Principles of World Trade Organisation (WTO) - Know everything about MFN; GATS & NTP for all exams Video Lecture | Indian Economy for Government Exams (Hindi) - Bank Exams

[Music]
[Applause]
hello and welcome to study IQ in this
lecture let us see some important
principles of the World Trade
Organization the World Trade
Organization is guided by certain
principles and one important among them
is the most favored nation principle or
the MFN principle let us see the MFN
principle this is a very very important
principle of the World Trade
Organization one thing to be noted here
is that this is a compulsory principle
that means all the member country has to
comply with this principle it is
necessary for all the member countries
to comply with this principle what does
this principle say it says that a member
country of the WTO or the World Trade
Organization cannot discriminate another
member in relation to trade so in
relation to trade a member country of
the World Trade Organization cannot
discriminate another country as we know
the World Trade Organization relates to
trade so this is in relation to trade
what does this mean let us take an
example country a B and C if suppose the
country a is giving some special
consideration to be say for example
country a imposes zero percentage of
import duty from country B so country a
has given a special treatment for
country B according to the most favored
nation principle if country a is giving
some special treatment to another
country
say for example country B country a has
to give the special treatment to all
other member countries so here the
country a has to give the zero
percentage import duty reference to all
other member countries so this is the
most favored nation principle of the WTO
so according to the most favored nation
principle of the World Trade
Organization if a member country gives
some special or preferential treatment
to some other country it has to be given
to all other member
it cannot discriminate another country
in terms of trade or in relation to
trade MFN is a very important principle
of the World Trade Organization and you
must know what does the MFN there are
certain exceptions to this most favored
nation principle let us see what are the
exceptions to this most favored nation
principle of the World Trade
Organization exceptions there are three
exceptions let us see one by one the
first exception is that when a country
goes for a preferential trade agreement
with another country or with a group of
countries so first one is preferential
trade agreement a country can have a
preferential trade agreement between
another country or with a grouping of
countries for example India can have a
preferential trade agreement with
Singapore it can also have a
preferential trade agreement with a
grouping of countries for example Sark
so the country can have a preferential
trade agreement with another country or
with the group of countries in that case
most favored nation will become an
exception for those countries under the
preferential trade agreement a country
gives preference to another country in
terms of trade so for example let us see
example Sri Lanka and India have signed
preferential trade agreement it means
that India can give better treatment to
Sri Lanka and this will not come under
the most favored nation principle
another example a grouping of countries
Sark if India has a preferential trade
agreement with Sark India can give a
preference to Sark countries in
relationship trade and this also will
not come under the most favored nation
principle what is this logic behind the
preferential trade agreement the
preferential trade agreement aims to
give preference to a country or to a
group of countries and by giving this
preference it ensures easy access to the
markets of the
country's so easy access here you must
understand that this is not a violation
of the most favored nation principle but
it is a exception to the most favored
nation principle so this is the first
exception to the most favored nation
principle the second exception is for
the developing and least developed
countries for the developing countries
special market axis is given in order to
boost their development and for least
developed countries least developed
countries are the LDCs
duty-free and Kota free map market
access is given duty-free and Kota free
Kota free market axis is given this is
the second exception to the most favored
nation principle of the World Trade
Organization the third exception to the
most favored nation principle of the
World Trade Organization is that in
special circumstances if a country feels
that the imported items are unfairly
traded items this term unfairly traded
items is very very important unfairly
traded items example China China
provides export subsidies to its
manufacturers so export subsidies
provided to its manufacturers and then
providing the export subsidies to the
manufacturers the Chinese manufacturers
can produce their products at a lower
price that means the government is
supporting the manufacturers to produce
or to increase the production so in that
case the manufacturers can produce their
commodity setter cheaper rate and they
can sell it at a cheaper rate as well so
as a result what will happen these
Chinese products will enter other
markets at a cheaper price and if
suppose Chinese products enter Indian
market at a cheaper rate what will
happen it will badly affect the domestic
producers in our economy so this kind of
bringing cheaper commodities in dilemma
is known as dumping the term dumping the
term dumping is often seen in the news
with regards with regard to this so this
is known as dumping as a result these
Chinese products enter Indian market at
lesser price that means the price of
those commodities will be lesser than
the actual price so lesser than actual
price price lesser than actual price
this is an example of unfair trade why
because the Chinese government is
providing manufacturers or the exporters
export subsidy and that is the reason
the manufacturers are able to sell their
commodities at cheaper rates so this is
an example of unfair trade in such
circumstances a particular country can
take an exception from the most favored
nation status and while taking this
exception from the most favored nations
principle the country can charge extra
