MANAGING THE CHALLENGES OF WTO PARTICIPATION: CASE STUDY
30
Nepal: The Role of an NGO in Support of Accession
P. R. Rajkarnikar*
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> Case Studies main page
> Introduction
   
ON THIS PAGE:  Trade (GATT — the WTO’s predecessor).
> I. The problem in context
> II. The local players and their
roles
> III. Challenges faced and the
outcome
> Tariff binding for agricultural
products
> Resisting the imposition of UPOV
> Ratification of the agreement on
accession to the WTO
> IV. Lessons for others
 
I. The problem in context    back to top
Nepal is a small landlocked country situated between China and India.
Access to sea is only through India, and India is also Nepal’s major trading
partner. Trade with India constitutes 55.9% of total trade, according to
2003 data. A bilateral trade treaty between Nepal and India governs the
trade between these two countries, and similarly the transit treaty
between two countries provides Nepal with access to the sea.
The treaties could not be renewed in 1989, when they lapsed, due to
certain disputes, and the impasse resulted in a serious shortage of goods
in Nepal, including critical inputs to the manufacturing sector and goods
meeting basic needs. The difficulties that Nepal had to face because of
bilateralism compelled it to seek entry into the multilateral trading
system. Thus shortly after the trade and transit treaties with India lapsed,
Nepal applied for accession to the General Agreement on Tariffs and
The impasse with India lasted for fifteen months. In 1990, there were
political changes in Nepal; a multiparty system was restored and a new
government came to power, which successfully renegotiated the Nepal-
India trade and transit treaties. After this, the urgency for Nepal to
accede to GATT, to be protected under Article V on transit rights,
lessened and its interest in accession waned.
Until the mid-1980s, Nepal had adopted heavily inward-looking
development strategies. In 1985 it introduced an economic reform
programme in a modest way, and from the early 1990s geared up the
process of economic reform and renewed its commitment to WTO
membership, realizing that the membership of the WTO would help its
better integration into the global economy, thereby making available
wider markets for Nepalese exports and more sources of foreign
investment.
Nepal gained GATT observer status in 1993 and participated in the final
meeting of the Uruguay Round. In 1995 Nepal again presented a formal
application to accede to the newly created WTO, this time with a desire
to globalize the economy, not just to be protected with transit rights.
In 1998 Nepal, in accordance with WTO procedure for accession,
submitted a memorandum of its foreign trade regime. This was followed
by the formation of the working party for Nepal’s accession to the WTO,
and the government was engaged in follow-up activities to expedite the
process. However, as in other developing countries, there was fear in
certain sections of Nepalese society that it would be difficult for the
country to face the challenges that might emerge in the aftermath of
WTO accession. Furthermore, a sizable section of society took the view
that accession to the WTO would result in adverse effects on the Nepalese
economy, resulting in closure of domestic industries due to weaker
competitive strength and in an increase in unemployment. There was also
the problem that the WTO was not completely understood: the pains were
well understood but the gains were not. Thus public opinion was not
strongly supportive of the membership bid. Against this backdrop, a
smooth accession could not be expected, and it was feared that there
might even be domestic opposition.

Some civil society organizations, including South Asia Watch on Trade,

Economics and Environment (SAWTEE), were strongly in favour of Nepal’s
obtaining WTO membership. They had faith in the multilateral trading
system and took the view that Nepal would gain from it. Meanwhile, they
were also critical of the ‘WTO-plus’ conditions often imposed by existing
members on an acceding country. They were aware of the fact that
countries wishing to accede to the WTO have to follow not only
multilateral but also bilateral negotiations, during which applicant
countries are asked to undertake ‘WTO-plus’ commitments. In their
opinion the WTO is inherently power-based, which is the very antithesis of
the WTO’s credo that countries do not receive what they desire but what
they negotiate. Therefore they were concerned to build the strength and
skill in negotiation of the Nepali negotiating team. They were also
concerned about domestic preparations.

There was a legal provision under Nepal’s parliamentary system,

according to which agreements made by the government with
international organizations become effective only after ratification by the
House of Representatives. In March 2002 Prime Minister Sher Bahadur
Deuba had dissolved it, creating additional problems or uncertainty in
obtaining WTO membership.

The fifth Ministerial Conference of the WTO held in Cancún in

September 2003 approved Nepal’s accession to the WTO and
offered membership, subject to ratification by the government.
Nepal was required to ratify the protocol of accession by 31 March
2004, as per the terms of its accession. But since there was at the
time no House of Representatives and the government was non-
representative, ratification became uncertain. On one hand, the
political parties could oppose ratification by a non-representative
government on political and legal grounds, but on the other hand it
would be disastrous for Nepal to defer ratification for the reason
that Nepal would not be able to maintain the policy flexibilities it
had been able to acquire during the tough negotiation process in
any future attempts to gain membership. Deferring the accession
process would mean additional commitments in such areas as
investment, the environment, trade facilitation, transparency in
government procurement, competition and most of the other areas
which had been negotiated in a single package during the Cancún
Ministerial Conference.

