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Export Challenges and the WTO Export Challenges and the WTO Implications - Five Sector StudiesImplications - Five Sector Studies

BY

INAAMUL HAQUE

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Scope of Presentation

A. Implications of the WTO Agreements

(General)

B. Flow of Information re: the WTO

C. Specific Sectors and WTO Agreements

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A: WTO ISSUES

Regulatory Framework for International Trade

• Discipline of multilaterally agreed rules.

• The World Trade Organization (WTO) oversees the multilateral system.

• Aim: To help international trade flow smoothly, freely, fairly and predictably.

• Trade liberalization orientation of the WTO’s rules – a rapid expansion of the world trade.

• WTO dispensation: Both opportunities and challenges for Pakistan.

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Opportunities

• WTO is about providing opportunities and not

guarantees.

• Converting Opportunities into Outcomes.

• Action: Government agencies, trade bodies and

above all by entrepreneurs themselves.

“It is for the business community supported by the

Government to convert tariff reductions and

liberalization commitments into opportunities for

trade.”

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Challenges

• Likewise concerted action both by the public and

private sectors.

• Managing negative fallout.

• Adjustment Policies

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Expansion in Market Access

• Drastic Reductions in Tariffs Under GATT/WTO

System, Eight rounds of Multilateral Trade

Negotiations (MTNs)

• Tariffs, however, on goods of export interest to

developing countries still remain relatively high e.g.

on clothing and footwear.

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Poor Countries Get Hit the Hardest Bangladesh vs France

The U.S. collects more tariff on imports from Bangladesh than on imports from France.

U.S. Imports

(billion dollars)

Tariff paid

(million dollars)

Per capita GDP

(dollars)

Bangladesh 2.4 331 370

France 30.0 330 24,170

Source: U.S. International Trade Commission.

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Current Status of Efforts to Liberalize Trade

• Currently, the ninth (and the first under the WTO)

MTN called the Doha Development Agenda (DDA)

in progress but pace at least glacial.

• Negotiations under the DDA on the Non-Agriculture

Market Access (NAMA) cover these five sectors.

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The WTO Agreements (In a Nutshell)

• General Agreement on Tariffs and Trade (GATT 94) regulates the international trade in goods and rests on five pillars: Most-Favoured-Nation (MFN) Obligation, National Treatment Obligation, Elimination of Quantitative Restrictions, Transparency of Government Regulations Affecting Trade and Tariff Bindings.

• Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) seeks to reduce impediments to international trade through promoting adequate protection of intellectual property rights. TRIPS Agreement is specially relevant for pharmaceutical industry.

• Agreement on Technical Barriers to Trade (TBT) contains a code of good practice for the preparation, adoption and application of standards.

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• Agreement on Sanitary and Phytosanitary Measures

(SPS) disciplines exercise of discretion when a

country wishes to disallow import of any item on the

ground that it would be hazardous to life or health of

human being or disallowing import to protect human,

animals or plants.

• Customs Valuation under GATT – Implementation of

Article VII, This agreement seeks to establish a fair

and uniform system for the valuation of goods that

provides protection to international traders from

fixation of arbitrary values by customs authorities of

importing countries.

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• Agreement on Rules of Origin seeks to clarify and harmonize rules of origin in member countries and in particular requires members to ensure that such rules do not create distorting or disruptive effects on trade. The rules of origin are of special relevance in cases where a country is to benefit from the lower tariff available through GSP or under a regional trading arrangement.

• Agreement on Trade-Related Investment Measures (TRIMs) seeks to prohibit investment related measures which are trade distorting e.g. local content requirements and export performance requirements. It is of special relevance for automobile parts sector.

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• Agreement on Implementation of Article VI of the GATT 1994 (Antidumping) regulates the practice of dumping i.e. the sale of products of a foreign country at less than the normal value of the products in the exporting country if the price level causes or threatens to cause material injury to an established industry in the importing country.

• Agreement on Subsidies and Countervailing Measures disciplines use of subsidies and also regulates the actions that can be taken by the countries to counter the effects of subsidies.

• Agreement on Safeguards disciplines initiation of emergency safeguards measures by laying down requirements for safeguard investigations.

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Information re: The WTO

WTOWTO

WTO Mission of Pakistan, GenevaWTO Mission of Pakistan, Geneva

Ministry of Commerce/TDAPMinistry of Commerce/TDAP

Chambers of CommerceChambers of Commerceand Trade Associationsand Trade Associations

EntrepreneursEntrepreneurs

Information flows, both upwards and downwards, on the WTO are depicted below:

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Upward Flows - Government Driven Flows

• Information transmitted by the GOP to the WTO as

an obligation of the membership of the

organization.

• GOP’s Information about WTO related problems of

business: Obtained through Consultative Meetings

and interaction with Entrepreneurs

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Entrepreneurs’ Driven Flows

Information flow (Upwards) Exporters’ Opinion

• Semi Voluntary and Sporadic

• Majority Views: Adequate Information about the

concerned government agencies/departments

• Finding: Information about Reaching Out to the

Government uneven.

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Information flow – Downwards, i.e. from the WTO via Government to Entrepreneurs

• Complaints about the lack of information about the WTO

• Not readily Available in a User Friendly Way.

• Inadequate knowledge about Implications of the WTO Agreements

• Useful Information on Websites of MOC/TDAP (Also on WTO Cell P&D Punjab).

• Efforts on the part of some entrepreneurs to obtain information.

• But a small number of few entrepreneurs not even familiar with the term “WTO”.

Findings: Present Flows Unsatisfactory (Content, Sources, Destination, User friendliness, Nature of Information)

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Recommendations

• More Proactive Role of the Government (Especially MOC & TDAP).

• Capacity building of Trade Associations/ Chamber of Commerce

• Setting up of Research & Advocacy Centres in Associations.

• Effective Dissemination of Information to Members

• Present system of generalized information on the WTO should be changed to one–disseminating focused information regularly on concrete issues.

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• A comprehensive plan for dissemination of sector-

specific information may be prepared by TDAP in

consultation with stakeholders.

• A helpline, professionally manned, should be

established in TDAP. Sector specific experts should

be available to callers.

• Special meetings/workshops/seminars on regular

basis for educating entrepreneurs about the WTO

issues should be organized by the TDAP in

partnership with concerned trade associations.

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C: Specific Sectors and WTO Agreements

I: AUTOMOTIVE PARTS

Improved Market Access under WTO Dispensation

• Better market access through liberalizing orientation

of the WTO system.

• Tariff rates have been drastically reduced in

developed countries’ markets (very low or even

zero).

• Rates still high in Developing Countries e.g.

Bangladesh – Our biggest market (Tariff rate: 22.6%)

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• Sustained growth in export earnings:

Year Value of Exports

2000-01 US$4.25 million2005-06 US$36.91 million

• WTO regime made contribution (though it is not the only factor).

• Counterfactual Question

• Issue of compliance

- TRIMS

- Safety Standards/TBT

• Great potential for increasing exports but we have to tackle supply side problem.

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II: FOOTWEAR

• Some improvement market access in the industrial countries’ markets.

• But rates still high e.g. more than 6% in EU, 28.34% in USA, 29.95% in Japan

• 1995-2001: Decline in Exports by 17% (Co-incidental)

• 2001-2005 Increase 224%

• Counterfactual Question

• Reduction in prices and improvement in the quality of inputs

• Great potential for increasing exports but we have to tackle supply side problems.

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III: FURNITURE

Impact of Agreements

• Improved market access in the industrial countries’ markets.

Year Value of

Exports

1994-95 US$3.4 million

2004-05 US$13.13 million

• Caveats.

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IV: PHARMACEUTICAL

• Improved market access for Pakistani pharmaceutical products in developed countries’ markets. Tariff rates have been drastically reduced (very low or even zero) in those markets.

• Requirement of Registration.

• Sustained growth of export earnings has taken place. 2000-2001: US$ 38 million, 2005-06: US$ 82 million.

• Compliance with provision of TRIPS.

• Great potential for increasing exports of generic drugs but we have to tackle supply side problem.

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V: SPORTS GOODS

• Improved Market Access

• With coming into force of the WTO agreements, exports have shown mixed trends.

(US$

Million)Period Exported value of Sports Goods

1995-96 247.51

2000-01 270.58

2005-2006 343.30

2006-2007 287.90

• Counterfactual question: where would we have been without WTO system?