GS-2, Indian Economy, Uncategorized

All you need to know about the new IPR Policy

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Finance Minister Arun Jaitley recently released India’s new National Intellectual Property Rights (IPR) Policy.

  • The Policy which is in compliance with WTO’s (World Trade Organisation) agreement on TRIPS (Trade Related aspects of IPRs), aims to sustain entrepreneurship and boost ‘Make in India’ scheme.
  • It also aims to create awareness about economic, social and cultural benefits of IPRs among all sections of society.

What are IPRs?

Intellectual Property Rights (IPRs) are legal rights, which result from intellectual invention, innovation and discovery in the industrial, scientific, literary and artistic fields. These rights entitle an individual or group to the moral and economic rights of creators in their creation.

Why have an IPR?

IPR is required to safeguard creators and other producers of their intellectual commodity, goods and services by granting them certain time-limited rights to control the use made of the manufactured goods. It gives protection to original ideas and avoids the commercial exploitation of the same.

What is the National IPR Policy?

According to the government, the National IPR Policy is a vision document that aims to create and exploit synergies between all forms of intellectual property (IP), concerned statutes and agencies.

  • It sets in place an institutional mechanism for implementation, monitoring and review.
  • It aims to incorporate and adapt global best practices to the Indian scenario.

Seven objectives of IPR Policy:

  1. IPR Awareness: To create public awareness about the economic, social and cultural benefits of IPRs among all sections of society.
  2. Generation of IPRs: To stimulate the generation of IPRs.
  3. Legal and Legislative Framework: To have strong and effective IPR laws, which balance the interests of rights owners with larger public interest.
  4. Administration and Management: To modernize and strengthen service-oriented IPR administration.
  5. Commercialization of IPRs: Get value for IPRs through commercialization.
  6. Enforcement and Adjudication: To strengthen the enforcement and adjudicatory mechanisms for combating IPR infringements.
  7. Human Capital Development: To strengthen and expand human resources, institutions and capacities for teaching, training, research and skill building in IPRs.

Highlights of the policy:

  • The new policy calls for providing financial support to the less empowered groups of IP owners or creators such as farmers, weavers and artisans through financial institutions like rural banks or co-operative banks offering IP-friendly loans.
  • The work done by various ministries and departments will be monitored by the Department of Industrial Policy & Promotion (DIPP), which will be the nodal department to coordinate, guide and oversee implementation and future development of IPRs in India.
  • The policy, with a tagline of Creative India: Innovative India, also calls for updating various intellectual property laws, including the Indian Cinematography Act, to remove anomalies and inconsistencies in consultation with stakeholders.
  • For supporting financial aspects of IPR commercialisation, it asks for financial support to develop IP assets through links with financial institutions, including banks, VC funds, angel funds and crowd-funding mechanisms.
  • To achieve the objective of strengthening enforcement and adjudicatory mechanisms to combat IPR infringements, it called for taking actions against attempts to treat generic drugs as spurious or counterfeit and undertake stringent measures to curb manufacture and sale of misbranded, adulterated and spurious drugs.
  • The policy will be reviewed after every five years to keep pace with further developments in the sector.

Why this policy was need of the hour?

  • Global drug brands led by US companies have been pushing for changes to India’s intellectual property rules for quite some time now. They have often complained about India’s price controls and marketing restrictions.
  • Also, an IPR policy is important for the government to formulate incentives in the form of tax concessions to encourage research and development (R&D). It is also critical to strengthen the Make In India, Startup and Digital India schemes.
  • The IPR policy comes at a time when India and other emerging countries faces fresh challenges from the developed world and mega regional trade agreements such as the Trans-Pacific Partnership (TPP).

Issues associated with this policy:

  • According to the policy, India will retain the right to issue so-called compulsory licenses to its drug firms, under “emergency” conditions. Also, the government has indicated that there is no urgent need to change patent laws that are already fully World Trade Organization-compliant. So India has resisted pressure from the US and other Western countries to amend its patent laws.
  • The policy also specifically does not open up Section 3(d) of the Patents Act, which sets the standard for what is considered an invention in India, for reinterpretation.

