INTERNATIONAL TRADE LAW A STUDY ON THE WTO RULES ON FDI -with special focus on the Inian e!pe"ience
TE#ASWI $ALLI%EDDI &'(()&* +th SE$ESTER $AR,H*&'(
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Table of Contents
INTRODU,TION
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O0#E,T
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RESEAR,H 2UESTIONS
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(3 What a"e the FDI polices* the positi4e an ne.ati4e incenti4es "elate to it5 &3 The "elation 6etween FDI an ."owth in Inia3 )3 Facto"s which influence the flow of FDI3 HY%OTHESIS7
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%OSITI8E IN,ENTI8ES
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NE9ATI8E IN,ENTI8ES
1
RESEAR,H $ETHODOLO9Y
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LITERARY RE8IEW
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,HA%TER ( - WTO A."ee;ents
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,HA%TER & - I$%A,T OF WTO ON INDIA
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,HA%TER ) - ,RTI,ISI$
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,ON,LUSION
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0I0LIO9RA%HY
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INTRODUCTION
The Wo"l T"ae O".ani=ation is a li4in. an ."owin. o".anis;3 The functionin. of WTO affects the econo;ic life of all count"ies a"oun the .lo6e3 It is not conce"ne onl> with inte"national t"ae law-;eanin. e!po"ts an i;po"ts of .oos an se"4ices in the t"aitional sense-6ut with ?inte"national 6usiness@ in .ene"al* an that inclues fo"ei.n i"ect in4est;ent FDIB3 Fo"ei.n i"ect in4est;ent FDIB is a i"ect in4est;ent into p"ouction o" 6usiness in a count"> 6> an ini4iual o" co;pan> of anothe" count">* eithe" 6> 6u>in. a co;pan> in the ta".et count"> o" 6> e!panin. ope"ations of an e!istin. 6usiness in that count">3 The p"o4isions on FDI in the WTO f"a;ewo"C a"e containe in two a."ee;ents7 the 9ene"al A."ee;ent on T"ae in Se"4ices 9ATSB an the A."ee;ent on T"ae-Relate In4est;ent $easu"es TRI$sB in "elation to t"ae in .oos3 All fo";s of FDI co;e une" the u"isiction of WTO3 The pe"io f"o; (<+: to (<' ;a> 6e "efe""e to an e"a of se4e"e "est"iction3 The infa;ous Fo"ei.n E!chan.e Re.ulation Act FERAB ca;e into e!istence in (<:)3 Fo"ei.n euit> was "est"icte to ' pe"cent* in the sense that7 A3 If the oint 4entu"e was to 6e t"eate without isc"i;ination 4is-a-4is o;estic fi";s* the fo"ei.n euit> sha"e ;ust not e!cee this li;it3 03 The conition une" which the fo"ei.n euit> sha"e coul e!cee ' pe"cent we"e uite st"in.ent an the ecision as to whethe" such a 4entu"e woul 6e allowe e4en if it ;et all conitionsB was left to the isc"etion of the .o4e"n;ent3
%olicies we"e ease in the (<'s3 In the waCe of the oil p"ice shocCs it was p"o6a6l> "eali=e that the count"> neee to inc"ease its e!po"ts consie"a6l> an fo" 4a"ious "easons* o;estic fi"; alone woul not 6e up to the tasC FERA "est"ictions we"e "ela!e fo" ('' pe"cent e!po"t-o"iente units3 In (<+* the ta! "ate on "o>alt> pa>;ents was 6"ou.ht own f"o; ' pe"cent to )' pe"cent3 FDI "e.ulations continue to fall at a ."aual "ate th"ou.hout the (<'s3
