ASSIGNMENT ON INTERNATIONAL

BUSINESS ENVIRONMENT
TOPIC: WORLD TRADE ORGANIZATION
SUBMITTED TO :

THEJASVI
MCOM (F)
14535
POMPEI COLLEGE, AIKALA

SUBITTED BY

RENITA RESHMA SEQUEIRA

DEPT. OF MCOM
POMPEI COLLEGE, AIKALA

SUBMITTED ON

DATE: 21/09/2015
PLACE: AIKALA

21/09/2015

CONTENTS
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INTRODUCTION OF WTO
MEANING OF WTO
ADVANTAGES OF WTO
DISADVANTAGES OF WTO
THREATS AND OPPORTUNITIES OF WTO
IN INDIAS INTERNATIONAL MARKET

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WORLD TRADE ORGANIZATION

INTRODUCTION
World trade organization was formed to promote free trade among its member
nations. It governs the rules of trade between the nations. Its main headquarters in
Geneva, Switzerland. WTOs budget is 163 million dollar. Its main objective is to
promote multilateral trade (Trade among many nations) in goods and services by
eliminating tariff and non-tariff barriers. Eliminating tariff barriers means
removing import duties and eliminating non- tariff barriers means removing import
quotas (quantitative restrictions) import licensing, etc.

MEANING OF WTO:
The WTO is member-driven with decision taken by general agreements among
all members of governments and it deals with the rules of trade between nations at
a global or near- global level. But there is more to it than that.
An international organization deals with the global rules of trade between
nations.

ADVANTAGES OF WTO:
1. Increase in foreign trade
WTO has helped India in increasing its foreign trade. Being a member
of WTO. India has its trade relations with 151countries. WTO has helped in
removing tariff and non -tariff barriers and this has opened various new
markets for India.
2. Increasing in agricultural exports
As a result of reduction in subsidies on agricultural goods given by
developing countries. Demand for variety of Indian food grains will rise in
international market. It will provide opportunity for India to increase export
of agricultural products.
3. Increase in inflow of foreign investment

As per TRIMs, government has removed all the barriers to foreign

investment. It has attracted foreign investment in India.
4. Improvement in services
By including trade in service sector under WTO proposals, developing
countries like India will stand to gain. According WTO, developed countries
will establish large number of trade and service establishments like- business
outsourcing, information technology, banking, insurance, transport etc.
5. Benefits for clothing and textile industry
WTO has benefited clothing and textile industry the most. Under
Multi-Fibre Arrangements (MFA) our cloth and readymade garment trade
was subject to quota restrictions. As a result of WTO all the restrictions have
been removed. It has helped increase the exports of Indian cloth and textiles.
6. Inflow of better technology and better quality products
With the increase and foreign trade and foreign investment, there will
be inflow of better technology and high quality product.
7. Benefits of multilateral system
Before WTO, foreign trade was usually bilateral, that is between
two counties. WTO promoted multilateral trade. It has increased the trade
relations of India with 151 nations. If multilateral system of WTO had not
been prevalent, India would have to enter into separate trade agreement with
each nation.

DISADVANTAGES OF WTO
1. Disadvantages to agricultural sector:
It is apprehended that by including agriculture in WTO, Indian farmers
Will become dependent on MNCs for improved seeds and agricultural
technology. Farmers will have to pay huge amount to MNCs for branded
seeds, fertilizers. It is clear from the following:
1. Reduction in subsidy
2. Import of food grains
3. Plant breeding protection
2. Loss to domestic industries

According to WTO agreements, India will not impose any restriction on

foreign investment. MNC will have a free entry in the Indian market. This will
adversely affect the domestic industry, as domestic industry will not be able
compete with MNCs.

3. Patent of Indian Herbs by Foreign Companies

Some foreign companies have taken patent of Indian herbs/food grain
like Haldi, Neem, Tulsi, Basmati Rice etc. so there is risk of Indian Herbs /grains
being patented by foreign companies. So India will have to make heavy payments
as royalty to patent holders for using these Herbs/Food grains.

4. Effect on prices
If patent for common products like medicines, food grains, chemicals
etc. are recognized, then developing countries like India will have to pay huge
royalty to the patent holders. It will result in price rise.

5. Loss to regional grouping

With the promotion of multilateral trade, the trade of regional grouping
like SAARC, NAFTA, ASEAN, etc. has come down. Regional groups promote
trade at regional level within a few countries, whereas WTO promotes trade among
many nations.

