Understanding WTO framework
The future of trade liberalization
By HAROON MUJAHID
July 23 - 29, 2001
Together as we enter the new millennium, the great forces of
convergence and divergence influence our lives concurrently even more than ever
before. Yes, today we live in a paradox which needs elaboration as we together
live in two different realms, one globalization the other clash of
civilizations. We stand together dividedly united than ever before.
On one end, the human adventure on the super-highway of
Information Technology (IT) takes a quantum leap leaving behind the geographic
limits of metaphysics bringing the world all more closer than ever before. With
the increasing use of emails, e-commerce, web applications and IP protocols the
new world of cyber-reality has been created. Information technology and its
"Killer Applications" have fashioned a Virtual Economy offering
tremendous opportunity in every field, every subject and every sphere of life.
C2C, B2C, B2B exchanges like Ubid, Amazon and E-bay respectively, web portals
like Yahoo, computer software companies like Microsoft, telecom infrastructure
companies like Cisco, Lucent and VOIP companies like NTTDoMoCo drive their
sheer power from the prowess of Internet economy. Information and content have
become the ultimate factors of production of the new economy. This abundance has
challenged the conventional rules of economics by creating unlimited resources
of information overcoming the conventional economic wisdom of scarce means.
Isn't this the emergence of the Age of Abundance where nothing is scarce!
On the other hand, humanity is divided into groups and
subgroups, information have and have-nots as forces of global capitalism
spread economic disparity greater than the prejudices of class, race or culture
binding the humanity in realms of riches and poverty. There is the 1st, 2nd, and
3rd worlds, developed, developing, underdeveloped worlds, geographic and
economic groups in the shape of World Economic Form, European Union, NAFTA,
ASEAN, OPEC, G7, Paris Club and London Clubs.
Living under the paradox of converging and diverging world
there is a great challenge which the countries of to grapple with to meet the
new demands of 21st century economic universe in order to keep their economies
buoyant. The role of trade has become sine-qua-non for sustainable economic
superiority and dominance what to talk about just economic sufficiency alone.
There is a paradigm shift from military dominance to economic eminence. Japan,
Germany, China, United Kingdom today are the leading nations of the world by
becoming major exporting countries of the world. Meaning that the future of
supremacy would be defined by strong economies and trade in particular. Export
led growth can really play as miracle for Pakistan if she is able to unleash the
prized unlimited resources gifted by Almighty and much more. But can we really
make a mark in our export arena? May be yes. Or before the miracle happens
Pakistan is again strangled into a complex web of economic obligations in the
form of WTO Agreements which she has incorporated to. With this comment I would
just say that World Trade Organization is just the beginning!
Entering into a debate of either opting or rejected WTO on
vague notions developed through grapevine would not help us. There is a need to
seriously understand organization if we are serious about it. Therefore, the
scope of this article is confined to the basic understanding of the organization
with few examples of its application on Pakistan.
History and Roots of WTO: From 1948 to 1994, the General
Agreement on Tariffs and Trade (GATT) provided the rules for much of world trade
and presided over periods that saw some of the highest growth rates in
international commerce. GATT helped establish a strong and prosperous
multilateral trading system that became more and more liberal through rounds of
trade negotiations. General Agreement on Tariffs and Trade (GATT) was two
international agreement, i.e. a document setting out the rules for conducting
international organization created later to support the agreement.
Much of this was achieved through a series of multilateral
negotiations known as "Trade Rounds" the biggest leaps forward in
international trade liberalization have come through these rounds which were
held under GATT's auspices.
Whenever, we look into the retrospect of WTO the two
well-known trade rounds are worth mentioning which where the first attempt to
harmonize the world of international trade. The first is the first Tokyo Round
and the second most popular is the last Uruguay Round.
During the seventies, The Tokyo Round was the first major
attempt to tackle trade barriers that do not take the form of tariffs, and to
improve the system. The Tokyo Round lasted from 1973 to 1979 with 102 countries
participating. It continued GATT's efforts to progressively reduce tariffs. The
results included an average one-third cut in customs duties in the world's nine
major industrial markets, bringing the average tariff on industrial products
down to 4.7%. The tariff reductions, phased in over a period of eight years,
involved an element of "harmonization" the higher the tariff, the
larger the cut, proportionally.
