Article

WORLD TRADE ORGANIZATION: CRITICAL ISSUES FOR PAKISTAN’S
AGRICULTURE AND TEXTILE INDUSTRY

Farzana Noshab *

The World Trade Organization (WTO) was established in 1995, as a result of the Uruguay-Round (UR) negotiations (1986-94), replacing the Bretton Woods system of (GATT).¹ The UR agreements have posed many challenges to the developing countries. On the internal (domestic) front, these include imperatives to make adjustments in the domestic production and trade regime to stay active in the international market characterized with tough competition. On the external side, the challenges originate also from the issues related to the WTO framework itself, pertaining to implementation of the built-in agenda, and new issues for coverage under the WTO framework. The developing countries are concerned about the implementation of built-in agenda before new issues are taken up.

Pakistan is one of the founder members of both the GATT and the WTO. During the Uruguay Round negotiations, Pakistan actively participated with the main objective of liberalizing trade in its areas of interest.² However, the two most important areas of its exports have largely been kept outside the scope of the normal rules of multilateral trading system. While agriculture became a victim of trade distortion through large-scale export subsidization by the major industrialized countries, the textile sector faced systemic barriers and discriminatory treatment through Multi-fibre Arrangements (MFA).

The objective of the paper is to identify and analyze the WTO-related issues for Pakistan at present in the area of textile and Agriculture- two main sectors of the economy. The paper will focus on the challenges faced by the country in implementing its WTO commitments and the challenges posed by the implementation of the agreements with its major trading partners. Apart from suggesting on how to cope with the internal challenges, the paper will suggest on what kind of strategy and course of action Pakistan should adopt, along with other South Asian countries, in the future multilateral negotiations, to deal with the external challenges posed by a WTO environment.

Given the complex and comprehensive nature of the Uruguay Round Agreements, it is difficult to precisely quantify the results for Pakistan. While certain components of the Round can not be quantified, even quantifiable areas are also marked with uncertainty as these are still in the process of implementation e.g. extent of liberalization in agriculture. In addition to the in-built agenda of the UR, still being implemented, new issues have also surfaced and are being considered for inclusion in the WTO.³ Scarce data is available in Pakistan on the subject, due to official restrictions, lack of documentation of economy, and not much work has been done in Pakistan regarding the challenges it faces. However, economic models giving a broad picture of the UR indicate a disproportionate distribution in the annual world gain of US$ 510 billion projected for 2005, only 22.7% of which will go to the developing countries. Even within developing countries, Pakistan is in the third tier of beneficiaries of the UR agreement. Any future opportunity would be based on a combination of domestic economic scenario vis-a-vis economic policies of other countries. The outcome of the UR for any individual country will depend heavily on its policy response. Countries that take the current opportunity to streamline their policies, and improve their competitiveness, are likely to increase their gains from the reform.

Like many other developing countries, for more than two decades Pakistan has followed the import substitution (IS) policy based on high import tariffs and quota restrictions, to protect the domestic industry. The IS policy, however, helped the country in achieving a higher growth rate for manufactures, increasing its share in exports from 29% in 1960 to 56% in 1970. After one decade of nationalization, the 1980s witnessed a shift in the emphasis of trade from the IS policy to outward looking export promotion, which gained a further momentum in the 1990s, through the liberalization of trade, opening up of foreign exchange regime and foreign investment. Under a comprehensive tariff rationalization programme, quantitative restrictions on imports were converted into tariff in June 1987. Maximum tariff rate was reduced to 35% in 1999 from 70% in 1994-95, and will be further reduced to 25% by January 2003.⁴ Maximum import duty was gradually reduced to half (35%) in 1998-99 from the level of 70% in 1994-5.⁵

Pakistan had a very small number of tariff bindings before the UR agreement. Under the Round, the country is committed to bind about 33% of its tariff lines. Approximately 81% of its agricultural import tariff are bound in HS ⁶ chapter (1-24) at a ceiling rate of 100%.⁷ A number of agricultural lines remain non-bound largely applying to alcoholic beverages, swine and pig meat. For industrial products (chapter 25-97), Pakistan committed to bind 25% of tariffs, mostly at the ceiling rate of 40-50%.⁸ For these, tariff reductions will take place in five equal installments from July 1995 onwards. For a number of other items,⁹ tariffs will be bound at a ceiling of 20% or 30%.¹⁰ For textiles, tariff reductions are scheduled in 10 equal installments.¹¹

As per its commitments made for non-tariff barriers, there is no positive list and the ‘Negative List’ of imports has also been reduced by up to 70 items in 1999 from 300 in 1988.¹² At the same time, there are neither minimum import prices nor specific safeguard measures applicable to imports. As a part of export promotion measures, the exchange rate regime has also been liberalised by moving to a unified market based exchange rate system since May 1999. The elimination of quantitative restrictions and rationalization of trade tariffs,¹³ resulted in lowering the average rate of import and export duty as well as in lowering the anti-export bias¹⁴ implicit in trade regime which has gone down from 36% in 1987 to 17% in 1998, as reflected in the figure-1. However, the exchange rate trade regime is still below the acceptable level of neutrality.¹⁵

It is also noteworthy that the applied tariffs in Pakistan are well below the bound tariffs under WTO. As per Schedule XV of WTO, Pakistan’s offer on tariff reduction under the Uruguay Round of trade negotiations covered 2128 items (roughly one-third of the national tariff 

Source:     Data from Ashfaque H. Khan, ‘The Experience of Trade Liberalization in Pakistan’, Pakistan Development Review, 37:4, 1998, p. 671, Shaukat Ali, Uruguay Round and Pakistan's Industry and Trade, World Bank Workshop on UR and South Asia, January 2000.

schedule), comprising 700 items in agriculture, 493 in textile & clothing, and 935 in industrial goods.

Inadequacy of exports to finance imports, lack of diversification and low quality exports, are amongst the several weaknesses of export regime in Pakistan.¹⁶ During 1991-98, export receipts have financed, on average, 76% of merchandise imports.¹⁷ 60% of total exports is cotton-based manufactures, making exports vulnerable to the vagaries of the cotton crop and the compulsions of the textile industry. Apart from the commodity concentration, there equally exists a geographical concentration of Pakistan’s exports. Almost two-third of exports is directed to only 11 countries thus making the exports more vulnerable.¹⁸ Like many other developing countries, Pakistan’s exports and imports are vulnerable also to the changes in international prices. As against the last year, in the year 1999-00, Pakistan lost $381.2 million in export earnings and $949 millions in import payments, due to decline in unit value of its exports and increase in value of imports.¹⁹

Measured in terms of ‘trade as a proportion to GDP’, the degree of openness of Pakistan’s economy is still limited. The proportion for 1996-97 was 33% (exports 13.5% and imports 19.3%). For 1997-98, it went down to 30% primarily because of reduced imports.²⁰ Despite the rationalization of tariff structure, import substitution bias still exists and country’s participation in world trade has been very small (0.15% exports and 0.17% imports in 1998).²¹

1.   Agreement on Textiles and Clothing (ATC)

From 1974 to 1994, the Multi-Fibre Arrangement (MFA) governed bilateral agreements, providing the framework for industrial countries to use quotas to restrict imports of textiles and clothing from more competitive developing countries. The MFA system, against fundamental principles of GATT, allowed restrictions on quantities of imports targeted at individual countries. The agreement on integration of textile and clothing sector into GATT in 1994, including phasing out of MFA textile quotas, was hailed a great deal by textile exporting countries, including Pakistan. In-fact, it was one of the principal objectives of Pakistan during the UR negotiations, to not only achieve the elimination of the MFA but also the full integration of Textile and Clothing into the GATT in order to secure access to international markets. However, the optimism faded significantly with the unsatisfactory actual implementation of the agreement during the past four years.

Textile Industry of Pakistan

The Textile industry is the backbone of Pakistan’s economy with a status of the largest industry and with a comparative advantage of resource utilization: source of employment to industrial workers (38%) and the largest source of foreign exchange earnings (60%).²² It accounts for 27% value addition in manufacturing sector. The sector has bounced back after five years of stagnation due to bumper cotton crop and lower lint cotton prices in the year 2000.²³

Direction of Pakistan’s Textile Exports

According to the ITC database on imports from Pakistan, in 1998, out of $759 million total export of yarn, worth $703 millions (92%) was exported to non-quota countries (China, Japan, Hong Kong, Indonesia). Whereas, for made-ups, out of $1915.9 million total exports, $1843 million exports (96.2%) were sent to quota countries (US, EU, Canada).²⁴ This direction of exports (Fig-2) and the very high rate of quota utilization for high value added (HVA) textiles (table-1) suggests that the MFA quotas have restrained country’s exports of HVA items and abolition of quotas would bring increased market access for HVA items. It is important to note that open markets would require more competitive goods in terms of price and quality. Under MFA quotas, price factor could singly work and quality could be compromised as market was secure anyway even for some sub quality products. Slow pace of quota elimination by the developed countries implies that Pakistan, like India, should focus on diversification of markets for its HVA items to non-quota countries as well.²⁵

Table-1 Average Quota Utilisation Rate (%)

Source: Reported in Standard & Poors (1998) as quoted in M. Shaukat Ali, Trade and Industrial Policy in Pakistan: Post Uruguay Round Challenges, January 2000.p.18. 

Source: Data from Ingco and Winters (1995) as quoted by Zafar Mehmood, ‘WTO and Pakistan: Opportunities and Policy Challenges’, Pakistan Development Review, 37:4, winter 1998. p. 689; SITC database, 2000.

Market Access Obstacles Continued

The cornerstone of the ATC is Article 2, which prescribes a ten-year phase out of MFA import quotas, along with a four phase "progressive liberalization" schedule calling for the gradual elimination of individual import quotas through a process called ‘integration’.

Table-2 Schedule Of Integration Of ATC

Source: www.wto.org/     

The progressive nature of integration in four stages (table-2) and non-specification of nature of product to be integrated at each of the first three stages provides opportunities for "end loading". Importing countries, in the first two stages, have integrated items, which are either commercially insignificant or not constrained under the MFA (i.e., non-quota items). Developing countries including Pakistan have shown concern over the way the agreement is being implemented, as importing countries are delaying the removal of quotas on labour intensive exports to 2005, which account for a significant proportion of developing countries’ exports.

The removal of non-existing quotas on products such as tyre cords (Canada) ties (EU), tents (USA) suggest a policy of window dressing.²⁶ Although, importing countries have met volume requirement in the first and second stage (36%) it is significantly low in value terms (23%).²⁷ In addition, integration of restrained products as a ratio of 1990 volume imports in respect of Stage II comes to 1.30% (USA), 3.15% (EU) and 2.05% (Canada).²⁸ In the case of Pakistan, no item previously under quota has been included in the first stage of integration. The integration of high value-added textile items, which are of special interest to Pakistan, has been postponed for the last stage, implying that it will not be before 2005 that Pakistan sees its quota restrictions phased out.

Consequent to the slow nature of integration by the textile importers, if the major adjustments are left until the end, it is doubtful that the importers manage to keep to the ATC schedule. In-fact studies on ATC have shown fear of postponement of the final tranche of tariff beyond scheduled phase out, especially when China joins the WTO.²⁹ It is important to note that the agreement on Textiles and Clothing cannot be extended beyond 2005, as it has a self-destruction clause built in.

Importing countries tend to misuse extensively the ‘transitional safeguard mechanism’ to curb textile imports (for protection of domestic textile industry against serious damage caused by excessive quantity of imports in the transition period). The Article 6 of the ATC provides for additional restrictions that can be placed on product lines not covered under current restraints during the transition period. US restriction imposed on yarn imports from Pakistan in March 1999 up to 3 years is an example in this respect.³⁰ Earlier, US took a safeguard action under article 6.7 against Pakistan under category 301, causing a considerable damage to Pakistani exports.³¹  If developed countries, quite expectedly, continue to use such measures even in the post MFA period, it will have damaging impact for textile exports of developing countries like Pakistan.

The industrial countries are also protecting imports of textile goods, especially the US, through more restrictive rules of origin.³²  For example, the newly proposed rule of the US implies that the US import of cloth from Pakistan, to make bed sheets or garments for exports would assign the ‘origin of exports of bed sheets and garments to Pakistan. Therefore quantity will be deducted from Pakistan’s textile quota for the US. This kind of rules of origin, being against the provisions of the ATC, will definitely disrupt trade in textiles and clothing from the way it had been originally envisaged under the ATC.

Preferential treatment (MFN) under the regional trade agreements (RTA) is increasingly seen as a source of trade dislocation. It is a violation of the GATT Article XXIV which, specifies that RTAs should extend the MFN status on non-discrimination between members and non-members.³³  While Pakistan’s products are facing 12% and 25% quotas in EU and NAFTA respectively, Turkey and Mexico have a tariff free access to markets of their respective blocs thereby putting Pakistani products on a disadvantageous position. Pakistan, like India, needs to enter into bilateral trade agreements with its major trading partners, to secure its market.³⁴ Similarly, EU’s recent announcement, to give tariff-free access to exports from the eight Asian countries excluding Pakistan would further effect latter’s textile exports market share. Pakistan’s exports to the EU-market account for 30% of its total exports. While SAARC has virtually been made dysfunctional due to Indian indifference, Pakistan should promote its ties with the ECO members and cultivate participation in other regional or bilateral agreements.