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An FDI p"oposal "eui"es app"o4al3 The"e a"e two app"o4al 6oies7 the Rese"4e 0anC of Inia an the Sec"eta"iat fo" Inust"ial Assistance an Fo"ei.n In4est;ent %"o;otion 0oa"3 The R0I .i4es auto;atic app"o4al to p"oposals in hi.h-p"io"it> secto"s whe"e fo"ei.n euit> oes not e!cee 1( pe"cent an in the ;inin. secto" as lon. as it oes not e!cee 1' pe"cent3 SIAGFI%0 eals with othe" p"oposals* such as whe"e fo"ei.n euit> e!cee 1( pe"cent the inust"> is not on the list of hi.h-p"io"it> secto"s* o" fo"ei.n euit> oes not co4e" the i;po"t of capital .oos3 UnliCe the R0I* SIAGFI%0 can initiate an ca""> on etaile ne.otiations with fo"ei.n fi"ns3
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OBJECT:
The o6ect of ;> p"oect is to epict the 6eneficia"ies .aine 6> Inian ;a"Cets th"ou.h FDI3 The policies an st"ate.ies picCe up the pa"ent an the host count"ies will 6e iscusse 4i4il>3 The last chapte" of the p"oect eals with c"itici=in. the FDI "e.ulations3 RESEARCH QUESTIONS
(3 What a"e the FDI polices* the positi4e an ne.ati4e incenti4es "elate to it5 &3 The "elation 6etween FDI an ."owth in Inia3 )3 Facto"s which influence the flow of FDI3
HYPOTHESIS:
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%OSITI8E IN,ENTI8ES
NE9ATI8E IN,ENTI8ES
(3 9ua"antee a.ainst nationali=ation (3 Nationali=ation o" app"op"iation &3 Dou6le ta!ation
&3 Ta! holia>s
)3 Do;estic content "eui"e;ent in )3 Ta!
t"eaties
to
a4oi
ou6le
ta!ation 3 E!e;ptions on i;po"t uties on capital .oos an inte";eiate .oos
te";s of inte";eiates 3 Do;estic e;plo>;ent "est"iction 13 E!po"ts "eui"e;ents an fo"ei.n cu""enc> ea"nin. ta".ets +3 9ene"al
fo"ei.n
euit>
li;itsSecto"al fo"ei.n euit> li;its 13 Othe" e!e;ptions o" "ela!ation of "ules in p"io"it> Secto"s3 +3 Su6sii=e loans* "euce "ent fo" lan use accele"ate ep"eciation3
:3 Lan owne"ship "est"ictions 3 Di4ision of ;ana.e;ent within a oint 4entu"e <3 Rest"ictions on "e;ittance of p"ofits ('3 T"ansfe" of sha"es
:3 Special p"o;otion of e!po"ts* fo" e!a;ple th"ou.h e!po"t p"ocessin.
((3 Rest"ictions on liuiation of The co;pan>
=ones3
&3 De4elop;ent econo;ists state that effects of FDI a"e si.nificant on econo;ic ."owth3 The .ains f"o; FDI inflows a"e unuestiona6le 6ecause it cont"i6utes to econo;ic ."owth th"ou.h an inc"ease in p"oucti4it> 6> p"o4iin. new in4est;ent* 6ette" technolo.ies an ;ana.e"ial sCills to the host count"ies3 Howe4e"* the effect of FDI on o;estic in4est;ent is an issue of conce"n 6ecause the"e is a possi6ilit> of isplace;ent of o;estic capital ue to co;petition f"o; fo"ei.n in4esto"s with thei" supe"io" technolo.ies an sCills3 Thus* the ulti;ate i;pact of FDI on econo ;ic ."owth epens on the e."ee of capacit> of the host count"> to use FDI as efficientl> as possi6le3 Si;ila"l>* t"ae li6e"alisation ;a> facilitate econo;ic ."owth th"ou.h efficienc> in p"ouction 6> %a.e / +
utilisin. the a6unant facto"s of p"ouction ;o"e effecti4el> an a6so"6in. 6ette" technolo.ies f"o; a4ance count"ies3 Inian econo;> was also conce"ne with issues pe"tainin. to fo"ei.n p"i4ate capital inflows an t"ae li6e"alisation initiall>3 Howe4e"* it late" ;o4e to li6e"ali=e its t"ae an in4est;ent policies to inclue 4a"ious in4est;ent incenti4es* pa"ticula"l> fo" fo"ei.n in4esto"s3 Alon. with this it ha ;aintaine hi.h an stea> econo;ic ."owth* sin.le-i.it inflation "ate it has a ."owin. o;estic ;a"Cet* a la".e nu;6e" of sCille pe"sonnel an a ;o"e fa4ou"a6le in4est;ent ;a"Cet3 FDI inflows into Inia ha ."own si=a6l> u"in. the pe"io f"o; &''' to &'':3 The 4alue of FDI inflows has "ose f"o; )3< 6illions to US in &'' an touche the hi.hest le4el of &) 6illions of US in &'':3 The a4e"a.e 4alue of FDI inflows an annual ."owth in this pe"io wo"Cs out to <3 6illions of US an ::3(:J pe" >ea" "especti4el>3(
