Regionalism vs. · PDF fileRegionalism vs. Multilateralism PUBLISHED BY South Asia Watch on...

Regionalism vs.Multilateralism

PUBLISHED BYSouth Asia Watch on Trade,

Economics & Environment (SAWTEE)

REGIONAL ADVISORY BOARDBangladesh

Dr Debapriya BhattacharyaIndia

Dr Veena JhaNepal

Dr Posh Raj PandeyPakistan

Dr Abid SuleriSri Lanka

Dr Saman Kelegama

CHIEF EDITORRatnakar Adhikari

EDITORKamalesh Adhikari

EXECUTIVE EDITORShyamal Krishna Shrestha

STAFF CONTRIBUTORSNavin Dahal

Dikshya Thapa

DESIGNIndra Shrestha

ILLUSTRATIONAbindra Shrestha

COVER PHOTOGRAPHKiran Pandey

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DEVELOPING countries have been undertaking trade liberalisa-tion through various modes – unilateral, bilateral, regional andmultilateral. The World Bank’s Global Economic Prospects, 2005states that there was a 21 percentage point cut in average weight-ed tariffs of all developing countries between 1983 and 2003, ofwhich unilateral or autonomous liberalisation accounted for ap-proximately 65 percent, multilateral commitments in the UruguayRound for 25 percent, and the regional trade agreements (RTAs)for about 10 percent. This shows that all the modes of trade liber-alisation have been moving simultaneously.

With regard to regionalism and multilateralism, economists are,however, deeply divided on whether RTAs are ‘building blocks’or ‘stumbling blocks’ to multilateral trade liberalisation.

Larry Summers opines that any reduction in trade barriers is wel-fare enhancing. Advocates of this school of thought view region-alism as a building block to multilateral trade liberalisation. Theyargue that it is much easier to reach consensus within a smallergroup of countries; RTAs help achieve faster liberalisation thandoes the multilateral trading system. They also view that RTAspioneer new ideas for trade liberalisation and provide an oppor-tunity to trade negotiators as well as other stakeholders to betternegotiate at the multilateral level. In addition, they opine that RTAsprovide a credible institutional threat to the multilateral tradingsystem to deliver.

As per another school of thought propounded by Jagadish Bhag-wati, regionalism is a stumbling block to multilateral trade liberal-isation. They opine that RTAs are inherently discriminatory. Coun-tries outside the RTA tend to lose as there is a serious ‘trade diver-sion’ effect due to the propensity to import from within the mem-ber countries, which may not necessarily be the lowest cost or themost efficient suppliers. Hence, RTAs could be welfare reducing.The opponents also argue that there are other systemic issues: dueto their high visibility, RTAs can energise and unify protectionistlobbies, turning them into obstacles to multilateral trade liberali-sation and there is also a diversion of scarce negotiating capital tonegotiate RTAs.

We believe that there is no inherent conflict between these twomodes of trade liberalisation, not least because they are compli-mentary to each other. On the balance, they are trade creating, notmerely trade diverting. However, the same may not hold true inthe case of bilateral trade agreement (BTA) – a sub-set of RTA –between a powerful developed country and a weak developingcountry due to the existence of asymmetric bargaining powers.The examples of the imposition of several ‘World Trade Organisa-tion-plus’ conditions by some developed countries on their devel-oping country trading partners during recent BTA negotiationsare a testimony to this.

Given these facts, developing countries, including the countriesin South Asia, should be cautious while negotiating with theirtrading partners to undertake further trade liberalisation. n

August 2005

Contents Trade Insight • Vol.1, No.3, 2005

“Spaghetti Bowl” of RTAs:Options for South Asia

COVER FEATURE 15

Poverty reduction inNepal: Myth or reality?Income poverty declined by 11percent in Nepal over the pastdecade but the latest nationalpoverty survey is plagued withmethodological shortcomings.

ECONOMIC FOCUS 19

Industrial tariffs and SouthAsia: How to cut andhow much to cut?Negotiations on non-agricultural market access -which began in January 2002 -are proving to be a majorobstacle to liberalising trade inindustrial goods.

RESEARCH ANALYSIS 28

The views expressed in the articles published in Trade Insight are thoseof the authors and do not necessarily reflect the official position ofSAWTEE or its member institutions.

The rapid growth of regional trade agreements reflects growingfrustration with multilateralism. What has been the experiencehitherto and what options do South Asian economies have withregard to this trend?

READERS’ FORUM 4

TRADE WINDS 5

VIEWPOINT 8• Trading well-being: Select

issues in environmental services• Hong Kong Ministerial: Current

negotiations and LDCs

REGIONAL FOCUS 13• Salvaging SAFTA

MDG FOCUS 21Millennium Development Goal 8: Acall for global cooperation

TRADE FOCUS 23• Emerging scenario in North-South

BTAs of South Asia• South-South cooperation on trade

TRADE CURRENT 30• Challenges for WTO DG• ‘July approximations’ unmet

UNDERSTANDING WTO 32TRIPS and Public Health: Concernsof developing and least developedcountries

TRADE DISPUTES 34Trade wars in T&C sector

BOOK REVIEW 36Food safety regulation concernsand trade: The developing countryperspective

NETWORK NEWS 37

BANGLADESH1. Associates for Development Initiatives

(ADI), Dhaka2. Bangladesh Environmental Lawyers

Association (BELA), Dhaka

INDIA1. Citizen Consumer & Civil Action Group

(CAG), Chennai2. Consumer Unity & Trust Society (CUTS),

Jaipur3. Development Research & Action Group

(DRAG), New Delhi4. Federation of Consumer Organisation of

Tamilnadu & Pondichery (FEDCOT),Thanjavur

NEPAL1. Society for Legal & Environmental

Analysis & Development Research(LEADERS), Kathmandu

2. Forum for Protection of Public Interest(Pro Public), Kathmandu

PAKISTAN1. Journalists for Democracy & Human

Rights (JDHR), Islamabad2. Sustainable Development Policy Institute

(SDPI), Islamabad

SRI LANKA1. Law & Society Trust (LST), Colombo

SAWTEE NETWORK

4 • Trade Insight • Vol.1, No.3, 2005

READERS’ FORUM

I enjoyed reading the article byHannah Irfan and ShandanaGulzar Khan on anti-dumping inthe second issue. There is animportant anti-developmentalaspect to anti-dumping. Asdeveloping countries move awayfrom traditional exports, theirnew, non-traditional exports faceanti-dumping cases.For small economies,these cases present amor-tal threat. Forinstance, copperused to account for85 percent ofChile’s exportsbut they accountfor just 40 percentnow. One ofChile’s majornon-traditionalexports wasfresh salmonwith an annualvalue of over US$1 billion. Whilethe domestic market for salmon inChile is economically insignifi-cant, high anti-dumping dutiescould destroy the industry. Whatis interesting is the relativeabsence of developing countriesseeking significant reforms inanti-dumping. Most of the majordeveloping countries seekingnegotiations, such as Brazil,India, South Africa and others,perceive the need to balance thevulnerability of their exporters tothe costs and risks of anti-dumping cases abroad againstthe desire of their internal anti-dumping administrators tomaintain their existing practices.

Gary N. Horlick, Senior Partner,International Trade Group of WilmerCutler, Pickering, Hale and Dorr,Washington DC

Congratulations for bringing outa very informative and instructivepublication providing useful tipsto the business community inSouth Asia on how to optimisetrade potentials under the WorldTrade Organisation regime and

globalisation. It compares very wellwith the publicationsof international trade-relatedinstitutions.

B.Raj Bhandari, Chief Consultant toGlobal Traders Conference, Geneva

I had an opportunity to go throughthe first two issues of Trade Insight.Despite a long-standing govern-

ment level regionalcooperationamong SouthAsian nations, itstill remains to beone of the leastintegrated regionseconomically. Ibelieve Trade Insightcan contributetowards a deeperand broader econom-ic cooperation amongSouth Asian Associa-tion for RegionalCooperation nationsby bringing complex

regional trade and economic issuesfor discussion. I look forward toseeing more articles on issues suchas quality, productivity andcompetitiveness along with region-al trade. Please do not hesitate tomake Trade Insight reader-friendlyby using more data, tables, graphsand charts.

GB Banjara, GTZ/Private SectorPromotion Project, Kathmandu

Trade Insight is a great initiative forSouth Asia and I applaud you onthe quality and timeliness of thepublication.

Adil Najam, Associate Professor ofInternational Negotiation & Diplomacy,Tufts University, Massachusetts

Congratulations for bringing outTrade Insight. The issues are topical,insightful and quitecomprehensive. I wish this publica-tion every success.

Ram Ghimire, Under Secretary, Ministryof General Administration, HMG Nepal

Trade Insight is relevant accordingto today’s need. My compliments

on publishing such a goodmagazine.

Vimal Jain, Rajasthan Patrika, Jaipur

I read the first two issues of TradeInsight with great interest andwould like to congratulate SAW-TEE for this useful and uniquepublication. The need to have aSouth Asia specific trade maga-zine was felt for quite some timeand I think Trade Insight is avaluable step in filling this gap. Ifound the style simple and lucid.The articles were crisp andconcise. The magazine alsoreflects the scale of work thatneeds to be done in the SouthAsian region. If trade has to playan important role in fosteringdevelopment and in alleviatingpoverty, then South Asia has to bethe focal point, as it is home tomillions of the world’s poor.

Samar Verma, Regional PolicyAdvisor, Oxfam GB, New Delhi

Congratulations on bringing outsuch an excellent magazine,which provides an insight intotrade-related issues. Please paygreater attention to the layout,headlines and break the introduc-tary texts of books given in the lastpage into smaller paragraphs thatwould make the magazine moreelegant and ready-friendly.

Ram Sharan Sedhai, SeniorCommunications Officer, ActionAidInternational Nepal

Thanks for sending us yourvaluable publication Trade Insight.We are very impressed by thequality of your publication and wewish you a good continuation!

Ricardo Melendez-Oritz, ExecutiveDirector, International Centre for Tradeand Sustainable Development, Geneva

I would like to thank you forsending us Trade Insight. Wefound it to be a very valuablepublication.

Mariano Iossa, Food and Trade PolicyAdvisor, ActionAid Internatinal,Brussels

Vol.1, No.3, 2005 • Trade Insight • 5

A deal between China and the Euro-pean Union (EU) on 10 June ended adispute between the two tradingpartners since the expiry of theAgreement on Textiles and Clothingon 31 December 2004. The under-standing – reached in an eleventhhour meeting between the EU TradeCommissioner Peter Mandelson andChina’s Commerce Minister, BoXilai, in Shanghai on 10 June – im-poses voluntary export restraints on10 categories of Chinese textiles andclothing (T&C) exports to Europe,thus saving China from EU’s actionto re-impose quotas (see related articleon pages 34-35).

The deal gives European T&Cmakers time to adjust to China’sgrowing dominance of the global tex-tiles and apparel trade. The EUdropped plans to re-

impose textile quotas and forciblylimit China’s surging T&C exports.

The agreement has provisionsthrough which China is expected towork with EU officials to manageand limit the growth of certain tex-tiles and apparel exports to Europeto about 10 percent a year until theend of 2008, tempering the rise ofsome of its largest and fastest-grow-ing exports. According to a state-ment released by the European Com-mission (EC), the two sides agreedthat Chinese textiles exports wouldbe managed to allow for “reasonablegrowth” from 2005 to 2007.

The trade disputes have pittedChina and its booming export tradeagainst the United States (US) andthe EU, which are now trying to copewith the consequences of ballooningtrade deficits with China. For exam-ple, in the first four months of 2005,European imports of Chinese T-shirts rose by 187 percent and ofChinese flax yarn – used for linen –by 56 percent from a year earlier.

During January-April 2005, Chi-na’s T&C imports jumped by 82 per-cent to the 15 countries of the EU be-fore an expansion to 25 members inMay 2004; and 78 percent to the US.In an effort to protect some textilesmakers, the US has already movedto reimpose quotas on some Chinesetextiles products. The EU decided on25 May to limit imports of ChineseT-shirts and flax yarn unless Chinatook action on its own to limit exportsof those two items by 10 June.

Chinese officials had con-demned the US and Europe forthreatening to reimpose quotas.

China revoked export tariffs on sev-eral categories of T&C products on

30 May, in retaliation against im-port restrictions imposed by theUS and the EU. This move camejust 10 days after it announcedthat it would raise export tariffs

five-fold on 74 categories in an at-tempt to prevent the US and the EUfrom restricting imports.

The breakthrough between Chi-na and the EU comes as a huge reliefeven as disputes over other goodslike footwear continue to put a strainon bilateral trade relations. The USheld its own abortive talks in Beijingearlier in June.

In August, Chinese textiles exportsexceeded the new quotas to which theEU responded by halting their sales;and requiring renewed talks betweenChina and the EU (NYT, 11.6.05; TE,27.8.05). n

China and EU

THE 148 members of the WorldTrade Organisation (WTO) formal-ly selected Frenchman Pascal Lamyto be the organisation’s fifth Direc-tor General (DG) to succeed Dr Su-pachai Panitchpakdi. The GeneralCouncil (GC) took the decision byconsensus on 26 May. A former Eu-ropean Union (EU) Trade Commis-sioner, Mr Lamy will begin his four-year renewable term from 1 Septem-ber (see related article on page 30).

The GC decision brings to a closethe five-month process duringwhich four candidates were nomi-nated by their respective govern-ments. Other candidates were Car-los Perez del Castillo of Uruguay,Jaya Krishna Cuttaree of Mauritiusand Luiz Felipe Seixas Correa ofBrazil. Lamy stated that the comple-tion of the Doha Round of trade talkswas his topmost priority in view ofthe December Ministerial Confer-ence in Hong Kong. At the 29 Julymeeting of the GC, the WTO DG-designate named his team of fourDeputy DGs. The deputies are Chil-ean WTO Ambassador AlejandroJara, Rwandan WTO AmbassadorValentine Sendanyoye-Rugwabiza,Harsha Vardhana Singh of India,and current Deputy DG, RufusYerxa of the United States. Their ten-ure commences on 1 October (BWT-ND, 01.6.05 and 03.8.05). n

takes over asWTO DG

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TRADE WINDS


THE Group of Eight (G8)industrialised nationshave agreed on apackage of financialhelp for Africa, whichended with a deal inwhich the world’srichest countriesagreed to provide anextra US$ 48 billion inaid worldwide by 2010.

Under the deal, Japanwould increase its aidbudget by US$ 10 billionover the next five years,while Germany would use atax on air travel to meet its aidtargets. Britain, which chairs theG8, admitted that the deal onAfrica was not all that campaign-ers wanted but represented real

progress. The countryhad wanted to go

further on elimi-nating exportsubsidies, whichallow rich nationsto dump excess

produce on globalmarkets, but was

forced to compro-mise. The summit

merely committed

itself to setting acredible date for

scrapping export subsidies, whichis expected to be 2010.

Aid to Africa will increase by

G8 promises aid relief

THE end-July 2005 targetdate for reaching interimagreements in key negoti-ating areas of the DohaRound were not realised.On 28 July, the Trade Ne-gotiations Committee(TNC) meeting followed bya General Council (GC) meet-ing on 29 July confirmed that aseries of last-minute intensive con-sultations and meetings failed toproduce any major breakthrough or‘first approximations’ in areas iden-tified as priorities by July Package(JP) of 2004 (see related article on page31). These include farm trade liber-alisation, non-agricultural marketaccess (NAMA), services, trade fa-cilitation, and ‘development dimen-sion’.

The Chairs of three key ne-gotiating groups had previously in-dicated that members were unableto come to any substantive agree-

WTO members fail to arrive at‘first approximations’

ment during the in-tensive consulta-tions they held pri-or to the 27 Julymeeting of the GC.

Addressing theTNC, WTO Director

General (DG) Su-pachai Panitchpakdi

characterised the state ofthe Doha Round talks as “disap-pointing but not disastrous”. In thereport to the GC as TNC Chair, theDG said that progress since July2004 has been “insufficient”. How-ever, he did say that as a result ofthe “useful work [that] has beendone to clarify options and buildunderstanding”, the “politicalchoices” that members will have tomake in areas such as agricultureand NAMA have become clearer.After a month long break in August,trade talks at Geneva resumes inSeptember (BWTND, 03.08.05). n

US$ 25 billion, more than doublingthe flows in 2004. Britain hadfeared that the G8 leaders wouldbackslide on commitments made bytheir finance ministers at a meetingin London in June. In the end,however, they endorsed agreementto write off debts owed by 18countries to the World Bank, theAfrican Development Bank and theInternational Monetary Fund.

The G8 comprises of Canada,France, Germany, Japan, Italy,Russia, the United Kingdom andthe United States. However, mostof the aid comprises of debt relief for28 nations qualifying underHeavily Indebted Poor CountriesInitiative, in Africa andLatin America (IHT; 12.6.05; TG,09.7.05). n

UNITED States (US) PresidentGeorge W Bush signed the Cen-tral America Free Trade Agree-ment-Dominican Republic (CAF-TA-DR) Act on 2 August. The sig-nature concludes months of in-tense lobbying. The Bill waspassed by a narrow 217 to 215vote in the US House of Represen-tatives on 28 June. The Bush Ad-ministration sees the passage ofCAFTA-DR as a much-needed po-litical victory in its pursuit of fur-ther trade pacts.

CAFTA-DR consolidates andexpands existing preferentialduty free access to US markets forCosta Rica, El Salvador, Guatema-la, Honduras, Nicaragua and theDominican Republic. The agree-ment also eliminates tariffs onmost US exports to those CentralAmerican countries (BWTND,02.8.05). n

CAFTA-DRAct passed byUS Congress

TRADE WINDS


LEAST developed countries(LDCs) have reached a consensusagainst imposition of tariff onproducts of their export interestand sought duty free access todeveloped and advanced devel-oping countries in the run up tothe Sixth World Trade Organisa-tion (WTO) Ministerial.

Issuing the ‘LivingstoneDeclaration’ at the end of theFourth LDC Trade MinistersMeeting held in Livingstone,Zambia, from 25-27 June, tradeministers from 49 WTO member-states representing LDCs, devel-oping and developed countries,joined hands to ask greateramounts of financial and techni-cal assistance (TA) to resource-hitcountries to help them diversifyexports and tap benefits of marketaccess. Developed countries,despite making commitments,have not been enthusiastic toabide by the support commit-ments as TA is not binding (seerelated article on page 10).

