Measures to Regulate Trade Environment

Measures to Regulate Trade Environment

 

Trade Related Aspects of Intellectual Property Rights (TRIPS)

 

Negotiation on the TRIPs agreement was an important highlight of the Uruguay Round of negotiations. Although many of the theorists have also been against this agreement as it confers limited monopoly rights to the intellectual property holders, which goes against the basic premise of multilateral trade liberalisation.

Intellectual property is described as a creation of human mind that is of value to the mankind. Intellectual property rights (IPRs) are the rights granted to persons (inventors) for creation of their mind (Mehta, 1999). TRIPs provide the norms and standards of protection of intellectual property. The TRIPs agreement provides minimum norms and standards of protection for seven forms of intellectual property those are copy right & related rights, trademarks, geographical indicators industrial designs, layout designs for integrated circuits, undisclosed information, and patents. Out of these seven, patents remains to be the most controversial.

 

In case of patents, Indian laws do not meet the standards and requirements prescribed by WTO (Parthasarathy, 1998). Developing countries were given time until 2000 to introduce protection norms for TRIPs other than patents. For patents, the deadline was extended to 2005. India has introduced the new patent act 1999.

 

The national intellectual property regimes were never considered the subject matter of the trade rules.  Before the launch of the Uruguay round of the trade negotiations, the subject appeared in GATT, only tangentially.  What was brought up the question of the trade in counterfeit articles and the need for the concerned countries to enforce their national laws to effectively curb the same. It is no coincidence that the entire approach and structure of the Annex IC i.e. “Agreement on Trade-Related Aspects of Intellectual Property Rights” (TRIPS) runs diametrically opposite to our Patents Act, 1970.   The Indian Patent Act, 1970 which came into force from April 20,1972, has become outdated as new patent regime with different requirements has emerged. Under the new patent regime, there will be product patent and the duration of patent will be 20 years. The agreement on TRIPs is basically unbalanced as it primarily focuses on the rights of owners of the IPR without paying much attention to the interests of the consumers.

 

Our Patents Act (1970) provided a perspective of public interest, defined in terms of the self-reliant growth of the industry and technology, on the one hand and the availability of essential drugs to common man at affordable prices, on the other.  It looked upon the inventor’s rights in a functional manner and tries to ensure that monopoly inherent in the patent regime was squarely regulated in the public interest.  To this end, it provided multiple rings of safeguards in term of exclusions, restrictions on the term of patents, definition of working in terms of establishment license, license of right, ceiling on royalty, revocation of patents.

 

TRIPS put the protection of private monopoly rights of the inventor as the main, if not exclusive objective of the new international regime for the protection of intellectual property rights.  To this end, it does not permit any exclusion.  It does not countenance denial of patents to products in vital areas of drugs and pharmaceuticals and chemicals. It lays down a uniformly long term of twenty years for all products and processes.  It equates imports with local production.  The references to “public policy objectives” in the preamble are weak The reference to technological innovation and transfer of technology in Article 7 is a toothless provision, with little sanction behind it.

 

Sections 83 through 90 of the Patents Act, 1970 contained the vital elements such as the objective of transfer of technology, the criterion of reasonable requirements of public defined in broad welfare and developmental terms, compulsory licensing, ceiling on royalty etc.  If we compare Article 31 of TRIPS with the preceding content of the Patents Act, we see a world of difference.  There is no reference patents in the sense of the establishment of indigenous manufacture.  On the other hand, Article 27 equates imports with local production.

The only new consideration introduced in TRIPS, in this context, is the need to correct the anti-competitive practices.  But this is understood to refer only to the domestic market situation and not international oligopolies of multinational corporations.  Moreover, the monopoly inherent in the product patents can not be questioned on this ground.

