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WTO and Pakistan: Submitted To: Dr. Bilal Aziz Submitted By: M.Tayyab Subject: WTO
WTO and Pakistan: Submitted To: Dr. Bilal Aziz Submitted By: M.Tayyab Subject: WTO
Submitted to:
Dr. Bilal Aziz
Submitted by:
M.Tayyab
Subject:
WTO
Achievement:-
2.
5. The WTO is criticized for being undemocratic. It is argued that its structure enables
the richer countries to win what they desire; arguably they benefit the most.
How it works
Example:More than 140 countries belong to the WTO, and membership is voluntary. Some
countries hold observer status with the WTO, which enables the country to follow
discussions and matters of particular interest. Some WTO committees are for members
only, however, and do not allow observers.
WTO decisions are made by consensus rather than by delegation to a board of
directors or leader. The WTO's highest authority is the Ministerial Conference, whose
members meet at least once every two years. The WTO General Council, with the
Dispute Settlement Body and the Trade Policy Review Body, handles the WTO's day-today duties. These day-to-day entities, which are collectively referred to as the General
Council, act on behalf of the Ministerial Conference and are composed of several sub
councils, including the Council for Trade in Goods, the Council for Trade in Services and
the Council for Trade-Related Aspects of Intellectual Property Rights. Each sub council
has several committees.
WTO members negotiate World Trade Agreements, which are later ratified by the
participating nations' parliaments or congresses. WTO agreements involve five
principles:
1. With some exceptions, members must provide equal trade-agreement terms to all
fellow WTO countries. This equal treatment is known as most-favored-nation status.
Members also must offer "national treatment," meaning a WTO member may not
discriminate against products from other WTO countries once the products have
entered the member's market.
2. WTO agreements must work to lower trade barriers such as customs duties, tariffs,
import bans and quotas.
3. WTO agreements must help provide a stable and predictable business environment
by including commitments about future trade policies.
4. WTO agreements must define fair and unfair trade practices.
5. WTO agreements must consider the special needs developing countries may have in
implementing WTO requirements.
Dispute settlement processes are written into WTO agreements, which are legally
binding. WTO members enforce agreements according to predetermined procedures,
but there is some concern that economically strong countries may be able to ignore
complaints brought by poorer countries, whose sanctions or other penalties may not
hurt the offending country enough to stimulate compliance.
Why it matters??
The WTO is one of the most powerful and controversial legislative bodies in the world.
Ideally, the purpose of the WTO is to facilitate free trade while helping governments
meet social and environmental goals.
Whether free trade and the WTO accomplish these goals is the subject of considerable
debate. Some question whether free trade benefits wealthy nations and multinational
corporations rather than communities and the environment. Further, approximately two
thirds of WTO members are developing countries, and some of these countries are
concerned
that
poor
domestic
infrastructure,
political
instability,
and
certain tariff arrangements disproportionately inhibit their abilities to engage in profitable
trade. Critics also point out that a country's choice not to join the WTO may effectively
place an embargo on the goods and services of that country.
2. Free trade encourages greater competitiveness. Firms face a higher incentive to cut
costs. For example, a domestic monopoly may now face competition from foreign firms.
3. Law of comparative advantage states that free trade will enable an increase in
economic welfare. This is because countries can specialize in producing goods where
they have a lower opportunity cost.
4. Economies of scale. By encouraging free trade, firms can specialize and produce a
higher quantity. This enables more economies of scale, this is important for industries
with high fixed costs, such as car and aero plane manufacture.
5. Free trade can help increase global economic growth.
Disadvantages
However, the WTO has often been criticized for ignoring the plight of the developing
world.
It is argued the benefits of free trade accrue mostly to the developed world.
Free trade may prevent developing economies develop their infant industries. For
example, if a developing economy was trying to diversify their economy to develop a
new manufacturing industry, they may be unable to do it without some tariff
protection.
6. To assist international organizations such as, IMF and IBRD for establishing
coherence in Universal Economic Policy determination.
