Seventh WTO ministerial meeting What is at stake for Nepal?

On November 30, the trade and economic ministers of the 153 WTO member countries will assemble in Geneva to keep the stalled Doha Round of trade talks back on track. The ambitious round of multilateral trade talks, aimed at issues ranging from reducing tariffs and non-tariff barriers (NTBs) in goods and services to trade facilitations and to more open markets for environmental goods and services, began in Doha in 2001. After eight years of strenuous negotiations, it is now moving towards the closing stages. And it is inevitable that the round is concluded to overcome the worst economic and financial crisis of modern times.

The insecurity created by the current financial crisis has adversely affected the flow of international trade and investment, with the threat of mass unemployment in industrialized economies. Already the international trade has been disturbed by some sort of trade barriers and trade remedy measures, such as anti-dumping actions, taken by some countries to protect their domestic production. That somehow manifested the “beggar-thy-neighbour” protectionism of the Great Depression of the Thirties, exacerbating the current world trade and financial crisis.

The World Bank, in its Global Economic Prospects report estimated that a successful Doha Round could generate US $ 291 billion in global economic gains; developing countries and rich countries reaping the benefits of US $ 159 billion and US $ 132 billion respectively by 2015.

Consequently, it is expected that the number of poor will substantially decline and that “the number of persons living on US $ 1-per-day or less will decline by 61 million-or 8% of the forecast of 734 million.” Thus, what is at stake for Nepal out of the successful conclusion of the Doha Round? Or, what really matters to Nepal about this round of trade talks, which is supposed to be the development round?

Rather than a deal for slashing tariffs and subsidies, Nepal’s priority would apparently be the WTO commitment for duty-free, quota-free market access for all LDC products as stipulated in the Hong Kong Ministerial Meeting. This is supposed to obligate rich countries for granting the preferential treatment to all LDC products without discriminating among the LDCs. Moreover, this will be a binding commitment for preferential market access to all LDCs under the multilateral trading system. It is presumed that without this deal the Doha Round of negotiation will be of little worth for Nepal and other poor countries. However, the commitment to the duty-free, quota-free market access is not without loopholes. The privilege covers only 97 per cent of LDC products and provides a safety margin of 3 per cent to rich countries to list any LDC product as sensitive to their imports at their discretion. That means there is a possibility of excluding products of export interest to poor countries from the 97 per cent provision, limiting the beneficial impacts of trade preferences on their exports.

While the proposed WTO preferential scheme for LDCs is not without limitations, the margins of preference to LDCs have been eroding due to the gradually reducing tariffs, taking place unilaterally or multilaterally, on the other. The potential erosion of the preference margin is likely to be even more intense with a massive reduction of tariffs under the NAMA (non-agricultural market access) of the Doha Round negotiation. Since the WTO negotiations are done in a package, the successful Doha Round will embrace both the duty-free, quota-free market access provision and an understanding on NAMA, together with other agendas.

To address these setbacks in this round of trade negotiation, a high-level government and the private sector dialogue should have been initiated with utmost priority. That was actually a prerequisite to help redress the issues through long-term strategies to diversify economic bases, enhance competitiveness, increase productive capacity, as well as develop new export opportunities for Nepal. The private sector should have been active to identify and analyse the issues in order to set priorities and select strategic options. With the consultation of the private sector, the government should determine a set of possible packages that could emerge as an outcome to the Doha Round negotiation, not only for Nepal, but for the LDCs as a group. But unfortunately, the government undermined a dialogue with the private sector, except for reiterating a hope for the duty-free, quota-free market access without evaluating a real gain from the scheme.

It reveals Nepal’s ill preparation for the Doha Round negotiation, despite the government having a donor funded trade project within the Ministry of Commerce to deal with such kind of trade issues. So it is doubtful that Nepal will have a share in the World Bank anticipated economic gain of US $ 159 billion for developing countries out of the successful conclusion of the Doha Development Round.