Post MFA Scenario

In the post MFA period, while elimination of quotas would increase market access for Pakistan in the developed countries, it will simultaneously increase competition from other low cost suppliers such as Bangladesh, India, China and South East Asian countries thereby squeezing our existing share otherwise protected by quota regime. Increased competition brings in the imperative-ness of quality and productive standards along-with attitudinal changes on the part of entrepreneurs and government in Pakistan. One of the major handicaps for Pakistani exports is the "credibility gap" especially in the US; exports are not supplied as per delivery schedule and the quality is compromised. In post MFA period these obstacles can cost us the loss of market share. Furthermore, it is also argued that freer imports could also lead to dumping of low cost fabrics from these countries, into Pakistan. The government, while realizing the crucial nature of textile sector, has outlined a policy document "textile vision 2005" containing a road map to prepare the textile sector for challenges in the post quota markets.³⁵ The document projects Pakistan as moving to the 5th position in the year 2005 from 8th position in 1998, in the world ranking of textile exporters, with increased share of its textile exports from $4.9 billion to 13.8 billion.³⁶ In a competitive world, achieving this target requires arduous work on various fronts. Following policy options may be considered in this respect:

Policy Options for Pakistan

• Pakistan should actively participate in the forthcoming review meetings on textile along-with other developing countries to emphasize that 100% quota and be phased out as per schedule that there will be no extension.

• Reorienting textile industry, towards higher-count yarn, fine-cloth and value-added made-ups by all means. The comparative edge and strong position in textiles must be maintained and increased through longer over due balancing, modernization and replacement (BMR) of industrial machinery.

• Incentives may be given to attract foreign direct investment in the textile sector, as advanced countries are considering relocation of their textile industries in the post MFA period, to cheap labor regions.

• A safeguard mechanism is required against dumping as well as sudden surge in imports of some item from abroad, as both may cause injury to domestic industry. Presently, such Issues are tackled by imposition of regulatory duty (central excise) on imports. At the moment Pakistan’s anti-dumping law of 1983 is not consistent with WTO requirements. An effective, WTO-consistent legislation is required in Pakistan to speed up integration into WTO and to fetch the benefits of a rule based economy. Some laws are necessary to be updated while new regulations are required in some other areas. For instance, the Anti-Dumping & Countervailing Duty bill, being revised by the National Tariff Commission (NTC), and is expected to be enacted by 2001 after approval of the WTO.³⁷ The Safeguards Bill has been formulated but not yet been approved to become a law.

2. Agreement on Agriculture (AoA)

The UR agreement on Agriculture is a significant step towards a less distorted agriculture trade being implemented over a period of six years (ten years for developing countries).³⁸ The Agreement led to the conversion of non-tariff barriers to agricultural imports into bound tariffs, and those bound tariffs are scheduled for phased reductions, besides support for farm production and export subsidies, between 1995 and 2000. The UR negotiations have resulted in the Agreement on Agriculture; concessions and commitments made on the market access, domestic support and export subsidies; Agreement on Sanitary and Photo-sanitary Measures; and the decision concerning Least Developed and Net Food Importing Countries.

a) Market Access

In the area of market access, non-tariff border measures are replaced by tariffs that provide substantially the same level of protection. Tariffs resulting from this ‘tariffication’ process, as well as other tariffs on agricultural products, are to be reduced by an average 36 per cent in the case of developed countries and 24 per cent in the case of developing countries, with minimum reductions for each tariff line being required. Least-developed countries are not required to reduce their tariffs.

• Import Barriers Increased

Due to ‘dirty tariffication’ on the part of the developed countries, import barriers have risen, rather than decreased especially on sensitive products. When compared to the non-tariff barriers of the 1990s, an ESCAP study³⁹ reveals that the EU’s final bindings for the year 2000 are almost two-thirds above the actual tariff equivalent for 1989-1993. For the US, they are more than three-quarters higher. Furthermore, for major agricultural products, developed countries’ tariffs are about twice as high as those of developing countries. For two major cereals, wheat and maize, the bound tariff rates for developing countries are 94% for wheat and 90% for maize. In contrast, the OECD average in the first year of implementation (1995) was calculated at 214% for wheat, 197% for barley and 154% for maize (FAO 1996).⁴⁰

b) Domestic Support

Domestic support measures are generally considered as encouraging over production thereby resulting in squeezing imports or dumping. Agreement on Agriculture stipulates the reduction in the level of domestic support cuts at 20% for developed countries and 13% for developing countries (see table in note 38). Different disciplines are adopted for different support policies called ‘boxes’ according to the degree of trade distortion.⁴¹ The discriminatory nature of the agreement is evident from the fact it has allowed domestic support which interests developed countries termed as ill defined ‘green box’ and ‘blue box’ exemptions. In-fact developed countries have misused green box thereby increasing the overall level of support while maintaining their commitments. For instance, the US subsidies more than doubled between 1986-1997.⁴²

In developing countries Aggregate Measures of Support (AMS) level (level of domestic support subject to reduction commitments) are far lower than for most of developed countries. While for EU and Japan, the AMS level is $61,309.1 millions and $30547.7 millions respectively, Pakistan and India have negative AMS levels amounting to $–56.9 millions and $–23847 million respectively, in 1996.⁴³ It implies that agricultural producers in these countries receive administered prices that are below world market price. The commodities most affected are basic foodstuffs such as rice and wheat reflecting food security considerations. While Product specific support is negative, non-product specific support is positive in both countries.