6.Disadvantages trade sector

It is feared that WTO will adversely affect our service sector also.
Our banking, insurance, transport, education and hotel services will not be able to
compete with the similar services offered by MNCs.
7. Increase in unemployment

WTO will encourage the free flow of imported goods and MNCs in
developing countries. MNCs use capital intensive technology which creates less
employment opportunities. Moreover because of liberal imports domestic
production of developing countries will come down. Less production activity will
result in less employment opportunities.

WTOS OPPORTUNITIES AND THREATS TO INDIAS

INTERNATIONAL BUSINESS

1. Trade in Goods-Non-tariff barriers

The signatories to the WTO have all made commitments to reduce and in many
cases do away with import restrictions in a time frame. However, this is fraught
with many obstacles, mainly opposition from strong groups within each country.
This aspect applies to all categories of members-Developed, Developing and Least
Developed. The Non-tariff barriers then become a necessity to overcome the
political situation at home. These normally take the form of Sanitary &
Phytosanitary Standards.
Opportunities-The WTO has opened up a huge market for products. India should
look at newer markets rather than concentrate on the traditional ones. This will
provide a huge opportunity. Development of trade with other Developing and least
developed nations will offer a great opportunity for India. India has to actively
perform in all International standard setting bodies and this again will give Indian
products a definite edge.
Threats-With the reduction/rationalization of Tariffs, foreign products made with
cheaper technology and mass produced, can flood the market. But this again will
peter off as has been evidenced by the demise of the threat from cheap Chinese
products.

2. Trade in services- restrictions on movement of natural persons

The trade in services is a significant one since the growth of services sector far
outstrips the trade in goods.
Opportunities-As has been seen in the case of Software, India has a huge talent
pool. It also has a large English speaking population. This coupled with the lower
cost of living, offers India, a big opportunity to tap newer markets.
Threats-As seen recently, there can be retaliation by way of new measures taken to
curb outsourcing of jobs to India. This can be countered by effective
intermediation at the WTO for a foreign firm, like the ones in the Accountancy
area, can offer threat to local firms because of their reach worldwide.
2. Intellectual Property Rights (IPR)
India has long been under a slumber and this has affected its development of IPR.
However we do have our strengths.
Opportunities-Development of newer varieties of Agricultural products and new
products that are needed in other developing countries offers India a great
opportunity. Its traditional medicine sector, which can offer cures to many illnesses
otherwise considered incurable, is also an opportunity. Sale of technology and
services in sectors like Space & Remote sensing provide many opportunities.
Threats-Unless constant vigil is maintained, other countries may try to
patent/protect Indian products as in the case of Basmathy. To overcome this, India
should step up its activity in the WTO and document all possible products with
geographical indications as also linkages to the ancient Indian texts. Mass
produced goods with latest technology are a definite threat. the areas related to
Information Technology.

4. Trade & Environment

These are newer areas, which have evolved mainly as a ruse by the bigger trading
parties to stifle exports by others.

Opportunities-India can afford to spend on environment friendly procedures since

another component of cost namely labor is still cheaper. It will also help India have
a healthier environment and avoid Bhopals in future.
Threats-The Developed countries that have developed the technology for safer
environment oriented processes can prove to be a big threat to India, till India
catches up.
5. Trade & Labor
India and many other countries have been consistently opposing the linkage since
there is another UN body, ILO for the purpose.
Opportunities-As has been evidenced by the Software sector, excellent quality
coupled with low wages can help India in many areas.
Threats-Countries like China and the Last Developed economies can offer cheaper
labor. At that juncture, quality will be the answer. coupled with low wages can help
India in many areas.

6. Trade & Investment

Investment and Trade are interrelated especially in technology driven ones. It has
resulted in a lot of disagreement among member nations.
Opportunities-By liberalizing investment norms (which has been done to a large
extent already) India is capable of attracting FDI in all sectors. This again will
result in employment generation and reduction of poverty.
Threats-The decision making process, steeped in red tape is a real threat to
investment. This will have to be tackled politically. Internationally, India offers
good investment opportunities and it has to have tight regulations to ward off
another East India Company experience. India cannot afford to forget the historical
fact that the British and many others who came to trade, ended up as the rulers.

7. Dispute Resolution

WTO has well-established Dispute Resolution Mechanism in place. India has to

utilize the opportunities.
Opportunities-The bodies like ICAI, Bar Council and others can offer Training
facilities along with the Training division of the WTO. This can open up new vistas
for professionals like CAs.
Threats-The highly trained professionals from developed nations offer threats, but
only in the short run.

REFFERNCE: