INTERNATIONAL TRADE LAW

WTO RULES ON FDI: AN INDIAN PRESPECTIVE

SUBMITTED TO – MR. ANKIT AWASTHI

[FACULTY, INTERNATIONAL TRADE LAW]

SUBMITTED BY – ONINDYA MITRA

SEMESTER VIII
ROLL NO – 194

HIDAYATULLAH NATIONAL LAW UNIVERSITY

RAIPUR, C.G.

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 ACKNOWLEDGEMENTS

I feel highly elated to work on the topic “WTO RULES ON FDI: AN INDIAN
PRESPECTIVE”. The practical realization of this project has obligated the assistance
of many persons. I express my deepest regard and gratitude for Mr. Ankit Awasthi,
Faculty of Trade & Investment Law. His consistent supervision, constant inspiration and
invaluable guidance has been of immense help in understanding and carrying out the
nuances of the project report. I would like to thank my family and friends without whose
support and encouragement, this project would not have been a reality. I take this
opportunity to also thank the University and the Vice Chancellor for providing extensive
database resources in the Library and through Internet. I would be grateful to receive
comments and suggestions to further improve this project report.

ONINDYA MITRA

Roll No. 194

Semester VIII

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 DECLARATION

I hereby declare that the project work entitled “A WTO RULES ON FDI: AN INDIAN
PRESPECTIVE” submitted to HNLU, Raipur, is record of an original work done by me under
the guidance of Mr. Ankit Awasthi, Faculty Member, HNLU, Raipur.

ONINDYA MITRA
Roll no. 194
Semester – VIII

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 Table of Contents

DECLARATION 3
INTRODUCTION 5
POSITIVE INCENTIVES 7
1. Guarantee against nationalization 7
2. Tax holidays 7
3. Tax treaties to avoid double taxation 7
4. Exemptions on import duties on capital goods and intermediate goods 7
5. Other exemptions or relaxation of rules in priority Sectors. 7
6. Subsidized loans, reduced rent for land use accelerated depreciation. 7
7. Special promotion of exports, for example through export processing zones. 8
NEGATIVE INCENTIVES 7
RESEARCH METHODOLOGY 9
LITERARY REVIEW 9
CHAPTER 1 - WTO Agreements 12
CHAPTER 2 - IMPACT OF WTO ON INDIA 14
CHAPTER 3 - CRTICISIM 19
CONCLUSION 21

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Page | 5
 INTRODUCTION

The World Trade Organization is a living and growing organism. The functioning of
WTO affects the economic life of all countries around the globe. It is not concerned only
with international trade law-meaning exports and imports of goods and services in the
traditional sense-but with “international business” in general, and that includes foreign
direct investment (FDI). Foreign direct investment (FDI) is a direct investment into
production or business in a country by an individual or company of another country,
either by buying a company in the target country or by expanding operations of an
existing business in that country. The provisions on FDI in the WTO framework are
contained in two agreements: the General Agreement on Trade in Services (GATS) and
the Agreement on Trade-Related Investment Measures (TRIMs) in relation to trade in
goods. All forms of FDI come under the jurisdiction of WTO. The period from 1967 to
1980 may be referred to an era of severe restriction. The infamous Foreign Exchange
Regulation Act (FERA) came into existence in 1973. Foreign equity was restricted to 40
percent, in the sense that:
A. If the joint venture was to be treated without discrimination vis-a-vis domestic firms,
the foreign equity share must not exceed this limit.
B. The condition under which the foreign equity share could exceed 40 percent were
quite stringent and the decision as to whether such a venture would be allowed (even if it
met all conditions) was left to the discretion of the government.

Policies were eased in the 1980s. In the wake of the oil price shocks it was probably
realized that the country needed to increase its exports considerably and for various
reasons, domestic firm alone would not be up to the task FERA restrictions were relaxed
for 100 percent export-oriented units. In 1986, the tax rate on royalty payments was
brought down from 40 percent to 30 percent. FDI regulations continued to fall at a
gradual rate throughout the 1980s.