c) Export Subsidies

Export subsidies are prohibited under Article 3.3 unless specified in the country’s specified commitments. Overall levels of subsidies have increased rather than decreased in OECD countries since the base year 1986-88, from US$247 billion in 1986-88, to US$274 billion in 1998.⁴⁴ In contrast, developing countries, which have traditionally not provided subsidies, have not been allowed to do so. Subsidies allowed to developing countries (exempted from AMS calculations) are highly specified and limited to only input and investment subsidies. These are subject to the ‘peace clause’ thereby limiting the support to 1992 level, thus restraining the developing countries’ from increasing subsidies if they want to do so. Whereas, developed countries, are the maximum users of the blue box and unlimited green box, and are given maximum protection under the ‘due restraint clause’ from countervailing duties.

Reduction in export subsidies by developed countries will result in increase in international prices of foodstuffs and deteriorating terms of trade for poor NFIDCs.⁴⁵ For instance, removal of subsidy on wheat by the exporting countries would increase Pakistan’s (a net importer of wheat) import bill due to increased prices.⁴⁶ According to one estimate, by 2002, Pakistan’s major agricultural imports prices are expected to rise by 3.8% in wheat, 2.3% in coarse grains and 1.8% in sugar while price of rice will decline by 0.9% and of cotton by 1.3%.⁴⁷ With increased agricultural liberalisation, net effect is not going to be favorable given the domestic policy distortion in this sector.

Nevertheless, these negative effects⁴⁸ are expected to be offset by the compensation as agreed upon in the Ministerial Decision Concerning the Possible Negative Effects of Reforms Least developed and Net Food Importing Countries (NFIDCs). The decision contains commitments on maintaining adequate level of food aid, preferential treatment in relation to export credits and short term financing of commercial imports. Nonetheless, despite the promises, there has been no political will to activate the ‘Marrakesh Decision’ in order to address the problems of NFIDCs.⁴⁹

Pakistan’s Agriculture Sector

Bringing Agriculture fully under the GATT discipline was another major objective of Pakistan in the UR. Although the share of Agriculture in Pakistan’s GDP has declined over the last 25 years it still accounts for 24% of GDP (1999). The agriculture sector is the largest one employing 48% of the work force and 65% of total export earnings are agriculture based raw/processed products.⁵⁰ Despite the significance of agriculture in the national economy, there exist an ever-widening gap between food supply and demand.

It is expected that UR agreements will make Pakistan agriculture products more competitive in the long term, if domestic policy distortions against the agriculture sector are eliminated. Domestic price stabilisation policies and trade policies have both direct and indirect effects in the agriculture sector. Export import restrictions often create a gulf between the domestic prices and border prices. Market forces would result in domestic price rising to the world price stimulating domestic production through reallocation of resources. Key considerations for NFIDCs like Pakistan have been the availability of adequate food supplies and desirability of low prices. Food security considerations have compelled the country to follow the IS policy, while on export side extensive controls were applied to staple crops to keep domestic prices below world prices.

UR Agreement on Agriculture (AoA)- Impact on Pakistan

The overall result of agricultural liberalisation and implementation of the AoA is not positive for the developing countries. Although, liberalisation of trade in agriculture under the Uruguay Round is estimated to produce a possible net welfare gains for the low income Asian region in the amount of $1.3 billion, the region remains a net importer of food after the Uruguay Round liberalisation. While there was little change in the volume exported, in the post UR period in agricultural exports, food imports were rising rapidly in most cases. These countries were not able to raise their exports due, amongst other factors, to supply side constraints, thus deteriorating balance of payment situation. While the concentration of farms led to an increased productivity and competitiveness, in the absence of safety nets, this process has marginalised small farmers and has added to unemployment and poverty.

The UR negotiations did result in some liberalisation for non-traditional products. Tariffs, in the developed markets, were reduced by 36% on fruits and vegetables⁵¹   and by 48% on flowers and other agricultural products (44% in Europe). Pakistan needs to diversify its exports of agriculture by exporting such horticultural/floricultural products to these markets. However to take full advantage of these potential opportunities, Pakistan requires to introduce policies to further attract investment in packing and marketing facilities and in transportation of these products. The area has been given special attention in the 2000-01Trade policy and many incentives have been announced aimed at market penetration and product up-gradation.⁵²

The result of the AoA on rice and wheat were considered to have mixed effects on Pakistan. The agreement to reduce subsidies on rice and cotton maintained by the US, the EU Japan and Korea could result in increased market access for Pakistan’s exports. However, Pakistan would have to switch production to rice varieties popular in Southeast Asia, as they are currently not produced in Pakistan.

