The negotiations under the auspices of the General Agreement on Tariffs and Trade (GATT), the Uruguay Round of multilateral trade negotiations, came to a conclusion in Marrakech, Morocco, in April, 1994.
In the meeting of GATT members in Geneva in 1982, it was decided that the GATT would be replaced by the WTO; in 1994 the WTO was formally established.
The principle objective of WTO is to ensure trade liberalisation, through involving its members in trade negotiations and settling trade related disputes between nations. It has now a membership of 147 countries. Pakistan joined the WTO on January 1,1995.
The obligations emanating from the charter of the WTO are expected have effects in different ways, in the short and long run.
They will have far-reaching implications for trade, investment and technology and thereby for overall industrial development and restructuring.
The implications, over the short and long run, are expected to be different depending on the level of overall development, export dependency and the structure of the industrial and trade sectors in the countries concerned.
It is expected that the long-term effects could be positive for most countries, as they will result in a substantial increase in global trade of all types of products and services, and are likely to improve market access for products of the development countries.
However, in order to benefit from the trade liberalisation process, as envisaged under the Uruguay Round, it would be necessary to change the patterns of trade of developing countries, including those of the least developed, and developing economics in transition.
Such changes would require a structural transformation of the industrial sector of those economies, through a policy reorientation as well as new approaches in industrial development strategies and programmes.
Adequate infrastructure, improvements in labour and credit markets, and the promotion of greater mobility across sectors and manufacturing branches would also be necessary to improve competitiveness.
Over the short run, the disadvantaged groups of economies such as the least developed, and developing economies in transition, face a daunting task of adjusting to the liberalised trade regime as a result of heavy reliance on primary products for exports and of great dependence on imports of capital and intermediate products.
Rapid technological changes' with increased application of new and emerging technologies in relatively faster developing countries and in the developed countries, are affecting competitive capabilities significantly.
Countries, which are lagging far behind on those fronts, will encounter great difficulty in improving efficiency in the manufacturing processes and production techniques as a result of structural rigidities of the industrial sector.
It is therefore essential for Pakistan to review and assess its current industrial policies and strategies and evolve critical measures to benefit from the Uruguay Round agreements, in the long run.
It is highly essential to improve the quality and productivity of manufacturing if we intend to be, or to remain, internationally competitive and benefit from the new trading opportunities arising out of the circumstances expected to prevail during the post-Uruguay Round era.
While it is difficult to present a comprehensive analysis of the likely implications of the Uruguay Round agreements, the following are the major decisions which will have general implications for countries like Pakistan.
The agreements have substantially strengthened the multilateral trading system through further liberalisation and tariff cuts, and have provided for greater transparency and clarity of international and national trade rules and principles.
Special consideration has been given to developing countries and provisions made for them to facilitate their transition and adjustment to the new trading regime.
As far as liberalisation is concerned, industrialised countries will eliminate tariffs on construction, farm and medical equipment, steel, and distilled spirits, pharmaceuticals, paper, toys and furniture, while tariffs on agricultural good will be cut and special arrangements made for textile and clothing products.
Industrialised countries will cut tariffs by 37% on imports from developing countries, and by 25%, on imports from the least developed countries.
There are no comparable figures on tariff cuts for developing countries.
However, the developing countries did agree to bind their tariffs, which will prohibit them from adding extra fees and payments to the tariff rates they adopt.
Overall, Asian countries agreed to bind 70% of their imports, while tariffs on the above mentioned industrial goods would be reduced.
Tariffs on semiconductors, computer parts and chip making equipment will fall by more than 50%; tariffs on chemicals will be harmonised at low rates; and the agreement regarding international trade in the textile multi-fibre arrangement regime in textiles and clothing will be phased out over 10 years.
The agreement on technical barriers to trade was expanded to include process and production methods, as well as products themselves.
Export subsidies on industrial products are prohibited, while those on agricultural products will be reduced; voluntary export restraints and other grey areas of safeguards are to be eliminated.
The greater transparency and clarity of international and national trade rules and principles are probably the most significant outcome of the Uruguay Round.