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An FDI proposal requires approval. There are two approval bodies: the Reserve Bank of
India and the Secretariat for Industrial Assistance and Foreign Investment Promotion
Board. The RBI gives automatic approval to proposals in high-priority sectors where
foreign equity does not exceed 51 percent and in the mining sector as long as it does not
exceed 50 percent. SIA/FIPB deals with other proposals, such as where foreign equity
exceed 51 percent the industry is not on the list of high-priority sectors, or foreign equity
does not cover the import of capital goods. Unlike the RBI, SIA/FIPB can initiate and
carry on detailed negotiations with foreign firns.

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 OBJECT

The object of my project is to depict the beneficiaries gained by Indian markets through
FDI. The policies and strategies picked up the parent and the host countries will be
discussed vividly. The last chapter of the project deals with criticizing the FDI
regulations.
RESEARCH QUESTIONS

1. What are the FDI polices, the positive and negative incentives related to it?
2. The relation between FDI and growth in India.
3. Factors which influence the flow of FDI.

HYPOTHESIS

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POSITIVE INCENTIVES NEGATIVE INCENTIVES

1. Guarantee against nationalization

1. Nationalization or appropriation
2. Tax holidays 2. Double taxation
3. Domestic content requirement in
3. Tax treaties to avoid double
terms of intermediates
taxation
4. Domestic employment restriction

4. Exemptions on import duties on 5. Exports requirements and foreign

capital goods and intermediate currency earnings targets

goods 6. General foreign equity limits

5. Other exemptions or relaxation of
rules in priority Sectors.
6. Subsidized loans, reduced rent for
land use accelerated depreciation.
7. Special promotion of exports, for
example through export processing
zones.
Sectoral foreign equity limits
7. Land ownership restrictions
8. Division of management within a
joint venture
9. Restrictions on remittance of profits
10. Transfer of shares
11. Restrictions on liquidation of The
company

2. Development economists state that effects of FDI are significant on economic growth.
The gains from FDI inflows are unquestionable because it contributes to economic
growth through an increase in productivity by providing new investment, better
technologies and managerial skills to the host countries. However, the effect of FDI on
domestic investment is an issue of concern because there is a possibility of displacement
of domestic capital due to competition from foreign investors with their superior
technologies and skills. Thus, the ultimate impact of FDI on economic growth depends on
the degree of capacity of the host country to use FDI as efficiently as possible. Similarly,
trade liberalisation may facilitate economic growth through efficiency in production by

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utilising the abundant factors of production more effectively and absorbing better
technologies from advanced countries. Indian economy was also concerned with issues
pertaining to foreign private capital inflows and trade liberalisation initially. However, it
later moved to liberalize its trade and investment policies to include various investment
incentives, particularly for foreign investors. Along with this it had maintained high and
steady economic growth, single-digit inflation rate; it has a growing domestic market, a
large number of skilled personnel and a more favourable investment market. FDI inflows
into India had grown sizably during the period from 2000 to 2007. The value of FDI
inflows has rose from 3.9 billions to US$ in 200 and touched the highest level of 23
billions of US$ in 2007. The average value of FDI inflows and annual growth in this
period works out to 9.4 billions of US$ and 77.17% per year respectively.1

3. There are numerous "pull" factors that can influence inflows of FDI.2 Current
economic performance represents the current governmental regime’s ability to handle the
state’s economy as well as other societal factors. Investors will seek out countries that
have had recent enonomic success, hoping that the trend will carry on in the long-run.
Investors will have more confidence in that nation that has done well in the past will aslo
do well in the future. In addition to macroeconomic stability, the consistency of exchange
rates is also important. The foreign investment of an MNC many times is used to
supplement the firm in the host country. As a result consistent exchange rates are
necessary for an MNC to repatriate fractions of its FDI profit to the home country. Lastly,
the human capital of a country is an important factor for an MNC when considering to
invest. When investing for the long term in another country, an MNC will most likely
have to utilize the labor in the host country.3

1
Robert M. Stern, India and the WTO, World bank Publication.
2
Trade and Investment: from bilateral to multilateral treaties?
http://www.wto.org/english/thewto_e/minist_e/min03_e/brief_e/brief07_e.htm accessed on 1st March 2014.
3
Michael Gestrin, Alan Rugman, Rules for Foreign Direct Investment at the WTO: Building on Regional
Trade Agreements, http://link.springer.com/chapter/10.1007%2F0-387-22688-5_50 accessed on 1st March
2014.

