World Trade Organization
 


ARTICLES ON WTO ISSUES

G-20 For Ending Farm Subsidy

The two-day (March 18 and 19) WTO moot of G-20 countries in New Delhi has demanded a time frame from the rich countries to end subsidies to their farmers and terminate price distorting export practices to bring equity between the developed and developing nations. This is a move in the right direction though it to be doubted if rich nations would retreat from their position and accede to demands of the developing nations.

The issue is not new and was raised in the WTO moot at Geneva last July where negotiations on the elimination of subsidies to farmers by rich countries were successfully conducted. Principles were spelled out but no plan of action was prepared. The New Delhi G-20 meeting was important in so far as concrete measures were identified and a five year period was proposed by the G-20 ministers for bringing the rich nation's regime of subsidies to an end.

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Copyright © 2003-2008 WTO Cell P&D, Govt of the Punjab.
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Gap Between Bound, Applied Tariff Rates

PAKISTAN is still perceived as the one of the least 'free economy' in the comity of nations. This is so even though applied tariffs for agricultural products in the country range between 0 to 10 per cent and for industrial goods, they fall between 5 to 25 per cent. The 2005 Index of Economic Freedom-an influential index published by the Wall Street Journal and Heritage Foundation-has rated Pakistan as one of the economically least free countries. On a scale of 155 counties, this index has ranked Pakistan on a low 133 position-which incidentally is at par with the grossly under-developed, Ethiopia.

The Index classified our economy as 'most unfree'. It goes without saying that the ranking is below all our competitors in the region and sadly enough it is also lower than a large number of least developed countries (LDCs). It would have been easy to dismiss the Index rating as biased, but several other publications and research works, regarded in repute, corroborate the findings. A publication by the Institute for Technological Advancement and another recent study by FAO gave similar ratings to the country's trade regime.

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Copyright © 2003-2008 WTO Cell P&D, Govt of the Punjab.
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WTO Still Remains A Question Mark?

The WTO regime has come a long way: from Marrakesh, where it started in 1994 to Geneva, 2004, where a semblance of meaningfulness and understanding was reached. There were pitfalls on the way, resistance from the developed nations to cast off, even marginally loosen their grip on world economy and apprehensions of developing nations that a Trojan horse is to infiltrate in to whatever economic security they possess. Distrust marred their response. While WTO covers both agriculture and industry, the former vitally concerns Pakistan as the national economy is based on it. This, however, is an issue for most developing nations also because their economies have similar resources in many cases and their dependence on domestic farm produce is substantial to total.

However, they cannot meet the needs of their people due to inefficiencies in the sector. The limitations of these nations are linked with constraint on resources for modernizing their agriculture. The tools are expensive and controlled by developed nations. Their access to world markets is paved with problems and conditions weighing heavily in favor of developed countries. Plans and proposals seemed at the point of falling apart more than once and misgivings clouded the view at Seattle and Cancan rounds; Doha round did not achieve any reportable results either.

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Copyright © 2003-2008 WTO Cell P&D, Govt of the Punjab.
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Challenges Of Compliance To WTO Regime

The textile industry world wide is standing on the verge of uncharted territory as it prepares to deal with the rapidly evolving business environment emerging in view of fast approaching quota abolition. As negotiations for 2005 deals commence, the effects of the expected abolition are already being felt by Pakistani organizations more tuned to international markets and dealing with the larger buying houses and retail chains. It may not be unfair to state that for the first time, a Pakistani industry of international stature would be forced to compete for export markets without any trade protection and that no organized initiative has been undertaken to educate the smaller and medium sized players as to the underlying threats and opportunities of such a business environment either on a private or public basis.

It is being argued by industry pundits that China, India and Pakistan will emerge as clear winners in the post-quota regime due to various inherent strengths that the textile industries in these countries possess. However, there is a very clear apprehension that the smaller to medium-sized and perhaps some of the larger mills may not be able to adjust to the ensuing competition and the power of huge retail chains operating on the model of lowest cost procurement. The devastating effect on the US textile manufacturing due to lower procurement cost and wage arbitrage by chains and brands is a very clear example of what is in store for Asian manufacturers over the next few years. The above projected scenario is acceptable under the doctrine of free trade and efficient manufacturing and procurement, however, without proper strategies, tactics and tune-up, units that could otherwise be profitable and competitive may not be able to withstand the new business order and related shocks.

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Copyright © 2003-2008 WTO Cell P&D, Govt of the Punjab.
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Textiles And Clothing in The WTO Regime

For pragmatic policy formulation in the textile and clothing sector, it is important to peep into the trade history of the world, particularly the year 1945. As the world had just witnessed mass slaughters, destruction of economic infrastructure and disruption of free flow of trade, it was decided to restructure international political and economic order to avoid such catastrophes in future. As a result, on the trade front, the contracting parties agreed to create GATT in 1947 with the objective to regulate the flow of goods at global level.

The US initially brought about across the board reduction in tariffs and trade barriers, but after seeing how quickly Japan was rehabilitating itself, it started to pressurize GATT into dispensing with its declared objectives of removing of quantitative restrictions and ensuring of non-discriminatory treatment in relation to textiles and clothing which were virtually taken out of its ambit through the 'short-term' (1960) and the 'long-term' cotton arrangements (1962-73) and the subsequent multi-fibre arrangements (MFA) of 1974.

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Copyright © 2003-2008 WTO Cell P&D, Govt of the Punjab.
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Why We Are Afraid Of The WTO

In Pakistan, almost every second businessman appears to be suffering from an unknown fear of the World Trade Organization and expecting, anytime during 2005 or later, some kind of calamity to visit his manufacturing facility or his export consignment. The smaller the trader, the greater the fear. That the WTO agreements may ultimately lead to de-industrialization is a guarded worry shared by many. Only the richer section of the community harbours much less, if at all, such anxieties.