 

t is feared in many quarters that strengths of our Patents Act are incompatible with the philosophy and approach of TRIPS in general, and Article 31, in particular. Come 2000 AD and we will be forced to eliminate each of these strengths, if we continue to follow the mode of “compliance” with the WTO. Indian Government has initiated the process of change by enacting Indian Patents (Amendment) Act, 1999. Certain salient features of Indian Patents (Amendment) Bill, 1998 related to pharmaceuticals and drugs are as follows:

 

·         Product patent is being stalled till 2005 A.D. by extending Exclusive Marketing Rights.

·         Exclusive Marketing Rights (EMR) will be granted for each patent application that has been accepted. EMR will be valid for a period of five years.

·         The Government can also fix the price of the products covered under EMRs. It has also reserved the rights to grant compulsory license or revocation of patent.

·         EMRs will not be granted for substances those are based on Indian System of Medicines where the product is already in public domain (Chitme and Gupta, 2000).

·         It is no longer necessary for Indian companies to apply for patents in India before submitting patent applications abroad.

 

In this context, the recent debate in certain quarters on whether the grant of Exclusive Marketing Rights (EMR) is a better or worse option than advancing of the product patents provision sounds empty and unreal.  The real question to be decided is whether we can afford to follow the “compliance” mode in regard to the basic changes that will soon be forced on us and what would be the social costs and challenges for Indian Economy. The product patent will be made effective in India from January 1, 2005. Due to the new patent regime where product patent will be implemented, the Indian pharma companies are in disarray fearing extinction. New regime has also created a number of challenges for Indian pharma companies. Such as:

 

·         Under the new patent regime, where product patents will be applicable, the emphasis will be on basic research in which India is lacking. The era of reverse engineering will be over.

·         Indian pharma companies technically as well as financially are not very sound to conduct basic research. Moreover they do not have inclination and orientation to conduct basic research and wait for a longer period for the outcome.

·         Indian pharma companies fear extinction. Out of that fear, the Indian companies have tried hard to prevent the government from accepting the WTO Agreement.

·         Under the new patent regime, price of the drugs may shoot up. Because Indian companies are perfect in reducing prices by applying reverse engineering.

 

The question whether we need to bring about the fundamental changes in our national patent regime has not been examined thoroughly and objectively. Parliamentarians, legal luminaries, leading scientists and large sections of industry and business were vocal in recognizing the merits of the national patent regime and opposing any changes in it.  Arguments started appearing in favor of change only as part of the need or compulsion perceived by the government under relentless pressure from industrialized countries. For example, it is said that we may gain by the introduction of the product patents in terms of products based on our traditional knowledge.  It is also argued that advances in technology since 1970 may have reduced the monopolistic content of product patents, particularly in drugs; and this changed situation will have to be taken into account.  Moreover, there have been recent developments in biotechnology, where we may have certain advantages, and our Patents Act needs a re-look in that context.  The new patent regime will bring the mixed fortunes to the Indian pharma sector. It has been realized that though the new patent regime will wipe out thousands of small and medium-sized Indian pharmaceutical companies that will also offer tremendous scope for the growth of most of the remaining drug companies. Although no convincing case has yet been established, taking into account the balance of advantages, for a thorough amendment of our patent regime.  And yet, the “compliance” requirements of WTO are propelling us into a trajectory with known undesirable consequences of a serious nature.

 

Some of the articles in the TRIPs agreement not only lack clarity but also stand against the interest of the developing countries. Members are allowed to exclude plants and animals from patentability, but there is no general prohibition of patenting these materials. There should be a clarification that naturally occurring plant animals, the parts of plants and animals including the gene sequence, and essentially biological processes for the production of plants, animals and their parts must not be granted patents.

 

There have been instances in the recent past when the firms in developed countries have obtained patents for the use of naturally occurring plants in some developing countries with some slight modifications. There should be a decision that patent must not be granted to a subject matter which was available to the public by means of use, written description or in any other manner in any country, prior to the date of filling of the application for patents.

 

Similarly, when the subject matter of patent is derived from the plant material of a country, the consent of country must be obtained before granting patents. Also patents, inconsistent with Article 15 of the Convention on Bio- Diversity (CBD must not be granted.