The Declaration also calls forunhindered temporary movementof workforce from the LDCs.Identifying that developed anddeveloping countries can absorb alarge number of semi-skilledLDCs’ work force, the tradeministers converged to voice forunfettered temporary movementof natural persons. They alsoupheld the long running stand ofthe past to fight for unconditionalelimination of export subsidy inagriculture, which has largelymade agricultural market accessin developed countries a distantdream (TKP, 08.7.05). n

ON 21 July, China’scentral bank – the Peo-ple’s Bank of China –announced a revalua-tion in its currency forthe first time in about adecade, scrapping thepeg to the dollar infavour of a basket ofcurrencies. The curren-cy is now valued at8.11 yuan to the USdollar compared to theold rate of 8.27 yuan,effectively a 2.1 percentrevaluation. China’s long awaited but small re-valuation of its currency probablyheralds the start of a series of revalu-ations but on its own will make littledifference to the huge United States(US) trade deficit. The US, which hadbeen exerting intense pressure on theChinese authorities to revalue the

yuan, called the revalua-tion “encouraging’’, but itwas not clear if the 2.1 per-cent upward move in theyuan’s value against thedollar, combined with thescrapping of the tradi-

LivingstoneDeclaration

READYMADE garment (RMG) man-ufacturers of 14 least developed coun-tries (LDCs) in the Asia-Pacific regionhave urged the United States (US) forearly endorsement of a trade bill, seek-ing duty free access for export fromthese poor countries. Representativesof leading business chambers from sev-en Asia-Pacific LDCs held a two-dayconference in the context of the US Tar-iff Relief Assistance for DevelopingEconomies Act (TRADE Act 2005) inDhaka from 21-22 June and adoptedthe ‘Dhaka Declaration’.

The Declaration reads: “Large-scale loss of employment and wide-spread poverty continue to pose huge

14 LDCs urge US topass TRADE Act

challenges to the region. Indeed, thesituation is urgent and need urgentattention.” The alliance of 14 Asian-Pacific LDCs and tsunami-devastat-ed Sri Lanka has been seeking dutyfree access to the US, particulary onRMG products following the end ofglobal quotas on 31 December 2005.Four US senators have sponsored theBill in the US Congress, representingthe 14 Asia-Pacific LDCs and Sri Lan-ka. The bill has not only sought dutyfree access for apparel products forthese countries but has also expand-ed preference for other items currentlyprohibited under the Generalised Sys-tem of Preferences (THT, 25.06.05). n

Chineserevaluation

tional peg to the dollar, would be suf-ficient to persuade the US to call offits threatened trade sanctions againstChina. US manufacturers and politi-cians have long complained that theChinese authorities have held thecurrency artificially low to aid its ex-porters (AFP, 21.7.05; TG, 22.7.05). n

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w.chinadaily.com

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NEWS SOURCESAFP: Agence France PressBWTND: Bridges Weekly Trade News DigestNYT: The New York TimesTE: The EconomistTG: The GuardianTHT: The Himalayan TimesTKP: The Kathmandu Post

TRADE WINDS


In the broadest sense, development is aboutimprovement in the quality of life. The well-

being of millions of people still living in abso-lute poverty depends in part on a wide rangeof environmental resources, including accessto and use of safe drinking water and sanita-tion. Close to two billion people in Asia lackaccess to basic sanitation, and over 650 mil-lion to safe drinking water. Every day, approx-imately 3,900 children die of diseases world-wide associated with water and sanitationthat are easily preventable. Almost half thepeople in the developing world have one ormore diseases or infections like diarrhoea, in-testinal helminth infections and dracunculia-sis associated with inadequate water supplyand sanitation. This is a colossal drain of hu-man potential.

According to the World Water Council, ahuge sum of around US$ 180 billion per yearis needed in poor countries to meet growingdemands on water and sanitation. Againstthese glaring challenges, countries with nar-row tax bases, modest aid inflows, insuffi-cient public resources, and disparate imple-menting capacities, have been forced to con-sider roles for cross-national resource trans-fers in international trade. This poses a ques-

tion. Is this option realistic and more impor-tantly, desirable?

Opportunities for trade and investment inenvironmental services have traditionallybeen limited because of their public monopo-ly and quasi-public good characteristics.However, the sector has been undergoing sig-nificant changes in recent years through de-regulation, privatisation of select activities,retrenchment of the state’s role in public pro-visioning, and growing information technol-ogy-enabled tradability of services. The envi-ronmental industry has grown to over US$550 billion in revenues in 2003, half of whichis accounted for by environmental services.As markets in Organisation for Economic De-velopment nations reach saturation points,developing countries are emerging as impor-tant destinations for the export of environmen-tal services. The significant barriers to thistrade pertain to restrictions on the establish-ment of commercial presence and on the move-ment or employment of nationals of the oper-ating company. These relate to modes 3 and 4of services supply in General Agreement onTrade in Services (GATS) of the World TradeOrganisation (WTO).

The main policy concern over attempts toopen up trade in capital-intensive environ-mental services is the sweeping nature ofmulti-generational commitments that coun-tries voluntarily lock themselves into, oftenwithout adequate national consultations. Thisis most sensitive in the case of water distribu-tion. As it comprises around 90 percent of thebrain, water is the most important moleculefor survival of human life. Issues surround-ing its access, quality, utility and affordabili-ty thus deserve sensitive scrutiny and restraintin trade talks that conclude with binding com-mitments.

So far, no country has made any GATS com-mitment on water distribution. Much of the con-troversy on GATS appears to be not about itspresent outcomes, but its possible negotiatedshape in the future. There are, however, nu-merous cases of unilateral privatisation of util-ities to treat and distribute water outside of theWTO framework. Their record is mixed.

Proponents of greater private sector involve-ment argue that users do not pay the full cost ofthe water cycle, which begins in the skies, isstored in reservoirs and ends as waste-water.When the true value of the environmental re-source is not accounted, there is wastage andresource degradation. This is the main reasonwhy water is not treated as a precious (andscarce) commodity and is almost taken for grant-ed. The prices determined by the private sectortypically approximate towards charging the

Select issueson environmental services

Trading well-being:

Water is a vitalaspect of our livesbut the reality isthat huge sectionsof populations arebereft from it,which requiresnew approachesto make itavailable andaffordable.

Swarnim Waglè

VIEWPOINT


true costs of supplying a service, but hereinlies a policy dilemma – how should govern-ments permit realistic charges for water with-out pricing out poor consumers? This requiresattachment of human-development pre-con-ditions – subjecting private suppliers to regu-lated prices, and setting up ceiling rates andcross-subsidies for the poor.

Wherever this delicate balance betweencommercial viability and social obligationshas faltered, companies have had to deal withfierce public opposition, sometimes leadingto costly withdrawals. From a peak of 38worldwide water and sewerage privateprojects in 1999, the number was down to 18in 2002. The examples include investors likeSuez quitting the American city of Atlantaand the Philippine capital Manila, Biwaterleaving Zimbabwe, and Bechtel having towithdraw from Bolivia’s Cochabamba mu-nicipal system where rioting followed a 35percent increase in water tariffs.

The type of political regime also mattersin the speed with which these schemes areimplemented. China and Vietnam – one-par-ty states with strong governments – have al-ready experimented with water-relatedprojects in major cities like Shanghai and HoChi Minh City. In China, Veolia signed a 50-year contract worth nearly US$ 250 millionin Shanghai in 2002 to treat, distribute andcollect fees for water. This subject is, howev-er, considered too sensitive in countries withactive elective politics like India and Thai-land, which have retracted policy measureson water and sanitation because of popularopposition.

Discussions on foreign investment oftenovershadow ‘alternative’ success models oflow-cost service delivery to the poor. Paki-stan's Orangi Pilot Project (OPP), for instance,has been working since 1980 to support peo-ple’s efforts in upgrading a low-income in-formal settlement with over 1 million resi-dents in Karachi. This comprises internal de-velopment such as latrines, lane sewers andcollector sewers at the neighbourhood level.Contributing US$ 1.5 million, the people haveconstructed hundreds of thousands of sew-erage lines and sanitary pour-flush latrinesin 90,000 houses. The OPP model has beenreplicated in 42 settlements in Karachi andin seven cities across Pakistan with varyingdegrees of success. There are similar successstories from China on cooperative non-profitwater and sanitation delivery system, andfrom India on mass sanitation drives that arecost-effective and pro-poor.

As far as the issue of water for human con-sumption within environmental services is

concerned, there is also a strong human rightsdimension that must be recognised as on parwith rights to basic food and adequate hous-ing. This has been discussed in the UnitedNations High Commission for Human Rightswhere countries have been urged to assesshow trade policies impact human rights. Overthe years, countries have undertaken manyinternational human rights treaty obligations,which need to be respected by WTO membersduring their negotiations and while imple-menting commitments to liberalise trade inmanaging air, water, and waste.

Multilateral negotiations are conductedon the basis of reciprocity, which countriesshould optimise by seeking concessions in ar-eas of export interest to them in return for con-sidered access to environmental markets.While there is no evidence that GATS com-mitments automatically lead to increase in for-eign direct investment, they could send a sig-nal of sorts to investors. Such commitmentscould also lock-in not only economic policy,but also development-friendly measures thatcountries could not retract owing to vestedpressures at a later date. The flip side, howev-er, is that reneging on commitments may re-sult in trade sanctions.

With coalition building around experi-ential learning, developing countries of theAsia-Pacific region could embed reform andinvestment needs in their national anti-pov-erty strategies that comprehensively addresswater, sanitation, and public health chal-lenges through multiple channels: public in-vestments, stage-wise privatisation, scalingup of participatory community-led ap-proaches, and engagement in internationaltrade. A comprehensive strategy that lever-ages all policy possibilities is the only waycountries of the Asia-Pacific region could fillparts of the glaring gaps in access, use, andaffordability of water and sanitation. Thisbottom-up approach assists countries to re-spond strategically to requests during sec-toral trade negotiations at the bilateral, re-gional and multilateral levels. In fact, gov-ernments could use negotiating positionsthat are a result of broad national consulta-tions with civil society organisations to re-sist pressures from stronger partners. n

(Mr Waglè is Programme Specialist at UnitedNations Development Programme RegionalCentre in Colombo. This article is exerpted froma draft section on trade in essential servicesfrom the forthcoming ‘Regional HumanDevelopment Report on International TradePolicy, to be produced by the UNDP RegionalCentre in Colombo in November 2005 )

VIEWPOINT

A compre-hensivestrategy thatleverages allpolicypossibilities isthe only waycountries ofthe Asia-Pacificregion could fillparts of theglaring gaps inaccess, use, andaffordability ofwater andsanitation


The Doha Round of trade negotiations ini-tiated after the Fourth World Trade Organisation

(WTO) Ministerial in Doha in 2001 has not madeprogress on major issues. Therefore, the Sixth WTOHong Kong Ministerial in December 2005 will be amilestone for the Doha Round, more so in the back-drop of the failure of the Fifth WTO Ministerial inCancún in 2003. The General Council (GC) meeting of the WTO on27-29 July confirms the delay in reaching even pre-liminary agreement among members. In view of theslow progress of the negotiations, WTO memberswant to keep their expectation rather low than to bedisappointed by the outcomes later. This implies thatdiscussions on major issues will continue till the lastminute and will gear up until December. Some of theissues may even be presented in Hong Kong itself forimportant political decisions. Although most issues included in the Doha Roundare being discussed in the trade negotiation commit-tees, some issues have gained more importance thanothers. Agriculture, non-agricultural market access(NAMA), services, trade faciliation and ‘developmentdimension’ have received the major attention afterthe adoption of July Package (JP) in 2004.

Developing countries emphasise breakthrough inagricultural liberalisation while developed countrieswant ‘progress in tandem’ in all areas. A number ofissues in agriculture still remains unresolved, includ-ing export subsidies, market access, tariff reductionformula, modalities for sensitive products, specialproducts and special safeguard measures for devel-oping countries. Though members have agreed onmarket access, agreement has remained elusive onthe method of reducing tariff on agricultural prod-ucts. For doing so, non-ad valorem duties have to beconverted into ad valorem equivalents (AVEs). Leastdeveloped countries (LDCs) – especially those that

The LDCs requireboth unity ofpurpose andsupport from theinternationalcommunity tobenefit from theirintegration intothe multilateraltrading system.

Fahmida Khatun

CurrentHONG KONG MINISTERIAL

negotiationsand LDCs

ISSUING the ‘Livingstone Declaration’at the end of the Fourth LDC Trade Min-isters Meeting held in Livingstone, Zam-bia, from 25-27 June, the LDCs calledupon the relevant WTO bodies and theSixth Ministerial Conference to agree,among others, on:

1. Binding commitment on duty free andquota free market access for all LDCproducts be granted and implementedimmediately;2. Complete exemption for LDCs fromany reduction commitments;6. Increased resources and an effectivedelivery mechanism for trade capacitybuilding to address the inherent sup-ply-side capacity;7. Strengthening the effectiveness of theIntegrated Framework, inter alia, by asignificant resource increase, includingthrough other initiatives;8. The need for “Aid for Trade” as anadditional, substantial and predictablefinancial mechanism;9. The need for all development part-ners to effect full debt cancellation forall LDCs;10. The need for all development part-ners to assist LDCs in attaining theMDGs, by making concrete efforts toachieve the targets on ODA;11. The special circumstances and needsof inter alia, post conflict, small island,landlocked and vulnerable economiesto be taken into consideration in meet-ing their commitments in the WTO;12. Incorporation of provisions in themodalities on realistic, flexible and sim-plified rules of origin, certification andinspection requirements and technicaland safety standards;13. A moratorium on safeguard mea-sures and antidumping actions againstLDCs;14. Binding commitments on targetedand substantive technical assistanceprogrammes in favour of LDCs;17. A credible end-date for the elimina-tion of all forms of export subsidies andsignificant reduction of all forms of tradedistorting domestic support;

LivingstoneDeclaration

VIEWPOINT


are net food importers – are worried of the incidenceof the withdrawal of export subsidies in the agricul-tural products of developed countries since this willlead to price increase. They may also face pressure ontheir balance of payments through a likely negativeimpact on their export potentials due to erosion of tar-iff preference on export of agricultural commoditiesfrom their countries.

Discussions on NAMA lag behind agriculture.Progress has not been made on the issue of formulafor tariff reduction, sectoral liberalisation, AVEs andnon-tariff barriers (NTBs). Although members are infavour of a deeper cut in case of high tariffs and alower cut in case of low tariffs, developing countriesare asking for a lower cut compared to developed coun-tries, and unbound tariff on certain products. Devel-oped countries have reiterated that they would agreeto only one of these two demands. Though LDCs donot have to commit themselves for tariff reduction, it isexpected that they will also take commitments to bindnon-bound industrial tariffs. It is quite understand-able that LDCs cannot come out of the Doha Roundnegotiations without meeting this expectation, special-ly when some of the LDCs have already bound theirtariff rates on most of their goods.

LDCs have to undertake preparations taking intoaccount the level of operative tariffs and strategic ex-port interest. Their offensive strategy is to ensure thatitems of their export interest do not get into sectoraltariffs. If sectoral tariffs include items such as textiles,leather and fisheries, it will erode their preferencesunder the Generalised System of Preferences (GSP)schemes.

The JP laid down that some sectors would beopened through zero tariff if sufficient number of coun-tries agree. Until now, there has not been enough re-sponse in favour of this proposal. Developing coun-tries want that the issue of sectoral tariff should bevoluntary and tariffs should not be bound. Some LDCsfear that the facilities under GSP would be reduceddue to bound tariffs. Preference erosion is a major con-cern for LDCs as they would be net losers. In order torecoup such losses, LDCs demand duty free access todeveloped country markets. Developed countries donot want to commit on zero tariff access for all prod-ucts from LDCs as they are in favour of a voluntaryapproach. Industrialised nations have also suggest-ed that developing countries such as India, Brazil andChina should also provide market access to LDCs.However, advanced developing countries are averseto this idea and want to discuss this at the meetings ofregional trade agreements (RTAs). LDCs are uncom-fortable with this proposal since they do not want suchinitiatives to hamper unity among the developingworld as a whole. On the other hand, LDCs are alsonot too optimistic about extracting any benefit fromRTAs.

Negotiations on trade in services have also not pro-gressed except for a few regulatory issues on tempo-

19. Establishing a Special SafeguardMechanism to respond to the needsand the particular circumstance ofLDCs enabling them to adopt tem-porary emergency measures in orderto address import surges and pricedeclines;20. Full implementation of the com-mitments made in the MarrakeshDeclaration and Ministerial Decisionsin favour of LDCs, and the Ministeri-al Decisions on Measures concerningthe Possible Negative Effects of theReform Programme on LDCs andNet-Food Importing DevelopingCountries;22. Flexibilities for LDCs to determinethe levels of binding commitments oftheir tariff lines consistent with theirtrade, development and financialneeds;23. The need to urgently amend theAgreement on Trade Related Intellec-tual Property Rights (TRIPS) to incor-porate the 30 August 2003 Decisionon the Implementation of paragraph6 of the Declaration of TRIPS and Pub-lic Health as a permanent solution tothe problems of LDCs with insuffi-cient or no manufacturing capacity;25. The urgent need to operationalisethe objective of coherence mandatebetween the WTO and InternationalFinancial Institutions (IMF, WorldBank), in line with the rights and flex-ibilities that LDCs have obtained un-der the WTO, since these are aimed atachieving and supporting LDC devel-opment objectives;26. Full implementation of the Mo-dalities for the Special Treatment forLDCs in the Negotiations on Trade inServices;27. Full market access and nationaltreatment to LDCs in the sectors andmodes of supply of export interest tothem, including less-skilled and nonprofessional services providers underMode 4 on a temporary and contrac-tual basis;28. Adequate targeted technical andfinancial assistance to LDCs, includ-ing to carry out sectoral assessmentsand take part in the request/offerprocess in a beneficial and meaning-ful way;29. Increased, sustained and targetedtechnical and financial assistance infavour of LDCs, consistent with thespirit of the Doha work programme;

VIEWPOINT

If sectoraltariffs includeitems such astextiles, leatherand fisheries, itwill erode theLDCs’preferencesunder theGeneralisedSystem ofPreferencesschemes


rary movement of natural persons (TMNPs) under Gen-eral Agreement on Trade in Services (GATS) Mode 4. Is-sues such as economic needs test, mutual recognition,transparency in TMNP related information and classifi-cation of services are being discussed. LDCs have mar-ginal participation in the offer and request process. Mode4 under GATS is an opportunity for countries with sur-plus labour (mostly unskilled) and high levels of unem-ployment in their domestic economies. Most developedcountries are unwilling to open their markets for work-ers from developing countries and LDCs. The move bydeveloped countries to provide temporary movement ofworkers considers only skilled labour and leaves lessskilled workers out of their purview. LDCs should sub-mit requests on Mode 4 at the earliest. Given the lessoptimistic outcome in agriculture and NAMA, Mode 4could be the only area for LDCs to offset the losses fromthe Doha Round.

The proposals on special and differential (S&D) treat-ment for LDCs do not have much meaning, as most of theclauses are of ‘best endeavour’ nature. Progress has beenslow due to the disagreement over specific issues as wellas cross-cutting issues such as the principles and objec-tives of S&D treatment, and eligibility to receive it. Dis-cussions on proposals by LDCs reveal that S&D treat-ment were not articulated in a clear and concise manner,and often failed to address the concerns and needs ofLDCs. Countries should consider redrafting the propos-als to reflect their needs with the help of experts as wellas the WTO Secretariat.

Many LDCs also have interests in the negotiations onrules, particularly in view of anti-dumping cases againstthem. LDCs should articulate proposals to the effect thatanti-dumping duties are not imposed on items of theirexport interest, particularly on textiles and clothing inview of the difficulties emanating from Agreement onTextiles and Clothing phase-out. Problems of LDCs asregards their infant industries should be clearly articu-lated keeping in consideration the implications of vari-ous anti-dumping measures.

