SAARC needs to prepare for the agenda of the Millennium Round.
It is often argued that the reason South Asian countries have historically often been marginalised in trade negotiations, is the lack of domestic reforms. This is because both unilateral domestic reforms and liberalisation through the GATT/WTO system represent movements in the same direction. In other words, the perspective towards multilateral liberalisation is partly a function of whether domestic economic reforms are introduced or not.
Either as a unilateral measure or due to stabilisation and structural adjustment conditions imposed by the International Monetary Fund (IMF) or the International Bank for Reconstruction and Development (IBRD), most countries in South Asia began introducing reform measures in the 1980s and the 1990s. There is therefore not much point in tracking responses to multilateral liberalisation, in the pre-Uruguay Round (1986-94) period. The focus should be instead on the Uruguay Round agreements and the agenda for the forthcoming Millennium Round.
All seven countries are classified as developing countries under the UN system. In addition, four—Bangladesh, Bhutan, Maldives and Nepal—are least developed countries (LDCs). This has a bearing on multilateral agreements as, under the special and differential treatment dispensation, developing countries can be exempted from some multilateral disciplines, or can be granted longer time frames for adherence. Least developed economies can be exempted from even more multilateral disciplines, or can be granted even longer time frames for adherence.
One must not presume that the seven countries are in any sense homogeneous, as considerable heterogeneity exists, regardless of the criteria used. As the table (page 27) illustrates, export profiles also differ. The table is self-explanatory, with “X” indicating an export interest in that particular product group. It indicates that, subject to problems of generalisation, the export sectors which tend to cut across all seven countries are leather and manufactures, textiles and garments and carpets. Thus, responses to multilateral trade liberalisation, especially on market access, are at present often conditioned by what is likely to happen to these product groups.
We now have to look into South Asia´s response or lack of it, towards the Uruguay Round agreements. In addition, some issues have cropped up in the post-Uruguay Round period and these will recur at the Millennium Round. Among these might be listed— i) competition policy; ii) electronic commerce; iii) environmental measures; and iv) labour standards.
On the first two, South Asia probably doesn´t have a position, as the contours of what is likely to happen at the WTO are yet uncertain. The only caveat about electronic commerce is reservations based on lack of IT (information technology) infrastructure within South Asia. On environmental measures, the essential concern is that these should not amount to NTBs (non-tariff barriers), and domestic laws on protecting the environment should not transcend national boundaries and impinge on what other countries have the right to do. The protectionist argument is even stronger for labour standards. Hence the argument that these concerns are best voiced and addressed through the ILO (International Labour Organisation) and not the WTO.
This argument is bolstered by the Bangladesh experience. In 1995, the Harkin Bill (Child Labour Deterrence Act) was proposed in the United States to prohibit the import of goods produced with child labour. The Harkin Bill never became legislation and was bypassed by an attempt to insert a social clause at the WTO negotiations. There have been similar prohibition movements in Germany and in the European Commission in Brussels. Within the export sector, the threat of external sanctions often drives child labour into other less desirable activities like prostitution. There is some evidence of this having happened in Bangladesh. Fifty thousand child workers were laid off in Bangladesh, following the threat of the Harkin Bill. Most of them did not go back to school, but ended up at stone crushing, street work or prostitution. Bans on child labour can therefore backfire.