 

4. Agreement on Trade in Services

 

  The Agreement on Trade in Services, (GATs) has three elements:

·       A framework of general rules and disciplines.

·       Annex’s addressing special consideration relating to some Service sectors / Modes of Delivery, and National Schedules of Initial Commitments

 

 4.1 Supply of services is envisaged under four different modes:

 

Trade in services has been defined under GATS in terms of four modes of delivery viz.

·         Cross –border Supply: a non-resident Service Supplier supplying services across borders’ into a Members’ territory;

·         Consumption abroad: The freedom for a members’ Resident to purchase services in the territory for another Member;

·         Commercial presence: The opportunities for Foreign services supplier’s to establish and expand a commercial presence on a members’ Territory and;

·         Presence of national persons: entry and temporary stay in a Members’ territory of foreign Individuals in order to supply service.

 

 

4.2 Basic Principles of GATS

 

·         Most favored nation treatment: no discrimination amongst other members of the agreement in terms of treatment accorded to their service suppliers:

·         National treatment: Foreign services and service suppliers to be treated no less favorably than nationals;

·         Progressive liberalization: the process of liberalization is irreversible because of binding commitments on the negotiated levels of market access; and

·         Transparency: All policies related to barriers to market access and discriminatory restrictions by the Members are to be notified.

 

The GATS is based on a “ positive list” approach, i.e. no sector is covered unless it is specifically mentioned in the Agreement, services sector has been classified into 12 categories, which are further subdivided into 160 subgroups.

 

Under the agreement each member has undertaken specific commitments in terms of market access (Article XVI) and national treatment (Article XVII). These are presented in the schedules of specific commitments on six service sector groups viz. Business, communication, construction and related engineering, financial service, health and social service and tourism and travel related service.

 

Table 1

Classification of Services

a- Business (including professional and computer service)

b- Communication

c- Construction & Engineering

d- Distribution

e- Education

f- Environmental

g- Finance

h- Health

i- Tourism and Travel

j- Recreational

k- Transport

l- Other services not included elsewhere

 

The major groups where broad agreements have been arrived are telecommunications and financial services, with a special emphasis on banking and insurance.

 

Although trade in services was never part of the GATT, but brought into the WTO framework during the Uruguay Round. The major problem in the agreement on services is the imbalances in benefits accrued to the developed and developing countries due to varying stages of their development. The agreement also suffers from unequal treatment given to capital and labour in terms of market access.

 

General Agreement on Trade in services, which extends the jurisdiction of WTO into all inclusive intra-border transactions, has not yet started hurting us.  This is for two reasons.  The service agreement so far negotiated is a thin one.  We have been able to get away with small offer lists, more or less, including those sectors, which were already in the international market e.g. re-insurance.  Moreover, the agreement leaves some margin of maneuver through specification of conditions and limits on opening e.g. the number of branches of foreign banks to be opened. However, the pace is going to be accelerated and the demanders are already voicing their dissatisfaction with the present level of access.  The priority attached by them to our market in insurance, telephone services, banking and other financial services is quite evident from the statements being made by multinationals and the governments of industrialized countries.

 

From the point of view of developing countries, the clauses regarding the movement of natural persons (MNP) need due consideration. Whereas the movement of capital has been specifically included in the GATS obligations the same treatment has not been given to the movement of labour.

 

It is important to note that only Indian unskilled labour but skilled and professionals would not be able to take advantage of the ongoing liberalization in the area of professional services unless some breakthrough is reached in the area of movement of natural persons.

 

Movement of natural persons, especially both professionals and non-professionals, is of importance to India as it enjoys distinct advantage in this area covering a whole range of services to hotel, health, engineering, accountancy, construction and other professional services.

