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By AMANULLAH BASHAR
Oct 06 - 12, 2003
The Agriculture, Manufacture, Trade, Market Accessibility and the movement of the professionals are the areas where a consensus has yet to be developed among the member countries prior to implement the World Trade Organization (WTO) regime with effect from January 1, 2005.
Currently, the subsidy on agriculture products by the developed countries is the burning issue for the ministerial council of the WTO regime, as some 90 countries have put strong resistance in the recently concluded Cancun conference on the un-even playing field between the developed and the under-developed nations especially in agriculture sector.
Although the agriculture sector plays a key role in strengthening the economy, yet it is the manufacturing sector which strictly speaking draws a line between the developing and the developed world. The developed world has an edge over the developing nations because they have allowed massive subsidy to farming sector besides having a strong industrial base, which provides sustainable growth to the developed economies as compared to the developing nations.
As far as Pakistan's economy was concerned, primarily it's a combination of agriculture, manufacture and trade activities. Despite having a strong agriculture base, we have not yet fully utilized the available resources through proper management of land due to excessive politicization of the agriculture sector.
On the manufacturing side, the country has considerably developed areas like textile, sugar, cement, fertilizer and leather and leather products of which only textile and leather products have the export potentials. On the service sector, Pakistan has comparatively a small urban base which is capable to produce professionals in very little numbers hence this area deserves efforts for human resource development at a much larger scale to make any impact under WTO regime.
There is a genuine concern among the developing nations that as a result of globalization of the trade it will become more difficult for them to develop their own industrial or manufacturing sector in the post-WTO scenario. The manufacturing sector of the developing countries would not be able to combat the onslaught of the cheaper products produced by the developed countries hence the smaller economies may divert their interest from industry to trade.
However, people of different shade of opinion think in diversified manners. One of the senior businessmen while commenting on the ensuing WTO regime, suggested that instead of setting up of new export processing zones in Pakistan, the economic managers should think in term of setting up free trade zone. He substantiates his suggestion with the argument that the coming situation does not suit to the processing of raw material into finished products. It is wise to allow development of free trade zone instead of groping for developing the industrial projects or processing zones.
The opinion leaders in Pakistan while justifying the resistance put by the developing countries have said that actually we cannot treat the agriculture sector of the developed and the developing countries at par. The privileges got by the developed countries in terms of market accessibility and technological advancement impairs the efforts of the farming sector in the developing countries. Hence the farming sector of the developing countries justifiably deserves certain subsidies to survive in the face of trade onslaught by the developed countries after December 2004.
Another genuine concern of the manufacture sector is the increasing non-tariff barriers being created by the developed countries against the exportable items from the developing countries. The business community time and again invites attention of the government for initiating one window operation to deal with the issue of social compliance under the WTO regime on labor, environment and security areas.
Any delay on this issue could hamper the exports of various industrial sectors, which could easily touch $15 billion mark within next couple of years. At present, industrial units are confronted with double compliance, one from the government agencies and the other from foreign buyers, who do not certify a factory unless it meets their standards for quality, environmental and social standards. Any lag in compliance in the required standard deprives them of the export orders.
The setback at Cancun by developed countries' resistance to agricultural subsidies, did not allow a level playing field to the farmers in Pakistan and other developing countries.
In order to resolve the issue, the WTO was however working closely with the IMF and the World Bank on a proposal to set up a fund so that adjustment process was facilitated for the benefit of the agriculture in the affected countries.
The leaders of the business community in Pakistan have their own reservations and concerns regarding possible impact of the WTO on the national economy. They feel that the economy of Pakistan was facing problems by observance of WTO rules since 1995, leading to stagnation of country's economy. Under IMF and World Bank conditions, Pakistan had to raise higher revenue, which consequently created a situation where poverty level was on the rapid increase in Pakistan.
The actual problem at the Cancun started soon after the release of a WTO draft trade text, which called for an end to export subsidies on farm products of special interest to developing countries and their gradual elimination on other farm goods. Justifying the draft, the WTO says it aims at bridging gaps in positions that have held up progress towards new multilateral trade deal.
Large-scale exporters of the 17-strong Cairns Group, led by Australia, and a newly-formed group, of 21 developing countries, whose key figures include Brazil, India and China, have been pressing for the complete elimination of export subsidies.
The proposed draft calls on members to commit to "eliminate export subsidies for products of particular interest to developing countries" stating that a list of these products will be established.