Benefits of this policy:

  • The new policy will try to safeguard the interests of rights owners with the wider public interest, while combating infringements of intellectual property rights.
  • By 2017, the window for trademark registration will be brought down to one month. This will help in clearing over 237,000 pending applications in India’s four patent offices.
  • It also seeks to promote R&D through tax benefits available under various laws and simplification of procedures for availing of direct and indirect tax benefits.
  • Unlike earlier where copyright was accorded to only books and publications, the recast regime will cover films, music and industrial drawings. A host of laws will also be streamlined — on semi-conductors, designs, geographical indications, trademarks and patents.
  • The policy also puts a premium on enhancing access to healthcare, food security and environmental protection.
  • Policy will provide both domestic and foreign investors a stable IPR framework in the country. This will promote a holistic and conducive ecosystem to catalyse the full potential of intellectual property for India’s growth and socio-cultural development while protecting public interest.
  • It is expected to lay the future roadmap for intellectual property in India, besides putting in place an institutional mechanism for implementation, monitoring and review. The idea is to incorporate global best practices in the Indian context and adapt to the same.

Why the US would not be happy with this policy?

Last month, the US Trade Representative kept India, China and Russia on its “Priority Watch List” for inadequate improvement in IPR protection. However, brushing aside concerns of the US on India’s IPR regime, the government said its intellectual property rights laws are legal-equitable and WTO-compliant. Thus, the government has not yielded to pressure from the United States to amend India’s patent laws.

TRIPS:

TRIPS is an international agreement administered by the World Trade Organization (WTO), which sets down minimum standards for many forms of intellectual property (IP) regulations as applied to the nationals of other WTO Members.

  • It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994.
  • TRIPS requires WTO members to provide copyright rights, covering content producers including performers, producers of sound recordings and broadcasting organizations; geographical indications, including appellations of origin; industrial designs; integrated circuit layout-designs; patents; new plant varieties; trademarks; trade dress; and undisclosed or confidential information.
  • The agreement also specifies enforcement procedures, remedies, and dispute resolution procedures.
Editorials, GS-3, Indian Economy, Uncategorized

Sensitise States, don’t intimidate them

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The finance ministry is preparing a model Centre-State Investment Agreement (CSIA), for effective implementation of the Bilateral Investment Treaty it is set to sign with other countries. The draft will shortly be presented to the Cabinet for approval.

What are BITs?

BITs protect investments made by an investor of one country into another by regulating the host nation’s treatment of the investment. BIT replaces the Bilateral Investment Promotion and Protection Agreements (BIPPA) that India had signed with 83 countries since 1994.

Background:

In his budget speech, Union Finance Minister Arun Jaitley had proposed the CSIA, to be signed between the central and state governments. This will ensure fulfilment of the obligations of state governments under BITs. States which opt to sign these will be seen as more attractive destinations by foreign investors.

Main features of CSIA:

Some of the features include an enterprise-based definition of investment, non-discriminatory treatment, protection against expropriation, an Investor State Dispute Settlement (ISDS) provision requiring investors to exhaust local remedies before commencing international arbitration, and limiting the power of tribunals to awarding of monetary compensation.

The Centre will also not make it mandatory for states to sign these agreements but if any don’t, counter-parties (other nations) will be informed.

Issues associated with CSIA:

  1. Obligations under international law.

According to some experts the Centre-State Investment Agreement (CSIA) does not make any sense from the perspective of international law. It is because whether a central government enters into any such agreement with states or not, the actions of state governments will continue to bind the Indian state. Irrespective of a foreign company running into trouble with any state, the liability will be on the Centre.

Also, the Centre’s proposal to warn their counter parties about non-compliant States before they make their investment in the State does not carry much legal significance.

  1. Cooperative federalism.

There are also practical considerations in this proposal. India is a quasi-federal structure with a multiparty system. The Centre and State governments are often politically non-aligned. In this context, a proposal by the Centre to enter into investment agreements with States as an optional arrangement may further sour fragile Centre-State relations for two reasons. First, the State governments will not like the shifting of the blame for violation of a BIT from New Delhi to State capitals. Second, the State governments will also not like the Centre informing India’s BIT partner country that a particular State government has not signed the agreement and thus, by implication, is not a safe destination for foreign investment.

