World Trade Organisation and Pakistan

By Asad, S. Hasan | Economic Review, April 1995 | Go to article overview

World Trade Organisation and Pakistan


Asad, S. Hasan, Economic Review


World Trade Organisation (WTO) came into being on January 1, 1995 after several years of negotiations under Uruguay Round of talks for freer trade. Under the new trade accord, which was signed in Morocco last April and went into force on January 1, with the launch of WTO the big power agreed to phase out the Multi-Fibre Agreement over the next ten years and bring textile under GATT/WTO. It is hoped that in ten years' time, the tariff will be reduced to zero. The developed countries having upper hand will be the ultimate gainers. WTO would facilitate the implementation of multilateral trade agreements concluded as a result of GATT negotiations. WTO now provides a forum for future talks among 128 members of GATT who will be absorbed in WTO.

After signing of the agreement under WTO treaty, Pakistan has opened up its markets for foreign products. WTO, which has succeeded GATT with much greater powers, has recently asked Pakistan to reduce the tariff and liberalise the trade particularly in the case of textile which forms the backbone of the industrial sector and contributes over 60 per cent to the foreign exchange earnings. The WTO report has observed that despite certain steps, Pakistan still maintains high tariffs. Pakistan h as already reduced maximum import tariff from 92 per cent to 70 per cent during the current year compared to the unprecedented 225 per cent a few years back and plans to reduce it further to 35 per cent by 1996. This paper seeks to analyse the raison d'etre of WTO and its implications for Pakistan in particular and developing countries in general.

WTO, in fact, is third in the series of international organisations after World Bank and IMF to dictate its terms to the developing countries in economic matters. On the multilateral bodies, the Report of the South Commission (1990) whose Chairman was Julius Nyerere, former President of Tanzania, aptly observes: "The decision-making processes that govern the international flows of trade, capital and technology are controlled by the major developed countries of the North and by the international institutions they dominate. The countries of the South are unfavourably placed in the world economic system; they are individually powerless to influence these processes and institutions and, hence, global economic environment which vitally affects their development.: (p.2) Pakistan like any other developing countries is powerless to influence the trade liberalisation sweeping the world. In the battle of supremacy, the gainers are likely to be industries in the developed countries compared with those of developing countries compared with those of developing countries because of having competitive edge with superior technology. The less developed countries have to expose their industries to foreign competition through lower tariff and trade liberalisation. In this respect, apprehension has been expressed by different countries. On the one hand, trading blocs have been found like NAFTA and EC and on the other hand, the developed countries are asking the developing countries to open their markets through GATT/WTO and IMF.

There is a clash of interests for the top slot of WTO between developed and developing countries. The contest involves an Italian Renato Ruggiero, a South Korean Kim Chul-su and a Mexican Carlos Salinas de Gortari. EU is backing Ruggiero whom US has been opposing so far. With the chance of Ruggiero being bright, US is now backing him against Kim who has withdrawn from the race and would accept a US proposal to become deputy chief. The manipulation and machination in the candidature of the highest post in WTO clearly bring to the fore the hypothesis of the hegemony of the developed countries over the less developed ones. In short, the policies framed by WTO in future will suit US and European interests more than those of Asian or African countries.

For Pakistan, the implications of lower tariff and trade liberalisation are two-fold.

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