In Cancun, according to director-general Supachai Panitchpakdi, "The objective is a bit more subtle and diverse. In the Doha Ministerial Declaration, ministers set for themselves, three tasks for the Fifth Ministerial Conference to take stock of progress in the negotiations, to provide any necessary political guidance, and take decisions as necessary."

The following is an analysis of the major subjects, which will come up for discussion at Cancun in which India has a substantial stake. They include:

Textiles

Pharmaceuticals

Agriculture

Information technology

1) Textiles
The Multi-Fibre Agreement (MFA) was set up in 1974 to set the rules for international trade in cotton, wool and synthetic fibre. The MFA was formulated to safeguard the developed countries' garment industries and to control the level of access of developing countries' garment exports.
According to the MFA textiles were divided into four broad categories. They are:

• Yarn and wool tops
  
• Fabrics
  
• Made-ups
  
• Clothing.

These categories were then divided into quota categories depending upon its nature and composition like cotton, knit, wool and polyester and sub-categories depending on whether they are shirts or trousers or lingerie. The US has 750 such quota categories and the EU has 219 quota categories. The importing country then apportions quotas, in number of items, in each quota category to the exporting country.

During the Uruguay rounds the participants decided to replace the MFA by the Agreement on Textiles and Clothing that would, in a time frame of ten years, phase out MFA by the end of 2004. From then on it will be known as the WTO's Agreement on Textiles and Clothing (ATC). According to the ATC the quota system should be fully dismantled by 31 December 2004 and replaced by free and multilateral trade from 1 January 2005. The advanced nations were supposed to phase out the system of apportioning quota on a gradual basis before the end of 2004. However, what has transpired is entirely another story.

As the story evolves, it can be observed that the phasing out of the MFA has been plagued by tardy implementation by the advanced countries, notably EU and US. They have been using anti-import tactics disguised as anti-dumping measures and rules of origin requirements against exports from developing countries. Another side of the quota story has been the fact that the EU has been using quotas as bait to lure countries away from drug trafficking and to encourage labour and environment standards. According to a report in the Economic Times dated 10 September 2003, "A WTO dispute settlement panel has given right to India's complaint challenging the European Union's use of conditional preferential access to its markets, given to competitive exports (on the basis of the EU's assessment) to benefit a country, and encourage it to take measures to combat drug production or trafficking or to encourage labour standards or environmental standards violates WTO / GATT rules."

India has strongly opposed linking of trade with issues of labour and environment. According to the above report, prior to the Doha meeting in 2001, the EU offered Pakistan preferential market access for its textiles on the grounds that it will control drug trafficking. This has been further corroborated by a report dated 15 May 2001 on the website of the Pakistani newspaper Dawn which reported thus, "The federal cabinet here on Wednesday approved a memorandum of understanding between Pakistan and the European community that enhanced by 15 per cent Islamabad's textile and clothing products quota from January 2001 to be further increased to 60 per cent by 2004."

The removal of the quota regime and integration with the WTO was to be achieved in four stages. As already stated the US has 750 quotas and EU has 219 quotas. These quotas are actually textile categories, which are to be completely integrated into a free and competitive trading system as envisaged by the WTO from 1 January 2005. The first stage involved integration of 16 per cent of quotas as envisage by the WTO beginning 1 January 1995. In the second stage beginning from 1 January 1998 integration of a further 17 per cent was required, and in the third stage from 1 January 2002 yet another 18 per cent of imports were to be integrated as envisaged by the WTO, thus adding up to 51 per cent. The balance 49 per cent was to be integrated on or before 31 December 2004. However, in the case of the EU that it has been reticent in implementing quota integration would be obvious from the facts presented below.

In the first stage no quota was integrated as against the required 16 per cent. In the second stage, only 14 quotas (or 6 per cent) were integrated as against the required 17 per cent. In the third stage, another 38 quotas (or 18 per cent) were integrated as envisaged by WTO. This adds up to only 24 per cent as against the planned 51 per cent. That leaves the EU with 167 quotas (or 76 per cent) to be integrated on or before 31 December 2004.

