Overview of WTO System in the context ofNepalese Economy


Prachanda Man Shrestha
October 26, 2008
Fifth Winter Residential School on Economic, Social, and Development Rights, and Good Governance


Background

Protectionism before the Wars
Post War Global Governance Steps
Bretton Woods Conference in 1944
IBRD (World Bank)
IMF
ITO (Not realized)
Instead of ITO, GATT formed 1947
GATT Reduced Tariffs and Trade Barriers Substantially


Global Trends

nWave of Globalization
nEconomic Liberalization
nReliance on Market Mechanism
nEconomic Interdependency
nComplementation and Collaboration
nConsumerism
nComparative / Competitive Advantage
nEconomic Use of Information Technology


Implications


nIncreased Movement of Goods / Services/ Capital /Information
nGrowth in Multinationals
nChanged State Role
nFormation of Regional Blocs
nSurvival on Knowledge Base
nIncreased Level of Uncertainty
nMarginalization Weaker Economies
nWidening Inequality
nAbsence of Level playing field


Emergence of WTO


nEighth Round of GATT Negotiation, Marrakesh Agreement in 1994 decided to establish WTO from 1 Jan 1995, with Objectives of:
•Raising Standard of Living / Ensuring Full Employment / Increasing Income / Expanding Production / Protecting Environment
nIntend to Benefit from Globalization
nAddress Marginalization of Weaker Economies
nAchieve Free trade by Fair trade
nBuild Multilateral Regime based on Bilateral
nFocus on trade with ramification to economy
nAccess to new Membership by Negotiation


Accession Process

nArticle XII under WTO is the only provision of new membership process.
nAfter establishment of WTO in 1995, 29 members completed this process.
nAccession process establish terms of membership as commitments/concessions
nAmong LDCs, Nepal and Cambodia are the 147/148 members completing this process
nProcess covers Bilateral Market access on goods and services, and
nMultilateral in Systemic issues


Nepal’s Accession Position


nDevelopment Needs
nFlexibility provided by WTO
nPolicy Space to Protect domestic producers, professional and workers
nDomestic reform opportunities
nDemand from Member States


Major Concerns

nLevel of Agricultural Tariff Binding
nMaintenance of De Minimis
nNon-commitment on agriculture Export subsidy
nRight of Doha Declaration on Public health and TRIPS
nRecognition of Enabling clause for existing Preferential Trading Arrangement
nTransition Period for Policy Adjustment
nTechnical Assistance for Capacity Building
nThreat to Domestic Industry from Import due to low Competitiveness
nRevenue Loss to Government
nEmployment and BOP implications
nSMEs’ special privilege
nFarmers’ Right to Seed
nFood Security due low productivity
nBio-diversity and Plant protection


WTO Key Functions

nAdminister/Implement Trade Agreements
nProvide Forum of Trade Negotiations
nEstablish Rules for Fair Trade
nHandle Trade Disputes
nMonitor Trade Policies of Members
nCo-ordinate Technical Assistance
nCo-operation with Other Agencies


Scope and Principles of WTO

§Scope :
§GATT / GATS / TRIPS / Plurilateral
§Principle:
§Non-discrimination
§Transparency
§Progressive liberalization
§Single Undertaking
§Practice:
§Most Favored Nation Treatment
§National Treatment
§Domestic Regulation
§Protection by Tariff
§Varied commitment from members
§Exceptions:
§Enabling Clause/ Free Trade Area / Public Morale
§Government Procurement / Health / Security /
§Environment / Trade Remedy Measures/
§Special & Differential Treatments


WTO Deliverables

nExtended Market
nCertainty and Predictability
nCredibility and Stability
nGood Economic Governance
nEstablish Trade Rights
nSafeguard Measures (Trade Remedy)
nFair Trade Mechanism
nSpecial and Differential Treatment
nTechnical Support for Capability Enhancement
nGSP and Preferential Treatment
nRule based Trading
nMember Driven Trade Rules
nDevelopment Justice


Major Agreements

nAgriculture
nSanitary and Phyto-sanitary
nTextiles and Clothing
nTechnical Barriers to Trade
nTrade Related Investment Measures
nCustoms Valuations
nRules of Origin
nImport Licensing Procedures
nMarrakesh Protocol and Understandings to GATT
nSubsidies and Countervailing Measures
nAnti-dumping
nSafeguards
nPre-shipment Inspection
nGATS
nTRIPS
nDispute Settlements
nPlurilateral Agreements (Trade in Civil Aircraft, Government Procurement, Information Technology)


Development Opportunities from Membership

§Address Limited Domestic Market Constraint
§Prospect of Large Scale Foreign Investment
§Comparative Advantage on Service Export
§Resource on Sectors of Competitiveness
§Import Consistency for Industrial Inputs and Supply Stability for Consumers
§Opportunity to Advocate Nepal’s Case
§Support Industrialization due to Liberalized Service Trade
§Transparency in Economic Governance
§Policy Stability and Enhanced Credibility
§Institutionalized Trade and Transit Rights
§Technical Support for Trade Capacity Building


Challenges

§How to Strengthen Institutional Capability to fulfill WTO commitments and abide Obligations?
§How to Address Supply Side Constraints to transform available market access into trade activities?
§How to Restructure Industrial sector to make it more Competitive?
§How to Avert marginalization of country as well as weaker sections of the society addressing Poverty by Trade?


Nepal’s Specific Concern on TRIPS


§Nepal's Concern due to debate of Non-clarity on Life Patent as per Article 27.3(b) on:
§Biodiversity
§Indigenous Knowledge in Bio-piracy
§High Agriculture Input Prices
§Access to Cheaper Medicine
§Protection Plant Variety
§Farmers’ Rights / Food Security


Precautions


§Compulsory Licensing- the license to use patent without consent of patent holder under certain circumstances
§Parallel Imports of patented products when they are obtainable in a foreign country at a lower price by Provisions be in National Legislation
§Benefit from Transition Period
§Doha Declaration giving transition to LDCs on Medicines by Jan 2016
§Hong Kong Declaration provided transition on TRIPS Agreement by July 2013
§Protection through Sui Generis System
§Plant Variety Protected by Sui Generis means “of its own Kind” that is according to national interests / local realities
§Protect Farmers’ rights of saving, exchanging, reusing, and selling seeds as they are their means of livelihood.
§Benefit Sharing and Access to Genetic Resources as provided by CBD


Some of the Strategic Recommendation



§Externalize to Benefit from the Opportunities of Global Integration
§Policy Reform for Open and Competitive Trade
§Safeguard to Mitigate Adverse Impacts of Globalization
§Focus on Niche with Intangible Values of Ethno-Culture-Heritage-Geography
§Benefit location of Fastest Growing Largest Economies
§Strengthen LDC Alliance for Negotiation and Benefit from Positive Discrimination of Global Trade Rules
§Encourage Business Stakeholders for Policy Advocacy
§Focus on Sectors of Comparative/Competitive advantage
§Establish Market Linkage with Multinationals
§Mobilize Donors for Capacity Building for Supply Constraints
§Economic Intelligence Strengthening Parallel Diplomacy