeting 90% of country’s entire medical needs and other 10,000 are unnecessary, ineffective, expensive and hazardous. Political economy of transfer of pollution and polluting technologies results from weak bargaining. The government will have to give necessary period for adjustment to the concerned industries.

7.An increase in production and income may result an increase in demand of environmental goods like clean air, fresh water and food security to rising population of India. There is a need for Multilateral Environment Agreement and WTO framework in favour of the third world countries like India.

8.The WTO is not clear about the development of non-tariff barrier to imports from the Third World such as anti-dumping duties, particularly for India . It is feared that the major economic power may enforce their will to small players. It must be recognised that India cannot change at its own except global code of conduct about this skeptical about benefits.

9.WTO rules on dumping and subsidies have crucial implications on IMF supported and sponsored programmes. From IMF side anti-dumping programme must be discouraged largely for two reasons: the first economic cost of large unproductive nature should avoidable and the second there are several countries whose tariff structures are only partially obligatory to the dictates of WTO, the result need to be sought to achieve through anti-dumping duties.

10.The Government of India will have to go in for Economic Reforms in Agriculture sector to raise strength of the sector by policy initiatives like market: (a) reform including support price, procurement and public distribution system (b) technology and protection of intellectual property,(c) Pricing of input and (d) institutional infrastructure.

11.The task force before commerce Ministry is wider transparent consultation with state government in India to develop new mechanism so as to have national position on trade issues for more legal and economic expertise for such big decision making.
                                                           
12.The WTO should not interfere with the domestic policy of its member nations so long as  policy does not relate to World Trade. If one country pursues policies that distort the flow of world trade or threatens to reduce trade of member countries should have the right to appeal to the WTO. In such cases the WTO can have right to intervene.

Conclusion :
         It appears that Government of India will have to protect  interest of states having predominance of unorganized sector, unorganized industries unorganized labour market existence. In any case, globalisation of trade process under the umbrella of WTO should not adversely affect from long term point of view to agri-business, small scale exports and pharmaceuticals by the multinationals. It is necessary to increase a share of Indian trade in total global trade. It is high time for corporates of India to encourage R & D to increase competitiveness in global markets to face global competition in 21st century. 

           For a country like India,  who as no trade preferences has some lessons as under :
1.WTO is powerful tool to reduce trade barriers globally, reducing the preferential access of Third World competitors. In fact many developing countries too are parasites living off the system, at our expense.
2.Trade preferences to SAARC countries will provide benefit not to a large extent.
3.It is not possible to get wholehearted support from other developing countries in area of agriculture and textiles in reducing trade barriers.
4.Preferential agreements have always created undesirable dependency. It is fears that economy of some small countries may collapse. Preferences create serious economic distortions considering long term growth of the economy. Resources are drawn away from fundamentally competitive sector to less competitive sectors prone to subsidy enjoying sector. Allocation of resources need to be given due weightage..
 
            More equitable global trade will enhance development process and migrants can contribute to increasing trade with their home countries which may ultimately lead to higher employment, output and rising GNP levels.

REFERENCES :

1.Chadha, G. K (2000):             Economic Reforms and  Emerging demand Hiatus Supply  in India Rural Labour Market Indian Economic Association Conference Volume

2. Panchmukhi, V. R. (2000):   World Trade Organization And India : ChallengesAnd Perspectives, The  Indian EconomicAssociation Conference Volume.    
3. Alagh,Yoginder (2001):     “ Globalization Debate”. The Indian Economic Association Conference Volume .

4. Mishra, R. S. (2001):         “The WTO Agreement on Agriculture and Agricultural crisis in India” The Indian Economic  Association

5. FICCI (1999):                     WTO and SSI sector Seminar Organized by FICCI, New Delhi.

6.Deodhar, S. Y. (1999)        WTO and India Agriculture, IUF  Conference,  Ahmedabad. Nov.20-22.  

7.Gulati, Ashok (1999):        “From Marrkesh to Seattle  Indian Agriculture Mehta, Rajesh Globalizing World”, Economic & Political Narayan, Sudha  Political weekly 34 (412) PP.2931-42.                                  

8.Mukhopadhyay, Somasri (2000):       Uruguay Round And India’s Export Response, Indian  Economic  Association,  Conference volume 2001

9. Bhalla, G. S Singh Gurumail (1996):     Impact of GATT on Punjab  Agriculture, Institute for Development and Communication, Monograph Series  II Ajanta Books International, New Delhi.

10. Garritse Ronald (1999)      Producers’ subsidies, Printer Publishers, London.

11.Sahota Gian S (1999):      Subsidies in Punjab Report to the Government of Punjab, Chandigarh

12.Srivastav, D. K.  Sen, Tapas: (1997)  Government Subsidies in India, National Institute of Public Finance and Policy, New Delhi.

13.UNDP(1999):          Human Development Report, Oxford University Press Ins, New York.