Conclusion:

One of the objectives of the proposal could be to sensitise State governments about India’s BIT obligations given the fact that many regulations of State governments directly impact foreign investors. However, this objective would be better served by institutionalising the involvement of State governments in the process of treaty-making. A forum such as the NITI Aayog, which has all the Chief Ministers as members of the governing council, could be used to create a Centre-State consultative process on treaty-making. Also, this sensitisation should not be restricted to BITs but also extend to other international agreements like the World Trade Organisation treaty, numerous Free Trade Agreements, and Double Taxation Avoidance Agreements. Cooperative federalism requires that Centre and States work together, which in turn would ensure better implementation of international treaties.

GS-3, Uncategorized

The importance of IP rights for innovation

Context

Piracy is a problem all over the world, original content created by the innovators is being distributed in this digital age where data is distributed all over the internet and is rampant

Why India and US have a relationship in IP rights

Indian movie production companies and software development companies have made a mark around the world, US also has done the same, to protect the rights of creators from both countries and to grow our economies, we must try and curb this illegal distribution.

World Intellectual Property Day

  • World Intellectual Property Day is observed annually on 26 April.
  • 2016 theme “Digital Creativity: Culture Reimagined”
  • 2015 theme was “Get Up, Stand Up. For Music”
  • The event was established by the World Intellectual Property Organization (WIPO) in 2000 to “raise awareness of how patents, copyright, trademarks and designs impact on daily life” and “to celebrate creativity, and the contribution made by creators and innovators to the development of societies across the globe”
  • 26 April was chosen as the date for World Intellectual Property Day because it coincides with the date on which the Convention Establishing the WIPO entered into force in 1970.

World Intellectual Property Organization

  • The World Intellectual Property Organization (WIPO) is one of the 17 specialized agencies of the United Nations.
  • WIPO was created in 1967 “to encourage creative activity, to promote the protection of intellectual property throughout the world
  • WIPO currently has 188 member states,administers 26 international treaties, and is headquartered in Geneva, Switzerland

What is the idea behind protecting intellectual property

  • That the original content creators are rewarded for their creations whether it be movies, art work, music, computer software and other so that future generations appreciate the rich, diverse and creative cultures as to the ones we enjoy today.
  • Also people make their living by selling their content and if their creations are not protected, they will go out of work, and producers will no more be encouraged to produce new things

How is it becoming impossible to protect the content

Growth in broadband connectivity also means an increase in the proliferation of piracy, which reduces the incentive of content innovators to create and erodes the desire of companies to invest. Illegal downloads, recording in movie theatres and other forms of intellectual property theft cost the creative industry dearly

GS-3, Indian Economy, Uncategorized

Trading charges

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In February, 2016, U.S. President Barack Obama signed the Trade Facilitation and Trade Enforcement Act of 2015.

  • The focus of the law is to enhance enforcement of IPR over the U.S.’s trading partners. It introduces important measures relating to intellectual property rights (IPR) issues.
  • This law is expected to impact India’s ability to develop an IP policy suited to its own developmental needs.

Present scenario:

The Special 301 list, brought out by the United States Trade Representative (USTR), has consistently featured India, most often as a Priority Watch List (PWL) country, since its institution in 1989.

  • This has caused some disquiet within India, which has been disappointed that its proactive steps to improve domestic IP protection and engage with the U.S. have been unsuccessful in placating the U.S.

Why be concerned about this?

  • Countries featured on Special 301 list are those that the USTR believes have either national laws or regulations that detrimentally affect U.S. trade or the rights of IP holders.
  • If a trading partner is on this list, the U.S. believes that the country is providing inadequate IPR protection, enforcement, or market access for persons relying on intellectual property.
  • Also, any country classified as PWL is subject to USTR scrutiny in the form of investigations and possible sanctions under the procedures set out under the Trade Act, 1974.

How the new law further aggravates the existing problem?

Trade Facilitation Act will increase the level of pressure to comply with the USTR’s requirement for countries like India that feature on the PWL for more than a year.

