WTO Agreements and India for UPSC

WTO structure

The World Trade Organization (WTO) came into being on 1 January 1995 after the Uruguay Round. Unlike its predecessor, the GATT, the WTO is a permanent institution. By 2025 it has 166 members, covering nearly all world trade. The WTO administers over 60 agreements, serves as a forum for negotiations, monitors policies, settles disputes and assists developing countries.

Institutional framework

Decision-making rests with the Ministerial Conference, meeting roughly every two years. The General Council handles day-to-day work and also acts as the Dispute Settlement Body and the Trade Policy Review Body. Three specialist councils-the Councils for Trade in Goods, Trade in Services and TRIPS-oversee implementation and are supported by committees on agriculture, subsidies, SPS, environment and development. A small secretariat in Geneva provides technical and legal support. Decisions are taken by consensus; voting is rare.

A simple diagram of the WTO's structure shows the Ministerial Conference at the top, below it the General Council, and beneath that the three specialised councils with their respective committees. The Dispute Settlement Body and Trade Policy Review Body are functions of the General Council. (Diagram description: a hierarchy starting with the Ministerial Conference, branching to the General Council and then to Goods, Services and TRIPS councils, each feeding into various committees.)

Key agreements

WTO rules are contained in a range of agreements. The ones most relevant for UPSC economics are summarised below.

Agreement on Agriculture (AoA)

The AoA integrated agriculture into the multilateral system. To reduce protection, it converted quotas into tariffs, lowered tariff ceilings and imposed disciplines on subsidies. Domestic support is classified into coloured boxes. The Green Box covers non-distorting measures like research and environmental payments, which are unlimited. The Amber Box contains trade-distorting support (price support, input subsidies), capped at 10 % of production for developing countries. Blue Box payments are linked to production-limiting programmes. A small de minimis exemption allows minimal support.

India procures rice and wheat at MSP and provides foodgrains to more than 800 million people through the PDS. These programmes fall under the Amber Box but remain within the de minimis limit when measured against 1986-88 prices. Because prices and production have multiplied since then, India argues the base period is outdated. The 2013 Bali ministerial introduced a temporary peace clause that shields public stockholding from legal challenge if certain conditions are met. India and other G-33 members want a permanent solution and a special safeguard mechanism to raise tariffs when imports surge.

TRIPS Agreement

TRIPS obliges all WTO members to provide minimum standards of intellectual property protection. It requires patents for inventions in all fields of technology, copyright protection for at least 50 years after the author's death, and protection of trademarks and industrial designs. At the same time, TRIPS recognises flexibilities. The 2001 Doha Declaration on TRIPS and Public Health clarified that members may issue compulsory licences or allow parallel imports to protect public health. Least developed countries have until 2034 to implement pharmaceutical patent rules.

India's patent law, amended in 2005, balances innovation and access. It bars evergreening (minor modifications to extend patent life) and allows compulsory licensing in emergencies. In 2012 India granted a compulsory licence for a cancer drug, reducing its price drastically. During the COVID-19 pandemic, India and South Africa proposed a TRIPS waiver for vaccines and therapeutics. In 2022 members agreed to a partial waiver covering vaccines, but negotiations on extending it to therapeutics continue. India also champions protection of traditional knowledge and numerous geographical indications.

TRIMS Agreement

The TRIMS Agreement ensures that investment policies do not nullify GATT commitments. Its illustrative list bans local content requirements (forcing firms to use a certain share of domestic inputs), trade-balancing obligations and foreign exchange restrictions. Countries had transition periods after joining the WTO to eliminate such measures.

India once mandated that a portion of solar cells and modules for government-supported projects be manufactured domestically. The United States challenged this under TRIMS and GATT, and the WTO ruled against India. India removed the local content requirement and now uses technology-neutral incentives like viability gap funding and production-linked incentives that are open to domestic and foreign firms. This example shows how TRIMS constrains industrial policy but still allows incentives not tied to import restrictions.

SCM Agreement

The SCM Agreement defines a subsidy as a financial contribution by a government that confers a benefit. Export subsidies and subsidies contingent on using domestic goods are banned. Actionable subsidies can be challenged if they cause injury, nullify benefits or seriously prejudice another member. Members can impose countervailing duties after a fair investigation.

India provides tax rebates, duty exemptions and financial incentives to exporters and manufacturers. In 2019 a WTO panel sided with the United States in case DS541 and held that five Indian programmes-MEIS, EOUs, SEZ benefits, EPCG and DFIA-were prohibited export subsidies. India replaced MEIS with the RoDTEP scheme in 2021 to refund embedded taxes without linking benefits to exports. In 2024 India and the United States settled several disputes, including this one, signalling a willingness to reform export incentives while seeking policy space for developing country needs.

Dispute Settlement Understanding (DSU)

The DSU is central to the WTO. It sets out a step-by-step procedure: consultations, panel adjudication, optional appellate review, adoption of reports and implementation. Rulings are automatically adopted unless there is consensus against them. If the losing party fails to comply within a reasonable period, the winning party may seek compensation or impose retaliatory measures.