 

4.3  Issues relating to E-Commerce

 

The WTO raises the possibility that in principle the digits traded on Internet could be viewed as goods, services or even something else. Which of these is chosen determines whether this trade is subject to the rules laid down in GATT or General Agreement on Trade in Services (GATS), a combination of these two or an entirely new agreement. How should taxation be imposed on electronic transmission of goods? Earlier deliberations in various bodies of the WTO including the Council for Trade in Services, Council for Trade in Goods, TRIPS Council and Committee for Trade & Development have centered around the following issues:

 

4.3.1 Issue of origin: How would rules of origin be applicable to an electronic transaction allowing for easy duplication and unlimited routing of digitized data.

 

4.3.2 Standardization: Many governments would need to consider the implications of standardization and regulations related to e-commerce. The current expansion of electronic commerce is based on the freedom of transactions and standards.

 

4.3.3 Intellectual Property Rights: A number of aspects of copyright and patents arise out of electronic commerce. These include software and e-commerce patents, fair use under copyrights, free software, and implications for definition of publication, right of reproduction, right of communication, moral rights, right holder, protected subject matter, limitation and collective management.

 

4.3.4 Development dimension of e-commerce: Account revenue and fiscal implications of electronic commerce for developing countries and the importance of developing human resources and critical infrastructure in this regard are the other areas of deliberations. WTO Member-Governments identified three types of transactions on the Internet.

 

·       Transactions for a service which is completed entirely on the Internet from selection to purchase and delivery.

·       Transactions involving “ distribution services” in which a product, whether a good or a service, is selected and purchased on-line but delivered by conventional means.

·       Transactions involving the telecommunication transport function, including provision of Internet services.

 

The above-discussed issues involved with electronic commerce are extremely complex, not only within a country but also between countries. From Indian perspective leveraging of human and administrative resources both in negotiations and non-negotiation bodies is must. Under the mixed definition, in any trade dispute involving Internet trade, panels will have to first decide whether the object of dispute is a good or a service to determine whether the rules of GATT or GATs are to be applied in evaluating the dispute. However if India in the bargain forces United States and other developed nations to reduce the barriers in Textiles and apparel and some elements of data processing, software programming and human capital movement across the border, the areas where electronic commerce can enhance the competitiveness of developing countries, it stands to gain.

 

The broad principle applicable to international taxation, such as not hindering the growth of electronic commerce and neutrality between conventional and electronic commerce should be applied to taxation. No new taxes should be applied to electronic commerce. Government of India acceding to the WTO-ITA declaration of 1996 at Singapore, applicable to E-Commerce products, has already brought down the duty to zero level. It must use its diplomacy to encourage member nations to adapt revised WTO-IT A schedule. Already as per CBEC (MOF) custom duty on CD-ROM has been reduced to zero in Budget 2000-01. Duty is charged on the media and not on the content, as per the existing agreement. The fiscal implication aside it helps in dispute elimination and removal of difficulties in revenue administration.

 

In June 2001 Hague Conference that would apart from other issue consider important jurisdiction issues for cyberspace, as they relate to commercial matters. Some of the significant areas of problems are software and E- Commerce. Free Software and difference in implementation of copyright laws. India should encourage other countries to fully and immediately implement the obligations contained in agreement on Trade-Related Aspects of Intellectual Property (TRIPS); seek ratification and deposit of the instruments of accession to the new World Intellectual Property Rights Organization (WIPO) treaties and implementation of the obligations in these treaties in a balanced and appropriate way as soon as possible; encourage other countries to join the two new WIPO Treaties and to implement fully the treaty obligations as soon as possible, and ensure that our trading partners establish laws and regulations that provide adequate and effective protection for copyrighted works, including motion pictures, computer software, and sound recordings.

5. Trade Related Investment Measures (TRIMS)

 

 One of the controversial aspects of the Uruguay Round negotiation was the non-discrimination clause. This was intended to bring liberalization in investment. The provision provided equal opportunity to all through’ national treatment. ‘In other words, it overlooks the ‘ level playing’ field argument by the developing countries. In the WTO ministerial meeting in Singapore in December 1996, the European Union supported by the U.S. and Japan pushed for Multilateral Investment Agreement (MIA). If the MIA adopted, corporation could invest without restrictions in any WTO member nation.

