WTO and Nepal

WTO and Nepal

Introduction

1          After fulfilling its commitments, Nepal finally got the official membership of WTO on 17^th May 2004.  WTO, a global trade organization of 148 members was established on 1 Jan. 1995 replacing the then General Agreement on Trade and Transit (GATT). It is the legal and institutional foundation of the multilateral trade system

2          There are a number of ways of looking at the WTO. It’s an organization for liberalizing trade. It’s a forum for governments to negotiate trade agreements. It’s a place for them to settle trade disputes. It operates a system of trade rules.

Background

3          Nepal had applied for General Agreement on Tariffs and Trade (GATT) membership as early in 1889. After the expiry of the validity of Treaty of Transit 1983, some misunderstanding developed between two governments of Nepal and India. The misunderstanding developed between the countries created tense situation. Then India suddenly noticed the government of Nepal to provide only two transit routes, out of 21 routes as accorded by the Treaty of Transit 1983. Since March 1989 for about 15 months India pushed a poor land - locked country Nepal into the “economic blockade”. This economic blockade compelled the poor people of Nepal to survive in difficult situation. Actually this difficult situation compelled the government of Nepal to think and rethink for obtaining membership of GATT, the predecessor of WTO. Due to this cause, Nepal applied in 1989 for the membership

Current situation

4          After 14 years of relentless efforts, Nepal as one of the least developed countries has got the membership of WTO. There are tremendous opportunities for Nepal to make a big leap forward in economic sphere. But we have to focus on expanding trade as well as increase industrial production many folds if we are to get full benefit of the globalization process. It will be a good step for moving towards self reliant economy from an aid dependent one.

5          The major advantages that the country can enjoy include

(a)        Easy access to international trade

(b)        Globalization of Foreign Economy

(c)        Special measures for least Developed countries

(d)       Expansion of Foreign Investment

(e)        Fair competition

(f)        Better settlement of dispute: The dispute settlement body of WTO provides equal treatment to its all member countries, whether big or small, rich or poor. So, after entering into WTO, trade disputes are raised with other member countries. For the above reasons, the developing countries, especially the least developed countries can benefit from WTO regime, provided that the advanced countries fulfill their obligations honestly.

6          Some grey areas        Several provisions were made to developing countries, especially least developed countries like Nepal, they are attractive on theoretical perspective only. In fact such provision may cause long – term impact on overall economy of least developed countries.

            (a)        For a least developed country like Nepal, where the production sector is     very poor, liberalization of trade and free competition may cause uncontrolled   imports of advanced products. This may kill the competitive power of domestic      products and home industries, and may create a serious balance of trade and          payments problems.

            (b)        Since most of the trade activities are controlled and regulated by WTO       Secretariat, the whole economy of the country may be dominated by WTO

7          Currently Nepalese government has been seeking technical assistance to workout policy for Tariffs and Sanitary and Phytosanitary Measures and the American, EU and Australian have shown their positive response on this matter.

Suggestions

8          Government will have to identify its products and services in which it can reap more benefits. Under the free and competitive environment Nepal must be able to sell a wide range of products to the foreign buyers. Otherwise, Nepal would be net looser in the international trade.

9          Membership in the WTO does not force us to remove barriers on all of the products that we produce, we can stall selectively protect our products as needed.

10        The government must restructure its trade policy and implement it sincerely. The bottom line is that if a country can confront keen competition from other countries, especially developed ones, and keep up its identity in the world market.