OPPORTUNITIES OF WTO MEMBERSHIP FOR PAKISTAN

Pakistani producers and service suppliers are facing major challenges today

By HAMMAD BASHIR
Jan 05 - 11, 2004

The World Trade Organization came into being in 1995. It is the successor to the General Agreement on Tariffs and Trade (GATT) established in the wake of the Second World War. After the Dec 2004, Pakistani Economy would be exposed to new challenges related to international trade. The WTO's implications would be started and the whole macro-economic and financial scenario would take a new shape. WTO is a big challenge facing the governments, traders, entrepreneurs, manufacturers, agriculturalist, businessmen, educationists, and business executives. It calls for tariffs reduction in International Trade and calls for free trade. Which is considered a threat for developing countries but no doubt it also has certain opportunities, which have to be identified. There are many apprehensions of local businessmen regarding the pre and post 2005 era when WTO rules will be implemented in all 146 signatory countries including Pakistan. And a greater percentage of our business people are ignorant of this fact. There are perplexed as to what will happen to their business and industry. Financial indicators in recent past and before that indicate that the multilateral trading system works and thus it makes room for every WTO member to be a winner. This can be said keeping in view the trade theory and the experience of more than 130 GATT/WTO members for over 50 years.

The opportunities, rights, and benefits that Pakistan will gain from WTO membership are apparent even before conducting and concluding accession negotiations. In order for Pakistan to reap the aforementioned advantages of WTO and benefit from market access liberalization implemented by WTO members during and after the Uruguay Round, Pakistan needs to

I. Reform its policy, legal, regulatory, and institutional framework, and
II. Provide market access on goods and services to other WTO members.

Access to the Pakistani market is subject to lengthy and complicated negotiations between Pakistan and interested trading partners who are members of the WTO. The outcome of such negotiations is difficult to predict at this stage. Based on the experience of other countries, one may however draw the following observations at this point with regard to the potential outcome of negotiations.

Pakistan does not have to eliminate all customs duties; rather, Pakistan will have to bind its customs duties at levels negotiated with its trading partners. The level of binding of certain goods may be above currently applied rates. Pakistan may have to lower certain import duties from the current level if the binding level is below the current rates. Given that Pakistan's market is saturated with imports, that too from China which produces goods at a very lower price, and also some smuggled goods, any reductions in import duties are not likely to lead to any significant increase in the volume of imports and cause any adverse effect on domestic producers.

The service sector is relatively open. Especially the telecommunication sector, after the deregulation. That is already open to for foreign companies so compliance with WTO restrictions won't be having any impact on telecom sector, which in Pakistan is growing at a proceeding rate. Banking sector is already open and there are many foreign players in this field in Pakistan. Certain areas such as transport, audio-visuals, courier services, and financial services, Pakistan is not likely to be requested to make significant commitments connected with other services.

Any market access commitments for both goods and services that Pakistan may be requested to make are likely to be in line with those made by other WTO countries; bringing, therefore, Pakistan's foreign trade regime to a level playing field with other countries.

The GoP, by dedicating its brightest resources and working together as partner with the private sector, various Chambers of Commerce and trade unions, will be able, as many other countries have done, to negotiate market access on goods and services that are favorable and are in the best interests of Pakistani producers and service suppliers.

The misperception that WTO membership will harm Pakistan's domestic industry is invalid. Under WTO rules, Pakistan will continue to have the right to take necessary measures to safeguard its industry in case of threat of material or serious injury caused by foreign products and apply, in addition to customs duties and where appropriate, safeguard measures, anti-dumping duties, and countervailing duties.

Even after acceding to the WTO, Pakistan retains the right to renegotiate aspects connected with market access with regard to goods and services. The WTO decision-making process is generally by consensus. This is even more democratic than majority vote, given that all countries present in a meeting have to agree. Pakistan, as a Member of the WTO will be able to participate in multilateral negotiations round and have an impact on shaping future trade rules in such a way to safeguard its interests.

Last, WTO membership will not lead to decrease in fiscal revenue. On the contrary, increase in fiscal revenue is the likely outcome.

Based on the above and provided that the Government of Pakistan will dedicate its best and brightest human resources and work as a partner with the private sector, there are no foreseen significant disadvantages resulting from Pakistan's membership in the WTO.

The cost of WTO membership for Pakistan is primarily the cost of

a. Implementing policy, legal, regulatory, and institutional reform to conform to the WTO agreements which will lead to the establishment of a transparent and cost-efficient business environment; and
b. Upgrading the civil service and building institutional capacities to be more responsive to private sector needs and to operate under the new rules. Conducting such reform should not be viewed negatively. Pakistan will be simply bringing its regime in line with rules that are currently applied in at least 140 countries. Pakistan should "speak the same trade and investment language" as the majority of the world. Conformity of Pakistan with the WTO agreements is essential if Pakistan is to develop its economy. Pakistan will not be able to compete for any investment with its archaic laws. The need for modernization of the policy, legal, and institutional base, the elimination of non-tariff barriers (which are very harmful to domestic producers and consumers), and ensuring transparency in service-related laws are crucial for the survival of the economy of Pakistan and should not be perceived as a concession on the part of Pakistan. A policy, legal, regulatory, and institutional regime in conformity with the WTO will reduce the cost of doing business in Pakistan, attract investment, ensure transparency and consistency in the application of laws, significantly curtail bureaucratic wrangling, and free up government and private resources to focus on more important issues for developing the economy of Pakistan.

The likely losers from policy, legal, regulatory, and institutional reform are mainly those persons who, currently are

a) taking advantage of, and profiting from the lack of adequate rule of law (e.g. wide discretionary authority, lack of accountability, lack of prompt arbitral and judicial appeals),
b) engaging in illicit activities (e.g. intellectual property piracy/ smuggling); and
c) engaging in unfair activities (e.g. monopolistic-collusion) harmful to consumers (including the general public, government, tourists, and Pakistani producers as a consumer).

Last but not least, Pakistani producers and service suppliers are facing major challenges today. This is regardless of WTO membership. The Pakistani industry needs to improve its competitiveness and deliver world-class quality products and services at a comparatively lesser. The Pakistani industry is already exposed to global competition. WTO membership will not further increase such exposure. On the contrary, WTO membership will provide advantages to Pakistani producers in international markets and greatly improve the prospects of improving the industry's competitiveness and quality of products and services by:

I. Encouraging investment that will bring required capital, know-how and technology, and expand and strengthen distribution channels.
II. Facilitating the adoption and application of internationally-accepted standards and safety requirements.
III. Establishing a conducive environment (rule of law, streamlined procedures, transparency, predictability, stability) for the development of competitive manufacturing and service sector, and
IV. Opening markets for both goods and services.