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  • Nov 11th, 2005
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The 18-member Senate Special Committee, (commonly known as WTO committee) headed by the Minister for Privatisation and Investment, Dr Abdul Hafeez Shaikh, has recommended further reduction in protection rates for the domestic industry, which, according to the committee's observation, would be beneficial for the economy and give space to allocate resources more effectively.

The 169-page report, which is yet to be laid down before the Senate for open discussion, observed that with 25 percent reduction in maximum import duties and removal of non-tariff barriers protection to domestic industry has been considerably lowered though the effective protection rates for various industries particularly automobile may still be quite high.

Regarding import duties, the committee is of the view that reduction in import duties would force the producers to become competitive. However, there was a danger that even those firms are closed down, which have comparative advantage, adding that any sharp reduction in tariff rates could also lead to closure of firms, in addition to other factors that may raise its cost of production.

"Pakistan will have to reduce the cost of production if the producers have to face the imported products within its borders and its competitors in the world market," the committee further added.

The committee said, tariff rationalisation would help in diversifying the production structure and help in accelerating growth of the economy. It would be instrumental in diversification of Pakistan's export structure and exclusive reliance on textile for export earnings does not augur well for the long run growth of exports.

Tariff rationalisation would also be helpful in making Pakistan TRIMS complaint as the deletion programme is replaced by tariff based system.

"Developing countries should show determination to resist pressure from the industrialised world to agree to their proposals and developed countries should reconsider their positions and commit themselves to reform WTO rules to help eradicate poverty," the committee further recommended.

To deal with the anti-competitive practices of international business, the committee suggested that an independent international competition body should be established to assist developing countries acquire expertise in competitive policies for regulating the business of multinational companies.

Within the country, Pakistan should strengthen its regulatory framework, including the Monopoly Control Authority (MCA).

The other areas which the committee discussed and made recommendations are as follows:

AGRICULTURE PRODUCTION: Pakistan should effectively participate in the group of 20 and try for reduction and later on elimination of all subsidies to agriculture sector by the developed world.

With the elimination of subsidy by the developed world and removal of other restrictions leading to free trade in agricultural products, Pakistan would be able to export higher volumes of agriculture products at higher prices. Hopefully, in addition textiles, cotton, rice etc, Pakistan would be able to increase export of vegetables, fruits, flowers and plants.

Since Pakistan will face strong competition from the other developing countries, farmers must improve their productivity levels. They must ensure the production efficiency, and may opt for organic farming and value addition for becoming more competitive, the committee maintained.

The committee observed that whereas reduction in tariffs and removal of subsidies would help the exports of agriculture products, patent regime has severe implications for Pakistani farmers. Under the patent laws, new plant varieties are protected and farmers, who traditionally reuse the produce for sowing purposes, would be unable to do so.

This is because under the new technologies, the reused seed will give lower yield. Therefore, development of an indigenous R& D in Pakistan with additional resource allocation is imminent. Pakistan should support the African Group's proposal that plants, animals, micro-organisms and all other living organisms and their parts should not be patentable.

They should also confirm that the rights of small farmers to save, use, exchange and sell farm saved seeds for both protected and patented varieties will be recognised and respected.

They proposed 'Plant Breeders' Rights Act should protect the farmer's traditional practices of saving, breeding, and selling seeds. A smooth transition from local seeds to privately produced proprietary seed and from government funded subsidised seed production to multinational capital's genetically modified seeds production should be quite orderly.

The communities need to be empowered to conserve their local seeds and genetic resources because they are more resistant to diseases and needs less management, the committee continued.

The committee said, benefits of adoption of modified organisms (GMO) techniques based on experience and technology in use in the US, Canada, Europe, and other developed countries, notwithstanding lack of consensus on the basic elements of a regulatory approach and a system suited to GM crops and by-products, the costs and benefits of labelling programmes, and whether WTO disciplines remain uncertain.

SANITARY AND PHYTOSANITARY STANDARDS: Standards developed by the International Plan Protection Convention, and International Office of Epizootics (OIE) can facilitate harmonisation. However, limited resources in developing countries preclude their access and active engagement in their development.

Moreover, it is difficult for most developing countries to have their standards accepted as "equivalent" by developed countries.

Mutual Recognition Agreements (MRAs) are not feasible given the lack of modern facilities to test and certify in many countries. Even under conditions of technological parity between trading partners, such as the US, Europe and Japan, there is little evidence that MRAs will facilitate trade.

Failure to recognise equivalence of measures is a major problem confronting developing countries.

TECHNICAL BARRIERS: Whereas, the role of traditional trade barriers such as tariffs quotas and bans have declined, technical and regulatory barriers are increasingly being employed to block trade.

There has been tremendous increase in the use of technical regulations as instruments of commercial policy in multilateral, regional, and global trade. Domestic regulations that affect imports through technical requirements, testing, certification, and labelling represent an important new area of emphasis in continuing liberalisation efforts.

These NTBs incur additional costs in meeting such mandatory standards that apply to production for export markets.

In future it is likely to have more number of cases involving standards. By the end of 2000, out of 27 disputes considered by WTO with reference to TBT and SPS, only 6 were brought by developing countries, including India.

For Pakistan it is impossible to benefit from these standards unless required technical and scientific expertise is developed within the country.

Pakistani products, which do not conform to the standards and technical regulations will not be accepted by developed countries. There is a need for development of the system/policy for the WTO laws on product standards and technical regulations, in order to ensure the uninterrupted and smooth exports of various products form Pakistan.

There is a need to develop a system that will ensure improved quality, control wastes and create customer confidence to meet all ever-changing international standards.

A careful analysis of foreign markets and trade policies, especially of export destination is urgently required and the developing countries should purse it collectively. Environmental and product standards while restricting the market access to exports of developing countries, if adhered to, can be source of penetrating developed countries market.

Legal protections and safeguards are allowed under WTO and Pakistan has promulgated regulations such as anti-dumping rules, countervailing rules and safeguard regulations. However, the country requires developing technical and scientific expertise to use and benefit from those measures and protect its domestic market.

The committee suggested that Pakistan may seek technical assistance in the areas of processing technologies, research and establishment of national regulatory bodies. TBT has a direct bearing on international trade in processed foods and beverages.

The conformity to the regulations and standards should not create unnecessary obstacles. Therefore, Pakistan needs to modernise its laws, regulations and standards to promote its relatively new agriculture exports such as fruits, vegetables in raw and processed forms and to educate its producers and traders in the requirements of its international trading partners.

OPENING OF THE SERVICES SECTOR: Pakistan has so far made commitments in six of the twelve services sectors, which are business services, financial services, communication services, health and related services, construction and related engineering services and tourism and travel related services.

Apart from the commitments, there are a number of autonomous liberalisation cases as well; in financial sector, the banking companies are allowed to conduct the asset management and leasing businesses as well; in the transport sector, there are few foreign companies operating with full market access and national treatment; in express delivery and shipping services, the major part of business is with foreign-service supplies.

Pakistan should examine the implications of opening each of the service sectors on employment and production of the service sector. Pakistan may also consider where its comparative advantage lies and improve the requisite skills.

TRADE RELATED INTELLECTUAL PROPERTY RIGHTS (TRIPS): Pakistan has revised its IPR laws to make them TRIPS compliant. The Ministry of Commerce has set up, Pakistan Intellectual Property Rights Organisation (PIPRO), as an umbrella organisation in order to improve the enforcement of IPRs and wherever necessary recommend changes in the administrative and legislative framework.

Patent Office under the administrative control of the Ministry of Industries has been authorised to grant patent, under the Patent Ordinance 2000. The government has enacted a new patent law which protects both process and product patents. Patents are granted for up to 20 years from the date of application.

Legal remedies such, as injunctions are available in the case of patent infringement.

The use of flexibility's, under the TRIPS has been made in the Patent Ordinance 2000, on the move of the Ministry of Health, and in consultation with the pharmaceutical industry.

The industry is being upgraded in terms of manufacturing facilities and quality. Right now more than 70 national pharmaceutical units have got ISO certifications.

The industry has started the Research and Development facilities and in preparing for FD approved facilities. These national pharmaceutical companies should be directed to make efforts to enter foreign markets. A taskforce comprising members familiar with the entire issue should constituted to look into the problems and finding solution at national level.

It should also make co-ordinated links within the regional countries. New laws on copyrights, industrial designs, and layout of integrated circuits, trademarks and patents have been enacted.

Pakistan enacted a new Trade Marks Ordinance, which provides for registration and protection of Trade Marks and for the prevention of the use of fraudulent marks. The new ordinance replaces the Trade Marks Act 1940, which provided Trade Mark protection but did not meet all requirements of the TRIPS agreement.

Pakistan has done away with a requirement that pharmaceutical firms label the generic name on all products with at least equal prominence as that of the brand name, although they must still display the generic name.

There also have been occasional instances of trademark violations, for toys and industrial machinery.

While Pakistan has enacted IPR laws covering most domains, enforcement remains week. Pakistan is a member of the Berne convention for the protection of Literary and Artistic Works the Universal Copyright Convention, and the World Intellectual Property Organisation, but is not a member of the Paris Convention for the Protection of Industrial Property.

EMPLOYMENT ISSUES: A movement towards free trade in Pakistan would tend to increase employment of the unskilled workers and an increase in their wage rates over medium and longer-term periods.

However, in the short-run, there is a distinct possibility of labour shedding in the industries in which the country does not have comparative advantage. Those workers who lose the job would need to be re-trained for absorption in the sector where the country has comparative advantage.

Until these unemployed persons get the job, some sort of social protection would be necessary.

FACTOR MOVEMENTS: Whereas TRIMS ensure that there are no restrictions on the movements of capital, no such agreements have been signed on the movements of workers.

Since countries like Pakistan have excess labour, they would like restrictions of the movements of persons to be removed. Unfortunately, instead of easing the movements, there have been further restrictions especially after 9/11 events.

INSTITUTIONAL DEVELOPMENT: The institutions are also expected to generate information needed for the ongoing negotiations on agreements. Developing countries have limited capacity to understand WTO agreements and translate into national policies.

There is hardly any institution where different stakeholders interact on the WOT issues. Most of the positions taken on WTO issues in Pakistan lack an empirical research and are based on assumptions.

A clear policy perspective emerging through consultations is necessary before the country commits itself to any position at the international level.

An institutional mechanism needs to be developed where the government, industrialists and agriculturists and service providers, both small and large, and the civil society may consult before any agreement is signed. Research institutes should consult various stakeholders before forming their research agenda.

Even though there is WTO council, which is to meet under the chairmanship of minister for commerce its meetings have been quite infrequent. The council needs to be activated and there should be a standing parliamentary committee on WTO, the committee concluded.

Copyright Business Recorder, 2005


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