Says a textile consultant based in Mumbai, "Right now the importing country gives an exporting country a quota to export a certain number of items of a particular type of textile [Indian mainstays are: cotton, knit-shirts, woven trousers, bed-linen, etc]. The commerce ministry divides this quota among exporters on the basis of their past export performance and on a first-come-first-serve basis. This is according to the terms of the multi-fibre agreement or the MFA. This whole system of allocating quotas will be phased out by 31 December 2004. Thereafter, market forces will prevail and the factors that will clinch export orders will be market forces like price, quality and delivery."

As can be seen from the above table, India's exports based on value to all countries have declined in 2001-2002 as compared to 2000-2001. What is discouraging from India's viewpoint is that none of the quotas that have been integrated according to WTO's requirements are items of export from India such as cotton yarn, woven cotton fabrics, knit-shirts, woven trousers and bed linen. Says the textile consultant, "India has not received any major benefit from quota integration." In other words, the EU has sidelined India from its quota integration by not choosing its products for integration. The reason, according to informed sources, is that India has not been receptive to linking of quota integration with extraneous factors like labour and environmental standards. Pakistan has benefited substantially by promising to curb drug trafficking and has been amply rewarded. Therefore, India hasn't benefited substantially from the lifting of tariffs on textiles, a major item of Indian exports.

2) Pharmaceuticals
In 1997 India filed an appeal with the WTO against the findings of a report of a WTO panel that severely indicted India for violation of the provisions of the Trade Related Intellectual Property Rights (TRIPS) agreement. The panel report was in response to a US complaint against India over what it called the absence of a proper system for registering patent applications for pharmaceutical and agricultural chemical products in India under TRIPS.

The basis of the US complaint was that under the WTO agreement, implemented on 1 January 1995, India had to establish a mailbox system to register pharmaceutical and agricultural chemical product patents effective from that date. This mailbox was intended to keep a record of patent applications received from 1 January 1995, on the basis of which patent protection can be granted when the patent regime become fully applicable in 2005. The US grouse was that India's mailbox system did not, "adequately preserve novelty and priority in respect of applications for product patents in respect of pharmaceutical and agricultural chemical inventions". "Novelty" and "priority" are important aspects of TRIPS because a company could lose its right to a patent if another company has filed an application for a similar patent before it did.

Rejecting India's appeal, the appellate body upheld the panel's original conclusion that India has not complied with its obligations under WTO. Further it instructed India thus: "The Appellate Body recommends that the dispute settlement body request India to bring its legal regime for patent protection of pharmaceutical and agricultural chemical products into conformity with India's obligations under Articles 70.8 and 70.9 of the TRIPS Agreement".

After this, the Indian Patents Act, 1970, was first amended in April 1999. This amendment provided for a mailbox that would comply with the requirements of the TRIPS agreement. In May 2002 the law was amended for a second time to make it compatible with the TRIPS agreement. The amended legislation provides for changes in the scope of patentable inventions, grant of new rights, extension of the term of patent protection and conditions for "compulsory licenses".

Traditionally, there has been many exemptions in the copyright law that can be claimed as exception to the rule. In many cases, limitations are drafted as outright exceptions to the copyright owner's exclusive rights. These exceptions to the rule can be applied to TRIPS also. Sometimes, in an emergency, exceptions take on the form of statutory or "compulsory licence" schemes. In such cases of "compulsory licences" the exclusive right to a product, is replaced by a right to sharing of remuneration by the right holder and the entity that takes advantage of the right.

What are "compulsory licences" in the realm of pharmaceuticals? Avers Ranjit Shahani, vice-chairman and managing director, Novartis India, "'Compulsory licences' are sought to be invoked by developing countries under WTO when there is a national health emergency." In short, a country when faced by a health emergency like HIV/AIDS and the recent SARS outbreak can invoke the "compulsory licence" rule to override patent rules in that country and import cheaper generic drugs (drugs of the same composition and with the same therapeutic effect after treatment) from low-cost producers like India and Brazil.

The latest development in pharmaceutical patents as of 29 August 2003 is that the issue of "compulsory licences" has been resolved by the WTO in favour of developing and least developed countries. This means poor countries with no drug manufacturing facilities of their own can over-ride patent rules and order generic drugs from countries like India, which is a major producer of generic drugs. However, this is applicable only when the poor country is facing health emergencies like HIV/AIDS and situations like the recent SARS outbreak.

This concession can be seen as a major victory for India and developing countries as they have been negotiating for it since the meeting in Doha, in 2001. However, the developed countries have expressed their apprehension that these generic drugs will subsequently be smuggled into their countries. Therefore these generic drugs will be packaged in distinctive packaging and will be assigned colour codes to easily differentiate them from patented drugs.