import duty so this is an example for
unfair trade practices and this is the
third exception to the most favored
nation principle of the World Trade
Organization so the most favored nation
principle and it's three exceptions are
very very important you must know what
are the exceptions to the most favored
nation principle of the WTO now coming
to the issue between India and Pakistan
regarding the most favored nation we
know that India has given Pakistan most
favored nation status but Pakistan
instead has not given India a most
favored nation status this is a clear
violation of the most favored nation
principle of the World Trade
Organization so India has given MFN to
Pakistan but Pakistan has not given MFN
to India since this is a violation of
the most favored nation principle of the
World Trade Organization India can
definitely take this matter to the World
Trade Organization and there is no doubt
that India will win the case in this
case but why is India not taking this
problem to the World Trade Organization
there are two basic reasons the first
reason is that Pakistan is not a
good trade partner of India so even if
we get the most favored nation status
from Pakistan it is not going to
positively affect our trade and the
second reason is due to the political
pressures so these are the two reasons
you must have an idea of what is the
issue between India and Pakistan
relating them to the most favored nation
principle next important principle of
the World Trade Organization is the
national treatment principle national
treatment principle we know there are
two types of goods - domestic Goods
second - foreign goods so in an open
economy there will be both domestic
Goods and foreign goods foreign goods
and services domestic goods and services
according to the National treatment
principle this principle says that both
the foreign goods and services and
national goods and services or the
domestic goods and services must be
treated equally here you must note that
it includes not only goods but also
services so goods and services both are
included in the national treatment
principle of the World Trade
Organization another important feature
you must notice that the National
treatment principle will start
functioning only when a particular good
or service reaches the market so it
means that before reaching the market
the country can treat the foreign goods
differently so before reaching the
market the country can treat the foreign
goods differently for example India
imports goods from us so example India
India imports goods from us so only when
the US goods reaches the Indian market
it should treat it equally so only when
the US goods reach the Indian market it
should be given equal treatment till the
point it reaches the Indian market it
can be treated differently a very good
example of this
the import duties import duties
important these are imposed before a
good or a commodity reaches the Indian
market so this is an example for this so
the National treatment principle applies
or starts functioning only when a
particular commodity reaches the market
of the country so before that it is not
necessary that equal treatment must be
given an important current affair
related to this national treatment
principle was related to the India us
debate or India us dispute with regard
to the solar cell panels so let us
discuss what was it National Solar
Mission is one of the flagship programs
of the Indian government as we all know
so National Solar Mission according to
this mission we are targeting a
particular amount of renewable energy to
be produced within a particular time
period and under this mission the
government had decided that the solar
cell panels will be procured
domestically in order to support the
domestic manufacturers and in order to
give a boost to the making India program
of the government so the government had
decided that it will procure the solar
cells domestically but what is the
problem here India is an open economy in
there is a member of the WTO so foreign
goods are also available in the Indian
market since India is an open economy
large number of foreign solar cells are
available in the market so foreign sales
are available in the Indian market but
our policy was to procure this solar
cells from the domestic producers to
boost the make in India program and to
help the domestic producers so what
happened was the u.s. said that this is
against the principle of national
treatment u.s. approached the World
Trade Organization saying that India
violated the National treatment
principle and India had lost the case so
India lost the case in the volt rate
organ
dispute settlement body here you must
understand that national treatment
principle is one of the important
principles of the World Trade
Organization next let us see what is
God's general agreement on trade in
services G a TS guards the guard general
agreement on the tariffs and trade which
was the predecessor of the WTO did not
include services so God did not include
services before moving on to the topic
you should understand what is meant by
nama na ma namah namah in terms of WTO
means non agricultural market access
known agricultural means industrial
goods so here
non agricultural means industrial goods
and market access means zero import duty
or lower import duty so when can we say
that country a has market access in the
country be it can be said when country B
in verses zero or lower import duty from
country with lower or zero import duty
the country a can easily access the
market of the country B so it is known
as market access so according to WTO
nama means non agricultural market
access it means that market access for
industrial goods coming back to our
topic that is guards general agreement
on trade in services one thing you must
understand here is that the WTO the
World Trade Organization has given much
flexibility to its member countries in
the implementation of guts so much
flexibility is given by the World Trade
Organization flexibility to its member
countries regarding the implementation
of the guts and for that reason many of
the member countries has not implemented
guards and it's true spirit as we said
guards is related to services or trade
in services so guards is related to
trade in services what does this mean
for India in case
