Special Report Understanding WTO framework

Profile Zia-ul-Haq Khwaja Column For The Record Politics & Policy Pakistan - India summit Special Report Understanding WTO framework

The future of trade liberalization

By HAROON MUJAHID
Islamabad
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 things:

an international agreement, i.e. a document setting out the rules for conducting international trade

an 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.

Reducing Tariffs

Anti-Dumping Agreement

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.

Figure A
WTO vs GATT Are they same No. They are different — the WTO is GATT plus a lot more.
GATT		WTO
1.	Ad hoc and provisional	1.	The WTO and its agreements are permanent
2.	GATT had "contracting parties".	2.	Th WTO has "members"
3.	GATT dealt with trade in	3.	Covers services and intellectual property as well
		4.	Dispute Settlement System is faster, more automatic
		5.	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:

Singapore 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 exception.

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 policies transparent.

There are three broad principles:

General Agreement on Tariffs and Trade (GATT)
General Agreement on Trade in Services (GATS)
The agreement on Trade-Related Aspects of
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:

Agreement on Agriculture itself
Concessions and commitments
Agreement on Sanitary and Phytosanitary Measures
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 built in.

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 territories.
4. How to settle disputes on intellectual property between members of the WTO.
5. Special Transitional Arrangements during the period when the new system is being introduced.

The areas covered by the TRIPS agreement are:

Copyright and related rights
Trademarks, including service marks
Geographical indications
Industrial designs
Patents
Layout-designs (topographies) of integrated circuits
Undisclosed information, 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 industry.

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 the product.

Is this unfair competition? Opinions differ, but many governments take action against dumping in order to defend their domestic industries.

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 modifications:

more detailed rules for calculating the amount of dumping

more detailed procedures for initiating and conducting anti-dumping investigations

rules on the implementation and duration (normally five years) of anti-dumping measures

particular 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 customs values.

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 quantities.

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:

to increase 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.

Dispute Settlement

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 Green Provisions".

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.

If the 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 investment
on competition policy
on transparency in government procurement.

They also instructed the WTO Goods Council to look at possible ways of simplifying trade procedures, an issue sometimes known as "Trade Facilitatio".

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 Round.

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:

WTO agreements 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 countries.

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:

Fundamental reforms in agricultural trade
The decision to phase out quotas on developing countries' exports of textiles and clothing
Reductions in customs duties on industrial products
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 economies

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 countries.

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 2000.

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 intellectual property.

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 Pakistan!