Transparency and clarity, including standardisation and agreements on the interpretation of various trade rules and principles, have been greatly improved, in particular with regard to safeguards, anti-dumping rules, subsidies and countervailing measures, rules of origin, import licensing procedures, TRIMS and TRIPS and dispute settlement procedures.
Subsidies were defined for the first time and higher discipline was established for their use and for countervailing measures.
By expanding the scope of multilateral co-operation to the new areas, the Uruguay Round redefined the traditional concept of trade, that of goods crossing borders, to include domestic issues previously considered exclusively within the domain of individual countries.
Differential and more favourable treatment for developing countries was consolidated, improved and more clearly defined, sometimes even in, the form of figures for undertaking certain commitments.
As a rule, the treatment extended to least developed countries is more favourable than that to other developing countries.
And in particular, for the least developed countries, it takes the form of longer periods for compliance with and implementation of obligations under the agreements or sometimes even outright exemption, either indefinitely (for example, concerning agricultural subsidies and export subsidies on industrial products) or for extended periods (for example, TRIMS).
Tariff curbs are generally lower for developing countries and least developed countries are exempt from the ban on export subsidies.
Developing countries are protected against some safeguard actions and have more flexibility to impose safeguards.
However, they assume the same obligations as all other countries in the Agreement on TRIPS.
Industrialised countries further agreed to advance implementation of the most Favoured Nation concessions on tariff and non tariff measures for products of export interest to the least developed counties, further improvement of their generalised system of references and other schemes, in respect of products of interest to the least developed countries, and substantial increase of technical assistance in the development, strengthening and diversification of their product and export bases, including those in services.
GENERAL IMPLICATIONS: Greater openness of the world's economies, liberalisation in trade and emphasis on market forces will lead to a more efficient allocation and utilisation of resources, resulting in higher economic growth rates.
A better appreciation of the limits and strengths of such forces would probably guide future policies in industrial and technological restructuring.
As the remarkable success of several Asian economies, especially the newly industrialising economies, in achieving spectacular industrial and economic growth rates was largely based on export orientation and promotion, they stand to gain more from trade liberalisation under the Uruguay Round agreements.
The GATT Secretariat estimates that merchandise trade would increase by more than 12 percent (over what current growth rates would have yielded), once the Round is fully implemented.
World exports would grow by 10 percent, and export from Asia and the Pacific by 9.7 percent.
The growth rate for trade would exceed those of real world income.
Estimates for the increase in global real income, as a result of the full implementation of the Uruguay Round, vary from US$ 212 billion to US$ 274 billion but the increase would probably be much higher.
The potential benefits of the Uruguay Round to several Asian developing economies are expected to be large.
These economies, which have high growth rate with strong export orientation, are likely to gain more from the Uruguay Round agreements.
It is estimated that the region will generate more than half of the new trade created by developing countries in the post-Uruguay Round era.
This will result in increased income, employment promotion and in most cases, a wider choice of cheaper and better products, as competition will rise substantially.
This means that higher income will lead to larger savings, and as a result, expanded domestic investments.
Although foreign direct investment will rise in some cases, it may decline in those cases where trade barriers used to favour investment. Implications for foreign direct investment will vary from agreement to agreement.
While preliminary quantitative may be open to debate, it is clear that, in general, Asia's faster developing economies will gain more that other developing regions.
Currently, Asia's developing economies account for roughly 15 percent of world trade, whereas Japan's share is 9 percent.
Their pro-rata shares of the US$ 755 billion-a-year increase in the global trade in goods, that the GATT projects, by 2005, would be US$ 116 billion for Asia's developing economies and US$ 69 billion for Japan.
Thus, the faster developing economies of the region could reap the benefits from the Uruguay Round, but the situation in certain economies would be different.
LEAST DEVELOPED COUNTRIES: Though the least developed countries would be required to undertake commitments and concessions inconsistent with their individual development and financial and trade needs.
They would face difficulties owing to the erosion of the preferential margins they enjoyed and the expected increase in the cost of imported technology and in the price of imported foodstuffs.
