Additional Notes for Corporate and Other Laws (CAP-II) - WTO and Nepalese Laws

OBJECTIVES OF WTO
1. To improve the standard of living of people in the member countries.
2. To ensure full employment and broad increase in effective demand.
3. To enlarge production and trade of goods.
4. To increase the trade of services.
5. To ensure optimum utilization of world resources.
6. To protect the environment.
7. To accept the concept of sustainable development.

MOST-FAVORED NATION (MFN)

A tariff reduction granted to one country that also known as bilateral liberalization.
A most favored nation clause is a level of status given to one country by another and enforced by the World Trade
Organization. A country grants this clause to another nation if it is interested in increasing trade with that country.
Countries achieving most favored nation status are given specific trade advantages such as reduced tariffs on imported
goods. Trade advantages include low tariffs or high import quotas.
The WTO stipulates that countries cannot discriminate against other member countries. However, there are special
provisions that give developing and least developed countries, which make up over three quarters of WTO members,
exclusive rights. For instance, they are given more time to implement WTO agreements, assistance in increasing their
trade opportunities and support to help them build the infrastructure they need for WTO work.
Special consideration is given to countries that are classified as "developing" by the World Trade Organization. The
members of the World Trade Organization (WTO) agree to accord MFN status to each other. Exceptions allow for
preferential treatment of developing countries, regional free trade areas and customs unions. Together with the principle
of national treatment, MFN is one of the cornerstones of WTO trade law. MFN tariff is a duty rate applied to a country
with MFN status. An MFN tariff is the lowest possible tariff a country can assess on another country.
For example: countries can set up a free trade agreement that applies only to goods traded within the group or they can
give developing countries special access to their markets or a country can raise barriers against products that are
considered to be traded unfairly from specific countries.

FUNCTIONS OF WTO
1. Administering WTO agreements:
The WTO agreements cover goods, services and intellectual property. They include individual countries'
commitments to lower customs tariffs and other trade barriers and to open and keep open services markets. It has
different mechanism like General Council which works on behalf of ministerial conference. It meets to Dispute
Settlement Body and Trade Policy Review Body to oversee procedures for settling disputes and to analyze members'
trade policies. There are Goods Council, Services Council and TRIPS Council with various committees to works on
related sectors. The ministerial conference can take decisions on all matters under any of the multilateral trade
agreements.
2. Forum for trade negotiation:
It provides forum for trade negotiation. For this purpose, its different mechanism activates to works for their
responsible sectors. Issues on trade related aspects could be submitted through committees and councils for
negotiations.
3. Handling trade disputes:
It has dispute settlement mechanism like Dispute Settlement panels and Dispute Settlement Body (General Council
in another guise). It is under the General Council and finally ministerial conference. The Dispute Settlement Body
has the sole authority to establish “panels” of experts to consider the case, and to accept or reject the panels’ findings
or the results of an appeal. It monitors the implementation of the rulings and recommendations, and has the power to
authorize retaliation when a country does not comply with a ruling.
4. Monitoring national trade policies:
It monitors national trade policies through General Council Meetings as Trade Policy Review Body. Finally, the
general council submits the report before conference.
5. Technical assistance and training for developing countries:
It provides technical assistance and training as it thinks fit. It has technical assistance missions that works in this
field.
6. Cooperation with other international organizations:
It cooperates with and assists to IMF and IBRD for establishing coherence in universal economic policy
determination. The WTO maintains extensive institutional relations with many of its sister organizations,
participates as observer in their work and has established several partnerships to help improve the trading
opportunities and capacities of developing and least-developed countries. Examples of such partnerships are the

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Additional Notes for Corporate and Other Laws (CAP-II) - WTO and Nepalese Laws

