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Friday, June 15, 2012

Liberalisation of Trade an Assessment of Implications for Develoment in Pakistan

Liberalisation Of Trade an assessment of Implications for Develoment in Pakistan.

*Nadeem Malik, lecturer and Supervisor *Dr Shafiqur Rehman
Uruguay Round (UR) of trade Pakistan became member of the World Trade Organisation (WTO) as a result of the negotiations (1986-94) to elicit gains from implementation of the new regime of multilateral trade liberalisation like other countries, under the ambit of the WTO. However, as is the case for many other developing countries, the WTO implementation process also involves significant challenges for the socio-economic development of Pakistan, due to the overall lack of technical capacity and the prevalent lower level of economic development in such countries.
Recent economic research1 provides compelling evidence that trade liberalisation is associated with increased growth and development, evidenced by the unprecedented global growth since the 1970s. However, the evidence of positive relationship between trade liberalisation and economic growth is not as convincing in the case of a majority of developing countries as it is in the case of devel oped countries. Pakistans economic and trade liberalisation during the 1990s, though initiated largely under the IMF pressure, has not been fruitful in improving its social and economic development; almost all socio-economic indicators were reversed by the end of the 1990s. This particular aspect further exacerbates the WTOs implementation-related challenges for Pakistan, as its obligations include not only a further reduction of trade barriers, but also to implement significant reforms both in trade procedures and in many regulatory areas.
The implementation of these agreements involves significant financial costs, raising the question of the future productivity of these expenses and opportunity costs. In addition to the financial cost, the social cost of the implementation in the form of rising unemployment is there (although the impact cannot be calculated precisely in various sectors at this initial stage). This is especially so as the implementation of WTO agreeme nts would not only affect trade-related sectors of the economy but would have indirect effects on non-trade sectors of the economy.
Using the results of countrys liberalisation reforms of 1990s as the background, this paper intends to focus upon the possible future impact on socio-economic development in Pakistan, with the implementation of the WTO provisions. For the purpose of analysis, the economy has been divided into three major categories i.e. agriculture, industry and services on the basis of their share in the GDP of Pakistan. However, due to space constraints the study will be restricted to the agriculture and manufacturing sectors. In doing so an attempt will be made to address the following questions:
1. Based on the projections from the existing literature, what current linkages emerge between trade liberalisation and economic development in relation to the WTOs implementation and what are the consequent gains/losses for developing countries?
2. Do the WTO agreements correctly diagnose the development problems and prescribe appropriate remedies?
3. What are the costs/gains associated in terms of socio-economic development of the country, with the implementation of the WTO agreements?
4. Does the implementation of the WTO agreements imply that Pakistan would be able to increase its share in foreign markets and thereby transfer the stated welfare and developmental benefits/gains to the various sectors within its economy?
Trade Liberalisation and Development Gains
Existing literature review on trade liberalisation, particularly on the aspect of reduction of tariffs and the elimination of non-tariff measures (NTMs) suggests enormous global welfare gains, though the estimates under various models are controversial.2 According to the EU estimates, the annual welfare gains for the world as a whole from multilateral liberalisation in agriculture, industrial products and services alone could range fro m around $150 billion to $370 billion, with an estimated accrual of $220 billion to developing countries.3 Similarly, World Bank studies have also estimated medium-term welfare gains from liberalising all trade, as between $250 billion to $550 billion; one-third to two-third of these gains would accrue to the developing countries.4 However, these estimates are seen with a great deal of scepticism by many analysts from the developing countries. In the words of Luis Fernando Jaramillo, former Chairman of the Group of 77, 70% of the additional income to be generated by the implementation of the Uruguay Round will be appropriated by the industrialised countries, which make up only 20% of the membership of GATT.5 In other words, the developing countries with more than a two-third majority in the WTO would have only 30% of the additional income to share among themselves, and they were the countries conceding the most during the Uruguay Round negotiations. The former Chairmans stat ement also alludes to the way developed countries are implementing WTO agreements in sectors like agriculture, textiles and intellectual property. For instance, in the case of agriculture, production subsidies in developed countries depress international prices thus reducing the export revenues for developing countries. In the post UR period, as a result of trade liberalisation in the agriculture sector, out of the total welfare gains of $122 billion only $11.6 billion will go to the developing countries, which comprise two-third of the WTO members, while $110 billion would go to the developed countries themselves.6 In the case of textiles, according to the same statements, if quotas are fully eliminated the estimated welfare effects on developing countries would range between $13-$22 billions.7 These estimated gains would be accrued only if the Agreement on Textiles and Clothing (ATC) is implemented in its true spirit by 2004. However, most of these models do not take into account the level of economic development of the developing countries and therefore do not represent true estimates for these countries. Hence, market access has emerged as a major concern for developing countries including Pakistan.
An Overview of Pakistans Socio-economic Development Indicators During the 1990s
During the 1990s, Pakistan opted for economic liberalisation, not as a policy generated indigenously but largely as an obligation under the conditionalities imposed by the IMF and the World Bank through their Structural Adjustment Programme.8 Presently, Pakistans trade and investment regimes are fairly liberal due to the continuous liberalisation process the country undertook during the 1990s. However, socio-economic development indicators for the decade of 1990s do not show corresponding gains to the liberalisation process.(see Table-I). Until the 1980s, Pakistans economic growth rate was fairly good (6% average annual GDP growth rate) although the benefit s of that growth were not transferred to the social sectors of the economy.9 However, during the 1990s, following economic liberalisation, not only have the social indicators declined further but economic growth has also been sluggish owing to various macroeconomic factors. Since 1994-95, there have been no major changes in the composition of Pakistans GDP and employment; the economy continues to be dominated by services and agriculture. The share of the manufacturing,10 construction, and wholesale and retail trade services in Pakistans GDP have declined steadily. The share of agriculture, livestock, fisheries, and forestry (single largest employer) in total employment has followed an upward trend, while that of other sectors has remained stable or declined. Since 1995, the unemployment rate has risen from 5.4% to 7.8% (2002).
The slowdown in economic growth and consequent rise in unemployment together with a relatively high population growth have contributed to a marke d increase in the incidence of poverty in Pakistan, particularly in the second half of the 1990s.11 The incidence of poverty, which had decreased to 18% during the 1980s in Pakistan, has reversed and rose upto 28% (1999), per capita income has decreased from $510 in 1995 to $426 in 2001.12 The proportion of the population below the poverty line has risen from 20% a decade ago to 30%, with the majority of the poor (about 70%-80% of poor households) living in rural areas. About two fifths of the population is without access to safe drinking water and more than half has no access to sanitation. Literacy has remained low (compared with elsewhere in the region and low-income countries world-wide) and gender disparities in education are significant. Health indicators, however, have been improving slowly. Development expenditures have decreased. A Social Action Programme (SAP) initiated in 1992, with the financial support of the World Bank and other donors, with a view to expanding and improving the countrys very weak social services (in elementary education, primary health, welfare, and rural water supply and sanitation) and creating employment has also been closed in 2002, due to its lack lustre performance. A comparison of the socio-economic indicators during 1990s with those in 1980s is given in the Table-I.
