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Overseas Pakistan Services

World Trade Organization

The World Trade Organization (WTO) is the most significant international organization regulating global trade in goods, services and intellectual property. It was established in 1995 through the Marrakesh Agreement of 1994 as a result of the Uruguay Round of negotiations. It currently comprises 153 (23rd July 2008) member states and represents almost 95% of the world trade. It provides a forum to member countries for considering trade-related issues and to conduct negotiations on trade liberalization.


Objective

WTO is responsible for the proper administration and effective implementation of all the WTO Agreements (multilateral and plurilateral trade). Its main objective is to discipline the global trading system by promoting fair and freer trade. Members of WTO meet on regular basis for negotiating tariffs and for reduction of other barriers to global trade.


Functions

The Marakkesh Agreement of 1994 provides the following five functions of the WTO:
1. Administration of WTO Agreements
It is responsible for the implementation, administration and operation of all WTO Agreements including those that would be negotiated in the future

2. Forum for Trade Negotiations
It provides a forum for negotiations among member countries for further liberalization of trade and on matters provided in the WTO Agreements. 3. Dispute Settlement
It is responsible for the settlement of trade disputes among member countries.

4. Trade Policy Review Mechanism
It administers a trade policy review mechanism in which periodic reviews of trade policies of member countries are conducted.

5. Cooperation with International Organizations
To achieve greater coherence in global economic policy-making, the WTO also cooperates, as appropriate, with the International Monetary Fund (IMF) and the World Bank.


Benefits of WTO

(i) Promotes Peace
(ii) Reduces Disputes
(iii) Harmonizes Rules
(iv) Decreases Cost of living
(v) Gives Choice
(vi) Increases Incomes
(vii) Encourages Growth and creates jobs
(viii) Increases Efficiency
(ix) Lobbying
(x) Good Governance


Implications of WTO in Pakistan


Pakistan was one of the 23 founders of GATT in 1947. It actively participated in all the subsequent GATT negotiations and was involved in the Uruguay Round that resulted in the creation of the WTO. Pakistan was thus also one of the founding members of WTO that was established in 1995. There is a considerable impact of WTO on all sectors of Pakistan's economy, particularly, its industry, textile, agriculture and services. The nature of impact is predictable for some sectors, whereas, it is difficult for others in view of global developments in trade and degree of complexity involved.


As far as the industrial sector is concerned, Pakistan's main exports are textile and related products. The non-textile exports of Pakistan are negligible but have a potential to grow tremendously under the WTO regime. On the import side, Pakistan has been rationalizing its tariff structure to a large extent under the trade liberalization principle as envisaged by WTO. The average tariff in Pakistan is around 17 percent however, there is a need to ensure that there are no adverse affects of trade liberalization on the domestic producers. This calls for a need to make adjustments in the policies for the domestic industry, so that they may be able to face the increased competition from global market.


The complete integration of all textile and clothing products into the free trade environment under the Agreement on Textile and Clothing (ATC) on 1st January 2005 was one of the most significant changes for Pakistan under the world trade regime. Pakistan's economy finds itself heavily dependent on the textile and clothing (T&C) sector. It is because of the nature of textile industry being labor intensive and requiring less capital and technical skills. However, a quota-free trade era calls for structural and operational adjustments in the textile sector, to enable Pakistan's exporters to be globally competitive. China is the biggest challenge to Pakistan T&C exports in this post ATC regime.


As regards agriculture, Pakistan being an agrarian economy is still a net importer of food items. The Agreement on Agriculture (AOA) of WTO has been significant in molding agricultural policies of Pakistan. The Agreement on Agriculture provides rules regarding export subsidies, domestic support and market access. Furthermore, the WTO Agreement on the application of Sanitary and Phytosanitary Measures (SPS) with regard to food safety and protection of human and animal life, and health from agricultural imports has considerable impact on Pakistan.


Apart from the major crops, Pakistan needs to exploit its comparative advantage in the production and exports of meat, dairy products, fruits, vegetables, horticulture, etc. The developing countries and the developed world are at loggerheads over agriculture. With regard to agricultural negotiations in the WTO, Pakistan along with the other developing countries, insists on a world trading system that is fair.


Moreover, Pakistan has a comparative advantage in many primary commodities. But in order to fully utilize its comparative advantage, it needs to focus on and solve the problems in supply side (domestic requirements). Pertaining to the Agreement on trade related aspects of intellectual property rights (TRIPS), Pakistan needs to ensure that the industry is encouraged to provide intellectual property protection for its products and also make certain that there is effective protection of the intellectual property rights attached to imported products.


Services are the largest and most dynamic component of both developed and developing country. It is impossible for any country to prosper today under the burden of an inefficient and expensive services infrastructure. In Pakistan, the services sector contributes more than half of the GDP. Workers, remittances account for the largest component of services and the country has a large number of expatriates throughout the world. Being a developing country, Pakistan has adopted a cautious approach while making commitments in trade in services. However, the actual policy of the government is far liberal as compared to the binding commitments scheduled in the General Agreement on Trade in Services (GATS). Pakistan has made some horizontal commitments that apply across the board, while in six sectors specific commitments have been made. These include Business services, Construction and related engineering services, Tourism and travel related services, Health and related social services, Telecommunication services, and Financial services.


Pakistan's domestic industry also faces problems of increased imports and unfair practices under the global trade regime. WTO Agreements have an in-built mechanism providing for trade remedial measures to counteract the effect of dumping, subsidies and surge of imports. Accordingly, Pakistan through national legislation has come up with anti-dumping laws against dumping, countervailing duties laws against subsidies and safeguard action laws against surge of imports in order to protect its domestic industry.


In a nutshell, at present Pakistan maintains a fairly liberal trade regime, where all quantitative restrictions on imports have either been removed or converted into tariffs. It is noteworthy that the applied tariffs in Pakistan are well below the bound tariffs under WTO, translating into market access. However, quality control is integral to competitiveness of Pakistan's exports. Low quality products fetch low price in the international market. The obvious problems of quality for Pakistan are those of technical precision, grading and specialization. The WTO Agreement on Technical Barriers to Trade is relevant in this regard. Proper support and prudent policies for the industry, along with intelligent balancing of imports and exports is vital for the sustainability and growth of Pakistan's economy and is likely to lead towards a bright future and trade enhancement under the WTO regime.

 
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