Published:  12:42 AM, 13 September 2018

WTO and Bangladesh economy

WTO and Bangladesh economy

The current institutional format of the trading system -- the World Trade Organisation -- was created on 1 January 1995 replacing the GATT under which trade rules had been developing since 1948 to meet the evolving needs of participating countries and the global community. WTO is an institution representing the multilateral trading system.

Immediately after the Second World War, from 1946 to 1948, over 50 countries negotiated for the creation of an International Trade Organization (ITO), which was to be the third leg of the Breton Woods post-war order together with the International Monetary Fund (IMF) and the World Bank.

In March 1948, these negotiators attended the United Nations (UN) Conference on Trade and Employment in Havana, Cuba, resulting in the Havana Charter describing the intended function of the ITO.

The Charter was ambitious and thus the ITO never came into being. In order to quickly implement the trade rules and protect the tariff concessions that came about during these discussions they were written up as the General Agreement on Tariffs and Trade (GATT).

It included promises to reduce 45,000 individual tariffs, affecting about one-fifth of total world trade. GATT was signed by these 23 contracting parties on October 30, 1947 and came into force on January 1, 1948.

The WTO currently has been accounting for 90% of the world trade. Although over three-quarters of these members are least-developed countries (LDC) and developing ones, there have been strong feelings that they did not get a fair deal. Since its creation, the WTO has not been idle.

There have been several ministerial meetings, nest agreements on telecommunications services information technology products and financial services, and by April 1999, 170 cases had been brought to the WTO reflecting it as a dispute settlement body.

The Seattle ministerial meeting was expected to sign into being 8 new agreements including an agreement that aimed to eliminate tariffs on all forest and paper products by the year 2000 for developed countries and by 2003 for developing ones. It was estimated that it would increase the consumption of wood products by 3% putting increasing pressure on the rapidly dwindling forests of the world.

By virtue of the membership of WTO, Bangladesh has closely quickened her trade and finance related issues with majority countries of the world. The sentiment among the policy-makers and policy-analysts of Bangladesh is at present in favor of keeping the new round as narrow as possible in order to try to clear the 'left-over' business being discussed in Cancun. There is the need to go back to the liberalization of trade in manufactured goods and with many other new issues this cause might not get sufficient attention.

Developing countries like Bangladesh have limited bargaining power due to their limited share of world markets. The divisions between EU, Japan and USA were still wide to WTO ministerial meeting at Cancun negotiations and developing countries were against the inclusion of new issues in the negotiating agenda.

That is why much clearly efforts are still needs to ensure success. Given the relative weakness in negotiation resources of developing countries, the developed countries should take a greater role in ensuring a successful outcome of issues of Cancun meeting.

The more serious threats of WTO might come from the incorporation of TRIMs and TRIPs whereby a developing country like Bangladesh would always lag behind. The result of a technological subjection might result in a silent outflow a huge exchange every year. GATS opens the country's gate for a host of services, including the financial ones, to the foreign giants.

Foreign banks and other service organizations with their superior financial and technological base are bound to pose together and bitter competition to the local banks and other service institutions that have very weak technological and financial base. It can be tempting to design a pro-poor trade reform by identifying sectors that are important to the poor, higher on the consumption side or on the income side and singling out these sectors for preferential treatment when the protection of other sectors is reduced.

A better approach would be to focus on developing two different sets of instruments in Bangladesh; a trade policy focused on providing the incentives appropriate for efficient production and use of goods services, complemented by policies aimed to redistribute income.

The set of distributional instruments will necessarily have a much wider range of dimensions, including investments in expanding access to education, the provision of safely nets and a range of infrastructure investment needed to give people in poorer regions access to the markets and other amenities enjoyed by relatively advantaged people.

If a reform is pre-announced to be implemented over several years and is credible normal market adjustment and labor force attrition can be used to alleviate adjustment costs. However, a gradual approach faces the risk of reversal or non-implementation, as entrenched interest will have time to mobilize their opposition.

A staged reform, that is scheduled to take more than five years is not likely to be credible unless it is anchored in WTO commitments or a far-reaching regional trade. It is important to address on-tariff barriers and high tariff rates as early as possible.

Tariffs should be cut across the board during each stage of a gradual reform. If instead a target is set based on the tariff average, the temptation will be to cut tariffs only where they cause no immediate difficulty, postponing adjustments to the last. So on the basis of the past experience the policy planners of Bangladesh should draw effective strategies on lessen the possible negative pitfalls of liberalization under the WTO agreement.        


The writer is a columnist

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