A

presentation
on
WTO and Nepal
Presented By:
Nirju Lawat
Nishchalta Phuel
Pragati K.c
Pradip Bhattarai
Pratima Bajracharya







Introduction

• The World Trade Organization (WTO) is an international
organization dealing with the rules of trade between nations.
• It deals with : agriculture, textile, clothing, banking,
tele-communication, government purchase, food sanitation
regulations, intellectual property and much more.
Cont..

• It is a forum for governments to negotiate trade agreements.
• It is a place for them to settle trade disputes.
• Its purpose is to help trade flow as freely as possible.
• It is run by its member governments.
• All major decisions are made by the membership as a whole.



GATT

• The full form of (GATT) General Agreement on Tariffs and
Trade
• Prior to 1994 the WTO was known as the GATT
• It was a multilateral agreement regulating international trade.
• Its purpose was the substantial reduction of tariffs and other
trade barriers and the elimination of preferences.
• It was replaced by the World Trade Organization in 1995.


Background


• WTO is Located at Geneva, Switzerland.
• It is formally established in 1 January 1995
• It was the outcome of the lengthy (1986-1994) Uruguay
round of GATT negotiation.
• It has the membership of 160 countries on 26 June 2014
• It was started with the budget of 197 million Swiss francs
for 2013
• It contains 640 secretariat staff in WTO.
• The head of WTO is Roberto Azevedo (Director-General)

Understanding the WTO

• Non- discrimination
• More open
• Predictable and transparent
• More competitive
• More beneficial for less developed countries
• Protect the environment

Functions of WTO
• Administering WTO trade agreements
• Forum for trade negotiations
• Handling trade disputes
• Monitoring national trade policies
• Technical assistance and training for developing countries
• Cooperation with other international organizations
Administering WTO agreements
• Facilitate the implementation, administration and operation
and further the objectives of GAAT and of the Multilateral
Trade Agreements.
• Provide the frame work for the implementation,
administration and operation of the plurilateral Trade
Agreements.
Forum for trade negotiations
• Provide the forum for negotiations among its members
concerning their multilateral trade relations in matters dealt
with under the Agreement in the Annexes to this Agreement.
Handling trade disputes
• Countries bring disputes to the WTO if they think their rights
under the agreements are being infringed.
• WTO members have agreed that if they believe fellow-
members are violating trade rules, they will use the
multilateral system of settling disputes instead of taking action
unilaterally.
Monitoring national trade policies
• All WTO members must undergo periodic scrutiny of their
trade policies and practices,
• Each review consists of reports by the country concerned and
the WTO Secretariat.
Technical assistance and training for
developing countries
• The WTO organizes hundreds of technical cooperation
missions to developing countries annually.
• It also holds numerous courses each year in Geneva for
government officials.
• Aid for Trade aims to help developing countries develop the
skills and infrastructure needed to expand their trade.
Cooperation with other international
organizations
• The WTO maintains regular dialogue with non-governmental
organizations, parliamentarians, other international
organizations, the media and the general public on various
aspects of the WTO and the ongoing Doha negotiations
• The aim being enhancing cooperation and increasing
awareness of WTO activities.
Principles of WTO
• Trade Without Discrimination
• Freer trade
• Predictability
• Promoting fair competition
• Encouraging development and economic reform
Trade Without Discrimination

• Treating other people equally Under the WTO agreement
• Countries cannot normally discriminate between their trading
partners.
• Treating Imported and locally-produced goods equally.
• The same should apply to foreign and domestic services, and
to foreign and local trademarks, copyrights and patents.
Free trade
• Lowering trade barriers is one of the most obvious means of
encouraging trade
• The barriers concerned include customs duties (or tariffs) and
measures such as import bans or quotas that restrict quantities
selectively
Predictability
• With stability and predictability, investment is encouraged,
jobs are created and consumers can fully enjoy the benefits of
competition — choice and lower prices.
• The multilateral trading system is an attempt by governments
to make the business environment stable and predictable.
Promoting fair competition
• The WTO is sometimes described as a “free trade” institution,
but that is not entirely accurate
• The system does allow tariffs and, in limited circumstances,
other forms of protection
• it is a system of rules dedicated to open, fair and undistorted
competition.
Encouraging development and economic
reform
• The WTO system contributes to development and economic
reform
• Allows for special assistance and trade concessions for
developing countries.
Doha Development Agenda (DDA)
• DDA is the current trade-negotiation round of the WTO which
started in November 2001under then director-general Mike
Moore
• Its objective is to lower trade barriers around the world, and
thus facilitate increased global trade
History
• 2001: The Doha Round began with a meeting in Doha,
Qatar
• 2003: Cancún, Mexico
• 2004: Geneva, Switzerland
• 2005: Hong Kong and Paris, France
• 2006: Geneva, Switzerland
• 2007: Potsdam, Germany
• 2008: Geneva, Switzerland
• The July 2008 negotiations broke down after failing to
reach a compromise on agricultural import rules.
• In April 2011, director-general Pascal Lamy asked
members to think hard about 'the consequences of
throwing away ten years of solid multilateral work.
• As of January 2014, the future of the Doha Round
remains uncertain.