Table-I: Selected Socio-economic Indicators for Pakistan
Sectors 1980s 1991 1996 2000
GDP Growth rate % 6.5 7.6 6.6 2.1
Exports of Goods and Services % n.a 21.19 14.9 17.5
Imports of Goods and Services % n.a 34.3 25.4 19.1
Unemployment rate % 1.35 5.85 6.12 6.0
Life Expectancy rate % n.a n.a n.a 63
Poverty head count % n.a 22.11 21.8 28.2*
Infant mortality rate/1000 121 85 85 83.3
Development Expenditure
% of GDP 7.3 7.6 3.5 2.2
*. Data available for 1998-99. Source: Economic Survey, 2002
Pakistans economic liberalisation of the 1990s was not done under the WTO obligations, but largely as a part of the Structural Adjustment Programme of the IMF. However, the way liberalisation was carried out could not lead to a successful outcome. One of the criticisms of the reforms is that the process of liberalisation was done only partially due to the lack of required institutional infrastructure.13 So far Pakistans trade has not been much affected by the WTO agreements as the country has just initiated the process of implementation of these agreements. However, given its current weak development indicators, there are concerns that Pakistan will continue to face serious challenges for its socio-economic development in the future, as it moves towards integrating WTO laws into its economy. It is worth mentioning that the WTO is an ongoing process and many new issues have been included after the Uruguay Round. In the future, developing countries would be facing increased obligations under the new rounds of trade negotiations. This was one of the reasons behind t he developing countries lack of interest in launching the new round of trade negotiations at Doha and their insistence to see the results from the UR implementation.
In order to evaluate the future impact of the WTO on Pakistans socio-economic development the study now focuses upon the following two categories as the broader framework:
a. Implementation of WTO agreements in other countries Market Access Issues
b. Domestic Implementation of the WTO
1. Market Access Issues
While the WTO has been successful in reducing the overall level of tariffs with increased transparency and greater market access, the majority of the developing countries, with the capacity to increase exports of labour-intensive manufactures, continue to face significant barriers in accessing foreign markets. According to the UNCTAD 2002 Report on Trade and Development, a comparison of the simple MFN tariff rates on manufactured imports, as a group applied in selected sectors, co nfirms that developed countries apply higher import tariffs to traditional labour-intensive manufactures than to other products. Table-II shows that the tariff rates applied in the developed countries for textiles and clothing and leather are much higher than those of computers and telecom audios, thus indicating a clear discrimination against developing countries exports. This discrimination is further envisaged within the labour intensive products where tariffs are higher for textiles and footwear two of the main exports of Pakistan. This particular factor does increase future market access challenges for Pakistans textile exports, comprising 70% of Pakistans total exports.

Table-II Simple MFN Average Tariffs of Selected Economies
Countries Manufactures Textiles Clothing Leather and travel goods Footwear Computers Telecom Audio and Video
Australia 5.4 9.9 20.7 4.7 11.1 0.3 2.6
US 4.0 9.1 11.4 5.0 13.4 0.4 1.6
Japan 2.9 6.5 11.1 10.2 19.2 0.0 0.0
Canada 4.9 10.7 18.4 4.2 16.3 0.2 1.5
EU 4.4 7.9 11.4 3.3 12.4 0.8 4.1
Source: UNCTAD Trade and Development Report, 2002.
Tariff Peaks, tariff escalation, tariff rate quotas and other non-tariff measures (NTMs) allowed under the WTO have become major impediments to market access for developing countries exports.
Tariff Peaks
Tariff peaks are often imposed on products of developing countries covering mainly labour intensive products: textiles, clothing, leather products, rubber, footwear (Japan) and agriculture products (EU). Clothing and footwear represent more than 60% of the industrial countries tariff peaks affecting the exports from developing countries. Due to greater share of labour intensive products in Pakistans exports, especially textiles, it is likely that tariff peaks would affect Pakistans textile exports in the future.
Tariff Escalation
Tariff escalation - the increase in import tariff corresponding to their va lue addition - is one of the major impediments to the exports of developing countries. For Pakistan, it implies that, in case the country shifts the composition of its textile exports from cotton yarn to clothing, or ready made garments, it is going to face higher tariffs on these products in its major markets. So what is the guarantee that Pakistans value-added textile exports would be able to capture markets? If these products fail to access the targeted markets it means that Pakistan would continue to be the exporter of primary commodities such as raw cotton, which are often subject to volatile prices. Overall data from the last decade reveals that Pakistan has been able to significantly shift the composition of its exports from primary commodities to finished goods.14 However, as suggested by the data in Table-III, in the case of the textile sector Pakistan has been unable to move to the upper rung of the ladder of value addition. On the other hand, in the case of Bangla desh, India and China there is a great deal of value addition to their textile exports, thereby posing the threat of Pakistans loss of market share to these countries, once quotas are removed and Agreement on Textile and Clothing is fully implemented by 2004. Between 1998-2001, Bangladesh and China have achieved 34 % and 36% value addition in their clothing sector respectively, while Pakistan has been able to increase value addition by only 18%.

