Haggling in Hong Kong - Issues that Nepal should take up

The sixth ministerial meeting of the World Trade Organisation (WTO) will begin in Hong Kong in less than five weeks. Nepal will now be a full-fledged participant in the meeting after it got the WTO membership at the last ministerial meet at Cancun in 2003.

The Cancun convention was supposed to take stock of the issues raised in the Doha Declaration in 2001. But the failure to agree on the issues in the declaration led the Cancun conference into a catastrophe. Thus the haggling in Hong Kong would continue to be over Doha dealings.

When the Doha Declaration was announced during the fourth WTO ministerial meet, Nepal was just an observer. However, the declaration had mattered to Nepal in its commitment to multilateral trading system, particularly in two ways. Firstly, the declaration emphasised faster and easier accession of LDCs to WTO, resulting in Nepal as one of the first LDCs to get the membership by completing the full accession procedure. Secondly, it has, for the first time, raised the market access opportunity of LDCs vividly, reflecting protection of trade interests of Nepal under WTO. Yet the benefit to Nepal would depend on how it puts forward the issues because the Doha Round has raised a number of issues to be negotiated, ranging from trade in agriculture and non-agriculture market access to services to trade facilitation.

Apparently, all areas of negotiations look equally crucial to Nepal. But it would be wrong if the Nepali negotiators embraced all areas without logic given the scope of trade and business implications. Take for instance the ongoing agricultural negotiations, which are seeking to build a consensus on reducing agriculture tariffs, domestic support and export subsidy, among member nations. The negotiators should not focus on these issues excessively in Hong Kong as the country is not required to further cut down farm tariffs or domestic support and subsidies given to Nepal’s LDC status. And Nepal has already made a commitment to cut farm tariffs in its accession protocol, whereas the domestic agricultural sector truly lacks support and subsidies.

Also, there is no reason to worry about the prevailing high agricultural tariffs internationally as long as Nepal’s agricultural export remains minuscule and concentrated excessively on India, where it enjoys preferential market access. After all, Nepal is a net food importing country, not an exporting country to be wary of trade barriers. The agriculture, therefore, does not secure a primary placement in the country’s export despite it being a mainstay in the GDP.

Agriculture contributes about half of the GDP, but less than one-fifth of the export. Even if the current negotiations would improve the market access for agriculture, Nepali farm sector would less likely cash in until it improves the farm processing and perceives the WTO consistent sanitary and phytosanitary requirements to avoid the risk of non-tariff barriers, escalating in international trade.

Given this reality, it would be unfortunate to overly concentrate on less important issues at the cost of other sectors, which really matter to their trade. We should closely watch the developments in market access negotiations for non-agricultural products, which is profoundly important, but barely entertained. Because the essence of this sector lies in the fact that Nepal’s export is composed of manufacturing goods and almost one-third of the total export value is transacted under the preferential treatment. Considering a paradoxical situation of the country’s export composition, the benefit of dealings in Hong Kong will depend on how skilfully our negotiators would manipulate the issue of Non-Agriculture Market Access (NAMA), which aims at reducing tariffs, and Para 42 of the Doha Declaration, which promises duty free and quota free market access to all LDC products.

Taking into account the actual value of the outcome in Hong Long our negotiators should have a knack to gauge the implication of tariff reduction formula on the preferential margin, so that a meaningful market access remains. It could be a disaster for Nepali trade to undermine the importance of preferential trading system, which has been helpful in offsetting the country’s export inefficiency through the duty advantage in every existing overseas market.

Given the scenario, the negotiators should carefully handle three key issues. Primarily, they should forge an alliance with all LDCs to mount pressure on binding commitment on preferential market access for all LDC products with predictability under the WTO purview. Equally important is to insist on separating the textiles and clo-thing issues from the ongoing NAMA negotiations, considering the probability of preference erosion, particularly to this sector. If these attempts look improbable then the move should be to establish a special committee under the WTO Goods Council for work programme on textiles and clothing.

Shakya, a TU lecturer, is a consultant to WTO Cell/GAN