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 RESEARCH METHODOLOGY

I have followed the doctrinal method of research. The first part of my project deals with
the history of flow of FDI and the definitions. The second part of my project deals with
information about FDI policies taken from various articles. Information from books has
also been taken.

LITERARY REVIEW

1. There are various types of FDI:

Horizontal FDI arises when a firm duplicates its home country-based activities at the
same value chain stage in a host country through FDI.

Platform FDI Foreign direct investment from a source country into a destination country
for the purpose of exporting to a third country.

Vertical FDI takes place when a firm through FDI moves upstream or downstream in
different value chains i.e., when firms perform value-adding activities stage by stage in a
vertical fashion in a host country.

Despite the global meltdown and its effect on the economy, India's engagement with the
world continued to widen and deepen. India is one of the fastest growing economies
among the large economies of the world.[ According to the IMF's World Economic
Outlook, April 2011, India had the highest growth rate of 10.4% in 2010, followed by
China at 10.3%, while world output grew at 5%. For 2011, the IMF has estimated India's
growth at 8.2%, while global growth is projected at 4.4%.] In terms of purchasing power
parity (PPP), the Indian economy is the fourth largest after the United States, China and
Japan. [World Bank: World Development Indicators Database; April 2011.] India's share
in world GDP (PPP) has increased from 4.3% in 1991 to 5.3% in 2009.4

4
World Bank: World Development Indicators Database; 1 March 2014

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2. Non transparency can be a barrier to the inflow of FDI. There are five origins of it.
First, economic policy – making will be seen as non-transparent if it is subject to
corruption and bribery. The second important element of non-transparency arises in the
area of property rights and their protection within a given country. The lack of copy right
protection, the existence of patent infringement and lack of enforcement of contracts are
all examples of what constitutes poor protection of property rights. The third and fourth
aspects of non-transparency relate to the level of bureaucratic inefficiency within the
government and poor enforcement of the rule of law. These two factors can pose severe
barriers to business. If the quality of government service is unpredictable, companies'
exposure to additional risks is increased. Moreover, their ability to cover against these
risk impeded due to the unpredictable nature of government service. OECD (1997b), for
example, shows that bureaucratic inefficiency and weak rule of law impede economic
activities by imposing additional costs on economic agents. Delays in licensing, the
inability of the courts to enforce contracts and the capricious and arbitrary enforcement of
rules and regulations all reduce economic efficiency and effectiveness. Finally, the fifth
origin of non-transparent economic policies has a great deal to do with the conduct of
economic policies per se. Economic policies are likely to be treated as non-transparent if
they are subject to unpredictable policy reversals. These policy reversal are particularly
damaging in privatization deals and whenever foreign investors are involved. Consider,
for example, the case of privatization in country X in which the government summarily
cancels decisions of the previous government to privatize the country's industry. The
reaction of foreign investors to the policy reversal is likely to put the country concerned
"off-limits" for foreign investors.5

5
Taken from his speech at the 24the Annual Conference of the International Organization of Securities
Commission in Lisbon, on May 25, 1999. Also reported in IMF Survey, June 7, 1999.

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 CHAPTER 1 - WTO Agreements

The General Agreement on Trade in Services (GATS) is a treaty of the World Trade
Organization (WTO) that entered into force in January 1995 as a result of the Uruguay
Round negotiations. The treaty was created to extend the multilateral trading system to
service sector, in the same way the General Agreement on Tariffs and Trade (GATT)
provides such a system for merchandise trade. While the overall goal of GATS is to
remove barriers to trade, members are free to choose which sectors are to be
progressively "liberalised", i.e. marketised and privatised, which mode of supply would
apply to a particular sector, and to what extent liberalisation will occur over a given
period of time. Members' commitments are governed by a "ratchet effect", meaning that
commitments are one-way and are not to be wound back once entered into. The reason
for this rule is to create a stable trading climate. However, Article XXI does allow
Members to withdraw commitments. For countries that like to attract trade and
investment, GATS adds a measure of transparency and legal predictability. Legal
obstacles to services trade can have legitimate policy reasons, but can also be an effective
tool for large scale corruption.