The DSU gave the WTO teeth, but its appellate stage has been defunct since December 2020 because the United States blocks the appointment of new Appellate Body members. Without a quorum, appeals remain unresolved. Some members have established a Multi-Party Interim Appeal Arbitration Arrangement to fill the gap. India supports restoring a full Appellate Body and participates in discussions on improving transparency, limiting the length of rulings and clarifying the standard of review.

India's cases at the WTO

India has been a party to numerous WTO disputes. As a respondent, it has defended food safety measures, renewable energy policies and export incentives. As a complainant, it has challenged protectionist policies abroad. The following examples illustrate the range.

• DS430 (U.S. poultry imports): The U.S. challenged India's ban on poultry products from countries with bird flu. Panels ruled that the ban was not based on scientific risk assessment. India lifted the ban in 2017.
• DS456 (Solar cells): The U.S. contested India's domestic content requirement for solar projects. The WTO held it was inconsistent with TRIMS and national treatment. India removed the requirement and restructured support.
• DS541 (Export subsidies): The U.S. challenged India's export promotion schemes. The panel ruled them illegal export subsidies. India introduced RoDTEP and negotiated a settlement in 2024.
• DS582/DS584 (ICT duties): The EU and Japan challenged India's tariffs on mobile phones and other ICT goods under the Information Technology Agreement. Panels ruled against India, which has appealed; the case remains unresolved due to the Appellate Body impasse.
• DS547 (Steel and aluminium tariffs): India challenged the U.S. Section 232 tariffs on steel and aluminium. A panel found the tariffs violated GATT, but the U.S. appealed into the void. India later withdrew the case as part of a broader bilateral settlement.
• DS510 (U.S. renewable energy programmes): India challenged U.S. state policies favouring local renewable energy products. A panel found several of these measures inconsistent with WTO obligations, demonstrating that industrialised countries also breach TRIMS.

These cases show that dispute settlement both constrains and empowers India. It forces domestic reforms in line with rules while allowing India to contest unfair foreign measures. The outcome of ongoing appeals remains uncertain until the appellate crisis is resolved.

Reforms and India's proposals

The WTO is under pressure to update its rules to reflect twenty-first century realities. Reform discussions cover dispute settlement, agriculture, fisheries, digital trade, investment facilitation and environmental measures. India's positions reflect its development priorities.

Dispute settlement reform

India wants a two-tier system restored with clearer mandates, fixed timelines and independence of adjudicators. It opposes unilateral actions and supports the reverse consensus rule. Although not part of the MPIA, India engages in informal talks and emphasises that reforms should preserve special and differential treatment for developing countries.

Agriculture and food security

India leads the G-33 coalition in demanding a permanent solution on public stockholding and an easy-to-trigger special safeguard mechanism. It also seeks stricter disciplines on rich countries' farm subsidies. The 13th Ministerial Conference in 2024 deferred decisions on these issues; India aims to secure them before the next ministerial meeting.

Fisheries subsidies

India supports curbing harmful subsidies that contribute to illegal, unreported and unregulated fishing and overfishing. But it insists on a 25-year transition for developing countries and exemptions for small-scale fishers, citing the tiny size of its subsidies relative to developed nations. It also demands the polluter-pays principle to target industrial fleets.

Digital trade and e-commerce

India has not joined the Joint Statement Initiative on e-commerce because it fears that binding rules on cross-border data flows and customs duties on electronic transmissions could constrain its digital policy space. It wants to develop domestic capacities and collect tax revenues from digital transactions before committing to global rules. It calls for a review of the moratorium on customs duties on electronic transmissions, which has been renewed since 1998.

Investment facilitation and other issues

Some WTO members are negotiating a voluntary agreement on investment facilitation to make procedures more transparent and predictable. India is cautious: it argues that investment is already regulated through bilateral treaties and that multilateral rules could limit domestic regulation. On climate measures, India stresses that carbon tariffs should not be used as disguised protectionism and that any new rules must respect the principle of common but differentiated responsibilities.

For UPSC Prelims vs Mains

Prelims pointers

• WTO membership as of 2025: 166 members, with Timor-Leste and Comoros about to join.
• The AoA's three pillars and the meaning of Green, Amber and Blue Boxes; India's demand for a permanent peace clause.
• Under TRIPS, patents last at least 20 years and compulsory licences are allowed.
• TRIMS prohibits local content and trade-balancing requirements; India lost a case on solar cells.
• The SCM Agreement bans export subsidies; India replaced MEIS with RoDTEP.
• DSU stages: consultations, panel, appellate review (currently stalled), and retaliation after a reasonable period if compliance fails.

Mains notes

• Discuss why the AoA's de minimis base period is problematic and evaluate India's proposals to recalibrate it.
• Analyse how India balances IP protection with public health, citing compulsory licensing and the TRIPS waiver proposal.
• Evaluate the impact of TRIMS on India's industrial policy; how can production-linked incentives be designed within WTO rules?
• Critically assess the implications of the Appellate Body crisis for the multilateral trading system and suggest ways to restore confidence.
• Examine India's negotiating strategy at MC13 on agriculture, fisheries, digital trade and dispute settlement. How does it reflect India's economic interests and South-South solidarity?