 5.1 The Agreement on Trade Related Investment Measures (TRIMs) specifically prohibits:

 

·         The application of domestic content requirements and

·         Limitation on import of inputs;

      Both of these restrictions will have adverse impact on the developing countries.

 

5.2 The domestic content requirement is useful and often necessary for reasons such as,

 

·         Encouraging domestic economic activities by using local inputs

·         Prevention of wastage of foreign exchange in the import of raw materials

·         Encouraging indigenisation of production, etc.

 

The restriction on “ putting limitation to the import of inputs” inhibits a developing country to have balancing of foreign exchange. The developing countries who often face foreign exchange crunch, require flexibility in this regard. The developing countries should be exempted from the disciplines on:

 

·         The application of domestic content requirement

·         Not limiting the imports of inputs.

 

There is a need of an enabling provision in Article 2 or 4 of the TRIMs agreement to this effect. In light of recent Basmati dispute, we have to strongly push for extension of protection under geographical indications for Basmati Rice and other such exclusive products.

 

 

TRIMS give the developing countries a period of five years to eliminate the measures that have restrictive effects on trade.  It also permits them to continue to maintain such measures on the grounds of the balance of payments difficulties, so recognized in WTO.  We have virtually lost the latter ground recently. Already, the European Union has complained about some of our practices in the automobile sector where we insist on the manufacturers to introduce progressive indigenization.  The export obligations constitute other such practice, which will be objected to.  Time is fast approaching for us to be told to eliminate all such policies and practices.  Worse still is the bridgehead surreptitiously established in the review provision of TRIMS, which call for an open ended review of investment and competition policies.  This exercise was initiated full two years in advance of the date specified in the agreement. This is the rebirth of the multinational’s “right to establish” with vengeance, which the industrialized countries had not succeeded in inscribing into the agreement on trade in services.  The demand for making the multilateral investment agreement an important part of the agenda of the impending round of trade negotiations has already gained ground and is difficult to resist.

 

In the new conditionalities of TRIMS, Small Scale Industries will have to compete on their own to find a place for themselves in the domestic as well as international markets. They will have to improve the quality of products and be efficient and competitive in order to survive and grow. While technology up-gradation is inevitable for SSIs, the size of investment, as per the recent definition, is considered a severe bottleneck. Other barriers hampering the growth and competitiveness of SSIs are severe credit crunch, inadequate knowledge of market dynamics and acumen, inadequate infrastructure, poor R&D, low productivity of manpower, etc.

 

The WTO agreement does not discriminate on the basis of size of industries or enterprises. Hardly there is single agreement of WTO, which is directly dealing with SSIs. Under the WTO scenario, Indian SSIs might face competition both from MNC's and from Indian large-scale companies. The market access agreements encompassing TRIPS & TRIMS means that import of goods will increase in all product categories including reserved items of SSIs. Reduced tariff rates would affect the Indian SSIs depending upon the level of import intensity of exportable items and demand for importable products.

 

6. Removal of Quantitative Restrictions

 

The fundamental principles that WTO expects the signatory countries to abide by are Most Favored Nation (MFN) and National Treatment. MFN treatment requires that every signatory will extend to every other signatory member, the same and equal treatment in a non-discriminatory manner. The principle of National Treatment requires imported goods and domestically produced goods to be treated alike, except for payment of customs duty at the time of import.

 

The Agreement stipulates that members will not restrict imports into each other’s countries, though they may levy tariffs. Restrictions are permitted under certain conditions. These restrictions are called Quantitative Restrictions (QRs). These can be in the form of quotas, licensing requirements or in the form of canalizing the imports.

 

India, like other signatories also has to remove its QRs. Quantitative restrictions on import were to be removed by the India Government into two phases. Of the 1429 items, QRs were phased out on 714 items on April 01,2000 and the remaining 715 items were further phased out on April 1, 2001.