As the deadline for the completion of Doha Round oftrade negotiations is approaches, there is little chancefor LDCs to gain unless they prepare a clear and coher-ent agenda. The LDC Trade Ministers’ meeting at Liv-ingstone, Zambia on 25-27 June 2005 has been instru-mental in consolidating their collective positions on var-ious issues in the run up to the forthcoming WTO Minis-terial. However, if history is any guide, there is littlechance that their positions would be taken into consid-eration.

LDCs also need larger political support from the glo-bal community, particularly the Group of Eight industri-alised nations. Efforts should also be made to convincedeveloped countries at the highest level of internationalfora such as the United Nations General Assembly to beheld in mid-September 2005. n

(Dr Khatun is Research Fellow at Centre for Policy Dialogue,Dhaka)

30. Strengthening the Joint IntegratedTechnical Assistance Programme forSelected Least Developed and OtherAfrican countries and extend it to allLDCs;31. Developing and applying domesticregulation disciplines, including recog-nition of qualifications, simplificationof administrative practices and visarequirements, and without asking foreconomic needs tests, that enhancemarket access to the sectors and modesof supply of export interest to LDCs;32. Ensuring that the Special Modali-ties for LDCs and Guidelines and Pro-cedures for the negotiations in servic-es adopted by the Council for Trade inServices in 2001 and 2003 respectivelycontinue to remain the basis for thenegotiations;33. The full implementation of the pro-visions of Special and Differential Treat-ment, and to make them more pre-cise, effective and operational; andadoption of new special and differen-tial measures to take into account prob-lems encountered by LDCs and ad-dress meaningfully the special and dif-ferential proposals of LDCs;34. Providing LDCs adequate policyspace to engage in regional trade ar-rangements in the pursuit of their de-velopment goals and objectives;35. The need for the negotiations onsystemic issues to address the princi-ple of less than full reciprocity, asym-metry in market access and the devel-opment concerns of LDCs enteringinto regional arrangements with de-veloped countries under the GATT1994 Article XXIV and GATS Article V;36. Operationalising the flexibilitiesagreed in the Modalities for Negotia-tions on Trade Facilitation which, interalia, stipulates that LDC Members willonly be required to undertake com-mitments to the extent consistent withtheir individual development, financialand trade needs or their administra-tive and institutional capabilities;37. Full and faithful implementation ofthe Modalities for Negotiations onTrade Facilitation that ensure adequatefinancial and technical assistance andcapacity building including support forinfrastructure development of LDCs,through coordinated and sustainedflow of funding that also address costimplications of proposed measures af-fecting LDCs.

VIEWPOINT

The movebydevelopedcountries toprovidetemporarymovementof workersconsidersonly skilledlabour andleaves lessskilledworkers outof theirpurview


alvagingAFTAS

‘rules of origin requirements’, ‘reve-nue compensation mechanism’ and‘technical assistance’ to least devel-oped country (LDC) members. Multi-ple rounds of negotiations have beenheld, of which the ninth meeting wasin Kathmandu in July 2005. Membershave not reached consensus on allissues except of some progress in the‘sensitive list’. When SAFTA is en-forced, it would encompass around25 percent of the products in the sen-sitive list of most of the members.

Fallacy of trade integrationIs the low coverage of liberalisationmerely an inability to negotiate or arethere deeper apprehensions amongthe members on the ability of SAFTAto facilitate regional trade?

Some pre-requisites for success-ful regional trade integration are ex-amined. Pitigala (2005) proposes thehypothesis of “natural trading part-ners”.3 A “natural trading partners”situation is characterised by comple-mentarities, i.e., if a country importswhat its trading partner exports, thehypothesis of “natural trading part-ner” is likely to hold. The situationmay, however, be influenced by tradepolicies.

In this regard, countries in SouthAsia can hardly be said to be “natu-ral trading partners”. For instance,the high percentage of intra-region-

Navin Dahal

The low level of intra-regional trade in South Asia calls forspeedier cooperation in areas such as trade facilitation,transport, and energy if SAFTA is to work successfully.

It has been two decades since SouthAsian Association for Regional Co-

operation (SAARC) was establishedand a decade since the implementa-tion of SAARC Preferential TradingArrangement (SAPTA).1 However, ata mere 5 percent, the level of intra-regional trade in South Asia is farfrom satisfactory. The region is indeedone of the least economically integrat-ed regions in the world.2 Therefore, isthere a case for a substantial increasein intra-regional trade in South Asiaor is the proposed South Asian FreeTrade Area (SAFTA) just a fad?

Signed on 11 April 1993, SAPTAwas enforced on 7 December 1995.Four rounds of negotiations have tak-en place to deal with around 5,000commodities in the preferential list.However, members are in the finalstages of negotiations to convert SAP-TA into SAFTA, which will become areality from 1 January 2006 and envi-sions completing the trade liberalisa-tion programme by 2016.

Currently, members are finalisingthe ‘sensitive list’ (a schedule of prod-ucts on which members are not re-quired to progressively lower tariffs),

REGIONAL FOCUS


al trade of Bhutan and Nepal is pri-marily due to their preferential trad-ing arrangements with India. Bhu-tan and Nepal have around 90 and60 percent of their total trade withIndia. Hence, trade policies, ratherthan fulfilling the condition of “nat-ural trading partners”, explain thereason for high levels of intra-region-al trade. In the cases of Bangladesh,India, Pakistan, and Sri Lanka, in-tra-regional trade is around 12, 3, 3and 13 percent of their total traderespectively.

Furthermore, the “natural trad-ing partner” hypothesis, based ontrade volumes approach, suggeststhat members in a regional agreementshould trade disproportionatelywith each other in order to be a suc-cessful block. The bigger nations inSouth Asia have very low percent-age of their total trade in the region,which makes the case for greater eco-nomic integration in South Asiaweak.

It has been shown by studies thata large volume of intra-regional tradegoes unrecorded and some studieshave shown big potential for growthin intra-regional trade. Countries ingeographical proximity prefer totrade with each other more than withmore distant countries. Is SAFTAthen going to bring greater econom-ic integration in South Asia?

Trade within South Asian coun-tries is likely to grow in the future butnot solely due to SAFTA. Bilateraltrading arrangements such as thosebetween Nepal and India, and Indiaand Sri Lanka accord more preferen-tial access to these countries than ac-corded by SAFTA. Moreover, com-pared to regional trade agreements(RTAs), it is much easier to negotiatebilateral trade agreements. Prospectsfor the success of SAFTA are alsothreatened by the existance of RTAssuch as Bay of Bengal Initiative forMulti-Sectoral Technical and Eco-nomic Cooperation (BIMSTEC) freetrade area, of which Bangladesh,Bhutan, India, Nepal and Sri Lankaare also members. This RTA is moreambitious than SAFTA. In additionto faster and deeper liberalisation ingoods, it seeks to liberalise servicesand investment too. In light of these

more progressive bilateral agreementsand RTAs, in due course of time,SAFTA could be a low priority formost of the countries in the region.

Hence, SAFTA is unlikely to be astrong regional arrangement on thebasis of being only a trading agree-ment for liberalising trade in goodsin South Asia. To be of any relevance,regional economic integration effortsin South Asia will also have to in-clude measures to liberalise trade inservices, remove barriers to intra-re-gional investments, improve tradefacilitation and enhance cooperationin infrastructure, such as energy andtelecommunications.

Services are increasingly playingan important role in the economies ofSouth Asia. The contribution of thissector in gross domestic product ofSouth Asian countries is 40 percenton average, ranging from 38 percentin Nepal to 52 percent in Sri Lanka.These figures are likely to increase aseconomic development advances.Coupled with liberalisation on invest-ments, services are likely to attractintra-regional investments. Tourism,health, education and business ser-vices are potential areas for such in-vestments. It is also believed that in-vestment liberalisation is a prerequi-site for increased intra-regional tradein South Asia. RTAs – which libera-lise their investment regimes – haveseen a rationalisation of investmentportfolios of their members.

With the gradual reduction in tar-iffs, trade facilitation is gaining rele-vance for reducing costs of interna-tional trade. Poor transportation fa-cilities, differing custom proceduresand requirements and inability touse more economical transit routeshinder regional trade. The contigu-ous nature of the Indian sub-conti-nent calls for joint efforts for improv-ing surface and sea transport facili-ties.

South Asia has been identified asan energy deficit region. Huge gasreserves in Bangladesh and hydro-power potential exists in Nepal(which remain untapped) while afast industrialising India is facingenergy shortages. The InternationalEnergy Outlook 2004 projects morethan doubling of Indian power de-

mand from 554 Billion Kilowatthours (BKWh) in 2001 to 1,216BKWh in 2025.4 Development of re-gional electricity grid and gas andoil pipelines is also going to benefitcountries in South Asia. The geo-graphical proximity makes cross-country supply of telecommunica-tions services feasible. These areprobably more attractive avenues forregional cooperation than merely en-hanced trade in goods.

ConclusionWithout considering other comple-mentarities that can boost intra-re-gional trade, SAFTA would becomean incomplete mission. If we fail tounderstand the deeper apprehen-sions of members on the potential ofSAFTA, which are reflected by theirinability to negotiate a manageable‘sensitive list’, South Asian countrieswould be wasting time and energy onsomething that is not going to bearfruit. Unless the mandate of SAFTAis broadened to include measures toliberalise trade in services, increaseintra-regional investments, improvetrade facilitation and enhance coop-eration in infrastructure such as en-ergy and telecommunications as a‘single undertaking’, it will not helpto enhance economic cooperation inSouth Asia. If these issues are notaddressed, SAFTA will remain anincomplete vehicle for regional coop-eration and development. n

NOTES

1 Seven countries in South Asia, viz.,Bangladesh, Bhutan, India, theMaldives, Nepal, Pakistan and SriLanka formed SAARC on 8 December2005.

2 Intra regional trade in the Associationof South East Asian Nations and theEuropean Union stands at around 20percent and 60 percent respectively.

3 Pitigala, Nihal. 2005. ‘What doesregional trade in South Asia revealabout future trade integration’, WorldBank Policy Research Working Paper3497. Washington DC: The WorldBank.

4 Upadhaya, Anup Raj. 2005. ‘SouthAsia Regional Energy Cooperation:Opportunities and Challenges’, inEconomic Integration in South Asia.Kathmandu: Nepal Rastra Bank.

REGIONAL FOCUS


After the failure of the WorldTrade Organisation (WTO)Cancún Ministerial Confer-

ence in 2003, regional trade agree-ments (RTAs) have regained focus. Atpresent, the proliferation of a “spa-ghetti bowl” of RTAs account for 40percent of world trade.1 The main con-cern about RTAs is not their increasebut whether growing regionalismand its further deepening could un-dermine the multilateral trading sys-tem.

Ardent advocates of regionalismbelieve that it could be a ‘buildingblock’ to multilateralism. Supportersmaintain that RTAs enable countriesto liberalise trade and investment bar-riers to a far greater degree than mul-tilateral trade negotiations allow.RTAs have gone beyond trade liber-alisation in harmonising regulations,adopting minimum standards for reg-ulations, and recognising other coun-tries’ standards and practices —trends that enhance market access.2

While the renewed momentum formultilateral trade liberalisationlaunched at the WTO Ministerial atDoha in 2001 could have helped re-duce the rising incidence of regional-ism, trade experts expressed fear thatthe Cancún Ministerial fiasco wouldforce WTO members to place an evengreater emphasis on regional initia-tives. For instance, the United States(US) is redoubling efforts to sign bi-lateral trade agreements (BTAs) andRTAs, which are easier to negotiatethan WTO agreements. The empiri-cal facts, to some extent, illustrate thisapprehension as between January2004 and February 2005 alone, 43RTAs were notified to the WTO, mak-ing this the most prolific RTA periodin recorded history.

Under the prevailing situation,what is the scope for South Asiancountries vis-à-vis RTAs? Howshould South Asian economies makea renewed effort to kick-start SouthAsian Free Trade Area (SAFTA)?Should they cooperate more with As-sociation of South East Asian Na-tions (ASEAN) and other East Asianeconomies or should they deepentrading relations with the EuropeanUnion (EU) and the US?

“SPAGHETTI BOWL” OF RTAs:

Options for

Pradeep Mehta and Pranav Kumar

The “spaghetti bowl” of regional trade agreements account foralmost 40 percent of world trade, heralding a form of liberalisation.What are the options available to South Asia given theunsatisfactory experience?

South Asia

COVER FEATURE


“Spaghetti bowl” of RTAsSince 1990, the number of RTAs inforce rose from 50 to nearly 230 bylate 2004.3 There are three distinctivefeatures of this trend of ‘new’ region-alism, which have been experiencedin the decades of 1980s and 1990s.First, as the largest economy, the UShas increasingly taken recourse to theregional approach. Secondly, the EUhas both deepened and widened itseconomic integration. Finally, AsiaPacific Economic Cooperation(APEC) was formed in 1989 as the firstinter-governmental arrangement inthe Asia-Pacific region.

While the recent rapid growth ofRTAs began in the 1990s, the seed wassown much earlier. Western Europecontinued its moves towardsdeeper and broader regionalintegration since the early1950s. What is also signifi-cant is the decision of the USto explore the preferential ap-proach to trade. Earlier, it re-lied almost entirely on theGeneral Agreement on Tar-iffs and Trade (GATT) andthe most favoured nation(MFN) principle to define itstrade relations with other na-tions.4 The US signed its firstBTA with Israel in 1985 andwith Canada in 1989. Later,the US, Canada, and Mexicoformed the North AmericanFree Trade Association(NAFTA) in 1994. Likewise,the Free Trade Areas of theAmericas (FTAA) – onceformed – will be an extreme-ly significant regional trading block,comprising 34 developed and devel-oping countries with a population of750 million and a total income of near-ly US$ 9 trillion.

The post Uruguay Round (UR) erahas also seen further widening anddeepening of the EU, which has wid-ened integration through the SingleEuropean Act and the MaastrichtTreaty. Under the new expansionplan, the original EU-15 has becomeEU-25. APEC was established in1989, when the UR of trade negotia-tion was at its peak. Started with 12members, today the grouping has 21

members, accounting for around 2.5billion people, a combined gross do-mestic product (GDP) of US$ 19 tril-lion and 47 percent of world trade.

South-South RTAsSouth Asia has the lowest level of in-tra-regional trade. In the table below,a comparison has been made betweenvarious southern RTAs. The sharesof ASEAN and Mercusor are high;even the African RTAs have done rea-sonably well in intra-regional trade.

During the 1980s, attempts at re-gional integration were made in Lat-in America, Africa, and Asia. Duringthta period, many developing coun-tries also adopted structural adjust-ment and economic reform. In LatinAmerica, Mercusor was formed in

1991 and the Group of Three was es-tablished in 1995. The Andean Pactand Central American Common Mar-ket were resurrected in 1991 and1993. Between 1990 and 1994 alone,26 BTAs and RTAs were signedamong Latin American countries.

The Southern African Develop-ment Community (SADC) succeededthe erstwhile Southern African Devel-opment Coordination Conference.The East African Cooperation sprangup where the East African Commu-nity had failed. The Middle East haswitnessed the development of theGulf Cooperation Council, and in

1997, Arab League members agreedto cut trade barriers over a 10-yearperiod. In Asia, ASEAN developed 25years of political cooperation into anRTA in 1992, with the formation ofthe ASEAN Free Trade Area (AFTA).

RTAs in South AsiaSouth Asian Association for Region-al Cooperation (SAARC) was estab-lished in 1985 as a political consulta-tion entity. Almost a decade later, theseven SAARC members initiated aframework for regional trade integra-tion called SAARC Preferential Trad-ing Arrangement (SAPTA). The actu-al exchange of preferences, however,remained extremely limited.

The SAPTA framework providesfor periodic rounds of trade negotia-

tions for the exchange ofconcessions on tariff, para-tariff and non-tariff mea-sures using a combination ofnegotiating approaches. Inview of the modest progressmade in the initial years, thedeadline for SAFTA, whichwas finally envisaged for2001-2005, has been post-poned to 2008 for non-leastdeveloped country (LDC)members, viz., India, Paki-stan and Sri Lanka; and2010 for LDC members, viz.,Bangladesh, Bhutan, theMaldives and Nepal.

In January 2004, a break-through was achievedwhen, during the TwelfthSAARC Summit held in Is-lamabad, an agreement onSAFTA was signed. SAFTA

is slated to come into force from 1 Jan-uary 2006 upon completion of formal-ities, including ratification by all con-tracting states and issuance of notifi-cation by the SAARC Secretariat. Thisagreement, inter alia, includes tradefacilitation measures like harmonisa-tion of standards, reciprocal recogni-tion of tests and accreditation of test-ing laboratories of contracting statesand certification of products.

The signing of SAFTA marks amovement away from the mere tink-ering with tariffs under SAPTA. How-ever, the commodity-by-commoditynegotiations under SAPTA are prov-

Intra-regional export sharesRTAs 1990 2001 Year in force

LATIN AMERICA

Andean Group 4.2 11.2 1988

Mercusor 8.9 20.8 1991

AFRICA

COMESA 6.3 5.2 1994

SADC 3.1 10.9 1992

UEMOA 12.1 13.5 2000

ASIA

ASEAN/AFTA 19.0 22.4 1992

SAARC 3.2 4.9 1985

Source: UNCTAD, Handbook of Statistics 2002; WTO,International Trade Statistics 2002.

COVER FEATURE


ing to be highly laborious and time-consuming and had hardly made anyimpact on intra-regional trade, stilllanguishing below 5 percent of glo-bal trade of the SAARC memberstates.

Will RTAs proliferate?There has been a proliferation ofRTAs in the last two decades and allpossible permutations and combina-tions have been tried, except in somepockets of East Asia involving Japan,China and Korea. Hence, in the wakeof slow multilataral trade negotia-tions, the fear of its proliferation is lit-tle unwarranted. The slow progress of multilateral-ism could strengthen the views ofthose who see regionalism being a‘stepping stone’ towards multilater-al trade liberalisation, as opposed tothose who see regionalism as a ‘stum-bling block’ to globalisation. It wouldalso facilitate further deepening andwidening of existing RTAs. It is be-ing increasingly recognised that ef-fective integration requires more thanreducing tariffs and quotas. There arealso chances of proliferation of minitrading alliances, especially BTAs.There is a concern among countriesthat have traditionally avoided thisapproach, which also want somecushion to fall back upon should incase the momentum of multilateral-ism falters as is the experience of theDoha Round talks that began in 2001and is still ongoing.