  • The Act specifically requires the USTR to develop action plans with benchmarks for PWL countries. The USTR has traditionally developed action plans in consultation with the country in question. However, under Trade Facilitation Act, the USTR is not required to consult with the listed country.
  • Also, Benchmarks refers to legislative or other institutional action that a sovereign country like India will need to establish to facilitate U.S. trade. And instituting benchmarked changes remains the only way to remove a country from the Special 301 list no matter how harsh they are. Since the role of USTR is focussed on U.S. trade, it is not obliged to take developmental or public health needs of the trading partner into account when developing action plans or listing benchmarks.
  • A country that refuses to comply with the benchmarks within a year can face appropriate action, resulting in further unilateral investigations followed by punitive trade sanctions. Such trade sanctions can include denial of preferential duty for exports, which developing countries rely on to export goods to the U.S.
  • The Act creates a new position within the office of the USTR titled ‘Chief Innovation and Intellectual Property Negotiator’ (IP negotiator). The IP negotiator is required to “take appropriate actions to address acts, policies, and practices of foreign governments that have a significant adverse impact on the value of U.S. innovation.”
  • Also, with a view to facilitating unilateral actions, the Act creates a Trade Enforcement Trust Fund for legal actions against foreign countries to ensure “fair and equitable market access for U.S. persons.”

Is it not possible to seek any help from the WTO?

Under World Trade Organisation jurisprudence, legality of unilateral actions over sovereign countries remains questionable. Hence, the U.S. may stay away from imposing unilateral sanctions, but tries to bring about change in a country’s domestic IP law through mechanisms like the Special 301 list.

Thus, under U.S. laws, compliance with WTO obligations is immaterial. A country that is compliant with WTO rules can be the subject of investigations if the USTR believes that U.S. trade is detrimentally affected by that country’s IP laws. Thus, India’s traditional defence that it is in compliance with WTO obligations has limited reach.

Conclusion:

India should be concerned about the heightened pressure that is bound to follow with the passage of the Trade Facilitation Act, especially on issues where its compliance with its TRIPS obligations is not disputed. As India continues to strategically engage with the U.S., it is time to develop a coalition of like-minded countries to monitor demands for legislative actions that result in WTO-plus standards.

GS-3, Uncategorized

Patents over patients

The U.S.-India Business Council (USIBC) to the U.S. Trade Representative (USTR) recently revealed that India has given private assurances to the US that it will not grant licences allowing local firms to override patents and make cheap copies of drugs by big Western drug makers.

Background:

It should be noted here that the USTR has placed India on its “priority watch” list for two years in a row saying the country’s patent laws unfairly favour local drug makers. A bone of contention has been a legal provision that allows the overriding of patents on original drugs and granting of ‘compulsory licences’ to local firms to make cheaper copycat medicines.

What is Compulsory Licensing (CL)?

CL is the grant of permission by the government to entities to use, manufacture, import or sell a patented invention without the patent-owner’s consent. Such licenses permit a third party to make, use, or sell a patented invention without the patent owner’s consent.

Laws governing such licenses:

India can grant such licences under certain conditions, such as public health emergencies, to ensure access to affordable medicines.

  • Under Indian Patent Act, 1970, the provision with regard to compulsory licensing is specifically given under Chapter XVI. The conditions which need to be fulfilled in order for a compulsory licence to be granted are also laid down under Sections 84 and 92 of the Act.
  • Under Section 84 (1) of the Indian Patent Act, any person may request a compulsory license if, after three years from the date of the grant of a patent, the needs of the public to be covered by the invention have not been satisfied; the invention is not available to the public at an affordable price; or the patented invention is not “worked in,” or manufactured in the country, to the fullest extent possible.
  • India’s National Manufacturing Policy (NMP) also supports the application of CL across different manufacturing sectors, more specifically to ensure access to the latest green technologies that are patented.
  • The NMP provides the “option” to entities such as the Technology Acquisition and Development Fund “to approach the government for issue of a CL for the technology which is not being provided by the patent holder at reasonable rates or is not being ‘worked in India’ to meet the domestic demand in a satisfactory manner.”
  • CL is also permitted under the WTO’s TRIPS (IPR) Agreement provided conditions such as ‘national emergencies, other circumstances of extreme urgency and anti-competitive practices’ are fulfilled.

Concerns over the recent assurance:

The disturbing word in the recent communication from the USIBC to the US Trade Representative is “privately”. This is related to Track II Diplomacy (Track II diplomacy refers to “non-governmental, informal and unofficial contacts and activities between private citizens or groups of individuals, sometimes called ‘non-state actors’. It contrasts with track I diplomacy, which can be defined as official, governmental diplomacy that occur inside official government channels).