Quick Facts

• The WTO entered into force on 1 January 1995, succeeding the GATT.
• India spends around 3 lakh crore (roughly US$40 billion) annually on MSP and food subsidies to support more than 800 million beneficiaries.
• The de minimis limit for trade-distorting support is 10 % of production for developing countries and 5 % for developed countries.
• TRIPS flexibilities include compulsory licensing and parallel imports; least developed countries have until 2034 to implement pharmaceutical patents.
• TRIMS prohibits local content requirements; India restructured its solar policies after losing DS456.
• The DSU's Appellate Body has been non-operational since December 2020 due to U.S. obstruction.
• India and the U.S. settled several long-standing WTO disputes in 2024, including DS541 and DS547.
• India is not part of the Joint Statement Initiative on e-commerce and advocates ending the moratorium on customs duties on electronic transmissions.

UPSC Previous Year Questions (Selected)

Illustrative questions show how the UPSC tests knowledge of WTO agreements:

1. 2012 Mains: Discuss the three pillars of the Agreement on Agriculture and explain why developing countries find the de minimis formula restrictive. Answer: The pillars are market access, domestic support and export competition. The de minimis formula caps trade-distorting support at 10 % of output value using 1986-88 prices; inflation and changed production patterns shrink policy space for food security.
2. 2015 Prelims: Which measures are prohibited under TRIMS? (a) Local content requirements, (b) Trade-balancing requirements, (c) Research subsidies. Answer: (a) and (b) are prohibited; research subsidies are not.
3. 2018 Mains: How does the Doha Declaration on TRIPS and Public Health help ensure access to medicines? Answer: It confirms that members may issue compulsory licences and allow parallel imports to address public health needs and clarifies that TRIPS should not prevent measures to protect health.
4. 2023 Prelims: Consider the following statements about the WTO DSU: 1. Panel reports are adopted automatically unless all members object. 2. Appeals relate only to legal questions. 3. Members can retaliate immediately after a ruling. Which statements are correct? Answer: Statements 1 and 2 are correct. Retaliation is permitted only if the losing party fails to comply within a reasonable period.

Practice MCQs

1. Which box under the Agreement on Agriculture contains non-distorting support and is unlimited?
   1. Green Box
   2. Amber Box
   3. Blue Box
   4. De minimis support
2. The TRIPS Agreement allows which of the following to ensure access to medicines?
   1. Patent evergreening
   2. Compulsory licences
   3. Exclusive marketing rights
   4. Trade-balancing requirements
3. The RoDTEP scheme in India was introduced in response to which WTO dispute?
   1. DS430 - Poultry imports
   2. DS456 - Solar cells
   3. DS541 - Export subsidies
   4. DS582 - ICT duties
4. In the WTO dispute settlement process, what happens if a party appeals but the Appellate Body is non-operational?
   1. The panel report is adopted by default
   2. The appeal is automatically dismissed
   3. The panel report is not adopted until the appeal is resolved
   4. The dispute goes to the International Court of Justice
5. India has not joined the Joint Statement Initiative on e-commerce because it:
   1. Opposes any digital trade rules
   2. Wants to protect policy space and tax revenues
   3. Has already committed to global e-commerce rules
   4. Has no domestic digital industry

Answer key: 1 A, 2 B, 3 C, 4 C, 5 B.

Frequently Asked Questions (FAQs)

Why is India pushing for a permanent peace clause?

India's food security programmes provide subsidised grain to hundreds of millions of people. Under current rules, these programmes risk breaching subsidy limits. A permanent peace clause would shield them from legal challenges, ensuring that livelihood policies are not constrained by outdated reference prices.

How does India benefit from TRIPS flexibilities?

India's patent law allows compulsory licences and prevents evergreening, enabling domestic firms to produce affordable generic drugs. This supports public health in India and other developing countries and fosters a competitive pharmaceutical industry.

What is the Multi-Party Interim Appeal Arbitration Arrangement?

It is an agreement among 57 WTO members to arbitrate appeals under Article 25 of the DSU while the Appellate Body is non-functional. Parties agree to use a pool of former Appellate Body members as arbitrators. India is not a participant but supports restoring the regular appellate system.

How does TRIMS affect India's "Make in India" programme?

TRIMS prohibits tying investment incentives to the use of domestic inputs or export performance. India can still promote manufacturing through incentives open to all firms, such as production-linked incentive schemes, but cannot require foreign firms to source a fixed proportion locally.

What is India's stand on e-commerce and digital trade?

India has refrained from joining plurilateral e-commerce talks because it wants flexibility to regulate data, tax cross-border digital transactions and support domestic firms. It also questions the moratorium on customs duties on electronic transmissions, which may erode developing countries' revenue bases.

Why are fisheries subsidies negotiations important?

Harmful fisheries subsidies contribute to overfishing and depletion of marine stocks. India supports disciplines that target illegal and unregulated fishing but demands long transition periods and exemptions for small fishers. It argues that large industrial fleets in rich countries cause most damage and should bear the burden of reforms.