Ready or Not, Here
it Comes
WTO Implementation in Pakistan
SHAHZADA IRFAN AHMED / The News International Pakistan 25may03
It is high time the government and the people realise the effects and consequences of the impending WTO implementation. The potential gainers and losers both need to start preparing for the time is near and the regulations tricky
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All aboard! Editorial There is no running away from World Trade Organisation. In fact, from the time when its vocal critics in the country far outnumbered its vocal supporters, we have come to a stage where we find certain NGOs (read activists' groups) thanking the government for kindly seeking their opinion on what is to be done in anticipation of January 2005. Globally, the opposition to the WTO may be more vociferous, more methodical and it may make more sense to a more aware audience. But the thrust everywhere is to seek modifications and clarifications, -- the deadline for outright rejection of the idea has passed. It's there, until proven a failure, beyond any shadow of doubt. In Pakistan, it is the same old chain reaction of sorts. It begins with those who say it is too early for us to be entering such tricky territory. Then there are those who say that while we have to join the rest of the world in the march towards the January 2005 date when the WTO is to fully come into force, we must at the same time press for changes to our benefit. Next come the non-believers -- people with no trust in the WTO, no trust in those behind WTO, and no trust in the government in Islamabad. Actually, contrary to the image they would want to project, it is this last group who have chosen an easy way out for themselves. A more realistic approach would be to make your views heard. There is no denying how pro-West these global bodies can turn out to be. But having understood that, staying away from such organisations, or being a part of the proceedings half-heartedly, also serves no purpose. At least some solace can be drawn from the fact that the world has been changing, despite the misdeeds committed on the way. A more informed intervention on our part might have hastened this process of change, and this information can only come if we are aware of the happenings around us, rather than taking the easy option of remaining aloof from the happenings. If world is a stage, there is no audience. Only actors. |
At a time when the world is upbeat about the implementation of the World Trade Organisation (WTO) agreement and introduction of revolutionary changes in international trade as its consequence, it is important for Pakistan to gauge its independent standing in this economic shift. Do we, as a nation realise what globalisation and WTO are? What are its rules and regulations and how it is going to effect Pakistan's trade and industry? Does it offer any benefits or is it a threat to our economic standing? And above all are we in a position to protect our interests or get relief from competent courts of law in case we think we have been treated in a discriminatory manner in a particular case?
Pakistan, like all other developing countries, is in the process of implementing the provisions of WTO. As a result, its trade and industrial sectors are undergoing radical changes in compliance with GATT/WTO rules and regulations. Where these rules give industries and business enterprises certain rights, they also place some obligations on them.
Unfortunately there has not been enough development in Pakistan to raise awareness and understanding about WTO. With not much time now remaining for the WTO (till January 2005) to be fully effective, there is an urgent need for all the stakeholders, those involved with international trade and industry in particular, to explore WTO's implications.
Business leaders dealing in international trade believe WTO is the only international body 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. These documents provide the legal ground-rules for international commerce. They are essentially contracts, binding governments to keep their trade policies within agreed limits. Although WTO became operational on January 1,1995, its trading system is half a century older. Since 1948, the General Agreement on Tariffs and Trade (GATT) have provided the rules for the system. In short, WTO and its agreements now cover trade in services, and in traded inventions, creations and designs popularly known as intellectual property.
Pakistan agreed to join WTO in 1994, one of the benefits of which is the integration of the textile sector into General Agreement on Tariff and Trade (GATT). Looking at 2005, people mostly believe that the major impact of WTO on Pakistan would again be on the textile sector. However, WTO comprises several protocols and agreements focussing on various sectors and have different implications for different sectors and thus the impact might not just be limited to the textile sector. For example, a few subjects or agreements signed by the government mentioned below show which sectors will be the most affected:
1) Improved access to foreign markets (reduction/binding of tariffs, abolition of quotas)
2) Subsidies, countervailing and anti-dumping measures
3) Agreement on Textiles and Clothing
4) Trade-related Aspects of Intellectual Property Rights (TRIPS)
5) Trade-related Investment Measures (TRIMs)
6) Agreement on Agriculture
The year 2005 is crucial for Pakistan as the 5th ministerial conference to be held in Cancun, Mexico in Sept 2003, would be 'a round to end all rounds'. Year 2005 is one of the important deadlines by which all negotiations should be finalised and most waivers granted to developing countries like Pakistan should expire. Thus the implication for Pakistan and other countries will be in several sectors and not just confined to the textile sector.