The eighth was the round to end all rounds. From 1986-94
Uruguay Round, was the latest and most extensive of all. It led to the WTO and a
new set of agreements. The seeds of the Uruguay Round were sown in November 1982
at a ministerial meeting of GATT members in Geneva. It took seven and a half
years, almost twice the original schedule. By the end, 125 countries were taking
part. It covered almost all trade, from toothbrushes to pleasure boats, from
banking to telecommunications, from the genes of wild rice to AIDS treatments.
It was quite simply the largest trade negotiation ever, and most probably the
largest negotiation of any kind in history. This led ultimately to the WTO.
There are some major differences between the GATT and World
Trade Organization which are highlighted in the figure (A) which is very
important to note in order to realize the implications of both systems on the
trading policies of the countries which have agreed to follow.
WTO vs GATT
Are they same
No. They are different the WTO is GATT plus a lot more.
Ad hoc and provisional
The WTO and its agreements are permanent
GATT had "contracting parties".
Th WTO has "members"
GATT dealt with trade in
Covers services and intellectual property as well
Dispute Settlement System is faster, more automatic
Itsrulings cannot be blocked.
What is WTO?: Today WTO is led under the dynamic
leadership of Mick Moore as Director General and it is a Geneva based
organization which was established on 1st January 1995 as a result of
Uruguay Round negotiations. 141 countries are its members as of 31st May
2001 including Pakistan which joined WTO in 1st January 1995.
Many of us have many apprehensions about the nature
of World Trade Organization or WTO. WTO organization is a multilateral
trading system including not all but most of the trading nations of the
world. In short
"The WTO is an organization of governments"
WTO the principle objective of WTO is to ensure trade
liberalization through involving its members in trade negotiations and settling
down trade disputes between nations.
The World Trade Organization (WTO) is the only global
international organization dealing with the rules of trade between nations. At
its heart are the WTO agreements, negotiated and signed by the bulk of the
world's trading nations and ratified in their parliaments. The goal is to help
producers of goods and services, exporters, and importers conduct their business
to help trade to flow smoothly, freely and predictably. The general decision
matrix of WTO operates something described in figure (B).
The Ministerial Conference: The Ministerial Conference is
the topmost body of the WTO under the governance structure set up by the
"Agreement establishing the WTO". Ministerial Conference meets at
least every two years. It brings together all members of the WTO, all of which
are countries or customs unions. The Ministerial Conference can take decisions
on all matters under any of the multilateral trade agreements.
The recent Ministerial Conference has been scheduled in Doha,
Qatar from 9-13 November 2001. Besides the forthcoming ministerial conference
there have been three past conferences are:
Ministerial Conference 9-13 December 1996
Geneva Ministerial Conference
18-20 May 1998
Seattle Ministerial Conference
Nov 30- Dec 03, 1999
The General Council: A General Council oversees the
operation of WTO and the ministerial decisions on a regular basis. This General
Council acts as a Dispute Settlement Body and a Trade Policy Review Mechanism,
which concern themselves with the full range of trade issues covered by the WTO,
and has also established subsidiary bodies such as a Goods Council, a Services
Council and a TRIPs Council. The WTO framework ensures a "single
undertaking approach" to the results of the Uruguay Round thus,
membership in the WTO entails accepting all the results of the Round without
The Agreements: The WTO agreements define the
nomenclature of the organization. The WTO agreements cover goods, services and
intellectual property. They spell out the principles of liberalization, and the
permitted exceptions. They include individual countries' commitments to lower
customs tariffs and other trade barriers, and to open and keep open services
markets. They set procedures for settling disputes. They prescribe special
treatment for developing countries. They require governments to make their trade
There are three broad principles:
Agreement on Tariffs and Trade (GATT)
General Agreement on Trade in
The agreement on Trade-Related
Intellectual Property Rights (TRIPS)
Although the above principles set the general framework yet
it is necessary to have a closer look at them categorically in order to grasp
the essence of the WTO agreements which are:
1. General Agreement on Trade and Tariff (GATT)
requires tariffs to be closer to zero.