)3 The"e a"e nu;e"ous KpullK facto"s that can influence inflows of FDI3& ,u""ent econo;ic pe"fo";ance "ep"esents the cu""ent .o4e"n;ental "e.i;es a6ilit> to hanle the states econo;> as well as othe" societal facto"s3 In4esto"s will seeC out count"ies that ha4e ha "ecent enono;ic success* hopin. that the t"en will ca""> on in the lon.-"un3 In4esto"s will ha4e ;o"e confience in that nation that has one well in the past will aslo o well in the futu"e3 In aition to ;ac"oecono;ic sta6ilit>* the consistenc> of e!chan.e "ates is also i;po"tant3 The fo"ei.n in4est;ent of an $N, ;an> ti;es is use to supple;ent the fi"; in the host count">3 As a "esult consistent e!chan.e "ates a"e necessa"> fo" an $N, to "epat"iate f"actions of its FDI p"ofit to the ho;e count">3 Lastl>* the hu;an capital of a count"> is an i;po"tant facto" fo" an $N, when consie"in. to in4est3 When in4estin. fo" the lon. te"; in anothe" count">* an $N, will ;ost liCel> ha4e to utili=e the la6o" in the host count">3)
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Ro6e"t $3 Ste"n* Inia an the WTO* Wo"l 6anC %u6lication3 T"ae an In4est;ent7 f"o; 6ilate"al to ;ultilate"al t"eaties5 http7GGwww3wto3o".Gen.lishGthewtoMeG;inistMeG;in')MeG6"iefMeG6"ief':Me3ht; accesse on (st $a"ch &'(3 ) $ichael 9est"in* Alan Ru.;an* Rules fo" Fo"ei.n Di"ect In4est;ent at the WTO7 0uilin. on Re.ional T"ae A."ee;ents* http7GGlinC3sp"in.e"3co;Gchapte"G('3('':J&F'-):-&&+-1M1' accesse on (st $a"ch &'(3 &
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RESEARCH METHODOLOGY
I ha4e followe the oct"inal ;etho of "esea"ch3 The fi"st pa"t of ;> p"oect eals with the histo"> of flow of FDI an the efinitions3 The secon pa"t of ;> p"oect eals with info";ation a6out FDI policies taCen f"o; 4a"ious a"ticles3 Info";ation f"o; 6ooCs has also 6een taCen3 LITERARY REIE!
(3 The"e a"e 4a"ious t>pes of FDI7
Ho"i=ontal FDI a"ises when a fi"; uplicates its ho;e count">-6ase acti4ities at the sa;e 4alue chain sta.e in a host count"> th"ou.h FDI3
%latfo"; FDI Fo"ei.n i"ect in4est;ent f"o; a sou"ce count"> into a estination count"> fo" the pu"pose of e!po"tin. to a thi" count">3
8e"tical FDI taCes place when a fi"; th"ou.h FDI ;o4es upst"ea; o" ownst"ea; in iffe"ent 4alue chains i3e3* when fi";s pe"fo"; 4alue-ain. acti4ities sta.e 6> sta.e in a 4e"tical fashion in a host count">3
Despite the .lo6al ;eltown an its effect on the econo;>* Inias en.a.e;ent with the wo"l continue to wien an eepen3 Inia is one of the fastest ."owin. econo;ies a;on. the la".e econo;ies of the wo"l3 Acco"in. to the I$Fs Wo"l Econo;ic OutlooC* Ap"il &'((* Inia ha the hi.hest ."owth "ate of ('3J in &'('* followe 6> ,hina at ('3)J* while wo"l output ."ew at 1J3 Fo" &'((* the I$F has esti;ate Inias ."owth at 3&J* while .lo6al ."owth is p"oecte at 3J3P In te";s of pu"chasin. powe" pa"it> %%%B* the Inian econo;> is the fou"th la".est afte" the Unite States* ,hina an #apan3 Wo"l 0anC7 Wo"l De4elop;ent Inicato"s Data6ase Ap"il &'((3P Inias sha"e in wo"l 9D% %%%B has inc"ease f"o; 3)J in (<<( to 13)J in &''<3
