WTO meeting and Pakistan

LAST week, I provided an overview of the process that led to the discussions at Hong Kong aimed at further improvements in the multilateral trading system. At issue were a series of actions the developed world had promised it would take to create a system that did not discriminate against the world’s poorer nations.

For most of developing countries what mattered most was the elimination of protective measures that kept the farmers in rich countries in agriculture producing the products in which the developing world had a clear comparative advantage.

What was the outcome of Hong Kong? This question has produced two answers. According to Prof Jagdish Bhagwati of Columbia University who is a leading exponent of multilateralism in trade, the summit was a great success. It was a success for the simple reason that it did not produce a deadlock among so many different trading interests represented at Hong Kong.

Bhagwati is also pleased that one of the decisions taken at Hong Kong was the agreement to create a new global financing facility that would provide “aid for trade”. He has argued for the establishment of such a facility for a long time suggesting that one way of appeasing the potential losers from the furtherance of multilateralism is to help them adjust to free and open trade.

The other view to which I subscribe is that only small steps were taken at Hong Kong; the objective was to save the talks from collapse and hope that time will narrow the considerable differences that remain among important trading nations. This is unlikely to happen in the time available. The current dialogue must be concluded by the end of 2006 since the authority given to President George W. Bush to negotiate a deal will expire in the middle of 2007 and is not likely to be renewed. I don’t believe much can be achieved in the short time that is available unless Europe, America and large developing countries are prepared to accept some fundamental changes in their trading systems.

How would Hong Kong’s conclusions affect Pakistan? What was the position taken by Pakistan at the meetings and why did it differ from the one assumed by much of the developing world? Pakistan went to the trade summit with the belief that its economic future depends on its ability to create a larger market share in textiles and that in textiles the United States and the European Union will remain the dominant markets for many years to come. I question both assumptions. It is not a sound economic strategy to put all economic eggs in the textile basket and it is equally imprudent to ignore the fact that the fastest developing markets in the world are in Pakistan’s immediate neighbourhood and not in distant Europe and America. Reading global economic trends from a static angle and not from a dynamic perspective is a big mistake. Looking at the world from a more dynamic perspective should have resulted in Pakistan pursuing a different approach at Hong Kong than the one it actually followed. Before indicating what should have been that approach I will provide a quick account of the mini-steps that were taken at the meeting in order to save the talks from total collapse.

The previous rounds of negotiations had made significant progress in reducing the level of tariffs on industrial products particularly among developed countries. Developing countries were permitted to maintain higher tariffs in order to give them the time to prepare their industries for competition with rich countries. Before Hong Kong, there was pressure on ‘more developed’ developing countries to lower their tariffs if not for the goods produced in developed countries than at least for the products of less developed countries. There was a demand that countries like Brazil, China, India and South Africa that had well developed industrial sectors should grant preferential access to less developed countries.

However, rich countries did not make much progress in further splitting the developing world. There was agreement that developed countries would not demand from the developing world more than they were prepared to give themselves. Rich countries, given the way they had handled trade in textiles and clothing for more than four decades, were playing on a weak wicket. Developing countries forced them to concentrate their attention on the opening up of the sector of agriculture.

After a series of whole night sessions that engaged most of the ministers who were present at the meeting, Pascal Lamy was able to come out of Hong Kong with a declaration that provided nothing more than a hint of progress. The only achievement was to keep the talks alive. Another failure after the debacle at Seattle in 1999 and Cancun in 2003 would have killed the Doha round of negotiations and probably also killed the World Trade Organization. The ministers made little tangible progress.

Those representing developing countries were able to secure a promise from the developed countries that agricultural export subsidies would be abolished by end 2013. There was an additional promise that a substantial part of the subsidies would be scrapped before 2011 and that there would be a parallel elimination of indirect subsidies. The choice of the timetable was forced on Hong Kong by the budgetary cycle followed by the European Union. The EU now follows a seven-year budgetary cycle. Instead of going through the pain of agreeing on a budget every year, it adopts fiscal parameters every seven years. This was done at a summit of the EU leaders held shortly before the meeting in Hong Kong which in itself is an indication that for Europe promoting integration in Europe has a much higher priority than promoting multilateralism in trade. The EU could have waited for the outcome of the Hong Kong meeting before setting its own budgetary policy. Instead, it chose to dictate to the WTO its own timetable. Since the next round of budgetary talks will take place in Brussels only in 2012, the EU was not prepared to accept any WTO deadline that came before that time. Hence the choice of 2013 as the deadline for the removal of agricultural subsidies.