There is no binding agreement that sets out the targets for
tariff reductions (e.g. by what percentage they were to be cut as a result of
the Uruguay Round). This is the legally binding agreement for the reduced tariff
rates. Developed countries' tariff cuts are for the most part being phased in
over five years from 1 January1995. The result will be a 40% cut in their
tariffs on industrial products, from an average of 6.3% to 3.8%. The value of
imported industrial products that receive duty-free treatment in developed
countries will jump from 20% to 44%.
2. Agreement on Agriculture (AOA) ensures fairer
markets to farmers.
The objective of the Agriculture Agreement is to reform trade
in the Agriculture sector and to make policies more market-oriented. This would
improve predictability and security for importing and exporting countries alike.
The new rules and commitments apply to three areas including Market Access
Barriers like various trade restrictions confronting imports; Domestic Support
in the form of subsidies and other programs, including those that raise or
guarantee farm-gate prices and farmers' incomes; and Export Subsidies and other
methods used to make exports artificially competitive. There are four portions
of the agreement dealing with the following:
Concessions and commitments
Agreement on Sanitary and
Ministerial Decision concerning
Least-Developed and Net Food-Importing Developing countries.
3. Agreement on Sanitary and Phytosanitary Measure
This agreement concerns the application of sanitary and
phytosanitary measures in other words food safety and animal and plant
health regulations. The agreement recognizes that governments have the right to
take sanitary and phytosanitary measures but that they should be applied only to
the extent necessary to protect human, animal or plant life or health and should
not arbitrarily or unjustifiably discriminate between WTO members where
identical or similar conditions prevail.
In order to harmonize sanitary and phytosanitary measures on
as wide a basis as possible, members are encouraged to base their measures on
international standards, guidelines and recommendations where they exist.
However, members may maintain or introduce measures which result in higher
standards if there is scientific justification or as a consequence of consistent
risk decisions based on an appropriate risk assessment. The Agreement spells out
procedures and criteria for the assessment of risk and the determination of
appropriate levels of sanitary or phytosanitary protection.
4. Agreement of Textiles and Clothing (ATC) have an
objective to bring textiles back into mainstream of international trade.
Textiles, like agriculture, is one of the hardest-fought issues in the WTO.
Previously Multi-fibre Arrangement (MFA) defines the
framework for bilateral agreements or unilateral actions that established quotas
limiting imports into countries whose domestic industries were facing serious
damage from rapidly increasing imports.
Agreement on Textiles and Clothing (ATC) since 1995, the
WTO's (ATC) has taken over from the Multi-fibre Arrangement (MFA). By 2005, the
sector is to be fully integrated into normal GATT rules. In particular, the
quotas will come to an end, and importing countries will no longer be able to
discriminate between exporters. The Agreement on Textiles and Clothing will
itself no longer exist: it is the only WTO agreement that has self-destruction
A Textiles Monitoring Body (TMB) oversees the implementation
of commitments and to prepare reports for the major reviews mentioned above. The
agreement also has provisions for special treatment to certain categories of
countries for example, those which have not been MFA members since 1986, new
entrants, small suppliers, and least-developed countries.
5. Agreement on Technical Barriers to Trade
This agreement seeks to ensure that technical negotiations and standards, as
well as testing and certification procedures, do not create unnecessary
obstacles to trade. However, it recognizes that countries have the right to
establish protection, at levels they consider appropriate, for example for
human, animal or plant life or health or the environment, and should not be
prevented from taking measures necessary to ensure those levels of protection
are met. The agreement therefore encourages countries to use international
standards where these are appropriate, but it does not require them to change
their levels of protection as a result of standardization.
6. General Agreement of Trade in Services (GATS)
defines rules for growth and investment in servicing sector. The General
Agreement on Trade in Services (GATS) is the first ever set of multilateral,
legally enforceable rules covering international trade in services.