Arguably, there was no collective response on the part of South Asia to the Uruguay Round negotiations, with the exception of some coordinated response by India and Pakistan in the area of textiles and garments. Perhaps a coordinated response is difficult. The interests of Bangladesh, India, Pakistan and Sri Lanka are somewhat similar, although Bangladesh happens to be classified as a least developed country. Nepal´s interests are somewhat different and, by extrapolation, the same can be said of Bhutan
In terms of negotiating postures, India, Pakistan and Sri Lanka are closer together, while Bangladesh, Nepal and Bhutan belong to a different category. The Maldives happens to be in a category of its own. The bargaining clout of individual countries would, be enhanced if collective positions were possible. At present, however, perhaps because of the formation of SAPTA and some progress towards SAFTA, there seems to be more of a coordinated response to the proposed Millennium Round. The following quote is symptomatic (Joint Statement by the SAARC Commerce Ministers before the Third WTO Ministerial Conference (Seattle), Bandos Island, Maldives, on 9 August 1999:
There is a move to further overload the WTO agenda with ‘new issues’ such as social clauses, environment, ‘governance’, labour standards, etc. Since these are not trade related, they should be kept out of the multilateral trading system. The SAARC region should strongly emphasise that expeditious action be taken for the full and fair implementation of existing agreements and commitments made thereon, with special reference to the impact on developing and least developed countries, and that imbalances and asymmetries in these agreements be addressed as a clear priority. This would enhance the credibility of the multilateral trading system among developing and least developed countries. There is a need to deepen and broaden concessions already provided under S&D (special and differential treatment) clauses in favour of developing and least developed countries…
The Uruguay Round negotiations did not result in greater market access for the exports of developing and least developed countries as was expected, due to the existence of ‘tariff peaks’, the phenomenon of tariff escalation, and the use of non-tariff barriers, in respect of products of export interest to the developing and least developed countries…. There is a need for meaningful integration of the textile and clothing sector under GATT. Measures which would result in increased market access for textile and clothing items need to be considered. These would include, inter-alia, adequate and faster coverage of items for meaningful integration, regular monitoring of the process of integration by the Textile Monitoring Body, disallowing unilateral modification of rules of origin to the detriment of developing and least developed countries, avoidance of arbitrary anti-dumping, anti-subsidy or safeguard measures by developed countries and full and effective compliance with the special and differential treatment provisions.
Increased commitment should be sought from developed countries with regard to market access in services… There is a need to prevent piracy of traditional knowledge built around biodiversity and to seek the harmonisation of the TRIPS Agreement with the UN Convention on Biological Diversity so as to ensure appropriate returns to traditional communities. It would be desirable to join forces with other developed and developing countries for the grant of higher levels of protection by way of geographical indication to products apart from wines and spirits so that products of export interest to the region could benefit. The relevant provisions of the TRIPS Agreement relating to meaningful transfer and dissemination of technology to developing and least developed countries should be effectively operationalised…. Greater flexibility in the TRIPS Agreement for developing countries is important to enable them to pursue their developmental objectives. Least developed country applicants for WTO membership should be allowed to accede on a fast-track basis with obligations commensurate with their stage of development…. LDCs should be granted duty-free access on an autonomous basis for their exports. These should be exempt from anti-dumping duties, safeguard actions and non-tariff barriers…. Export subsidies should be exempt from competitiveness thresholds and non-actionable categories of subsidies expanded to include subsidies for development, diversification and upgrading of industries…. The proposed legal advisory centra and a special cell for LDCs in WTO should be established as soon as possible. Technical assistance should be regarded as a right for LDCs and adequate resources should be made available under the WTO regular budget. Developed countries should give priority to the concessional transfer of technology to LDCs. The use of unilateral trade measures inconsistent with international law, WTO Agreements and the bask tenets of a multilateral trading system should be rejected.
This is collective response and partly reflects public posturing. But public posturing apart, where does this leave us in terms of a possible united front? Is it possible to work out a common position on WTO negotiations among SAARC member countries? The principle makes sense, because it can increase the collective bargaining clout of countries that are relatively insignificant at an individual level. But this is easier said than done. As was mentioned earlier, five countries are members of WTO-Bangladesh, India, Maldives, Pakistan and Sri Lanka. Nepal applied for accession to GATT in 1989, an application later transferred to WTO and the first round of trade negotiations for Nepal´s entry have taken place. Bhutan is not a member of WTO, nor is an application for membership pending.
Yet another complication is that three of the SAARC countries are developing countries, while the rest are LDCs. Consequently, perceptions and negotiating approaches differ between LDCs and others. For instance, Bangladesh has adopted the mantle of leadership of the 48 LDCs. There are differing perceptions on agriculture, as also textiles and garments. Differing perceptions on agriculture are understandable, as liberalisation and an expected hike in global agro prices do not impact net food importing countries in the same way as net food exporting countries. The textiles and garments perception depend on views about MFA quotas. If foreign direct investments have come into circumvent MFA quotas, Bangladesh and Nepal being examples, there is no particular reason to press for quicker removal of these quotas.
In a similar vein, attitudes towards intellectual property rights and services vary between India, Pakistan and Sri Lanka on one side and the remaining countries on the other. Perhaps this argument can also be extrapolated to investment measures, although all SAARC countries do agree that cross-border labour movements must be freed further.