Agricultural subsidies take several forms including export credits, food aid and trading through state enterprises. It was agreed that in the coming months, WTO member nations will agree on the value of indirect subsidies since at Hong Kong they were unable even to define state policies that could be described as subsidies. Governments pledged that they would also draw up a timetable for phasing out subsidies.

The Europeans, led by France, had declared that any attempt to force them to drastically reduce subsidies could mean the end of the Doha round. At Hong Kong, the Europeans agreed to a three tier classification which placed them at the top, the United States in the middle and all other nations at the bottom. The members with the highest subsidies — the Europeans — agreed to cut the trade distorting subsidies the most.

Having agreed to this qualification, governments will need to determine the size of the cuts and to devise rules to stop them from reclassifying subsidies into categories that could shelter them from future cuts. This is an area in which Pakistan could benefit if it changed the structure of its economy to reflect fully its natural advantage.

A multi-tier formula agreed at Hong Kong set bigger cuts in higher tariff, smaller cuts for “sensitive” products produced in developed countries and exemption for “special” products grown in developing countries. A mechanism was also agreed upon that would allow poor nations to raise duties in case there was a surge in imports following the implementation of the tariff structure at the conclusion of the Doha round. These agreements notwithstanding, a great deal of work remains to be done in 2006. WTO members must decide in the coming months on the size of tariff cuts and on the number and treatment of “sensitive” and “special” products. For a country such as Pakistan the Doha round must produce a sizable market access for the various fruit, vegetables and flowers it can grow for export to developed country markets.

The Hong Kong negotiators dealt with the sensitive subject of cotton subsidies by giving concession only to African countries and to least developed nations but not to countries such as Pakistan. They agreed to eliminate subsidies in 2006 and grant unrestricted access to the countries in these two categories. The United States will further cut its $4 billion subsidy to cotton growers and also promised to reduce its farm support programme for cotton producers.

The process begun at Hong Kong aimed at bringing trade in agricultural products into the multilateral framework was perhaps the most notable achievement of the trade talks. Pakistan adopted a different posture; it decided to pursue market access in textile as its main objective. As such it showed little interest in the development of trade in agriculture. To neglect the opportunities agriculture offers and to concentrate entirely on developing long-distance foreign markets in textiles is to neglect Pakistan’s real comparative advantage in favour of a sector that is over-crowded with competitors and the development of which in Pakistan was the result of faulty policies adopted in the past rather than the exploitation of the country’s real potential.

Before they met in Hong Kong, WTO members had agreed to extend the deadline for the poorest countries to comply with intellectual property rules. Another concession to the least developed countries included giving market access to them for 97 per cent of their product lines. At the urging of Pakistan and some developed countries, textiles were included in the three per cent “tariff lines” left over that would not have duty free access. As was to be expected, Pakistan’s stance was not appreciated by the least developed nations who had gone to Hong Kong in the hope of gaining free market access for the entire list of their products.

Before the Hong Kong meeting there was agreement that talks would be intensified bilaterally between various groups of countries to liberalize trade in services. At Hong Kong the Europeans pressed for liberalization targets and that position was opposed by most developing countries that fear that their underdeveloped service industry would be swamped by such developed country institutions as banks and insurance companies. Instead, developing countries want greater access for their workers to the service sector even on a temporary basis. I have always found it hard to understand the strong protectionist sentiment in the developing world in the service sector.

Instead of seeking protection and long periods of time for opening the sector, the developing world — in particular countries like Pakistan which have large and young populations — should ask for opening the markets in the developed world for services such as airlines and shipping.

As already indicated above, I believe that Pakistan should work harder to define its position in global trade talks in a way that helps it to secure a better access in agricultural products. It should spend less energy on improving access for textiles. In textiles Pakistan has considerable potential in the rapidly growing markets in Asia. For opening these markets it should focus on providing such regional arrangements as the proposed South Asia Free Trade Area, Safta, with greater substance than it has at present and to obtain better access to China in the context of the bilateral agreement on which it is presently working.

Rethinking nation-building

IN 1945 the future of capitalism as the organizational form of the economy and democracy as the organizational form of the polity was far from certain in the advanced industrialized world. Today there is a remarkable consensus on both the preferred economic and political forms.

With globalization of the media, the benefits of membership in the wealthy democratic club are beamed daily to the homes of billions of people who in turn aspire to the economic opportunities and political freedoms that the market economies and democratic societies have delivered to their citizens. Yet the daily experience of so many people in poor countries is confrontation with the realities of failing or fragile states, criminalized and informal economies, and the denial of basic freedoms.

It is not resentment of the West but exclusion from the right to make decisions in their own countries that feeds the resentment of the poor. At the same time, the networks of violence that have declared war on the security and order of ordinary people in the developed world are making use of the territory of failed states to expand their bases of destruction.

The path to security is not just investment in the institutions of security. The price tag for security in a fragile state can quickly run into billions of dollars a year. A sustained analysis by Nato of the best means of achieving security in Afghanistan showed that credible institutions and public finance would contribute more to security than would the deployment of troops.

Nor is the answer money alone; in these countries, money cannot be translated to capital, because such things as the rule of law, transparency and predictability are lacking. The state is the most effective, economical way of organizing the security and well-being of a population, just as the company is the most effective approach in a competitive economy.

Thus, the need for functioning states has become one of the critical issues of our times. Global political, economic and security institutions must have a new goal: to promote the emergence of states that can fulfil their necessary functions. This goal provides a unified answer to numerous initiatives, including debt crisis, implementation of the Millennium Development Goals, and security. It also requires that we make clear what functions need to be performed by a state if it is to have internal legitimacy and external credibility. We have proposed a framework of the 10 most critical functions the modern state must perform, which was endorsed by a group of leaders of post-conflict transitions last year. The functions include maintenance of a monopoly on the legitimate means of violence, the nurturing of human capital, and creation and regulation of the market.

We have also proposed that state-building or sovereignty strategies be devised to meet the goal of having the state perform each of the 10 functions — strategies backed by compacts between the leadership of countries and the international community on the one side and citizens on the other to create capable states that deliver value to their citizens. And instead of thousands of reports, there should be a single global report on state effectiveness, compiled with the involvement of global and local civil societies and issued by a credible international organization.

For this to work, the global institutions must receive renewed attention. Despite some obvious shortcomings of the United Nations and international financial institutions, the fact remains that if they did not exist they would need to be invented. We must not succumb to calls for their abolition or further weakening.

Revitalization of these organizations will require sustained attention from the leaders of the Group of Eight industrial nations, which need to agree on a programme of reform. It is critical to redefine their tasks and coordinate their activities. In turn, their leaderships need to become models of transparency in recruitment, evaluation and promotion of staff members.

UN agencies need the resources to tackle state-building in fragile and conflict-ridden states. The decision at the UN summit in September to create a peace-building commission provides the United Nations with the opportunity to demonstrate its commitment and capacity for serious reform.

The international system needs reordering, with a new role for the United Nations, international financial institutions and security organizations. The wars of Europe between 1648 and 1945 were made history by collective security institutions. With that experience in mind, the nature of current threats and opportunities can now be confronted. —Dawn/Washington Post Service

Ashraf Ghani is chancellor of Kabul University. Clare Lockhart is a fellow of the Overseas Development Institute in Britain.

Out of Saudi comfort

THE story was apocryphal once but has acquired the patina of fact. It pertained to a remark by the American millionaire Mr J. J. Astor, who on seeing the shards of the fatal iceberg strewn on the decks of the Titanic, muttered: ‘I had ordered ice, but this is ridiculous.’

Here in Pakistan, in October 1999, when a disgruntled public prayed for deliverance from a rampant prime minister, they got what they had least expected. In place of a glutinous Nero, they got a Caesar with similarly imperious inclinations.

Today, Mian Nawaz Sharif and his extended family are preparing to leave Jeddah that has been their home-in-exile for the past six years, to take up residence in their equally luxurious flats in London, which incidentally they did not have to surrender in satisfaction of their debts. To his entourage, Mian Nawaz Sharif continues to be the prime minister. He is addressed as such and apparently does not discourage such homage, no more than the Romanovs did during their exile in Paris and in Copenhagen during the 1920s.

Like the evicted Romanovs, Mian Nawaz Sharif yearns to return to his homeland. Given half a chance, he would happily board a plane for Pakistan to make a triumphant return home. The snag is that General Musharraf will not give him permission to land, either at Karachi or Nawabshah or at any other airport in Pakistan.

Many supporters of Mian Nawaz Sharif and of his former opponent Mohtarma Benazir Bhutto still regard the take-over by the Pakistan Army in October 1999 as a military coup against an elected prime minister. In reality, it was more than that. It was in fact a pre-planned coup de grace against democracy.

The speed with which the generals loyal to their chief were able to seize control of government indicated a level of preparedness that is normally applied in simulated war games against a foreign enemy. The confidence with which they assumed responsibility for governing the country was the by-product of their conviction that they could make a better job of it than civilian politicians could or did. To them, the logic appeared irrefutable: the Ark had been built by amateurs, the Titanic by professionals. And as self-mandated amateur Noahs, they intended to save Pakistani society and its various species.

Now six years later, when the turbulent waters that separate Mian Nawaz Sharif’s position and that of his nemesis have subsided, and a dove of peace has been released in his direction by Musharraf to search for common ground, both these men must be ruminating on the events that once brought them together, and then drove them so far apart so forcibly.

Mian Nawaz Sharif has had all the time to recall the indignity of his arrest, and the discomfort of the solitary confinement he had to endure for at least 38 days after his ouster. As he told the Time magazine correspondent on November 19, 1999, during his trial proceedings: “They kept shifting me to different places. I was kept in small rooms. Dingy rooms. I can’t explain it to you in words. Seeing is believing. There was no mineral water. Each time I had to request them to fetch me mineral water.”

These were not all the hardships he was forced to face. He was also charged with hijacking a commercial airliner, endangering the lives of 200 passengers (including General Musharraf and a number of schoolchildren), and the gravest accusation that any citizen should have to answer for — treason.

To Nawaz, an elected prime minister, the charge was untenable. To him, if treason had been committed by anyone, it was by General Musharraf when he usurped power, thereby subverting the form of the Constitution. To Musharraf, though, Nawaz Sharif was the guilty party for having perverted the substance of the Constitution and the requirements of sound, good governance. Which one of them was right, and which one wrong? A 17th century epigram could have provided Nawaz Sharif with the answer: ‘Treason doth never prosper: what’s the reason? / For if it prospers, none dare call it treason.’

Nawaz Sharif obviously did not prosper. He found himself being sentenced to life imprisonment. Hard on the heels of that punishment, a special anti-corruption court sentenced him to 14 years of hard labour, fined him for $370,000 and disqualified him from politics for 21 years.

Yet, a month later, ‘in the best interest of the country and of the people of Pakistan’ (and fortuitously in Mian Nawaz Sharif’s own interest), Musharraf allowed him to leave the country for the sort of exile in Saudi Arabia. He was exempted from having to serve any further time in jail, he would have to forfeit Rs 500 million of assets, and could not return to Pakistan for ten years. When asked who would stand guarantor for Nawaz Sharif’s adherence to the terms of this windfall amnesty, General Musharraf responded: “The Saudi Government”, insisting at the time that the agreement was not between him and Nawaz Sharif personally but between two states, — the Royal Kingdom of Saudi Arabia and the Islamic Republic of Pakistan.

Why, many Pakistanis asked at the time, was Nawaz Sharif released when thousands of other ‘lifers’ continued to languish in Pakistani jails? And why to the comfort of a princely abode — albeit maximum-security — in Jeddah?

It is perhaps indicative of the present style of government in Pakistan that the decision to release Mian Nawaz Sharif from his second term of imprisonment should have been taken not by the National Security Council nor by the cabinet nor by the National Assembly, but personally by the Chief of Army Staff who had taken such desperate measures to oust Mian Nawaz six years ago.

There are many left in Pakistan who still believe in democracy, who hold their country and its Constitution in some esteem. There are many who still believe in the supremacy of the law, even though it may have been procreated by inept lawmakers and administered by courts. To them, a bottom-up approach to governance is preferable to a top-down one, if only because one knows where the bottom is and can always build upwards. Top-down governments never know how far they have to bend and descend before they can reach the common man.

Devolution to ‘a grass-roots level’ might have been an answer had it succeeded. What is clear now is that the answer does not lie in the concentration of power in one set of praetorian hands. A situation is fomenting similar to one that the French savant de Montesquieu described in French politics over two centuries ago: “Monarchy is lost when the King, concentrating all power in himself alone, summons the state to his capital, the capital to his court, and the court to his person.”

Restoring real choice

THE political situation at the start of 2006 is remarkably changed from anything that anyone alive today has known for at least a generation. Put it this way: when was the last time there was a serious case for being able to contemplate a vote for any one of the three main parties?

Not since 1979, certainly, and even that distant election — Margaret Thatcher’s first as Conservative leader — would be a nomination too far for very many. Go back beyond that and, for all the Butskellite consensus of the 1950s and early 1960s, you are into the era in which the class roots of both the Tories and Labour were a stricter determining factor than today and in which the predecessors of the Liberal Democrats were mostly stuck at the margins of the bigger picture.

In any case, the youngest voter in that 1979 contest is 44 years old now. So no one younger has lived their adult life through a period in which there was a greater convergence between the three main parties and it is arguable that none of us, of whatever generation, has ever been in such a place before.

It is tempting to say that the principal author of this convergence is David Cameron, the new Conservative leader. Barely known to the wider public six months ago, Mr Cameron has managed, in less than a month since succeeding Michael Howard, to put a new face on the Tory party, and perhaps new substance behind it too. With a few brisk strokes, Mr Cameron has, in the space of a mere four weeks, shifted the party’s stance on important subjects such as gender equality, development aid, immigration, the environment and student finance.

He has sounded a new note by disinterring the notion and the language of liberal Toryism and has been immediately rewarded by a decent bounce in public support for his party. These are very early days and it may all prove before long to be more superficial than substantive. Yet it is clearly something more than an electoral stance. When Mr Cameron talks about compassionate conservatism, we think he means it. It is a fascinating and important development and Mr Cameron was entitled, in his New Year message, to claim that these are exciting times for Conservatives.

Yet the true architect of this new political situation is not Mr Cameron but the prime minister. To understand the new convergence it is essential to treat Tony Blair’s achievement seriously.

—The Guardian, London

Taking innocent life

EARLIER last month, the state of North Carolina executed Kenneth Boyd — who became the 1,000th person put to death in the United States since the Supreme Court permitted executions to resume in 1976.

The 1,001st, Shawn Paul Humphries, was put to death in South Carolina hours later. The 1,002nd, Wesley Baker, followed in Maryland the next week, the 1,003rd in California and the 1,004th in Mississippi. At this rate, the next thousand will not take anything like three decades.

And that, in all likelihood, means that an innocent person will be executed relatively quickly. While these five men were not innocent, it is exceedingly improbable that all of their fellow inmates were rightly convicted. The faster the death chambers do their work, the sooner an innocent person will be put to death.

The latest probably erroneous execution to come to light is that of Ruben Cantu, who was executed more than a decade ago in Texas for a brutal robbery-murder that took place in 1984, when he was 17. Recently, the Houston Chronicle published a remarkable series revealing that the lone eyewitness, who was shot multiple times during the incident but who survived to testify against Mr Cantu, has recanted.

The evidence against Mr Cantu was limited to the testimony of this man, Juan Moreno. Likewise, Mr Cantu’s co-defendant now says that he and another teenager committed the robbery. David Garza, who served a sentence for his role, now says that “Ruben Cantu had nothing to do with the murder. . . . I should know.”

This isn’t the first time serious questions of innocence have arisen after an execution. Last year, the Chicago Tribune reported on the case of Cameron Todd Willingham, who was also executed in Texas. The case against him for burning down his home and thereby killing his children was, the paper reported, “based primarily on arson theories that have since been repudiated by scientific advances.”

— The Washington Post