The basic objectives of GATS is to ensure that all Services
are covered and Most-Favoured-Nation (MFN) treatment applies to all services,
except the one-off temporary exemptions; National Treatment applies in the areas
where commitments are made; transparency in regulations, inquiry points;
regulations have to be objective and reasonable; international payments which
are normally unrestricted; individual countries' commitments that are negotiated
and bound; progressive liberalization through further negotiations.
7. Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS) The WTO's Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS) is an attempt to narrow the gaps in the way
these rights are protected around the world, and to bring them under common
international rules. When there are trade disputes over intellectual property
rights, the WTO's dispute settlement system is now available. The agreement
covers five broad issues:
1. How basic principles of the trading system and
other international intellectual property agreements should be applied.
2. How to give adequate protection to intellectual property rights.
3. How countries should enforce those rights adequately in their own
4. How to settle disputes on intellectual property between members of the
5. Special Transitional Arrangements during the period when the new
system is being introduced.
The areas covered by the TRIPS agreement are:
Trademarks, including service
Layout-designs (topographies) of
including trade secrets
8. Anti-Dumping, Subsidies, and Safeguards
a) Agreement on Anti-Dumping
The WTO agreement allows governments to act against dumping
where there is genuine ("material") injury to the competing domestic
Typically anti-dumping action means charging extra import
duty on the particular product from the particular exporting country in order to
bring its price closer to the "normal value" or to remove the injury
to domestic industry in the importing country.
Whereas, dumping can be defined as
If a company exports a product at a price lower than the
price it normally charges on its own home market, it is said to be μdumpingξ
Is this unfair competition? Opinions differ, but many
governments take action against dumping in order to defend their domestic
The WTO agreement does not pass judgment. Its focus is on how
governments can or cannot react to dumping it disciplines anti-dumping
actions, and it is often called the "Anti-Dumping Agreement".
The WTO Anti-Dumping Agreement introduced these
rules for calculating the amount of dumping
procedures for initiating and conducting anti-dumping investigations
rules on the
implementation and duration (normally five years) of anti-dumping measures
standards for dispute settlement panels to apply in anti-dumping disputes
b) Agreement on Subsidies and Countervailing Measures
WTO rationale for removing subsidies is that it sees it as a
trade barrier against foreign products. For trade liberalization it requires to
minimize the subsidies in order to achieve its objectives of trade
liberalization. This agreement does two things; one disciplines the use of
subsidies and secondly, regulates the actions countries can take to counter the
effects of subsidies. The agreement defines three categories of subsidies namely
Prohibited, Actionable, Non-actionable.
The issue of subsidies is again one of the most controversial
issues WTO has faced since its inception as both developed and developing
countries are providing a large number of subsidies to different sectors of
their respective economies and industries.
WTO has set a timeframe for least developing, developing and
developed countries in order to minimize or fully remove subsidies
c) Agreement on Safeguards
Article XIX of the General Agreement allows a GATT member to
take a "safeguard" action to protect a specific domestic industry from
an unforeseen increase of imports of any product which is causing, or which is
likely to cause, serious injury to the industry.
The agreement breaks major ground in establishing a
prohibition against so-called "grey area" measures, and in setting a
"sunset clause" on all safeguard actions. The agreement sets out the
criteria for "serious injury" and the factors which must be considered
in determining the impact of imports. The safeguard measure should be applied
only to the extent necessary to prevent or remedy serious injury and to
facilitate adjustment. All existing safeguard measures shall be terminated not
later than eight years after the date on which they were first applied or five
years after the date of entry into force of the agreement establishing the WTO,
whichever comes later.
The agreement establishes a Safeguards Committee which would
oversee the operation of its provisions and, in particular, be responsible for
surveillance of its commitments.