In case of Pakistan, while applied tariffs on most agricultural products have fallen since the early 1990s these tariffs remain relatively high for commodities classified as ‘essential’ such as edible oils and oil seed. High ceiling bindings for most products, under their Uruguay Round commitments place India, Pakistan and Bangladesh with the highest bound rates among WTO members. Although progress has been achieved on the export side by removing export controls however restrictions still apply for commodities such as sugar in India and cotton in Pakistan.⁵³

Multifunctionality/Food Security

Article 20 (c) of the URAA addresses the ‘non-trade concerns" of agriculture to be discussed in the agricultural policy reform process negotiation in 2000. These concerns include security of food supplies, protection of the environment. and the viability of rural areas (positive externalities).⁵⁴  Countries like Japan, EU, Norway Sweden are proponents of multifunctional agriculture and non trade concerns. While Japan and Norway place particular emphasis on food security, EU stresses more on protection of environment, and viability of rural areas. Pakistan has registered itself as a net food importing country.⁵⁵  Major concerns of NFIDCs are: focus on market access to deal with higher import bills, improve national food security situation and the implementation of Marrakesh agreement.⁵⁶  In essence, Pakistan and its allies accept the argument commonly made by the EU and Japan that agriculture has social consequences justifying special considerations. However, they argue that, therefore, international trade rules should be made to favor poor countries, where the externalities of rural demise are the worst.⁵⁷

Sanitary and Photo-Sanitary Measures (SPS)

SPS measures are also used as a discriminatory measure against the developing countries despite prohibition of arbitrary and unjustified barriers to trade in Article XIV. These standards can be applied for the health or animal or plant protection, only if a scientific justification is provided – an area where developing countries lack expertise. Whereas developed countries, having an edge in scientific knowledge, use SPS measures as a quarantine instrument against imports from developing countries. The levels of protection involved are in some cases equivalent to tariffs of more than 100 per cent.⁵⁸

Policy Options:

• Food security being the main concern require sustainable agricultural policies focusing increased productivity.

• Technical expertise need to be brought upto the required level, to reap the full benefits of the WTO agreements, especially in the use of dispute settlement, antidumping and safeguard clauses. SPS measures, Agreement on property rights and patents have created a new paradigm for agricultural productivity, thereby emphasising agricultural research and development. Its is worthwhile to benefit from the technical assistance programme of the World Bank for capacity building of developing countries, in this respect.

• Aggressive market diversification strategy and search for new market opportunities through trade centres abroad is inevitable. Marketing measures should be made efficient through web based product information and e-commerce. In addition diversification of agricultural exports from rice and cotton to non traditional high value added agricultural exports is inevitable.

• There is an urgent need to make the various cross sections of the economy in government and private sector to be apprised of the changes required by the new multilateral economic system. Also arrange should be made by the government for update on the developments in the WTO, through its permanent mission in Geneva.

Conclusion

The establishment of the World Trade Organisation has institutionalised the international economic environment. It is becoming more competitive and inter linked in view of globalisation forces. The loopholes in the WTO agreements and lack of technical expertise in Pakistan are accentuating the challenges for Pakistan. In a rule-based system, Pakistan would be facing much more acrimonious situation in its economic relations with other countries. Economies, which are adapting themselves to the new realities, will be able to survive in the competitive world. Due to complexity of the world trading system, the implementation of its UR obligations has placed new demands on the knowledge and skills of the economic managers in Pakistan. Domestically, in implementing its UR commitments, Pakistan has to modify its domestic legal and administrative rules to be consistent with the WTO rules. The agriculture and textile sectors are the backbone of the Pakistani economy. Pakistan needs to give a special attention to prepare both the sectors not only to mitigate the effects of risks within the competitive world, but also to realise the potential benefits being offered. Greater gains are likely to be made through formation of trading blocs through preferential access to the developed countries’ markets, where Pakistan lacks initiative and stands marginalised.

References

1. General Agreement on Tariff and Trade (GATT) controlled the world economy for more than 40 years since 1948-replaced by the WTO in 1994. The Final Act of the Uruguay Round results included average tariff cuts of 40 per cent on industrial products; an average increase in the percentage of tariff bindings from 21 per cent to 73 per cent (for developing countries), from 78 per cent to 99 per cent (for developed countries) www.wto.org/

2. For Pakistan’s position see Global Trade Negotiations Home page at the URL www.cid.harvard.edu/cid.trade/ GOV/Pakistan.html

3. Issues such as labour standards, environment, transparency in government procurement etc.

4. Tariff reforms in 1993 and 1996-97, lowered tariffs to 65% and 45% respectively, however, effectiveness is partly eroded due to fiscal constraints. Ashfaque H. Khan, ‘Trade Liberalization in Pakistan’, Pakistan Development Review, 37:4, 1998. p. 678; Business Recorder, October 25, 2000.

