BY

There is then the need to explore the implications of the WTO objectives on the developing nations, such as Pakistan. The various agreements that encompass the structure of WTO have been debated, discussed, and approved so that today the WTO has been accepted by over 139 countries (Oman became a member on October 10, 2000) and about 30 more are on the threshold of signing the objectives of WTO. Three-fourths of the WTO members are developing countries and a quarter of this includes those that are known as least developed countries. These LDCs represent 20% of the world population but their share of the world trade is a dismal 0.03%.

The developing countries, inspite of being formidable number-wise, have relatively little power within the WTO framework because of inevitable reasons. First of all, they are dependent on USA, European Union, Canada or Japan for their foreign trade, for aid inflows, and even for their security. Thus, they have to be very practical in their dealings in the WTO decision making process where the aim is to develop a consensus. Then, these countries do not have the financial resources or legal expertise to embark upon seeking recourse to trade disputes. At times, these countries themselves may adopt the very maneuvers that they accuse others of violating. Furthermore, there are 40-50 meetings going on at the WTO headquarters in Geneva every week, and the lack of human resources or technical competence precludes effective participation and protection of interests. More importantly, trade negotiations are generally based on a reciprocal basis, or on an equality basis, or on a barter basis. The developing nations have little to offer compared to the economic clout and diversified nature of the developed countries. This can best be summed up by quoting Nelson Mandela who commented: "The developing countries were not able to ensure that the rules accommodated their realities . . . . it was mainly the preoccupations and problems of the advanced industrial economies that shaped the agreement."

The discussion on the implications of WTO on the employers is imperative. For the entrepreneurs in Pakistan, the liberalization of world trade would result:

• In the elimination of all preferential treatment such as subsidies, incentives, and price supports.
• In the demise of the era of protectionism thru measures such as import tariffs, price regulations, or product licenses.
• In the ending of substandard quality, apathy towards human rights, and low productivity.

The businessmen must now have a global mind-set and must refrain from being cynical about the importance of the conditionalities of WTO. They should comprehend the fact that the world economy is breaking down the antiquated concepts of doing business, both on the domestic front as well as in the international markets. It would be pertinent to point out here that the Pakistany businessmen cannot afford to be aloof or insouciant since there is already a revolutionary configuration of corporations and industries along the global avenue.

The Pakistany employers have to brave themselves with the global onslaught and if they are not realistically armed to challenge this offensive or are themselves unprepared to be aggressive in their ventures, then the outlook would be very bleak for the nation's economy. It is, therefore, very important to look into some of the aspects of the new way of doing business. The first and primary premise to consider is that WTO is here to stay and inspite of the tough rules, the developing nations have to blend into the global melting pot.

There is a need to discuss some of the agreements under WTO and what would be their implications for Pakistany employers:

This updated version of the old GATT implies the Most Favored Nation clause and national treatment clause. MFN means that the member countries must grant the same treatment as they would to products of any other country while the national treatment clause requires that once the goods have entered a market, they must be treated as favorable as the equivalent domestic goods.

With reference to the MFN status, the main issue for Pakistan is whether to grant it to India. In a joint statement issued at the end of the historic visit on February 20, 1999 by the Indian Premier in which the Lahore Declaration and a Memorandum of Understanding were signed, the two leaders agreed, inter alia, that "the two sides shall undertake consultations on WTO related issues with a view to coordinating their respective positions." The paramount issue relating to WTO is, of course, the Most Favored Nation Clause that has been a matter of intense debate ever since the Marrakech Agreement came into force. Both Pakistan and India are prime signatories to WTO and they are bound to respect the agreement. The Kashmir imbroglio has been the focal element on which there is no solution in sight and thus Pakistan has not undertaken the step to grant MFN to India, even though New Delhi has already done it. Sooner than later, the MFN status would be granted to India and then the competition between the two neighbors would escalate on the economic front. The Pakistany employers should begin to prepare the plans to penetrate the Indian market and be ready when the doors are opened wide.

There will be substantial reduction in tariffs on industrial goods. These could be between 40 to 70% and there would be elimination of tariffs on certain items.

Pakistan has already been reducing tariffs every year and the process is intensified in every Federal Budget. The most distressing feature has been that Pakistan reduced duties on finished textile goods and brought them at par with the import duty structure of the raw materials even though at that time there was no compulsion to do so. Unfortunately, the decision-makers have their own twisted agenda to put into the fore. This was considered by the textile industry as an anti-industry move, especially when textiles form 65% of Pakistan's exports and is the major industrial sector in the country.