Recent developmentsIn the absence of progess in trade lib-eralisation under the aegis of theWTO, the US has made it clear that itwould not wait but follow the path ofbilateralism and regionalism. It cur-rently has RTAs with six countries,is negotiating with 14 more, and ispressing ahead to establish FTAsthroughout the western hemisphere.After failing to prevail upon develop-ing countries at Cancún, the US triedto dictate the agenda of VIII Free TradeArea of the Americas (FTAA) Minis-terial Meeting, held at Miami during17-21 November 2003. In order tocounter the growing influence of Bra-zil among the members of FTAA, itannounced BTAs with some member

countries.5The EU has, so far, resisted the

temptation to engage in bilateral freetrade deals. The European Parlia-ment, in its resolution on the FifthWTO Ministerial, strongly support-ed multilateral trade agreements asthe best mechanism for promotingfree and fair trade. It is felt that the EUwould face a number of problems inshifting its policy toward BTAs asopening the EU to bilateral dealscould mean being flooded with re-quests for negotiations. Such deals arehard to negotiate in a grouping of 25nations like the EU, where individu-al states might have sharply differentviews regarding countries the EUshould consider for reducing tradebarriers.6

However, the EUdecided to strike a freetrade deal with Mercu-sor. This is despite anearlier accord to delaysuch a treaty till thecompletion of the DohaRound of WTO talks,which as per the origi-nal schedule was sup-posed to end in Decem-ber 2004. The failure ofthe Cancún Ministerialput the entire round outof gear. The EU-Merco-sur FTA was slated tobe completed in Octo-ber 2004 but the twosides failed to agree oneach other’s final offers.Among others, Mercusor was not sat-isfied with the EU’s agricultural mar-ket access provisions and the EUfound Mercusor’s proposals to openits telecommunications sector andupgrade protection of European geo-graphical indications lacking.

East Asia – excluding Japan – hasincreased its share of intra-regionaltrade over the last two decades. In2001, nearly 40 percent of exports byEast Asian economies were destinedto the same region, up from 23 per-cent in 1980. Likewise, their depen-dency on intra-regional trade in termsof imports was 43.7 percent in 2001as compared to 22.2 percent in 1980.Intra-regional trade accounts for 62percent in the EU and 46.3 percent in

NAFTA. Several proposals have beenmooted to form a broad FTA involv-ing ASEAN, Japan, China and Korea– the so-called ‘ASEAN plus 3’. Thesecountries want to reduce their depen-dence on the US market and also co-operate on security issues. In 2003,Japan decided to join ASEAN’s Trea-ty of Amity and Cooperation and thecommitment to create a ‘comprehen-sive economic partnership’ betweenit and ASEAN, which will include el-ements of a FTA by 2012.

When the Fifth WTO Ministerialcollapsed in 2003, it was argued thatthe inevitable consequence of notconcluding multilateral trade negoti-ations to the satisfaction of majortrading partners is to drive them to-wards BTAs and RTAs. South Asia –

especially India –stands to lose becauseof not being a memberof either BTA or RTAwith developed coun-tries. However, Indiahas followed a twin ap-proach over the last fewyears. On the one hand,it is actively trying to in-fluence the WTO tradenegotiations while onthe other hand, it is in-creasingly involved inbilateral and regionaltrade negotiations.

Prior to the CancúnMinisterial, Indiasigned a frameworktrade agreement with

Mercusor. This set in motion the pro-cess that ultimately led to signing ofan FTA between India and the LatinAmerican trading block in March2005. After Cancún, India signedframework agreements for establish-ing FTAs with Singapore and Thai-land and also initiated a process forsigning an FTA with Egypt. Follow-ing this is a similar agreement amongChina, Japan and India to create abroad East Asian group.

As regards other SAARC coun-tries, they are not as active as India.In 2004, Bangladesh and Pakistanhave developed a framework on aproposed FTA. Pakistan had consent-ed to Bangladesh’s request to give itspecial trade preference under an

SAARCcountries should

continue topromote

multilateralismand

simultaneouslyexplore the

possibility ofengaging

themselves inwelfare enhaing

RTAs.

COVER FEATURE


FTA. Bangladesh alsosought a longer time thanPakistan to phase out tar-iff under FTA and imme-diate free entry of itsproducts to the Pakistanimarket. However, Bang-ladesh has reiterated thatit would not have suchan agreement if Pakistanfails to remove varioustrade barriers. Besides,Pakistan is also set tosign an FTA with Iran.

Trade in South Asia: Why it is low?Intra-regional trade within SAARCcountries was only 5 percent of theirtotal trade in 2001.7 Estimates showthat trade between India and Pakistanis 70 percent lower than two other-wise identical economies.8 From asub-regional perspective, severalstudies have established that SAARCcountries can benefit enormously bycooperating economically and pro-moting regional trade.9

An oft-repeated argument for thelow level of intra-regional trade is thelack of trade complementarities.SAARC nations export labour inten-sive products in which they have acomparative advantage in relation tothe rest of the world. So the volume oftrade and the economic benefits fromtrading these products among them-selves are limited. A counter argu-ment says there is no hard evidenceto endorse the argument of lack ofcomplementarities.

In the absence of high levels of in-dustrialisation, services trade mayprovide a better scope to find tradecomplementarities among SouthAsian countries. In sectors like healthand education, there is considerableopportunity of increasing intra-SAARC trade. Moreover, SAARCcountries are vocal in their demandfor greater liberalisation of trade inservices under mode 4 of GeneralAgreement on Trade in Services(GATS). Developed countries oftenraise the issue of poor mobility of la-bour within South Asia itself. Thus,greater mobility of labour within theregion can be a stepping stone in seek-ing greater market access for SouthAsian labour in developed nations.

Another reason for lowintra-regional trade is notthe absence of trade pref-erences but the lack of lib-eral trade policies. Oncethe countries in the regionbegan to liberalise theireconomies, their intra-re-gional trade expandedrapidly. In 1990, the shareof intra-regional trade wasonly 3.2 percent, which in-creased marginally to 5

percent in 2001.10 Various studiesshow that a huge amount of informaland unrecorded trade is taking placebetween South Asian countries. It isbelieved that such trade is consider-ably higher than official trade flows.These trade flows are taking place notonly to evade high tariffs, but also toundertake trade that would have notbeen permitted at all. Hence, takinginto account such trade flows, intra-SAARC trade as a proportion of totalSAARC trade would be higher.

South Asia: Possible optionsThe new wave of regionalism has notonly resulted in signing of moreRTAs but has also led to further deep-ening and widening of existingRTAs. As it has touched almost allmembers of the WTO, SAARC coun-tries cannot afford to flow against thestream. However, in the prevailingsituation, the South Asian countriesshould continue with their two-trackapproach, giving primacy to promot-ing multilateralism and simulta-neously exploring the possibility ofengaging themselves in welfare en-hancing RTAs. At present, the levelof intra-regional trade in South Asiais marginal, but it would be still ben-eficial if they work for deeper inte-gration as regionalism goes well be-yond cooperation on trade frontalone.

A pertinent question arises,whether South Asia should go forRTAs with developed countries ortry to explore the possibility of form-ing South–South RTAs, especiallywith East Asian countries. One view-point says that it would be unwiseto go for trade treaties with the USand the EU, as these markets are rel-atively more open and signing BTAs

NOTES1 The World Bank. 2005. Global

Economic Prospects 2005: Trade,Regionalism and Development.Washington DC: The World Bank.

2 The World Bank. 2000. WorldDevelopment Report 1999/2000.Washington DC: The World Bank.

3 The World Bank. 2005. Above note 1.4 World Trade Organisation. 2003.

World Trade Report 2003. Geneva:WTO.

5 International Centre for Trade andSustainable Development. 2003.‘Bridges Miami Update on the VIII FTAAMinisterial Meeting’. Geneva: ICTSD.

6 Miller, S. and M. Newman. 2003. ‘EUunlikely to switch to bilateral deals’,Wall Street Journal as published inFinancial Express on 8 November2003. New Delhi.

7 World Trade Organisation. 2003.Above note 4.

8 Franknel, J. 1997. Regional TradingBlocks in the World EconomicSystem, Washington DC: Institute ofInternational Economics; Franknel, J.and S. Wei. 1997. ‘The New Regional-ism and Asia: Impact and Options’, inN. Rao and A. Panaragiya (eds.). TheGlobal Trading System and Develop-ing Asia. Hong Kong: Oxford Universi-ty Press.

9 Srinivasan, T. and G. Canonero. 1993.Preferential Trading Arrangements:Estimating the Effects on South AsianCountries , Harvard: Yale Universityand Washington DC: World Bank;Srinivasan, T. and G. Canonero. 1995.Preferential Trading Arrangements inSouth Asia: Theory, Empirics andPolicy. Harvard: Yale University andWashington DC: World Bank.

10 World Trade Organisation. 2003.Above note 4.

would be tantamount to giving un-hindered market access to them. Ithas been suggested that South Asiancountries should follow the ‘LookEast’ policy. India has already madeefforts in this direction, signingframework agreements with Thai-land and ASEAN for proposedFTAs.n

(Mr Mehta and Mr Kumar are SecretaryGeneral and Policy Analyst at CUTSInternational, Jaipur)

Bangladeshhas reiteratedthat it would

not have suchan agreement

if Pakistan failsto remove

various tradebarriers.

COVER FEATURE


MythPoverty reduction in Nepal

reality?

for 53 percent of the poor. House-holds, headed by agricultural wagelabourers, are the poorest (with a 46percent poverty incidence) while thesecond poorest group is made up ofthose who live in households head-ed by self-employed in agriculture.Similarly, land ownership is foundto be the crucial factor determiningpoverty, as 39 percent of the peoplehaving less than 0.2 hectares of landare poor while it is only 24 percentfor those owning more than two hect-ares of land.

Furthermore, households withseven or more members have thehighest poverty incidence of 41.4 per-cent while it is only 20 percent forthose households with only fourmembers. The data also substantiatethe significance of literacy/educa-tion in reducing poverty. Between1995/96 and 2003/04, the nationalincome poverty incidence declinedamong all rural households, exceptfor small and medium farmers in theeastern hills.

However, the preliminary resultsbased on the NLSS 2003/04 shouldbe interpreted with caution. Despitethe quantitative indication of declinein poverty, there may be several rea-sons to believe otherwise. Along thisline of thought, several specific con-cerns are highlighted below.

One concern relates to the repre-sentativeness of the survey itself.Some of the most remote districtswere left out. For instance, 96 out of4,008 households – 8 out of 334 Pri-mary Sampling Units (PSUs) – most-ly in the Far-Western DevelopmentRegion, were not enumerated. Somepractical difficulties in conductingthe survey were reported. For somerural PSUs, data entry could not bedone in the field and was done atthe nearest market or district head-quarters resulting in discrepancies.It should also be noted that the sur-vey relates to a longer recall periodthereby resulting in either under-re-porting or over-reporting of certainincome sources or consumptionitems. Besides, the survey report ad-mits difficulties being faced becauseof the discrepancies in the use of met-ric/non-metric units of measure-ments.

Although income povertydeclined by 11 percent in Nepalover the past decade, the latestnational poverty survey isplagued with methodoligicalshortcomings.

Suman Sharma

According to the Nepal LivingStandards Survey (NLSS), the

headcount income poverty ratio was42 percent in 1995/96. There werewide variations in poverty levelsbased on rural-urban division, geog-raphy, gender, ethnicity and occupa-tional castes. In 2000, an internalstudy commissioned by the NationalPlanning Commission (NPC) estimat-ed the poverty incidence at 38 percent.

The most recent poverty esti-mates – using the NLSS 2003/04dataset – show income poverty inci-dence at 31 percent. Urban areas re-corded a higher rate of decline inpoverty of 12 percentage points whilerural areas experienced a drop of 8percentage points. This survey re-ports a higher incidence of rural pov-erty. There exists substantial dispar-ity in poverty incidence across Ne-pal’s three major agro-ecologicalzones: 42 percent in the hills, fol-lowed by 33 percent in the moun-

tains and 29 percent in the Terai.The reasons cited by NPC for the

decline in poverty incidence are man-ifold: remittance supported consump-tion, increased income of agricultur-al labour, increment in number of eco-nomically active population, rapidurbanisation and increase in non-farm incomes. Furthermore, the pov-erty gap ratio has declined, indicat-ing that people have moved closer tothe poverty line.

In 2003/04, the incidence of pov-erty is closely correlated with landownership. For instance, small farm-ers – operating less than one hectareof land – represent the largest groupof rural poor households, accounting

ww

w.if

ad.o

rg

or

ECONOMIC FOCUS


Another concernrelates to the con-sumption focus ofpoverty. Past nation-al poverty lines wereexpressed in terms ofconsumption expen-diture. Some studieshave reported that inthe case of householdsurveys, consumptiondata are more likely tobe measured accu-rately compared to in-come data and arealso considered to bebetter indicators of liv-ing standards. However, in the Ne-palese context, mere focus on con-sumption could be a problem whileconsidering the situation of the poor,who are more than likely to belongto one of the lowest income groups.These groups of poor may have beensurviving simply through borrow-ings or remittances. Are we con-cerned about the borrowings thattemporarily might reflect increasedconsumption but are not sustainableover a longer term? Considering therecent findings that one out of 11 ru-ral male adults is working abroad,do increased remittances automati-cally translate into poverty reduc-tion?

Moreover, increasing feminisa-tion of poverty exists mainly due toprevailing gender disparities, the on-going armed conflict and its adverseimpact on all economic activities.Nepalese women, on average, face arelatively larger burden of poverty ascompared to men. This was as suchindicated by the 1995/96 NLSS, inwhich female-headed householdsshowed a higher incidence of pover-ty. However, this finding is not sub-stantiated by the NLSS 2003/04,which show that female-headedhouseholds exhibit a lower inci-dence of poverty (probably due tomale migration and resulting remit-tances). The 2003/04 data furtherreveal that of these households, thosewith higher number of small chil-dren and/or higher number ofhousehold members, are poorer. Thisis likely to cause an adverse impacton women within a household.

Population dy-namics of an econo-my (such as, age-sexstructure, temporaland spatial distribu-tion, migration, la-bour force participa-tion, employmentpattern and house-hold composition-headship and eth-nicity) do have sig-nificant bearing onpoverty. The irony isthat the country’spopulation will con-tinue to grow further

despite the progress made in fertili-ty decline due to the in-built momen-tum for growth in age-sex structure.As a consequence, despite the declinein poverty incidence, the total num-ber of poor will decline only at a rel-atively lower rate.

Furthermore, the existing inter-linkages between populationgrowth, poverty and environmentaldegradation do have important im-plications on poverty. High popula-tion growth without commensurateeconomic growth has led to in-creased dependence on land. Thisleads to adverse effect on the envi-ronment, which, in turn, affects thepoor as they usually rely mostly onmarginal and fragile lands. These in-ter-linkages lead to decreased percapita cultivated land, large scaledeforestation contributing to fuel-wood deficit, fodder deficit, etc. Theargument for a decline in povertyshould be accompanied by a thor-ough poverty analysis taking due ac-count of these concerns.

Another alarming factor that hasimportant implication on poverty isrising inequality. Increasing incomeconcentration was seen from 1984/85 to 1995/96 as per capita incomeinequality rose during this period.During 1995/96 – 2003/04, real percapita expenditure (PCE) increasedby 42 percent. Furthermore, real PCEincreased for all quintile groups butmuch more so for the higher quintilegroups. These trends suggest a re-markable growth in consumption forthe wealthier population, implyinga sharp increase in inequality. Dur-

ing the same period, the Gini coeffi-cient increased from 34.2 to 41.4. Ifpoverty declined at the expense ofthe very poor people whose con-sumption levels are way below thepoverty line, poverty reduction wasaccompanied by rising inequality.

Nepal’s poverty is also manifest-ed by food insecurity usually causedby high dependence on agriculture,inequality in land holdings, low pro-ductivity in agriculture and low lev-el of non-agricultural income. Foodinsecurity has escalated in severalparts of the country, particularly thehills and mountains, due to the on-going insurgency. Food security can-not be examined from a national per-spective only and must be looked intoat micro-level encompassing house-hold level and possibly intra-house-hold level. Although the poverty lineitself is nutrition-based, the distribu-tional aspect of food security has notbeen adequately captured to reflectthe severe food insecurity situationprevalent in several parts of thecountry.

The domestic armed conflictsince 1996 has taken a heavy toll onthe economy and people. The devel-opment spending of the governmenthas been diverted for meeting the se-curity needs. A majority of the ser-vice delivery institutions in remoteareas are hardly functioning. Vari-ous successful initiatives like decen-tralisation and social mobilisationprogrammes are under severe threat.The intensification of the securitythreat has seriously affected the de-velopment process.

Therefore, an ideal poverty anal-ysis should take due considerationof these factors to fully understandthe multi-dimensional aspects ofpoverty. Instead of simply claimingthat poverty has declined based onthe head-count index alone, furtherinvestigations are absolutely essen-tial that should analyse, amongothers, other income poverty indica-tors, viz., depth and severity ofpoverty and more importantly,inequality. n

(Dr Sharma is Associate Professor atCentral Department of Economics,Tribhuvan University, Kathmandu)

Increasingfeminisation ofpoverty existsmainly due to

prevailing genderdisparities, the

ongoing armedconflict and its

adverse impact onall economic

activities.

ECONOMIC FOCUS


Millennium Development Goal 8

A Call for GlobalCooperationIt seems that the developed countries are only concerned about ODAgiving little attention to other commitments under Goal 8.

Kamalesh Adhikari

The Millennium DevelopmentGoals (MDGs) represent a global

cooperation between developing anddeveloped countries. While the firstseven goals require developing coun-tries to create an enabling national en-vironment, Goal 8 – Develop a Glo-bal Partnership for Development –identifies the responsibility that restswith the developed countries. To-wards fulfilling the commitments un-der Goal 8, the United Nations reportsthat many donors are on track to meetthe target of dedicating 0.7 percent ofgross national income to official de-velopment assistance (ODA) by 2015.Others have promised to make sub-stantial increases in ODA over thenext 10 years. Leaders meeting at theGroup of Eight (G8) Summit in earlyJuly agreed to increase annual aidflows by at least US$ 50 billion by2010, with at least half of that increaseto be directed at Africa, and to writeoff the debts of 18 of the world’s poor-est countries.

These initiatives are a welcomemove. However, the concerns are: Arethey up to the mark of the globalpledge to support poor countries at-tain MDGs? Since donors would meetthe ODA targets by 2010 or 2015,would these initiatives help poorcountries achieve MDGs by 2015?Besides, without fulfilling the ODAneeds of poor countries in other re-gions, for example South Asia, wouldthe world be able to tackle the Millen-nium challenges? In addition, thedeveloped countries are only con-

cerned about ODA giving little atten-tion to other commitments. An in-creased focus on ODA is part of thestory. Of equal importance are actionsin other areas, including trade, agri-culture, health, employment and tech-nology transfer, which are covered byGoal 8 targets (12-18).

Target 12: Develop an open, rules-based, predictable, non-discriminatorytrading and financial systemOne year after the adoption of MDGs,World Trade Organisation (WTO)members made a historic effort tostrengthen the international tradingsystem through the launch of DohaDevelopment Agenda (DDA). How-ever, little progress has been made toaccomplish DDA; almost all dead-lines were missed and the CancúnMinisterial in 2003 also failed to pro-vide a momentum to DDA.

Amidst continued deadlock onDoha Round negotiations, membersadopted the July Package (JP) in 2004,establishing modalities for negotia-tions on five major issues of DDA –agriculture, non-agricultural marketaccess, services, trade facilitation and‘development dimension’. If negotia-tions on these issues are completed“taking into consideration the devel-opment issues and the interests ofpoorer members”, including the ‘de-velopment dimension’, it would helppoor countries to make internationaltrade work for development. In thiscontext, ongoing negotiations underJP and the WTO Ministerial in Hong

Kong (December 2005) provide WTOmembers with an opportunity to workon Target 12.