The Agreement on Trade Related Investment Measures (TRIMs) are rules that apply to
the domestic regulations a country applies to foreign investors, often as part of an

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industrial policy. In the late 1980s, there was a significant increase in foreign direct
investment throughout the world. However, some of the countries receiving foreign
investment imposed numerous restrictions on that investment designed to protect and
foster domestic industries, and to prevent the outflow of foreign exchange reserves.
Examples of these restrictions include local content requirements (which require that
locally-produced goods be purchased or used), manufacturing requirements (which
require the domestic manufacturing of certain components), trade balancing
requirements, domestic sales requirements, technology transfer requirements, export
performance requirements (which require the export of a specified percentage of
production volume), local equity restrictions, foreign exchange restrictions, remittance
restrictions, licensing requirements, and employment restrictions. These measures can
also be used in connection with fiscal incentives as opposed to requirement. There are
eight types of TRIMs:

1. Local content requirements

2. Trade balancing requirements
3. Foreign exchange restrictions
4. Export performance requirements
5. Local production requirements
6. Mandatory technology transfers
7. Production mandates
8. Limits on foreign equity and remittances

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 CHAPTER 2 - IMPACT OF WTO ON INDIA

Different scholars have different opinion on impact of World Trade Organization on

Foreign Trade in India. The result of trade liberalization in 1991 and the establishment of
World Trade Organization in January 1995 many questions have been raised on the
present and future development possibilities of the developing countries. The world trade
is in fact not based on free and competitive conditions in the world market rather world
market is trade–distorting. India’s external sector has exhibited a sharp transformation
since 1991 when India witnessed a severe balance of payments crisis. It is a fact that there
has been a substantial and significant change in the commodity composition and the
direction of India’s merchandise exports as well imports in the post-liberalization and
post-WTO periods but side by side there has been a widening deficit in the balance of
trade. In addition to this India being a founder member of GATT (1947) and the WTO
(1995) has been trying to extend trade and economic relations at the global level. To
improve its trade relations India did actively participate in various rounds of trade
negotiations. Not only this, it had utilized the financial resources of international financial
institutions for over six decades. India has been facing several trade restrictions from
most of the industrially advanced countries. The restrictions India does face include
quantitative restrictions imposed by developed countries unrealistic standards, testing,
leveling and certification, export subsidies, barriers on services, government procurement
regimes and other barriers. The WTO is wholly controlled by a few industrially advanced

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nations (e.g., America), WTO provisions are thus always manipulated by the developed
world. The wealthy countries of developed world in fact dominate the whole world
economic system. Many of the developing countries are locked in a vicious cycle of debt,
rising population, poverty and unemployment. The developed countries of the world
which possess only the ¼th of the world population have 80 percent of the world’s
manufacturing income. In the WTO period global agricultural exports have declined in
value terms, whereas, quantity of export has grown. Thus, global trade in post WTO
period has turned out to be favourable to consumers of agricultural products and adverse
to agricultural producers.
Similarly, WTO has been favourable to net importing countries and unfavourable to net
exporters of agricultural products. The decline in value of agricultural exports has been
higher in the case of group of developed countries compared to the developing countries.