Table-III Export Quantity of Textile Sector in Pakistan 1990-2001
YEAR Cotton cloth m.sq.m Cotton Thread mkg. Yarn Raw Cotton
000 mt.
1990 1056.5 0.9 501 282
1996 1257.4 0.4 508 221
1998 1355.2 0.3 421 2
2000-01 1735.8 0.2 513 135
Source: Economic Survey, Government of Pakistan, 2001-02.
Although Pakistan has made a modest progress during the 1998-02 period in its textile sector, a major source of concern is that this increase has only been in volume and not in terms of value due to falling international prices.
Tariff Rate Quotas (TRQs)
Tariff Rate Quotas (TRQs) allow a certain quantity of imports to enter under low tariffs and above that high tariffs are applied. Under the Uruguay Round Agreement on Agriculture, the tariffication process i.e. converting non-tariff measures into tariffs was carried out by the developed countries in such a way that it increased the level of actual tariffs on their agriculture imports. Hence it became difficult to trade in certain agriculture products, therefore tariff rate quotas were allowed as a way out for market access for certain countries. So far, 37 countries use TRQs and most of the tariffs are concentrated in few products including vegetables, meat cereals, oilseeds, and dairy products. (Table-IV). Products like fruits and vegetables, tobacco and oil seeds are not only some of the few major exports of Pakistan, but also of potential future interest to Pakistan. Especially the vegetables and f ruits where Pakistan can expand its exports, have been subject to tariff rate quotas. The difference between tariffs within quotas and tariffs above quotas is significantly large. For example in OECD countries with TRQs, the TRQ in-quota rates on agriculture products average 36% while out-of-quota rates average 120%.15 Although, the tariffication process has improved transparency in market access conditions, many studies have concluded that the URAA will not result in a significant reduction in agricultural protection due to the conversion of quotas into high tariffs and TRQs.16
Table-IV Tariff Quotas Distribution by Product Category
Product Group Cereals Oil seeds Sugar Dairy Meat Eggs Beverage
Number of TQs 217 124 51 181 247 21 35

Product Group Beverage Fruits and vegetable Tobacco Fibres Coffee
Number of TQs 35 358 13 18 56
Anti-dumping, Countervailing Duties and Safeguard Measures
Trade remedies permitted under t he WTO agreements include antidumping measures- against dumping of cheaper imports; countervailing duties - against actionable subsidies; and safeguard measures - to protect against serious injury from import surges. These protective measures can be challenging obstacles to market access in particular products. During 1995-99, over out of a total 1200 antidumping cases, 75% cases were initiated by developed countries and 49% of the latter were targeted against developing countries.17 Thus developing countries are the major object of anti-dumping duties. Pakistans textile exports have recently been subject to various anti-dumping investigations, or facing duties, thus restricting market access (see Table-V). Pakistans cotton yarn exports also faced the US Transitional Safeguard Action for three years (1997-2001), irrespective of the fact that the action was not consistent with the WTO agreement on Textile and Clothing. However, by the time the decision was made by the WTO App ellate Body, the time for safeguard action had lapsed, but it caused a serious financial damage to Pakistans cotton exports.18
Table-V Anti-Dumping Cases/ Duties Facing Pakistan
Product Country Initiating Year
Bed Linen South Africa 1999
Cotton Yarn Japan 2000
Cotton Shop Towel US 2000
Cotton Bed Linen, Cotton Fabrics, Unbleached Cotton Fabrics EU 2000
Cotton Shop Towels US 1999
Source: Trade Policy Review of Pakistan 2001, WT/TPR/95 at
Product and Environmental Standards
Product standards under Technical Barriers to Trade (TBT) and Sanitary and Phytosanitary measures (SPS) are also a source of concern for developing countries, which lack the capacity to meet the increasingly complex health and technical standards.19 TBT relates to all products and measures, while the SPS covers sanitary standards for food and phytosanitary standards for animals and plants. In maintaining these standards, both fixed (product redesign and administrative system) and variable costs (of maintaining quality control, testing certification and conformity assessments) are involved. In addition, revision to standards can have important implications for exporters. For example, World Bank estimates that due to the EUs new standards