Ramesh Singh Summary: International Economic Organisations & India- 2 | Indian Economy for UPSC CSE PDF Download

Introduction

The dynamics of global economic interactions are profoundly influenced by international economic organizations. In the context of India, active participation in these forums has become integral to shaping the nation's economic policies and fostering international cooperation. This introduction explores the role, significance, and challenges associated with India's engagement with various international economic organizations. By examining the collaborative efforts and evolving partnerships, it aims to provide insights into how India navigates the complex web of global economic governance.

World Trade Organisation (WTO)

• The World Trade Organization (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. 

NAIROBI NEGOTIATIONS & INDIA

• The WTO held its 10th Ministerial Conference in Nairobi, Kenya during 15-19 December 2015. This was the first such meeting to be hosted by an African nation.
• The outcomes of the Conference, referred to as the Nairobi Package, are as  given below :
• He Nairobi Declaration reflects divergence amongst the WTO membership on the relevance of reaffirming the Doha Development Agenda (DDA) as the basis of future negotiations.
• Doha Round appeared in doubt, India sought and succeeded in obtaining a re-affirmative Ministerial Decision on Public Stockholding for Food Security Purposes honouring both the Bali Ministerial and General Council Decisions.
• A large group of developing countries has long been seeking an SSM (Special Safeguard Mechanism) for agricultural products. In order to ensure that this issue remains on the agenda of future discussion in the WTO, India negotiated a Ministerial Decision which recognizes that developing countries will have the right to have recourse to an SSM as envisaged in the mandate.
• It was also agreed to the elimination of agricultural export subsidies subject to the preservation of special and differential treatment for developing countries such as a longer phase-out period for transportation and marketing export subsidies for exporting agricultural products.
• One of the Decisions adopted extends the relevant provision to prevent 'ever-greening' of patents in the pharmaceuticals sector. This decision would help in maintaining an affordable and accessible supply of generic medicines.

BUENOS AIRES CONFERENCE AND INDIA

• The 11th Ministerial Conference (MC11) of World Trade Organisation [WTO] which took place in Buenos Aires, Argentina (10-13 December, 2017) ended without a Ministerial Declaration or any substantive outcome, though the unanimous view was that it was extremely well-conducted with complete openness and transparency and the process afforded everyone ample opportunity to express their views.
• In the run-up to MC11, decisions were expected on a permanent solution on food security and other agriculture issues. Unfortunately, the strong position of one of the member (the USA) against agricultural reforms based on current WTO mandates and rules, led to a deadlock without any outcome on agriculture or even a work programme for the next two years.
• Some of the other decisions that were taken included a Work Programme on disciplines on Fisheries Subsidies with a view to arriving at a decision by MC12.
• On new issues like investment facilitation, MSMEs, gender and trade, which lacked a mandate or consensus, Ministerial Decisions were not taken forward.
• India stood firm during the Conference on its stand on the fundamental principles of the WTO, including multilateralism, rule-based consensual decision-making, an independent and credible dispute resolution and appellate process, the centrality of development, which underlies the Doha Development Agenda (DDA), and special and differential treatment for all developing countries.   

India and WTO

• India has been always in favour of a multilaterally trading world and effective and transparent dispute settlement arrangement in the WTO.
• In mid-May (13-14 May) 2019, India hosted a WTO Ministerial Meeting of Trade Ministers in New Delhi on the concerns of the 16 developing and 6 least developed countries. An outcome document was released in the meeting, which lays out priorities for developing countries in various areas and envisages addressing the challenges being faced by the Dispute Settlement system of the WTO.S India has submitted a paper in the General Council meeting of the WTO, spelling out the following major priorities that are required to be taken into consideration while undertaking reforms in the WTO—
  (a) Preservation of core principles of the Multilateral Trading System,
  (b) Safeguarding special and differential treatment provisions,
  (c) Resolution of the Appellate Body crisis,
  (d) Addressing unilateral actions and continuation of negotiations in mandated areas, among others.
• The twelfth Ministerial Conference of the WTO (MC12) is scheduled to be held in June 2020 in Nur-Sultan, Kazakhstan. Discussions for an outcome at MC12 are underway at various informal Ministerial meetings and regular meetings at the WTO.

TRADE FACILITATION BY INDIA

• Trade facilitation has been a highly contentious issue related to the multilateral trade and was always prioritised in the WTO negotiations by the member nations.
• The Trade Facilitation Agreement (TFA) agreed upon by the WTO was ratified by India in April 2016.
• For its implementation a National Committee on Trade Facilitation (NCTF) was also set up by the Government.
• In order to achieve cargo release time targets, India undertook a national level Time Release Study (TRS) for the first time in 2019 across multiple locations covering seaports, Inland Container Depots (ICDs), air cargo complex and integrated check posts.
• The intended objectives of the TRS was to assess impact of extant measures to reduce release time, examine extant procedures, technologies and infrastructure and administrative concerns and thereby identify manual processes and physical touch points, bottlenecks and inefficiencies (by stakeholders) to bring down the overall release time.