An APTMA spokesman told TNS that the textiles sector has been the first to feel the heat of WTO's implementation. "Pakistani exports, especially textiles, are being increasingly subjected to initiation of anti-dumping and countervailing investigations which create uncertainty and depresses the business sentiment. Investigation periods are sometimes quite lengthy and the legal costs of defending these cases are tremendous. Similarly, the loosening government control on cotton export under WTO commitments is also being seen as a threat to the local textile sector," he said.
Explaining his point, the APTMA spokesman said the local demand for cotton stood at 10 million bales but WTO's unrestricted export of cotton would deprive the spinning industry of raw material and push up production costs to uneconomic levels. "Since quotas would be removed from other garment and made-up producing countries as well there would be more demand for Pakistani yarn and fabrics and there will be even less cotton left for local producers. This means that Pakistani textile exporters can influence the global trade to the extent of raw material supplies. Due to its commitment, the government will hardly be in a position to intervene either in terms of discouraging exports of cotton, yarn or fabrics or providing subsidies to garments and made-up exporters."
A positive impact of quota free trade on Pakistani textile sector would definitely be an abrupt increase in the demand for Pakistani products for being cheaper in price than they previously were due to no quota charges in the black market. According to textile sector experts, quota is being sold in the black market and constitutes a major part of the exported item's price. After January 2005, experts think that billions of rupees would be liberated from quota trading and will be invested in establishing modern units and improving the efficiency of the established ones.
Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) Chairman Pervez Hanif told TNS that the developed world had also introduced new forms of barriers like the countervailing duty, anti-dumping duties, social, labour, and security issues which will play an important role by the end of 2004. "Pakistani industry is striving hard to reach the required levels of social compliance and is hopeful of securing a grace period to come up to the mark. Otherwise, Pakistan will lose its hard-earned market share to the developed world."
While all sectors of the economy come under the WTO, it severely hits Pakistan's agriculture and those directly or indirectly involved with it. Studies have revealed that the Agreement on Agriculture signed by Pakistan with WTO and the Trade Related Aspects of Intellectual Property Rights are directly relevant to agriculture. However, the fact that Pakistan government organised the first seminar on the Agreement on Agriculture in 1999 -- four years after joining the organisation -- shows its lack of awareness and interest in this regard.
Mubarak Ahmed, President All Pakistan Vegetables and Fruits Exporters told TNS that a gradual phase out of the subsidies being given by the developed countries was agreed to in the Doha Declaration adopted by 142 countries on November 15, 2001, but there was no commitment of any steep cut in these subsidies. "On the other hand the developing countries like Pakistan, whose forte is agriculture, were asked to effect drastic cuts in farm subsidies and finally remove them altogether. There is no sense in abolishing domestic support for our farmers when the developed world like the US and the EU are not themselves ready to compromise on this issue. They have in fact recently increased their agricultural subsidies to help their farmers difficult times."
However, Sharjeel Hashmi, another exporter of agricultural products disagreed with the phenomenon. "There is a code for relaxation under WTO called the Special and Differential (S&D) treatment provisions for developing countries. This is allowed to developing countries in all agreements and under the same Pakistan can give export subsidies to its businessmen. Pakistan falls under Annexure 7 list, i.e. the country with less than $1000 per capita income, which makes it eligible to get S&D treatment. Most of the reductions in farm subsidies are on account of commitment to the International Financial Institutions, particularly the IMF and the ADB, rather than the WTO, and the commitments made bilaterally to the US and the EU."
Pakistani pharmaceutical companies are also expected to suffer as WTO has envisaged special safeguards for Western, particularly the US pharmaceutical companies under TRIPS. As most of the research is being carried out in the developed world, the formulae of drugs will be patented and may raise public health-related issues in the developing world. However, Pakistani pharmaceutical industry is constantly raising its voice at various fora to win exemptions in this respect.
The most easily understood effect on the local industry and Pakistan government is that of the WTO's push for an area free of customs duties and tariff protections. Pakistani tax authorities fear a major shortfall in revenue whereas the local industry confronts imminent closures in the face of ever-increasing costs of production.
Another interesting phenomena under TRIPs is that of the Geographical Indications (GIs) related to different products and the idea will grow with the passage of time. Primarily, it is the extension of the trade mark concept to a country level. For example Champagne and Whiskey are associated to France which bars non-French companies from selling wines as Champagne.
Against this backdrop, Pakistan has sought US support to help protect its intellectual property rights and around 100 items that it wants to protect from trade liberalisation on the pretext of national and geographical identification (GI). The matter gains prime importance due to the fact that India and Pakistan jointly share the identification of products like Basmati rice and Alphanso mango and the one who takes the lead in registering the products will enjoy their exclusive selling rights.
source: http://www.jang.com.pk/thenews/may2003-weekly/nos-25-05-2003/spr.htm 27may03
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