Indian Economy, 5th edition (78 page)

Asian Development Bank

The Asian Development Bank (ADB), with an international partnership of 63 member countries, was established in 1966 and has headquarters at Manila, the Philippines. India is a founder member of ADB. The Bank is engaged in promoting economic and social progress of its developing member countries in the Asia-Pacific region. Its principal functions are as follows:

(i)
to make loans and equity investments for the economic and social advancement of its developing member countries;

(ii)
to provide technical assistance for the preparation and execution of development projects and programmes and advisory services;

(iii)
to respond to the requests for assistance in coordinating development policies and plans in developing member countries; and

(iv)
to respond to the requests for assistance and coordinating development policies and plans of developing member countries.

India’s subscription to the Bank’s capital stock is 7.190 per cent with a voting power of 6.050 per cent (as per the
ADB Annual Report, 2010
)
,
as quoted by India 2013.

India started borrowing from ADB’s Ordinary Capital Resources(OCR) in 1986. The Bank’s lending has been mainly in the Energy, Transport and Communications, Finance, Industry and Social Infrastructure sectors.

The Bank has extended technical assistance to India in addition to loans from its OCR window. The technical assistance provided include support for institutional strengthening, effective project implementation and policy reforms as well as for project preparation.

India holds the position of Executive Director on the Board of Directors of the Bank—its Constituency comprises India, Bangladesh, Bhutan, Lao PDR and Tajikistan. The Finance Minister is India’s Governor on the Board of Governors of the Asian Development Bank and Secretary (EA) is the Alternate Governor.

OECD

The roots
17
of the Organisation for Economic Co-operation and Development (OECD), Paris, go back to the rubble of Europe after World War II. Determined to avoid the mistakes of their predecessors in the wake of World War I, European leaders realised that the best way to ensure lasting peace was to encourage co-operation and reconstruction, rather than punish the defeated.

The Organisation for European Economic Cooperation (OEEC) was established in 1947 to run the US-financed
Marshall Plan
for reconstruction of a continent ravaged by war. By making individual governments recognise the interdependence of their economies, it paved the way for a new era of cooperation that was to change the face of Europe. Encouraged by its success and the prospect of carrying its work forward on a global stage, Canada and the US joined OEEC members in signing the new OECD Convention on December 14, 1960. The Organisation for Economic Co-operation and Development (OECD) was officially born on September 30, 1961, when the Convention entered into force.

Other countries joined in, starting with Japan in 1964. Today,
34
OECD member countries worldwide regularly turn to one another to identify problems, discuss and analyse them, and promote policies to solve them. The track record is striking. The US has seen its national wealth almost
triple
in the five decades since the OECD was created, calculated in terms of gross domestic product per head of population. Other OECD countries have seen similar, and in some cases even more spectacular, progress.

There are many countries that a few decades ago were still only minor players on the world stage – China, India and Brazil have emerged as new economic giants. Most of the countries that formed part of the former Soviet bloc have either joined the OECD or adopted its standards and principles to achieve the common goals. Russia is negotiating to become a member of the OECD, and now the organisation has close relations with Brazil, China, India, Indonesia and South Africa through its “enhanced engagement” programme. Together with them, the OECD brings around its table
40
countries that account for
80%
of world trade and investment, giving it a pivotal role in addressing the challenges facing the world economy.

Enlargement and Enhanced Engagement:

In May 2007, OECD countries agreed to invite Chile, Estonia, Israel, Russia and Slovenia to open discussions for membership of the Organisation and offered enhanced engagement to Brazil, China, India, Indonesia and South Africa.

Chile became a member of the Organisation on May 7, 2010, Slovenia became a member on July 21, 2010 and Israel became a member on September 7, 2010. On December 9, 2010, Estonia became a member, once necessary formalities, including parliamentary approval, were completed.

While enhanced engagement is distinct from
accession
to the OECD, it has the potential in the future to lead to membership. The approval of so-called ‘road maps’ marked the start of accession talks with Chile, Estonia, Israel, Russia and Slovenia. The accession procedure is complex and can be long, as it involves a series of examinations to assess a country’s ability to meet OECD standards in a wide range of policy areas. This makes it difficult to bring on board more than a small number of new members at the same time.

World Trade Organisation
(WTO)

The World Trade Organisation (WTO) came into being as a result of the evolution of the multilateral trading system starting with the establishment of the General Agreement on Tariffs and Trade (GATT) in 1947. The protracted Uruguay Round negotiations spanning the period 1986–1994, which resulted in the establishment of the WTO, substantially extended the reach of multilateral rules and disciplines related to trade in goods, and introduced multilateral rules applicable to trade in agriculture (Agreement on Agriculture), trade in services (General Agreement on Trade in Services—GATS) as well as Trade Related Intellectual Property Rights (TRIPS). A separate understanding on WTO dispute settlement mechanism (DSU) and trade policy review mechanism (TPRM) was also agreed upon.

WTO and India

India is a founder-member of both GATT and WTO. The WTO provides a rule based, transparent and predictable multilateral trading system. The WTO rules envisage non-discrimination in the form of National Treatment and
Most Favoured Nation (MFN)
treatment to India’s exports in the markets of other WTO Members. National Treatment ensures that India’s products once imported into the territory of other WTO Members would not be discriminated vis-à-vis the domestic products in those countries. MFN treatment principle ensures that members do not discriminate among various WTO Members. If a Member country believes that the due benefits are not accruing to it because of trade measures by another WTO Member, which are violative of WTO rules and disciplines, it may file a dispute under the Dispute Settlement Mechanism (DSM) of the WTO. There are also contingency provisions built into WTO rules, enabling member countries to take care of exigencies like balance of payment problems and situations like a surge in imports. In case of unfair trade practices causing injury to the domestic producers, there are provisions to impose Anti-Dumping or Countervailing duties as provided for in the Anti-Dumping Agreement and the Subsidies and Countervailing Measures Agreement.