14. World Bank (1999):         World Development Report, 1999-2000.

15. Palit, Amitendu (1997):    IMF – WTO Agreement, The Economic Times 11 January

16. National Working Group on Patent Laws(1993):  Patent Regimes in TRIPS, New Delhi.

17.Panagariya, Arvind (1998):  WTO and Developing Countries, The Economic Times, 14 December.

                                                   

Major issues and problems of Indian Multilateral Trade Under the WTO

                                                   

The World Trade Organization is a global level institution for expansion of global trade in general and the trade of the developing countries like India in particular. WTO has brought out issues related to the broad framework of international economic relationships which is between trade and development and environment

The WTO is an international organization which has quasi-judicial rights, whereas, GATT is simply a treaty that operates by consensus. 

Issues which need due discussion :

1.For India’s adjustment, strategy to World Trade in Agriculture can be through diversification and sustainable agriculture. In this regard what kind of strategy to be followed by policy-makers to increase India’s share in world exports  ?

2.What should be the nature of anti-dumping tariffs in era of dumping by China and other countries to damage agricultural and small industry products in Global competition  ?

3. The bringing of intellectual property rights (TRIPS) in the purview of WTO would also have serious effect on  Indian agriculture through patenting of seeds, sui-generis system.. Will WTO -regime not affect adversely to Indian agriculture ?

4. Market access of agricultural products and commodities manufactured by small scale industries in World trade need legal protection. Do we have legal reforms in India with respect to WTO and globalization of Indian trade  ?

5. Who will fund for technological advancement in agriculture, industrial and service sector products in global Indian trade so as to increase its share  ?

6. Multinational are selling technology as a commodity in global market. And charging discrimately from country to country. In such a situation, what is a way out for developing country like India ?

7. As WTO being quasi-judicial body, is there any scope to have code of conduct for the developed countries to stop exploitation  ?

8.Technology and knowledge industry, including information technology  as the most competitive sector are core one in Indian economy. What kind of strategic policy initiatives should India take to strengthen domestic R & D activities so as to make the indigenous technology and knowledge-industries emerge as the most competitive sector in the next five years.

9. What should be India’s approach to wards new issues such as Multilateral Agreement on Investment, labour standards, child labour trade-environment linkages ?

10. What are the consequences of liberalization and globalization in the fields of the banking and insurance sectors on the domestic banking and insurance industries ? How should government monitor and control the instabilities that may be generated by the external shocks in this field  ?

11. Looking to mounting internal and external debt burden both governmental and private on average India, it is most necessary to monitor control such debts. Would it not affect adversely to competitive strength of India economy ?

12 What kind of global financial architecture should be evolved that volatility and instability of  capital markets and exchange rates can be controlled so as to manage Indian capital and forex markets under rule-based disciplines framework  ?

Visions and Provisions :

The Uruguay Round Agreement are launched from January 2000 and the WTO members will have to negotiate for trade liberalization in Agriculture and service trade. A New Millennium will force member of the WTO in round of multilateral trade negotiations.
Section 25 of Dunkel proposals reveal :  (I) Trade in Goods, (2) Trade in services, (3) Trade related aspects of Intellectual property rights including trade in counterfeit goods (4) Agreement establishing the Multilateral Trade organization to be executed by the WTO. TRIPS and TRIMS have drawn attention of WTO on what is  essentially non-trade agenda. The clearest of this approach is the attention given to the inclusion of labour and environment standards into the WTO agenda. It appears that non-trade issues are more important than that of pure trade issues. Free trade rise under the most favoured nations rule of game under General Agreement on Tariffs and Trade (GATT) now a key component of the WTO, a tariff reduction to trading partner must be granted to all GATT members. But on the other hand , this non-participation encouraged the developed countries to leave the sectors of great interest to the developing countries out of the liberalization exercise.
The second interest show that Post Uruguay round average tariff reduction would be around 3 to 4% by member countries which may virtually lead to free trade with respect to border measures. Apart from textiles, Asian developing countries can have interest in leather, rubber and foot wear by January 2005. Much liberalization process in developing countries continue to have high tariff on industrial products to engage developed countries in bargaining process. However, it should be noted here that the developed countries have much larger markets so 1% reduction in tariff by the former will lead to  reduction by the latter. In gain sharing exercise the developing countries may not be rich.
In formation Technology Agreement, telecommunication and financial service need to be successfully concluded for comprehensive negotiation round to cope with balance of payment situation. Thus, sectoral negotiations can help India to gain from trade and raise its contribution in global; trade. WTO Ministerial conference at Singapore accepted that negotiation can proceed along sectoral line on piecemeal basis.

WTO has mandated changes in the Patents Acts which are to affected India in the so called Patentable subject matter so Trade related intellectual rights (Trips) need to be reviewed by mobilizing public opinion. Micro-organism in patentable subject  include patenting of life forms, patents on animals of all hues and patents of biotechnology as

 

 
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