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WTO: Services, the key for India

M. M. Goel

Uncle Dunkel American Star,

Don't We Know What You Are;

Just a trap to squeeze us dry,

Patent our genes and leave us to die.

THIS POEM perhaps best describes the fear psychosis in India on the World Trade Organisation's implications for the economy. This is despite the fact the WTO's objectives include increasing standard of living, multistage effective demand and full employm ent, expansion of production, trade of goods, and so on.

The above quoted lines also allude to Trade Related Intellectual Property Rights (TRIPs) with far-reaching implications. What do all these `rights' and `governing bodies' mean for India? Does the economy stand to benefit from the them? Perhaps no. Exclus ive marketing rights (EMRs) have been granted to an international company to market products in the Indian pharmaceutical market; the Patents (Amendment) Act grants exclusive marketing rights (EMRs) for five years -- a prelude to put in place an updated product patent regime in India, in line with the WTO requirements envisaging product patents from 2005.

In such a situation, the smaller Indian pharma companies will find it difficult to survive and compete as the cost of developing a new drug is around Rs 100 crore. The EMR route has other adverse implications, such as monopoly for five years to the produ ct covered by the product patent application made under Article 70.8.

This exclusivity of rights has two serious implications: First, India would have to give a patent that has long-term significance. By acceding to the demand granting EMR, or a patent-like monopoly in the market, on the basis of a patent granted in any ot her WTO member-country, India would have de facto surrendered even the little space it has in terms of exercising the sovereign right to apply its standards on examination of the patent application and applying the patentability criteria (EPW December 19 , 1998).

Truly, EMRs will affect the interests of Rs 12,000-crore Indian medicine industry, and the economy as a whole. The writing on the wall is clear: The WTO is not providing a level-playing field. So India has to act now.

In the light of the gloomy state described by the Economic Survey 2000-01, the economy is in the grip of industrial pessimism caused by the fear of competition (healthy as well as unhealthy) now with the removal of quantitative restrictions on the last b atch of 715 items. The complete opening up of imports under the WTO has caused severe contraction in fresh investments in several industries.

Manufacturing investments committed by the private sector have slumped by 48 per cent in the last three years. Investment in textiles is down by 50 per cent, cement by 35 per cent and chemicals by 40 per cent. Besides, the manufacturing sector is not inv esting in expansion or fresh projects because it knows India does not stand a chance against China after the latter joins the WTO. As it is, the Indian market is crowded with Chinese goods offered at half and three-fourth the price of Indian goods. It is believed that it could be the end of manufacturing, incrementally, in many sectors.

Thus, India will have to accept and fight the challenge posed by China. India should shift its focus from manufacturing to the service industry, where its competitive edge would be greater.

The Economic Survey shows that employment generation in the public sector is either stagnant or falling after 1995. It is, however, not clear if the private sector is emerging as a major employment provider. According to a recent NCAER study, the growth rates in the 1990s were the same as in the 1980s; as such, there has been little improvement in productivity. Thus, on the whole, there has not been any substantial growth in employment generation in the private sector too. It is feared that the situatio n will worsen when investments in the manufacturing sectors shrink as imports open up further.

The World Bank has raised serious doubts about India's New Economic Policy -- has it reduced poverty? The claim of National Sample Survey Organisation in its 55th round reveals the poverty ratio declined to 26.1 per cent in 1999-2000. However, if we acce pt the international definition of poverty, that is, $2 per person per day, the number of people below the poverty line might have increased in India.

India would do well to consider the trade in services through movement of service providers. According to the WTO's General Agreement on Trade in Services (GATS), two obligations -- the `most favoured nation' treatment and `transparency' -- apply to the entire universe of services. The other two commitments -- `national treatment' and `market access' apply only to services, that are opened according to specific negotiated commitments. It is noteworthy that the agreement places on equal footing all four modes of delivery of service, including `commercial presence' and movement of `natural persons'. The Agreement also contains specific provisions for increasing the participation of developing countries in service trade, including the ``liberalisation of market access in sectors and modes of supply of export interest to them''.

We should explore the possibilities of exporting services of our manpower which might solve India's economic problems, including poverty and unemployment. We need to perceive globalisation as ``internationalisation of indianisation.

Indians are poor in India only. Whenever and wherever they have got the opportunity, Indians have proved better than any body else. The brain drain need not to be perceived as a problem but as an opportunity to get rid of the problems of unemployment and poverty. It is worth considering that under GAT's commitments, there is provision of movement of `natural persons' as a mode of delivery. The beneficial effects of the expansion of the service sector will go beyond our expectations, (especially in the l ight of minimal support from the WTO) and will help India face the countless challenges before it -- especially China.

(The author is Senior Reader in Economics, Kurukshetra University, Kurukshetra.)