Target 13: Addressing the specialneeds of LDCsThe least developed countries (LDCs)face serious supply-side constraintsto benefit from international trade.Their limited financial resources andinstitutional capacity to overcomethese constraints make them uncom-petitive and vulnerable in the globaleconomy. Besides, due to limited prod-ucts and destinations to export, theyare prone to external shocks. Productdiversification, enhancement of com-petitiveness and market access are,therefore, crucial for the LDCs to ben-efit from international trade. In thisrespect, there is a need to help theLDCs with meaningful and effectivetechnical and financial assistance.

The developed countries, as theLDCs have been demanding, shouldalso make a binding commitment onduty free and quota free market ac-cess for all LDC products, with no re-strictive measures introduced. Also,since most of Generalised System ofPreferences schemes are unilateral,there is hardly any element of predict-ability. Hence, these schemes must bemade binding at the WTO. At the sametime, it should be ensured that theLDCs are not subject to any type ofnon-tariff barriers.

Target 14: Address the special needsof landlocked countriesThe special needs of landlocked coun-tries have gained wider recognitionin the Brussels Declaration and theProgramme of Action for the LeastDeveloped Countries. The AlmatyProgramme of Action – adopted in2003 – has obliged the developedcountries to assist and support thelandlocked countries by providingeffective and meaningful technicalassistance and better market accessopportunities. Therefore, the devel-oped countries should implementtheir part of the commitment so thatlandlocked countries are able to ad-dress the challenges associated withtheir landlockedness.

Besides, the ongoing trade facilita-tion negotiations under JP establishes

MDG FOCUS


that the focus of the nego-tiations should be, amongothers, on clarifying andimproving relevant as-pects of Article V (free-dom of transit) of theGeneral Agreement onTariffs and Trade. There-fore, these negotiationsshould establish theirtransit right at the multi-lateral level with furtherimprovement and clarity.

Target 16: Develop andimplement strategies fordecent and productivework for youthYouth unemployment is a major prob-lem in poor countries. If patterns ofinternational investment, the growthof trade, and the cross-border move-ment of workers do not help in creat-ing decent, productive and secure jobs,poor countries would be under furtherpressure to meet the MDG targets.Therefore, international policies thataffect employment should be support-ive of growth, enterprise developmentand poverty reduction. The Interna-tional Labour Organisation’s (ILO)Global Employment Agenda – the em-ployment pillar of the decent workconcept – should serve as a usefulguide to develop sound and far-sight-ed employment strategies. In this pro-cess, the ILO has a major role to play,working in greater cooperation withother international organisations, in-cluding the international financial in-stitutions and the WTO and nationalgovernments.

Besides, all WTO members shouldliberalise temporary movement of nat-ural persons under Mode 4 of GeneralAgreement on Trade in Services (GATS)without excluding any skill categoryand sector/sub-sectors. In this context,the ongoing services negotiations un-der JP should ensure that administra-tive procedures, overly burdensomevisa requirements and qualificationschemes, among others, do not impedethe movement of natural persons.

Target 17: Provide access to affordableessential drugs in developing countriesInternationally, the concept of ‘healthfor all’ has been an important factor in

making medicinesmore affordable. The2001 WHO-supportedCommission on Mac-roeconomics andHealth argued forlarge-scale financialcommitment by richcountries to scaling upthe access of theworld’s poor to essen-tial health services. Inthis direction, someinitiatives have beentaken but more needsto be done. For exam-ple, multilateral insti-tutions and pro-

grammes – such as the Global Fund toFight AIDS, Tuberculosis and Malar-ia and the WHO ‘3 by 5’ strategy todeliver antiretroviral therapy to 3 mil-lion people by 2005 – remain under-funded.

At the WTO level, a separate ‘Dec-laration on TRIPS and Public Health’states that Agreement on Trade Relat-ed Aspects of Intellectual PropertyRights (TRIPS) does not and shouldnot prevent members from taking mea-sures to protect public health. TheDeclaration also underscores coun-tries’ ability to use the TRIPS’ flexibil-ities, including ‘compulsory licensing’and ‘parallel importing’. However, itdid not address the problems of coun-tries with insufficient or no manufac-turing capacity. On 30 August 2003through a ‘Decision’, members agreedon legal changes to make it easier forcountries without manufacturing ca-pacity to import cheaper genericsmade under compulsory licensing.However, countries are still not clearwhether or not such an allowancewould ensure affordable access tomedicines in the future (See related ar-ticle on page 32-33).

Target 18: Make available the benefitsof new technologies, especially ICTsThe willingness of developed coun-tries to facilitate access to and transferof technologies to developing coun-tries is reflected in a number of inter-national agreements. For instance,GATS acknowledges that the in-creased participation of developingcountry members in world trade shall

be facilitated through, inter alia, accessto technology and further calls onmembers to encourage foreign suppli-ers of telecommunication services to“assist” in the transfer of technology,training and other activities. TRIPScalls upon developed countries to “pro-vide incentives to enterprises and in-stitutions” in their territories to trans-fer technologies to the LDCs.

Similarly, the Doha Declarationhas introduced a binding mandateto examine the relationship betweentrade and technology transfer. Tothis end, ministers have establisheda Working Group on Trade andTransfer of Technology. However,some developed countries tend toperceive this mandate as an academ-ic exercise and are reluctant to deep-en the work towards the implemen-tation of technology transfer clausesin WTO agreements or to initiate ne-gotiations for increasing technologytransfer flows.

Realising the role that technologiesplay in growth, development and pov-erty reduction, developed countriesshould foster international partner-ship to bring the benefits of technolo-gies to poor countries. Otherwise, notonly the “digital divide” will widen,poor countries would also face diffi-culties in meeting MDG targets. In or-der to transfer technologies to and es-tablish partnership with the LDCs,developed countries should follow the“actions” that are stipulated in theBrussels Programme of Action for theLeast Developed Countries.

ConclusionThe 2005 World Summit, to be heldfrom 14-16 September in New York,is expected to bring together morethan 170 Heads of State and Govern-ment: the largest gathering of worldleaders in history. The internationalcommunity perceives it a once-in-a-generation opportunity to take bolddecisions in the areas of trade,growth, development and poverty re-duction. The developing and leastdeveloped countries should capital-ise on this opportunity by collective-ly pressing for the need to bind devel-oped countries to work on each andevery target under Goal 8. n

MDG FOCUS

The willingnessof developedcountries to

facilitate accessto and transferof technologiesto developingcountries is

reflected in anumber of

internationalagreements.


Southern developing countries appear to be in a rush to enter into

bilateral trade agreements (BTAs)with their major industrialised trad-ing partners in the North. This is arecent phenomenon and has gatheredmomentum after the failure of theWorld Trade Organisation (WTO)Ministerial at Cancún in 2003. SouthAsia is no exception to this trend.

Since the Trade and DevelopmentAct was enforced in 2000, the UnitedStates (US) has been aggressively pro-moting BTAs with willing tradingpartners in the South. Such BTAs areworked out after signing a Trade andInvestment Framework Agreement(TIFA), which is basically a preludethat promotes negotiations to workout the BTA. The US has signedTIFAs with three South Asian coun-tries, viz., Sri Lanka, Pakistan, andBangladesh. The negotiations for afree trade area (FTA) are ongoing inall these three countries at present.

Considering the TIFA based negotia-tions in the context of Sri Lanka, it isargued that the ‘development dimen-sion’ in favour of the country in thenegotiations is far from clear. In thenew Generalised System of Preferenc-es (GSP) scheme, the ‘development di-mension’ is not straightforward fromthe perspective of South Asian na-tions.

Negotiations on the US-SriLanka FTASouthern countries embark on tradeagreements with Northern tradingpartners mainly for better market ac-cess, which Southern countries fail toobtain via WTO negotiations. North-South BTAs may thus be seen as adevice for side-stepping the WTO.However, in their enthusiastic pur-suit of market access, Southern coun-tries most often ignore the details ofthe trade arrangement from the startand thereby undermine the cost of

market access. One reason for this isthat most often, the BTA is workedout for a particular export commodi-ty, which is concentrated in the part-ner Northern country and the prod-uct may be an item generating signif-icant foreign exchange earnings andemployment, accounting for the live-lihood of a large section of the labourforce. This concern tends to overrideall other obligations in the process.Secondly, export lobbies of the par-ticular product in the Southern coun-try, although ignorant of the detailsof the BTA, can exert strong pressureon the government, which the lattermay find difficult to resist.

In the context of the ready madegarment (RMG) industry in SouthAsia, market access is crucial becausethis sector accounts for the largestexport earnings in the three SouthAsian countries that have alreadysigned TIFAs with the US. More than50 percent of RMG exports of these

Emerging ScenarioSouth AsiaIN NORTH–SOUTH BTAs OF

Saman Kelegama

Developing countries thatpin high hopes on BTAsand GSPs are unable toreap expected benefits.Instead, such type ofagreements lead tooutcomes that restrict theirpolicy space whiledeveloped countriesextract most of theadvantages. A case study ofSri Lanka is a pointer tothis trend.

TRADE FOCUS


South Asian countries are destinedto the US market. The RMG industryalso accounts for a large number ofmanufacturing employment. With theend of the Agreement on Textiles andClothing and the emergence of Chinaas a major player in the RMG globalindustry, the eagerness to gain pref-erential market access in the US be-came even more important for theseSouth Asian countries. After seeingthe US granting preferential marketaccess to RMG exports under AfricanGrowth Opportunities Act, Caribbe-an Basin Trade Partnership Act, andthrough BTAs to Asian competitorsin RMG exports, there is a growingview that an FTA with the US is es-sential to safeguard the future of theRMG industry.

In the case of Sri Lanka, the USwas prepared to grant duty free entryfor Sri Lankan RMG exports but it wasconditional on fulfilling the follow-ing conditions:(a) Fulfilling the stipulated rules of

origin (ROO) requirements, i.e.,following the yarn forward ruleand reverse purchase of US fab-rics to produce RMG earmarkedto the US market.

(b) Amending intellectual propertylaws by dropping legislation forcompulsory licensing and paral-lel importation of drugs and phar-maceuticals.

(c) Amending competition policy leg-islation by dropping the monopo-lies and mergers clause that wasseen as a deterrent to US invest-ment in Sri Lanka.

(d) Further opening up of the Sri Lan-kan market by implementing sec-ond generation reforms and de-regulation, which included liber-alisation of trade in services andthe capital account of the balanceof payments for trade exchangeswith the US.Implicit in the trade negotiations

was offering political support to theUS on contemporary internationalissues, viz., (a) the war in Iraq, (b) al-low US ships engaged in military ex-ercises in the Indian Ocean to use SriLankan ports freely, and (c) supportthe US position in some issues at theWTO Cancún Ministerial.

Based on these conditionalties,

national policy makers were request-ed to work with their US counterparts.The following are some of the note-worthy characteristics of the BTA:(a) The BTA was worked out on a

template prepared by the US forother BTAs (US-Chile BTA, US-Singapore BTA, etc.), which hadmany standards and clauses andgave little space for Sri Lanka formanoeuvering in negotiations.The agreement focused on specif-ic amendments and enforcementmeasures, on which the US had akeen interest, e.g., expanded pro-tection on copyrights in the digi-tal environment and plant varietyprotection in line with Internation-al Union for the Protection of New

Varieties of Plants (UPOV). It wasstated that the treaty templatewould be reviewed regularly toinclude higher standards and un-addressed issues.

(b) Intellectual property rights (IPRs)amendments were linked to in-vestment issues and, in turn,linked with other economic assis-tance like more funds under Unit-ed States Agency for Internation-al Development.

(c) The negotiations were promotinga ‘one size fits all’ system for say,IPRs, and increasingly demand-ing for harmonisation based onUS legislation without taking intoaccount development objectivesand in many cases, public inter-est concerns.

(d) Tentative estimates show that the

ROO requirements of the BTA in-creased the cost of production inthe RMG industry. Even with dutyfree entry to the US market, thisincrease in production costswould not permit most Sri LankanRMGs to be competitive vis-a-visChinese RMG industry in the USmarket.1

(e) In the context of the WTO, the BTAwould make sense only if it is‘WTO-plus’. The identification ofthe ‘WTO-plus’ elements de-manded a comprehensive analy-sis of different rule making, devel-opments in different layers – mul-tilateral, regional, and bilateral –and identifying space available ineach action level.2 This was in-deed a tedious task.

There was tremendous resistanceto the amendments in the IPR Bill inaccordance with the above condition-ality. Even before the Bill was present-ed to Parliament in mid-2003, it waschallenged in the Supreme Court bya local non-governmental organisa-tion (NGO) claiming that it violated afundamental human right of the citi-zens of Sri Lanka, i.e., having accessto cheap and affordable drugs. TheSupreme Court gave its verdict infavour of the local NGO and thereaf-ter the Bill had to be once againamended to include compulsory li-censing and parallel importation fordrugs and pharmaceuticals.3 It was amajor embarrassment for the govern-ment, which handled the entire ne-gotiations with the US officials in amost non-transparent manner.

The conditionalities in this agree-ment clearly undermined the benefitsof preferential/duty free market ac-cess. They made public interest issuesirrelevant and thus the ‘developmentdimension’ was far from clear. In fact,it undermined the flexibilities and ex-ceptions allowed for Sri Lanka in theWTO agreements. The US-Sri LankaBTA negotiations are still ongoingwith limited progress.

GSP Scheme: A South AsianPerspectiveGSP scheme is another instance ofNorth-South trade channel where the‘development dimension’ is murky

The ‘developmentdimension’ that is

supposed to arise fromBTAs and GSPs is far

from clear in thecontext of North-South

trade relations. Thecases of Pakistan and

Sri Lanka are testimonyto the fact that such

agreements are highlyasymetrical.

TRADE FOCUS


although the primary aim of suchschemes is to accelerate developmentand economic growth in developingcountries. However, developed coun-tries increasingly use GSP as a toolto foster a particular political agen-da, i.e., as an instrument of foreignpolicy.4 Two examples illustrate this:(a) The drugs regime in the GSPscheme was increasingly used infavour of Pakistan to combat terror-ism sponsored by the Taliban, and(b) The US denied GSP schemes toany country that did not take stepsto support its efforts to combat ter-rorism.

Recently, consequent to a com-plaint made by India to the WTO, theAppellate Body (AB) of the WTO not-ed that the drug regime in EuropeanCommission’s (EC) current GSP didnot fulfil the conditions of transpar-ency. The AB’s ruling showed thatthe drug regime was not based onany substantive and procedural cri-teria. It requested the EC to make thedrug regime consistent with its obli-gations under the General Agree-ment on Tariffs and Trade 1994. Thedrug regime has been replaced witha new programme called ‘GSP-plus.’

The new programme requires theratification of 27 international con-ventions to obtain additional tariffpreferences. These conventions in-clude: abolition of forced labour,maintaining universal human rightsand adhering to minimum age of ad-mission to employment.

All Southern countries cannotratify all the conventions becausethey do not have supporting institu-tions. There is also ample scope tofashion the GSP scheme to suit a par-ticular political and economic agen-da. This is so because the eligibilityrequires two conditions to be ful-filled: incorporation of internation-al agreements on which condition-ality is based, in its domestic legisla-tion; and the effective implementa-tion of this legislation. Countries canhave all the agreements in domesticlegislation but their implementationis a subjective matter. Political andother interests will always have aninfluence in making such determina-tion. For instance, if the US feels thatit requires Pakistan’s help or it wants

to reward Pakistan for its role in the‘war against terror’, it may extendtariff preferences even if Pakistanfulfils only the first condition of theeligibility criteria.5

The EU was of the view that in-creased regional economic coopera-tion should be in-built in the GSPscheme. Thus, the ROO was de-signed with this objective, whichwas considered as a contributory fac-tor to promote development. TheROO governing RMG exports to EUunder the the GSP scheme for SouthAsian countries was set at 50 per-cent value addition based on SouthAsian Association for Regional Co-operation (SAARC) cumulation.This was far from satisfactory for thesmaller South Asian nations that donot possess a large domestic produc-tion base because most of these coun-tries depend on inputs from EastAsian economies for RMG produc-tion and found it difficult to fulfilSAARC cumulation. Consequently,the GSP scheme could not be fullyutilised for preferential market ac-cess for RMG exports.

It can be seen that the ‘develop-ment dimension’ is promoted by ad-herence to international conventionsand promoting ROO that the Northfeels will enhance cooperationamong Southern countries, therebycontributing to development. Thereare major shortcomings in these con-ditionalities with regard to promot-ing development in South Asia.

ConclusionTrade routes are being increasinglyused to address matters that are con-sidered as ‘international standards’by the North. In other words, North-South BTAs are used to achieve whatNorthern countries failed to achievevia the WTO.

Basically, ‘international stan-dards’ are now in-built to the BTAs.The ‘development dimension’ is un-dermined to a large extent in thisprocess. For example, IPR concernsare becoming an objective ratherthan a means of promoting innova-tion, creation, and technology trans-fer. Non-commercial considerationsof IPRs, such as, health and food se-curity, environment, consumer inter-

NOTES1 Kelegama, S. 2004. ‘A Possible US-Sri

Lanka Free Trade Agreement toSupport the Garment Industry?’, in S.Kelegama (ed.). Ready-MadeGarment Industry in Sri Lanka:Facing the Global Challenge.Colombo: Institute of Policy Studies.

2 Abugattas, L. 2004. ‘Swimming in theSpaghetti Bowl: Challenges forDeveloping Countries under NewRegionalism’, in Policy Issues inInternational Trade and Commodities,Study Series No. 27. Geneva: UnitedNations Conference on Trade andDevelopment.

3 Kelegama, S. and I.N. Mukherji. 2003.‘WTO and South Asia: From Doha toCancun’. Economic and PoliticalWeekly. September 13-19, Mumbai:Sameeksha Publications.

4 Consumer Unity & Trust Society-Centre for International Trade,Economics and Environment. 2004.‘GSP Dispute: Winning the Battle,Losing the War’. Trade Law Brief, No.1. Jaipur: CUTS-CITEE.

5 Ranjan, P. and A. Shivpuri. 2005. ‘GSP:Still Open to Political Use’, Economicand Political Weekly. 15 January,Mumbai: Sameeksha Publications.

ests, etc., are undermined and there-by public interest issues are madecostly. Once committed to these ‘in-ternational standards’, it is very dif-ficult to alter them even if domesticpolicy warrants. Such commitmentsalso weaken a developing country’sbargaining power vis-à-vis othertrading partners when formulatingnew BTAs.