 
 

II. The local players and their roles    back to top

SAWTEE was one of the non-governmental organizations (NGOs) which

played an active and positive role in Nepal’s accession to WTO. It is a
non-profit-making organization which was established in December 1994.
It operates as a regional network through its secretariat in Kathmandu
and eleven network institutions in five south Asian countries, namely
Bangladesh, India, Nepal, Pakistan and Sri Lanka. Its mission is to enable
south Asian communities to benefit from and minimize the adverse
effects of changing regional and global economic paradigms. Its broad
objective is to build the capacity of concerned stakeholders in south Asia
by equipping them with knowledge, information and skills to voice their
concerns in the context of globalization and liberalization. One of its
specific objectives is to enhance the participation of developing
countries, in particular least developed countries (LDCs) and landlocked
countries, in the global trading system.

Of the member countries of SAWTEE, until its accession in April 2004

Nepal alone was not a member of the WTO. As it is within the scope of
their work, SAWTEE, along with other NGOs, made a remarkable
contribution to Nepal’s accession to the WTO.

Though critical of it, SAWTEE understood the WTO not only as a threat or
challenge but also as an opportunity for Nepal. Its executive director,
Ratnakar Adhikari, took the view that the survival of the multilateral
trading system is more important for the developing countries than the
developed countries, so that it is necessary for the former to support the
system. He believed that SAWTEE should play a positive and active role in
facilitating Nepal’s accession to the WTO, mainly for the following
reasons.

 The WTO trading system provides a degree of certainty of market

access. Trade becomes more predictable, which in turn
encourages trade and investment in the country. In this context,
he recalled the bad experience of the sharp decline in Nepalese
exports of woollen carpets to Germany when it unilaterally
banned import of carpets from Nepal on the pretexts of the use of
child labour or of azo dyes. WTO membership provides access to
its dispute settlement procedure and legal recourse to contest
capricious trade policies imposed by trading partners.
 
 The WTO rules grant transit rights to the member countries. This
is a most important benefit of WTO membership for a landlocked
country such as Nepal. It has a crucial impact not only on Nepal’s
foreign trade but also on the whole process of its development.
An unhindered and cost-effective transit facility enhances the
competitive strength of the economy.
 
 There are several other international conventions on transit
rights. But they are less effective in implementation, and also
 lack an effective regulatory authority, whereas the WTO provides
a strong regulatory mechanism to enforce its rules.
 
 WTO membership enforces a rules-based trade regime, increasing
transparency and reducing corruption and uncertainties in trading
activities.

SAWTEE played its role of facilitating Nepal’s accession to the WTO

mainly in two areas, namely (i) creating a critical constituency, and (ii)
strengthening the government’s hand. It launched a massive advocacy
effort through its regular publications and monthly forum on globalization
and the WTO, organized jointly with Action Aid Nepal (AAN),(1) to create
a critical constituency.

SAWTEE publishes occasional briefing papers on various topics related to

its mission. It published several papers on different aspects of the WTO
and brought out a study report on the gender implications of Nepal’s
accession to the WTO. In 2002, on the eve of Nepal’s accession, it
published a briefing paper entitled ‘The Challenges of the WTO:
Rethinking Strategies’. This paper offered the message to its readers that
globalization was not an option for the developing countries, and that
they should have strategies to adjust themselves to and manage the
challenges of globalization. It had also published a book in July 2003, The
Road to Cancún, which analyzed WTO agreements in the context of
Nepal’s accession.

SAWTEE also brings out quarterly printed newsletters and monthly

electronic newsletters. These, with a large readership including policy-
makers, academics, media professionals and civil society activists,
covered a wide range of issues related to Nepal’s accession.

From February 2003 SAWTEE and AAN started jointly organizing a monthly
forum on globalization and the WTO in Kathmandu. These included as
participants a wide range of stakeholders including policy-makers, the
private business sector, academia, the media and civil society and
activists. The one-year programme focused on various issues and
agreements affecting Nepal’s accession and the way forward, and the
regional agreements signed by Nepal and their pros and cons. The reports
of monthly fora were posted on the official website and included in the e-
newsletters.

On the part of strengthening the government’s hand in the process of

accession, SAWTEE provided the government with suggestions on different
issues, including the protection of farmers’ interests, anti-competitive
and monopoly practices. Adhikari was included in the official delegation
to the Cancún Ministerial Conference. He took it as a recognition of
SAWTEE’s contribution on WTO issues and the co-operation it extended to
the Nepalese government during the accession process.

