Although the majority of WTO agreements and various implicative guidelines are already in vogue, we being a predominantly textile based economy, look forwards towards the ending of the MFA (Multi Fibre Agreement) and the removal of quantitative restrictions primarily quota regime from January 1, 2005 as the beginning of the WTO system of trade.
The factual situation is that the WTO regime based on its constituent agreements is more then 90% effective and implemented. It looks that even our business community is subject to focusing on a few areas considering them to be the totality of WTO while the situation is just about the opposite.
Such is our level of knowledge that we believe the misleading notion that a fall in the tariff rates in the last few years was a consequence of signing the WTO Agreements.
However in reality it was an IMF Conditionality Affair and in fact the WTO Tariff Rates called Binding Rates are almost 2-4 times higher than the current rates of Tariffs. Sadly as it has always been we are waiting for reactive situations to turn up instead of being proactive in this upbeat environment.
WTO in our country is understood to be tariffs, quotas and some non-tariff barriers like Anti Dumping Duty mechanisms while, in actuality, WTO covers the entire sphere of business activities, commercial practices and trade rules which governs the entire system of doing business globally.
It even affects governments in restricting their dominion in award of contracts for public projects as according to the WTO Agreement on Government Procurements, transparencies and openness is to be ensured for all public sector works and projects and the WTO Principle of National Treatment which restricts discrimination of foreign from domestic sources is to be ensured.
Although the Pakistan Government is not a signatory to this agreement but as the next rounds of negotiations progress it would become part of the WTO Agreements.
Sanitary and Phyto-Sanitary (SPS) Agreement and Technical Barriers to Trade (TBT) Agreement may become more implicative in the coming years compared to the areas we are looking into.
According to the SPS agreement, countries are allowed to protect animals, plant health and can use international food and health standards such as FAO/WHO/CODEX for allowing products to enter and can also have their own standards.
TBT sets out a code of good practices for the preparation, adoption and application of standards, procedures, specifications and certification for products and process and production methods (PPM).
Standards, including eco-labelling packaging; bio-degradability can also be used to protect the environment and for allowing certified goods.
Pakistan is a major exporter of primary agro produces and process materials, including food products. We are all aware that our food processing is unhygienic; our use of pesticide, herbicide and germicide in agriculture and food products do not follow the standards of developing world.
Such a situation can restrictive the flow of our agro-based products due to strict SPS measures in developed countries.
Similarly, processing areas at our food, dairy and seafood industries do not usually follow the best practices as required under various standards. These deficiencies can provide importing countries sufficient base to restrict our food, processed food imports.
TBT can also restrict environmentally hazardous industrial goods exports which may be subject to test against Product and Production Process Standardisation in developed countries.
Similarly Labour and Social Standards can be used to control the flow of goods and in the recent past the child labour issue has been used by the US & EU for restricting our exports of textiles, carpets, sports goods and others. Very few companies in Pakistan are certified like ISO-9000:2001, ISO-14000 while the certification of our food processing companies and standardisation according to CODEX is almost non-existent.
The Pakistan Standard Institute needs to provide help to the local industry in understanding and achieving certifications.
TBT & SPS CAN BE DIRECTLY OR INDIRECTLY IMPLICATIVE: It looks so unimaginative but under the TBT & SPS agreements, Packaging Material from Pakistan produced under processes generating effluent and solid wastes beyond permissible limits can be restricted or may be heavily fined under the polluter-pay principle. In fact any packaging product which is not bio-degradable can attract pollution charge.
This would affect our paper and board production, packaging industries and printing facilities. Similarly, our food processing facilities have unsanitised environments while the workers are not aware of standards and hygiene, making such units fall prey to TBT & SPS Agreements.
Developed countries can use environmental factors to restrict imports and affect our trade such as the famous Shrimp-Turtle case when the USA banned seafood imports from Pakistan as catching practices were killing Sea Turtles an endangered specie in US.
TBT Agreements can be used for imports as various industrial segments including Textiles, Leather, Paper Board, Cutlery, and Surgical Instrument that do not even meet Pakistan's National Environmental Quality Standards (NEQS).
Coming to anti-dumping duty which can be effectively used to protect deliberate and purposeful dumping of goods, our level of preparation and competence is far from the required level.
