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World Trade Organization

The formation of the World Trade Organization (WTO) in 1995 was a watershed
development in the sphere of international trade. It was a major advancement in the
multilateral trade regime, with the previous regime embodied in the form of a treaty
known as the General Agreement on Tariffs and Trade (GATT).
GATT was signed in 1948 and had close to 30 member countries. Its primary objective
was to see that impediments to international trade -- mainly in the form of tariffs -- were
reduced or removed in order to facilitate the movement of goods across borders. In the
course of six to seven rounds of negotiation, it succeeded in getting countries to lower
their tariff rates, thus enabling greater movement of goods.
However, over time, the nature and character of global trade started to get very
complex. Countries began to realise that GATT did not have all the answers to the
questions posed by the increasingly complicated nature of global trade.
This led member countries to launch a new round of negotiations, from 1986-1994,
known as the Uruguay Round (UR). This series of negotiations was much more
elaborate and detailed. It not only covered trade in goods but also brought trade in
services and intellectual property rights within the ambit of the multilateral trading
regime. Even within trade in goods, a far more thorough set of rules was discussed and
negotiated. Further, trade in agricultural goods was brought into the fold of the
multilateral trading regime in a major way. In GATT, trade in agricultural goods was, at
best, minimal and at the fringes of the discussions.
The end of the UR resulted in the formation of the WTO, which established a substantial
set of rules regarding trade in goods -- including agricultural goods, included
agreements on trade in services and on trade-related aspects of intellectual property
rights, as well as a strong and comprehensive mechanism to settle trade disputes
between member countries. Notwithstanding these additions, the WTO retained some
of the basic characteristics of GATT, such as the principles of non-discrimination
embodied in the Most Favored Nation (MFN) and National Treatment (NT) rules.
Today the WTO, the youngest of the worlds multilateral organizations, is over 10 years
old.
It may be instructive to follow the journey of the WTO from 1995 onwards, even though
it is difficult to assess the overall impact of the organization on the global economy or on

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individual developing countries. It has been good for some, bad for others and a mixed
bag for the remaining. It is also difficult to capture all the developments that have taken
place from 1995 to 2006. However, one can certainly attempt to outline some of the key
developments of the past decade

Pakistan in WTO
Pakistan has commitments under the General Agreement on Trade in Services (GATS)
in 47 activities, in financial (banking and insurance), business, communications,
construction/engineering, health, and tourism/travel services; those concerning financial
and basic telecoms services improved, inter alia, conditions for foreign presence, and
were ratified. Pakistan's GATS MFN exemptions cover financial services, with a view to
preserving reciprocity requirements, Islamic financing transactions, and joint ventures
among ECO countries, as well as accounting rates agreed bilaterally.
Pakistan was one of the 23 founders of GATT in 1947. It actively participated in all the
subsequent GATT negotiations and was involved in the Uruguay Round that resulted in
the creation of the WTO. Pakistan was thus also one of the founding members of WTO
that was established in 1995. There is a considerable impact of WTO on all sectors of
Pakistan's economy, particularly, its industry, textile, agriculture and services. The
nature of impact is predictable for some sectors, whereas, it is difficult for others in view
of global developments in trade and degree of complexity involved.
As far as the industrial sector is concerned, Pakistans main exports are textile and
related products. The non-textile exports of Pakistan are negligible but have a potential
to grow tremendously under the WTO regime. On the import side, Pakistan has been
rationalizing its tariff structure to a large extent under the trade liberalization principle as
envisaged by WTO. The average tariff in Pakistan is around 17 percent however, there
is a need to ensure that there are no adverse affects of trade liberalization on the
domestic producers. This calls for a need to make adjustments in the policies for the
domestic industry, so that they may be able to face the increased competition from
global market.
As regards agriculture, Pakistan being an agrarian economy is still a net importer of
food items. The Agreement on Agriculture (AOA) of WTO has been significant in
molding agricultural policies of Pakistan. The Agreement on Agriculture provides rules
regarding export subsidies, domestic support and market access. Furthermore, the
WTO Agreement on the application of Sanitary and Phytosanitary Measures (SPS) with
regard to food safety and protection of human and animal life, and health from
agricultural imports has considerable impact on Pakistan.
Apart from the major crops, Pakistan needs to exploit its comparative advantage in the
production and exports of meat, dairy products, fruits, vegetables, horticulture, etc. The
developing countries and the developed world are at loggerheads over agriculture. With

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regard to agricultural negotiations in the WTO, Pakistan along with the other developing
countries, insists on a world trading system that is fair.
Services are the largest and most dynamic component of both developed and
developing country. It is impossible for any country to prosper today under the burden of
an inefficient and expensive services infrastructure. In Pakistan, the services sector
contributes more than half of the GDP. Workers remittances account for the largest
component of services and the country has a large number of expatriates throughout
the world. Being a developing country, Pakistan has adopted a cautious approach while
making commitments in trade in services. However, the actual policy of the government
is far liberal as compared to the binding commitments scheduled in the General
Agreement on Trade in Services (GATS). Pakistan has made some horizontal
commitments that apply across the board, while in six sectors specific commitments
have been made. These include Business services, Construction and related
engineering services, Tourism and travel related services, Health and related social
services, Telecommunication services, and financial services.
The complete integration of all textile and clothing products into the free trade
environment under the Agreement on Textile and Clothing (ATC) on 1st January 2005
was one of the most significant changes for Pakistan under the world trade regime.
Pakistans economy finds itself heavily dependent on the textile and clothing (T&C)
sector. It is because of the nature of textile industry being labor intensive and requiring
less capital and technical skills. However, a quota-free trade era calls for structural and
operational adjustments in the textile sector, to enable Pakistan's exporters to be
globally competitive. China is the biggest challenge to Pakistan T&C exports in this post
ATC regime.
Pakistans domestic industry also faces problems of increased imports and unfair
practices under the global trade regime. WTO Agreements have an in-built mechanism
providing for trade remedial measures to counteract the effect of dumping, subsidies
and surge of imports. Accordingly, Pakistan through national legislation has come up
with anti-dumping laws against dumping, countervailing duties laws against subsidies
and safeguard action laws against surge of imports in order to protect its domestic
industry.
In a nutshell, at present Pakistan maintains a fairly liberal trade regime, where all
quantitative restrictions on imports have either been removed or converted into tariffs. It
is noteworthy that the applied tariffs in Pakistan are well below the bound tariffs under
WTO, translating into market access. However, quality control is integral to
competitiveness of Pakistan's exports. Low quality products fetch low price in the
international market. The obvious problems of quality for Pakistan are those of technical
precision, grading and specialization. The WTO Agreement on Technical Barriers to
Trade is relevant in this regard. Proper support and prudent policies for the industry,
along with intelligent balancing of imports and exports is vital for the sustainability and

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growth of Pakistan's economy and is likely to lead towards a bright future and trade
enhancement under the WTO regime.