Wo"l 0anC7 Wo"l De4elop;ent Inicato"s Data6ase ( $a"ch &'( %a.e /
&3 Non t"anspa"enc> can 6e a 6a""ie" to the inflow of FDI3 The"e a"e fi4e o"i.ins of it3 Fi"st* econo;ic polic> Q ;aCin. will 6e seen as non-t"anspa"ent if it is su6ect to co""uption an 6"i6e">3 The secon i;po"tant ele;ent of non-t"anspa"enc> a"ises in the a"ea of p"ope"t> "i.hts an thei" p"otection within a .i4en count">3 The lacC of cop> "i.ht p"otection* the e!istence of patent inf"in.e;ent an lacC of enfo"ce;ent of cont"acts a"e all e!a;ples of what constitutes poo" p"otection of p"ope"t> "i.hts3 The thi" an fou"th aspects of non-t"anspa"enc> "elate to the le4el of 6u"eauc"atic inefficienc> within the .o4e"n;ent an poo" enfo"ce;ent of the "ule of law3 These two facto"s can pose se4e"e 6a""ie"s to 6usiness3 If the ualit> of .o4e"n;ent se"4ice is unp"eicta6le* co;panies e!posu"e to aitional "isCs is inc"ease3 $o"eo4e"* thei" a6ilit> to co4e" a.ainst these "isC i;pee ue to the unp"eicta6le natu"e of .o4e"n;ent se"4ice3 OE,D (<<:6B* fo" e!a;ple* shows that 6u"eauc"atic inefficienc> an weaC "ule of law i;pee econo;ic acti4ities 6> i;posin. aitional costs on econo;ic a.ents3 Dela>s in licensin.* the ina6ilit> of the cou"ts to enfo"ce cont"acts an the cap"icious an a"6it"a"> enfo"ce;ent of "ules an "e.ulations all "euce econo;ic efficienc> an effecti4eness3 Finall>* the fifth o"i.in of non-t"anspa"ent econo;ic policies has a ."eat eal to o with the conuct of econo;ic policies pe" se3 Econo;ic policies a"e liCel> to 6e t"eate as non-t"anspa"ent if the> a"e su6ect to unp"eicta6le polic> "e4e"sals3 These polic> "e4e"sal a"e pa"ticula"l> a;a.in. in p"i4ati=ation eals an whene4e" fo"ei.n in4esto"s a"e in4ol4e3 ,onsie"* fo" e!a;ple* the case of p"i4ati=ation in count"> in which the .o4e"n;ent su;;a"il> cancels ecisions of the p"e4ious .o4e"n;ent to p"i4ati=e the count">s inust">3 The "eaction of fo"ei.n in4esto"s to the polic> "e4e"sal is liCel> to put the count"> conce"ne Koff-li;itsK fo" fo"ei.n in4esto"s31
CHAPTER " # !TO A$%ee&ents
The 9ene"al A."ee;ent on T"ae in Se"4ices 9ATSB is a t"eat> of the Wo"l T"ae O".ani=ation WTOB that ente"e into fo"ce in #anua"> (<<1 as a "esult of the U"u.ua> Roun ne.otiations3 The t"eat> was c"eate to e!ten the ;ultilate"al t"ain. s>ste; to 1
TaCen f"o; his speech at the &the Annual ,onfe"ence of the Inte"national O".ani=ation of Secu"ities ,o;;ission in Lis6on* on $a> &1* (<<<3 Also "epo"te in I$F Su"4e>* #une :* (<<<3 %a.e / <
se"4ice secto"* in the sa;e wa> the 9ene"al A."ee;ent on Ta"iffs an T"ae 9ATTB p"o4ies such a s>ste; fo" ;e"chanise t"ae3 While the o4e"all .oal of 9ATS is to "e;o4e 6a""ie"s to t"ae* ;e;6e"s a"e f"ee to choose which secto"s a"e to 6e p"o."essi4el> Kli6e"aliseK* i3e3 ;a"Cetise an p"i4atise* which ;oe of suppl> woul appl> to a pa"ticula" secto"* an to what e!tent li6e"alisation will occu" o4e" a .i4en pe"io of ti;e3 $e;6e"s co;;it;ents a"e .o4e"ne 6> a K"atchet effectK* ;eanin. that co;;it;ents a"e one-wa> an a"e not to 6e woun 6acC once ente"e into3 The "eason fo" this "ule is to c"eate a sta6le t"ain. cli;ate3 Howe4e"* A"ticle I oes allow $e;6e"s to with"aw co;;it;ents3 Fo" count"ies that liCe to att"act t"ae an in4est;ent* 9ATS as a ;easu"e of t"anspa"enc> an le.al p"eicta6ilit>3 Le.al o6stacles to se"4ices t"ae can ha4e le.iti;ate polic> "easons* 6ut can also 6e an effecti4e tool fo" la".e scale co""uption3