Prior to becoming member of WTO India’s foreign trade appeared quite sluggish. For
instance in 1949-50 imports of India valued at Rs.617 crores and exports valued at
Rs.485 crores. In 1992-93 imports valued at Rs.63,375 crores and exports were noted at
Rs.53,688 crores while in 1993-94 imports went up to Rs.73101 crores and exports were
noted at Rs.69,751crores in 1993-94. The pattern of India’s exports prior to WTO reveals
the Common Wealth countries (An organization of countries that used to be under the
political control of United Kingdom) accounted at 54% of total exports during the pre-
war period. United Kingdom (UK) held the most prominent position accounting 34% of
exports from India. Next in importance were Japan (9%) and USA (8%) France, Italy, the
Netherlands, Belgium and Germany together accounted of about 15% of India’s exports.
During the post-war periods, trade with Japan and Germany completely disappeared.
Besides this, war cut off European markets especially UK and this reduced India’s
volume of exports, But after becoming part of WTO there was sudden spurt in imports
which were noted at Rs.3,33,907 crores and value of exports went up to Rs. 2,42,435
crores in 2004-05 respectively. It is important to note here that the structure of trade has
also undergone change. Earlier the major items of imports were food grains, consumer
and capital goods but now India is in a position to export along with food items spices,
rice, and some other non-traditional items also.

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A look at the referred data also shows that with the formation of WTO, India’s value of
exports, though, has gone up but this increase in exports is certainly less as compared to
the increase in imports, An important feature notable here is that where India’s trade with
OECD (Organization for Economic Cooperation and Development) reduced from 54% in
1990-91 to 46% in 2003-04 with Europe it reduced from 18% in 1990-91 to 2% in 2003-
04 on the one hand, on the other hand trade with other developing and least developed
countries (Third World Countries) had different picture. For instance trade with the such
OPEC (The Organization of Petroleum Exporting Countries) trade increased from 6% in
1990-91 to 15% in 2003-04 and other developing and least developed countries
(including Asia, Africa, Latin America and Caribbean Countries) increased from 25% in
1990-91 to 37% during 2003-04. In pre WTO period India’s foreign trade was confined
too few countries such as Russia, UK,USA, India’s neighbour countries etc. but in the
post WTO period India’s trade extend to most of the WTO member countries such as
Congo, Mongolia, Niger Nicaragua, Rhodesia etc. The USA was the major trade partner
in 2003-04 but maximum of imports were from European Union (17%) and Asian
countries (17.2 %) of the total imports in 2003-04. While only 7 items of exports share
more than 5% in the world exports. These included; rice, tea and mate, spices, iron ore,
concentrate medicinal and pharmaceuticals products, manufacturing of leather, pearls and
precious and semi-precious stones.

Exports during December, 2014 were valued at US $ 25397.74 million (Rs.159378.46

crore) and Imports during December, 2014 were valued at US $ 34832.56 million
(Rs.218584.77 crore) In 2013-14, there was good growth of exports to North America
(9.1 per cent) and Africa (7.2 per cent), low growth to Europe (4 per cent) and Asia (1.7
per cent), and negative growth to Latin America (-20 per cent) and the CIS and Baltics (-
4.7 per cent). While export growth to the US was 8.3 per cent, it was just 2.2 per cent to
the EU 27 as a result of the slowdown in the EU. Exports to the UAE fell to a negative
-16 per cent. Exports to Asia still constitute around 50 per cent of India’s exports. While
India’s exports to ASEAN (Association of South East Asian Nations) grew by a small 0.5
per cent, exports to South Asia grew robustly with high growths to all the four major

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SAARC (South Asian Association for Regional Cooperation) countries, Sri Lanka,
Bangladesh, Nepal and Pakistan, besides Bhutan. There was also good export growth to
China and Japan at 9.5 per cent and 11.7 per cent respectively. Region-wise, imports from
all five regions declined, with the highest decline of-19.3 per cent in imports from
Europe. India’s trade at 58 per cent in 2013-14 was more or less the same as in earlier
years. The top three trading partners of India are China, the USA, and the UAE, with the
top slot shifting between the three. Export-import ratios reflecting bilateral trade balance
show that India had bilateral trade surplus with four countries, namely the USA, UAE,
Singapore, and Hong Kong, in 2013-14 with high increase in the export-import ratio with
the USA. India’s bilateral trade deficit with Switzerland declined sharply from US$ 31.1
billion in 2012-13 to US$ 17.6 billion in 2013-14 owing to a fall in gold imports. India
has high and rising bilateral trade deficit with China, which however fell by 6.6 per cent
in 2013-14. Given the growing importance of these two Asian giants, India needs to
formulate a comprehensive trade strategy for China keeping in view India’s export
potential in China. It shows that Indian trade in absolute terms has risen. The position of
exports in GDP ratio has improved. But at the same time imports as compared to exports
has increased rapidly. This indicates that trade deficit also rose sharply. Though
comparatively India’s exports position has improved yet India’s balance of trade position
has remained deficit and this certainly is not appreciable when an attempt is made to
make India economically viable and strong. This is certainly a matter of grave concern
for the country as earlier also and right from 1947-48 to 2013-14, expect for the two
years 1972-73 and 1976-77 India’s balance of payment (BOP) position remained deficit
and was considered a very unhealthy symptom but after becoming member of WTO the
same deficit has not decrease but has enormously increased. It is significant to point out
here after becoming a part of WTO, India’ trade links with other countries has improved
particularly with less developed countries which means that in absolute terms India’s
trade had improved as well its trade link have widened. Perhaps this has compensated the
deficit, which apparently does not seem a point of controversy at the first look. India’s
should not confine to have trade links with less develop countries only but also improve
trade with develop and developing economies.

