July 22, 2005, Business Standard

Islamabad,19 August 2004: Cooperation among Southern countries through consensus building on trade and trade policy issues is essential to ensure a concerted approach to counter-balance the hegemony of developed countries in designing and implementing trade policies. These were the general observations voiced by the experts and participants during the second day of a regional conference on WTO issues being held at Islamabad.

At the session on the future of Singapore issues, the keynote speaker, Mr. Pradeep Mehta from CUTS International stated that developing countries had balked in including these issues in trade talks, specifically investment rules, because many wanted to retain control over their own key industrial sectors. The complexity of negotiating completely new areas would have left them at a disadvantage, compared to the rich countries.

Participants demanded an accelerated pace of clarification for these issues, as enhanced awareness in the South might lead greater participation in negotiations. It was argued that although there has been some technical assistance provided since Doha, it was mainly in the form of donor-driven workshops. It was felt that the capacity of Southern countries to negotiate and implement new obligations had not increased considerably.

On competition policy, Prof. Manoj Pant of Jawaharlal Nehru University stated that developing countries were not in a position to undertake many obligations and a harmonisation of competition laws across the board may not be in the interest of trade as each country’s policy was determined by its domestic needs and culture. As a result, the one-size-fits-all approach would not work.

Former Indian Ambassador to the WTO, Mr. S. Narayanan, while sharing his experiences of the Doha meeting said that India had all along questioned the legitimacy of including the Singapore issues in the WTO programme. It had maintained that the issues are not for multilateral negotiations as they impinge on the sovereignty of individual countries.

On investment, many participants said that a multilateral agreement might erode governments’ ability to regulate and formulate investment policies. An investment framework advocated by the proponents would prevent or limit the host government’s ability to regulate the entry and operations of foreign firms and funds, and its ability to assist or give preference to local firms. Local firms may lose protection and assistance provided by the state. The prohibition on government to regulate the flow of funds could lead to financial instability, balance of payments problems and increased external debt.

On trade and competition policy, an extremely complex issue subject to different interpretations, there is a need for governments to assist and promote local firms so that they may be viable and develop despite their present relative weakness, to enable them to successfully compete with foreign firms and their products. However, there were apprehensions that the market access approach of developed countries may eventually win out, due to their higher negotiating capacity and influence.

On trade facilitation, the participants expressed serious concerns that it may lead to imposition of new obligations on developing countries that would be costly and difficult to implement.

Dr. Saman Kelegama, Executive Director of Institute of Policy Studies, Sri Lanka, while speaking at a session on trade in textiles & clothing, stated that two stages of the phase-out of the present quota regime have passed, but little meaningful integration had taken place. Exports will improve with relocation of industry from developed to developing countries, but the maximum relocation will be in South Asia. The region will gain from the new (post-2004) trade regime on textiles & clothing, with India & Pakistan benefiting from low wages and domestic capacity.

However, China is expected to dominate global trade in textiles & clothing, increasing its share to 50 percent after 2005. Sri Lanka, Thailand and the Philippines are expected to lose out due to dependence on imported fabrics. However, environmental, labour, health and other safety standards may be used to circumvent the quota-free trade regime. He further argued that one of the most important aspects of garment exports is to highlight the importance of this sector with people’s livelihoods.

According to Dr. Aradhana Agarwal of Indian Council for Research on International Economic Relations, even in a quota-free regime the question as to which country would gain out of the new regime will depend on the sectoral competitiveness of that country. In India, there is little investment in technology and machinery. Apart from this, transaction cost is very high. India is already loosing out to China and although it is predicted that the country will gain from the quota-free trade regime this might not actually happen, she argued.

Dr. Atiur Rahman of Bangladesh Institute of Development Studies said that textiles and clothing is an extremely important sector for Bangladesh. If this sector collapses, there will be very serious repercussions on the Bangladeshi economy.