 

In the last six years, we have experienced the severe impact of the new system in the trade policy area.   Quantitative restrictions maintained by us on imports to safeguard our external financial USA and European Union under the new dispensation challenged position.  Article XVIII of GATT 47, recognizes the right of the developing countries to maintain such restrictions.  In fact, this is the only legally enforceable, exceptional right conferred on the developing countries under the GATT.  All other so-called special and differential measures in favor of the developing countries are either well-meaning exhortations or mere decisions not acquiring the status of a legal right.  This right was diluted in the course of successive rounds of negotiations.  The effects of the removal of the import restrictions on the medium, small, village and cottage industries have become visible.  As the unemployment and loss of production and incomes is felt more and more acutely in the coming years, the costs of the new system will be more readily palpable.

 

7.      Effect on Agriculture

 

The recommendations of the WTO which influence agricultural economy can be broadly divided into two groups; Fiscal and trading measures and intellectual property rights (IPRs). The fiscal & trading measures in WTO include; (I) reduction of agricultural subsidies, (ii) conversion of all barriers on agricultural imports in to tariffs (tariffication), (iii) guaranteed minimum access for farm imports of between 3 and 5 percent of consumption, (iv) reduction of public distribution system (PDS) activity, of subsidized food only to those eligible on the basis of clearly defined criteria muted to nutritional objectives.

 

The farmers in the developed countries, with the massive support of governments through domestic and export subsidies and high tariffs, clearly have unfair advantage over the farmers in the developing countries. The bulk of the domestic support and export subsidy in the developed countries will continue to be applicable even beyond 2000.The farmers of the developed countries have already got tremendous advantages over those in the developing countries in terms of higher financial resources, access to technology, benefit of modern infrastructure and several other facilities. Over and above, they also get heavy protection of governments. This is patently unfair in international trade. It stands to reason that the developed countries should totally eliminate their domestic support and export subsidy on agriculture within a short time and also have reasonable ceilings on their tariffs in this sector.

 

In spite of the AoA, agriculture still remains to be the most protected sector and is mortgaged to domestic political agenda in many countries. Loopholes in the agreement allow countries to replace quantitative restrictions with tariff peaks and continue with their subsidy programmes by packaging it in a GATT compatible manner. Besides unrealistically stringent Sanitary and Phyto- Sanitary (SPS) measures adopted by industrial countries, tariffs on agricultural products generally remain substantially higher. Developed countries have also managed to wriggle out of subsidy reduction commitments by cleverly manipulating different  “ Boxes”. OECD-countries combined spending on account of support to agriculture stood at $ 327 billion during 2000. Look like “ Special & Differential Treatment” in reverse gear, which is benefiting the industrial countries, instead of developing countries and LDCs.

 

The AoA seeks primarily to remove distortions existing in agriculture trade by reducing barriers affecting market access and disciplining market-distorting subsidies. AoA has also made references to non-trade concerns (NTCs) that would have to be taken on-board while the Agreement is being implemented by the WTO Member countries. These NTCs include food security and the protection to the environment, among others.

 

The preamble to the AoA provides some indications as to what can be treated as the NTCs. It states that “ commitments under the reform Programme should be made in an equitable way among all Members, having regard to non-trade concerns, including food security and the need to protect environment, having regard to the agreement that special and differential treatment for developing countries is an integral element of the negotiations, and taking into account the possible negatives effects of the reform programme on least –developed and net food importing countries”. The NTCs also find a mention in Article 20 of the AoA, wherein the need to continue the reform process that the Article initiates has been emphasized.

 

The food production of developing countries for domestic consumption should be excluded from the disciplines of import control and domestic support. This should be done either through clarifications of Articles 3 and 4 of the agreement, or if need be, by putting additional provisions in the agreement.