The General Council delegates responsibility to three other major bodies - namely the
Councils for Trade in Goods, Trade in Services and Trade-Related Aspects of
Intellectual Property. The Council for Goods oversees the implementation and
functioning of all the agreements (Annex 1A of the WTO Agreement) covering trade in
goods, though many such agreements have their own specific overseeing bodies. The
latter two Councils have responsibility for their respective WTO agreements (Annexes
1B and 1C) and may establish their own subsidiary bodies as necessary.
Three other bodies are established by the Ministerial Conference and report to the
General Council. The Committee on Trade and Development is concerned with issues
relating to the developing countries and, especially, to the "least-developed" among
them. The Committee on Balance of Payments is responsible for consultations between
WTO members and countries which take trade-restrictive measures, under Articles XII
and XVIII of GATT, in order to cope with balance-of-payments difficulties. Finally, issues
relating to WTO's financing and budget are dealt with by a Committee on Budget.
Each of the four plurilateral agreements of the WTO - those on civil aircraft, government
procurement, dairy products and bovine meat - establish their own management bodies
which are required to report to the General Council.
Since 2001, there have two more ministerial conferences in Cancun in 2003 and Hong
Kong in 2005 respectively. There have been many ups and downs in the road to a
successful conclusion to the Doha round that takes into account the myriad interests of
the developing membership. There was a breakdown of talks in the summer of 2006
which led many observers to be skeptical of the entire process. However, sustained
efforts by the membership led to a partial resumption of the talks in November 2006 and
full resumption since January 2007 after the annual meeting of the World economic
forum at Davos.
Continued:Pakistan joined WTO in 1995 when the organization came into being. As a developing
country Pakistan has enjoyed the extra time given for preparations to abide by the
Agreements of WTO up to 2005. The implications to adopt the free liberalization under
WTO has many pros and cons but until now there has been no comprehensive study to
capitulate the total impact in economic terms focusing overall and individual sectors of
the economy in particular. To enter into the intricacies of WTO Agreements and applying
them on sectors of the economy is a huge and difficult task and out of scope of this
essay. In simple terms, WTO negates anything which blocks the way of free movement
of goods and services from one market to another on a basic assumption of improving
the human lifestyle. It demands open market access for foreign goods and services in
the local market without any discrimination by creation of tariff or non-tariff barriers.
Pakistan is required to provide a Most Favored Nation (MFN) status to all trading
partners which means non-discriminatory treatment among the members implying on
any imports or exports origination from respective countries. If Pakistan provides an
MFN status to India for example, then Pakistan has to provide an equitable treatment to
all imports originating from India which will restrict Pakistan to impose any kind of
qualitative or quantities restriction on Indian products. Now this implies to the question
why like India Pakistan is not reciprocating to given the same MFN status. The major
reason is that the total GDP of Pakistan is approximately $80 billion and if India can
subsidize all its imports of an equal amount this will create havoc for the Pakistani
industry. In case of GATT, it requires all countries to reduce their respective rates to a
given limit, and here WTO provides special preferential treatment to the developing and
least developed countries by giving them more time and more flexibility to adjust to the
global trade liberalization system. But in reality, with specific reference to Pakistan
under IMF conditionality and structural adjustment program, Pakistan has to reduce its
tariff from 65% to 30% gradually, and WTO also requires the same. Under WTO it is
partly the mutual consent of the negotiating parties to determine tariff bind and tariff
bound rates but under IMF it is more enforcement of the loan requirements.
In case of a dispute the case is to be presented to the Dispute Settlement Body of
WTO. This requires preparation of the case in context with the legalities of WTO rules. A
developing country like Pakistan which does not have ample resources or know-how of
the subject of WTO rules and references usually are trapped to pay hefty foreign
exchange to international lawyers which are almost unaffordable. An ideal example is of
Basmati Rice, which was initially patented by a U.S. firm has been challenged by India,
where Dispute Settlement body favored India. Now, India having the sole patents
refrains all Pakistani rice exports to be referred as "Basmati" until the patents rights are
paid
for.