The A."ee;ent on T"ae Relate In4est;ent $easu"es TRI$sB a"e "ules that appl> to the o;estic "e.ulations a count"> applies to fo"ei.n in4esto"s* often as pa"t of an inust"ial polic>3 In the late (<'s* the"e was a si.nificant inc"ease in fo"ei.n i"ect in4est;ent th"ou.hout the wo"l3 Howe4e"* so;e of the count"ies "ecei4in. fo"ei.n in4est;ent i;pose nu;e"ous "est"ictions on that in4est;ent esi.ne to p"otect an foste" o;estic inust"ies* an to p"e4ent the outflow of fo"ei.n e!chan.e "ese"4es3 E!a;ples of these "est"ictions inclue local content "eui"e;ents which "eui"e that locall>-p"ouce .oos 6e pu"chase o" useB* ;anufactu"in. "eui"e;ents which "eui"e
the
o;estic ;anufactu"in.
of ce"tain
co;ponentsB* t"ae
6alancin.
"eui"e;ents* o;estic sales "eui"e;ents* technolo.> t"ansfe" "eui"e;ents* e!po"t pe"fo";ance "eui"e;ents which "eui"e the e!po"t of a specifie pe"centa.e of p"ouction 4olu;eB* local euit> "est"ictions* fo"ei.n e!chan.e "est"ictions* "e;ittance "est"ictions* licensin. "eui"e;ents* an e;plo>;ent "est"ictions3 These ;easu"es can also 6e use in connection with fiscal incenti4es as oppose to "eui"e;ent3 The"e a"e ei.ht t>pes of TRI$s7 (3 Local content "eui"e;ents &3 T"ae 6alancin. "eui"e;ents )3 Fo"ei.n e!chan.e "est"ictions
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3 E!po"t pe"fo";ance "eui"e;ents 13 Local p"ouction "eui"e;ents +3 $anato"> technolo.> t"ansfe"s :3 %"ouction ;anates 3 Li;its on fo"ei.n euit> an "e;ittances
CHAPTER ' # IMPACT O( !TO ON INDIA
Inc"ease in e!po"t ea"nin.s7 Inc"ease in e!po"t ea"nin.s can 6e 4iewe f"o; ."owth in ;e"chanise e!po"ts an ."owth in se"4ice e!po"ts7
9"owth in ;e"chanise e!po"ts7 The esta6lish;ent of the WTO has inc"ease the e!po"ts of e4elopin. count"ies 6ecause of "euction in ta"iff an non-ta"iff t"ae 6a""ie"s3 Inias ;e"chanise e!po"ts ha4e inc"ease f"o; )& 6illion us (<<1B to (1 6illion u &'''
A."icultu"al e!po"ts7 Reuction of t"ae 6a""ie"s an o;estic su6siies "aise the
p"ice of a."icultu"al p"oucts in inte"national ;a"Cet* Inia hopes to 6enefit f"o; this in the fo"; of hi.he" e!po"t ea"nin.s f"o; a."icultu"e
)3
Te!tiles an ,lothin.7 The phasin. out of the $FA will la".el> 6enefit the te!tiles
secto"3 It will help the e4elopin. count"ies liCe Inia to inc"ease the e!po"t of te!tiles an clothin.3
3
Fo"ei.n Di"ect In4est;ent7 As pe" the TRI$s a."ee;ent* "est"ictions on fo"ei.n
in4est;ent ha4e 6een with"awn 6> the ;e;6e" nations of the WTO3 This has 6enefite
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e4elopin. count"ies 6> wa> of fo"ei.n i"ect in4est;ent* eu"o euities an po"tfolio in4est;ent3 In &''-'<* the net fo"ei.n i"ect in4est;ent in Inia was )1 6illion us 3
13
$ulti-late"al "ules an iscipline7 It is e!pecte that fai" t"ae conitions will 6e
c"eate* ue to "ules an iscipline "elate to p"actices liCe anti-u;pin.* su6siies an counte"4ailin. ;easu"e* safe.ua"s an ispute settle;ents3 Such conitions will 6enefit Inia in its atte;pt to .lo6alise its econo;>3
CHAPTER ) # CRTICISIM
(3