At the same time, the large-scale influx of smuggled goods has played havoc with the nation's industrial base. The smugglers have become very powerful and carry on their nefarious activities without impunity. All announced measures have been hot air balloons and have miserable failed to make even a minute stain on the smuggling fabric. The actions of the present military government against smuggling have been disastrous and have been public relation blunders. Inspite of strict vigil at the entry points, the smuggling trade goes on unrestricted. It is no big deal to openly buy foreign made products from a common pin to heavy ammunition without being afraid of punitive actions.

The government must seriously become a potent force and must establish its writ if the industrial base has to progress. The CBR is extra-vigilant when it comes to auditing and intimidating the genuine industrialists but when it comes to smugglers then it is groping in the dark for laws and rules to regulate their trade. It is unfortunate that no government in this country has the willpower to atleast curb the proliferation of contraband business if it cannot eliminate unofficial trade resulting from smuggling.

The agreement of textile and clothing stipulates that the Multifiber Arrangement would be phased out in four designated stages over a period of ten years. Under this agreement, and based on the 1990 trade volumes, starting from July 01, 1995, 16% of textile and clothing imports under stage one, by January 01, 2002 another 17% in stage two, while by July 01, 2004 there would be additional 18% in stage three, and by July 01, 2005 in the final stage, the remaining 49% would be phased out. Thus, there would be total integration of textiles and clothing in the free trade regime theoretically by the middle of 2005.

The Pakistan export regime is 65% textile based and the phasing out of the quotas should augur well for the textile sector. However, under the Uruguay Round, about half of the textile and clothing products would be integrated in the final year of the ten-year integration period. Notwithstanding the agreement clauses, there is the fear that at the expiry of the integration period, the developed countries may impose new restrictions or measures that would prevent the goods from entering their borders.

Talking about the textile trade, it is sad to note that the majority of exports are in very few quota categories and these are utilized very soon and thus these quotas are worth a gigantic amount of money for new exporters to procure. At the same time, the performance of Pakistany exporters with regard to many other categories has been pathetic. In fact, according to a Business Recorder lead story, in one specific category for the Canadian market, the quota utilization is a mere 6%, whereas for the same category, the utilization is 62% by South Korea and 55% by China. Pakistany manufacturers must develop expertise in other textile categories to USA, EU, and Canada so that the exports pick up momentum and new vistas are explored and penetrated.

TRIMS primarily consists of investment incentives, such as subsidies, investment grants and allowances, preferential credit facilities, tax relief and exemptions, tariff protection, and other inducements and attractions. TRIMS agreement cautions against certain investment measures that restrict or distort trade.

At present Pakistan has an inherent disadvantage as compared to those countries that are developed and have an institutionalized export culture or have the essential ingredients to forge ahead. These can be enumerated as follows:

• Functional and established industrial culture and a substantial market for consumption not only in the domestic markets but also on a regional level.
• Extensive infrastructure network that is reliable and affordable.
• Availability of state-of-the-art technology as a matter of routine.
• Developed capital market with access to financial facilities at a very low mark-up rate.
• Support of a plethora of research institutes and organizations resulting in access to new processes, ideas, and innovations.
• Plenty of educational institutions, vocational training schools, and skill development programs aimed at the development of human resources in order to enable them to handle technological advancements, understand modern management practices, and adopt latest marketing methods.
• Status of transnational allows corporations from developed countries to promote products and services to a worldwide market and gain universal recognition and prestige.

Hence, the trend over all these years in countries like Pakistan has been to protect the existing industrial base by resorting to incentive measures such as rebates and subsidies and by providing substantial tariff protection. However, the non-availability of infrastructure, the excessive governmental monitoring and interference, and the lack of an export culture have been some of the reasons for retardation in industrial growth.

TRIPS requires protection of intellectual property rights as an integral part of the multilateral trading order and is considered as a gateway to commercial interests. Those who have copyrights and patent rights assiduously demand it.

There has to be the understanding that the major global corporations have been forcefully demanding the protection of IPRs. Pakistan has witnessed the efforts of computer-related corporations who have conducted well-publicized raids on stores and institutions that have pirated software. The artistic community banded together on a common platform to protect their creativity from being victims of worldwide piracy. It has been figured out that over 75% of the piracy is done in developing countries and in the newly emerging industrialized countries in Asia. It is also estimated that the annual loss in software due to piracy exceeds US$ 1.5 billion.

As a WTO member, Pakistan is committed to fulfilling the obligations of TRIPs. However, until today, Pakistan has not fully implemented the copyright laws in conformity with the WTO commitments. This is a contentious issue and the policymakers would have to seriously decide on this because the pressure by the US government is very strong as global piracy is hurting the American companies very badly. It is more profound when one considers that 45% of piracy of American products and services is done in Asia.

This provided members the right to apply anti-dumping measures if such dumped imports cause a negative impact on a domestic industry.