  • Track II flourishes in diplomacy, but the idea of Track II policy is problematic. Policy must always be created and operated transparently, or government runs the risk of losing credibility.
  • Yet, the government appears to have offered a verbal, Track II-like reassurance on drug patents, which has found its way into the official record.
  • Technically, private assurance suggests that India is willing to pay heed to multinational requests to respect intellectual property and to protect incomes accruing from it, even if it amounts to disrespecting the right of its citizens to life and health.
  • Such an assurance also goes against the main spirit of Patents Act and the public health safeguards enshrined in it.

Natco’s case:

Based on section 84, Natco, an Indian generic manufacturer, applied for India’s first compulsory licence some years ago and convinced the patent office that Bayer’s patented drug for kidney cancer, Sorafenib Tosylate, was excessively priced and available to hardly 2% of patients.

  • In sharp contrast to Bayer’s Rs 2.8 lakh per month price tag, Natco offered to sell its version of the drug at Rs 8,800 per month.
  • The controller of patents granted a licence upon the payment of a 6% royalty rate to Bayer, ensuring this was not a zero-sum game but one that could potentially benefit the patent owner as well, given Natco’s knack of selling in markets beyond the ordinary purview of the high-priced patented drug.
  • Upon appeal by Bayer, the patent office decision was validated, with some minor modifications in royalty rates.

Unfortunately, despite this excellent start to the invocation of an important public health safeguard, no other licence has been granted since.

WTO’s view:

The WTO’s fourth ministerial conference in Doha in 2001 had adopted a declaration which balanced the imperative of national health against the transnational rights to intellectual property.

  • It established the primacy of the right of member nations to protect public health and promote access to medicines for all. It further clarified that each member has the sovereign right to decide the grounds for granting compulsory licences according to national interests, and implicitly did away with the need for an emergency or a situation of urgency, which are listed both in Trips and in the IPA.
  • The Indian government is, therefore, under no compulsion to put multinational interest ahead of the imperative of public health. It only needs to be fair in its policy — and transparent.

What needs to be done now?

World over, compulsory licensing is largely a matter of government discretion to be invoked at the government’s pleasure. However, in India, Section 84 makes clear it’s a legal entitlement that cannot be pimped away through private assurances to foreign friends. Rather, the government is obliged to adjudicate each application on merit, donning its robe as a quasi-judicial authority. The patent office must, therefore, be equipped with personnel vested with a fair degree of adjudicatory competence and independence.

  • If serious about its constitutional commitment to good health, the government must immediately formulate a legal framework to compel private parties to disclose drug and disease data.
  • Also, it must ensure quasi-judicial authorities (the patent office) remain relatively independent and are infused with sufficient training to ensure a fair, impartial and competent dispensation of justice.
Editorials, Environment, GS-3, Uncategorized

Why the WTO is right in the solar panel dispute

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A World Trade Organization (WTO) panel has ruled against India in a dispute raised by the US over the country’s solar power programme, requiring the government to offer a level playing field to both foreign and domestic manufacturers of solar panels.

  • The panel found that the domestic content requirement imposed under India’s national solar programme is inconsistent with its treaty obligations under the global trading regime.
  • This is the second case that India has lost to the US at the WTO. In June 2015, the WTO’s appellate body upheld an earlier ruling against an Indian ban on poultry meat and eggs supplied by American producers. The ban had been imposed to prevent an outbreak of avian influenza.

What’s the issue?

It all started with the announcement of India’s national solar programme, which was launched in 2010. This programme aims to “establish India as a global leader in solar energy, by creating the policy conditions for its diffusion across the country as quickly as possible”.

  • To incentivise the production of solar energy within the country, the government under the programme agrees to enter into long-term power purchase agreements with solar power producers, effectively “guaranteeing” the sale of the energy produced and the price that such a solar power producer could obtain.
  • Thereafter, it would sell such energy through distribution utilities to the ultimate consumer. However, a solar power producer, to be eligible to participate under the programme, is required compulsorily to use certain domestically sourced inputs, namely solar cells and modules for certain types of solar projects.
  • In other words, unless a solar power producer satisfies this domestic content requirement, the government will not ‘guarantee’ the purchase of the energy produced.
  • In 2013, the U.S. brought a complaint before the WTO arguing that this domestic content requirement clause imposed under India’s national solar programme is in violation of the global trading rules.
  • Specifically, it said, India has violated its “national treatment” obligation by unfavourably discriminating against imported solar cells and modules. Thus, indicating a clear violation trade commitment.