A country like Pakistan where the industries perform on low economies of scale the cost of doing business is high with inefficient operations and where the infrastructure and logistics deficiencies mar industrial competitiveness dumping of goods is imminent.
In such circumstances Anti Dumping and Safeguard duties are a viable alternative to protect the nascent industrial structure like that of Pakistan. Regrettably we have few professionals educated and trained in Anti Dumping & Safeguard Measures.
We need lawyers, accountants, engineers and business graduates who are well versed in the legal, technical, costing, accounting and commercial fields for effectively leading the anti-dumping cases.
Further it must be construed that merely anti dumping duty (ADD) provisions cannot protect our industries from dumping as anti-dumping needs proof that material is dumped at a price lower then the exporting country's local market price or normal value. Merely abnormal imports cannot make a case for ADD.
Further, ADD can only be imposed on a particular exporter while for a small level of industrial operations in Pakistan we might need a blanket duty on imports to save the our industries in extreme cases.
In such circumstances Safeguard Measures can be effectively used to save local industry from permanent impairment. To further protect industries Safeguard Measures and Countervailing Duty also needs to be understood for effective utilisation.
TRIPS (Trade Related Intellectual Property Rights) is one issue which can change the set of principles of doing business as our businesses are unaware of honouring patents, copyrights, trade marks, trade secrets and other intellectual property rights.
Much of our Small and Medium Sector Enterprises (SME) are unaware of the cost of TRIPS. Can a small business assume of buying a Window Software for a PC for over Rs 10,000?
Similarly, some of the Software's like CAD-CAM which are profusely used by Architects, Consultants sometime costs hundred of thousands of rupees. The importance of TRIPS may be low for us but for Developed Countries it is a lifeline.
Recently, the US Commerce Secretary on a visit to Pakistan openly linked any future assistance with the implementation of TRIPS and asked for the fast enactment of legal agreement on TRIPS.
Even GSP (Generalised System of Preference) System which provides our Textile Exports with much impetus is proposed to be linked with TRIPS.
With the implementation of TRIPS, our local pharma industries would lose the right to manufacture certain generic medicines and drugs and would now need to get a licence or right of production resulting in high costs for the Pharma Companies and for consumers.
Those Pharma Companies which are not in Knowledge-Based and Basic Raw Material business would find it difficult to continue and unfortunately for Pakistan, no local company is in this domain.
Similarly under TRIMS, various small businesses like music, computer CD, VCD outlets would suffer drastically as the high cost of products would result in low sales.
Even for industrial units, cost of doing business would increase, distressing sales and profitability.
We need to understand that the WTO Regime is nothing but the exchange of Gains and Losses and a situation of give and take. If our Government is making all out efforts to gain Market Access for our Textile Products we need to implement Agreements like TRIPS & TRIMS in swap to make space for the Industrial and Electronics Goods of the developed nations.
Coming to TRIMS (Trade Related Investment Measures) our Auto Parts Manufacturing Industry is on the verge of being exploited by the limited Customers Market. It is pertinent to mention that investment by Four Auto manufacturing units which command 95% of the auto market is much below the capital investment made by Part Manufacturers which is over Rupees Fifty Billion.
Much of this was under the pull of the Governments of Pakistan's Attractive Deletion Program.
However with TRIPS from 2005 this Deletion Program would come to an end and the Auto Producers would be at liberty to procure from their source of choice and in this field China, India and Thailand can become a threat to local Auto Part Manufacturers.
TRIMS can further be extended to other industries as MNC's operating in Pakistan can buy process, packaging and intermediary products from any source affecting local industries.
We live in a myth that the WTO is something about the ending of quotas, market access and anti dumping duty. In reality the situation is much more elaborate, far reaching, detailed and intricate.
WTO Access Agreement signed by Governments ensures that three major agreements ie GATT (General Agreement on Tariff and Trade), GATS (General Agreement on Trade in Services) and TRIPS and their Articles and Annexure are all conclusively and jointly implemented as condition of accessions.
It cannot be partly implemented or accessed to. This legal binding entices competitors to use their area of advantage.
Our businesses needs to undergo intensive studies of these agreements to ensure their businesses are well protected and take steps to upgrade their facilities, improve technologies and skills and adjust their business portfolios when and where necessary in this dynamic era of the WTO Regime.
Any business which remains static or continues to believe in supports for inefficiencies will go no where but to extinction.