WTO Membership

The present strength of WTO membership
18
is 159. Against the backdrop of the challenging world economic climate
four countries
acceded to the WTO at the 8th Ministerial Conference, Geneva in December 2011 – the Russian Federation, Samoa, Montenegro and Vanuatu. Russian Federation joined it after an 18-year accession process – it applied to join the WTO in 1993 – then they entered a period of 18 years of bilateral negotiations with GATT/WTO members concerning goods and services and various systemic obligations. Significant divergence of views between Russia and the EU, US and Georgia respectively were the source of repeated setbacks in the accession process.

WTO Ministerial Conferences

The highest decision-making body of the WTO is the Ministerial Conference, which has to meet at least once every two years. It brings together all members of the WTO, all of which are countries or separate customs territories. The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements. Since the coming into being of the WTO in January 1995, eight Ministerial Conferences have been held, namely,
Geneva
(December 15–17, 2011);
Geneva
(30 November 30–2, December 2009);
Hong Kong
( December 13–18, 2005);
Cancún
(September 10–14, 2003);
Doha
( November 9–13, 2001);
Seattle
(November 30 – December 3, 1999);
Geneva
(May 18–20, 1998);
Singapore
(December 9–13 1996). The next (9
th
) Ministerial Conference will be
Bali
(December 3–6, 2013).

WTO NEGOTIATIONS AND INDIA

The Doha Round of trade negotiations in the WTO, effectively, made very little progress after 2008. Throughout 2009 and 2010, discussions continued but no headway was made on any substantive issue in the negotiations. However, the subject featured on the agenda of almost every major international meeting and there were strong affirmations of political support for an early conclusion of the Doha Round. Discussions continued in Geneva during March and April 2011, in a variety of formats. Reports on each area of the negotiations were issued on April 21, 2011. These documents provided an overview of the status of negotiations covered in the Doha Development Agenda. While they indicated significant progress in many areas, they also captured the wide gaps remaining on many issues.

The focus then shifted to the possibility of selecting some issues for finalisation as an
‘early harvest’
in time for the Eighth Ministerial Conference of the WTO in December 2011. It began with an attempt to select issues of particular importance to least developed countries (LDCs). However, these attempts did not meet with any success and proved not only unproductive but very divisive as well. Members could not agree on the issues to be included and sought to selectively bring in various issues of commercial interest to them. Gradually, as members brought in non-LDC issues, the discussion veered away from the LDC issues. The LDC issues include:

(i)
duty free quota free (DFQF) market access;

(ii)
the rules of origin for DFQF market access;

(iii)
LDC waiver in services; and

(iv)
issues relating to cotton (domestic and export subsidies for cotton and tariffs).

Some of the issues suggested in addition for an
‘LDC plus’
package were trade facilitation and the export competition pillar of the agriculture negotiations. There was, however, little progress in arriving at a consensus on the elements of the early harvest package. The LDCs made it clear that if the LDC package was not delivered at the December 2011 Ministerial Conference, they would be very disappointed. The African Group, the African-Caribbean-Pacific Group, and other groups of developing countries supported an effort to harvest an LDC package for the Conference. India too, supported this stand.

In
October–November 2011,
concerted efforts were made by some of the developed country members of the WTO to use the G20 Leaders Summit in November 2011 to advance an agenda for the
Eighth WTO Ministerial Conference
scheduled to be held in
Geneva
in December 2011. Specifically, they wanted the following things:

(i)
to set the stage for plurilateral agreements on selected issues in the WTO negotiations (rather than multilateral agreements);

(ii)
to get WTO members’ on abjuring the use of export restrictions; and

(iii)
to introduce new issues for negotiation, namely climate change, energy security, and food security.

The weeks preceding the Eighth WTO Ministerial Conference saw hectic activity in the WTO as some members attempted to put various issues on the agenda for ministerial decision. These proposals, however, did not receive support amongst WTO members. At the
Eighth Ministerial Conference
from 15 to 17 December 2011, ministers adopted a number of decisions on intellectual property (IP), electronic commerce, small economies, LDCs’ accession, a services waiver for LDCs, and trade policy reviews.

A number of members expressed
strong reservations
about plurilateral approaches. Many members stressed that any different approaches in the work ahead should conform to the Doha mandate, respect the single undertaking, and be truly multilateral, transparent, and inclusive. In looking at future work, a large number of ministers stressed the centrality of development. Many underlined the need to give priority to issues of interest to LDCs, including cotton. Many mentioned the importance of all three pillars in the agriculture negotiations. Many also mentioned trade facilitation, special and differential (S&D) treatment, S&D monitoring mechanism and NTMs. In an
unprecedented display of unity
, a coalition of more than a hundred developing countries, including India, Brazil, China, and South Africa, met on the sidelines of the Conference and issued a declaration emphasizing the development agenda. They roundly criticized suggestions for plurilateral agreements to replace decision making by multilateral consensus. Critics declared the Doha Round a dead horse now.

Fifth Trade Policy Review (TPR) of India

In order to promote transparency and provide better understanding of the trade policies and practices of its members, the WTO has
a mechanism
for regular review of their trade policies. Depending upon its share in world trade, each member’s trade policy is reviewed by the WTO at fixed periodic intervals. India’s TPR is carried out every
four
years.