Doha, 2001
• Negotiations related to:
opening agricultural and manufacturing markets
trade-in-services (GATS) negotiations
expanded intellectual property regulation (TRIPS).
Cancún, 2003
• The intention of this meeting was to forge concrete
agreement on the Doha round objectives and to create a
framework for further negotiations
• This meeting collapsed after four days during which the
members could not agree on a framework to continue
negotiations
Reasons for Collapse of negotiations
1. Differences over the Singapore issues seemed incapable
of resolution
2. Few countries showed no flexibility in their positions
and only repeated their demands rather than talk about
trade-offs
3. The wide difference between developing and developed
countries across virtually all topics was a major
obstacle.
4. There was some criticism of procedure.
Geneva, 2004
• EU accepted the elimination of agricultural export
subsidies
• The Singapore issues were moved off the Doha agenda.
• Developing countries too played an active part in
negotiations this year, first by India and Brazil
negotiating directly with the developed countries on
agriculture, and second by working toward acceptance of
trade facilitation as a subject for negotiation.
• The negotiators in Geneva were able to concentrate on
moving forward with the Doha Round.
• After intense negotiations in late July 2004, WTO
members reached what has become known as
the Framework Agreement (sometimes called the July
Package), which provides broad guidelines for
completing the Doha round negotiations
Hong Kong and Paris, 2005
• Trade negotiators wanted to make tangible progress
before the December 2005 WTO meeting in Hong Kong,
and held a session of negotiations in Paris in May 2005.
• Paris talks were hanging over a few issues:
France protested moves to cut subsidies to farmers
U.S., Australia, the EU, Brazil and India failed to agree
on issues relating to chicken, beef and rice

Geneva, 2006
• The talks in Geneva failed to reach an agreement about:
reducing farming subsidies
lowering import taxes
Potsdam, 2007
• In June 2007, negotiations within the Doha round broke
down at a conference in Potsdam, as a major impasse
occurred between the USA, the EU, India and Brazil.
• The main disagreement was over opening up agricultural
and industrial markets in various countries and how to
cut rich nation farm subsidies

Geneva, 2008
• Around 40 ministers attended the negotiations, which
were only expected to last five days but instead lasted
nine days.
• On the second day of the conference, U.S. Trade
Representative announced that the U.S. would cap
its farm subsidies at $15 billion a year,

from $18.2 billion
in 2006.
.
The proposal was on the condition that
countries such as Brazil and India drop their objections
to various aspects of the round
• There were disagreements on issues including
special protection for Chinese and Indian
farmers and African and Caribbean banana
imports to the EU.
Issues
1. Agriculture has become the lynchpin of the agenda for
both developing and developed countries.
2. compulsory licensing of medicines and patent
protection.
3. review of provisions giving special and differential
treatment to developing countries
4. problems that developing countries are having in
implementing current trade obligations
Benefits to developing countries
• Many large emerging economies are significant global
exporters and will stand to gain from greater market
opening.
• Smaller developing countries also stand to gain from a
more level playing field in agriculture through major cuts
in developed countries' farm tariffs (by at least 54%) as
well as through the elimination of all export subsidies.

Cont…
• Least Developed Countries stand to gain very significant
duty-free, quota-free access to developed countries'
markets
• Developing countries benefit from flexibilities in tariff
cutting.
• They will also benefit from significant special and
differential treatment across the board
Effect on the world economy
• World exports would increase by $359 billion on an
annual basis from a deal including trade facilitation.
• This would mean an increase of 2% in world trade
• An agreement would also bring positive effects on tariff
revenue for certain regions, one of which is Sub-Saharan
Africa (SSA).


WTO Provision For Least Developed Countries
• The WTO recognizes as least-developed countries (LDCs) those countries
which have been designated as such by the United Nations.
• There are at present 48 LDCs on the UN list, 34 of which are members of the
WTO.
• WTO members recognize that LDCs need special treatment and assistance
for their development.
• WTO agreements include provisions aimed at increasing LDCs’ trade
opportunities through market access; provisions requiring WTO Members
to safeguard the interest of developing countries; provisions allowing
LDCs flexibilities in the implementation of WTO rules and commitments,
including longer implementation periods; and provisions for technical
assistance.

