Weekly Current Affairs Prelims (19th to 25th Aug, 2019)

WTO – Developing Country Status

Weekly Current Affairs Prelims (19th to 25th Aug, 2019)

(Info graphic Summary at the end)

 

Topic : First Monument of a Glacier – Okjokull Glacier

Topic in Syllabus: Ecology & Environment

 

Context:

First Monument of a Glacier - Okjokull Glacier

  • Iceland honours the passing of Okjokull, its first glacier lost to climate change.
  • A bronze plaque was unveiled in a ceremony to mark Okjokull — which translates to “Ok glacier” — in the western Iceland.
  • It will be the first monument to a glacier lost to climate change anywhere in the world.

 

Background:

  • A glacier is defined as a persistent mass of compacted ice that accumulates more mass each winter than it loses through summer melt and moves constantly under its own weight. When this ceases to be the case, the remains are known as “dead ice”.
  • According to a study published by the International Union for Conservation of Nature (IUCN), nearly half of the world’s heritage sites could lose their glaciers by 2100 if greenhouse gas emissions continue at the current rate.

 

Okjokull Glacier

  • Okjokull Glacier is now dead
  • Okjokull, also called OK (jokull is Icelandic name for “glacier”), was part of the Langjökull group.
  • The glacier was officially declared dead by the Icelandic Meteorological Office when it was no longer thick enough to move.
  • What once was glacier has been reduced to a small patch of ice atop a volcano.
  • The people attending the ceremony will walk up the volcano northeast of the capital Reykjavik to lay a plaque which carries a letter to the future.
  • The plaque is also labelled “415 ppm CO2”, referring to the record level of carbon dioxide measured in the atmosphere in May 2018.

 

Vatnajokull Glacier

  • The Iceland’s Vatnajokull National Park was recently added to UNESCO’s World Heritage List, is situated in the largest ice cap in Europe i.eVatnajokull Glacier.
  • Vatnajokull National Park is situated in the south Iceland and was officially formed in 2008 by joining together Jokulsargljufur and Skaftafell National Parks.
  • It is the largest National Park in Europe and covers an area of 12,000 square kilometers.
  • It is situated atop of OK volcano in the west central Iceland.

Vatnajokull Glacier

 

Significance:

  • An ice-free Iceland represents more than just an identity crisis for Icelanders.
  • If global leaders don’t take action to slow rising temperatures, the melting of Greenland’s ice sheet alone could raise sea-levels more than five feet in the next 200 years.
  • Enormous quantities of methane slumbering in the Arctic permafrost are threatening to come alive as record temperatures fry the poles.
  • Two fast-melting glaciers in Antarctica are holding back enough sea ice to flood oceans with another 11 feet of water.

 

Sample Question:

In which country, a first intact head of a gigantic adult wolf whichdied about 32,000 years ago and was preserved in permafrost has beenfound?

(a) Norwegian Arctic

(b) Denmark Arctic

(c) Iceland Arctic

(d) Russian Arctic

 

Answer: d


Topic : Direct Tax Code

Topic in Syllabus: Indian Economy

 

Context:

Direct Tax Code

Recently, the panel on re-writing the direct tax legislation has submitted its report and a draft of the new proposed version of the Income-tax law to the Government.

The panel on the Direct Tax Code (DTC) has suggested a rejig of personal income tax slabs, roadmap of corporate tax rate cut to 25% for companies, provisions to reduce compliance burden by simplification of procedures and litigation management. It has also suggested some changes in Dividend Distribution Tax and Minimum Alternate Tax.

 

Minimum Alternate Tax

  • MAT is calculated at 18.5% on the book profit (the profit shown in the profit and loss account) or at the usual corporate rates, and whichever is higher is payable as tax.
  • All companies in India, whether domestic or foreign, fall under this provision. MAT was later extended to cover non-corporate entities as well.
  • MAT is an important tool with which tax avoidance can be prevented.

 

Background

The Task Force, initially headed by former CBDT Member (Legislation) Arbind Modi and later on by Akhilesh Ranjan, was constituted in November 2017 in order to review the Income-tax Act and to draft a new Direct Tax Law.

 

Key Suggestions

  • Litigation Management: Amendments in Section 147 and Section 148 of the I-T Act, empowering the tax officer to reopen assessment cases based on predefined criteria.
  • The I-T officer can go back up to six years to scrutinise the books of accounts of the assessees.
  • Currently, these provisions are prone to the interpretation. 40% of litigation happens because assessees challenge reasons given by officers for reopening cases.
  • Increasing the threshold limit for opening cases: Currently it is Rs 1 lakh and above. Also, the pre-defined criteria to select cases for scrutiny will be tightened.
  • Reopening cases should be supported by proper reasoning. Often cases are reopened due to information received from banks, financial institutions, and other sources.
  • Assessment proceedings should be made faceless, and an option be allowed to the public to seek clarifications on tax matters from CBDT.
  • Reduced Burden of Tax Compliance:Tax compliance based on global trends and best practices. This is expected to increase clarity among taxpayers and also expand the tax base.
  • Use of Artificial Intelligence (AI)in the tax-compliance and administration process.
  • Proposal of introducing collaborative compliance in direct tax administration, which would integrate data from banks, financial institutions and the Goods and Services Tax (GST) network to ensure that the scope of taxable income increases.

 

Personal Income Tax:

  • A rejig in rates between 5% to 20%.
  • Currently, the personal income tax structure has three categories based on age — for people below the age of 60, for people above the age of 60 but less than 80, and the third for people of 80 years and above.
  • The first category has four slabs –
    • nil tax on income up to Rs 2.5 lakh;
    • 5% tax rate for income between Rs 2.50 lakh and Rs 5 lakh,
    • 20% tax rate for income between Rs 5 lakh and Rs 10 lakh and
    • 30% for income above Rs 10 lakh.
  • The second category has the basic slab of Rs 3 lakh while
  • the third category has ‘nil’ rate for income up to Rs 5 lakh.

Corporate Tax to be 25%

The government will be cutting down the corporate tax rate gradually to 25% for all companies, including the large ones with an annual turnover of over Rs 400 crore.

Merits:

  • The government has, over the last five years, trimmed the rate to 25% from 30% in a phased manner for 99.3% of companies.
  • However, the 0.7% large companies that do not enjoy this benefit make up for almost 80% of the total corporate tax collection and are subject to as much as 30%.
  • The proposed corporate tax reduction will apply to both large local as well as foreign companies that are present in India without a subsidiary and are taxed at 40%.
  • Unlike domestic firms, foreign companies pay a higher corporate tax rate, but do not have to pay dividend distribution tax that is applicable to domestic companies.
  • If implemented, the tax rate reduction could prove to be a big fiscal stimulus for the corporate sector reeling under a sharp economic downturn.

 

Significance:

  • The proposals in the draft code are aimed at bringing more certainty to taxation of personal and corporate income and capital gains, and at bringing the gist of numerous judicial pronouncements made since 1961, when the current tax law came into force, in one place for easy reference.
  • It could improve ease of doing business and reduce the compliance burden as well as tax disputes.
  • While the new direct tax law will bring to force new taxation concepts as well as schemes to reduce litigation, the actual tax rate reduction may be executed as part of annual Finance Bills, depending on the revenue buoyancy of the government from time to time.

 

Sample Question:

Which of these can’t be claimed as deduction by individual taxpayers?
a. Accidental death and disability insurance.
b. Health insurance of self and family.
c. Preventive health check-ups of self and family.
d. none

Answer: a.

Though accidental death and disability insurance is very important, the premium paid for this cover cannot be claimed as a deduction by an individual.


Topic : Amazon Rainforest

Topic in Syllabus: Indian Geography

 

Context:

Amazon Rainforest

According to the data from Brazil’s National Institute for Space Research (INPE), the Amazon Forests in Brazil has experienced 74,155 fires since January 2019.

Moreover, there is nothing abnormal about the climate this year or the rainfall in the Amazon region, which is just a little below average.

 

Amazon Rainforests:

  • These are large tropical rainforest occupying the drainage basin of the Amazon River and its tributaries in northern South America and covering an area of 6,000,000 square km.
  • Tropical forests are closed-canopy forests growing within 28 degrees north or south of the equator.
  • They are very wet places, receiving more than 200 cm rainfall per year, either seasonally or throughout the year.
  • Temperatures are uniformly high – between 20°C and 35°C.
  • Such forests are found in Asia, Australia, Africa, South America, Central America, Mexico and on many of the Pacific Islands.
  • Comprising about 40% of Brazil’s total area, it is bounded by the Guiana Highlands to the north, the Andes Mountains to the west, the Brazilian central plateau to the south, and the Atlantic Ocean to the east.

 

Savannas:

  • Savanna is a vegetation type that grows under hot, seasonally dry climatic conditions and is characterized by an open tree canopy (i.e., scattered trees) above a continuous tall grass understory (the vegetation layer between the forest canopy and the ground).
  • The largest areas of savanna are found in Africa, South America, Australia, India, Myanmar (Burma)–Thailand region in Asia, and Madagascar.

 

Reason Behind the Fires:

  • Natural Cause:The dry season creates favourable conditions for the use and spread of fire.
  • Man-made causes:Since the 1960s, the Amazon has witnessed large-scale deforestation because of cattle-ranching, logging, power projects, mining and farming.
  • The Amazon has large reserves of gold and other minerals.
  • Immediate Cause: Environmentalists have blamed farmers setting the forest alight to clear land for pasture.

Concerns:

  • The President of Brazil has repeatedly said that he believes that Brazil should open the Amazon up to business interests, to allow mining, agricultural and logging companies to exploit its natural resources.
  • Further deforestation could lead to Amazon’s transformation from the world’s largest rainforest to a savanna, which would reverse the region’s ecology.
  • The United Nations and the international community need to take serious measures to save the forests.

 

Significance:

  • The Amazon rainforest is a repository of rich biodiversity and produces approximately 20% of oxygen in the Earth’s atmosphere.
  • It is home to many indigenous communities, their life depends on the forests.
  • Additional Carbon Emissions: Carbon intake by the Amazon basin matches the emissions released by nations in the basin. The burning of forests, therefore, implies additional carbon emissions.
  • Impact on Water Cycle: Amazon rainforest has the ability to produce at least half of the rain it receives. The rain produced by the Amazon travels through the region and even reaches the Andes mountain range.

 

Sample Question:

In which forest we can see deforestation to large extent?
a) Atlantic forest
b) Amazon forest
c) Borneo forest
d) Sumatra forest

Answer: b

Explanation: According to World Wildlife report Amazon forest is the region where we can see more number of deforestation than any other region. Amazon forest which is the world’s largest forest is also the site of the biggest projected loss due to deforestation.


 

Topic : India biggest emitter of sulphur dioxide

Topic in Syllabus: Ecology & Environment

 

Context:

India biggest emitter of sulphur dioxide

A new report by Greenpeace India shows the country is the largest emitter of sulphur dioxide in the world, with more than 15% of all the anthropogenic sulphur dioxide hotspots.

This was detected by the NASA OMI (Ozone Monitoring Instrument) satellite.

 

Reason:

The vast majority of coal-based power plants in India lack flue-gas desulphurization technology to reduce air pollution.

 

Emission Hotspots:

The largest sulphur dioxide emission hotspots have been found in Russia, South Africa, Iran, Saudi Arabia, India, Mexico, United Arab Emirates, Turkey and Serbia.

 

In India:

The Singrauli, Neyveli, Talcher, Jharsuguda, Korba, Kutch, Chennai, Ramagundam, Chandrapur and Koradi thermal power plants or clusters are the major emission hotspots in India.

 

Steps Taken:

  • Of the world’s major emitters, China and the United States have been able to reduce emissions rapidly.
  • They have achieved this feat by switching to clean energy sources.
  • China, in particular, has achieved success by dramatically improving emission standards and enforcement for sulphur dioxide control.
  • In a first step to combat pollution levels, the MoEFCC introduced, for the first time, sulphur dioxide emission limits for coal-fired power plants in December 2015.
  • But the deadline for the installation of flue-gas desulphurization (FGD) in power plants has been extended from 2017 to 2022.

 

NASA data

  • Air pollutant emissions from power plants and other industries continue to increase in India, Saudi Arabia and Iran, the report says.
  • In Russia, South Africa, Mexico and Turkey, emissions are currently not increasing — however, there is not a lot of progress in tackling them either.

 

Sample Question:

Taj Mahal at Agra may be damaged by:

(a) Sulphur dioxide

(b) Chlorine

(c) Hydrogen

(d) Oxygen

 

Answer: a

 


 

Topic : Alien species

Topic in Syllabus: Science & Technology

 

Context:

Alien species

  • In the past 15 years, India has faced at least 10 major invasive pest and weed attacks.
  • When pests, weeds, viruses and bacteria invade, they can wipe out food crops, alter the ecology, deplete water levels and cause diseases.

 

 Fall Armyworm

  • The most recent was the fall armyworm that destroyed almost the entire maize crop in the country in 2018.
  • India had to import maize in 2019 due to the damage caused by the pest in 2018.

 

Reasons:

  • It is difficult to establish how pests and weeds are entering India.
  • What’s inexplicable is that there is no institutional mechanism to even probe these invasions.
  • The Union Ministry of Agriculture and Farmers Welfare (MAFW), which is responsible for the control of invasive pests and weeds, has not investigated any invasions till date.

 

Testing:

  • Invasive pests and weeds can enter a country by flying over the border or by simply growing gratuitously. In such cases, checking their entry is difficult.
  • But when they land up at airports and dockyards in cargos of imported grain or with items carried by tourists, the authorities should be able to weed them out.
  • For this reason countries have animal, plant and health quarantine facilities at all transborder entry points.
  • India, however, seems to have let its guard down of late, especially with regards to agricultural products, which form the bulk of its imports.

 

Measures:

  • When an agricultural product arrives, customs officials check if it has a phytosanitary certificate or not.
  • This certificate, showing that the product is without any pest or weed infestation, is issued by the government of the exporting country.
  • If the product is certified, it is cleared by Quarantine system after a sample test.
  • If the product has not been given a phytosanitary certificate, the foreign government is obliged to inform India, in which case Quarantine system fumigates the product with methyl bromide and issues a phytosanitary certificate.
  • The fumigation is for two to 48 hours and depends upon the volume and quality of the product, and the country of origin. The company is charged for the fumigation.

 

Check on agri imports

  • Import of agricultural products is governed by the Destructive Insects and Pests Act, 1914.
  • The country has 108 plant quarantine centres located at major airports, seaports and transborder railway stations.
  • The check posts at these quarantine centres are under the control of the Central Board of Indirect Taxes and Customs (CBITC), which works in close coordination with DPPQS.

 

Suggestions:

  • There should be a war room-like cell to catalogue, monitor and investigate the influx of exotic pests and weeds.
  • In fact, India’s quarantine system needs an overhaul.
  • Nepal, for instance, stopped the entry of agriculture products from India without a phytosanitary certificate in June after the outbreak of acute encephalitis syndrome in Bihar earlier this year.

 

Way forward

  • With increasing global trade and movement, countries worldwide are becoming serious about alien pests and microbes.
  • At a time when bioterrorism is a global reality, it is imperative that we get our quarantine system in order.

 

Sample Question:

What do invasive species do when in a new area?

  1. Die because they cannot survive
  2. Breed with existing species
  3. Get in balance with the existing food chains
  4. “take over” the area and edge out the native species

 

Answer: d

 


 

Topic : Micro credit model

Topic in Syllabus: Indian Economy

 

Context:

Microcredit model

Microcredit has gained much traction as a tool for ensuring the welfare of the most impoverished in society, and boosting development alongside.

 

Microcredit:

  • Microcredit refers to the granting of very small loans to impoverished borrowers, with the aim of enabling the borrowers to use that capital to become self-employed and strengthen their businesses.
  • Loans given as microcredit are often given to people who may lack collateral, credit history, or a steady source of income.
  • Microcredit agreements frequently do not require any sort of collateral, and sometimes may not even involve a written agreement, as many recipients of microcredit are often illiterate.
  • When borrowers demonstrate success in paying their loans on time, they become eligible for loans of even larger amounts, allowing them to finance expansion.

 

The idea behind

The core idea of microcredit is that a small loan will provide access to the larger economy to people who typically live outside the scope of the institutions on which the mainstream economy rests.

Such a loan is meant to enable them to commence with productive activities, and will give them the initial boost required to gain entry into an industry, after which production will be able to sustain itself, and the loan will gradually be repaid.

 

Part of Microfinance

  • Microcredit falls under the larger umbrella of microfinance, financial services for individuals who don’t have access to traditional services of this kind.
  • Microfinance activities usually target low-income individuals, with the goal of helping them to become self-sufficient. In this way, microfinance activities have an aim of poverty alleviation as well.
  • An example of a microcredit institution is the Grameen Bank in Bangladesh, founded in 1976 by Mohammed Yunus.
  • The Grameen Bank offers small loans to the impoverished without asking for collateral, and was the pioneering institution in the realm of microfinance.
  • The bank has 8.4 million followers, 97% of whom are women, and the bank has repayment success rates between 95 to 98 percent.

 

Microcredit institutions are failing in India

Reasons:

  • The primary reason for the lackadaisical effects of microcredit is the stringent repayment schedule offered by most microcredit institutions.
  • Since most borrowers to whom microcredit is given have little to no credit history as a result of their exclusion from traditional systems of credit.
  • Hence institutions offering microcredit are unable to judge the risk associated with lending to certain borrowers, and cannot be sure what the risk of them defaulting will be.
  • To lower the risk of defaulting, microcredit lenders therefore resort to repayment schedules that demand an initial repayment that is almost immediate, to which borrowers must adhere.
  • The effect of this is that borrowers are unable to use the loans on investments that will take some time to be fully realized.
  • The borrowers instead are forced to use the loans they receive on short term investments that only boost production to an extent, and the overall growth of their incomes remains meager.

 

What are the other applications of microcredit?

  • Conventionally, microcredit has been used mainly for entrepreneurs to begin production and attain self-sufficiency.
  • Small microcredit loans can allow rural labourers –those who are employees, as opposed to entrepreneurs, who are employers– to migrate to urban areas to find work during the lean season, when there is no work to be found on farms.
  • Those who migrated temporarily during this season experienced increased spending in both food and non-food areas, and increased their calories consumed.
  • Microcredit can be used in situations where seasonal factors cause drops in income to overcome these “seasonal credit crunches” and avoid taking decisions which cause people long-term negative impacts.
  • They can also be used to dampen the effects of shocks like floods by providing people with a form of insurance that both increases production before the shock and provides a safety net after.

 

Conclusion

  • Microcredit has a vast range of applications for poverty alleviation and general development, but existing systems require reform in multiple areas to allow for unfettered benefits that last.
  • Furthermore, in areas were the application of microcredit is relatively new, microcredit systems must be carefully evaluated before they are put into place, so as to enable the greatest benefit from such institutions.

 

Sample Question:

Which of the following groups of people does microfinancing help the most?

a. Impoverished women

b. Children

c. Village elders

d. International banks

 

Answer: a


Topic : Indian Indentured Labourers

Topic in Syllabus: Indian History

 

Indentured labourers during colonial period

Indian Indentured Labourers

  • The migration of indentured labour—bonded labour—is a lesser known part of the history of slavery and that of Indian migration.
  • Indentured servitude from India started in 1834 and lasted up till 1922, despite having been officially banned in 1917 by British India’s Imperial Legislative Council after pressure from freedom fighters like Mahatma Gandhi.

 

UNESCO recognition

  • In 1998, UNESCO designated August 23 as the International Day for Remembrance of the Slave Trade & Abolition to commemorate “the tragedy of the slave trade in the memory of all peoples”.
  • UNESCO also established an international, intercultural project called ‘The Slave Route’ to document and conduct an analysis of the interactions to which it has given rise between Africa, Europe, the Americas and the Caribbean.

 

Indentured migrant labour from India:

  • From 1830 to 1860 the British, French and the Portuguese during the colonization of India prohibited slavery that was implemented by several acts under their individual domains.
  • In Europe in the 1820s, there was a new kind of liberal humanism where slavery was considered inhuman.
  • It was following this ideology that the colonizers stopped slavery in India, only to replace it with another form of bonded servitude and euphemistically term it ‘indentured labour’.
  • This practice of indentured labour resulted in the growth of a large diaspora with Indo-Carribean, Indo-African and Indo-Malaysian heritage that continue to live in the Carribean, Fiji, Réunion, Natal, Mauritius, Malaysia, Sri Lanka etc.

 

No change in colonial attitude

  • The abolition of slavery failed to change the mindset of the planters which remained that of ‘slave owners’.
  • They were ‘accustomed to a mentality of coerced labour’ and desired ‘an alternative and competitive labour force which would give them same type of labour control that they were accustomed to under slavery.
  • After ruining the agriculture business in India, they exploited the mass unemployment that had hit small farmers the hardest.
  • The worst affected regions were the modern-day states of Jharkhand, Bihar, Uttar Pradesh, Tamil Nadu and Andhra Pradesh.
  • They were poor farmers and the indenture lasted for 10 years. They were paid monthly wages and were living on the plantations in these colonies.

 

Family migration

  • Initially, single men were selected for indenture but the British Parliament decided to encourage family migration to provide “stability”.
  • Encouraging family migration hardly arose out of concern for the welfare of these bonded migrants.
  • According to the terms of indentured labour, the migrants had the right to return after finishing their 10 year terms of indenture.
  • The British were not interested in having them return to their homeland because it wouldn’t be a good return on their investment.
  • For every 100 males who were put on board the ships that transported the migrants, 40 were women, in an attempt to maintain the sex ratio.
  • Due to the skewed sex ratios, many men went on to settle permanently in these colonies and have families.

 

Indentured labour was Slavery

  • The British attempted to disassociate indentured labour from slavery by calling it an “agreement” when recruiting Indians who would be willing to migrate, to try and hide the true nature of the practice.
  • The British recruited young, single men from regions that had witnessed a collapse of the local agriculture business and were facing shortages and severe famine.
  • Widows who faced socio-cultural stigma wanted to migrate to these new lands to live life on their own terms.
  • According to Mishra, many urban women who were single and employed in various professions also chose to travel to get a fresh start.
  • Most aspiring migrants were misled about the work they would have to engage in, the wages they would receive, the living conditions and the places they were travelling to.

 

Sea voyage perilous for indentured Indian migrants:

  • The journey by sea was long and traumatic, with travel taking approximately 160 days to reach the Caribbean colonies.
  • The comfort of the migrants was not even a consideration for the British and the travellers were loaded onto cargo cargo ships that were not meant to carry passengers.
  • Many of these migrants had never even left their small villages, let alone engaged in travel to such distant lands.
  • On board the ships, there were cramped quarters and little space.
  • Many migrants were forced to sit on open decks that left them vulnerable to direct, harsh weather at sea. Sanitation was poor and there was little access to food and medication.
  • These conditions were particularly difficult for small children and there was high mortality. Those who died on board were simply thrown off the ships into the sea.
  • The migrants also faced physical and sexual abuse at the hands of the European ship captains and there was no means of escape except jumping off the ship into the water.
  • The migrants called it ‘crossing the kala pani ’.
  • Indians were not familiar with the sea and the (cultural) association with sea journeys was that crossing the sea would mean breaking free from attachments in the homeland.

 

Indentured migrants reached far-flung colonies:

  • The migrants took their culture with them through their language, food and music and the meagre belongings that they were permitted to carry.
  • Once they reached these colonies, they created their unique socio-cultural ecosystems while they were limited to living in the confines of these large plantations.
  • Locals in the Mauritius, Suriname and Fiji opposed the presence of these migrants.
  • After their terms of indenture were over, some migrants returned to India while many stayed back.
  • Those who did stay back did so because they had rebuilt their lives and families in these colonies and were poor and had not been able to maintain contact or connections with their families and country.
  • Their families had forgotten them and there was a cultural gap that had resulted due to the years the migrants had spent overseas.
  • For some others, however, the cultural stigma of having a significant amount of time overseas and untouchability associated with the journey, resulted in a denial of acceptance once they returned to India.

 

Commemorated around the world:

  • Along with UNESCO designating August 23 as the International Day for Remembrance of the Slave Trade & Abolition, several memorials exist around the world in commemoration of Indian indentured labour.
  • In Mauritius, the Immigration Depot or the AapravasiGhat in Port Louis was declared a UNESCO World Heritage site in 2006 to mark its importance in world history.
  • Mauritius was the first British colony to receive indentured migrants and records indicate that approximately half a million indentured Indians arrived at the Immigration Depot between 1849 to 1923.
  • On the banks of the Hooghly near the Port of Kolkata, the Suriname Ghat is named after one of the colonies to where ships would depart from Kolkata.
  • At the Suriname Ghat, the Mai-Baap Memorial is an unassuming metal structure that was unveiled by India’s former Minister for External Affairs, Sushma Swaraj in 2015.
  • The statue is a replica of the Baba and Mai monument in Paramaribo , Suriname, that marks the first Indian migrants in Suriname.

 

Sample Question:

Which of the following has not been implemented through any legislation at the National level?

(A) Joint Management Council

(B) Workers’ Participation in Management

(C) Recognition of Trade Unions

(D) None of the above

 

Answer: D

 


 

Topic : WTO – Developing Country Status

Topic in Syllabus: International Affairs

 

Context

WTO – Developing Country Status

President Trump earlier this month attacked the World Trade Organization (WTO) for allowing countries such as India and China to engage in unfair trade practices that affect American economic interests.

 

Issue:

  • While addressing a gathering he took issue with the “developing country” status enjoyed by India and China at the WTO.
  • He argued that these countries are not developing economies, as they claim to be, but instead grown economies that do not deserve any preferential trade treatment from the WTO over developed countries such as the U.S.

 

The “developing country” status

  • The “developing country” status allows a member of the WTO to seek temporary exception from the commitments under various multilateral trade agreements ratified by the organisation.
  • It was introduced during the initial days of the WTO as a mechanism to offer some respite to poor countries while they try to adjust to a new global trade order marked by lower barriers to trade.
  • Countries such as India and China, while seeking exception from various WTO agreements, have argued that their economic backwardness should be considered when it comes to the timeline of implementation of these agreements.
  • The issue of farm subsidies, for instance, is one over which rich and poor countries have had major disagreements.

 

Granting of the status

  • The WTO does not formally classify any of its members as a developing country.
  • Individual countries are allowed to unilaterally classify themselves as developing economies.
  • So, as many as two-thirds of the 164 members of the WTO have classified themselves as developing countries.
  • Since the WTO allows countries to unilaterally classify themselves as “developing”, many countries have been happy to make use of this freedom.
  • Even many developed economies such as Singapore and Hong Kong which have per capita income levels higher than the U.S., have made use of the provision to classify themselves as growing economies.

 

Benefits:

  • Developing countries such as India and China, however, as earlier mentioned, can seek to delay the implementation of these WTO agreements owing to their disadvantaged economic status.
  • They can continue to impose tariffs and quotas on goods and services in order to limit imports and promote domestic producers who may otherwise be affected adversely by imports that are lower in price or better in quality.
  • India, for instance, subsidises agriculture heavily in the name of food security in order to protect its farmers.
  • While local producers may be protected by protectionist barriers such as tariffs, consumers in India and China will have limited access to foreign goods.

 

Is the U.S. justified in criticizing the WTO?

  • While the “developing country” status was supposed to help poor countries ease gradually into a more globalised world economy, it has had other unintended effects.
  • Further, countries such as China justify that while their per capita income level has increased many-fold over the last few decades, these are still far below that of high income levels in countries such as the U.S.
  • Thus, Mr. Trump may have a prima facie case in urging the WTO to address the issue of how countries arbitrarily classify themselves as “developing” to justify raising trade barriers.

 

Effects:

  • This is not to say that WTO rules always work to the advantage of developing countries alone.
  • Developed countries such as the U.S. have tried to force poorer countries to impose stringent labour safety and other regulations that are already widely prevalent in the West.
  • These regulations can increase the cost of production in developing countries and make them globally uncompetitive.
  • Developing countries further view the introduction of labour issues into trade agreements as beyond the scope of the WTO, which is primarily supposed to be an organisation dealing with trade.

 

Conclusion

  • Since developing countries are likely to oppose any efforts to stop them from protecting their domestic economic interests, global trade rules are unlikely to experience any drastic reform any time soon.
  • The inability of the WTO to rein in global trade tensions has raised questions about its relevance in today’s world.
  • This is particularly so given that global tariff rates over the years have dropped more due to bilateral trade agreements rather than due to multilateral trade agreements brokered at the WTO.
  • Further, the dispute resolution mechanism of the WTO, which can pass judgments on disputes, lacks the powers to enforce them as the enforcement of decisions is left to individual member states.
  • While initially envisaged as a global body to promote free trade, the WTO has now deteriorated into a forum where competing governments fiercely try to protect their narrow interests.

 

Sample Question:

Does the WTO come with its own institutional framework?

(a) No, the WTO depends on the relevant frameworks of national governments

(b) No, the WTO provides certain institutional arrangements but only on an ad hoc basis

(c) Yes, the WTO provides a certain institutional framework which changes depending on the nature of free trade agreements

(d) Yes, the WTO provides a common institutional framework for the implementation of free trade agreements

 

Answer: d


 

Weekly Current Affairs Prelims (19th to 25th Aug, 2019)