9. Non-Tariff Agreements
A number of agreements deal with various technical,
bureaucratic or legal issues that could involve hindrances to trade:
a) Agreement on Technical Barriers to Trade tries to
ensure that regulations, standards, testing and certification procedures do not
create unnecessary obstacles.
b) Agreement on Import Licensing Procedures says
import licensing should be simple, transparent and predictable.
c) Rules for the valuation of goods at customs this
WTO agreement on customs valuation aims for a fair, uniform and neutral system
for the valuation of goods for customs purposes a system that conforms to
commercial realities, and which outlaws the use of arbitrary or fictitious
d) Agreement on Pre-shipment Inspection is the
practice of employing specialized private companies (or "independent
entities") to check shipment details essentially price, quantity and
quality of goods ordered overseas.
e) Agreement on Rules of Origin "Rules of
origin" are the criteria used to define where a product was made are to
ensure that their rules of origin are transparent; that they do not have
restricting, distorting or disruptive effects on international trade; that they
are administered in a consistent, uniform, impartial and reasonable manner; and
that they are based on a positive standard.
10. Agreement on Trade-Related Aspects of Investment
Measures (TRIMS) applies only to measures that affect trade in goods. It
recognizes that certain measures can restrict and distort trade, and states that
no member shall apply any measure that discriminates against foreigners or
foreign products. Under the agreement, countries must inform the WTO and
fellow-members of all investment measures that do not conform with the agreement
and following figure (D) shows the compliance timetable for WTO member w.r.t
TRIMS. It also outlaws investment measures that lead to restrictions in
Trade Policy Reviews: Individuals and companies involved
in trade have to know as much as possible about the conditions of trade. It is
therefore fundamentally important that regulations and policies are transparent.
In the WTO, this is achieved in two ways. Firstly, Governments have to inform
the WTO and fellow- members of specific measures, policies or laws through
regular "notifications" and secondly, WTO conducts regular reviews of
individual countries' trade policies the trade policy reviews. The
objectives of Trade Review mechanism are:
the transparency and understanding of countries' trade policies and practices,
through regular monitoring
to improve the
quality of public and intergovernmental debate on the issues
to enable a
multilateral assessment of the effects of policies on the world trading system.
WTO members have agreed that if they believe fellow-members
are violating trade rules, they will use the multilateral system of settling
disputes instead of taking action unilaterally. That means abiding by the agreed
procedures, and respecting judgments.
Typically, a dispute arises when one country adopts a trade
policy measure or takes some action that one or more fellow-WTO members
considers to be breaking the WTO agreements, or to be a failure to live up to
obligations. A third group of countries can declare that they have an interest
in the case and enjoy some rights. Usually in a normal course of time a dispute
takes approximately 1 year and 3 months to get settled
WTO and Beyond
1. Regionalism Friends or Rivals
WTO recognizes the importance of geo-political, bilateral and
multilateral agreements between countries like the European Union (EU), the
North American Free Trade Agreement (NAFTA), the Association of Southeast Asian
Nations (ASEAN), the South Asian Association for Regional Cooperation (SAARC),
the Common Market of the South, the Australia-New Zealand Closer Economic
Relations Agreement, Economic Cooperation Organization (ECO) etc.
From 1947 to early 1995, GATT and the WTO had been informed
of the creation of more than 100 regional economic agreements (although some no
longer exist or they remain insubstantial).
The regional groupings that are important for the WTO are
those involving the abolition or reduction of barriers on trade within the
group. The WTO agreements recognize that regional arrangements and closer
economic integration can benefit countries.
2. Environment New high profile
Yet the emphasis on environment is quite recent though the
WTO Committee on Trade and Environment has brought environmental and sustainable
development issues into the mainstream of WTO work commonly known as "The
The committee's work is based on two important principles:
The WTO is only competent to deal with trade. Its members do
not want it to intervene in national or international environmental policies or
to set environmental standards.
committee does identify problems, the solutions must continue to uphold the
principles of the WTO trading system.
3. Investment, Competition & Government Procurement
Ministers from WTO member-countries decided at the 1996
Singapore ministerial conference to set up three new working groups:
on trade and
on competition policy
on transparency in government
They also instructed the WTO Goods Council to look at
possible ways of simplifying trade procedures, an issue sometimes known as
4. Labour Standards Not in Agenda
Core Labour Standards are applied to the way workers are
treated. The term covers a wide range of things: from use of child labour and
forced labour, to the right to organize trade unions and to strike.
