Pakissan.com; WTO and the challenge to exports

WTO and the challenge to exports

March, 29: The WTO regulation presents challenges as well as opportunities to all stakeholders after the year 2004. Its trade regime is complex but is based on four simple rules.

These rules are spelt out as follows:

a) Tariff protection: While the GATT 1994 stands for liberal trade, it allows member countries to protect domestic industry from foreign competition subject to the condition that protection should come through tariffs only. Complete ban or quantitative restrictions are prohibited. An important exception permits countries that are in balance of payment (BOP) difficulties to restrict imports in order to safeguard their external financial position. A major flaw of this rule is the continuation, till December 31,2004 of the quantitative restrictions imposed by the developed countries on the trade of textiles and clothing.

b) Tariff bindings: The member countries were required to reduce their then existing tariffs and bind the reduced tariffs against further increases. The rates of tariffs agreed in the negotiations are listed in the Schedules of Concessions. Each country has a separate schedule and is under obligation not to impose tariffs or other charges, which are in excess of those set forth in its schedule. The schedule,lists on a product-by product basis the pre-negotiation tariff rate and the rate of tariff at which the country has agreed in the negotiations to bind the tariff rate.

c) Most-favoured nation (MFN) principle: In simple terms, the MFN principle requires that trade must not be discriminatory. If a member country grants another country any tariff or other benefit, it must automatically be extended to other member countries. By agreeing to give the MFN treatment, member countries undertake not to discriminate among countries and not to treat a country less favourably than another in all matters connected with foreign trade. The regional preferential arrangements constitute a major exception to the MFN rule. A high proportion of world trade continues to take place on a preferential basis.

d) National treatment: The national treatment principle requires that an imported product which has crossed the border after payment of customs duties and other charges should not receive treatment that is less favourable than that extended to the like product produced domestically. In other words, the principle requires member countries to treat imported products on the same footing as similar domestically produced product. National treatment complements the MFN principle.

In the WTO, quality is the focal point. The ISO has developed management standards like the ISO 9000, social compliance and standard regarding environmental issues.

The aim of these standards is that the organizations providing services or products will adopt management systems striving for the betterment of human being by improving quality and environment.

The developed countries have long ago settled the issues of quality by establishing a comprehensive national quality infrastructure. The producers and consumers in these countries are well aware of the benefits of using the conformity assessment system that ensures consumer protection and overall improvement in quality of life. However, the developing countries are lagging behind in the field that affects adversely their economic development, health and safety standard.

In Pakistan, the government has put institutional arrangements in place on similar lines. However, there is need to operate effectively and achieve desired objectives. Crash awareness raising and training programmes in the quality sector are necessary.

To the best of my knowledge, 'textile quota-free regime', scenario 2005, is an upcoming threat to our industry as well as to our country's economy. China's apparent ability to suddenly swamp markets has caused alarm among the world's leading textile and apparel producing countries.

According to the recent statistics, the Chinese government retains ownership of 52 per cent of its textile and 25 per cent of its apparel manufacturing sectors. As such, China regularly runs its textile sector at a loss, subsidizing its output in order to gain market share around the world.

In addition to direct state ownership, China subsidizes its textile industry through use of an export rebate, currently at 10 per cent. On the basis of this, Chinese flooding of cheaper products will be disastrous for major textile countries.

Both the developed and developing countries of the global village would be affected. Sound export strategies and plan of action is required to meet the challenge.

In this era, good infrastructure, which includes educated, and skilled manpower, easy access to raw materials, markets for disposal of their goods, assured supply of electricity and gas are the key elements.

Price of electricity is a crucial issue. Electricity price should be compatible both for common people and investors. Cheaper power will boost production at comparative prices and much-needed exports.

High quality, competitive prices, diverse products, and quick responses to the changing needs, are the basic requirements of the customer. Adoption of latest technologies will enable our companies to manufacture products quickly on large scale with minimum waste.

Knowledge determines the superiority of a nation, organization or individuals over others. In spite of being blessed with abundant physical resources, Pakistan is counted in the least developed countries due to its low literacy percentage.

In the 21st century, our country can only prosper with high literacy ratio. The government with the help of NGOs could launch literacy increased promotions programmes.

As implementation of social compliance and environmental standards has become a market-driven mandatory requirement of our buyers. Therefore, our industry has to implement these systems. The major requirements of social compliance, by the industry are:

Daily work should not exceed than 11 hours including one hour lunch-break and over time; wages should not be less than the prescribed level as mentioned in 'The Worker Compensation Act 1923; over-time be paid with double rates; freedom of association given to workers; substitute leave be given due to Sunday working; health/hygiene care; grant of the EOBI; social security; education cess; group insurance; profit bonus/gratuity; human safety; provision of sufficient and separate wash rooms for either sex with one washroom for 20 persons; child labour should be strictly prohibited; no company should engage in or support the use of corporal punishment, mental or physical pressure, and verbal abuse, under any circumstances; discrimination not allowed on the basis of race, cast national origin, religion, disability, and gender.

Environmental protection is mandatory. Our environment is polluted due to chemical discharge by our industries; disposal of municipal, hospital and other waste and release of unburned fuel gases in the air. Installation of Water effluent treatment plants is an uncompromising' prerequisite of our buyers.

Lack of understanding to follow quality improvement practices has resulted in deterioration of our trade, health and environment. Environmental management will be achieved through technologies that minimize the use of natural resources, and discharge no net waste to the environment.

Effective implementation of compliance Environmental standards in our industry would definitely help to attract quality and standards conscious buyers.

Agriculture sector needs great attention, as this is the back-bone of Pakistan. In the WTO talks, agriculture is the greatest stumbling block, and unless decisive progress is achieved in this area, advances will not be made in the other areas such as services, consumer and manufacture goods. So there is need to totally eliminate export subsidies on agriculture by developed countries.

Being international competitor in textile segment, we need not worry about the withdrawal of export quota by the year-2005. It has been accepted by whole world that "cotton' is the best for fabric manufacturing and Pakistan is producing the best quality of cotton.

So, the future of textile industry is bright, provided and the government and the industry work aggressively to achieve the intended objectives. Some of the areas that need to be focused for smooth operation and promotion of business to take advantage of the trade quota-free regime can be summed up follows:

Set our house in order;, peace is a guarantee for promotion of business. The state should provide business professionals as ambassadors and business-related information.

Keeping in view diverse Chinese products, a strategy to either counter or collaborate with Chinese textile industry is needed as India has done. It is imperative - both for the government and industrialists to explore fields where competition is still less fierce and margins much higher.

The DAWN

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