Pakistan is cognizant of the fact that anti-dumping measures are imperative if the local industries are to survive and face the competition. A draft of the Anti-Dumping Ordinance has been approved by the Federal Government and sent for necessary vetting before promulgation by the President. Pakistany exporters have also been accused of dumping products in foreign markets and have faced the ignominy of having their goods refused in those countries. At the same time, Pakistany industrialists have continuously faced the invasion of dumped goods and have not been able to get government support in ensuring the blockade of these goods into the country.

One very significant issue that needs to be expanded here is the debate on new trade issues that are of immense concern to Pakistany employers. The important item of this debate is the question of labor standards and it has become a highly controversial issue. At the 1996 Singapore Ministerial Conference, WTO members defined the organization’s role more clearly, identifying the International Labor Organization (ILO) as the competent body to deal with labor standards.

The debate outside the WTO has raised three broad questions.

• The legal question: should trade action be permitted as a means of putting pressure on countries considered to be severely violating core labor rights?
• The analytical question: if a country has lower standards for labor rights, do its exports gain an unfair advantage?
• The institutional question: is the WTO the proper place to discuss labor?

All three questions have a political angle: whether trade actions should be used to impose labor standards, or whether this would simply be an excuse for protectionism. The WTO agreements do not deal with any core labor standards. However, some industrial nations believe that the issue should be studied by the WTO as a first step toward bringing the matter of core labor standards into the organization. WTO rules and disciplines, they argue, would provide a powerful incentive for member nations to improve workplace conditions. Many developing and some developed nations believe the issue has no place in the WTO framework. These nations argue that efforts to bring labor standards into the arena of multilateral trade negotiations are little more than a smokescreen for protectionism. Many officials in developing countries fear that the campaign to bring labor issues into the WTO is actually a bid by industrial nations to undermine the comparative advantage of lower wage trading partners.

The core labor standards issue relates to the rights to freedom of association and collective bargaining, the prevention of child and bonded labor, and the outlawing of discrimination. Pakistan has been at the receiving end on the world forum in matters of child labor. However, the initiatives taken under the ILO-IPEC program have become successful examples to display to the world. The soccer ball, carpets, and surgical instruments industries were very much affected by the negative publicity. Even then, there are a huge number of children variously employed and the number would increase with the worsening economic situation.

The Export Processing Zones are exempted from a lot of labor laws and this has created heart burning among the labor leadership. The very fact that inspite of the developed countries making labor standards a pivotal issue at all WTO forums, the investors from these countries make it a point to demand hassle-free labor if they are to invest in Pakistan. The establishment of Special Industrial Zones set up in many parts of the country where labor laws would be non-existent further compounds the issue of no labor laws in EPZs. The workers in the EPZs and SIZs would not have the protection of the three most important labor laws, i.e., the Industrial Relations Ordinance, therefore there would be no unions, the West Pakistan Standing Orders Ordinance, thus no minimum employment terms and conditions, and the Shop and Establishment Ordinance, hence no safeguard modes for workers in smaller enterprises.

The fact of the matter is that notwithstanding the aims and objectives of WTO, notwithstanding the universal socio-economic scenario, and notwithstanding the desire to bring about a technological advancement in the global marketplace, the world would be a better place if higher standards of living, full employment, and conditions of economic and social progress and development are explored and promoted so that stability and well-being is achieved. The world would really progress if the three core issues were attained:

• Alleviation and then elimination of widespread poverty.
• Productive employment-generation leading to maximum reduction in unemployment.
• Social integration thru an enabling environment consisting of empowerment and full citizenship, elimination of class systems, and end of religious discrimination.
• The employers of Pakistan have to be in the forefront in ensuring the following if they are to be active and successful players in the global arena:
• The workers are provided and have access to all the prevalent rights so that there is increased productivity, there is a contented workforce, and there is an improved working environment. All these would be beneficial to the employers, as these would give them leverage in promoting their companies and their products.
• The products have the desired quality assurance guarantees thru effective adherence to ISO-9000, Total Quality Management, and thru development of the skills of the workforce, so that the discerning consumers can patronize these products and that the companies can command a premium in the sale price of these products.
• The management and marketing aspects have to be practical and efficient. There has to be aggressive marketing of products in the global markets and there has to be a keen sense of competition. The timely and current knowledge of world trends should be an integral part of all management strategies. The development of better products, the quick-response delivery programming, and a watchful eye on costs would determine the winners and would be the criteria for strong global players.

The question is very simple: Are the Pakistany entrepreneurs ready for the global market or are they still in the time warp, waiting for another loophole to prolong the process of becoming revolutionary and becoming world class employers. The only hitch is that water is rising fast and there are no lifeboats to take them to the shore. They will have to swim on their own to survive.

The poet must have had in mind those employers whose positive actions to become formidable participants in the global village would be imperative for the economic development of Pakistan, when he so beautifully reflected: