WTO Membership Obligation and Implications

Prachanda Man Shrestha Trade and Tourism Analyst September 8, 2012

Trade Regime
Domestic Trade Regulatory System (Governed by national laws) Bilateral Trading Arrangements (Governed by Understanding and Treaties between two countries) Regional Trading Arrangements (Governed by Agreement between the group of countries in the region) Multilateral Trading System (Governed by Non-discriminatory Trade Rules)

Nepals External Trade Instruments

Bilateral Trade Agreements with 17 Trade Partners But Limited in force with Few but Bigger and Stronger Economies Regional Trade of SAPTA enforced since 1995 under SAARC Moving towards SAFTA / BIMSTEC-FTA Membership (147th) to WTO since 23 April 2004 Observer in APTA

Trend in Global Economy

Liberalization relying on Market Mechanism Economic Interdependency of Nation States Focus on Consumers than Producers Production based on Competitive Advantage Economic Use of Information Technology Increased Movement of Goods / Services / Capital / Information Growth in Multinationals Change of State Role as Facilitator Formation of Regional Economic Blocs Survival on Knowledge Resource Increased State of Uncertainty Marginalization of Weaker economies Growing power of Bigger economies

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Emergence of Global Institutions

Global Governing Institutions at UN Monetary Financial Conference (Bretton Woods) 1944 as: IBRD (World Bank) IMF ITO (Not realized) Instead, General Agreement on Tariffs and Trade (GATT) was negotiated temporarily in 1947 with 23 members which remained till 1994 with 124 members GATT as forum than institution was Limited to Trade in Goods GATT achieved substantial tariff reduction under rounds of trade negotiations known as Uruguay/ Tokyo / Kennedy / Dillion)

Emergence of WTO

Uruguay Round of GATT, by Marrakesh Agreement in 1994 established WTO on 1 Jan 1995, with Objectives of: Raising Living standard Increasing Income Ensuring Full Employment Expanding Production Protecting Environment Benefit from opportunities of Globalization Address Marginalization of Weaker Economies Free trade by Mechanism of Fair trade Rules based trading than Power pushed New Membership by Negotiation Membership based on Custom Territory Members Vote & Veto neutral to Scale and Size

Scope and Principles of WTO

Scope : GATT / GATS / TRIPS / Plurilateral Principle: Non-discrimination Transparency Progressive liberalization Trade Rights by Mandatory System Practice: Most Favored Nation Treatment National Treatment Protection by Tariff and Trade Remedy Measures Domestic Regulation Exceptions: Enabling Clause/ FTA / Public Morale Government Procurement / Health / Security Environment / Trade Remedy Measures/ Special & Differential Treatments

WTO Functions

Trade Negotiation Forum Trade Policy Review Dispute Settlement Promote a free, open and non-discriminatory world trading system in a transparent manner Adhere multilaterally agreed rules and disciplines Facilitate the implementation, administration and operation of the Multilateral Trade Agreement Function as Single undertakings Help to achieve greater coherence in global economic policymaking by cooperating with IMF, the World Bank and its affiliated agencies

Major Agreements
Marrakesh Protocol & Agriculture Sanitary and

Understandings GATT 94

Phyto-sanitary Textiles and Clothing Technical Barriers to Trade Trade Related Investment Measures Customs Valuations Rules of Origin Import Licensing Procedures Subsidies and Countervailing Measures Anti-dumping Safeguards Pre-shipment Inspection General Agreement on Trade in Service (GATS) Trade Related Intellectual Property Rights (TRIPS) Dispute Settlements Plurilateral Agreements Sectoral Initiatives

Reasons of Joining WTO

Integrating National Economy to Global Mainstream Securing Extended Market for Exports Maintaining Policy Stability for Predictability Enhancing National Image for Credibility Attracting Foreign Investment Strengthening Domestic Institutions Establishing Trade Rights Safeguarding from External Shocks Benefiting from Fair Trade Rules: Special and Differential Treatment Technical Support for Capability Enhancement Preferential Treatment in Market Access Getting Development Justice

Nepals Terms of Membership

Systemic Commitments on Mandatory Provisions Future Liberalization on LAP (24 Acts) Implement CV/TBT/SPS/TRIPS by 1Jan 2007 Transition Period for Adjustment (Max. 10 yrs) Technical Assistance for Capability Tariff Flexibility for Policy Space on Goods trade (Final Ceiling Average Agro 42% and Others 24%) Phasing out ODC (LDF, SF, ARF) Phasing out tariff on Selected IT products by 5 years Tariff Reduction Committed (about 58 tariff lines) Conditional Commitment on Service Trade (about 70 sub-sectors with incorporation, equity, employees limit) Transparency fulfillment by publishing laws Non-commitment on Plurilateral / Sectoral initiatives

www.moics.gov.np / www.multitrade.org.np
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Opportunity from Membership

Stability

in Domestic Policy/Procedure/Delivery due to tying up with Global Framework of Rules National Image/Credibility on Recognition as Member of Global Economic Community Opportunity for Institutional Strengthenment Transparency in Economic Governance Safeguard against vulnerability in Trade (Trade Remedy Measures and Unilateral Decision from Trading Partners) Protection of Tariff in Trade in Goods and Domestic Regulation in Trade in Service Benefit of Fair Trade Mechanism Institutionalized Trade and Transit Rights Technical Assistance for Domestic Capability Membership Stops Non-membership Risk

Major Concerns
Market Access

Preference for LDC products are not Bound Non-Tariff Barriers are the major Constraints for Export Transit Facilitation to Landlocked is not getting Priority Integrated Framework is not enough for Capacity Building Threat to Domestic Producers from Liberalization is not strongly addressed Revenue Loss due to WTO Obligation is Substantial Risk of Non-abidance of WTO Obligation No Assistance for Trade Capacity of Private Sector Bilateral and Multilateral Assistance limited to Technical Support and Hard Infrastructure is Missing Sequencing of Multiple Donors Difficult to Coordinate Assistance for Capacity Building is Voluntary while WTO Obligation is Mandatory TRIPS CBD Linkage not Progressing DDA is in doldrum

Business Opportunities Envisaged

Address Small Domestic Market Constraint Encourage Domestic / Foreign Investment Market Access from Reduced Tariff Comparative Advantage on Service Export Resource on Sectors of Competitiveness Import Consistency and Supply Stability for Industrial Productive Inputs Opportunity to Advocate Nepals Trade Rights Support Industrialization and Infrastructure Building liberalizing Service Trade Transparency in Economic Governance Safeguard against vulnerability in Trade Institutionalized Trade and Transit Rights Technical Support for Reforms
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Challenges
No Automatic Benefit :Means not End Cost for Policy Compatibility Gear up Infrastructures /Institutions Identifying sectors of Advantage SMEs privilege can be Disputed Enhancing Competitive Capability (Supply Constraints) Documenting Traditional Knowledge and Bio-resources Non-compliance Cost and Risks Capability of Business Advocacy Developing Human Resource capacity

Strategy to Benefit

Policy Reform for Open / Competitive Trade with Safeguard Measures to Mitigate Adverse Impacts to Cottage and Small Industries Focus and Consolidate on Niche Products and Niche Market adding Intangible Values based on EthnoCulture-Heritage-Geography Benefit location of Fastest Growing Largest Economies Strengthen LDC Alliance for Negotiation and Benefit from Positive Discrimination of Global Trade Rules Encourage Stakeholders for Policy Advocacy Focus on Sectors of Comparative/competitive advantage Encourage Market Linkage with Multinationals Capitalize Moral obligations of WTO Members and Donors for Trade Capacity Building Encourage for Novelty and technology in production Economic Diplomacy Strengthening Parallel Diplomacy

THANKS