How India defends its move?

India principally relied on the ‘government procurement’ justification, which permits countries to deviate from their national treatment obligation provided that the measure was related to “the procurement by governmental agencies of products purchased for governmental purposes and not with a view to commercial resale or use in production of goods for commercial sale”.

  • India also argued that the measure was justified under the general exceptions since it was necessary to secure compliance with its domestic and international law obligations relating to ecologically sustainable development and climate change.

What the WTO Panel says?

However, after a detailed examination, the panel concluded that India, by imposing a mandatory domestic content requirement, had violated its national treatment obligation.

  • In so far as the government procurement derogation was concerned, the panel found that the product being subject to the domestic content requirement was solar cells and modules, but the product that was ultimately procured or purchased by the government was electricity.
  • The domestic content requirement was therefore not an instance of “government procurement”.
  • Besides, the panel also found that since India failed to point out any specific obligation having direct effect in India or forming part of its domestic legal system, which obligated India to impose the particular domestic content requirement, the general exception was not available to the Indian government in the instant case.

Was India really wrong?

The ruling has been described as yet another instance of archaic trade rules trumping important climate imperatives. It is being seen as undermining India’s efforts towards promoting the use of clean energy. However, this criticism is not entirely justified.

  • There appears to be no rational basis for how mandatory local content requirements contribute towards promoting the use of clean energy.
  • Besides, by mandatorily requiring solar power producers to buy locally, the government is imposing an additional cost, usually passed on to the ultimate consumer, for the production of clean energy. The decision may therefore stand to benefit the interest of the ultimate consumer.

How should the policy be?

If the objective is to produce more clean energy, then solar power producers should be free to choose energy-generation equipment on the basis of price and quality, irrespective of whether they are manufactured locally or not.

  • It is entirely possible to give preferential treatment to clean energies (in the form of tax rebates for solar power producers and so on) without requiring mandatory local content.

Way ahead:

The panel ruling, however, is not final and reports indicate that India will prefer an appeal to the appellate body. Simultaneously, India may be exploring the option of filing a counter complaint against the U.S., with several states in the U.S. such as Michigan, Texas and California having also reportedly been accused of employing mandatory local content requirements in the renewable energies sector.

Conclusion:

In a bid to support its ‘Make in India’ campaign India is coming out with such policies. However, India must resist the temptation of adopting protectionist measures such as domestic content requirements which are inconsistent with its international obligations. Domestic content measures, despite their immediate political gains, have a tendency to skew competition. Manufacturers must remain free to select inputs based solely on quality and price, irrespective of the origin. The government must continue working towards building a business and regulatory environment which is conducive to manufacturing. This would require systemic changes in the form of simpler, transparent and consistent laws and effective dispute resolution mechanisms.

GS-3, Indian Economy, Uncategorized

Economic integration and different types of trade agreements

What is economic integration & why go for it?

Economic integration refers to trade unification between different states by the partial or full abolishing of customs tariffs on trade taking place within the borders of each state.

  1. The objective of this integration is to increase the combined economic productivity of the countries – easier access of goods and services
  2. Other by-product of integration is competitiveness. If 4-5 countries come together to form a closely knit family (of sorts), they would create barriers to entry of an external (possibly much larger player) to disrupt the region with cheaper goods

What is a trade agreement?

A trade agreement is a contract/agreement/pact between two or more nations that outlines how they will work together to ensure mutual benefit in the field of trade and investment.

This can be bilateral (2 countries) or multilateral (2+ countries). 

Once a trade agreement is finalised, we get to read about these Trade Blocs – a type of intergovernmental agreement, where regional barriers to trade, (tariffs and non-tariff barriers) are reduced or eliminated among the participating states.

img26

trade-agreements-hierarchy

 

#1. PTA – Preferential trade agreement

A preferential trade agreement, is a trading bloc that gives preferential access to certain products from the participating countries.

This is done by reducing tariffs but not by abolishing them completely. A PTA can be established through a trade pact. It is the first stage of economic integration. 

Some examples:

  • Asia-Pacific Trade Agreement (APTA): formerly known as the Bangkok Agreement, was signed on 31st of July 1975 as an initiative of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP). ESCAP is the regional development arm of the United Nations for the Asia-Pacific region.
  • India-Mercosur Preferential Trade Agreement (PTA): Mercosur is a sub-regional blogs with its member countries – full members are Argentina, Brazil, Paraguay, Uruguay and Venezuela.