WTO Standing is such that there are no WTO agreements that
deal with any core labour standards. Although some industrial nations believe
the issue should be studied by the WTO as a first step toward bringing the
matter of core labour standards into the organization. This agenda was one of
the apple of discord between developed and developing countries at the Seattle
5. Developing Countries more time, better terms
The WTO recognizes as least-developed countries (LDCs) those
countries which have been designated as such by the United Nations. There are
currently 48 least-developed countries on the UN list, 30 of which to date have
become WTO members. Although it is important to note that there are no WTO
definitions of "developed" or "developing" countries.
Developing countries in the WTO are designated on the basis of self-selection.
The WTO deals with the special needs of developing countries
in three ways:
contain special provisions on developing countries
The Committee on Trade and
Development oversees work in this area in the WTO
WTO Secretariat provides
technical assistance (mainly training of various kinds) for developing
The concessionary measures concerning developing countries in
the WTO agreements include:
Extra Time for developing countries to fulfill their
commitments (in most of the WTO agreements). Provisions that are designed to
increase developing countries' trading opportunities through Greater Market
Access (e.g. in textiles, services, technical barriers to trade). Provisions
that require WTO members to Safeguard the Interests of developing countries when
adopting some domestic or international measures (e.g. in anti-dumping,
safeguards, technical barriers to trade). Provisions for various means of
supporting developing countries (e.g. in helping them deal with commitments on
animal and plant health standards, technical standards, and assisting them in
strengthening their domestic telecommunications sectors).
5. Core Issues opportunities & concerns
As a number of countries come to negotiate general rules of
trade under the WTO umbrella there are a number of issues and concerns of each
particular country over a number of areas but here are the most important of
them hard hitting both developing and the developed countries:
reforms in agricultural trade
The decision to phase out quotas
on developing countries' exports of textiles and clothing
Reductions in customs duties on
Expanding the number of products
whose customs duty rates are "bound" under the WTO, making the rates
difficult to raise
Phasing out bilateral agreements to restrict traded
quantities of certain goods these "grey area" measures are not
really recognized under GATT-WTO
WTO Special Policies: Assisting developing and transition
Developing countries makeup about three quarters of the total
WTO membership. Together with countries currently in the process of
"transition" to market-based economies, they are expected to play an
increasingly important role in the WTO as membership expands. Therefore, much
attention is paid to the special needs and problems of developing and transition
economies. The WTO Secretariat organizes a number of programmes to explain how
the system works and to help train government officials and negotiators. Some of
the events are in Geneva, others are held in the countries concerned. A number
of the programmes are organized jointly with other international organizations.
Some take the form of training courses. In other cases individual assistance
might be offered.
The subjects can be anything from help in dealing with
negotiations to join the WTO and implementing WTO commitments to guidance in
participating effectively in multilateral negotiations. Developing countries,
especially the least-developed among them, are helped with trade and tariff data
relating to their own export interests and to their participation in WTO bodies.
International Trade Center: The International Trade
Center was established by GATT in 1964 at the request of the developing
countries to help them promote their exports. It is jointly operated by the WTO
and the United Nations, the latter acting through UNCTAD (the UN Conference on
Trade and Development).
The center responds to requests from developing countries for
assistance in formulating and implementing export promotion programmes as well
as import operations and techniques. It provides information and advice on
export markets and marketing techniques. It assists in establishing export
promotion and marketing services, and in training personnel required for these
services. The Center's help is freely available to the least-developed
Coherence In Global Economic Policy-Making: This will set
out concepts and proposals with respect to achieving greater coherence in global
economic policy-making. It recognizes that while difficulties whose origins lie
outside the trade field cannot be redressed through measures taken in the trade
field alone, there are nevertheless interlinkages between the different aspects
of economic policy.
Therefore, WTO is called upon to develop its cooperation with
the international organizations responsible for monetary and financial matters.
In particular, the Director-General of WTO is called upon to review, with his
opposite numbers in the World Bank and the International Monetary Fund, the
implications of WTO's future responsibilities for its cooperation with the
Bretton Woods institutions.