Take any industry or sector of economy i.e., textile, fertilizer, pharmaceutical, oil & gas,
ship building, sugar, banks, insurance, leasing, and agriculture WTO directly effects
the local industry both at the import and export ends from the beginning to end focusing
more on quality standards, hygienic conditions, and the very existence of a product or
service through intellectual property clauses.
The negotiation ground of WTO, we must be ready and fully prepared with complete set
of briefings on impacts of WTO Agreements and its agenda on all sectors of Pakistani
economy and industry. Pakistan should have a vision i.e. what it would like to achieve
from other nations before reciprocating market access to respective countries. Like all
other relations, trade relations are friend and foe oriented and are glued with the
broader national goals of the country. Trade relations have become so influential that
they have become either source of normalization of other diplomatic relationships, or
creating more belligerent associations with other countries. If Pakistan has to choose
between the options international trade relationship can work wonders for Pakistan,
making it possible for Pakistan to normalizing relationships with countries where the
advantage
is.
In additions, as it has been emphasized from the beginning that exports are function of
domestic production strength. Pakistan should also develop an indigenous model of
economic development based on local stakeholders rather than following blindly the
policies and guidelines of WTO, WB and IMF. Bangladesh is a key example in this
respect which has achieved formidable success in developing socio-economic
strategies focusing the Small and Medium Enterprises (SMEs) of the country. Gramine
Bank and Gramine Telecom of Dr. Younas are an epic story of mobilizing the poorest
fraction of the country especially women by providing credit loans to them to invest in
local self-employment and business opportunities, and accessing market information
using
communication
facilities.
To what extend the tariff should be bound, to what extend the subsidies to be provided,
to what extend Pakistan can win preferential treatment, win anti-dumping and safeguard
cases, secure intellectual property rights, to choose to give MFN status, to apply
national treatment to foreign products, to acclaim developing country provisions, to
ensure a level playing field for domestic industry is not an easy task for Pakistani
Mission to Geneva in WTO at least for now!
the Europe was top most priority of the US and that promoted, along with other steps, to
create some international institutions to facilitate and promote trade and development.
In January 1948, 23 nations organized the General Agreement on Tariffs and Trade
(GATT) in Geneva providing opportunity to start the tariff negotiations. This first round
resulted in 45,000 tariff concessions affecting $10 billion (about 1/5th of the world trade).
In the next 47 years, the basic legal text of the GATT remained the same as it was in
1948, with some additions in the form of plurilateral voluntary membership
agreements and continual efforts to reduce tariffs in a series of trade rounds till the
inception of World Trade Organization on 1st January, 1995 in the 8th round at Uruguay.
The agendas of the eight rounds of the GATT from 1947 to 1994 can be glanced
through
the
following
table.
The WTO is an institution with the broader legal and constitutional elements that
incorporate and standardize the strategies for global economic integration. Its basic
objective is to create a liberal and open trading system under which business
enterprises from respective member countries can trade with one another in a fair and
undisclosed competitive system with an agenda to raising standards of living, ensuring
full employment and a large and steadily growing volume of real income and effect
demand and developing the full sense of the resources of the world and expanding the
production and exchange of goods. These objectives are to be achieved by following
the optimal use of the world's resources in accordance with the objective of sustainable
development, seeking both to protect and preserve the environment and to enhance the
means for doing so in a manner which is consistent with their respective needs and
concerns at different levels of economic development. In other words, the WTO
facilitates the implementation, administration and operation, and further the objectives of
the Multilateral Trade Agreements, and also provides framework for the implementation,
administration and operation of the Plurilateral Trade Agreements. It provides the forum
for negotiations among its members concerning their multilateral trade relations in
matters dealt with under the agreements and a framework for the implementation of the
results of such negotiations, as may be decided by the Ministerial Conference. The
WTO administers the Understandings on Rules and Procedures governing the
Settlement of Disputes. It administers the Trade Policy Review Mechanism (TPRM).