BRICS Bank

• The Fortaleza Declaration of heads of state (late July 2014) from Brazil, Russia, India, China, and South Africa (the BRICS countries) is another such attempt—creation of a BRICS Bank i.e., New Development Bank (NDB).
• Major highlights about the bank are given :
  (i) The bank will have initial subscribed capital of $50 billion—equally shared by the five nations.
  (ii) The capital base is to be used for funding infrastructure and 'sustainable development' projects in the BRICS countries initially.
  (iii) Other low and middle-income countries will be able get funding as time progresses.
  (iv) A Contingent Reserve Arrangement (CRA) of $100 billion is to be also created to provide additional liquidity protection to member-nations during balance of payments problems.
  (v) The CRA is being funded 41 per cent by China, 18 per cent each from Brazil, India, and Russia, and 5 per cent from South Africa.
  (vi) CRA, according to the Declaration, is 'a framework for the provision of currency swaps in response to actual or potential short-term balance of payments pressures.'
  (vii) The BRICS bank development comes at a time when reforms at the Bretton Woods institutions fail to fructify for one reason or the other and with the US and European nations still not reconciled to concede BRICS nations a greater voice in the governance structure of the Bretton-Woods institutions.
  (viii) The BRICS-sponsored development bank is not an isolated and unique initiative. Similar initiatives had sprung up in the past to blunt the might of Bretton-Woods twin.
  (ix) Development Bank of Latin America (created by Andean nations) in the 1960s, the Chiang Mai Initiative in early 2000s (of 10 ASEAN nations plus China, South Korea and Japan) to establish a network of bilateral currency swap pacts in the wake of Asian currency crisis, and the establishment of the Bank of South by Latin American countries in 2009 were the result of escalating dissatisfaction with the US-dominated IMF and World Rank.

Asian Infrastructure Investment Bank

• The Asian Infrastructure Investment Bank [AIIB] was officially launched in 2014 by China with 21 Asian nations as the founding members. By March 2019, the bank had a total of 93 members from across the world (inclusive of the 23 prospective members).
• Still, the USA, Japan and Canada have not joined it rather the experts suggested them to support it especially when the existing mechanism (the World Bank and Asian Development Bank) is not able to cater to the infrastructural needs of the continent.
• The AIIB is aimed at providing finance to infrastructure projects in the Asia region, as a multilateral institution.
• It is planned to operate broadly in the same manner as existing multilateral development banks (MDBs) such as the World Bank and the Asian Development Bank (ADB).
• While much of the debate is centred on whether the AIIB will complement or compete with existing organisations, it is intended to be more a commercial bank—with nations as shareholders, than a purely development aid institution.
• The AIIB will start with an authorised capital base of US$ 1 billion to be 1 enhanced to US $ 100 billion.
• Size of the AIIB : Based on the lending capital ratios of the World Bank and European Development Bank —the AIIB could extend loans for infrastructure spending at around 100 per cent to 175 per cent of its subscribed capital. This would mean having outstanding loans of up to $US175 billion.
• India & AIIB : India is one of the 21 founding members of the bank and is believed to benefit maximum from it. India holds 8.6794 per cent of its shares (with a total investment of US$ 8.3673 billion) and avails a 7.614 per cent voting rights (with a total of 86,214 shares) in it. India's shareholding is the second highest after China which holds 30.8913 per cent shares.

Reforming IMF & WB

Reforms in the IMF :

• Increasing its resource base so that it is able to help out (bail out in case of balance of payment situations) nations in times of crisis. G20 wishes to increase its resources from the current level of US$250 billion to US$750 billion.
• Merit-based selection of the head of the IMF, irrespective of nationality.
• Eliminating the veto of the U.S. in key decisions.
• Broadening the application of double-majority voting as a way to increase the role of smaller members.
• Revising the rule of quota and vote distribution to reflect accurately and fairly the current and future economic weight of the members.
• Transforming its Board of Directors from a bureaucratic body to a high-level policy decision-making forum of ministers.

Reforms in the WB :

• Need of Shareholders to replenish the capital base for 'soft' loans (while the IDA disburses interest-free the IBRD disburses concessional loans to the eligible member nations and in recent years the WB has faced a resource crunch as several developed countries, especially the USA, proposed fund cuts).
• Merit-based selection of the World Bank president—without regard to nationality.
• Revamping of shareholdings and voting rights in the executive boards (to give a greater voice to emerging market economies and to borrowers).
• Overhauling its operational modalities (so that it can react with less bureaucratic and time-consuming burdens to the legitimate needs of its borrowers).