Saturday, December 14, 2013

Long way to go to benefit from Bali Package

KATHMANDU, Dec 12: “We did it! We achieved what many said could not be done,” Gita Wirjawan, Indonesia’s Trade Minister said at the end of the 9th WTO Ministerial Conference in Bali last week.

WTO Director-General Roberto Azevêdo echoed the response after the ‘historic’ success of the conference saying: “For the first time in our history: the WTO has truly delivered.”
Widely dubbed a ‘make or break’ meeting of 160-member WTO ministers, it emerged ultimately as the largest ever global trade deal.

Giving a fresh push to the Doha Development Agenda (DDA), which has remained stagnant for more than a decade, the deal has been termed as a major breakthrough to boosting trade, especially for Least Developed Countries (LDCs) associated with WTO.

However, some Latin American countries -- Cuba, Bolivia, Nicaragua, and Venezuela -- voiced their serious reservations on the deal, saying that it was designed to favor rich countries and lacked provisions to bar trade embargoes on goods in transit.

In greater sense, the Bali Package is framed with the hope of streamlining global trade, strengthening food security in developing countries by giving them more options of increasing public stockholding and boost trade in services.

Under the package, trade facilitation is one of the most significant deals that aims to simplify and speed up customs procedures to boost international trade between member-countries. Landlocked countries like Nepal will be among those who can take maximum benefit from the pact for smooth movement of goods in transit, which is legally binding.
Nepali traders have been facing a slew of problems due to limited transit routes and procedural hassle during overseas trade via India.

Besides, it will render a simplified, cheaper, transparent and efficient trade process with reduction of administrative formalities and minimum chance of corruption.

The deal has provided opportunities to LDCs to get international support in upgrading trade infrastructures, which are crucial in promoting their foreign trade.

The provision of simplifying trade enshrined in the deal is expected to shore up revenue with a favorable environment for business and foreign investment ultimately boosting world economy by up to one trillion US dollars due to reduction of cost of trade by 10-15 percent.

“As a landlocked country we will get the opportunity for smooth mobility of goods to and from our countries, from the trade facilitation provision in the Bali package. And, it will also help us strongly raise our issues on transit with India in bi-lateral talks,” Toya Narayan Gyawali, joint secretary at the Ministry of Commerce and Supplies (MoCS), said.

In a major push to enhance food security of developing countries, the package has provided them with a four-year transitional period to continue farm subsidies for public stockholding programs for food security.

There has been apprehension that permission to India to continue its heavy food subsidy will weaken the competitive power of Nepali farm products.
India’s Food Security Act entitles 820 million people to 5 kg of food grains per person a month at Rs 1-3 per kg. The country needs 62 million tons of food grains a year to implement the law.

The act had envisaged shoring up food stocks by enhancing farm production to provide rice, wheat and millet at highly subsidized prices to the designated poor people.
Given the porous border with India, Nepali experts have expressed apprehensions that far cheaper farm grains produced using highly subsidized inputs will flood the Nepali market making it tough for Nepali farm products to compete.

But, Gyawali does not fully buy into this argument.

“Food produced from high subsidy will be internally consumed and be used for public stockholding, and will not be flooding Nepal. Even if cheaper Indian grains penetrate into Nepal through the porous border, they will support us to stabilize the market prices,” said Gyawali, who also participated at the Bali Conference.

Uday Raj Pandey, the president of Garment Association of Nepal (GAN), also thinks heavy subsidy in India in the farm sector will not have a major effect on Nepali products. “As Nepal is no more an exporter of food grain, we needn’t worry that we will miss our market in India due to cheap Indian product being available there,” Pandey said.

However, the government should take measures to protect domestic farmers if the highly subsidized Indian farm products threaten them.

Some cotton producing LDCs have also something to be happy about as the deal pledged to extend support in production and access to global market.

Under the development issues, the Bali Package re-enforced provisions of Duty-Free-Quota-Free (DFQF) market access to at least 97 percent of goods originating from LDCs in line with the decision of the Hong Kong Ministerial Conference held in 2005.

Though most of the developed countries have abided by the decision, some are still to implement.

The US has granted DFQF access to only 82 percent of Nepali products to its market.

“The Bali Package has not only put pressure on sincerely implementing the decision for market access to 97 percent products from LDCs, but has sought further rise in the number of goods under such facility,” said Gyawali.

Nepal is the chair of the 35-member LDCs in WTO. It, however, failed to get a proposal about getting DFDF market access to a hundred percent of LDCs’ products. European countries have designated products with 30 percent value addition in LDCs as their locally originated products.

Amid a host of hassles faced by LDCs in proving the origin of their products, the new deal is going to introduce simplified rules of origin and LDCs will qualify themselves for preferential treatment in developed countries. In a move aimed at promoting service trade across the globe, a ‘Service Waiver’ agreement has paved the way for investment in the services sector, expanded services such as health, education, ICT, and provided greater mobility for migrants in international job markets from LDCs.

“LDCs will benefit from easy access for their services in developed countries and easy mobility of job seekers aspiring to go abroad,” said Gyawali.

According to WTO, services trade contribute over 70 percent of the world’s Gross Domestic Product (GDP), 45 percent of the world’s employment and around 40 percent of the world’s stock of foreign direct investment. However, participation of LDCs in world trade of commercial services accounts for about 0.6 percent of exports and 1.7 percent of imports of these services.

Travel, communication, financial services, insurance, construction, royalties and license fees and transport are among the widely traded services across the globe.
A monitoring mechanism established by the Bali meeting will open the door to frequently assess the implementation of special treatment on trade committed by developed countries to poor countries.

To combat with the ballooning trade deficit, the Bali conference laid the ground to enhance the trade capacity of poor countries through an increase in Aid for Trade and by continuing Enhanced Integrated Framework (EIF) – a support mechanism for increasing the supply side of LDCs -- beyond 2015.

“Access to market for Nepali products will widen as the Bali Package has agreed on formulating a guideline for flexible rule of origin for LDC products,” Gyawali said.
However, the ‘Bali Package’ is not the end of the road. The package will not ensure automatic surge in trade volume of LDCs without increasing their domestic production of exportable goods. We can use the Bali deal as an opportunity to enhance our trade through increasing our supply capacity, boosting production and using the greater mobility of goods with simplified customs procedures and greater market access.

“We have to utilize the multilateral pact to strengthen our bargaining power during bi-lateral trade deals also,” Gyawali added.

Member countries need to be engaged in a series of follow-up negotiations to effectively implement the Bali deal for their greater benefits.

Frequent follow-up meetings are a must to ensure the benefits from the Bali deal.

“On the ground of the Bali deal, we can negotiate with bi-lateral trade partners, including the US, to include our major products such as Pashmina and garment under the DFQF regime for their market,” Pandey said.

Published on 2013-12-13 09:51:21

1 comment:

  1. So till date how has Nepal benefitted from Bali package? Did Nepal really gain access to export 97% of its goods in the US market under DFQF agreement?