With a view to achieving greater coherence in global economic policy-making, the WTO
cooperates, as appropriate, with the International Monetary Fund (IMF) and with the
International Bank for Reconstruction and Development (World Bank) and its affiliate
agencies.
Binding of tariffs.
The member countries are urged to eliminate protection to domestic industry/
production by reducing tariffs and removing other barriers to trade in multilateral
trade negotiations. The reduced tariffs are bound against further increases by listing
them in each country's national schedule and the schedules are an integrated part of
the GATT legal system.
should not be any adverse effects on the domestic producer with the globalization as
the local industry has already adjusted to the increased competition from global
market. This however does not hold true for automobile industry, which still enjoys
high protection and needs to become efficient if it wants to survive.
This study attempts to analyze the impact of WTO on the important sectors in
Pakistan i.e. Industry, Textile, Agriculture and Services.
Pakistan Economy
The economy of Pakistan is the 27th largest in the world in terms of purchasing power
parity, and 38th largest in terms of nominal gross domestic product.
Currency:
Pakistani Rupee
Following are the two cases which are occurred in Pakistan with other countries with
respect to world trade organization
Consultations
Complaint by India, Malaysia, Pakistan and Thailand.
On 8 October 1996, India, Malaysia, Pakistan and Thailand requested consultations
with the United States concerning a ban on importation of shrimp and shrimp products
from these complainants imposed by the US under Section 609 of US Public Law 101162. Violations of Articles I, XI and XIII of the GATT 1994, as well nullification and
impairment of benefits, were alleged.
On 9 January 1997, Malaysia and Thailand requested the establishment of a panel. At
its meeting on 22 January 1997, the DSB deferred the establishment of a panel. On 30
January 1997, Pakistan also requested the establishment of a panel.
1.
With respect to customs duties and charges of any kind imposed on or in
connection with importation or exportation or imposed on the international transfer
of payments for imports or exports, and with respect to the method of levying such
duties and charges, and with respect to all rules and formalities in connection with
importation and exportation, and with respect to all matters referred to
in paragraphs 2 and 4 of Article III,* any advantage, favor, privilege or immunity
granted by any contracting party to any product originating in or destined for any
other country shall be accorded immediately and unconditionally to the like
product originating in or destined for the territories of all other contracting parties.
2. The provisions of paragraph 1 of this Article shall not require the elimination
of any preferences in respect of import duties or charges which do not exceed the
levels provided for in paragraph 4 of this Article and which fall within the following
descriptions:
XXV which shall be applied in this respect in the light of paragraph 1 of Article
XXIX.
In the case of the contracting parties named in Annex G, the date of April 10,
1947, referred to in subparagraph (a) and (b) of this paragraph shall be replaced
by the respective dates set forth in that Annex.
1.
No prohibitions or restrictions other than duties, taxes or other charges,
whether made effective through quotas, import or export licenses or other
measures, shall be instituted or maintained by any contracting party on the
importation of any product of the territory of any other contracting party or on the
exportation or sale for export of any product destined for the territory of any other
contracting party.
2.
The provisions of paragraph 1 of this Article shall not extend to the following:
(a)
Export prohibitions or restrictions temporarily applied to prevent or
relieve critical shortages of foodstuffs or other products essential to the
exporting contracting party;
(b)
Import and export prohibitions or restrictions necessary to the
application of standards or regulations for the classification, grading or
marketing of commodities in international trade;
applied under (i) above shall not be such as will reduce the total of imports relative
to the total of domestic production, as compared with the proportion which might
reasonably be expected to rule between the two in the absence of restrictions. In
determining this proportion, the contracting party shall pay due regard to the
proportion prevailing during a previous representative period and to any special
factors* which may have affected or may be affecting the trade in the product
concerned.