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Increase in export earnings: Increase in export earnings can be viewed from growth in
merchandise exports and growth in service exports:

Growth in merchandise exports: The establishment of the WTO has increased the
exports of developing countries because of reduction in tariff and non-tariff trade barriers.
India’s merchandise exports have increased from 32 billion us $ (1995) to 185 billion u $
(2008-09).

Growth in service exports: The WTO introduced the GATS (general Agreement on
Trade in Services) that proved beneficial for countries like India. India’s service exports
increased from 5 billion us $ (1995) to 102 billion us $ (2008-09) (software services
accounted) for 45% of India’s service exports)

Agricultural exports: Reduction of trade barriers and domestic subsidies raise the price
of agricultural products in international market, India hopes to benefit from this in the
form of higher export earnings from agriculture

Textiles and Clothing: The phasing out of the MFA will largely benefit the textiles
sector. It will help the developing countries like India to increase the export of textiles
and clothing.

Foreign Direct Investment: As per the TRIMs agreement, restrictions on foreign

investment have been withdrawn by the member nations of the WTO. This has benefited
developing countries by way of foreign direct investment, euro equities and portfolio
investment. In 2008-09, the net foreign direct investment in India was 35 billion us $.

Multi-lateral rules and discipline: It is expected that fair trade conditions will be
created, due to rules and discipline related to practices like anti-dumping, subsidies and
countervailing measure, safeguards and dispute settlements. Such conditions will benefit
India in its attempt to globalise its economy.

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 CHAPTER 3 - CRTICISIM

1. TRIPs: Protection of intellectual property rights has been one of the major concerns
of the WTO. As a member of the WTO, India has to comply with the TRIPs standards.
However, the agreement on TRIPs goes against the Indian patent act, 1970, in the
following ways:

Pharmaceutical sector: Under the Indian Patent act, 1970, only process patents are
granted to chemicals, drugs and medicines. Thus, a company can legally manufacture
once it had the product patent. So Indian pharmaceutical companies could sell good
quality products (medicines) at low prices. However under TRIPs agreement, product
patents will also be granted that will raise the prices of medicines, thus keeping those out
of reach of the poor people, fortunately, most of drugs manufactured in India are off –
patents and so will be less affected.

Agriculture: Since the agreement on TRIPs extends to agriculture as well, it will have
considerable implications on Indian agriculture. The MNG, with their huge financial
resources, may also take over seed production and will eventually control food
production. Since a large majority of Indian population depends on agriculture for their
livelihood, these developments will have serious consequences.

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Micro-organisms: Under TRIPs Agreement, patenting has been extended to micro-
organisms as well. This mill largely benefit MNCs and not developing countries like
India.

2. TRIMs: The Agreement on TRIMs also favours developed nations as there are no
rules in the agreement to formulate international rules for controlling business practices
of foreign investors. Also, complying with the TRIMs agreement will contradict our
objective of self – reliant growth based on locally available technology and resources.

