Essay on the Impact of Various WTO Agreements on Various Industries

(i) Toys and Games Industry:

The global toys and games market includes conventional toys and video games which together amount to over US$70 to 80billion. China is the top exporter with a share of almost two-thirds of the world market for toys.

The toy industry has immense export potential as there is a huge demand for a variety of toys, particularly soft toys, in developed country markets (with the average annual expenditure on toys and games per child ranging from US$100 in Europe to US$329 in North America).

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

India’s toy exports are mainly to neighbouring developing countries and have fallen from Rs. 38.12 crore in 1997-98 to Rs. 33.94 crore in 1999-2000 (Min. of Com­merce, Gol). Imports of toys and games into India have risen nearly two and a half times during the same period – from Rs. 47.86 crore to Rs. 123.90 crore. The expenditure on toys in the domestic market works out to US$3.47 per consumer.

In India, the industry was earlier reserved for the small scale sector. This has changed with de-reservation of the sector since June 2001, though this policy excludes electronic, mechanical and plastic toys.

At present, there are a little over 4000 units in this sector (located predominantly in and around Delhi and Mumbai) three-fourths of which are in the tiny sector. Some large scale units with foreign collaboration have also been set-up with the stipulated 50 per cent export obligation.

The main problems faced by the domestic toy industry are: high cost of production (20 to 40 per cent higher than in other competing countries); quality of moulds/ dyes; slow down in technology up-gradation; low level of expenditure on design development and R and D (between 2 to 5 per cent of the turnover); inadequate marketing and brand promotion; high cost of road transport and power.

Non­refundable duties paid on imported raw materials, contribute to the finished product being 40per cent higher and such high costs have reduced the competitiveness of the toy industry in domestic and global markets. Illegal imports have added to the problems of the toy industry.

The effect of some of the WTO Agreements will be positive on the small-scale industries in this sector as they offer protection to domestic industry from the threat of increased imports.

The Agreement on Anti-Dumping Measures, the Agreement on Subsidies and Countervailing Measures and the Agreement on Safeguard Measures. The Agreement on Textiles and Clothing is also expected to have a favourable impact on the toy industry through a fall in the prices of imported raw material such as soft fur/plush as a result of freer trade – the toy industry imports almost 70 to 80 per cent of this raw material at present.

A suggested Action Plan for the toy industry in the context of WTO includes the following recommendations:

a. Reduction in the cost of production by at least 25 per cent across the industry

b. Focus on mass production

c. Development of original designs and varieties of toys and games

d. Attract global toy manufacturing base to India, as done by China

(ii) Leather and Leather Products Industry:

The global leather market has been stagnant in recent years due to high prices of leather goods, emergence of substitutes and increasing consumer consciousness with regard to environmental and ethical issues involved in leather production. The world tanning industry has been re-located from developed countries to developing countries like Brazil and India.

India accounts for about 6 per cent of world leather production and about 2.3 per cent of world trade in leather and leather products, though this industry-group ranks sixth in terms of India’s commodity and merchandise exports. The major export markets for India’s leather and leather products are USA (19% share), Germany (16%), U.K. (14%) and Italy (12%).

The leather sector in India is highly fragmented with 2200 tanneries (of which, 2100 are tiny and small scale units) and over 8000 leather product manufacturing units. The industry was on the reserved list up to June, 2001.

The share of small and tiny sector units in the leather footwear industry is around 55 per cent, with the household segment accounting for nearly one-third of production. Large-scale units cater mainly to the export market.

Some of the major problems facing the tanning industry are: effluent treatment; high operational and maintenance costs; manual operation or basic machines in use for various stages of production; lack of modernization; irregular supply of raw hides and skins; and poor process control.

There is a likelihood of better export opportunities for raw hides and skins in global markets under a WTO regime. The export quota regime in India has been changed to a tariff-based regime with the export tariff on raw hides and skins and semi finished leather at 60 per cent and on tanned leather at 15 per cent.

However, improved quality and conformity with international standards for these exports are a priority. Environmental issues can become a technical barrier to trade and the adoption of cleaner technologies by domestic industry will necessitate increased finance availability. Leather goods and garments and footwear may face increased imports from low-cost producers like China and Taiwan.

Overview of the Leather Industry

Products exported

Leather Footwear

Footwear Components (Shoe Uppers, Soles, etc.)

Leather Garments

Leather Goods (Including Harness and Saddler, Leather Gloves, etc.)

Finished Leather

Major Production Centres of Leather and Leather Products

Southern Region

Tamil Nadu – Chennai, Ambur, Ranipet Vaniyambadi,

Trichy and Dindigul

Andhra Pradesh – Hyderabad

Karnataka – Bangalore

Northern Region

Panjab, – Jallandhar

Delhi – Delhi

Eastern Region

West Bengal – Kolkata

Central Region

Uttar Pradesh – Kanpur and Agra

Western Region

Maharashtra – Mumbai

(iii) Drugs and Pharmaceutical Industry:

The global market for pharmaceuticals is placed at US$400billion and is projected to grow at an annual rate of 8 per cent over the next five years. India’s share in the world pharma market was less than 2 per cent in 2002. However, India ranks 5th in the world in production of drugs and pharmaceuticals with an 8 per cent share in terms of volume; and is ranked 17th in terms of export value of bulk drugs and finished formulations.

India’s pharmaceutical imports are mainly from China, Switzerland, USA, Germany, UK, France and Japan. North America, Europe and Japan account for 90 per cent of world consumption of pharmaceuticals. The Indian pharmaceutical industry has 8000 operational units of which 1000 units produce bulk drugs.

There are 250 large scale units, which constitute the core of the drug industry, and account for more than half the total drug production and exports. Nearly 75 per cent of the small units in drugs industry manufactured generic formulations and bulk drugs.

A few units also manufactured Ayurvedic medicines.With the WTO trade regime, the Agreement on Trade-Related Intellectual Property Rights (TRIPs) and the changes brought about in the patent regime are likely to have the most significant impact on the drugs and pharmaceuticals industry.

Current Amendments to Schedule M of the Drugs and Cosmetics Act (requiring all pharmaceutical manufacturing units in the country to have Good Manufacturing Practices) provides stringent rules for the quality of drugs being manufactured.

The Agreements on TBT and SPS are also important in terms of their impact on industries in this sector. The number of SSI units operating in the industry is expected to come down significantly after 2005. Those units that survive will have to either grow in size or go in for contract manufacturing for the larger companies, or move to the distribution segment of the industry.

Some of the problems facing the drugs and pharma industry are: high costs of production, operating at uneconomic capacities, constraints in technology up gradation, lack of in-house R and D facilities (only 20 per cent of SSIs had invested as much 5to7% of their turnover on R and D), lack of appropriate quality certification; lack of infrastructure such as testing laboratories, warehouses and linkages with ports.

In the context of WTO, the industry will face price competition from China, and, unless manufacturing standards are upgraded, SSIs will find it difficult to operate in the changed environment.

Suggested strategies for SSI include:

a. Focus on one strong item

b. Tie up with a large company

c. Technical assistance for product development, R and D, technology up gradation and absorption and effluent treatment.

(iv) Readymade Garments and Textile Industry:

World trade in textiles is expected to touch US$500billion a year by 2005. India’s j share in world textile trade is about 3 per cent at present, though India claims a larger share of 1 1 per cent in the world market for readymade garments.

China is the world’s leading textiles and garments exporter with a share of 1 3 per cent in I world trade. The unit realization value (UVR) of China’s exports is US$12.21 per piece compared to India’s UVR of $3.89 per piece.

The apparel industry in India contributes nearly 6 per cent of GDP and 18 per cent of India’s export earnings. The total size of the domestic market is of the order of Rs. 1000 billion.

The industry, with over 60,000 small and tiny sector units, was reserved for the small scale sector till 2001. Deregulation is expected to have a positive impact on the industry’s competitiveness in the export market as a result of expansion in capacity, technology up gradation and integration of all the processes.

The phasing out of the Multi-Fiber Arrangement (MFA) quotas on textiles and clothing! will mean unrestricted access for Indian textile exports in EU markets, but intense competition from China, Hong Kong, Taiwan, Korea, and other garment exporting countries is expected for the developed country markets.

In tune with WTO stipulations 1 as laid down in the Agreement on Textiles and Clothing (ATC), the existing import I duties will have to be reduced to the international level of 1 7 per cent, leading to! A steep rise in imports, especially from China, Sri Lanka and Bangladesh.

The main problems facing the industry are constraints in procurement of quality I fabrics and accessories, high cost of indigenous fabrics; seasonal variations in I export markets; lack of adequate infrastructure and lack of awareness of WTO and emerging competition among SSI garment manufacturers.

One of the suggested measures is for Government to provide WTO-compatible subsidies to small and medium units to enable them to improve R and D, acquire! Patents for designs and pursue anti-dumping cases against exporters.

(v) Gems and Jewellery Industry:

The total turnover of the jewellery industry in India is estimated at Rs. 45,000 crores World trade in gems and jewellery (which includes cut and polished diamonds and coloured gemstones) is estimated at US$1 3.8billion. Gemstone exports from India I account for about 3 per cent of total gems and jewellery exports.

The value chain of the industry consists of a number of intermediaries/processors at different locations. The main processing centres for diamonds are located in Mumbai, Surat, New York, Antwerp and Tel Aviv; and for gemstones in Thailand, India, Israel j and Johannesburg. India’s exports of processed diamonds were estimated at US$6.6 billion in 1 999; India and Israel account for nearly 60 per cent of world exports of processed diamonds.

The industry is mainly export-oriented. There are about 10,000 to 12,000 diamond processing units in the country (excluding very tiny units) and of these, around 3000 are regular exporters. Surat accounts for three-fourths of the total production.

An export of diamonds depends entirely on imports of roughs, mainly from Belgium. The main problem facing this sector is the high import-dependence and lack of a long-term sourcing strategy for roughs. Other problems relate to use of traditional methods by small units and lack of information pertaining to international markets.

(vi) Dyestuff Industry:

The dyestuff industry has three segments: dyes, pigments and intermediates. The restructuring of the global dyestuff industry through large-scale mergers and acquisitions has resulted in SMEs acting as feeders to the large manufacturers.

World dyestuff production is around 1.3 million metric tonnes valued at US$23 billion. Asia leads in world production with a 44 per cent share in the total, followed by US (24 per cent) and Europe (22 per cent). India’s share in global dyestuff production is around 6 per cent.

The industry in India (located mainly in the States of Maharashtra and Gujarat due to proximity to the textile industry and ports) comprises 50 large scale units that produce 65 per cent of the total production and 600 small scale units accounting for the remaining share. The SSIs are operating at 60 to 65 per cent capacity.

However, SSI units account for over 60 per cent of India’s total exports of dyes, pigments and intermediates. Imports of dyestuffs have increased sharply since 1996- 97, with imports from China accounting for one-third of these imports.

The landed prices of China’s exports of dyes, pigments, etc., are 30 to 60 per cent lower than Indian products. In the WTO context, the domestic dyestuff industry is not fully protected through tariffs to effectively face international competition.

The main problems facing the industry are: stagnation in the market resulting in low capacity-utilisation; effluent treatment; barriers imposed by importing countries (ban on use of certain toxic materials); and low-priced imports.

Some of the recommended strategies for the dyestuff industry are: to encourage access to finance, newer technologies and markets. The use of provisions in the WTO Agreements relating to anti-dumping and safeguard measures to protect domestic industry need to be explored.

Related Articles

Pro­visions under the Hindu Succe­ssion Act Gov­erning Intestate Succession to the Property of a Female

The Explanation to the section seeks to give a very comprehensive connotation to the term ‘property’, and deals elaborately with the various sources and the sundry modes of acquisition of property by such a person. It provides that ‘property’ includes both movable and immovable property acquired by a female Hindu — (i) By inheritance or […]
Read more

5 Chief Advantages of Legisla­tion over Precedent as Sources of Law

Precedent, on the other hand, cannot abrogate the existing rule of law although it may produce very good law and in some respects better than legislation. What it does, it docs once for all. It cannot retrace its steps. Legislation as a destructive and reformative agent has no equal. 2. Efficiency: Legislation allows an advantageous […]
Read more
Search for:
x

Hi!
I'm Rebecca!

Would you like to get a custom essay? How about receiving a customized one?

Check it out