#2. FTA – Free trade agreement

A free-trade area is a trade bloc whose member countries have signed a free-trade agreement (FTA), which eliminates tariffs, import quotas, and preferences on most (if not all) goods and services traded between them.

Please note that you cannot distinct PTA and FTA by just saying that the former has fewer barriers and later has no barriers at all. FTA does not mean everything is free! PTA closely follows FTA.

  • Evolution of SAPTA to SAFTA (South Asian PTA to FTA)
  • ASEAN FTA (Trade agreement within the Southeast asian nations)

What would happen if countries want to move more closer (beyond material trade)?

When the countries go beyond FTA and agree for a greater degree of economic integration which includes improving the attractiveness to capital and human resources, and to expand trade and investment, it would result in CECA or CEPA.

  • CEPA = Comprehensive Economic partnership Agreement
  • CECA = Comprehensive Economic Cooperation Agreement

CECA and CEPA have very minor differences, if you will. While CECA comes first with elimination of tariffs, CEPA comes later including trade in services and investments. CEPA has a bit wider scope than CECA.


#3. Customs Union

An agreement among countries to have free trade among themselves and to adopt common external barriers against any other country interested in exporting to these countries.

Some examples:

  • Southern Common Market – Mercosur (Argentina; Bolivia; Brazil; Paraguay; Uruguay; and Venezuela)
  • Gulf Cooperation Council (GCC) – Its member states are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates
  • East African Community (EAC) – composed of 5 countries in the African Great Lakes region in eastern Africa: Burundi, Kenya, Rwanda, Tanzania, and Uganda

#4. Common Market

A type of custom union where there are common policies on product regulation, and free movement of goods and services, capital and labour.


 

#5. Economic Union

An economic union is a type of trade bloc which is composed of a common market with a customs union. The participant countries have both common policies on product regulation, freedom of movement of goods, services and the factors of production (capital and labour) and a common external trade policy.


#6. Economic and monetary union

When an economic union involves unifying currency it becomes a economic and monetary union. Eg – Euro!

 

Big Picture, GS-2, GS-3, Indian Economy, Uncategorized

Impact of Chinese slowdown

China’s economy grew at 6.9% in 2015, but that was a slowest growth rate for the world’s second largest economy in 25 years. The IMF has projected China’s growth rate to be 6.3% in 2016. There are expectations of further devaluation of renminbi or yuan by China to boost its exports. This could erode the export competitiveness of other countries and fuel currency market volatility. China’s slowdown is also one of the big drivers of massive fall in oil process and that is causing its own problems. Many believe that China’s slowdown could lead to a cycle of decline around the world.

However, few experts say that estimates of IMF and other estimates about China are still high when compared to the overall global growth rate which is at 2% or less. When compared to the biggest economies like US and UK, China is still on the brighter side. Some experts also indicate that China is passing through a phase through which all the developed countries have once passed, which is called as middle income trap. China is also restructuring its economy for domestic consumption. Hence, the overall slowdown might be slightly fuelled by this and should not be a cause for concern.

On the other hand, few developments like swelling of trade volume in 2015 by 7%, slowing down in bank lending, shrinking manufacturing sector and depleting foreign exchanges indicate a different story. Looking at these developments, some argue that what is happening in China is not a cause but an effect. Hence, according to them the world economy is heading towards a recession. Added to it are the falling export rates of various developing countries including India. However, China is not willing to increase its buying rate in the world market by cutting down its reserves. Another significant reason for the slowdown may be the now stable population in China which has reportedly brought down the growth rate by 25%.

So far, China was one of the biggest buyers of commodities. Now the commodity exporting countries of Africa and Latin America will definitely be hit by Chinese slowdown. This added with falling energy rates will affect these countries.

