Book Review-VI

WTO:  Globalisation And Nepal
 

Edited by Ananda P. Srestha
Nepal Foundation For Advanced Studies, Kathmandu, 2001
 

epal is a landlocked nation and a constitutional monarchy. If Nepal is to accede to World Trade Organisation (WTO) to increase its trade benefits, a need is felt to study the advantages and disadvantages of this decision. In this regard a seminar was organised by Nepal Foundation For Advanced Studies (NEFAS) and NUSACCI, with assistance from the US embassy to assess the impact of WTO accession on different aspects of Nepal’s social security and foreign policy. This book basically covers the proceedings of that seminar. Various scholars read out their papers in the seminar in order to evaluate the pros and cons of acceding to WTO. This book, being an edited version, consists of seven chapters. Each chapter is preceded by comments, discussing globalisation, WTO and its implications for Nepal. It is a unique book in the sense that fewer publications appear on Nepal in the realm of globalisation and WTO. Moreover, it has tried to address some lingering apprehensions.

With the coming of WTO into effect by 2005, a need is felt at various  national and international fora to discuss its implications for developing countries. Globalisation as a phenomenon and its manifestations in the form of WTO regime have been a focus of a rigorous debate. There are lobbies in favour of and against globalisation. It has turned out to be an unprecedented debate. Never before, has an issue generated so much debate and controversy, especially in the least developed countries (LDCs). To the writer, globalisation is another name for universalism. It is important to note that globalisation implies that the "industrial age" has been replaced by the" information age. "

        The writer has provided comprehensive definitions of globalisation. Many aspects of globalisation are economic, political and social. This demarcation has been made to understand a complex phenomenon. The writer has also discussed how globalisation will affect the traditions of South Asian region. He has attempted to answer many questions raised against globalisation as a phenomenon and implications of WTO on the economies of LDCs. Globalisation signifies the devolution of responsibility and authority of the state to the local community at the grassroots and the growing interface between like-minded local communities and individuals across nations.

            WTO is a post-industrial phenomenon, representing a shift from “industrial capitalism” to peoples or “intellectual capitalism”. It also affects the cultural aspects of human life where one language can supersede the other languages and traditional cultures can become extinct, especially in the remote areas of the world. People would be more exposed to market economy and effects of capitalism especially  in the LDCs. WTO is basically an agreement in goods, services and ideas. An apprehension is felt that discrimination between rich and poor might exceed the limits which ought not to be so. However, it offers prospects both for poverty alleviation as well as widening the inequality chasm. WTO as an international trading regime offers both opportunities and challenges for the developing countries and the LDCs. There are special provisions in the WTO agreement for the benefit of LDCs, e.g. a 'transition period' is provided in which rules and regulations can be amended. It has been acknowledged that it would cost a lot of money and expenditure to adopt industrial effectiveness and competitiveness and to review the judicial laws and implement the various regulations of the WTO. The least developed countries like Nepal suffer from the fact that these countries do not have a permanent representation in Geneva to participate in the negotiations.

Under the General Enabling Clause, the proportion of the annual budget, the burden would not be placed on LDCs. The LDCs would not pay the proportion of the budget of WTO, also termed as “burden of membership”. According to the General Enabling Clause, their contributions would depend on the progressive development of their economies. It is important to note that Nepal is imposing higher tariffs as of its schedule of commitments. These are permitted to protect their domestic industries.

The writer has also discussed how the Trade Related Intellectual Property Rights (TRIPS) regulations favour the LDCs because without Intellectual Property Rights, the Multinational Corporations (MNCs) will not like transfer of technology and investments to Nepal. Hence the TRIPS that generate the most controversy in reality are in favour of LDCs. The innovations would then be protected and benefits would go to individuals and companies, which have the input, resources and innovative ideas. Their innovative technology would then be saved from being copied. Hence, in reality, TRIPs regulations would benefit the LDCs.