 
 
III. Challenges faced and the outcome    back to top

The advocacy of SAWTEE and other NGOs had a positive impact in favour
of WTO membership. Negative attitudes towards the WTO declined.
People realized that entry into the WTO was inevitable, albeit they were
concerned about the threat of ‘WTO-plus’ conditions and about the
domestic preparations needed to ensure that accession would be
favourable for Nepal.

In the course of the accession process, challenges emerged in three main

areas, namely (i) tariff binding for agricultural products, (ii) resisting
pressure to join UPOV, and (iii) domestic political support for ratification
of the accession agreements. However, with the help of NGOs including
SAWTEE, Nepal managed to meet the challenges successfully, which
ultimately resulted in positive outcomes.

Tariff binding for agricultural products    back to top

Agriculture is the mainstay of the Nepalese economy; it is the source of

livelihood for more than 80% of the population. But Nepal’s applied tariffs
on agriculture were very low, ranging from zero to 10%. NGOs in Nepal
including SAWTEE had realized the need to protect Nepalese farmers
through an appropriate level of tariff binding at the time of accession to
the WTO. At the initiative of AAN they formed a loose network of NGOs
with the Federation of Nepalese Chambers of Commerce and Industries
(FNCCI) and the Ministry of Agriculture and Co-operatives (MOACS) in April
2003. The network convinced the government of the need to protect
Nepalese farmers and the food security of the Nepalese people by
providing adequate tariff protection to sensitive agricultural products.
They worked out the appropriate tariff bindings for sixty agricultural
products with proper justifications and submitted them to the
government. With this background, Nepal proposed binding tariffs on
agricultural products at an average of 30%. Initially, developed member
countries opposed the proposal in view of the existing applied rate, but
with the help of the detailed work done by the Network, the Nepalese
negotiators convinced them of the need to create a policy space for
protecting the agriculture sector. Finally, the average tariff binding on
sensitive agricultural products was fixed at 51% for the transition period
and 42% thereafter. This was a remarkable achievement in view of the
prevalent low level of the applied rate, at 10%.

Resisting the imposition of UPOV    back to top

At the final stage of its accession negotiations Nepal was under pressure
from one trading partner country to become a member of the
International Union for the Protection of New Varieties of Plants (UPOV).
UPOV is seen as providing a high level of protection to plant breeders but
as severely weakening the position of farmers, restricting their rights to
save, reuse, exchange and sell seeds. This proposal came to the notice of
the Nepalese authorities on 9 August 2003, only a day before the Nepalese
delegation had to leave for Geneva to finalize its accession to the WTO.

After receiving this proposal the government authorities asked a member

of SAWTEE to prepare a briefing for them. The brief, ‘Why Nepal cannot
and should not join the UPOV’, was handed over to the head of the WTO
Division of the Ministry of Industry, Commerce and Supplies at 10.30 p.m.
on 9 August 2003, giving various reasons for not joining.

Government officials made a public announcement that they would not

compromise the interests of Nepalese farmers while obtaining WTO
membership. Prior to their departure for Geneva, they promised that they
would deal with the issue bilaterally and close the chapter once and for
all.

Members of SAWTEE remained in constant touch with the government

delegates by phone. NGOs were seriously concerned about the possible
infringement of the rights of Nepalese farmers over seeds and local
biological resources as a result of Nepal’s entry into UPOV. A meeting of
core members of the National Alliance for Food Security — Nepal (NAFOS)
(2) was organized on 11 August to discuss possible future strategies. One
of the major decisions of the meeting was to publish articles in various
newsletters highlighting the need to ward off the pressure to join UPOV.
Two members of SAWTEE published three articles within four days in two
of the leading national dailies. Similarly, two posters, one in Nepali and
the other in English, were also published and distributed to all the
concerned stakeholder groups.

The NGOs also organized a press conference in Kathmandu on 13 August

under the banner of NAFOS. Journalists from all the leading media
organizations, farmer’s groups, lawyers and other stakeholder groups
participated in the conference.

The press coverage of the event was among the best during the NGOs’
advocacy campaign. The next day, almost all the media provided
prominent coverage, and it also came to the notice of the trading partner
country’s trade representative’s office in Geneva.

On the final day of the accession negotiation, 15 August 2003, it was

agreed to include only minimal text in the final working party report,
which states:

Nepal would also look at other WIPO and IP-related Conventions,

e.g. Geneva Phonograms Convention, UPOV 91, WIPO Copyright
Treaty and WIPO Performances and Phonograms Treaty, in terms of
the national interest and explore the possibility of joining them in
the future, as appropriate.

  
Ratification of the agreement on accession to the WTO    back to top

After an effort lasting more than a decade and several rounds of both
multilateral and bilateral negotiations, Nepal finally received an offer of
WTO membership on 11 September 2003, subject to ratification of the
protocol of accession by the Nepali government by 31 March 2004.
According to the legal provisions of Nepal the protocol needed to be
ratified by the House of Representatives.