TRI%s7 %"otection of intellectual p"ope"t> "i.hts has 6een one of the ;ao" conce"ns
of the WTO3 As a ;e;6e" of the WTO* Inia has to co;pl> with the TRI%s stana"s3 Howe4e"* the a."ee;ent on TRI%s .oes a.ainst the Inian patent act* (<:'* in the followin. wa>s7
%ha";aceutical secto"7 Une" the Inian %atent act* (<:'* onl> p"ocess patents a"e ."ante to che;icals* "u.s an ;eicines3 Thus* a co;pan> can le.all> ;anufactu"e once it ha the p"ouct patent3 So Inian pha";aceutical co;panies coul sell .oo ualit> p"oucts ;eicinesB at low p"ices3 Howe4e" une" TRI%s a."ee;ent* p"ouct patents will also 6e ."ante that will "aise the p"ices of ;eicines* thus Ceepin. the; out of "each of the poo" people* fo"tunatel>* ;ost of "u.s ;anufactu"e in Inia a"e off Q patents an so will 6e less affecte3 A."icultu"e7 Since the a."ee;ent on TRI%s e!tens to a."icultu"e as well* it will ha4e consie"a6le i;plications on Inian a."icultu"e3 The $N9* with thei" hu.e financial "esou"ces* ;a> also taCe o4e" see p"ouction an will e4entuall> cont"ol foo p"ouction3 Since a la".e ;ao"it> of Inian population epens on a."icultu"e fo" thei" i4elihoo* these e4elop;ents will ha4e se"ious conseuences3 $ic"o-o".anis;s7 Une" TRI%s A."ee;ent* patentin. has 6een e!tene to ;ic"oo".anis;s as well3 This ;ill la".el> 6enefit $N,s an not e4elopin. count"ies liCe Inia3
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TRI$s7 The A."ee;ent on TRI$s also fa4ou"s e4elope nations as the"e a"e no
"ules in the a."ee;ent to fo";ulate inte"national "ules fo" cont"ollin. 6usiness p"actices of fo"ei.n in4esto"s3 Also* co;pl>in. with the TRI$s a."ee;ent will cont"aict ou" o6ecti4e of self Q "eliant ."owth 6ase on locall> a4aila6le technolo.> an "esou"ces3
)3 9ATS7 The A."ee;ent on 9ATS will also fa4ou" the e4elope nations ;o"e3 Thus* the "apil> ."owin. se"4ice secto" in Inia will now ha4e to co;pete with .iant fo"ei.n fi";s3 $o"eo4e"* since fo"ei.n fi";s a"e allowe to "e;it thei" p"ofits* i4iens an "o>alties to thei" pa"ent co;pan>* it will cause fo"ei.n e!chan.e 6u"en fo" Inia3
3
TARIFF 0a""ie"s an NON-TARIFF 0a""ie"s7 Reuction of t"ae an non-ta"iff
6a""ie"s has a4e"sel> affecte the e!po"ts of 4a"ious e4elopin. nations3 8a"ious Inian p"oucts ha4e 6een hit 6>3 Non- ta"iff 6a""ie"s3 These inclue te!tiles* ;a"ine p"oucts* flo"icultu"e* pha";aceuticals* 6as;ati "ice* ca"pets* leathe" .oos etc3
13 LD, e!po"ts7 $an> ;e;6e" nations ha4e a."ee to p"o4ie ut> Q f"ce an uota Q f"ce ;a"Cet access to all p"oucts o"i.inatin. f"o; least e4elope count"ies3 Inia will ha4e to now 6ea" the a4e"se effect of co;petin. with cheap LD, e!po"ts inte"nationall>3 $o"eo4e"* LD, e!po"ts will also co;e to the Inian ;a"Cet an thus co;pete with o;esticall> p"ouce .oos3
CONCLUSION
Despite the ifficulties associate with the ;easu"e;ent of the efficienc>-enhancin. effects inuce 6> FDI* let alone with the assess;ent of the specific channels 6> which a t"ansfe" of technolo.> affects local p"oucti4it>* the e;pi"ical lite"atu"e offe"s so;e i;po"tant conclusions3 Fi"st* the"e appea"s to 6e a wie consensus that FDI is an i;po"tant* pe"haps e4en the ;ost i;po"tant* channel th"ou.h which a4ance technolo.> is t"ansfe""e to e4elopin. count"ies3 Secon* the"e also see;s to 6e a consensus that FDI leas to hi.he" p"oucti4it> in locall> owne fi";s* pa"ticula"l> in the ;anufactu"in.