Enhanced Integrated Framework (EIF), the Standards and Trade Development Facility (STDF) and the Aid for
Trade Initiative. WTO cooperation with other international organizations continues to evolve and is more than ever a
function of the need for increased global coordination and better governance.
Dispute Settlement Mechanism under WTO
 The WTO’s procedure underscores the rule of law, and it makes the trading system more secure and predictable. The
system is based on clearly defined rules, with timetables for completing a case. First, rulings are made by a panel
where ruling is endorsed (or rejected) by the WTO’s full membership. Appeals based on points of law are also
possible. It introduced greater discipline for the length of time a case should take to be settled, with flexible deadlines
set in various stages of the procedures.
 The agreement emphasizes that prompt settlement is essential if the WTO is to function effectively. It sets out in
considerable detail the procedures and the timetable to be followed in resolving disputes.
 If a case runs its full course to a first ruling, it should not normally take more than about one year - 15 months if the
case is appealed. The agreed time limits are flexible, and if the case is considered urgent (e.g. if perishable goods are
involved), then the case should take three months or less.
 Rulings are automatically adopted unless there is a consensus to reject a ruling. In such cases a country wanting to
block a ruling has to persuade other WTO members (including the adversary in the case) to share its position.

CHALLENGES TO NEPAL FROM WTO MEMBERSHIP

Employment: At present, 14 % of the Nepalese workforce is believed to be unemployed and 47 % underemployed, 13 %
to achieve a higher level of production, in terms of both quality and quantity, sophisticated machineries and better
technology have to raise production efficiency. It is machinery rather than labor that allows to achieve the target of
meeting the market demand on schedule. Therefore, it is very likely that the workforce is replaced instantly by
machineries like in developed economics.
Negotiation for more benefits: The task of negotiation for accessions with the objective of gaining more and loosing less
ins challenging for Nepal primarily due to lack of knowledgeable and skillful human resources with the government as
well as private sector.
Strengthening institutions: Given the financial constraint of the government and the lack of proper policy intervention to
cope with the responsibility and obligations posed by the WTO membership, the task of strengthening intuitions seems
difficult to achieve.
Specialization in some products and services: This is a challenging task of the Nepal, when there is lack of proper
physical and institutional infrastructure, capital and resources for industrialization.
Making industries cost effective: This old industries of Nepal need urgent restructuring and modernization in order to
make them capable of producing quality goods at a competitive price. It is not possible to make industries cost effective
without investment.
Income distribution and Poverty: Since rules, laws, practices, and norms of economic and social nature are shaped as
per the requirement of the global village, the economy and society are put under the powerful influence of outside forces,
such as INGO’s and MNC’s. Local monopolies are also replaced by international monopolist whose interest is not to co-
operate with local government in resolving any social crisis but to read economics benefits. The process aggravates the
problems of income and wealth inequality, the rural-urban gap, poverty, unemployment and social and economic dualism.
The country is thus forced to remain in a low equilibrium poverty trap.
Monopoly of MNC’s in Patent: Due to the intervention on MNCs in local initiatives, due to huge research capacities and
technological advancement, MNC’s are able to patent other countries resources epically LDC’s like Nepal Basmati rice
which is originated in South Asia was patented by one of the U.S. MNCS under the name of “Taxomati”. Similarly,
“turmeric” & “neem” was also being patented in the U.S recently a patent has been granted to a U.S firm on Karela (bitter
gourd), Jamun (Sygimiun Cumini) and brinzal for anti-diabetic properties despite their use mentioned in several Indian
texts.

OPPORTUNITIES OF NEPAL FROM THE MEMBERSHIP OF WTO

i. Liberalization: Locking in the Liberalization Process WTO membership would help to lock in the ongoing
liberalization process and increase the credibility of initial reform.
ii. Market Access: The most visible achievement of the Uruguay Round was the commitment on market access
through reduction in tariffs and elimination of WTO inconsistent non-tariff measures and their bindings, which
Nepal may use.
iii. Freedom of Transit: Being a landlocked country, secure transit rights would be a major achievement for Nepal,
particularly she would have the legal right to trans-ship goods through India, using the convenient port, for entry or
exit.
iv. Access to Dispute Settlement Body: WTO ensures a common, stronger, faster, impartial, and a binding
mechanism for dispute settlement through Dispute Settlement Body (DSB). After WTO membership Nepal has the