The third amendment to the patent law is expected shortly and there are a host of issues waiting to be resolved like the maintaining of data exclusivity, which advanced nations claim is not being adhered by India. Says Ranjit Shahani, "Article 39.3 of Trade Related Intellectual Property Rights states that data exclusivity should be maintained when data is submitted to the government for approval of drug patents. This is an important aspect of our demand as we find that very often when we submit data to the government, data exclusivity is not maintained. Hopefully, the third amendment to the patent bill will cover this aspect."

3) Agriculture
There is unanimity in the WTO that agricultural subsidies, support prices and exports incentives given by all members to their farmers should be reduced. This is because advanced countries like the US have only about 3 million affluent farmers while a developing country like India has 650 million, mostly subsistent farmers. The 3 million farmers of the US, using advanced technology, can produce enough to feed the entire country and produce enough surplus for export. To keep these food-producers happy and productive the government gives them subsidies in the form of support prices and export subsidies and incentives.

These subsidies ensure that agricultural products are cheap and abundantly available and that there is no starvation. However, this has created imbalances when these products find their way to the developing countries. These subsidies and cheap products when they land in a developing country is economical and of a better variety. The end result is that the developing countries' agricultural products instead of finding a market in developed countries do not even find buyers in their own traditional markets.

A study by International Food Policy Research Institute has estimated that India's loss due to agricultural policies of developed countries amounts to about US$1.1billion. Says Jairam Ramesh, "We must take a fresh look at agricultural subsidies even though the WTO is not coercing us to do so. Agriculture is being deprived of public investment as most of government's finance goes into subsidies." But will the India farm lobby be open to this suggestion? Adds Ramesh, "Despite the fact that there is no pressure from the WTO, we have to examine whether the Rs 28,000 crores we spend on food security is achieving its goal." In fact, modernisation and infusing new capital into the agricultural sector can bring about the much needed revival of the farm sector in developing countries.

Says Arun Jaitley in an article published in a leading financial daily, "We visualise ourselves as an economy, which is gradually becoming self-sufficient in agriculture…. Last year, we were able to export our largest amount ever in terms of agriculture and that was a little more than $4billion." He adds, "A large part of the negotiating space at Cancun is going to be [taken by] the agreement on agriculture. We [would] repeatedly emphasise the number of people in India who depend on agriculture for a livelihood - 650 million or 65 per cent of our population." Apparently what is needed is negotiating for reduction in subsidies and support in advanced countries so that Indian agricultural exports can find a market there, while at the same time reducing subsidies at home.

It must be noted that the major Indian subsidies are on agricultural inputs like fertilisers, power and credit while developed countries give support to the price of the finished product as well as give incentives for export. Therefore while the subsidies to Indian farmers are not easily quantifiable that to farmers in developed countries is easily quantifiable. The Indian government is gradually lowering subsidies in fertilisers and other agricultural inputs. Though it used to provided price subsidy for fertilisers earlier, it has now decontrolled both phosphatic and potassic fertilisers and retained subsidy only for nitrogenous fertilisers. Only nitrogenous fertilisers remain under price control. Because of the gradual removal of such subsidies, of late, there has been an influx of agricultural products from abroad into India. Fruits from advanced countries are available in Mumbai at prices comparable to those from the state of Himachal Pradesh. At the same time Indian agricultural products haven't found a substantial market in advanced countries - though it deserves to - because of high tariff barriers.

Recently the World Bank released a report, "Global Economic Prospects," pointing out that about 70 per cent of the world's poor live in rural areas and make their living from agriculture, which is, in turn, the most misunderstood sector of world trade. Poor farmers from developing countries who want to export their products abroad face levels of trade protection two to three times higher than those faced by rich-country farmers. "Said differently," the report concludes, "subsidies make the relatively rich even richer and the poor even poorer."

Another area that needs attention is that of genetically modified organisms. As a result of sustained public pressure after Trade Related Intellectual Property Rights (TRIPS) came into force in 1995, many third world countries made recommendations for changes in TRIPS to prevent biological piracy. India in its discussion paper submitted to the TRIPS council stated, "Patenting of life forms may have at least two dimensions. Firstly, there is the ethical question of the extent of private ownership that could be extended to life forms. The second dimension relates to the use of IPR (intellectual property right) concept as understood in the industrialised world and its appropriateness in the face of the larger dimension of rights on knowledge, their ownership, use, transfer and dissemination."