The writer has discussed the need for social security and welfare for the poor in the Globalisation context. Due to high prices of goods, cost of living has increased whereas low interest rates are provided to small deposits in banks. The LDCs also provide less for social welfare as compared to developed countries; hence resentment amongst people would further increase if 'distributive justice' were not applied. The writer has explained it by using such terms as ‘Casino Capitalism’, the usual outcome of which is 'economics of fear’ in all aspects of economy, including social security. Globalisation results in increased economic interdependence and may also in the derivations of a common culture. This possible outcome is highly criticised by anti-globalists, where MNCs would also have a dominant role in policy choices.

The writer says that the benefits of direct investment in Nepal are limited because of Nepal’s traditional characteristics of a society consuming traditional food items and work opportunities permitted by Hindu and Buddhist traditions. Only skilled people with technical knowledge about machines, management and manufacturing would get jobs. Small-scale capital and indigenous raw material may be displaced and this may affect both informal and formal sectors. These are effects of high stage capitalism but some of the effects are already visible high crime rate and poverty ratio in Nepal has increased from 32% in 1977 to 49% in 1991. Whereas, on one hand, there are opportunities for economic transformation,  on the other, it has made the poor vulnerable. The author does not assess how Nepal would benefit from rule based trade and how WTO will help Nepal in its goal of product and country diversification and price fluctuations. The writer argues that if preferential treatment is not provided to LDCs in the WTO then their participation would be similar to that in “Olympics”.

Two important principles on which WTO regime is based upon are
the issues of non-discrimination in the most favored nation clause and national treatment. Under most favoured nation clause, if member countries grant lower tariffs to another country on a preferential basis, it must extend it to all member countries. However the preferential treatment in the form of lower tariffs to other countries e.g. between India and Nepal under India-Nepal treaty 1950, is allowed under the General Enabling Clause i.e. capacity of states to make concessions and contributions, that will increase with progressive development in their economies.

            The national treatment provision that is an important basis of WTO, is that once a product crosses the border of that country after paying the custom duty, it must not be given discriminatory treatment. However, Nepal  imposes excise tax on imported specified goods in the name of 'equalising duty' in a non-discriminatory manner. Once foreign goods enter the Nepalese market legally, they get the same treatment as that of domestic goods. Hence the author comes to the conclusion that Nepal can implement MFN and national treatment provision in its accession to WTO.

             The writer has discussed many misperceptions especially regarding WTO implications for the LDCs. WTO is basically a set of agreements in goods, services and ideas with states. There are also plurilateral agreements, to which few states have acceded; hence they do not apply to all member states. WTO regime is based on such principles e.g. principle of transparency, judicial and administrative review, issue of non-discrimination etc. Nepal too would have access to foreign direct investment (FDI), which is the key to success in the modern world and an access to a rule based trading system as well as dispute settlement body. Nepal seeks to balance trade dependence on India with multilateralism. It is a foreign policy choice for Nepal. It has also been said that had the WTO existed in 1988-89, India would have been forced to stop its trade embargo on Nepal. Some of the negative implications of the regime may include erosion of sovereignty of the states i.e. governments would lose some jurisdiction over commercial and economic matters. It includes both opportunities and challenges. The opportunities include possibility of poverty   alleviation, access to rule-based trading system, dispute settlement body, accession to international markets, foreign investment and privileges. The challenges include negotiations for more benefits, strengthening institutions, specialisation in products and services and making industries cost effective.

           With the passage of time, the WTO system would get more complicated. If Nepal accedes to it now, it would be in a better position to negotiate the terms and conditions. However, Nepal cannot be compelled to accept agreements, which against its national interests. Moreover, the members of the Nepalese business community and private sector have an active role to play. If they are aware of the business and investment opportunities, they can brief their government on different policy issues.

            The merits of WTO are much debated. It would only be seen on entry into force of WTO regime, whether it has a positive impact on the trade of LDCs, and provides opportunities to raise living standards and induce poverty alleviation.

            The book provides an optimistic view of WTO. However, few chapters have been written on the theory of globalisation. WTO might be a key towards globalisation but it is not the transformation itself that is needed to modernise the economy. LDCs are required to improve low human resources status, poor infrastructure, primitive technology and inefficient bureaucracy, rather than rely on WTO wholly for their development.

             In short, it is a comprehensive book on the subject and is worth reading.

Nuzhat Khanum
 

Assistant Research Officer, IPRI