of India we know that at present the
majority of the GDP of our country comes
from services so the GDP contribution of
services sector is very very important
for a country like India and for that
reason guards would be an important
agreement for country for a country like
India even though India has joined the
dots it is not able to benefit much from
the guts why because as we said many of
the member countries has not implemented
guards in its true spirit because w2
itself is giving so much of flexibility
in implementing guards so India's has so
India has not benefited much from
joining the guards guards are the
general agreement on trade in services
divides divides services into four
categories and this categories are known
as mode 1 mode 2 mode 3 and mode 4 let
us see what are these four modes the
first mode deals with cross-border
supply cross-border supply example of
cross borders a place the BPO centers or
the call centers in India the call
centers in India giving services to the
customers in US or any other country so
this is an example of the cross border
supply example BPO
the second mode or the mode 2 deals with
consumption abroad consumption abroad
for example education an Indian student
going to US or UK or Australia or Canada
for his higher education so this is an
example of more to that is consumption
abroad so education another example is
tourism the third one or the more three
is related to commercial presence
example of commercial presence is the
foreign direct investment example
foreign direct investment if a
multinational company setting up a
company in India this can be an example
of commercial presence the fourth one or
the mode
relates to movement of natural persons
movement of natural persons example of
mode for would be doctor sir engineers
from our country going to other
countries for job so example doctors for
a country like India with a huge
demographic dividend this mode for will
be of high interest so mod for us of
high interest for India so we have seen
how WTO or the guards has divided the
services into four modes mode 1 mode 2
mode 3 and mode full now let us see
which modes are important for India mode
1 which deals with cross-border supply
let us see mod 1 which deals with
cross-border supply so we said example
is BPO so for a developing country like
India cross-border supply is an
important issue so mod 1 is very
important for India which deals with
cross-border supplies more to
consumption abroad consumption abroad
example we have seen education so is
there a chance that Indian students will
go abroad or foreign students will come
to India there is more chance that
Indian students will go abroad so more -
is not a big priority for India it is a
priority for the developed countries so
developed countries more - is a priority
for the developed countries coming to
the mod 3 that this commercial presence
example we said foreign direct
investment a country like India expects
foreign direct investments in Indian
Territory not that Indian citizens will
go and then make investments abroad so
mod 3 is also not very important for
India it is important for developed
countries because their corporates or
their multinational companies will come
to developing countries like India for
investments in the form of foreign
direct investments coming to mode 4 that
is movement of natural persons movement
of
chiral persons we have discussed that it
includes Indian professionals going
abroad for job so this is a very very
important priority for India so this is
very very important priority actually
this is the most important priority for
India in the four modes and first
priority for India is movement of
natural persons and the second one would
be cross-border supply so these two are
the important priorities for India in
relation to the four modes which is
given by the guards general agreement on
trade in services now let us see more
for that is the movement of natural
persons in some detail because this is
also a current affair topic so mode for
that is movement of natural persons we
said that with the huge demographic
dividend our country has mod 4 is very
very important for our economy and this
is the most important priority for our
economy but recent years what has
happened let us see US government has
adopted a protectionism policy
especially under the leadership of Trump
so protectionism policy adopted by the
US government so the US government
introduced new types of visas and they
started sending back migrants back to
countries and then things like that and
this protectionism policy of the u.s. is
against the mode for what the smartphone
mode for of the guards deals with
movement of natural persons this is
against the mode for of the guards so
what the mode 4 deals with movement of
natural persons and according to the
mode for protectionism policies cannot
be adopted it is against the mode 4 but
the US government has adopted
protectionism policies what is the
remedy if a particular agreement is not
adopted to its true spirit the
particular country can approach the
World Trade Organization who has
implemented this particular agreement so
in case of God's general agreement on
trade in services
the Indian government can approach the
world trade organization against the
protectionism policy of the US
government but can it really go and
approach the World Trade Organization in
this scenario no it cannot why because
in the beginning of the discussion
itself we said that even though India
has agreed or signed the guard's India
is not getting much benefit out of the
guts why because many of the member
countries has not implemented this
guards in its true spirit and WTO is
also very flexible in this regard
because of this reason even if India
approaches the wall trade organization
it is not necessary that the country
would win so the reason is that many
member countries has not adopted or
accepted guards in its true spirit but
negotiations are going on in the World
Trade Organization for the proper
implementation of the guts
if guards is properly implemented India
will definitely benefit especially in
the more won and mode for as we have
discussed but in other regional
partnerships India is making its stand
very clear by saying that it needs its
own space and related to services
[Music]
[Applause]
[Music]