However India had to retract from this stance. In its second amendment to the patent act in 2002 it made a provision that modification of a plant or seed can now be counted as an invention and can hence be patented. This has affected the agricultural sector a great deal as can be seen from the Bt cotton issue. In the early eighties, scientists with an American multinational discovered a way to introduce the Bacillus thuringiensis (Bt) gene in cottonseed. The cotton plant thus generated produced toxins internally to kill bollworms, which were a major destroyer of cotton crop.

In 2001, an American multinational was successful in getting a clearance for commercial planting of Bt cotton in India through the Genetic Engineering Approval Committee (GEAC), which falls under the jurisdiction of the Indian environment ministry. Around that time, the multinational used the same GEAC to order the burning and destruction of 11,000 hectares of cotton planted in Gujarat planted with the Navbharat 151 variety of cotton seed, which was found to have the Bt cotton gene.

However, such a conflagration never took place. The unexpected upside of this issue is that illegal seeds obtained from the harvest of Navbharat seeds have flooded the market around Gujarat at one-tenth or one-half the legal prices of Bt cotton seeds. The GEAC had endorsed the burning of the standing cotton crop on the ground of its potential to "cause an irreversible change in the environment structure of the soil," danger to "environment and human health and to obviate any possibility of cross-pollination".

Recently, the GEAC postponed the approval for commercial cultivation of genetically modified mustard in India. This is in the wake of the controversy generated by the Bt-cotton issue. The genetically modified mustard is the first consumer-oriented biotechnology product to enter India. Soon there may be others. Ricetec, a company in the US, tried to patent Basmatic rice. Another patentable rice product "Golden Rice" is under development. In the aftermath of the Bt cotton issue India needs to consider whether it can afford to allow patenting of life forms like seeds and grains, which would have a major impact on farmers in its villages.

4) Information technology
What can India achieve at the WTO in the information technology and the fast-growing business process outsourcing fields? After all, this is a key area in which it has proven skill and expertise. Admittedly, the advanced nations need our code-writing skills. India has the analytical and technical skills, the patience and perseverance, and the aptitude required to execute complex software projects. The Chinese, Malays and Filipinos are nowhere near it in English language skills. But they are making fast progress and could catch up if India doesn't put some distance between itself and its Oriental neighbours.

In the Singapore ministerial meeting in 1996 the Information Technology Agreement (ITA) was drafted. Only 29 countries signed it at that time. Later, India agreed to the terms of the ITA and notified its acceptance of the agreement. The information technology agreement (ITA) is solely a tariff cutting mechanism. While the declaration provides for the review of non-tariff barriers, there are no binding commitments about it. There are three basic principles that members must abide by to become an ITA participant:

• All IT products listed in the declaration must be covered
  
• All IT products must be reduced to a zero tariff level, and
  
• All other duties and charges must be bound at zero.

There are no exceptions to product coverage, however for sensitive items, it is possible to have an extended implementation period. The commitments undertaken under the ITA in the WTO are on a most favoured nation basis, and therefore benefits accrue to all other WTO Members.

The declaration on electronic commerce from the second ministerial conference also stated that WTO members will continue their practice of not imposing customs duties on electronic transmissions. The Doha Declaration states that members will continue this practice until the fifth ministerial conference, that is, the present Cancun conference.

Incidentally, software industry experts feel that of late India has been losing its information technology advantages because of protectionist sentiment and visa restrictions in developed nations. They also feel that India can negotiate bilateral agreements with both the US and EU for preferential treatment for its software developers.

Overall, India needs to build up considerable expertise in dealing with the WTO issues. Avers Jairam Ramesh, "WTO is as much about trade law as it is about trade in general. We have not yet built up considerable expertise in WTO-related issues. Domestic legislation should also be enacted that would take full advantage of the WTO. The Chinese are using the WTO to spearhead fundamental internal reforms." He adds, "Greater exports from India are not the result of external blocks but are triggered by our own internal policies, be it in agriculture, textiles or manufacturing. China's exports grew six times but so also did its imports. This is important because India still adheres to the obsolete rule that fair trade means more exports and little or no imports."

That probably summarises the situation neatly.