For other agricultural products, members shall commit to reduce, with a view to phasing out, budgetary and quantity allowances for export subsidies. On another divisive issue, the draft proposes the launch of negotiations to draw up new global rules on government procurement and trade facilitation, which basically means easing customs procedures. But on two other more controversial matters — regulations on cross border investment and competition — the text merely calls for further consideration.
Developing countries had particularly objected to expanding the WTO mandate to include investment rules, fearing they would in the end benefit Western capitalists at the expense of their own industries.
In an instant reaction over the WTO draft regarding withdrawal of farm subsidies, 90 countries from Africa, Asian and other poor nations formed a block to demand wide concessions on farm reforms, adding pressure on rich nations at global trade talks.
The alliance came after a more powerful group of 21 developing nations, including India and Brazil, went on the offensive against the European Union and the US at World Trade Organization talks.
Pakistan has, however, assured implementation of World Trade Organization (WTO) rules in letter and spirit, said Supachal Panitchpakdi, the Director General of WTO, after a detailed meeting with leaders at top level during recent visit to Pakistan.
Though Pakistan has expressed its disappointment over what is being called failure of the Cancun conference to reach an agreement on the agricultural policy, yet hopes are alive that WTO would be able to be on the track soon. The issue of agriculture policy would soon be taken up for a review as soon as the currently on-going election process in different countries completes in due course of time. It may be mentioned that currently hot election campaigns are under way in the United States, France and India which are signatory to the WTO regime. Agriculture policy would again be reviewed to reach at a certain agreement prior to the inauguration of the global trade regime.
Besides, holding details meetings with President Pervez Musharraf and his team members, WTO Chief also had discussion on pros and cons of the WTO program with different opinion leaders within the government and outside the government including Sartaj Aziz, former minister for finance and foreign affairs.
Pakistan, however, pins great hopes that the spirit of give and take would prevail at future negotiations on the outstanding issues and it would be possible to implement the program according to the schedule i.e. 1st January 2005.
The failure of the Cancun conference to reach at a consensus regarding agriculture policy may hit the time schedule for implementation of WTO program. The Council of ministers of the WTO, however, has given no indication regarding any change in the schedule for implementation. The council seems firm on the given timeframe for implementation of the program.
The WTO Chief has however vowed to salvage the global trade talks despite setback at Cancun.
In his first post-Cancun pronouncements on the issue in Pakistan, WTO leader Dr. Supachal has said though he was disappointed with the Cancun discussions, he would move forward with the cooperation of all the member countries to salvage WTO. He was of the view that WTO has not failed. The Cancun conference was not the end of a round. In the past, WTO had seen many worse crises.
Before the year ends, meetings with the senior officials of the member countries would be called to discuss how to go ahead with the WTO's goals. In this respect an action plan is also under consideration on how to move forward.
In cooperation with the IMF and the World Bank, they propose to set up a fund to assist countries in making adjustments.
WTO officials feel that member countries would have to adopt a positive approach in a spirit of give and take to achieve success. WTO Chief chose Pakistan for his first public pronouncements because Pakistan had adopted a very positive approach during the Cancun parleys and had also announced its solidarity with the WTO.
The officials of the member countries have to work on how to put the negotiations on track by consulting their capitals. It is a challenging task but not daunting. In fact, the members need Doba development package to succeed and it is of no use talking away. The senior officials would contact their capitals on further to resolve the issues. They would work out a plan to move forward.
The WTO Chief has said that next year trade issues will be taken up with the member countries. He, however, expressed the hope that the countries would show flexibility in their approach. The countries, which, have acquired newly gained role at the Cancun talks must not forget that they have obligations too. They have to be reasonable and forward looking.
It is not the setback alone at the Cancun instead several gains have also been achieved by the WTO during the parleys. A major gain has been in the field of health allowing manufacture of cheap medicines by developing countries. This would benefit not only the producers, but also people of other developing countries. At the Cancun entry into the WTO by Nepal and Cambodia was another landmark. Besides other achievements some 700 projects of trade concessions have also been approved.
Choudhry Amir Hussain, Speaker of the National Assembly while speaking on the subject at a business conference said that Pakistan attaches great importance to the multilateral trading system to supplements its export-led strategy on the road to sustainable and equitable development and economic growth. The multilateral trading system offers all the nations the best opportunity to run world trade in a just and rules based system. The rules are there but we need to negotiate on making them more just and development-friendly.