for level of aflatoxin can reduce African exports of cereal dried fruits and nuts to Europe by 64%.20 Pakistan, along with Malaysia, India and Thailand lost the famous Shrimp Turtle case when the WTO Panel upheld the US prohibition of shrimp turtle imports from these countries on the basis of environmental standards, as conforming to the WTO laws.21 On the other hand, the US itself is not ready to conform to the global environmental standards and has pulled out of Kyoto Protocol. In future there is the likelihood of increased number of cases involving standards. By the end of 2000, out of 27 disputes considered by the WTO with reference to TBT and SPS, only 6 were brought by the developing c ountries and no low-income countries other than India brought such cases to the WTO. Hence, for Pakistan, it will remain a distant idea to benefit from these standards, unless the required technical and scientific expertise is developed within the country. Overall, the above-mentioned tariff and non-tariff measures being used as tools of market access denial to the developing countries exports indicate that realising the stated benefits and opportunities under the WTO is a challenging task. A careful analysis of the foreign markets and trade policies, especially of export destination countries, as well as the WTO rules and regulation is urgently required. Market access for developing countries was on the agenda of the Doha Round negotiations. It is the right time for the developing countries to pursue it collectively. Environmental and product standards, while restricting market access for the exports of the developing countries, if adhered to, however, are also a source of penetrating developed countries markets. While legal protections and safeguards are allowed under the ambit of the WTO, Pakistan has promulgated the contingent regulations such as anti-dumping rules, countervailing rules and safeguard regulations. However, P akistan requires technical and scientific expertise to use and benefit from those measures and protect its own domestic market.
2. Domestic Implementation Issues
Domestically, the implementation of the WTO agreements goes far beyond trade-related policy, especially when it comes to the supporting legal and regulatory environment. This is where the cost of implementation matters. Pakistans trade and investment regime is fairly liberal. The average import tariffs declined to just over 20% in 2001-02 which is less than half its levels during the mid-1990s.22 Under its 1997 foreign investment policy, Pakistan has fully opened most sectors of its economy to foreign direct investment (FDI), thus allowing 100% foreign ownership except for certain activities that are subject to specific conditions. From November 1997, Pakistan has provided national treatment to foreign companies under its WTO obligations with respect to incentives such as duty and tax exemptions and other import concessions.23 Developing countries incur substantial problems from reducing their trade barriers. According to the World Developing Indicators 2001, a comparison of developed and developing countries for 1990s, show that in many developing countries, tariff revenue accounts for 10-20% of government revenue, and in some cases considerably more. In the case of India and Pakistan, tariffs make 21% and 17% of total revenues, respectively, whereas in developed countries this share ranges between 0-1%.24 If tariffs are reduced or eliminated in developing countries, they are bound to lose a reasonable share of their revenues.
A liberal trade regime is considered as one that removes domestic market distortions through increased competition and reallocation of resources. However, this whole process involves structural adjustments in the economy, in themselves having socio-economic implications, which has become a major concern of the developing country members of the W TO. Once tariffs are reduced under the WTO regime, it will lead to the inflow of cheaper products. Products in countries like Pakistan, with higher costs of unit production in agriculture and industrial sectors will not be able to compete with the cheaper imports. This effect would be further aggravated with the expected increase in water, electricity and gas prices committed to with the IMF under the present Poverty Reduction Growth Facility (PRGF) reforms.25 The price incompetitiveness would, in the near term, inevitably lead to the closure of the industries in manufacturing sector, while agriculture producers will not be able to meet the cost of production for the same reason.