Cont…
• Article 66.1 of the TRIPS Agreement specifies a transition period
for LDCs to delay protecting intellectual property under the
Agreement.
• As least developed countries use their transition period to prepare to
implement the WTO’s intellectual property provisions, they have
been asked to identify their priority needs for technical assistance in
order to receive support.
• Article XIX:3 of the WTO's General Agreement on Trade in
Services (GATS) requires the establishment of modalities for the
special treatment for LDCs in the negotiations on trade in services.
These modalities were established in September 2003 .

Provisions Contained In The WTO Legal
Texts

• A number of the WTO Agreements have specific provisions
for taking into account the interests of LDCs, in addition to
those of developing countries.
• The table below provides an indicative list of the S&D
provisions for LDCs contained in the various WTO
Agreements.
Major Elements Of Decision From Proposal
Regarding LDCs
• A decision on the implementation of duty-free and quota-free
market access for LDCs.
• A decision on preferential rules of origin for LDCs.
• A decision on the operationalization of the LDC services
waiver.
• A decision in the area of cotton, covering both trade and
development assistance aspects.
Nepal Entry in WTO
• Nepal had applied for GATT membership for the first
time in 1989.
• It obtained an observer status in 1995 and submitted the
memorandum on Foreign Trade Regime in July 1998.
• The fifth Ministerial Conference at Cancun, Mexico
approved Nepal's membership package on 11th
September 2003.
• Consequently after the government's approval on April
23, 2004, Nepal became a fully fledge WTO member.

Cont…
• Nepal became the first LDC to obtain WTO membership by
accession
• Nepal had to furnish answers to a large number of questions
and queries.
• Nepal has made commitments to a number of areas while
negotiating for the membership.
• Nepal has secured the rights to protect cottage industries and
to provide export subsidies.
• It also has a right to grant subsidies up to 10 percent to
agriculture sector.

Fulfillments

• Nepal’s trade liberalization has been more faster in many areas than
WTO commitments and now Nepal is one of the most liberalized
countries in South Asia
• Trade is completely deregulated and no trade and non-trade
barriers including no support measures are there in exports
contradicting WTO rules
• Expect transportation and fertilizer subsidy in remote areas (now
limited irrigation subsidy also), no subsidy is there (recently
reintroduced )
• In large and medium industries up to 100 percent foreign equity
participation is allowed with repatriation facilities
Cont…
• In banking three fourth and in insurance 100 percent foreign
equity participation has been already allowed even if in a
selected basis
• Now the average tariff rate is in the neighborhood of 7.11
percent and estimates reveal that the actual rate has reduced
to 5.13 percent in 2007 from 6.1 percent in 2003. Likewise,
the imports tariff rate has gone down to 6.23 percent from
7.72 percent during the same period.
• Many laws have been already enacted and many are in the
process of enactments

WTO and Nepal
• Nepal is an active participant in WTO negotiations.
• It participates mainly in NAMA, Agriculture, Services, TRIPS,
Trade Facilitation, Sub-committee on Least Developed Countries,
S&D treatment and SPS negotiations.
• Nepal's participation in the WTO negotiations is severely
handicapped by its limited human resources, institutional capacity,
financial resources and understanding of complex dynamics of
multilateral trade regime.
• The problem of capacity constraints has compounding effects on
international trade negotiations and benefits that would come from
Nepal's membership in the WTO.


Aid for Trade and EIF

• Nepal is one of the EIF board members and as a board member, it is
concentrating and consolidating its efforts to strengthen the
efficiency and scope of EIF.
• Nepal is trying its best to maximize the utilization of trade related
foreign assistance.
• In this regard, with the assistance of EIF, Nepal has established a
National Implementation Unit (NIU) in the Ministry of Commerce
and Supplies.
• Several programs have been launched under EIF Tier 1 project to
develop the capacity of NIU. Similarly, Nepal Trade Integration
Study also has been conducted under this program.


