The export led Trade Policy for year 2005-06 was announced by the commerce minister on 21st July, 2005. The export target of US$13.7B fixed for the year 2004-05 exceeded the target and reached US$14.41B ie an increase of 17% over the last year’s exports. The export target for the year 2005-06 is US$17.00B ie about 18% more than the exports of 2004-05. The ministry plans to achieve the target by adopting a five-pronged Rapid Export Growth Strategy (REGS). The trade policy has generally been well taken by the trade and industry except for the observation that it is textile biased. For achieving the export targets and export led policy it is imperative that a fairly advanced level of understanding on the WTO, international trade rules and regulations is created amongst the stakeholders and the Government functionaries for developing negotiation and trade diplomacy skills. The ambitious and aggressive REGS, as envisaged by the Minister for Commerce, if not supported by adequate training, skill development and participation of the stakeholders in policy execution could prove counter-productive.
The concept of acquiring increased market access is quite tedious and involves multifarious aspects under the WTO regime. Some of the major agreements under the WTO which directly affect market access are tariffs, technical barriers to trade, sanitary and phytosanitary measures and trade remedy measures. An attempt has been made in this article to give an overview to the readers and the stakeholders on the market access and FTAs. Principally market access can be acquired on multilateral or regional trade basis. After the failure of the Cancun Round of Talks the WTO member countries started emphasizing more and more on regional and bilateral trade. Market access under the multilateral trade discipline is guided, inter alia, by the concept of trade liberalization in terms of the GATT/WTO agreements.
Countries generally target specific tariffs of countries which they wish to see reduced through negotiations. At the same time, most countries have import sensitive products and industrial sectors for which they are not inclined to agree to duty reductions. To manage tariff negotiations, two primary negotiations have generally been used (i) Request — Offer Methods, and (ii) Formula Method. The Uruguay Round tariff negotiations are characterized as formula negotiations based on product/sector basis. Such negotiations take place on two types of occasions. First, the Multilateral Trade Negotiation (MTN) Rounds provide this opportunity. Second, two Members or a group of Members get down negotiating among themselves for this purpose.
Negotiations, for increased market access, involve the establishment of maximum limits on the level of tariffs which can be imposed on individual tariff classifications. These limits are known as tariff bindings. The WTO rules provide a detailed procedure for upward modification of bound tariffs to which it has agreed. In case of modification it may be required to pay compensation or face retaliation. Tariff negotiations have very important and far-reaching implications in regard to the economy and industry of any country, specially a developing country like Pakistan as they firstly affect the protection levels of the domestic industry and secondly increase the market accessibility for its products in the international markets for export.
Pakistan and China have recently signed the early harvest agreement of Pak-China Free Trade Area. Under this programme all exportable items of Pakistan including textile, surgical and sports goods, vegetables, fruits, rice, citrus and mangoes will have duty-free market access from January, 2006, while Pakistan will import machinery and raw material from China. Apparently the arrangement seems to be quite enthusiastic and ambitious. However, the ground realities are much different, Pakistani market is already flooded with Chinese consumer and other goods as Pakistan has extended unwarranted and unintentional clandestine market access to Chinese goods in Pakistan. Pakistan’s trade and industry is adversely being affected by the Chinese goods. with special reference to textile (made ups and fabrics), table ware, shoes and toys industry. The Government is also being deprived off valuable revenue on account of customs duty and sales tax as these products are entering Pakistan as clandestine imports.
The economic managers of international trade and departments concerned must have taken into account its actual trade balance with China and considered the on ground situation before signing the trade agreement, as Chinese are known for their negotiation skills throughout the world. One example is that China against the grant of duty-free import of marble from Pakistan has demanded Pakistan to reduce the import duty on Chinese granite to zero. Some body very rightly said that there is no free lunch. Pakistan certainly needs to learn lessons from this.
The tariff negotiations if not done appropriately considering the individual needs of the economy and industry will adversely affect the domestic industry. It will be advisable to assess the present bound level of tariffs and their impact on Pakistan’s trade and industry and develop a strategy for participating in the regional and multilateral trade negotiations. Implications of not binding or not adequately binding of tariffs on Pakistan and grant of unintentional market access to goods of other countries could adversely affect the domestic industry.
The proposals for market access should be based on interaction and discussions with major stakeholders, manufacturers, associations and chambers of commerce and industries etc. The Export Promotion Bureau should play a vital and important role in assisting the exporters for identifying new markets and areas for their products.
The author is Director (WTO), Faculty of Management Sciences in the International Islamic University.