In fact, for countries like Pakistan, there is a major concern of becoming dumping grounds for over-produced, subsidized agriculture produce of the developed countries. These market distorting tactics can be a big blow to the agriculture sector in Pakistan, which accounts for 25% of the GDP and 47% of total employment, in addition to being the major source of raw material for its manufacturing sector as well. Table-VI shows the agriculture sectors contributions to the GDP and its share in total employment. The ultimate outcome will be an overall lowering in the levels of production, and displacement of labour force through unemployment in the affected sectors of the economy. Given the large share of the household expenditures dedicated to food, even small rises in agricultural unemployment or prices can have major destabilizing effects in the overall socio-economic regime.
Table-VI Pakistan: Sect oral Share (%age)
in GDP, Exports and Employment
Sectors 1991 1996 2000
-Agriculture share in GDP 25.8 25.7 24.1
Employment 47.4 46.8 47.3
-Manufacturing share in GDP 17.4 16.6 15.7
Employment 12.3 10.1 11.2
-Services share in GDP 48.7 49.5 50.9
Employment 42.7 42.6
Source: Economic Survey, 2001-02; WTT/TPR/95.
In Pa kistan, unemployment has been a rising phenomenon during the 1990s (7.8% in 2002), but there is no major evidence to show that this has been a direct consequence of the economic liberalisation programme of 1990s. However, according to the Human Development Report in South Asia 2001, the liberalisation programme was not even aimed at employment generation.26 Economic liberalisation without catering for employment opportunities for displaced labour, is a factor that itself explains rising levels of unemployment during 1990s. It was generally expected that higher growth would generate employment expansion and poverty reduction, which could not yield the desired outcome, thereby increasing the incidence of poverty, during the 1990s.
Generally, economic models assume this process as a short-term phenomenon and it is expected that eventually these resources will be re-employed in some other sector of the economy thus bringing overall gains for the economy. However, actually, displaced workers may not necessarily be re-employed for a significant period of time. This situation is further aggravated in the case of Pakistan where the development expenditure is very low and social safety nets are almost negligible (see Table-1). Although under the PRGF Programme, the Musharraf government initiated the Khushhal Pakistan Programme and National Food Support Programme however, these efforts are at a very preliminary stage, and even if implemented properly will take some time to deliver the desired results.27
Economic liberalisation attaches great importance to the role of foreign direct investment, especially in generating new employment opportunities thereby acting as a factor canceling the unemployment effect. In the case of Pakistan, foreign direct investment has also been on the decline since 1995-96, despite liberal economic policies pursued by various governments.28 The level of FDI is specifically very low in the agriculture sector as compa red to other sectors of the economy and is concentrated mostly in oil and gas and power sectors.29 It is also a reflection of the continued biased policies of various governments in favor of the manufacturing sector, although, the manufacturing sector especially large-scale manufacturing, has also been the victim of the FDI drainage due to overall reduction in FDI into Pakistan, during the mid-90s.30
There are many factors contributing towards the creation of an environment that is not conducive for attracting higher FDI in Pakistan. These factors include: weak property rights, lack of continuity in policies and lack of credibility of various governments in honoring international agreements and, above all, weak politico-security situation within the country and in its relations with India. If all other irritants are removed the security factor remains the most hindering factor in attracting FDI into Pakistan. In that case, amongst the regional countries, China would ben efit the most and with its recent reform programme it will continue to be the most attractive place for FDI.
The implementation of the WTO agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) brings many challenges for various sectors of the economy and consequently socio-economic development of the country. In the case of Pakistan, so far no study has been conducted to estimate the cost of implementation of an IPR regime in Pakistan i.e. the establishment of new institutions, administrative and enforcement costs. Nonetheless, World Bank estimates for selected developing countries and overall estimates for developing countries suggest exuberant costs attached to the establishment of an IPR regime.31 However, views from the official sources in Pakistan indicate that the country already had an IPR regime and three ministries were handling the issue, namely Commerce, Education and Industries, which is in the process of being merged into one authority, called the Pakistan Intellectual Property Rights Authority (PIPRA).32 So, if these views are taken into account, initial fixed costs on institutional arrangements would not be much of expenditure in Pakistan. However, estimating the variable costs related to additional workforce, enforcement of IPR laws, training of police and custom officers would be little premature, as the country has just started the process of implementation of IPR laws. Also, the costs are wide-ranging and scattered in various sectors of the economy. Hence, it is not possible to see the exact impact of IPR regime related cost in connection with the concerns that it would squeeze development funds of the country.
In addition to institutional costs, there are socio-economic costs attached to an IPR regime. The creation of a Patent regime in Pakistan implies that foreign pharmaceutical multinationals can sell their patented products in the country at a desired price, which is going to increase the cost of those medicines in the country, or else the local firms have to get patents for those products and pay royalty to big multinationals. According to the World Bank, this will lead to the transfer of billions of dollars from developing countries to high income-countries in the form of royalties and licensing fees.33 It further indicates that the cost of TRIPs to developing countries is likely to be comparable to any gains they might receive from trade liberalisation.34 In addition, to avoid uncompetitive practices on the part of multinationals, the enforcement of a strict competition regime is a necessary step. In fact, without a sound and strong competition policy, the establishment of an IPR regime is meaningless. Pakistan has been widely blamed by the US and the EU for piracy and weak copyright implementation in the field of entertainment and computers, thereby incurring losses to copyright industries in these countries.35 With the enforcement of IPR rules, the price s for computers will certainly shoot up many times thus extremely restricting the fast-spreading use of computers and internet in Pakistan. With the inclusion of electronic data within the scope of TRIPs, the spill-over effects of the internet in the field of education a crucial aspect in its human development- will also wane. The purchasing power in Pakistan is too little to pay for highly expensive books, or cover the internet charges.
The patent regime has severe implications for farmers in the developing countries. Under the patent laws, new plant varieties are protected and farmers in the developing countries like Pakistan, which traditionally used to reuse the produce for sowing purposes will be unable to do that. In fact, under the new technologies, the seed if reused, will not give the same quantity of crop, hence putting financial strain on the poor farmers who lack access to financial credit. This very factor implies the development of an indigenous R&D in Pa kistan, and further allocation of funds in the national budget for this purpose.
During the Uruguay Round, Pakistan and other developing countries reluctantly adhered to the TRIPs agreement, with the lures of transfer of technology and technical assistance from the developed countries. While both these commitments were non-binding, there is no such international framework ensuring the transfer of technology or technical assistance to the developing countries. In fact TRIPs has strengthened the protection to the suppliers of technology. So, do the gains from TRIPs outweigh the costs in developing countries? Although, Pakistan is benefiting from the technical assistance and capacity-building programmes of the WTO and World Intellectual Property Organisation (WIPO), but a very little and insufficient technical assistance is actually available.
Strong IPRs are considered as one of the incentives for foreign direct investment and technology transfer. But stronger IPRs in developing countries may not necessarily decrease the technology gap between North and South. Once a product is patented and multinationals are getting royalties they might not be interested in investing overseas under uncertain political and security environment for example, as in Pakistan.36

The importance and benefits of economic liberalisation cannot be contested for the developing economies like Pakistan. However, focusing exclusively on one area while neglecting other aspects of human and social development can be very dangerous. As research has proven that it is social and human development that makes a strong basis for sustainable economic development. This is where Pakistan needs to pay attention. Trade liberalisation under the WTO regime is Pakistans obligation, but at the same time it should be complied to in a manner with least implications for the social sectors of the economy. For the Doha Round of trade negotiations, it is suggest ed that any future binding commitments by the Government of Pakistan must be made in consultation with the relevant industry and business sectors. Pakistan should not liberalise more than what is required. Any move towards liberalisation should be carefully measured in terms of its prospective costs and benefits.