In the WTO, some policy space isallowed to autonomously implementdevelopment policies. In BTAs, thistrend is reversed with strong pres-sure to move towards adopting‘WTO-plus’ obligations in the sameareas where developing countriesare demanding a review. These‘WTO-plus’ obligations threaten toundermine the balance achieved inmany national laws and capacity ofdeveloping countries to use flexibil-ities existing at international levelto achieve development relatedgoals. n

(Dr Kelegama is Executive Director ofInstitute of Policy Studies, Colombo)

TRADE FOCUS


Cooperation

South-South trade increased by200 percent in the 1990s and ac-

counts for 12 percent of total worldtrade. Although a huge potential ex-ists to enhance trade between devel-oping countries, there are obstanclestoo. First, the major export marketsof developing countries are the Or-ganisation for Economic Coopera-tion and Development countries.Since the comparative advantage ofdeveloping and developed countriesvastly differ, tremendous compli-mentarities exist. Therefore, the firsttarget of developing countries at theWTO as well as regional trade agree-ments (RTAs) is to obtain increasedmarket access to industrialised na-tions. Since the former group ofcountries spend considerable time

and resources in ensuring this out-come, they tend to ignore the poten-tial of South-South trade cooperation.Such complimentarities do not nec-essarily exist among developingcountries due to similar product pro-files and comparative advantage.Therefore, they do not perceive ben-efit in spending their negotiatingcapital on opening each others’ mar-kets.

Second, trade barriers in develop-ing countries are still very high, re-flecting their transition from the im-port substitution industrialisationera. While average tariffs in devel-oped countries have fallen to 3.8 per-cent in the post Uruguay Round (UR)era, the corresponding figure for de-veloping countries is 29 percent. It is

not surprising that 70 percent of alltariffs in developing countries are onproducts of other developing coun-tries. Furthermore, those developingcountries and least developed coun-tries (LDCs), which became membersof the WTO by virtue of their mem-bership to the General Agreement onTariffs and Trade (GATT), have stillnot bound a major portion of theirindustrial tariffs. While it is manda-tory for all the countries to bind 100percent of their agricultural tariffs,such requirement does not exist inthe case of industrial products. Tak-ing tariff lines as a criterion, tariffbinding on industrial products is 73percent in the case of developingcountries in the post UR era. If totalimports of the developing countriesare taken as the criterion, this figureis 61 percent.1 Individual countryfigures are even more disappointing.Only two-third of Malaysia’s tarifflines are bound while one-third oftariff lines (including all agricultur-al items) are bound in Pakistan. Thefigure is 13.3 percent in the case ofCameroon and Tanzania.2 The av-erage binding rates – both in agri-culture and non-agricultural prod-ucts – are also very high in the caseof developing countries and LDCs.Similarly, the market opening in ser-vices sector is extremely limited. Thetable below provides a brief accountof bound tariffs across various de-veloping countries.

Another vital issue is tariff esca-lation, which developing countriesare pursuing to ensure that most ofthe value addition takes place intheir own countries. For example,China has a zero tariff on unroastedcoffee but imposes a 53 percent tarifffor processed coffee. While develop-ing countries argue for the removalof tariff escalation prevalent in de-veloped countries on the products oftheir export interests, they have notpaid sufficient attention to tariff es-calation in other developing coun-trys, which are also WTO members.Fortunately, the incidence of non-tariff barriers is not widely prevalentin developing countries as com-pared to developed countries.

Third, initiatives taken by devel-oping countries to increase trade

S O U T H - S O U T H

In the context of contiuned marginalisation of developing and leastdeveloped countries from the multilateral trading system, closerSouth-South cooperation needs to be considered more seriouslythan before.

Ratnakar Adhikari

Country Bound tariff Bound tariff Serviceson agriculutral on industrial liberalisationproducts (%) products sector (No.)

India 114 38 6 (36)

Pakistan 77.1 36.6 5 (40)

Bangladesh 200 48 2 (14)

Solomon Islands 80 37 4 (23)

Tanzania 120 120 1 (1)

Source: WTO (2005)3 and Adhikari (2004)4

on Trade

Bound agricultural and industrial tariffs and commitments onservices liberalisation by selected developing countries

TRADE FOCUS


among themselves have not pro-duced desired results. The Genera-lised System of Trade Preferences(GSTP) among developing countrieswas established in 1989 under theauspicious of United Nations Con-ference on Trade and Development(UNCTAD). Its objective was to pro-mote and sustain mutual tradeamong developing countries,through the exchange of concessionsin accordance withthe provisions of theagreement. In es-sence, the GSTP wasdesigned to providefor tariff preferenceson trade among itsmembers. Addition-ally, it provides forthe possibility of ne-gotiating non-tariffpreferences. So far,44 countries have be-come members of thisagreement. TheSouth Asian members of GSTP areBangladesh, India, Pakistan and SriLanka. Considering the number ofdeveloping countries – both mem-bers of the WTO and non-members –this number is considered extremelylimited, reflecting the apathy of de-veloping countries to enter into thiskind of arrangement. Only 24 coun-tries, including four South Asiancountries mentioned above, have ex-changed tariff concessions so far.

Though the WTO is based on theprinciple of non-discrimination (theso-called ‘most favoured nation’principle in the case of border tradebarriers), developing countries arenot obliged to provide reciprocal tar-iff concessions to developed coun-tries. It is considered legal under theWTO’s Enabling Clause (Decisionon Differential and More FavourableTreatment, Reciprocity and FullerParticipation of Developing Coun-tries, Decision of the GATT Contract-ing Parties of 28 November 1979).

In recent years, developing coun-tries have exhibited a renewed senseof urgency to enhance South-Southtrade cooperation, which is a posi-tive step. The Sao Paulo Consensus(agreed during the Eleventh Sessionof UNCTAD) provides impetus to

this process. The Consensus empha-sises that UNCTAD should contin-ue its support for the revitalisationand greater utilisation of the GSTPand other initiatives that stimulateSouth-South trade (Para 97).5

The Doha Declaration – issued on16 June 2005 – by the Second SouthSummit in Doha, Qatar (where Groupof 77 and China participated) high-lights the need to recognise the in-

creasing importance ofSouth-South Trade andEconomic Cooperation(Para 12) and welcomesthe launch of the ThirdRound of the GSTP as animportant instrument tostimulate South-Southtrade. The Summit alsoinvited all member coun-tries of the GSTP to con-clude the Third Roundof GSTP by 2006 and toencourage other mem-bers of the Group of 77

and China to consider participatingin the GSTP (Para 28).6

Given this scenario, Southerncountries need to revitalise the pro-cess of increased cooperation ontrade, making renewed efforts onfour main areas. First, they shouldparticipate actively within the GSTPmechanism and negotiate better mar-ket access terms, not only by address-ing the issues of tariff preferences,but also non-tariff preferences asmandated by the agreement.

Second, they ought to expedite theprocess of forming RTAs and explorethe possibility of intra-regional tradecooperation, first at the continentallevel; then at the cross-continentallevel. Ideally, the first stage of cooper-ation should serve as the stepping-stone for the second. For instance,trade cooperation between SouthAsian Association for Regional Co-operation and Association of SouthEast Asian Nations; Southern Com-mon Market and Andean Pact; andCommon Market for Eastern andSouthern Africa and Southern Afri-can Development Community couldbecome instrumental in forming great-er Asian, South American, and Afri-can trade cooperation agreements.The ultimate objective should be to

NOTES1 Ognivtsev, Victor, Eila Jounela and

Xiaobing Tang. 2001. ‘Accession tothe WTO: The process and selectedissues’, in WTO Accessions andDevelopment Policies . New York:United Nations and Geneva: UnitedNations Conference on Trade andDevelopment, p. 183.

2 United Nations Conference on Tradeand Development. 2004. The LeastDevelopment Countries Report 2004– Linking International Trade withPoverty Reduction. New York andGeneva: UNCTAD and United Nations.

3 World Trade Organisation. 2005.World Trade Report. Geneva: WTO.

4 Adhikari, Ratnakar. 2004. ‘WTOAccession of Least Developed andLow Income Countries of Asia and thePacific: A Human DevelopmentPerspective’, in Asia Pacific RegionalHuman Development ReportsInitiative. New Delhi.

5 United Nations Conference on Tradeand Development. 2004. Sao PauloConsensus . 13-18 June. Geneva:UNCTAD.

6 Group of 77. 2005. Doha Declaration.Second South Summit. 12-16 June.Doha.

7 The multilateral trade negotiations thatwere launched in Doha in November2001 by the Fourth MinisterialConference of the WTO.

form a trade cooperation agreementof the developing countries under theGSTP framework.

Third, advanced developing coun-tries should provide trade-relatedtechnical assistance to their LDCcounterparts. Such assistance shouldhelp address the latter’s lack of nego-tiating capacity and supply-side con-straints. Training, human resourcedevelopment and technology trans-fer are the necessary components ofsuch a cooperation arrangement.

Finally, developing countrieshave shown remarkable unity in mul-tilateral trade negotiations; such alli-ance should be continued beyond theDoha Round negotiations.7 Theyshould aim at promoting an open,equitable, rule-based, predictable andnon discriminatory multilateral trad-ing system that gives priority to the‘development dimension’ – in linewith the Doha Declaration. n

Developingcountries havedemonstrated

remarkableunity in

multilateral tradenegotiations,

which needs tobe sustained.

TRADE FOCUS


One region thatvery appositely cap-tures both the issuesunder tariff reduc-tion is South Asia.1The tariff profiles ofSouth Asian coun-tries – except Nepaland Sri Lanka to

some extent – are characterised byvery high bound tariff rates and lowbinding coverage. Any drastic re-duction in these tariff rates wouldimpose harsh adjustment costs andnot augur well for the developmen-tal imperatives of these countries.Similarly, South Asian exports facea host of tariff barriers in the form of

tariff escalation and tariff peaks in de-veloped countries. Tariff escalation,as a tariff measure in developed coun-ties, does not allow developing coun-tries to graduate from exporting rawmaterials to processed and finishedgoods. For instance, according to anOxfam study, the European Commis-sion imposes tariffs of less than 4 per-cent on Indian yarns. However, thistariff rate escalates to 12 percent if theyarn is woven into garments. Thesestringent tariff measures have not al-lowed South Asian countries to gen-erate adequate resources and henceeffectively use trade to foster devel-opment. For instance, there are stud-ies to show that if Bangladesh getsduty free and quota free access to themarkets of Quad countries (US, EU,Canada and Japan), its export reve-nue would increase by 45 percent.Hence, any tariff reduction modalityshould take care of both the flexibili-ty in tariff reduction and measures toimprove market access for South

to cut andmuch to cut?HOW

Industrial tariffs and South Asia

Prabhash Ranjan

Negotiations on non-agricultural market access– which began on January2002 – are proving to be amajor obstacle toliberalising trade inindustrial goods.

A major objective of the ongoingtrade negotiations in the World

Trade Organisation (WTO), launchedin Doha in 2001, is to reduce both tar-iff barriers and non-tariff barriers(NTBs) for freer and fairer movementof goods and services. The negotia-tions on non-agricultural market ac-cess (NAMA), initiated in January2002, intend to accomplish this ob-jective for industrial goods, especial-ly for developing countries and leastdeveloped countries (LDCs). Howev-er, hitherto negotiations on NAMAhave had a bumpy journey and thelaudable destination of dismantlingtariff barriers and NTBs is still verydistant. Much hope was pinned atthe July 2005 General Council (GC)meeting of the WTO. However, con-trary to the expectations, the GC meet-ing ended without arriving at anycommon meeting ground betweenWTO members.

The reason for this bumpy jour-ney is the sharp divsion amongst

countries on many contentious issuesunder NAMA negotiations. One suchcontentious issue is tariff reduction.Countries are poles apart on the meth-odology and the quantum of tariff cut.

For developing countries, promi-nently, two issues in tariff reductionin NAMA are important. First, theyshould not be asked to undertake sub-stantial tariff reduction so as to re-tain policy flexibility. Secondly, de-veloped countries should reduce oreliminate their high tariffs on exportsfrom developing countries. ArticleXXVIII bis of the General Agreementon Tariffs and Trade supports this as-sertion of developing countries. TheArticle states that negotiations on in-dustrial tariffs will take into accountthe special and developmental needsof developing countries. This basicprinciple is also strongly encapsulat-ed in Paragraph 16 of the ‘Doha Dec-laration’ to which the present roundof negotiations owes its origin andsustenance.

RESEARCH ANALYSIS


Asian countries.Not all South Asian countries

would be required to undertake tariffreduction in the ongoing trade round.Bangladesh, the Maldives and Nepalare exempted from undertaking tariffreduction due to their LDC status. SriLanka may also be exempted if thepresent proposal of exempting coun-tries from undertaking tariff reduc-tion, which have less than 35 percentof binding coverage, is accepted. Fornon-agricultural goods, Sri Lankahas a tariff binding coverage of 28.3percent. Therefore, in South, Asiaonly India and Pakistan are requiredto undertake tariff reduction.

This brings us to the issue of howtariff reduction needs to be undertak-en. The July Package of 2004 statedthat negotiations on tariff reductionwould focus on a non-linear formulaon a line-by-line basis. Hence, the op-tions for developing countries havenarrowed. They have to accept a non-linear formula for undertaking line-by-line tariff reduction. Two types ofnon-linear formula are on the negoti-ating table. One is the Swiss formulaand the other is the modified Swissformula, which has different ver-sions.2 The simplest modified Swissformula is referred as the Girard for-mula.3 The Caribbean group of coun-tries has recently proposed anotherversion of the modified Swiss formu-la.4

All these formulae could lead tosteep tariff reductions depending onthe value of the coefficient ‘B’. It is thevalue of ‘B’, in each of these formulaethat will decide the quantum of cut.The smaller the value of B, the steeperwould be the reduction. However, ona relative scale, the Swiss formula willlead to a much steeper reduction ascompared to the Girard formula or theCaribbean formula and hence is notappropriate for countries such as In-dia and Pakistan that have high tar-iff rates.

On the other hand, the Girard for-mula is milder compared to the Swissformula because it uses the averagetariff rate of a country as one of thecoefficients in the formula while un-dertaking tariff reduction. The aver-age tariff rate of a country is a fair in-dicator of a country’s tariff profile. Its

use in the tariff cutting exercise willensure a balanced outcome for all thecountries.

In April 2005, India – along withBrazil and Argentina – proposed theGirard formula for tariff reduction(also called the ABI proposal), which– contrary to expectations – drew flakfrom all developed countries, as thesecountries favour the Swiss formula.A bigger blow to the ABI proposalcame from some developing countriesthemselves, viz., China, the Philip-pines and other countries from theAsia-Pacific region. These countriesare against the Girard formula be-cause it allegedly favours countrieswith higher average tariff rates likeIndia and Pakistan more than otherdeveloping countries that have lowaverage tariff rates. Many developingcountries like China or the LatinAmerican countries have low averagetariff rates.

The ABI proposal got a shot in thearm when the Caribbean countriesmade a new proposal on the lines ofthe ABI proposal, just before theDalian (in China) mini-ministerialmeeting in July 2005. According tothis proposal, a tariff reduction exer-cise should not only take into accountthe average tariff rate of countries, aswarranted by the ABI proposal, butalso other factors such as the depen-dence on tariff revenue, need for wid-er policy space, a country’s adjust-ment costs. Hence, the Caribbean pro-posal is ‘ABI plus’. It is better thanthe ABI proposal, as it takes into ac-count a host of development relatedfactors. However, looking at the op-position targeted at the ABI propos-al, it is highly unlikely that the Carib-bean formula will succeed.

At Dalian, Pakistan made a newproposal where it proposed the Swissformula with different values of ‘B’for developed and developing coun-tries on the basis of their average tar-iff rates. It has proposed ‘B’ = 6 fordeveloped countries and ‘B’ = 30 fordeveloping countries. This proposalis not appropriate, as it advocates asimple Swiss formula, which wouldlead to steep tariff reductions.

From the perspective of develop-ing countries – including those fromSouth Asia – a modified Swiss for-

mula is suitable. The Dalian mini-ministerial had seen a shift away fromthe Swiss formula. The Co-Chair ofthat meeting, in his report, opined thatthere were signs of convergence on aSwiss formula with a couple of coef-ficients for undertaking tariff reduc-tion. This is clear pointer to a modi-fied Swiss formula on the lines of theABI and the Caribbean proposal.Hence, any attempt to revive the Swissformula in the coming months shouldbe strongly resisted.

However, it is important for Indiaand countries from the Caribbean re-gion to be more specific by providingnumbers to their proposed formulae.The argument that a structure shouldbe decided first and only then coun-tries will reveal their ‘numbers card’is untenable. As we have seen before,how steeply a tariff reduction formu-la will cut tariff rates depends on val-ues of the coefficients such as the val-ue of ‘B’. A lower value of ‘B’ in theGirard formula can even lead to steep-er cuts than the Swiss formula with ahigher value of ‘B’. Hence, structurealone will not help. Countries shouldprovide more specific proposals in thefuture in order to attract greater sup-port for their proposals. n

(Mr Ranjan is Research Officer at Centrefor Trade and Development – an OxfamGB Initiative – in New Delhi)

NOTES1 For this article only, South Asia refers to

the WTO members from the region,viz., Bangladesh, India, the Maldives,Nepal, Pakistan and Sri Lanka.

2 Swiss formula is given as:

T1= B*T0/B+T0

where, T1 is the final tariff rate, T0 isthe initial tariff rate and “B” is acoefficient.

3 Girard formula is given as:

T1= B*T2*T0/B*T2+T0

where, T1 is the final tariff rate, T0 isthe initial tariff rate; T2 is the averagetariff rate, B is a coefficient.

4 Modified Swiss formula is given as:

T1 = (B+C)*T2*T0/(B+C)*T2+T0

where, T1 is the final tariff rate, T0 isthe initial tariff rate, T2 is the averagetariff rate, B is a coefficient, C is thecredit to be accorded to developingcountries.

RESEARCH ANALYSIS


forChallenges

WTO DG

Dikshya Thapa

concerns. It had brought a new per-spective and a much needed boost tothe liberalisation agenda. However,these expectations are being crushedgiven the actions of developed coun-tries henceforth.

Negotiations are tenous becauseof the disparate views of memberswith consensus requiring affirmationfrom all member governments. Devel-oping countries are handicapped dueto lack of financial and technical re-sources. Hence, issues such as tradeand technology transfer, special anddifferential treatment and dispute set-tlement need to be addressed to en-sure their increased participation ininternational trade.

Frenchman Pascal Lamy was appointed the fifth Director General (DG) of the World Trade

Organisation (WTO) at a 26 May meet-ing of the organisation’s GeneralCouncil and will assume his postfrom September 1. He was able to en-list the support of almost four-fifthsof the WTO’s 148 member delega-tions.

During his tenure as EuropeanUnion (EU) Trade Commissionerfrom 1999 to 2004, Lamy was knownfor his advocacy to bring the ’Sin-gapore issues’ (competition, trans-parency in government procurement,investment and trade facilitation) intothe WTO’s ambit. He also sympathis-ed with least developed countries(LDCs) and proposed that they be giv-en a ”round for free”, i.e., that theyshould not be asked to make any ad-ditional commitments in the DohaRound. Ironically, he firmly stoodbehind the EU farm subsidies andprotectionist policies, turning ablind eye to their detrimental ef-fects on developing countries.