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secto"3 Thi"* the"e is e4ience that the a;ount of technolo.> t"ansfe""e th"ou.h FDI is influence 6> 4a"ious host inust"> an host count"> cha"acte"istics3 $o"e co;petiti4e conitions* hi.he" le4els of local in4est;ent in fi!e capital an eucation* an less "est"icti4e conitions i;pose on affiliates appea" to inc"ease the e!tent of technolo.> t"ansfe"s3 the p"esent netwo"C of inte"national a."ee;ents in the in4est;ent a"ea p"o4ies little p"otection a.ainst isc"i;ination 4is--4is non-pa"ticipatin. count"ies3 9enuinel> ;ultilate"al "ules woul ena6le 6ilate"al an "e.ional initiati4es to 6e "afte an function within a f"a;ewo"C which p"otects the inte"ests of thi" pa"ties3 A "elate conce"n is that cu""ent wo"C on in4est;ent-"elate issues tens to focus ;o"e on those count"ies which a"e al"ea> "ecei4in. si.nificant inflows of fo"ei.n in4est;ent* to the ne.lect of those whose nees ;a> 6e ."eate"3 No" oes it alwa>s p"o4ie fo" the effecti4e pa"ticipation* in the fo";ulation of new "ules* of all those who ;a> 6e affecte 6> the;3 In the face of these ."owin. econo;ic* institutional an le.al inte"linCa.es 6etween t"ae an FDI* WTO ;e;6e"s a"e conf"onte with a 6asic polic> choice7 o the> continue to app"oach the FDI issue as the> ha4e until now* that is 6ilate"all>* "e.ionall> an plu"ilate"all>* an on an a hoc 6asis in secto"al an othe" specific WTO a."ee;ents o" o the> seeC to inte."ate such a""an.e;ents into a co;p"ehensi4e an .lo6al f"a;ewo"C that "eco.ni=es the close linCa.es 6etween t"ae an in4est;ent* assu"es the co;pati6ilit> of in4est;ent an t"ae "ules an* ;ost of all* taCes into account in a 6alance wa> the inte"ests of all the ;e;6e"s of the WTO - e4elope* e4elopin. an least-e4elope aliCe3 Onl> a ;ultilate"al ne.otiation in the WTO* when app"op"iate* can p"o4ie such a .lo6al an 6alance f"a;ewo"C3 Thei" ecision will ha4e an i;po"tant i;pact on the efficienc> with which sca"ce supplies of capital an technolo.> will 6e e;plo>e in the ne!t ecae an 6e>on3 It will also ha4e an i;pact on the st"en.th* cohe"ence an "ele4ance of effo"ts to inte."ate all e4elopin. count"ies into the ;ultilate"al t"ain. s>ste;3
0I0LIO9RA%HY 0ooCs "efe""e Ro6e"t $3 Se;* Inia an the WTO* Wo"l 6anC %u6lication3 We6sites http7GGwto3o".3
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http7GGlinC3sp"in.e"3co;G
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