Statement by Pakistan at Evian IX Plenary Meeting
Montreaux - Switzerland - 16 October, 2004.
I would like to sincerely thank the Evian Group for organizing this meeting and for giving me an opportunity to address such an influential audience. This meeting comes at an opportune time, now that the WTO members are entering the final phase of negotiations of the Doha Round.
This year’s rallying call of the Evian Group is “let’s move on!” In order to do so on a sure footing, we need to look back and reflect on the lessons learnt after the earlier rounds, to take stock of our successes and failures, on the gains made as well as the opportunities lost. I’ll speak of this with reference to Pakistan ’s experience, but first let me talk of the impact of the new actors on the world economic scene – particularly China .
Perhaps never before in modern history has the emergence of new actors on the world economic scene has caused such a mix of optimism and anxiety, as has the emergence of China . In recent times new economic powers have regularly emerged, and have reshaped international trade. Japan in the 1970’s is a case in point, followed by the East Asian “tigers”. But the situation now is different. Whereas the Japanese economy was closed, the Chinese economy is exceedingly open and integrated with the global economy. Foreign investments in China totals more than one-third of its GDP, whereas for Japan the foreign investment to GDP ratio was negligible. Chinese imports and exports account for a huge 75% of its GDP, while for US and Japan it is less than 30%. It is because of this open, integrated economy that the emergence of China will affect world economies much more than the earlier players did.
China ’s growth has been a boon for the other countries of the region, and has been instrumental in revitalizing the world’s economy, Japan ’s recovery being just one example. China imports almost as much as it exports, and this creates opportunities for other economies. While China ’s leap is likely to be a boon for most of the world’s economies, in the short term, we cannot dismiss the fear of poorer countries whose exports will face stiff competition from China . This is true particularly of textile and clothing exporters, whose exports stand to be adversely affected after the elimination of quotas in January. However since the global economy is not a zero-sum game, countries such as Pakistan can gain from the Chinese factor by continuing their economic reforms and further opening up their economies. China should be seen as providing opportunities for gain rather than cause for loss.
When the Uruguay Round was drawing to a close, the World Bank and many others estimated that the world economies would gain on the order of $ 200 to $ 500 billion each year, with at least one-third of these gains going to developing countries. Ten years on, these estimates have proved to be overly optimistic. In the case of my own country for example, there were hardly any gains during the first few years following the completion of Uruguay Round. What went wrong, and what have we learnt?
There were no doubt external obstacles, but let me first speak of how we could have better availed ourselves of the opportunities provided by the opening of markets through the Uruguay Round. We started moving in the right direction to obtain the benefits of trade liberalization only in mid nineties. Our tariffs remained high until 2001. That kept our industry uncompetitive, and we were not able to take advantage of freer trade. Our quickened pace of reforms over the past 5 years is now yielding dividends. Pakistan ’s exports now are growing at a rate of 15 to 20% annually, whereas they were stagnant in the 1990s. This is resulting in higher industrial growth. Whatever revenue losses we had to incur because of rapid tariff reforms was more than compensated by revenue increases from income tax, sales tax, and custom duties from the higher volume of imports.
The most significant hurdle has been the restriction of access to markets of the developed countries for our goods and services. Even though the average tariffs in these countries are low, the products of developing countries still face tariffs at least three or four times higher than the products of developed countries. For example, whereas the average tariff on imports into the United States is 1.5%, Pakistan ’s exports to the US are subjected to 10.5% tariff. In the case of the EU, we appear to be enjoying special GSP preferences under the ‘Drugs Arrangements’. However, where we are competitive or where we can possibly make use of this concession, we have been ‘graduated’ and are not eligible for GSP concessions. By 1st January 2005 , we will have been ‘graduated’ with regard to 80% of our exports. This not only means that normal tariffs will apply but in some cases Pakistan ’s exports will suffer higher tariffs. Our most competitive export of bed linen is subject to a high anti-dumping duty.
Looking to the future, what are the challenges we are likely to continue to face? Marketing of our agricultural products is one. Due to very high level of export subsidies and domestic support for these products in industrialized nations, we find ourselves unable to sell our exportable surplus. Negotiations in the context of WTO’s July framework have resulted in some progress on export subsidies but it is not yet clear whether there will be any actual impact on the present levels of domestic support, which is many times greater than the export subsidies.
For Services, the picture is not yet clear. From the ‘offers’ made so far it is evident that the focus is on services, such as financial services where developed countries have an advantage, and not on low-skill, labour-intensive services such as maritime and construction, which are of interest to developing countries.
Another external challenge faced by lower income developing countries is that developed countries have been increasing market access for some of the relatively higher income developing countries through free trade agreements. Thus low income developing countries, such as mine are getting squeezed between higher income developing countries and least-developed countries, as both of these are enjoying preferential market access.
What is my message? As in the past, countries that have experienced rapid economic growth have done it through openness to international trade and integration with bigger economies. Historically there have always been new players operating at much faster pace than the rest. However, they have always created additional opportunities. The growth of Japan in the 60’s and 70’s led to the growth of several others, notably East Asian countries. Therefore, the best course of action is to see such growth as an opportunity. We should take advantage of their boom and not look back to the past. However, care should be exercised, that if certain groups of countries are being left out; there should be a concerted effort to bring them along. Restricting opportunities does not benefit anyone. We should think of the long term gains for humanity as a whole. What September 11 has shown us is that no country is an island. We all have to work together to make this world a better place to live in.