The WTO DG designate has de-clared that his chief priority wouldbe to complete the ongoing Doha De-velopment Agenda (DDA) to ensurethat trade openness continues to con-tribute to development and that theinterests of developing countries areplaced at the centre of the world trad-ing system. However, the WTO’srhetoric and ambitious deadlines arehardly a novelty. Despite Lamy’sclaim, the task of facilitating agree-ments at the Sixth WTO MinisterialConference in December 2005 andpropelling the Doha Round to a suc-cessful close will be gargantuan chal-lenges. Issues within the DDA in-clude agriculture, non-agriculturalmarket access, trade facilitation, ser-vices and ‘development dimension’.Negotiations on the DDA were ini-tially set to conclude by 1 January2005. However, given the current im-passe, ministers have now post-poned the deadline to 31 December2006.

The expectations of the majorityof WTO members were raised after the‘Doha Declaration’, which focusedon developing country issues and

Agricultural liberalisation, in par-ticular, holds paramount significancefor a large majority of developingeconomies primarily dependent on itfor their livelihood. Its liberalisationhas hardly benefited poorer countries,which have experienced import surg-es and declines in exports. This isowed mostly to protection in devel-oped countries and falling prices ofagricultural goods globally. Develop-ing countries also cannot afford thedomestic support and export subsi-dies allowed by the Agreement on Ag-riculture. As a result, most are unableto reap the benefits from the multilat-eral system.

In addition to the Doha Round, thenew WTO DG will be preoccupiedwith emerging disputes, which mighthave an impact on the ongoing nego-

tiations. A concern that needs im-mediate attention is the effects ofChina’s surging textile exportsfollowing the expiry of theAgreement on Textiles andClothing, creating trade ten-sions between China and theUnited States (US). Another is-

sue is the ongoing dispute betweenthe US and the EU over billions of dol-lars worth of subsidies to their respec-tive large civilian aircraft manufac-turers. These cases, involving the in-terests of some of the largest econo-mies, could undermine the ongoingDoha negotiations.

Under these circumstances, it re-mains to be seen if the new DG willlive up to his pledge of focusing ondeveloping country concerns as wellas accommodating the interests of allWTO members. This requires accom-modation of other crucial componentsof the DDA such as trade-related as-pects of intellectual property rights,trade and investment; trade; debt andfinance.

The Hong Kong Ministerial willbe the first test as to whether the newWTO DG will bring forth correctivemeasures sought through the DohaRound and make the multilateraltrading system work for all itsmembers. n

(Ms Thapa was Programme Associateat SAWTEE)

TRADE CURRENT


The ‘July Package’ (JP), agreedupon by World Trade Organisa-

tion (WTO) members in 2004, rescuedthe stalled multilateral trade talks fol-lowing the collapse of the Fifth Min-isterial at Cancún in 2003. JP set July2005 as the date for reaching broadconsensus on agriculture, non-agri-cultural market access (NAMA), ser-vices, trade facilitation and ‘develop-ment dimension’.

Since the past 12 months, membershave reaffirmed their commitment tothe multilateral trading system buthave remained short of actually reach-ing a deal in any area. It comes as nosurprise that the WTO General Coun-cil (GC) meeting held in Geneva from28-30 July failed to arrive at ‘first ap-proximations’, putting the talks in im-mediate danger but providing abreathing space for members to chalkout deals by the Hong Kong Ministe-rial in December 2005. The WTO Di-rector General Dr Supachai Panitch-pakdi summed up the situation in thenegotiations on the Doha work pro-gramme as “disappointing but not di-sastrous”. The Chairs of the negotiat-ing groups could not present ‘first ap-proximations’ but only reported theprogress made so far.

The GC meeting was held after afortnight following the ‘mini ministe-rial’ held at Dalian, China from 12-13July, where 30 trade ministers gath-ered to discuss issues under the DohaRound. Previous ‘mini ministerials’ inNairobi in February and in ParisinMay ended without any break-through. Declarations and proposalsissued by least developed countries(LDCs), Group of 33 (G33) and AsiaPacific Economic Cooperation (APEC)also reveal the deep chasm that existsamong members.

The Paris ‘mini ministerial’ man-aged to reach a compromise on con-verting duties to ad valorem equivalents

but other issues remain unresolved inthe agricultural negotiations, especial-ly on the market access provision ofthe Agreement on Agriculture. The so-called ‘middle ground’ proposal of theGroup of 20 (G20) has been used asthe starting point for negotiationssince Dalian. This proposal calls for abanded approach to tariff reductionswith four bands for developing coun-tries and five for developed countries.Furthermore, each band would be sub-jected to a linear tariff reduction ap-proach with overall caps on high tar-iffs differentiated between developedand developing countries. The UnitedStates opposed this proposal by pro-posing a more ambitious formula.Meanwhile, countries are not show-ing any signs of compromising fromtheir respective positions.

Talks on NAMA reached an im-passe after members still remained di-vided over the industrial tariff reduc-tion formula and also on the treatmentof unbound tariffs. Negotiation ses-sions in June had witnessed supportfor the Swiss formula, particularlyamong the trade ministers of devel-oped countries and groups like APEC.Higher tariffs imply higher cuts un-der a simple Swiss formula. Develop-ing countries like Argentina, Braziland India; which had earlier pro-posed the Girard formula, remainconvinced that the Swiss formuladoes not reflect the principle of ‘lessthan full reciprocity’ in reductioncommitments. They would have tomake the steepest cuts arising fromtheir higher industrial tariffs thandeveloped countries. However, afterDalian, there was greater possibilityabout further exploration of the Swissformula with various coefficients thatwould accommodate specific con-cerns of members. Trade ministers inDalian also agreed that all tariffsshould be bound. Progress on NAMA

is closely linked to progress on theagricultural negotiations as state-ments by countries like France thatboth agricultural and industrial tar-iffs are interlinked, attest.

Although more than 40 new mar-ket opening offers – basically revisedversions of earlier offers following bi-lateral negotiations – were submittedbetween May and June, members re-main divided over services negotia-tions. Therefore, the present request-offer process has not yielded a bal-anced and substantive outcome. De-veloped countries and certain newlyindustrialised countries seek theopening of sectors such as telecom-munications, financial markets andinformation technology while a keyissue for some developing countriesis lack of progress on Mode 4 (tempo-rary movement of natural persons).

The WTO’s mandate that puts‘development dimension’ at theheart of the negotiations is limited tosome special and differential treat-ment provisions. Selected participa-tion in various ‘mini ministerials’ re-veals exclusion and lack of transpar-ency in the working of the WTO, in-viting criticisms from many develop-ing countries. Without the realisa-tion of ‘first approximations’, theonus now lies on members to workintensively in the next few monthsfor successfully concluding of theHong Kong Ministerial. n

‘July approximations’ unmet

NOTESThis is a slightly modified version ofthe ‘article in lead’ published in theJuly-August 2005 e-newsletter underProgressive Regional Action andCooperation on Trade Phase III ofSAWTEE. The article is drawn fromarticles provided by InternationalCentre for Trade and SustainableDevelopment (www.ictsd.org) andThird World Network(www.twinside.org.sg), both basedin Geneva.

The failure to meet the ‘first approximations’ by July puts the onus on WTO members to intensifynegotiations in order to prevent multilateral trade talks from collapsing.

Shyamal Krishna Shrestha

TRADE CURRENT


Prior to the establishment of theWorld Trade Organisation

(WTO), multilateral trade used to begoverned by the General Agreementon Tariffs and Trade (GATT). Found-ed in 1948, the GATT’s mandate wasto merely deal with trade in goods.After the Uruguay Round (UR) ofmultilateral trade negotiations estab-lished the WTO in January 1995 byreplacing the GATT, the multilater-al trade framework extended beyondtrade in goods.

As a rules-based multilateraltrade body, the WTO also deals withtrade in services and intellectualproperty rights (IPRs). Its remit ex-pands from cross-border transac-tions to areas – such as publichealth, food security and employ-ment – which crucially affect domes-tic development policies. Amongthese, in recent years, the globalpatent rules – as enshrined in theAgreement on Trade RelatedAspects of IntellectualProperty Rights (TRIPS)– have generated muchcontroversy. The North-South divergence is ap-parent – particularly in re-lation to access to medi-cines – during WTO ne-gotiations and the debatecontinues on how to bal-ance the interests of both.

The Southern coun-tries perceive that the patentrules are set to further restrictpoor people’s access to vital life-saving drugs by allowing compa-nies to create a monopoly andcharge high prices whereas theNorthern countries argue that the

strengthening of IPRs is essential forencouraging companies to investmore in research and developmentand find solutions to global healthproblems by producing new or moreeffective drugs.

TRIPS and PatentTRIPS is the binding and most com-prehensive multilateral agreementon IPR. It sets out minimum stan-dards of protection for each catego-ry of IPRs, including patents. The im-plementation of TRIPS is subject tothe “requirements” of the agreementand the “commitments” the mem-bers have made (during their acces-sion to the WTO). The Agreement re-

quires member governments to har-monise their national IPR systemwith global rules.

WTO members have to providepatent protection for any invention,whether it is a product (such as amedicine) or a process (such as amethod of producing the chemicalingredients for a medicine). Such apatent protection must be availablefor inventions for at least 20 years.

TRIPS has set three criteria toqualify for a patent – an inventionhas to be new (novelty), it must be aninventive step (non-obviousness),and it must have industrial applica-bility (useful). The Agreement, how-ever, states that governments canrefuse to issue a patent for an inven-tion if its commercial exploitation isprohibited for reasons of public or-der or morality. They can also ex-clude diagnostic, therapeutic andsurgical methods, plants and ani-

mals (other than microorgan-isms), and essentially biolog-

ical processes for the pro-duction of plants or ani-mals (other than non-bio-

logical and microbiologicalprocesses).

TRIPS and Public HealthConcernsDeveloping and least de-veloped countries face crit-

ical public health problemsranging from “production, distribu-

tion and market” to “access, quality,cost and affordability”. Persistentand widespread poverty, food inse-curity and vulnerability in thesecountries put further pressures onpublic health. In addition, the TRIPS

TRIPS AND PUBLIC HEALTHConcerns of Developing and Least Developed Countries

Kamalesh Adhikari

Poor people’s access to medicines hinges upon the outcomes of the global negotiationsdealing with pharmaceutical product patents.

UNDERSTANDING WTO


Agreement is likely to bring furtherchallenges with severe implicationson public health, mainly in relationto access to medicines at cheaper andaffordable prices. It is, therefore, im-portant that developing and least de-veloped members understand howTRIPS relates to public health, howthe agreement could affect the pub-lic health situation in their countries,and what flexibilities the agreementprovide them to address publichealth concerns.

Initiatives at the WTO LevelSome initiatives have been taken atthe WTO level to address the con-cerns of poor countries. In the mainDoha Declaration (adopted at thefourth WTO Ministerial in Doha in2001), WTO member governmentsstressed that it is important to im-plement and interpret TRIPS in away that supports public health, bypromoting both access to existingmedicines and the creation of newmedicines. They, therefore, alsoadopted a separate Declaration onTRIPS and Public Health and agreedthat TRIPS does not and should notprevent members from taking mea-sures to protect public health. Theyunderscored countries’ ability to usethe flexibilities that are built intoTRIPS, including “compulsory li-censing” and “parallel importing”.They also agreed to extend exemp-tions on pharmaceutical productpatent protection for LDCs until2016.

On the issue of providing flexi-bility to countries that are unable toproduce copies of patented drugs do-mestically, members, in Paragraph 6of the Declaration, assigned furtherwork to the TRIPS Council to sort outhow to provide extra flexibility tosuch countries.

Article 31(f) of TRIPS says prod-ucts made under compulsory licens-ing must be “predominantly for thesupply of the domestic market”. Thisapplies to countries that can manu-facture drugs. It limits the amountthey can export when the drug ismade under compulsory licence. Andit has an impact on countries unableto make medicines and thereforewanting to import generics. They

would find it difficult to find coun-tries that can supply them with drugsmade under compulsory licensing.

This problem was resolved on 30August 2003 through a “Decision onthe Implementation of Paragraph 6”.WTO members agreed on legalchanges to make it easier for coun-tries to import cheaper genericsmade under compulsory licensing ifthey are unable to manufacture themedicines themselves. The decisionwaives exporting countries’ obliga-tions under Article 31(f) – any mem-ber country can export generic phar-

maceutical products made undercompulsory licences to meet theneeds of importing countries, pro-vided certain conditions are met. Thewaiver is interim, the ultimate goalwas to amend TRIPS itself within thefirst half of 2004. However, this dead-line has been missed.

In this regard, the LDCs have de-manded that there is a need to ur-gently amend TRIPS to incorporatethe “30th August 2003 Decision onthe Implementation of Paragraph 6of the Declaration of TRIPS and Pub-lic Health” as a permanent solutionto the problems of countries with in-sufficient or no manufacturing ca-pacity.

Patents, Drug Prices and AccessThere is a growing concern in theSouthern world that the monopoly

created by patents on pharmaceuti-cal products would increase drugprices and thus would lead to pub-lic health crisis in the developing andleast developed countries. However,many others opine that since over 90percent of the drugs on the WorldHealth Organisation’s (WHO) “es-sential drugs list” are off-patent, itwould not be wise to conclude thatthe patenting of pharmaceuticalproducts under TRIPS would resultin an increase in the price of all med-icines and would negatively affectthe public health situation in the de-veloping and least developed coun-tries. But countries that are demand-ing for fair treatment of IPRs in thefield of public health are not con-vinced with these arguments for thefollowing reasons.

First, there is a greater chance ofan increment in the price of the re-maining 10 percent of pharmaceuti-cal products, which are not in the es-sential drugs list. Secondly, whiledrug prices for the new and existing(known) diseases such as HIV/AIDSare already higher, there is everypossibility that the drug prices forthe new and emerging (unknown)diseases will be high due to patents.Thirdly, even in the case of 90 per-cent of drugs under the essentialdrugs list, there can be an increasein price if more effective and im-proved drugs enter the market re-placing the drugs under the essen-tial drugs list.

Therefore, the global negotiationsdealing with pharmaceutical prod-uct patents and public health at theWTO hold importance for develop-ing and least developed countries.The negotiations should focus onensuring cheaper and affordable ac-cess to medicines and must enablethese countries to capitalise onTRIPS’ flexibilities. While enactingintellectual property laws at the do-mestic level, as required by TRIPS,these countries need to make maxi-mum use of TRIPS’ flexibilities (suchas compulsory license and parallelimport). However, it remains to beseen whether or not future negotia-tions would provide countries with“more flexibilities” to protect publichealth. n

UNDERSTANDING WTO

It is important thatdeveloping and leastdeveloped members

understand how TRIPSrelates to public health,

how the agreementcould affect the publichealth situation in their

countries, and whatflexibilities the

agreement providethem to address public

health concerns.


Shyamal Krishna Shrestha

Trade disputes have surfaced sincethe abolition of the Agreement on

Textiles and Clothing (ATC) on 31 De-cember 2004. The stakes in the US$400 billion global textiles and cloth-ing (T&C) industry are high due tovested interests of China, the Europe-an Union (EU) and the United States(US) – representing the major suppli-ers and buyers. As far as many devel-oping countries and least developedcountries (LDCs) are concerned, it isevident that country competitivenessmatters in a liberalised trade regime,as much as a level playing field.

The Multi-Fiber Arrangement(MFA) – constituted in 1974 – enableddeveloping country exporters to ac-quire a foothold in the European andUS markets. The T&C sector compris-

es a major share in the manufactur-ing sectors in many low-income na-tions, where it emerged as a vitalsource of export led-growth. Whenthe World Trade Organisation (WTO)was formed in 1995, the ATC soughtto free the T&C sector from quotasbeginning 1 January 2005.

In the wake of the ATC expiry,competition has intensified with ram-ifications for international trade.While upgrading is vital for produc-ers to remain competitive, trade poli-cies have also put increasing compet-itive pressures on producers every-where. Some developing countriesfrom the Caribbean Basin and Sub-Saharan Africa have been able tomaintain their competitiveness due topreferential (duty-free) access to theUS market while least developedcountry (LDC) producers in Asia and

the Pacific region have been unableto do so.

The Chinese onslaughtWith a total share of 25 percent of T&Cexports in 2004, China’s strong per-formance in the months after the ATCelapsed has caused frictions with theEU and the US. Verbal exchangesspanned for several weeks before theUS imposed ‘safeguard’ quotas onseven categories of Chinese textiles.An eleventh hour agreement on 11June imposed voluntary export re-straints on Chinese T&C products tothe EU before the latter erected its owntrade barriers.

US Commerce Department statis-tics released on 1 April showed thatChinese T&C imports into the coun-try were 63 percent higher in the firstquarter of 2005 compared to 2004. As

Trade wars insectorT C&

TRADE DISPUTES


a response, the US Committee for theImplementation of Textile Agreements– an interagency US governmentgroup chaired by the Department ofCommerce – announced on 13 Maythe initiation of ‘safeguard proceed-ings’ to determine whether certainChinese T&C imports were disrupt-ing the domestic market; as they in-creased by approximately 1,240 per-cent, 1,500 percent and 300 percentfor three categories, viz., cotton T-shirts and blouses, cotton trousersand cotton underwear, respectively.In the EU, imports of Chinese pull-overs and men’s trousers rose by morethan five times whereas imports of T-shirts and blouses nearly doubledalthough prices fell by as much as aquarter. The EU reacted sharply to ris-ing Chinese T&C import levels, con-stituting 20 percent of its market byannouncing ‘an early warning sys-tem’. This provision allows Chineseimports of particular products to in-crease by 10 – 100 percent before trig-gering investigations to determinetheir impact in terms of trade flowsand possible injury to the EU indus-try. China vehemently opposed thesemoves by the US and the EU, termingthem unfounded and a protectionistgarb to deter Chinese export perfor-mance that would undermine its ownbelief in free trade.

The EU and US repulseThe EU and the US have the discre-tion to impose quotas to offset fur-ther rise of China’s T&C imports, ac-cording to ‘Textile Safeguards Pro-vision’ included in China’s Protocolof Accession to the WTO. As a con-ciliatory move, China announced on20 May that it would raise exporttariffs by as much as 400 percent on74 types of textile products (but cov-ering only one-fifth of Chinese ap-parel exports) beginning 1 June butlater revoked the step when the EUand the US decided to proceed withrestrictions. The EU gave China un-til 11 June to check its export surge,failing which it would follow the USin imposing quotas. However, aneleventh hour agreement in Beijingbetween EU Trade Commissioner Pe-ter Mandelson and Chinese Com-merce Minister Bo Xilai on 10 June,

resulted in a settement. The deal lim-its 10 categories of Chinese T&C ex-ports to the EU to between 8 - 12.5percent growth above a specifiedbase period until 2008. The EU even-tually dropped its intention to im-pose import restrictions against Chi-nese textiles.

Meanwhile, the target of US criti-cism is not only against Chinese T&Cexports per se but also at China’s ex-change controls, which it accuses ofbeing used soley to the benefit of Chi-nese exporters. China’s currency – theyuan – has been pegged to the USdollar at an exchange rate of 8.28 toone since 1995. The Chinese econo-my has witnessed rapid economicgrowth, accumulation of huge foreignexchange reserves, large foreign di-rect investment inflows and balanceof payments surplus. At the sametime, the US dollar has depreciatedin world markets, which has also ledto depreciation of the yuan. An up-ward revision of China’s exchangeregime had thus been long overdue.A manifestation of its undervaluedexchange rate is that it distorts pricesand gives an artificial advantage tonational exporters at the cost of ex-porters in the rest of the world. TheUS further estimated that the yuanhas been undervalued by 27.5 per-cent; a bill was introduced in the USCongress on 27 May, threatening toimpose a 27.5 percent tariff on all Chi-nese imports to the US should Chinafail to change its monetary policy byNovember 2005. China acknowl-edged the need for exchange rate re-form but has categorially stated thatany decision to intervene in its for-eign exchange markets would not bemade under external pressure. In thefirst week of July, China revauled itscurrency by 2.1 percent and alsopegged it to a basket of currencies in-stead of the US dollar. Nevertheless,US quotas on Chinese imports remaineffective.