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Additional Notes for Corporate and Other Laws (CAP-II) - WTO and Nepalese Laws

right to challenge any unilateral measures taken by trading partners, which are against her economic and trade
interest, if they are inconsistent with the WTO provisions.
v. Avoiding costs of Non-membership: As Nepal's major trading partners are members of WTO, she could not have
afforded to remain outside the system and pursue development policies in isolation. Moreover, the rights and
obligations of the Uruguay Round agreements are applicable only to member countries.
vi. Special Measures for Least Developed Countries: The WTO agreement has provided special protective
measures for least developed countries like Nepal, measures of special assistance e.g. technical assistance in the
development and strengthen and diversification of their production and export bases, enable them to maximize
benefit from liberalization process, etc.
vii. Globalization of Foreign Economy: Free trade or open market policy may open up the country's market all over
the world.
viii. Expansion of Foreign Investment through system of National Treatment.
ix. Fair Competition: WTO requires fair competition in the world trade for all member countries which may benefit
Nepal.

MONEY/FINANCE BILL
“Money/Finance Bill” means a Bill concerning any or all of the following subjects:
a) the imposition, collection, abolition, remission, alteration or regulation of taxes,
b) the preservation of the Federal Consolidated Fund or any other Federal Government Fund, the deposit of moneys
into and the appropriation or the withdrawal of moneys from such funds, or the reduction, increment or cancellation
of appropriations or of proposed expenditures from such Funds,
c) the regulation of matters relating to the borrowing of money or the giving of guarantee by the Government of Nepal,
or any matter pertaining to the amendment of the law with respect to any financial obligations undertaken or to be
undertaken by the Government of Nepal,
d) the custody and investment of all revenues received by any Federal Government Fund, moneys acquired through the
repayment of loans, and grant moneys, or accounts or audits of the accounts of the Government of Nepal, or
e) Other matters directly related to any of the subjects specified in clause (a), (b), (c) or (d).
Provided that any Bill shall not be deemed to be a Money Bill by the reason only that it provides for the levying of
any charges and fees such as license fee, application fee, renewal fee or for the imposition of fines or penalty of
imprisonment.
If any question arises whether a Bill is a Money Bill or not, the decision of the Speaker thereon shall be final.
Finance Bill Finance Act
When the proposals are introduced to the Legislative Once finance bill is passed by the Parliament and assented
Parliament it is called as a Finance Bill. The Finance Bill is to by the President. Finance Bill becomes the Finance Act
presented at the time of presentation of the budget before for that year. Finance Act refers to the headline fiscal
Parliament in fulfillment of the requirement of the (budgetary) legislation enacted by the Parliament,
constitution, detailing the imposition, abolition, remission, containing multiple provisions as to taxes, duties,
alteration or regulation of taxes proposed in the Budget. exemptions and reliefs at least once per year, and in
Finance Bill generally seeks approval of the Parliament for particular setting out the principal tax rates for each fiscal
raising resources through taxes. year. It is through the Finance Act that amendments are
made to the various Acts like Income Tax Act, Value
Added Tax, Customs Act, Excise Act etc.

CHECK AND BALANCE

Checks and balances is a system that was built into the Nepal Constitution, to keep each branch of government in check. It
is meant to prevent any one branch from usurping too much power. Each branch of government has a certain amount of
control over the other branches, in addition to its individual powers. In Nepal, the executive is a part of the legislature.
The president is the head of the executive but he/she acts on the advice of the Council of Ministers. He can be impeached
by the parliament. The Council of Ministers is collectively responsible to the House of Representative (Lower House) and
is therefore removable by it. There is separation only so far as the judiciary and other organs of the government are
concerned. The judges of the superior courts are appointed by the government, although they can be removed only by the
parliament, and their salaries are provided by the constitution or can be laid down by a law made by the parliament. The
courts can declare legislative as well as executive acts unconstitutional. So, we can say that the system operates in Nepal
is not based on the doctrine of the separation of powers in it rigidly but there is the system of check and balance.

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