*. Mr Nadeem Malik, lecturer, Commerce department, University of Balochistan Quetta, Pakistan.
Supervisor Dr Shafiqur Rehman, Registrar, University of Balochistan Quetta
1. World Development Report, Washington D.C.: World Bank, various issues, Trade and Development Report 2002, New York: UN Publications, 1996-2001.
2. Bernard Hoekman, ed. A Hand Book on Development Trade and WTO, Washington DC: World Bank, at pp.1-10.
3. /trade.htm
4. Market Access for Developing Countries Exports, IMF and World Bank Staff Paper, April 27, 2001, at p.45.
5. Trading into Future: An Introductio n to the WTO at
6. Market Access for Developing Countries Exports, p.46. op.cit.
7. Ibid., p. 47.
8. Shahid Kardar, Political Economy of Pakistan, Lahore: Progressive Publishers, 1997.
9. Dr. Ishrat Hussain, Pakistan: Economy of An Elitist State, Karachi: Oxford University Press, 1999; William Easterly, The Political Economy of Growth Without Development: A Case Study of Pakistan, Development Research Group, World Bank, March 2001, at
10. Although the decline of the manufacturing sector was, inter alia, due to the adverse impact of economic sanctions and resultant foreign currency crisis that led to drastic reduction in domestic and foreign investment and a contraction of imports. Mark Weisbort and Dean Baker,Relative Impact of Trade on Developing Countries, Centre for Economic Policy Research Briefing Paper, Washington D.C, at
11. Economic Survey, 2000-01, Government of Pakistan.
12. Pakistan Development Policy Review: A New Dawn , World Bank Report no.23916-PAK, April 3, 2002.
13. Ibid.
14. Economic Surveyp.119, Op.cit.
15. UNCTAD Report on, Trade and Development, 2002,Now York: UN Publications, p.60.
16. OECD Report on Market Access for Developing Countries, 2001, at
17. Market Access for Developing Countries Exports, World Bank IMF Joint Staff Paper, April 27, 2001, at
18. Appellate Body Decision on US Transitional Safeguard Measures on Combed Cotton Yarn from Pakistan, WTO Document no. WT/DS192/7, 7 November 2001, at
19. Under SPS measures, imports can be prohibited to protect animal and plant health, on the basis of scientific evidence.
20. Market Access for Developing Countries Exports, World Bank IMF Joint Staff Paper, April 27, 2001, at
21. WTO Appellate Body Decision, Document No. WT/DS58/AB/RW, 22 October 2001.
22. Pakistan Development Policy Review, op.cit.
23. Trade Policy Review Pakistan 2001, WTO Document no. WT/TPR/ S/95, p. 22, at
24. World Development Indicators, World Bank, 2001.
25. Under the PRGF reform programme the Government of Pakistan is bound to increase the electricity prices twice a year, Interim Poverty Reduction Strategy Paper (PRSP) 2001, at
26. Globalization and Human Development, Human Development Report on South Asia Mahbub ul Haq Human Development Centre, , 2001, pp.74-78.
27. Economic Survey 2001-02, Finance Division, Government of Pakistan, pp.55-57.
28. Ibid.
29. Ibid., p.41.
30. Pakistan Development Policy Review, op.cit.
31. A Hand Book on Development Trade and WTO, op.cit., pp.1-10.
32. Personal discussion on various WTO agreements with officials in the WTO Wing, Ministry of Commerce, Islamabad.
33. World Economic Prospects 2000, Washington DC: World Bank, p.94.
34. Jayashree Watal, Implementing the TRIPS Agreement in A Hand Book on Development Trade and WTO, World Bank publication, 2002, p. 36 6-370.
35. The EU and US review the copyright enforcement of their trading partners and Pakistan is on the special watch list of the US under special 301 Act.
36. Ibid. p.366.

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