5. M. Shaukat Ali, ‘Trade and Industrial Policy in Pakistan: Post Uruguay Round Challenges’, World Bank’s WTO 2000 Regional Workshop in New Delhi (December 20-21), p.3.

6. HS stands for Harmonised Commodity Description and Coding System 1996. It is a standard nomenclature for commodities in international trade.

7. WTO, 1995 Trade Policy Review-Pakistan, Geneva: GATT, document no. Press / TPRB/1 at www.wto.org/english/ tradetop_e.

8. Ibid.

9. These include mineral and products, leather items, travel goods, wood products and certain transport equipment.

10. 1995 Trade Policy Review-Pakistan. Op.cit.

11. Background paper for seminar series on ‘Pakistan and Uruguay Round: Issues, Implementation and Impact’, by Centre for Trade Policy and Law, Carleton University, Ottawa, March 1997.

12. Shaukat Ali, Op.cit., p.3.

13. Through conversion of non-tariffs into tariff restrictions.

14. Degree of bias is calculated by degree of EERm/EERx.

15. Ashfaque H. Khan, ‘Trade Liberalization in Pakistan’, Pakistan Development Review, 37:4,1998.p.680.

16. Review of Economic Situation during July-May/June 1999-2000, Ministry of Finance, at the URL www.finance.gov.pk/

17. This is due partly to low absolute level of exports and partly to its low growth rate. The export level in 1997-98 was $8,628 million compared to the import level of $10,118 million. The average growth rate of exports during 1991-98 was recorded at 7.2% per annum in current dollar terms (in real terms it was 5.6%). In 1998-99 it went down to $7779.29 million and took a slightly upward trend in 1999-2000 amounting to $8458 million and 8.7%.

18. Economic Survey, 1998-99.

19. Review of Economic Situation, Op.cit., p.19.

20. Economic Survey, 1999-2000.

21. Own calculations based on data from ‘Selected Indicators in World Development Report 2000’, Washington DC: World Bank. p. 269.

22. Economic Survey, 1999-2000.

23. In 2000, there is a marked revival of closed capacity of the textile industry in Pakistan.

24. Author’s calculations based on SITC database, 2000 downloaded from the URL www.intracen.org/ and Economic Survey, 1999-2000.

25. India’s exports to non-MFA countries increased from 280 million garments in 1994 to 440 million in 1995. ‘IITD-India Case Study’, International Trade and Development Centre, Geneva, 2000. Downloaded from URL www.itd.org/issues/india4.htm

26. Text of various statements between September-November, 1997 showing Pakistan’s position on the Major Review of the Agreement on Textile and Clothing (ATC) by the WTO Council for Trade in Goods (CTG), Dean Springer, ‘Faking Liberalization and Finagling Protectionism: The ATC at its Best’, Background Paper for the WTO 2000 negotiations, presented at the World Bank Workshop in Cairo, July, 1999.

27. Ibid.

28. Ibid., Also see UNCTAD Report 1998.

29. Dean Springer, Op.cit.; Also see, Kim Anderson, "Agriculture, Developing Countries and the Millennium Round", Centre for International Economic Studies, Discussion Paper No.99/28, Adelaide. The lower probability of the ATC being fully implemented as China’s ‘voluntary’ export restraints on those products may not be phased out by 2005.

30. In March 1999, US imposed quota restriction on yarn export up-to 5.2 million/kg from Pakistan, on the grounds that these were hurting US textile industry. Despite DSU’s ruling in Pakistan’s favour, it is using delaying tactics in adhering to the decision of international body. In-fact Pakistan’s export of yarn picked up after 1997 when quotas were abolished. However, the increase was very small in terms of quantity, being a small fraction of the total US yarn imports.

31. Although, the issue was settled through bilateral consultation, it resulted in a considerable damage to Pakistan’s exports.

32. WTO agreement on rules of origin allows countries to take such actions.

33. EU is extending exclusive MFN treatment to only eight countries. WTO, 2000 Trade Policy Review-European Union, Document No. PRESS/TPRB/137.

34. EU has increased India’s textile quota to 3500 tones under EU-India joint Lisbon Summit, which would affect Pakistan’s textile exports to the EU. Times of India, September 16, 2000. While Indian textile export to the EU are increasing Pakistan’s exports to the EU have decreased e.g. Export of made-ups declined from $360.40 m in 1996-97 to 216.1m in 1999-00 (Government of Pakistan, Federal Bureau of Statistics). Further more India has diversified market for its HVA textiles exports to non-quota countries also whereas Pakistan’s HVA textiles are limited mostly to quota countries. India-Case Study Textiles, Op.cit.