Casualty: Free tradeThe transition to the quota free regimein the T&C sector has been far fromsmooth. Instead, events proved thatprotectionism in various guises exists.

China’s failure to restrain its ex-port surge runs countrary to its bind-

ing commitments when joining theWTO. Both the EU and the US canimpose ‘safeguard measures’ to re-strict the growth of Chinese T&C ex-ports to 7.5 percent, renewable annu-ally until 2008. The safeguard provi-sion was primarily invoked to smooththe transition in the post ATC era forproducers facing the ‘new competi-tion’. This is understandable as Chi-na is a rapidly growing economy andalready accounts for around a quar-ter of US T&C imports and one-fifthof EU T&C imports. Domestic textilelobbies, strong in both the EU and theUS, would repel any Chinese actionto dominate their markets. However,the proposed US legislation to tax allChinese imports unless China reval-ues the yuan, is utterly meaninglesssince the product/s under dispute areonly T&C and not other goods. Theyuan’s under-valuation by 27.5 per-cent is subject to debate and its reval-uation is best left for the Chinese au-thorities to decide. In the near future,both quotas and tariffs on ChineseT&C products would lead to a rise intheir prices, making them expensiveto consumers in the EU and the US.With Chinese products becoming ex-pensive, buyers have the option ofsourcing from other emerging low-cost and efficient suppliers. Mean-while, the new deal between Chinaand the EU requires monitoring toavoid trade disputes from resurfac-ing.

Although the expiry of ATC lib-eralises trade in the T&C sector, thecurrent trade regime is characterisedby preferential trade agreementssuch as the African Growth and Op-portunity Act (AGOA) and Caribbe-an Basin Partnership Treaty Act(CBPTA). The US has yet to providesimilar treatment to textile-depen-dent LDCs in Asia and the Pacific,which are facing the brunt of stiffcompetition through factory closuresand lay-offs of workers. These coun-tries could be well placed for growthif provided with duty free marketaccess. Granting of similar prefer-ences by the US to LDC T&C produc-ers in Asia and the Pacific region hasbecome urgent required to save mil-lions from being the victims of un-bridled liberalisation. n

TRADE DISPUTES


International food safety regula-tions are emerging as a source of

friction between developed anddeveloping countries. Theseregulations have acted as non-tariffbarriers (NTBs) for exports fromdeveloping countries as developedcountries have used them with aprotectionist intent. In particular,agricultural exports from develop-ing countries are the most affected.

These are some of the issues thebook Food Safety Regulation Con-cerns and Trade: A DevelopingCountry Perspective – jointly editedby researchers Dr Rajesh Mehtaand Dr J George, affiliated toResearch and Information Systemsfor Developing Countries, NewDelhi – attempts to address.

For anyone examining theproblems faced by developingcountries with regard to marketaccess in developed countries, theone that would prominently featurewould be the NTBs arising in thepretext of food safety. There areconcerns that developed countriesmisuse the flexibility availableunder the Agreement on the Appli-cation of Sanitary and Phytosani-tary (SPS) Measures by imposingstandards higher than internationalnorms through stringent regula-tions on the basis of very detailedenvironmental risk assessments.The 10 chapters deal with variousfacets of food safety regulation andsanitation issues as well as somecountry specific case studies.

The relevance of this book liesnot just in its overall content, but

chapter also provides an overviewof the multilateral arrangementsand India’s national policyframework relating to food safetyregulations.

Several case studies providedin the book help to quench readers’thirst to learn of the implications ofthe food safety regulations onspecific industries. For example,chapter 8 on ‘Response of PoultrySector to SPS Measures’ wouldcertainly be an issue of interest tonot just the industry-relatedreader, but also to others who wantto enhance their understanding ofthe ramifications of food-relatedregulations.

Though the book tries tosimplify technical issues, theshortcoming is that the book doesnot go far enough in this regard. Forinstance, the complex formulaeused in some of the chaptersdemand further explanation andclarification for a better under-standing.

Altogether, 13 authors havejointly and individually contribut-ed to this book. The editors havejointly authored the first and thelast chapters. The book is indis-pensable not just for someone whois aware of the food safety issues,but also to the wider developmentcommunity. Last but not the least,the book’s high standard is owed toits excellent editing. n

(Mr Sharma, a Kathmandu-basedfreelancer, writes on trade anddevelopment issues)

Food safety regulation concerns and trade:

The developing country perspectiveSeveral case studies provided in the book help to quench readers’ thirst to learn of the implications

of the food safety regulations on specific industries.

Bhaskar Sharma

Title: Food Safety Regulation Concernsand Trade: The Developing Country

Perspective

Editors: Rajesh Mehta and J George

Publisher: Macmillan India Ltd., 2005

ISBN: 1403 92504 6

Price: Rs 345 (Indian Rupees)

also in the manner the chaptershave been structured. Though alarge part of the book is viewed inthe Indian context, it also addressesrelevant issues of concern andinterest to all developing countries.

The reader is first introduced tothe key issues relating to foodsafety from a global and localperspective. The introductory

BOOK REVIEW


Nepal’s position forLivingstone and Hong Kong Meetings

MDGs and tradeSAWTEE and ActionAid Interna-tional Nepal organised the Seven-teenth Forum on Globalisationand WTO on 25 August 2005 on‘The Role of Trade in AchievingMDGs’ in Kathmandu.

The participants in the forumstressed the importance of anopen, rules-based, predictable,non-discriminatory trading andfinancial system in helping poorcountries acheive the MillenniumDevelopment Goals (MDGs).Since Goal 8 (Develop a GlobalPartnership for Development)provides a room for partnershipbetween the developed and devel-oping countries, the participantsopined that the developed coun-tries should fulfill their commit-ments they have pledged underGoal 8.

The participants viewed thattrade can hardly contribute topoverty reduction without back-ward linkages. The participantsalso stressed that internationaltrade policies should not adverse-ly affect the poor in developingand least developed countries.

The forum was organisedahead of the United Nations Sum-mit to be held from 14-16 Septem-ber in New York. n

SAWTEE and ActionAid Internation-al Nepal jointly organised the three-day national seminar titled ‘Road toHong Kong’ from 16-18 June 2005 inKathmandu. At the end of the semi-nar, government officials, civil soci-ety actors, academicians, lawyers,private sector representatives andjournalists issued a 37-point resolu-tion.

The resolution was adopted witha view to helping His Majesty’s Gov-ernment of Nepal prepare a nationalposition for a Meeting of the TradeMinisters of 31 least developed coun-tries (LDCs) held in Livingstone,Zambia from 25-26 June 2005 and itsnegotiation strategy for the Sixth Min-isterial Conference of the World TradeOrganisation (WTO) to be held inHong Kong from 13-18 December2005.

Expressing disappointment withthe slow progress in negotiations onissues of utmost importance to theLDCs, the resolution calls for, among

others, the following initiatives:• Various preferential facilities of-

fered by the developed and devel-oping countries to the LDCsshould be bound at the WTO.

• Duty free and quota free access toLDC products should be providedin developed as well as develop-ing countries and bound at theWTO.

• All the non-tariff barriers on exportinterest to the LDCs should be elim-inated.

• The LDCs should be providedwith unconditional and need-based technical assistance to en-hance their competitiveness andaddress their supply-side con-straints.

• Developed countries should allowfree movement of natural personsfrom LDCs in all categories(skilled, semi-skilled and un-skilled), without linking them withcommercial presence no later than2007.

• Developed countries should elim-inate overly burdensome visa re-quirements and qualificationschemes for the movement of natu-ral persons.

• The transit rights of landlockedcountries should be established ona multilateral basis.

• The process of reconciliation ofConvention on Biological Diversi-ty and Trade Related Aspects ofIntellectual Property Rights shouldbe expedited.

The resolution also calls for ad-dressing the special needs of theLDCs, in particular the landlockedLDCs, for their effective and meaning-ful integration into the multilateraltrading system. n

AFTER the completion of the threeyear regional programme titled ‘Se-curing Farmers’ Rights to Livelihoodin the Hindu-Kush Himalaya Region(FRP Phase I)’ in 2004, SAWTEE to-gether with its partners in Bang-ladesh, India, Nepal, Pakistan and SriLanka initiated the second phase ofthis programme (FRP Phase II) foranother three year period. FRP PhaseII seeks to protect farmers’ rights, withits focus on mountain areas of fiveSouth Asian countries. The projectaddresses farmers’ rights issues –access and benefit sharing, prior in-formed consent and farmers’ activeparticipation in the decision makingprocess – in the context of globalisa-tion and the World Trade Organisa-tion (WTO) regime.

Under the project, SAWTEE’spartners in India, Nepal, Pakistanand Sri Lanka – Consumer Unity &Trust Society, Kolkatta; Forum for Pro-

tection of Public Interest, Kathmandu;Sustainable Development Policy In-stitute, Islamabad; Law & SocietyTrust, Colombo – organised the NeedAssessment Workshops on Farmers’Rights between May and August intheir respective countries.

These workshops were organisedto consult with the stakeholders, in-cluding farmers and their groups,government authorities, civil societygroups, and experts, and discuss theintervention strategies that need to bedesigned for the successful imple-mentation of the project at the nation-al level in respective countries. A wideand in-depth discussion with thestakeholders ultimately helped SAW-TEE and its partners to plan their fu-ture strategies for the implementationof the project. Besides, the workshopsalso helped to network with thesestakeholders and build alliances withlike-minded organisations. n

Workshops on Farmers’ Rights

NETWORK NEWS


SAWTEE and Centre for Trade andDevelopment (CENTAD) – an OxfamGB Initiative – New Delhi jointly or-ganised the three-day regional train-ing seminar for South Asian journal-ists titled ‘Road to Hong Kong’ from11-13 July 2005 in Pokhara, Nepal.The seminar culminated in the forma-tion of South Asian Centre of Econom-ic Journalists (SACEJ). SACEJ is aloose network that aims to establishlinkages between economic journal-ists in the region.

Mr Shafqat Munir, a senior jour-nalist from Pakistan, is the Convenorof the network while journalists fromBangladesh, India, Nepal and SriLanka are its members.

The objectives of the training sem-inar were two-fold:

• To take stock of issues in the con-text of the Sixth World Trade Or-ganisation (WTO) Ministerial tobe held in Hong Kong from 13-18December 2005.

• To orient and build the capacityof economic journalists in the re-gion in the context of understand-ing issues under the ambit of theWTO and encourage them to help

mainstream public interest dimen-sions in the trade negotiating pro-cess.

The training were provided on issuessuch as introduction to the multilat-eral trading system; agriculture; non-agricultural market access; services;standards; trade facilitation; intellec-tual property rights; trade and devel-opment; and dispute settlement.

The South Asian trade experts

CONSUMER Unity & Trust Cen-tre, Centre for International Trade,Economics & Environment (CUTS-CITEE), Jaipur, in association withFriedrich Ebert Stiftung (FES), NewDelhi, organised a regional semi-nar on ‘Economic Cooperation inSouth Asia’ in Colombo from 7-9May 2005. The main objectives ofthe seminar were:

• To facilitate cross-fertilisationof experiences and lessons

learnt on economic cooperation(especially on trade andinvestment issues) amongSouth Asian countries in orderto develop appropriate policyresponses.

• To discuss South Asia’sposition on global economicissues, its relations with otherregional groupings and re-sponse to global developments.

• To identify initiatives that couldbe taken to enhance economic

Economic Cooperation in South Asiacooperation among SouthAsian countries.

• To enhance understanding ofthe role that civil society canplay for greater economiccooperation in South Asia.

Representatives from aca-demia, businesses, governments,inter-governmental organisations,and civil society organisations ofSouth Asian countries participat-ed in the seminar. n

South Asian Centre of EconomicJournalists formed

made presentations on these issuesto enable the media persons under-stand their implications on the SouthAsian economies. The seminar wasinstrumental in creating greaterawareness among the participants onthe need to put development at theheart of trade negotiations.

Forty participants – including 32economic journalists hailing fromBangladesh, India, Nepal, Pakistanand Sri Lanka – participated. n

NETWORK NEWS


Linking Civil Society with Trade NegotiationsUNDER the coordination of CUTSCentre for International Trade,Economics & Environment (CUTS-CITEE), Jaipur, national consulta-tion meetings in various SouthAsian capitals during the secondand third weeks of September 2005are being organised. The meetingsare being held under ‘WTO DohaRound & South Asia: Linking CivilSociety with Trade Negotiations’project, being implemented in fiveSouth Asian countries. The periodof the project is 15 months startingon 1 January 2005 and completingon 31 March 2006.

The first consultation meetingwill be held on 12 September inIslamabad, in collaboration withPakistan Institute of DevelopmentEconomics; the second on 15

September in Dhaka, in collabora-tion with Bangladesh Institute ofDevelopment Studies; the third on17 September in New Delhi; thefourth on 19 September in Kath-mandu, in collaboration withSAWTEE; and the fifth on 22September in Colombo, in collabo-ration with Institute of PolicyStudies. These consultationmeetings are a part of Multi-stakeholder Consultation Processof the project, which would help intaking inputs from various stake-holders on issues being negotiatedat the WTO.

During consultations, research-ers from Bangladesh, India, Nepal,Pakistan and Sri Lanka willpresent their papers on agriculture,non-agricultural market access,

CUTS-Africa Resource Centre or-ganised the three-day workshop ti-tled ‘Pre-Hong Kong LDC Civil So-ciety Consultative Forum,’ in Liv-ingstone, Zambia, from 23-25 June2005. The workshop was organ-ised in collaboration with Civil So-ciety Trade Network of Zambia andOrganisation Development andCommunity Management Trust.

The objective of the workshopwas to identify the key trade anddevelopment issues of least devel-oped countries (LDCs) in light ofthe LDC Trade Ministers’ Meetingthat was held in June 2005 and theSixth World Trade OrganisationMinisterial to be held in December2005.

The Civil Society ConsultativeForum called upon the WTO mem-bers to conclude negotiations un-der the July Package in a mannerthat benefits the LDCs. The Forumsuggested the WTO members to beguided by global commitments tosustainable development and pov-erty reduction.

The Forum also urged the LDCMinisters to expediate national ef-forts for sustained growth and de-velopment, including attainment ofthe Millennium DevelopmentGoals. Calling upon the developedcountries to further work underGoal 8 (Develop a Global Partner-ship for Development), the Forumasked them to address the specialneeds of the LDCs, including theirdebt problems. n

LDCCivil Society Forum

SAWTEE bid farewell to its Execu-tive Director, Mr Ratnakar Adhikari(on left), who joined United NationsDevelopment Programme RegionalCentre in Colombo from 22 August2005 as Programme Specialist. Dur-ing his new job tenure, Mr Adhikariwould be responsible for the project‘Industrial Diversification in AsianLeast Development Countries in thepost-Agreement on Textiles andClothing era’. The project countries

are Bangladesh, Cambodia, Laos andNepal.

Mr Adhikari was founder Gener-al Secretary and Executive Director ofSAWTEE during 1999-2001 and2003-2005.

Mr Navin Dahal, formerly Re-search Director of SAWTEE, assumedthe post of Executive Director from 18August. Mr Dahal has 12 years ofwork experience in private, publicand development sectors. n

Change in SAWTEE leadership

services, trade facilitation and‘development dimension’. Theseissues have been taken for furthernegotiations by July Package,adopted by WTO members in 2004.JP provides the basis on which theDoha Round of trade negotiationswill progress. n

NETWORK NEWS


Launched in December 1994 at Nagarkot, Nepal by a consortium of South Asian NGOs, South Asia Watch onTrade, Economics & Environment (SAWTEE) is a regional network that operates through its secretariat inKathmandu and member institutions from five South Asian countries, namely Bangladesh, India, Nepal, Paki-stan and Sri Lanka. Registered in Kathmandu in 1999, the overall objective of SAWTEE is to build thecapacity of concerned stakeholders in South Asia in the context of liberalisation and globalisation.

Title: Farmers’ RightsPublisher: SAWTEE

Editor: Mr Ratnakar AdhikariAssociate Editor:

Mr Kamalesh Adhikari

Title: From Doha to Hong Kong:Issues for South AsiaPublisher: SAWTEE

Authors: Mr Ratnakar Adhikari andMr Shyamal Krishna Shrestha

Farmers’ Rights in the context of

Globalisation and WTO

MULTILATERAL trade negotiations under Doha Development Agenda(DDA), which resumed after the collapse of the Fifth Ministerial of theWorld Trade Organisation (WTO) in Cancún in September 2003, culmi-nated in the General Council meeting in July 2004 that adopted ‘JulyPackage’ (JP). Subsequent meetings have met with little success as far asreaching agreements on various issues under DDA is concerned. JP hasset end July 2005 as the deadline to arrive at ‘first approximations’, i.e.,broad consensus on five issues: agriculture, non-agricultural market ac-cess, services, trade facilitation and development dimension. The successof the Sixth WTO Ministerial in Hong Kong to be held from 13-18 Decem-ber 2005 depends on successful talks among members. Developing coun-tries, including those in South Asia, have a high stake on the successfulcompletion of the Ministerial.

This briefing paper analyses the issues being negotiated under JP andother issues under DDA with a view to identifying South Asian prioritiesfor the Hong Kong Ministerial. It also deals with the concerns that thesecountries have in relation to further negotiations on such isues and sug-gests the governments to take a proactive and unified stance during fu-ture negotiations. n

From Doha to Hong Kong:Issues for South Asia

SAWTEE – in the capacity of Secretariat of Farmers’ Rights AdvocacyNetwork (FRANK) – has started publishing a four monthly newslettertitled “Farmers’ Rights”. The newsletter deals with issues concerningfarmers in developing and least developed countries, South Asian coun-tries in particular, in light of developments taking place in the globalisa-tion and the World Trade Organisation (WTO) era.

The first issue of the newsletter was published in July 2005. The newslet-ter covers articles dealing with “interfacing breeders’ rights with farm-ers’ rights”, “disclosure requirement”, “access and benefit sharing” and“prior informed consent”, particularly in the context of intellectual prop-erty right rules and biotechnology. SAWTEE’s network institutions fromBangladesh, India, Nepal, Pakistan and Sri Lanka have contributed coun-try case articles that focus on legal and policy frameworks to protectfarmers’ rights in respective countries.

FRANK was launched at Cancún in September 2003 during the FifthMinisterial of the WTO. A group of international civil society organisa-tions, namely SAWTEE, Gene Campaign, ActionAid International, andConsumers International sponsored the initiative at a panel discussionon “The TRIPS Review: A Roadmap for Protecting Farmers’ Rights”,which was organised on 11 September 2003. n

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