So while the idea of a common SAARC approach is laudable, it does not seem workable across the board. Instead, one should perhaps look for a consensus on selected issues and there are indeed issues where such a consensus is possible. The entire rules area is a case in point—anti-dumping, subsidies and countervailing measures, dispute resolution, safeguards. The consensus also spills over into other NTBs in developed countries, such as those that surface through the sanitary and phytosanitary (SPS) measures or technical barriers to trade (TBT) agreements. Similarly, there is partial agreement on industrial tariffs— specific duties, peak tariffs and tariff escalation in developed countries must be brought down. However, if industrial tariffs are negotiated, bindings in developing countries will also be extended and bound tariffs perhaps brought down. On this, there is lack of consensus. Or perhaps there is consensus that tariffs in developing countries must not be brought down.
There also seems to be agreement, for what it is worth, that there ought not to be a Millennium Round. Implementation issues must be discussed first, before overloading the WTO agenda with new issues. This is a difficult argument to understand, this separation of implementation issues from the Millennium Round. If one is unhappy with back-loading of textiles and garments liberalisation or tariff peaks (such as in garments) in developed countries, the question to ask is whether developed countries are violating the law of any of the Uruguay Round agreements. (Whether they are violating the spirit of liberalisation is irrelevant.) The answer clearly is that the law is not being violated. Ditto for anti-dumping investigations. Therefore, the agreements need re-negotiation. Therefore, we should want the Millennium Round.
Perhaps the response is not to the Millennium Round, but to the Millennium Round´s agenda, such as labour and environmental standards or competition policy. Even in these instances, the argument is difficult to understand. Whether one likes it or not, environmental issues have already been included, through the SPS and TBT agreements, and through disputes like the one on shrimps and turtles. Under the circumstances, is it better to have multilateral agreements, or is it better to open oneself up to unilateral action? Similarly, on labour standards, the agenda can be extended to beyond child labour issues. Because of opposition to the Millennium Round, SAARC is probably allowing the Round´s agenda to be dictated by developed countries.
Competition policy is yet another example. Distortions in developed countries are caused by private enterprise. Distortions in developing countries are still caused by government intervention. That is the reason developed countries single out government procurement, which by the way, is an agreement that all SAARC countries seem to be opposed to. But by the same token, developing countries ought to focus on unfair and restrictive business practices and transfer pricing, the province of competition policy. However, throughout SAARC, there is a general resistance to inclusion of a competition policy.
The Bandos Island communique is illuminating because it is symptomatic of the inherent problems in hammering out a consensus. There are two clear parts in this joint communique. Caricaturing a bit, the first half is a WTO kind of document (the developing country agenda), while the second half is the standard UNCTAD line (the LDC agenda). If SAARC as a collective body is to make an impact on negotiations, there must be progress beyond Bandos Island. This will not happen unless one accepts the proposition that consensus across the board is impossible. One can instead, single out areas where consensus is possible and forget the rest. But for this to happen, the SAARC process itself must make some headway.
Although one is extremely sceptical about a common SAARC negotiating position, it ought to be possible in the rules area and in protectionism surfacing through newer issues like´ labour and environmental standards. For the rest, common positions are possible between India, Pakistan and Sri Lanka on the one hand and Bangladesh, Nepal and Bhutan on the other. All that is needed is collective will.
WIPO & TRIPS
BANGLADESH, INDIA, the Maldives, Pakistan and Sri Lanka are members of the WTO. Bhutan and Nepal are not, although Nepal’s membership of WTO is imminent. Trade-related intellectual property rights (TRIPS) now form part of WTO’s agenda. Therefore, it is pertinent to mention that the Maldives is the only one among the seven that is not yet a member of the World Intellectual Property Rights Organisation (WIPO). Bangladesh has been a member of WIPO since May 1985, and is also a signatory to the Paris Convention on industrial property and the Berne Union on copyright and related rights. Bhutan became a member of WIPO in March 1994, although it has not yet signed the Paris Convention or the Berne Union treaty. India joined WIPO in May 1975, and is a signatory to both the Paris Convention and the Berne Union. Nepal became part of WIPO in February 1997, although it has not yet signed the Paris Convention or the Berne Union treaty. Pakistan joined WIPO in January 1977, and has signed the Berne Union treaty, but is yet to join the Paris Convention. Sri Lanka joined WIPO in September 1978, and is a signatory to both the Paris Convention and the Berne Union.