3. GATS: The Agreement on GATS will also favour the developed nations more. Thus,
the rapidly growing service sector in India will now have to compete with giant foreign
firms. Moreover, since foreign firms are allowed to remit their profits, dividends and
royalties to their parent company, it will cause foreign exchange burden for India.

4. TARIFF Barriers and NON-TARIFF Barriers: Reduction of trade and non-tariff

barriers has adversely affected the exports of various developing nations. Various Indian
products have been hit by. Non- tariff barriers. These include textiles, marine products,
floriculture, pharmaceuticals, basmati rice, carpets, leather goods etc.

5. LDC exports: Many member nations have agreed to provide duty – free and quota –
free market access to all products originating from least developed countries. India will
have to now bear the adverse effect of competing with cheap LDC exports internationally.
Moreover, LDC exports will also come to the Indian market and thus compete with
domestically produced goods.

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 CONCLUSION

Despite the difficulties associated with the measurement of the efficiency-enhancing

effects induced by FDI, let alone with the assessment of the specific channels by which a
transfer of technology affects local productivity, the empirical literature offers some
important conclusions. First, there appears to be a wide consensus that FDI is an
important, perhaps even the most important, channel through which advanced technology
is transferred to developing countries. Second, there also seems to be a consensus that
FDI leads to higher productivity in locally owned firms, particularly in the manufacturing
sector. Third, there is evidence that the amount of technology transferred through FDI is
influenced by various host industry and host country characteristics.

More competitive conditions, higher levels of local investment in fixed capital and
education, and less restrictive conditions imposed on affiliates appear to increase the
extent of technology transfers. The present network of international agreements in the
investment area provides little protection against discrimination vis-à-vis non-
participating countries. Genuinely multilateral rules would enable bilateral and regional
initiatives to be drafted and function within a framework which protects the interests of
third parties. A related concern is that current work on investment-related issues tends to
focus more on those countries which are already receiving significant inflows of foreign
investment, to the neglect of those whose needs may be greater. Nor does it always
provide for the effective participation, in the formulation of new rules, of all those who
may be affected by them.

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In the face of these growing economic, institutional and legal interlinkages between trade
and FDI, WTO members are confronted with a basic policy choice: do they continue to
approach the FDI issue as they have until now, that is bilaterally, regionally and
plurilaterally, and on an ad hoc basis in sectoral and other specific WTO agreements; or
do they seek to integrate such arrangements into a comprehensive and global framework
that recognizes the close linkages between trade and investment, assures the compatibility
of investment and trade rules and, most of all, takes into account in a balanced way the
interests of all the members of the WTO - developed, developing and least-developed
alike. Only a multilateral negotiation in the WTO, when appropriate, can provide such a
global and balanced framework. Their decision will have an important impact on the
efficiency with which scarce supplies of capital and technology will be employed in the
next decade and beyond. It will also have an impact on the strength, coherence and
relevance of efforts to integrate all developing countries into the multilateral trading
system.

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 BIBLIOGRAPHY

Websites
 http://wto.org.
 http://link.springer.com/
 https://www.researchgate.net/publication/311613950_Impact_of_World_Trade_O
rganization_on_Foreign_Trade_in_India
 https://www.ukessays.com/essays/international-studies/impact-of-wto-on-
india.php
 https://www.mbarendezvous.com/general-awareness/wto-and-impact-on-india/

Journals and Articles

 S.K. Misra and V.K.Puri, "Indian Economy", Himalaya Publishing House, Mumbai,
2002, pp. 643-644.
 S.K. Misra and V.K.Puri, Op.Cit. p. 642.
 Sanjiv Mathur, "Cooperator", Published by Bhagwati Prasad, New Delhi, Vol XXXIX,
No. 4, Oct. 2001, p. 179.
 Vijaya Katti and Subir Sen, "Foreign Trade Review", Published by P.K. Gupta, New
Delhi, Vol. XXXIV, No. 3 & 4, Oct., 1999-March 2000, p. 102, 103 & 105.
 H.G. Hegde, "Yojana", Publication Division, New Delhi, Vol. 45, Dec 2001, pp. 34,35 &
43.
 S.K. Misra and V.K.Puri, Op.Cit. pp. 645-648 & 650.

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