But this is not something peculiar to Pakistan, elsewhere in the Third World it is the same tension and confusion. One reason is obvious: lack of knowledge and awareness among the middle class traders about the WTO, its functioning, its rules and its key objectives. Another reason is the uncertainty that free trade can bring in its wake; our entrepreneurs have grown up in a protectionist atmosphere. Then, little is known about our government's attitude towards the unfolding scenario - will it protect its private sector's interests or just succumb to WTO pressures?

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Copyright © 2003-2008 WTO Cell P&D, Govt of the Punjab.
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WTO And Pakistani Citrus Exports

Citrus are the largest produced fruits in Pakistan. The country produces about 8% percent of world production, with only 0.5% percent share in the international trade. Exports have increased in recent years. Net returns are sufficient but some problems like lack of exploration of new markets, transportation, high duties and non-availability of quality packing material hinder export. The upcoming WTO-related concerns have posed challenges as well as opportunities to our agriculture sector. Pakistan needs to meet challenges and avail opportunities in all sub-sectors.

Increased production is the key to promoting the export of horticultural crops. However, lack of incentives and high-tech guidance from the extension department hinder the process. Most plants are locally-manufactured, and are meant only for processing mandarin. The suppliers/contractors do not undertake proper grading before supplying produce to factories. After grading, a significant quantity is channelized back into the domestic market adding costs and delaying processing. Foreign demand is so small that exporters resort to competition among themselves and most of them are operating in neighbouring markets.

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Copyright © 2003-2008 WTO Cell P&D, Govt of the Punjab.
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WTO And The Automobile Industry

THE World Trade Organization (WTO) has rejected Pakistan's request for the extension of the deletion programme which enabled it to lay down the condition of the local content requirement (LCR). Under LCR, the automobile and other engineering industry was required to use locally manufactured parts and accessories in terms of government's deletion policy. The condition of the LCR was an aberration to the Clause 5.2 of the WTO Agreement on Trade Related Investment Measures (TRIMs) read with clause Article III--National Treatment under the GATT, 1994.

Pakistan being a developing country was in principle, required to phase out and withdraw all the trade-related investment measures, inconsistent with the agreement on TRIMs, by the year 2000. However, it kept on seeking extensions of the LCR condition and was granted two consecutive extensions.

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Copyright © 2003-2008 WTO Cell P&D, Govt of the Punjab.
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WTO Rules For Protection Of Industry

IN an attempt to keep pace with the process of globalization under WTO regime and the lenders' conditionalities, Pakistan has exposed its domestic industry to harsh foreign competition. As a result, even some of its efficient export-oriented and import substitution industry is being adversely affected. The main factor affecting the industry being cut in tariff protection, which has considerably been slashed over past few years to 25 per cent and would now further be reduced to 20 per cent in the budget for 2005-06, the unwarranted access to Chinese goods, and the rampant under-voicing. The grant of proposed MFN status to India will aggravate the situation.

Authorities need to adopt a strategic policy to identify and protect these industries. Although GATT/WTO's rule-based system advocates globalization and free trade, at the same time it also permits the member countries to take measures to protect their domestic industry in specific situations. These measures are commonly known as 'trade remedy measures' (TRM), invoked by the members countries under their national legislation but within framed in terms of the GATT/WTO legal frame work. The TRM enable a WTO member country to protect its domestic industry (i) against unfair trade, (ii) increased imports, and (iii) to provide additional protection to its new or infant industry to pursue the economic development.

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Copyright © 2003-2008 WTO Cell P&D, Govt of the Punjab.
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Challenges For The Textile Industry

One way to ensure the right selection is to select all! This is probably the philosophy behind the recent selection of the largest ever cabinet in the national history by the new Prime Minister. Now he wants to empower them to have a performance-oriented administration instead of merely an activity-oriented one. As Karl Marx once observed, 'Visionary administration is where empowerment lies with everyone'. For all our sake one hopes that Mr. Aziz does not believe in the Marxist philosophy and does not go on to empower all of them.

However, on a more positive note, finally the long standing need and demand for a separate textile ministry has been finally met and with the main WTO implementations round the corner it is better late than never. Mushtaq Cheema is a good choice in the sense that in him they have selected a person who is practical, a go getter, and most importantly being a leading national textile exporter he is very much in touch with the textile issues and challenges pertaining to the WTO. He might not hail from a classical textile background but his track record in the field speaks well for the work he has done and the organizations he has headed in this sector.

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Copyright © 2003-2008 WTO Cell P&D, Govt of the Punjab.
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WTO’s Appearance And The Reality

WORLD trade is based on the principle of comparative advantage, a principle undisputed in the economists' community. Specialization and trade, the result of this principle, increase the productivity of a nation's resources and allows for a larger total output than otherwise. Why the global protests and the feeling of unease against the WTO? These are not unfounded. The WTO has its plus points and its drawbacks. To improve upon what has already been a tremendous leap forward in global trade, we need to understand the intricacies involved.

If we are able to comprehend both sides of the argument, we will find a course of action to solve the maladies believed to be caused by the WTO. The disagreements do not arise from the global trade but the resultant effects of globalization and the very rules of the body governing world trade. Globalization is a foregone conclusion. Its ills must be regulated and benefits availed. So, leaving globalization and its spillover costs aside, the exact nature of the opposition must be analyzed.

The opposition to the WTO is centred around the following main points:.

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Copyright © 2003-2008 WTO Cell P&D, Govt of the Punjab.
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