There was no doubt that the WTO system was for freer trade and discouraged protectionist measures by the governments. However, this was lopsided at the moment because it was ostensibly designed to benefit developed countries since items such as agriculture products, textiles, etc, face not only non-tariff barriers but also high tariffs.
Unfortunately, the Cancun conference has been termed as the failure, and this result was not favorable for the progress in the WTO system, in general and development concerns in trade issues in particular.
However, this should not dishearten us as the previous negotiating rounds and specifically the last one, i.e. the Uruguay round, which ended in the birth of the WTO, was beset with numerous delays as well. Therefore, the Cancun setback perhaps would be temporary phase in the history of the WTO. Pakistan was an agrarian economy and the WTO regime by allowing agricultural subsidies to the developed countries rendered the playing field uneven. This handicaps the farmers who find it hard to compete with the foreign products in the domestic market what to speak about the international arena.
The concept of free trade in agriculture products does not really exist. A farmer from Mexico was quoted saying that one can buy corn imported from the United States three times cheaper than the corn crown in Mexico because of subsidies to American farmers.
With this background, the WTO has to ensure more trade friendliness for developing countries so it was not seen as benefiting some countries at the cost of others. It is generally said that the originally, the program for globalization of trade under WTO regime was authored by the developed nations. Obviously, the program must have been designed in a way that the maximum benefit of the program goes to the developed world as compared to the poor or developing countries.
However, the council of the ministers of the WTO regime claims that the program is aimed at bridging the yawning gap between the rich and the poor states and breaking down barriers to global trade. Contrary to these claims, the reality of the international trading system today does not match the rhetoric. Instead of open market, there are too many barriers that stunt, stifle and starve; UN Secretary General Kofi Annan in his written statement read at the opening of the Cancun conference made these remarks.
Prior to the establishment of the WTO in January 1995, the General Agreement on Tariffs and Trade (GATT) was the main operational treaty amongst the world nations dealing with trade rules and their implementation. Pakistan was one of the original 23 countries, who had signed GATT.
Special and Differential Treatment for Developing Countries is the concept of the exports of developing countries should be given preferential access to markets of developed countries and that developing countries and less developed countries need not reciprocate fully the concessions they receive. Less developed countries and developed nations also get longer time frames for phasing in new rules and lower levels of obligations. Such provisions are intended to assist at developing countries in capturing a greatest portion of the gains from trade.
Under GATT agreement, WTO members engaged in market access negotiations and consequently made commitments to eliminate reduce tariff rates and non-tariff measures applicable to trade in goods. These commitments have been recorded in the national schedules of tariff concessions that formed an integral part of the Package of Uruguay Round Agreement.
Pakistan pledged to bind about 38 percent of its tariff lines and equal installments over a 10 year period (1995-2005), virtually all agricultural tariffs have been bound and mostly at 100 per cent. Tariffs on tea, certain types of wheat, maize, cane and beet sugar and their products are bound at even higher rates i.e. 150 percent while the betel nuts are subject to binding of 200 percent.
Pakistan has been the victim of anti-dumping actions number of times since the implementation of WTO agreement. Pakistan has enacted its own legislation on anti-dumping; recently Pakistan imposed anti-dumping duty (27-33 percent) on imports of tin plate from South Africa. Recently NTC also applied provisional anti-dumping duty (96-50 percent) on imports from France and Indonesia. Pakistan has been enacted its countervailing and safeguards legislation to provide protection to domestic industry.
Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement provided a transitional period of five years for developing countries, which has already expired on December 1999. Pakistan has accordingly upgraded its legislation in different areas of IPRs, in conformity with the provisions of the TRIPS agreement through Patents Ordinance 2000, Registered Designs of Integrated Circuits 2000, Copyright Ordinance 2000 and Trademarks Ordinance 2001.
Out of 12 sectors as classified by WTO, Pakistan has made very limited commitments in six sectors namely business services, communications, construction, financial services, health and tourism.
In the area of market access, Pakistan is fairly comfortable in this negotiation, because our tariffs are relatively low, Pakistan hardly giving any subsidy, reliance on customs revenue has reduced drastically and constitutes only 15 percent of our total revenue. In order to get greater market access, Pakistan would like to see tariff reduction by other developing countries, reduction or elimination of peak tariffs of developed countries in products of export interest, most of the tariffs are otherwise very low and reduction of non-tariff barriers in all countries.
Pakistan is however supportive of the objectives of negotiations on improvement and clarification of WTO rules whereas some developed countries are reluctant to make concession in this area.