 

The agreement should not stand in the way of support to small farmers and household farmers in developing countries. In many developing countries the large number of small farmers normally do not engage in agriculture as a commercial venture. For them it is a way of life coming from generations. Also they do not have any other source of income. They will face a bleak prospect if they are called upon to face international competition.

 

However, notwithstanding these references to the NTCs, existing provisions in AoA do not provide clear guidelines with which to address these concerns. Among the dimensions that the preamble statement considers as being part of the NTCs, only the food security issue has found a mention that too in a very perfunctory manner.

 

The only support for measures aimed at ensuring food security appear in the form of an exemption from the calculation of Aggregate Measure of Support (AMS); the expenditure which is made on public stockholding of foodgrains. Expenditure made for accumulation and holding of stocks of products would, however, be exempt from AMS only if these activities form an integral part of a food security programme identified by national legislation.

 

8. Agreement on Textiles and Clothing 

 

The Uruguay Round negotiations culminated with an Agreement on Textiles and Clothing (ATC) which guarantees the inclusion of textiles in the WTO framework, the trade of which was hitherto guided by the Multi- fibre Arrangement (MFA). As per the ATC, trade in textiles and clothing will be fully integrated into the multilateral trading system in four stages, the last being at the end of the year 2004. However, the progress achieved in the first two stage of integration, i.e., on 1 January 1995 and 1 January 1998 is negligible.

 

This is an important area where proper implementation of the existing provisions is of crucial relevance to a large number of developing countries. The general perception is that the developed countries have done everything they can to reduce tariffs and that we cannot extract more from them on this score. This is wrong and in areas like textiles, plastic, leather and footwear, tariffs on many tariffs on many textile items will be in excess of 25%-30% in the USA and the EU. Moreover, the developed countries have resorted to anti-dumping processes and safeguard measures.

 

The agreement also suffers from certain basic deficiencies. For example, it does not have a provision for positive structural adjustment efforts by government in the developed countries. They should also prepare positive structural adjustment programmes and notify it to the WTO, where timely implementation of these programmes should be kept under review. This will smoothen process of final integration of this sector into the normal trade rules.

 

9. Dispute Settlement Procedures

 

As Sarah Anderson and John Cavnagh write: “ The most controversial outcome of the Uruguay Round was the establishment of much stronger enforcement mechanism in the WTO. Although GATT had always had a dispute resolution process, member nations often ignored its rulings since they lacked serious enforcement power. Unlike GATT, WTO panel decisions are binding--- (t) he WTO can authorize the complainant nation to impose trade sanctions.”

 

Many commentators have warmly talked of the dispute settlement procedures in New GATT.  And, purely in terms of the “efficiency” of the process, they have a point.  We have, however, to test it in terms of our own experience. The multilateral system is supposed to be strength for the weaker members, mainly through its subsystem of rule-based dispute settlement.

 

 The Dispute Settlement Undertaking (DSU) of the WTO forms Annex 2 to the WTO Agreement. It is one of the corner stones of the WTO as the process is meant to ensure the rights and obligations of its members.

 

The WTO as compared to GATT has improved the enforcement rights and obligations by fixing time frames for various stages in the dispute settlement process and by bringing in automaticity in the decision making process. However, DSU suffers from some major deficiencies from the point of view of developing countries, and also states measures for rectification.

 

The dispute settlement process under the WTO is time consulting and costly. For example, international law firms charge anything between  $250 to 1,000 per hour as fees for trade disputes arising at the WTO. Many of developing countries can neither afford such costs of litigation nor they have enough expertise to handle these cases on their own. Furthermore, the final relief can take as much as 28 months. Developing countries’ trade prospects often suffer during this period. Thus, there should be a provision for legal assistance to developing and least developing countries.

 

Once the legal settlement is reached on any matters at the WTO, even if the erring country removes the measures promptly, the affected country get relief only from the time when these measures are removed. Further, there is no provision for compensation for the illegal measures of the past, which created the dispute. Hence, there should have provisions for adequate compensation to developing country (complainant) for all these factors.