The Economic Co-ordination Committee of the Cabinet last Tuesday, gave approval to Commerce Minister Humayun Akhtar's proposed strategy for the upcoming round of negotiations under WTO in Hong Kong. Prime Minister Shaukat Aziz said the Commerce Minister has given a clear mandate to the Pakistan team to seek a reduction in high duties and subsidies in the developed world in order to protect the interests of developing nations.
Officials of 148 countries are expected to hold a heated debate on early completion of Doha Development Agenda, with the developing countries agitating to have a fairer system of global trade. The pressure is building up on all sides because of the fact that time is running out.
The "fast track" authority enabling President George W. Bush to sign off on Doha Round expires in July 2007. The US authorities, therefore, have proposed deep tariff cuts in the range of 55 to 90 percent, with few exceptions such as beef and dairy products.
The EU is thinking in terms of only a 40-45 percent cut in agricultural imports tariff with an enlarged list of sensitive items to be left untouched. Agricultural products access to EU market is capped with an agreed reform programme under the Common Agriculture Policy, which prescribes payments to farmers until 2013.
According to the European negotiators, deeper tariff cuts, as proposed by the US, will result in fall in prices and increase in subsidy payments to farmers. US doles out $12 billion in subsidies to its farmers on everything from corn to sugar to tobacco; on the other side of the Atlantic. Europeans spew out subsidies amounting to $53 billion.
Before the Hong Kong meeting, each of the big participants wants to avoid blame for the stalemate. The US wants to focus on agriculture and is trying to persuade developing countries that the surest way to economic growth is ambitious liberalisation.
EU wants the discussions to shift away from agriculture and is seeking to build alliances with the poorest countries on the perception that the preferential treatment they presently enjoy will be eroded by deep cuts in farm tariff.
Japan has joined EU in offering quota-free market access to least developed countries. According to the United Nations Food and Agriculture Organisation (FAO), the biggest beneficiaries of cuts in farm subsidies and tariffs, now being negotiated in global trade talks, will be the rich nations whose agricultural markets are in disarray at present, and a few sugar producers in Latin America may also benefit.
Pakistan's has very little raw cotton to export and our major agricultural export is basically rice. Since we do not produce glutinous rice, normally eaten in Far East, we do not need to be very aggressive. Instead, our main focus, in Hong Kong, should be to seek additional market access for our textile products being negotiated under Non-Agricultural Market Access (NAMA) agenda.
Tariffs on industrial goods, particularly on textile products are very high in the developed countries. Additionally, Pakistan is unfavourably placed in Europe where the least developed countries such as: Bangladesh and some African nations receive preferential treatment of zero tariff on textile goods.
It is the banking and insurance industry in the developed world which is keen on gaining access to markets in developing countries. In answer, Pakistan along with other countries, must ask for maximum market access for export of unskilled and semi-skilled labour.
There is no question that the multilateral system governing global trade remains inherently unfair, tilted in favour of the US and the EU which have long set the agenda. Failure to correct the flaws of the system would mean the politics of trade would get nastier. According to a study by the University of Michigan, a reduction of trade barriers by one-third would increase global economic output by $574 billion a year.
The crucial advance made under the Uruguay Round was the establishment of rule of law for trade and a body to enforce it - the WTO itself. It has delivered some stinging blows to both the US and the EU, declaring that some of the most contentious subsidies they pay to their farmers on cotton and sugar are illegal. Until the Doha Round negotiations are concluded, the best hope for developing countries would be using the rule of law principle to push back the US and EU onslaught.
Once they have shown the cut in illegal subsidies they can come back to the bargaining table. It does not matter if the Hong Kong talks sputter and the Doha Round fails. After all, the world economy is presently more buoyant than at any time in the past three decades. As far as Pakistan is concerned, Humayun Akhtar as facilitator of NAMA negotiations, is happily placed to present this country's position at this important forum. Unless NAMA occupies centre-stage in the Doha Round, the Pakistan authorities must continue to press for bilateral FTA's with nations having a common outlook.