The offer came at a time when the country was in a state of political
turmoil. The House of Representatives had been dissolved by the then
Prime Minster a year previously. The incumbent government, appointed
by the king, was hence non-representative, and political parties were
protesting in the street against it. The task of ratification was thus
politically and legally challenging.

As it was uncertain when the country would have a House of

Representatives in place, the government was also not in a position to ask
for extension for the ratification period, since it could not ask for an
indefinite extension. It had an option to amend the legal provisions
through promulgation of an ordinance, but the political parties, including
the Nepali Congress and the Nepali Congress (Democratic), who were in
the government as a united party at the time of applying for the
membership, were likely to oppose such a move on political and legal
grounds. In such a critical situation NGOs, including SAWTEE, through
their various advocacy mechanisms, were able to persuade public opinion
to be in favour of not deferring accession to the WTO. Through their
articles and deliberations in different fora they expressed the view that if
Nepal missed the opportunity of entering the WTO, it would cost the
country very dear.

Towards the third week of March 2004 the government promulgated an

ordinance paving the way for ratification, and were not opposed by the
political parties. On 24 March 2004 Nepal notified the WTO that the
process of ratification and acceptance of the protocol of accession had
been completed. According to established practice, the entry into force
of the protocol occurred thirty days later, on 23 April 2004. Nepal
obtained membership of the WTO as the 147th member and the first least
developed country (LDC) member.

 
 

IV. Lessons for others    back to top

As elsewhere, people in Nepal had differing views on the WTO; the

debate on the pros and cons of the WTO system would probably never
end. However, it was widely accepted that countries need to be
integrated with the global economy through the multilateral trading
system. It was also recognized that Nepal could not remain in isolation
from the fast integrating global economic system. With membership of
the WTO Nepal would be able to participate in future important trade-
related decision-making. From Nepal’s experience, it has become clear
that NGOs can play a meaningful role in influencing public opinion. It was
the advocacy of NGOs that helped people to understand the nature of the
WTO and reduce negative attitudes towards it. This created a domestic
political environment conducive to the accession of Nepal. The approach
of the NGOs created opportunities for them to work closely with the
government to some extent. This, in turn had enhanced transparency in
government activities in relation to WTO accession.

The Nepalese experience showed that even the efforts of the larger
countries to impose ‘WTO-plus’ conditions could be avoided with the help
of NGOs by means of networking, which had also corrected the perception
that the WTO is the tool of powerful lobbies. What is important is the
power of and skill in negotiations, through which the acceding country
can convince the working party.

Another important lesson that Nepal learned is that the approach of

networking, rather than the efforts of a single NGO, is more effective in
advocacy, and that advocacy becomes effective if it covers all
stakeholders.

The commitment of the government to enact and enforce competition

law in a time-bound manner in the process of obtaining WTO membership
was another important aspect of the Nepalese experience. NGOs, by
lending a helping hand to the government, can also advance the cause of
fair trade in the country.

Accession to the WTO is not only the business of government. It is the

concern of the country as a whole, including NGOs, farmers, consumers
and others. Socio-economic conditions differ between developed and
developing countries. Hence the implications of WTO accession also
differ.

Based on his experience in the course of Nepal’s accession process,

Ratnakar Adhikari, SAWTEE’s executive director, believes that NGOs in
acceding countries should, first, conduct research on the impact of the
various WTO agreements on the poor, marginalized and vulnerable. They
should also find out which of the agreements reduce the policy space of
governments seeking to protect and promote their national development
priorities.

Second, NGOs should determine which ‘WTO-plus’ conditions the

members of the accession working party are trying to impose on their
countries. Third, they should work closely with the government not only
to elicit the information (which is invariably otherwise kept confidential)
about the terms of accession but should also provide suggestions to the
government on how to fend off the pressure on them to agree to things
that are ‘WTO-plus’ in nature. Fourth, they should gain strong public
support and make use of the media to make themselves heard. Finally, if
the government does not take notice of them through the regular
channels, they should use other pressure tactics (campaigns,
demonstrations) to make their message loud and clear.

 
 

NOTES:
1.- Action Aid has been in Nepal since 1982. From the very beginning, AAN has been working
with the poorest and most downtrodden. It encourages communities to take an active role in
their own development process and aims to develop links by working with the government
and with NGOs. It is also geared towards advocating the rights of the poor and influencing
policy in their favour. back to text
2.- NAFOS is a network of NGOs and INGOs working in Nepal for the cause of protecting and
promoting food security and farmers’ rights. It was founded by Action Aid Nepal, together
with other like-minded organizations, including SAWTEE, in 1999. SAWTEE is currently the
secretariat of this network. back to text