However, in the long run, all countries stand to gain from the Uruguay Round agreements.
Moreover, the plight of least the developed countries is well understood and the agreements make special provisions to ease their burden and provide assistance for their smooth transition.
ECONOMIES IN TRANSITION: For the economies in transition to a market-oriented economy, the Uruguay Round has opened up new avenues for increasing their exports based on, largely, labour-intensive manufacturing.
Most economies in transition enjoy relatively better-developed infrastructure and skills, which give these economies a competitive edge over the other disadvantaged economies of the region.
Their industrial development largely depends on trade, in particular for the land-locked Central Asian republics, Mongolia, and the Lao Peoples Democratic Republic.
Vietnam's current liberalisation policies conveniently fit in with the Uruguay Round results, but efforts could be strengthened in skills development and infrastructure development.
The Uruguay Round agreement are not perfect. Though they provide more transparency and clarity of trade and principles, the increased and high level of complexity of the agreements, along with the complex provisos, exceptions and exemptions, provide ample room for circumvention and loopholes.
The transition periods allowed, to implement the agreements, are often quite long, for instance, 10 years in the case of textiles and clothing.
Political and economic realities have changed during this period, undermining or at least delaying the implementation of the agreements.
No matter how substantial is the potential gains and benefits from the Uruguay Round agreements, their realisation depends on the full implementation of the agreements and the political commitment of the countries concerned.
To ensure that the benefits are realised, policy makers in Pakistan need to ensure that their domestic policies and market forces respond to a more open trading environment, as failure to do so may make the difference between winning and losing.
CONCLUSION: It appears that the short term implications for developing countries of the Uruguay Round include few benefits but considerable costs, while in the long run all counties, including developing countries, will benefit, though some more than others.
Nevertheless, the importance of the Uruguay Round agreements should not be under estimated.
The wide spread participation of the developing countries, and their increased interest in and involvement with the GATT, testify to the importance they attach to the multilateral trading system.
There seems to be a global political consensus that trade liberalisation and a global trade regime would increase trade and, through trade as the engine of growth, industrial and technological development would be further accelerated.
However, the actual long-term benefits to developing countries depend not only on the full implementation of the agreements but also on further liberalisation of national trade and investment regimes.
Several studies have indicated the huge benefits that may accrue to the developing countries as a result of further trade liberalisation.
We should be mindful of the fact that China's induction into the WTO will have a bearing on the economies in transition and the developing economies.
A UN study reveals, in labour intensive manufactured goods, China competes mainly with South Asian countries and a few Latin American and African countries.
Some Latin American and African countries may benefit from the expansion of China's imports of foods and agricultural raw materials.
For newly industrialising economies, (NIE's) competition involves complementary effects, through the import of parts and components, which will offset the competition effects in the short and medium term.
As China develops its capacity to produce components, competition may become harder for the NIE's and developing economies.
China's entry into the WTO will not change, for some time, its market access for textiles and clothing for it to be a threat to other developing countries.
China's growth in quota, for exports to developed countries, will increase far less than other developing countries.
Nevertheless, if China attempts devaluation, the situation could change radically although this is unlikely at present.
The WTO regime will be fully operative effective 1st January, 2005. It will have, inter-alia, a significant bearing on our agriculture, textiles and pharmaceutical sectors.
There is no running away from the World Trade Organization. Some businesses have already started feeling the heat of the WTO obligations. It is incumbent upon traders, the business community, the chambers, NGO's and the Ministry of Commerce to prepare for the onslaught emanating from the WTO agreements with the sole purpose of disseminating information for the benefit of the stakeholders.
It perhaps would be in the fitness of things to accelerate the process of educating different segments of society, in general, and the stake holders, in particular, to gauge the situation in the context of the impending implementation of the WTO regime and take all measures to ensure that we emerge as a winner, taking advantage of the positivities of the agreements rather than sweating in fears.
China's attempt to increase domestic value added exports could lead to improvement in its competitiveness in technology/skill intensive products.
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