35. The document is at the draft stage and has not yet released officially.

36. World textile imports are projected to increase from $280 billion in 1998 to $365 billion in 2005 and Pakistan’s export share is also expected to increase.

37. ‘Law on Antidumping is Ready to be submitted to the WTO’, The Dawn, September 22, 2000.

38. Table-3 Numerical targets for cutting subsidies and protection.

	Developed countries 6 years: 1995–2000	Developing countries 10 years: 1995–2004
Tariffs -average cut for all agricultural products -minimum cut per product Domestic support total AMS cuts for sector (base period: 1986-88) Exports -value of subsidies -subsidised quantities (base period: 1986–90)	-36% -15% -20% -36% -21%	-24% -10% -13% -24% -14%

Source: www.wto.org/  

39. ESCAP 1996 ‘Agricultural Policy Reform under the Uruguay Round: Implications for Developing Countries of the ESCAP Region’, Asian and Pacific Developing Economies and the First WTO Ministerial Conference: Issues of Concern, United Nations, New York.

40. FAO 1996, ‘Policy Options for Developing Countries to Support Food Security in the Post-Uruguay Round Period’, Panos Konandreas and Jim Greenfield, Rome.

41. ‘Amber box’ covers support linked to production and causes trade distortion and are subject to reduction commitments. ‘Green box’ covers support as having minimum trade distorting impact (research training infrastructure services, domestic food aid, decoupled direct payment, regional assistance programmes) and can be used freely. ‘Blue box’ refers to the de-coupled direct payments to the producers to limit agriculture production, government assistance programmes to limit agriculture and rural development in developing countries.

42. WTO, ‘Proposal to Committee on Agriculture, Agreement on Agriculture: Green Box/Annexure 2 Subsidies’. Document No.G/AG/NG/W/14.

43. ‘The Impact of Agricultural Trade Liberalization on Developing Countries’, ABARE Research Report No. 2000. 6, Canberra. p. 27, Data based on Country notification to the WTO, World Bank (2000).

44. WTO, Special Session Of The Committee On Agriculture Proposal by Cuba, Dominican Republic, Honduras, Pakistan, Haiti, Nicaragua, Kenya, Uganda, Zimbabwe, Sri Lanka And El Salvador. WTO Document No. G/AG/NG/ W/13, 23 June 2000.

45. Constantine Michalopoulos, Developing Countries’ Goals and Strategies for the Millennium Round, (Washington DC: World Bank), 1999.

46. Although for the first time in its history, in year 2000, Pakistan is exporting its one million tones surplus wheat.

47. Zafar Mehmood, Op.cit., p.690; Pakistan and Uruguay Round. Op.cit., p. 24.

48. Consider effects of nominal increase (5%) in the real average international food prices.

49. WTO, Special Session of the Committee on Agriculture, Op.cit.

50. ‘Agricultural Strategy for the First Decade of New Millennium’, Document prepared by the Ministry of Food, Agriculture and Livestock, Islamabad, May 2000, p.(i).

51. Fruits that can be produced in substantial quantities in Pakistan include citrus, mango, apple, banana, almonds, grapes and guava.

52. Incentives with active government support include: Product up-gradation fund upto Rupees one billion, Tariff free export of vegetables and fruit, new markets in Indonesia, Iran, Iraq, Philippine, South Africa, Kenya, Zimbabwe.

53. ABARE Economics 2000, Op.cit., p 19-20.

54. ‘The Use and Abuse of Multifunctionality’, Economic Research Service/USDA, November 1999, The basic idea is that agriculture is more than just producing and selling commodities; it also produces many intended and unintended by-products.

55. 64 developing countries are registered as NFIDCs, ABARE Economic 2000, p.9.

56. ‘Food Security and the Agreement on Agriculture: Country Positions’ A summary, based on their submissions to the Analysis and Information Exchange (AIE) that was held under the auspices of the WTO Committee on Trade and Agriculture over the last 18 months. compiled by Sabrina Varma, Catholic Institute International Relations, UK. Workshop on Agriculture, Trade and the WTO, Geneva, 21-23 June 1999.

57. ‘Global Trade negotiation home page-Pakistan’, at the URL www.cid.harvard.edu/cid.trade/current.htm 

58. Kym Anderson, Erwidodo and Merlinda Ingco, ‘Integrating Agriculture Into The WTO the next phase’, The WTO/World Bank Conference on Developing Countries’ Countries in a Millennium Round, WTO Secretariat, Centre William Rappard, Geneva, 20-21 September 1999. More than 300 technical barriers to imports in 63 countries that are believed to threaten, constrain or block almost US$5 billion of US farm exports.

Back to Top