WTO NUTURING TRADE OR BUDDING A SEED OF CONFLICT

Two schools of thought prevail in Pakistan about the impacts of different WTO agreements on the country

By HIRRA GULRAZE MIR
June 09  - 15, 2003 

Trade Ministers from 128 countries met in Singapore in December 1997 for the inaugural meeting of the World Trade Organization (WTO). Their aim to chart a course for trade into the 21st century and to accelerate the creation of a global market free of trade restrictions. It is a course that will affect all our lives, with widespread effects on where and how the work of the future will be done.

Two schools of thought prevail in Pakistan about the impacts of different WTO agreements on the country. One group feels that these agreements are a panacea for every ill we are suffering from. They believe that there is a strong positive effect of free trade on the provision of enabling conditions for poverty reduction through enhanced provision of direct and indirect employment opportunities, social welfare services, and infrastructure that can potentially benefit the poor. This is the view taken by the proponents of "trickle down" hypothesis. The second group, on the other hand, declares that WTO is a curse and everything going wrong in developing countries is the result of the WTO agreements. They feel that WTO is rich man's club, meant to exploit the interest of developing world.

The agreement vows that the opening of food markets would be beneficial for the poor in Third World countries since it would increase productivity. But it does not require extra intelligence to foresee that the emerging scenario would be far from beneficial. Firstly, agricultural subsidies in OECD countries, especially the US, EU, Canada and, Japan have been estimated at $1 billion per day. In sharp contrast, developing countries are being forced to end subsidies. Secondly, it would be next to impossible for developing countries to resist the onslaught of MNCs that have sophisticated and technical superiority and huge funds at their disposal and to top it off are to struggle to market their products in the South. The "market access" promised by industrialized countries is nothing but a "misleading notion." More so because most developing countries export 10 percent of their agricultural produce while the remaining 90 percent is consumed in their domestic markets.

US trade policy risks isolating the Muslim states that are on the front line in the war on terrorism. The falling economics of many Muslims states have been repeatedly acknowledged by the White House but detractors say the US has done little confronting with the quandary. The dilemma has been rancorous with the trade concessions to some of its closets allies in the war on terrorism. Pakistan has hoped for about $1bn in additional sales of textiles and clothing to the US to offset the costs of the war on terrorism, but under pressure from its own textile industry the US granted just $143m. Most of the causes are internal, a consequence of oil-dominated economics, high barriers to trade and investment and political tensions that dampen regional trade. Seven of the 10 largest Arab Leagues Members, including Syria and Saudi Arabia, remain outside the World Trade Organization, as does Iran.

US trade policies have worsened the Muslim World's isolation. The five largest Muslim countries Bangladesh, Egypt, Indonesia, Pakistan and Turkey already face high barriers on exports to the US. These countries sell mostly light manufactured goods like clothing and fabric. The situation will deteriorate as the US negotiates further trade deals offering tariff-free access to the US for Latin America, Africa and Asia. At the same time, the removal of quotas on textiles will help the largest producers, such as China and India. Washington has presented few initiatives to contradict this trend; it is said Morocco is the only Muslim country to be currently in line for a free trade agreement with the US.

Pakistan and India have signed the WTO agreement but have to give a most favored nation (MFN) status to each other. India has already given Pakistan the (MFN) status but Pakistan is reluctant. Technically this is the appropriate itinerary because the Indian products are much cheaper furthermore they will flood our market if the agreement is signed, predominantly devastating our local industry which needs protection. The Indian products would shatter the Pakistani market mechanism as their internal (cost of production) and external infrastructure is superior to ours.

As for China, another intimidating competitor in terms of world trade, Pakistan would be forced to deal with them for the sake of political and on the level of defense grounds. China has warned the US against imposing new restrictions on textile imports when the present quotas end in 2005, stating such measures would undermine Beijing's co-operation in the new round of global trade talks. American Textile manufactures wants quotas reimposed under the special safeguard provisions in China's WTO accession agreement, which allow for restrictions if an importing country concludes shipments are causing "market disruption". The provisions were concluded in the WTO accession especially for the protection of the US textile and clothing industry against a possible surge in Chinese exports. However China feels strongly about textiles, one of its largest exports, and one which offers it great potential to benefit from WTO membership.

Our products continue to countenance tariffs and quotas and other protective measures. In the Western market, at the time of the formation of the WTO we were assured of reciprocal benefits if we approved to join the World Trade Organization. Pakistan has already brought its tariffs to the level of zero on its products while the West has comparative advantage in the field of computers and telecommunication equipment however our textile products continue to face discrimination and import barriers.

As far as our imports are concerned, there are two sides to it, if we lower the tariffs our imports would increase, this would pressurize our domestic industry. Only those sectors of the industry will survive which have modernized their plant, equipment, management, and labor and lowered their cost of production. These sectors would add to the efficiency and compete in the sectors of surgical, sports, and leather goods, textile manufacturing and primary commodities.

With water logging and salinity transforming fertile land into wasteland amid persistent drought coupled with the attack of WTO, the ability of the State to feed 140 million people appears to be at great risk. All ready as many as 41.2 percent of Pakistan's population is living below the poverty line. Not only the food security of Pakistan and other developing countries is being jeopardized but colossal multinational companies, whose immense power and capability to takeover the principal fraction in trade would be prominent.

The European Union is by far the biggest user of export subsides, the most trade-distorting form of subsidy, which depresses world price and undercuts more efficient farmers in poor countries. The commission has said it is ready to contemplate a phasing-out of export subsides, it has made this conditional on other countries scrapping their schemes for subsiding exports, which the EU says includes US use of export credits and food aid. But deeper cuts are needed in tariffs and trade-distorting domestic subsides that would narrow and widen disparities between WTO-members. Other agricultural exporting countries are also expressing disappointment.

Even where some lower income countries have increased their share of world trade, they have not seen a corresponding rise in income. Over two decades there has been a 'decoupling' of world trade from 'growth' in the neo-colonial world. Following advice from the international agencies of world capitalism they have, in most cases, diversified out of raw materials into manufacturing. This however has led to them being trapped in 'international production networks', which means they merely assemble imported parts in low-skilled, labour intensive industries, owned by multinational companies.

Those who can maneuver the rules get benefited from it and rich nations, by virtue of their better bargaining position, are able to do so. The developing countries are far behind in this process not only due to the reason that they don't have the required capacity and understanding but also due to the fact that they lack political and administrative will due to pressure.