Non-discriminatory Administration of
Quantitative Restrictions
1. No prohibition or restriction shall be applied by any contracting party on the
importation of any product of the territory of any other contracting party or on the
exportation of any product destined for the territory of any other contracting party,
unless the importation of the like product of all third countries or the exportation of
the like product to all third countries is similarly prohibited or restricted.
period for any product and the appraisal of any special factors* affecting the trade
in the product shall be made initially by the contracting party applying the
restriction; Provided that such contracting party shall, upon the request of any
other contracting party having a substantial interest in supplying that product or
upon the request of the CONTRACTING PARTIES, consult promptly with the other
contracting party or the CONTRACTING PARTIES regarding the need for an
adjustment of the proportion determined or of the base period selected, or for the
reappraisal of the special factors involved, or for the elimination of conditions,
formalities or any other provisions established unilaterally relating to the allocation
of an adequate quota or its unrestricted utilization.
5.
The provisions of this Article shall apply to any tariff quota instituted or
maintained by any contracting party, and, in so far as applicable, the principles of
this Article shall also extend to export restrictions.
General Exceptions
Subject to the requirement that such measures are not applied in a manner which
would constitute a means of arbitrary or unjustifiable discrimination between
countries where the same conditions prevail, or a disguised restriction on
international trade, nothing in this Agreement shall be construed to prevent the
adoption or enforcement by any contracting party of measures:
(a)
(b)
(c)
(d) necessary to secure compliance with laws or regulations which are not
inconsistent with the provisions of this Agreement, including those relating to
customs enforcement, the enforcement of monopolies operated
under paragraph 4 of Article II and Article XVII, the protection of patents,
trademarks and copyrights, and the prevention of deceptive practices;
(e)
(f)
imposed for the protection of national treasures of artistic, historic or
archaeological value;
(g)
Relating to the conservation of exhaustible natural resources if such
measures are made effective in conjunction with restrictions on domestic
production or consumption;
(h)
undertaken in pursuance of obligations under any intergovernmental
commodity agreement which conforms to criteria submitted to the
CONTRACTING PARTIES and not disapproved by them or which is itself so
submitted and not so disapproved;*
(i)
involving restrictions on exports of domestic materials necessary to
ensure essential quantities of such materials to a domestic processing
industry during periods when the domestic price of such materials is held
below the world price as part of a governmental stabilization
plan; Provided that such restrictions shall not operate to increase the exports
of or the protection afforded to such domestic industry, and shall not depart
from the provisions of this Agreement relating to nondiscrimination;
(j) essential to the acquisition or distribution of products in general or local
short supply; Provided that any such measures shall be consistent with the
principle that all contracting parties are entitled to an equitable share of the
international supply of such products, and that any such measures, which
are inconsistent with the other provisions of the Agreement shall be
discontinued as soon as the conditions giving rise to them have ceased to
exist. The CONTRACTING PARTIES shall review the need for this subparagraph not later than 30 June 1960.
Guatemala, Hong Kong, India, Japan, Mexico, Nigeria, the Philippines, Senegal,
Singapore and Sri Lanka reserved their third-party rights.
On 25 February 1997, India also requested the establishment of a panel on the same
matter. At its meeting on 20 March 1997, the DSB deferred the establishment of a
panel. Further to a second request to establish a panel by India, the DSB agreed to
establish a panel at its meeting on 10 April 1997. The DSB also agreed that this panel
would be consolidated with the panel already established at the request of Malaysia,
Thailand and Pakistan. El Salvador and Venezuela reserved their third party rights, in
addition to those delegations who had reserved their third-party rights to the panel
established at the requests of Malaysia, Pakistan and Thailand. On 15 April 1997, the
panel was composed.
On 15 May 1998, the panel report was circulated to Members. The panel found that the
import ban in shrimp and shrimp products as applied by the United States is
inconsistent with Article XI:1 of the GATT 1994, and cannot be justified under Article XX
of the GATT 1994.
On 13 July 1998, the United States notified its intention to appeal certain issues of law
and legal interpretations developed by the panel. The Appellate Body report was
circulated to Members on 12 October 1998. The Appellate Body reversed the panels
finding that the US measure at issue is not within the scope of measures permitted
under the chapeau of Article XX of the GATT 1994, but concluded that the US measure,
while qualifying for provisional justification under Article XX(g), fails to meet the
requirements of the chapeau of Article XX.
