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| Kathmandu, Saturday March 08, 2003 Falgun 24, 2059. |
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Costs are immediate and real
By RATNAKAR ADHIKARI
Notwithstanding the gains of the WTO accession,
there are several challenges Nepal is bound to face. The costs of WTO membership are
immediate and real, unlike the benefits, which are potential and intangible. We should,
therefore, prepare a suitable strategy so as to ensure that the costs of the WTO
membership are minimised or contained through the use of proper safeguards. This calls for
identification and through evaluation of the costs to be incurred and the possible
mitigating factors.
The first and foremost condition for a free,
liberal and open economy is the existence of a mechanism to protect competition and
competitive processes. Since the raison d’etre of the free trade is promoting
competition, making efficient allocation of productive resources and providing greater
choices to the consumers, it becomes the responsibility of the State to ensure that big
companies do not abuse their market power and engage in monopoly or anti-competitive
practices. What we need to see is how much are we geared towards facing this challenge in
the post-accession era. One way of doing it is to have an effective competition policy in
place supported by a competition law.
Secondly, the inclusion of Trade Related Aspects
of Intellectual Property Rights (TRIPS) Agreement in the WTO goes against the principle of
trade liberalisation ushered in by the WTO as it facilitates the use of ‘limited
monopolies’. This Agreement in its present form is extremely deleterious to the
interests of the Nepalese farmers, indigenous communities, consumers, biodiversity and
traditional skills, knowledge and practices. To prevent an open assault of the TRIPS
Agreement on our livelihood, legislation aimed at protecting biodiversity, farmers’
rights and rights of the indigenous communities need to be enacted and effectively
enforced. Moreover, in order to prevent piracy of our genetic resources and traditional
knowledge, which is indirectly perpetuated by this very Agreement, the government should
initiate the process for their documentation and/or registration. However, the problem is
HMG/N has been moving at snail’s pace in this direction.
Thirdly, complete liberalisation of agriculture
sector will breed food insecurity for a net food importing country like Nepal due to the
possible wiping out of the farming communities coupled with increase in global food prices
resulting from massive reduction in subsidies provided by the developed countries.
However, this situation could be completely reversed if we could become a net food
exporter and take advantage of whatever incremental market opening come our way. In order
to ensure that it is indispensable to implement Agriculture Perspective Plan (APP) fully
and faithfully. Lack of political and bureaucratic commitments to implement the APP is a
matter of grave concern for all. This needs to be corrected as an issue deserving topmost
priority.
Fourthly, as is being often argued, the WTO will
trigger dislocation in some of the vital nerves of our economy. Readymade garment sector,
the number one foreign exchange earner for the country at the moment, is one of them. The
vulnerability of this sector is evidently clear because of the heavy dependence of our
export on quota items, which occupy 80 percent business of this sector. After 2004, due to
eventual phase out of quota system granted to Nepal under the Multi-Fibre Arrangement,
this sector is likely to receive a shot on the arm. But the government does not seem to
have any programme in hand at this stage to tackle this inevitable crisis.
Fifthly, Nepal already has a very low tariff
structure due to autonomous and/or Bretton Woods Institutions [The World Bank and the
International Monetary Fund (IMF)] led liberalisation measures. At the time of entering
the WTO, if we bind our tariffs at a low level it would not be possible for us to raise
them to a higher level at a later stage. Therefore, we should bind our tariffs at a
sufficiently higher level and ensure that tariff reduction does not lead to
de-industrialisation or cause devastation to our agriculture sector. We should at least be
allowed to bind our tariffs at least at the level of other South Asian member countries of
the WTO.
Sixthly, the implementation costs of the WTO
Agreements are enormous. As per a study conducted by the World Bank, the cost of
implementing three agreements, namely, TRIPS, Agreement on Sanitary and Phytosanitary
(SPS) Measures and Agreement Customs Valuations was US$ 130 million. Assuming that Nepal
is a much smaller country in terms of size as well as economy, it might have to incur 10
times less than that, which is still a substantial amount. The implementation of these
agreements is not only mandatory as per the WTO, but is also important for enhancing our
export base as well as for attracting foreign direct investment. If this resource has to
be spent from the regular budget of the government, it would mean further cut in social
sector spending. Whether to channel scare resources on education, health and
infrastructure or spend them on pursuing the trade liberalisation agenda under the WTO is
a difficult political question for our government. Fortunately, there are some
multilateral and bilateral lender/donors, which are willing to provide such funds to a
country like Nepal, provided we could make a genuine case for such assistance.
Finally, it is learnt that during the
accession negotiations, developed member countries of the WTO are asking Nepal to assume
"WTO-plus" commitments, i.e., more commitments than what the WTO would normally
ask an LDC to make. This will entail additional burden on a resource strapped country like
Nepal. Moreover, imposing of such conditions for the WTO accession is not at all
justified. But our negotiators have to provide solid arguments to these members to prove
that Nepal deserves to be treated properly and impartially.
Given the difficulty in quantifying the benefits
and costs of Nepal’s accession to the WTO and due to dearth of study as well as lack
of data on these issues, it becomes imperative for us to conduct an in-depth study from
these perspectives. While Ministry of Industry, Commerce and Supplies has been making
endeavours towards this end, due to lack of financial, human and institutional resources,
the efforts of the Ministry cannot be considered upto the mark as demanded by the breadth
and depth of the issues and their long-term implications. Therefore, business
associations, civil society, academia and other sectors which have high stake in Nepal’s
accession to the WTO should join hands to conduct such studies and disseminate them for
the benefits of the stakeholders at large. Time is running out, we cannot afford to wait
any longer.
(Concluded)
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