January 9, 2006	Monday	Zilhaj 8, 1426

THE WTO regime was meant to devise a set of universally applicable rules for trade negotiations among countries from both the developed and developing world, and getting these implemented in letter and spirit, of course with certain exceptions in favour of less developed countries.

There are prescribed guidelines for Special and Differential Treatment (SDT) to be extended to developing countries in the form of preferential access to their markets, liberalizing their capital accounts for enhancing the flow of investments into low-income developing countries, removing agriculture subsidies and tariffs, liberalizing visa rules for skilled and unskilled labour from developing countries under the General Trade Agreement in Trade in Service (GATS) etc. But there is no mechanism to monitor the effectiveness of the policies of the developed countries under STD provisions.

The developed countries desire to improve their terms of trade through better access to markets of other member countries, overriding their commitment on the SDT. In total disregard of the welfare and growth prospects of all member countries, they have in place trade policies which are detrimental to the economies of developing countries, particularly those having an agrarian base.

In other words, trading disadvantage or costs are transferred to developing countries. The subsidies provided by rich countries to their agriculture sector impede the free flow of export trade mostly from low-income developing countries with agrarian economies.

Generally, the SDT has given rise to discriminatory trading approach among developing countries. Recipients of trade preferences, in fact having trading policies contrary to the norms of trade liberalization, create uncertainty and unpredictability in the overall trade arena.

Accordingly, many of the low-income developing countries have not been able to expand and diversify their exports due to differential treatment extended to their counterparts in the same geographic regions.

Within the South Asian region, Pakistani exporters of textile apparel have been suffering a lot due to preferential treatment extended by US and EU countries to Bangladesh for export of the same items. However it is now a matter of satisfaction that in terms of text released on conclusion of the Hong Kong ministerial conference, Pakistan’s apparel and other textile products will also enjoy the same access as Bangladesh and Cambodia have to developed markets. Still, there is a need to address other similar remaining constraints.

Under the SDT or preferential treatment approach, it should be incumbent on the part of rich countries to minimize conditionalities attached to specific trade agreements entered into with the Least Developed Countries (LDCs), as presently in terms of rules pertaining to the SDT, developing countries are required to designate special products and use special safeguards, particularly for products of agricultural export, which, when implemented, generally result in adding to the cost of production. Hence the “development perspective” — the ultimate philosophy of the WTO — is badly damaged.

Almost all the developing countries desire to do away with discriminatory trade preferences and instead adopt a new approach to preferential treatment in the form of ‘trade aid’ from developed countries, coupled with strengthened grant-based financing: in other words, financial assistance for low-income developing countries to improve trade supply capacity and competitiveness of local firms, upholding one of the basic objectives of the WTO, that is redistribution of gains from trade liberalization and creating an enabling environment for developing countries to streamline integration into the WTO mechanism.

In his article Bernard Hoekman, a senior advisor in the World Bank’s Development Research Group suggests ‘making the WTO more supportive of development’. The rich countries who have committed, under the Doha Round, to cut or totally remove subsidies and tariffs gradually over a long time period, like the US, be made to commit part of their gains from trade liberalization to a fund to be set up for building up trade capacity of developing countries. Developing countries, including Pakistan, need to take up this issue at all international forums.

The developing countries, including low-income countries, have more or less complied with the requirement of removing trade barriers by altogether removing or reducing subsidies provided to their farmers. However their chances of getting access to trade capacity measures remain in oblivion. The steps, to be undertaken by developed countries with a development supportive approach, are still being overlooked.

Under the WTO regime, rich countries are required to provide service visas to skilled and unskilled workers of developing countries on a non-discriminatory basis, but still quite a number of low-income developing countries of South Asia, including Pakistan, are being discriminated against on this count.

Pakistan’s service sector, particularly in information technology (IT) has a competitive edge over quite a number of developing countries, but it is being overlooked by developed countries while outsourcing their requirements relating to the development of software and other IT-related services.

Similarly, banking is a sector where Pakistan can boast of having professionals of high ranking. Developed countries must open up their service sector to entertain expertise from developing countries.

Contrary to this unanimously desired strategy by developing countries, rich industrial countries insist on lower tariffs relating to fast-growing sectors like telecommunication and energy, which impedes their making available high-tech services. Accordingly, a majority of developing countries are insisting on availing work visas for skilled and unskilled workers only. This issue has no doubt been discussed at the recent Hong Kong ministerial conference, without positive outcome. It must be taken up at all such future talks.

No doubt developing countries have generously complied with the requirements of liberating trade by reducing tariffs substantially, but reciprocal steps from developed countries regarding the removal/reduction of subsidies allowed to their farmers is an immediate need. It will be too cruel to make low-income developing countries suffer until 2013. These subsidies have resulted in trade distortions and exportable agriculture products of developing countries have been rendered incompatible in the international market.

Further, the practice on the part of rich countries to protect their farmers through levying high tariffs on the import of agriculture and agri-based products from developing countries is going on unabated. This, apart from defying the developmental perspective of the WTO agenda, in fact provides incentives to their inefficient farmers at the cost of enhanced poverty among farmers of low-income developing countries, which mostly have agrarian economies.

Besides that, developing countries that have already done away with subsidies to their agriculture sector and export to a great extent, need to be allowed to retain tariffs on products in which they need to protect a particular industry from the developmental perspective. Sufficient time must be made available to them to reduce the tariffs to a manageable level.

In the ministerial conference at Hong Kong, 110 less developed countries took a strong stand for gaining access to rich countries’ markets and for the removal of agriculture subsidies by rich counties on an immediate basis. They succeeded in availing better protection for LDCs relating to the exports of textiles and also getting the timeframe slashed for removing agriculture subsidies.

However, members of this newly formed bloc must remain united and insist on getting this timeframe further shortened and also to get export subsidies totally removed and most importantly, to have greater market access for export of their non-agriculture products during the next round of talks to be held in Geneva next year.