Why in news?
- India’s recently adopted policy to curb opportunistic takeovers of domestic companies goes against the principles of the World Trade Organisation (WTO), the spokesperson of the Chinese Embassy in India said on 20th April 2020.
- This is the first response from the Chinese side after the Ministry of Commerce and Industry in an April 17 decision that imposed restrictions saying companies from countries that share borders with India can invest “only under the government route”.
Details of the response
- The additional barriers set by Indian side for investors from specific countries violate WTO’s principle of non-discrimination, and go against the general trend of liberalisation and facilitation of trade and investment.
- More importantly, they do not conform to the consensus of the G20 leaders and Trade Ministers to realise a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, and to keep our markets open.
- The Indian policy revision is meant for sectors and enterprises other than defence, space, atomic energy and sectors and activities “prohibited for foreign investment”.
- It was understood that the Indian decision was a response to the news of an incremental purchase of shares in HDFC by the People’s Bank of China.
- The Chinese spokesperson invoked the principle of free market economy.
Criticisms of the move
- Analysts have pointed out that the amended policy brings every kind of Chinese investors to India within the ambit of government approval reducing the space for private business negotiations.
- The decision would face difficulties, especially if the government tried to attribute nationality to venture capital funds.
World Trade Organisation (WTO)
- The World Trade Organization (WTO) is an intergovernmental organization that is concerned with the regulation of international trade between nations.
- It is the largest international economic organization in the world.
- The headquarters of the World Trade Organization is in Geneva, Switzerland.
- The WTO deals with regulation of trade in goods, services and intellectual property between participating countries by providing a framework for negotiating trade agreements and a dispute resolution process aimed at enforcing participants’ adherence to WTO agreements, which are signed by representatives of member governments.
- The WTO prohibits discrimination between trading partners, but provides exceptions for environmental protection, national security, and other important goals.
- Trade-related disputes are resolved by independent judges at the WTO through a dispute resolution process.