Key Features of Global Trade 2000: According to the
Annual Report 2001 of WTO merchandise trade expansion in real terms in 2000
matched the best annual rates observed over the last five decades. While all
regions reported faster nominal trade growth, exports and imports of developing
countries expanded by more than 20%, lifting their share in world merchandise
trade to the highest level in the last 50 years. Various factors contributed to
this outcome, including the economic recovery in Latin America and East Asia,
the sharp rise of oil prices and stronger import demand in developed countries.
The value of world merchandise trade rose by 12.5% in 2000
twice the average for the last decade to reach nearly 6.2 trillion
dollars. World commercial services trade is estimated to have expanded by 5% (to
1.4 trillion dollars) in 2000, the fastest annual growth since 1997. In 2001,
the world economy is retreating from the high growth path seen last year,
dimming the prospects for world trade in 2001. The volume of world merchandise
trade is expected to grow by 7%, a marked reduction from the estimated 12% in
The regions with a large share of fuels in their merchandise
exports (the Middle East, Africa and the transition economies) recorded
outstanding export growth between 25 and 50% in 2000. Asia's merchandise
import growth was the strongest of all the regions (23.5%) and exceeded for the
second year in a row its export growth. North America's merchandise import
growth (18%) was second only to that of Asia and again stronger than its export
expansion (13.5%). The growth in the dollar value of Western Europe's
merchandise exports and imports was by far the lowest of all regions, largely
due to the further depreciation of the euro and other European currencies
vis-a-vis the dollar. North America and Latin America recorded both double digit
export and import growth for commercial services.
In the Nutshell
Understanding of the WTO framework, as captured above, is
necessary in order to assess the implications of WTO agreements on developing
countries like Pakistan. Over the years the wisdom of export-led-growth has
evolved that is strong indigenous Industry leads to large scale production
massive production means excess supply of goods & services for export
export brings excess foreign reserves excess foreign reserves mean
positive balance of payments, and balance of trade positive balance of trade
leads to strengthening rupee-dollar parity stronger rupee has more
purchasing prowess leading to savings meaning more investment conducive
indigenous investment means attracting local as well foreign capital for
investment more investment makes stronger economy, sound growth rate, fiscal
self-sufficiency and above all the phenomenon of export-led growth creates
skilled human capital. Take examples of Japan, Germany, USA, Malaysia or any
other robust economy it is more or less export-oriented. But this cycle can be
work other way if the foundations of local industry are not strong or they
become uncompetitive in the face of growing imports. Once the local industry
base trembles down the country becomes a consumer economy relying on foreign
imports only something near to a strategic catastrophe which everyone would
like to avoid. But WTO is here for market-access and removal of barrier to trade
giving greater access to markets abroad to goods and services on one hand, and
possession of knowledge, ideas and experience on the other in the form of
With the ascension of Pakistan into WTO framework there are
gigantic challenge ahead that how Pakistan performs in a global economy heading
towards trade-liberalization which is opening up domestic markets for
international completion. Is Pakistan and her industry ready for this is
something very unsure until unless a legal framework is laid down addressing the
needs of new millennium!
The industry is rightly feeling threatened today and so is
the economy as it is unprepared to grapple with the unseen challenges of WTO
framework. As an agrarian economy the farmers are the first to get the blow,
then the agriculture associated industries and business like fertilizers and
pesticides. Once, along with agriculture the livestock comes under the stringent
regulations of certifications for quality, our leather industry, food and
beverages, textile all become venerable to principle of comparative advantage
meaning "either qualify or die". Can indigenous industry can bear the
sky-rocketing costs for getting them certified or qualified by paying for
international standard certifications, may be a few but what would be the fate
of the rest? Right now we do not know who has the answers to all of these issues
where our economy is already in a moratorium, may be the government or may be
WTO! How can small farmers, businessmen and trades coup up with the new scenario
is quite unclear? If WTO and its rules like most favored nation and national
treatment mean "Comparative Advantage" take it as "Survival of
the fittest" the message is very clear and loud.
Though we have heard the Ministry of Commerce and Industries
Mr. Daud Razzaq during promulgating the Trade Policy 2001-02 saying that we have
now entered into a era of free trade but what he is walling in or walling
out will decide the future of economic prosperity in the years to come for