Trade Policy 2009
• It is a comprehensive and updated policy which was framed
and brought into implementation after Nepal became a
member of the WTO replacing trade policy 1992.
• It is consistent with the principles of WTO and adheres to the
principles of liberal, open and transparent economic system.
• It emphasizes on private sector-led competitive economy.
• The main objective of this policy is to increase contribution of
trade sector in national economy and thereby reduce poverty
and accelerate economic growth.
• Emphasizes trade in services and intellectual property equally
as trade in goods
• The policy has broadly classified potential Nepalese
exports into two categories: Special Focus Area and
Thrust Area Development.
Nepal Trade Integration Strategy (NTIS) 2010

• This is a very pragmatic, comprehensive and in-depth
study which elaborates the current status, the
constraints and future prospects of trade and also
suggests the necessary future actions to be undertaken to
promote trade.
• It complements Trade Policy 2009.
Challenges
• Ensuring proper market access
• Building domestic support institutions
• Strengthening the supply capacities
• Mobilizing overseas development assistance
Objectives
• strengthen trade negotiations (especially bilateral)
• strengthen the technical capacity of domestic non-tariff
barriers (NTB) and other business environment
supporting institutions
• strengthen the export capacity of 'inclusive' export
potential goods and services
• strengthen the Government's capacity to coordinate and
manage Trade-Related Technical Assistance (TRTA) and
Aid for Trade (AfT) and to implement the NTIS
Recommendations
• It has also recommended 258 action plans as necessary
for the promotion of trade and to improve its
contribution to GDP.
• It has identified 19 products comprising 12 commodities
and 7 services as major export potential items that can
contribute significantly in the promotion of export.
• It has also identified 10 major potential markets for
Nepalese export. Now the challenge is to fully
implement the recommendations of NTIS.
Macroeconomic Situation

• The average GDP growth rate since Nepal acceded to WTO in 2004 is
3.8%.
• The contribution of the services sector share has increased and reached
50.1% of GDP in 2010/11 which was 45.9% in 2004/05.
• The shares of agriculture and industry in GDP have been decreasing,
reaching 34.9% and 15.0% in 2010/11 from 37.4% and 16.6%
respectively in 2004/05.
• During the same period, nominal per-capita GDP has increased from
USD 328 to 642.
• The total volume of trade doubled in 2009/10 in comparison to that of
2004/05. In the total trade volume, export share decreased drastically
from 28.2% in 2004/05 to 14.1% in 2010/11 and import share increased
from 71.8% to 85.9%.

Agriculture
• Contributes around 34.9% of total national GDP and more than
73% of total employment.
• Agriculture occupies around 18% of total land area of the country, of
which less than 50% of cultivated area is irrigated
• However, the sector grew at 2.81%, slightly more than the growth
rate of the population.
• Trade Policy 2009 and the Nepal Trade Integration Strategy (NTIS)
2010 have identified several agricultural products such as lentils,
tea, coffee, ginger, large cardamom, jute etc. as potential goods for
export.

Cont…
• Not only used as an end product but also as raw materials to
industries and tradable items

Services
• Service sector is emerging as a robust precinct of the
Nepalese economy in recent years.
• It accounts for around half of the GDP and absorbs
around 18% of total employment.
• Trade in services accounted for 69.9% of total
convertible foreign exchange earnings whereas
merchandise trade shared only 13.1% in average during
the period between 2004/05 and 2010/11.
• The share of service trade income in total income has
increased from 62.4% in 2004/05 to 72.6% in 2010/11.

Income of Convertible Foreign Exchange (in NRs 10 million)

Trade
• Current total foreign trade ratio to GDP is around 37%.
• The trend of export is not positive as it tended to be
stagnant and declined in relative terms from (-) 14.9% to
(-) 27.7% in by 2009/10.
• After the accession of Nepal to the WTO, the share of
export in total trade decreased from 28.2% in 2004/05
to 14.5% in 2010/11 in comparison to the increase in
import from 71.8% to 85.9% during the same period.


Investment
• The Government has declared attracting FDI as one of its major
objectives and has adopted several measures accordingly.
• Introduced Industrial Policy 2010 and the Board of Investment Act
2011 to attract investments.
• No nationalization of private industries
• Prioritized five areas for foreign investment, viz. hydro electricity,
infrastructure and development, agro processing and herbs, tourism
and other services and minerals and mine related projects.
• The proposed Intellectual Property Policy will be another milestone
in this regard
Pros
• Market access and predictability of trade
• Transit rights to the member countries
• Transparency of partners’ trade policies
• Policy stability
• Remarkable progress in attracting FDI
• Gearing up domestic institutional capability
• Preferential rules of Origin for LDC

Cons
• Employment
• The tariff rates in the developed countries go up for
imports of products with a higher degree of finishing
process
• Negotiation for more benefits
• Widening trade deficit
• Free trade may prevent developing economies develop
their infant industries
• Monopoly of MNCs
Conclusion
• The World Trade Organization (WTO) deals with the
global rules of trade between nations.
• Its main function is to ensure that trade flows as
smoothly, predictably and freely as possible.
• All WTO members must undergo periodic scrutiny of
their trade policies and practices.

Cont…
• WTO plays vital role in development of LDC
• Dependency of Nepal on India is high
• WTO membership enables Nepal to reduce this
dependency and reach global market.




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