In Europe, the Middle East, and Africa in particular, there are three ways in which a China slowdown will substantially impact regional economic growth:

  • A fading export market: China’s boom has provided a growing, reliable export destination for many European companies, but a slowdown will suppress top-line growth for industrial, technology, and consumer firms alike. The commodity-led economies of the Middle East and Africa could be harder hit. Chinese demand has filled the void left by Europe’s stagnant consumption. Reduced commodity exports would cut governments’ ability to spend, weakening an important growth driver for many of the world’s most dynamic frontier markets.
  • A pullback in foreign direct investment: One-quarter of all FDI into Sub-Saharan Africa since 2006 has come from China. However, recipients of Chinese FDI are less likely to be severely affected, because Chinese companies are more likely to focus on growth internationally if their domestic market weakens.
  • A trigger of financial-market instability: Depending on whether a Chinese slowdown surprises global financial markets, financial volatility would result in a flow of capital back to developed markets, causing significant currency volatility in EMEA and impacting the prices of goods imported from developed markets, hurting consumers across the region.

But, rejecting this argument, some experts say at the best times, China constituted 10% of the world imports and 12% of the world exports. At the peak they constituted 12% of the world demand. The bigger amount of demand still lies in Europe, USA and Japan. China has lived on export growth. Hence, if it doesn’t change its policy now, it will be the worst affected. Thus, the slowdown may not affect the world as a whole.

India is set to become the world’s fastest-growing major economy by 2016 ahead of populous neighbour China that is battling an industrial deceleration. India is expected to grow at 6.3% this year and 6.5% in 2016 by when it is likely to cross China’s projected growth rate. However, in the short run, China’s slowdown may slightly erode India’s export competitiveness and fuel currency-market volatility. Our economy is strongly integrated with the Chinese one, and there is no escaping the impact of a slowdown in what was until recently the engine of global growth. The Indian companies in which they invest are battling several fallouts: Poor demand for their products in China due to slow growth and a weaker yuan, the prospect of dumping of Chinese goods in India, and higher costs of servicing dollar debt due to downward pressure on the rupee.

For India, the impact of China’s slowdown has been on the rupee, which recently breached the 68-to-the-dollar mark, likely driven by heavy selling of Indian shares by foreign investors. A weak rupee will make imports costlier and is not having the usual tonic impact on exports because our key markets are slowing down. It will also make the Reserve Bank of India think long and hard about further interest rate cuts and could eat into our dollar reserves. All in all, the world economy is a complicated broth, with China the most toxic ingredient.

GS-2, International Relations, Uncategorized

What do you understand by the Doha Development Agenda (DDA)? What is India’s stand vis a vis DDA? Examine.

Doha Development Agenda (DDA) is the name given to the various issues that have to be negotiated among the World Trade Organization (WTO) members. It includes discussions on the following subjects:
1)Agriculture-to reduce trade distorting domestic subsidies and reducing export subsidies
2)Services-to strengthen the service sector with each government deciding how much it wants to open the sectors to foreign companies
3)Trade facilitation-to ease custom procedures and to facilitate quick movement of goods
4)Rules-to negotiate framework for anti-dumping duties, countervailing measures; and others.

India’s Stand :-
1)Developing countries are disappointed about the deadlock of the Doha Development Agenda (DDA) which was introduced in 2001.India says that Doha talks contain the work of many years and reflects the development aspirations of developing countries and hence, cannot be abandoned midway and has opposed the attempts of Developed nations to stall DDA

2)Issue On Subsidy:-Developed countries are giving 70-80% subsidies to their farmers, which only they can afford to give.Developing Countries don’t have the wherewithal to pay these kinds of subsidies which distorts prices and make farmers vulnerable when the products hit markets.

According to the WTO rule, subsidies must not exceed 10% of the value of foodgrains produced and calculated at the base price of 1986-88. This is biggest issues which India is negotiating as it provides huge subsidies to farmers through various
initiatives.

3)Another issue for India is the provision of Special Safeguard Mechanism (SSM) under Agreement on Agriculture. The SSM allows countries to impose tariffs and other measures when agricultural imports cause injuries to domestic agricultural sector.

4)India wants the resolution of the issue of Public Stockholding so that it can imlement Food Security act and PDS schemes properly.Indian Public stockholding has always been criticised by the western nations.

5)India has long being champion of Generic medicines, which is not received very well by the occidental developed nations. For India, India has not agreed upon the IPR clause as dictated by the WTO,because if it agrees a great section of poor patients, medical sector will be hit along with medical tourism..

Western media’s alleges that India is delaying the trade talks. but India’s intention is not to delay the talks rather to ensure that the talks come to a successful, logical and balanced conclusion, and fulfillment of the development dimension in every aspect.