The DSB adopted the Appellate Body report and the Panel report, as modified by the
Appellate Body report, on 6 November 1998.
date of adoption of the Appellate Body and Panel reports, i.e. it expired on 6 December
1999. On 22 December 1999, Malaysia and the United States informed the DSB that
they had reached an understanding regarding possible proceedings under Articles 21
and 22 of the DSU.
Compliance proceedings
On the grounds that the United States had not implemented appropriately the
recommendations of the DSB, on 12 October 2000, Malaysia requested that the matter
be referred to the original panel pursuant to Article 21.5 of the DSU. In particular,
Malaysia considered that by not lifting the import prohibition and not taking the
necessary measures to allow the importation of certain shrimp and shrimp products in
an unrestrictive manner, the United States had failed to comply with the
recommendations and rulings of the DSB. At its meeting of 23 October 2000, the DSB
referred the matter to the original panel pursuant to Article 21.5 DSU. Australia, Canada,
the European Communities, Ecuador, India, Japan, Mexico, Pakistan, Thailand and
Hong Kong, China reserved their third-party rights. On 8 November 2000, the
compliance panel was composed.
The compliance panel circulated its report on 15 June 2001. The compliance panel
concluded that:
the measure adopted by the United States in order to comply with the
recommendations and rulings of the DSB violated Article XI:1 of the GATT 1994;
in light of the recommendations and rulings of the DSB, Section 609 of Public
Law 101-162, as implemented by the Revised Guidelines of 8 July 1999 and as
applied so far by the US authorities, was justified under Article XX of the GATT
1994 as long as the conditions stated in the findings of this Report, in particular
the ongoing serious good faith efforts to reach a multilateral agreement, remain
satisfied.
Should any one of the conditions referred to above cease to be met in the future,
the recommendations of the DSB may no longer be complied with. In such a
case, any complaining party in the original case may be entitled to have further
recourse to Article 21.5 of the DSU.
On 23 July 2001, Malaysia notified the DSB its intention to appeal the compliance panel
report. In particular, Malaysia sought review by the Appellate Body of the compliance
panels finding that the US measure at issue does not constitute unjustifiable or arbitrary
discrimination between countries where the same conditions prevail and that it is
therefore within the scope of the measures permitted under Article XX of the GATT 1994
as long as the conditions stated in the findings of the compliance panel report, in
particular the ongoing serious good faith efforts to reach a multilateral agreement,
remain satisfied.
On 19 September 2001, the Chairman of the Appellate Body informed the DSB that it
would not be able to circulate its report within 60 days. It was estimated that the
Appellate Body report would be circulated no later than 22 October 2001.
The Appellate Body report was circulated to the Members on 22 October 2001. The
Appellate Body upheld the contested findings of the compliance panel. Since it had
upheld the panels findings that the US measure was now applied in a manner that met
the requirements of Article XX of the GATT 1994, the Appellate Body refrained from
making any recommendations. On 21 November 2001, the DSB adopted the Appellate
Body report and the compliance panel report, as upheld by the Appellate Body report.
Case no 2.
Pakistan Patent mailbox provision
Plaintiff: United States
Defendant: Pakistan
Outcome
The United States and Pakistan reached on an agreement on agreement prior to a
panel decision whereby Pakistan agreed to come into compliance with WTO intellectual
property provisions.
The United States complained that Pakistan had neither made patent protection
available for pharmaceutical and agricultural chemical inventions nor established a
system, called a mailbox for filling patent applications for these inventions, as
required by the agreement of its trade-related aspects of intellectual property
(TRIPS). The United States also argued that Pakistan had failed to establish a
system to provide a patent application with exclusive marketing rights for their
products as required by the agreement.
Pakistan responded as its parliament was considering amending its patent law to
include patent protection.
Case resolution
The United States and Pakistan negotiated a mutually agreed solution to the dispute, in
which Pakistan stated that it had taken action to come into compliance with (TRIPS).