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THE WTO was formally launched in 1995 to succeed the General Agreements on Tariffs and Trade. Currently, the total number of members of WTO is 147. World trade organisation (WTO) is intervening in the domestic economy and advocating effective open market economy. The advent of globalisation of trade and investment has caused many developing countries like Bangladesh to call for increased cooperation through the establishment of international rules and commitments under WTO.
Globalisation has been defined as the broadening and deepening linkages of national economies to a worldwide market of goods, services and especially capital. Investment, competition policy, transparency in government procurement, trade facilitation has been labelled as the "Singapore Issues", following the WTO work program in the 1996 Singapore Ministerial Declaration. Singapore issues in FTAs are associated not only with assistance for LDC members but also provides for flexibility and scope for slippage in implementation.
Doha WTO Ministerial Declaration 2001 states that WTO is the unique forum for making global trade rules as well as for liberalisation, which also means that regional trade agreements can play an important role in prompting the liberalisation and expansion of trade and fostering development.
Following are the main principles of WTO: market access; transparency; most favoured nation; and national treatment.
The Fifth WTO Ministerial Conference was held in Cancún in 2003. The main task was to take stock of progress in negotiations. Negotiations collapsed in Cancun when rich and poor countries failed to agree on the way ahead and opened up a rift over agricultural subsidies.
Director General of WTO on 19th July 2004 called on WTO member governments to make every effort to strike a deal on a framework accord which can eliminate all forms of farm export subsidies and create enhanced trading opportunities for all countries and more equitable rules for international trading.
Trading nations give mixed reaction as final attempt by the World Trade Organisation to broker a compromise in deadlocked global trade talks by the end of the month July. However, the Doha round was originally meant to be completed by the end of 2004. Global trade talks could run well into 2005 even if the WTO member countries take steps to break the seal of the long-delayed interim deal this month in Geneva.
The relative weaknesses in negotiation skills of the developing countries are being continuously felt. If developed countries want to ensure success of negotiation, they need to consider ways to make the game worthwhile. Otherwise, negotiations are likely to produce poor results or the weaker players will not want to play at all.
Where does Bangladesh stand now?
Below is an analysis of the implications of WTO for Bangladesh:
Starting in 2005, the country's export sector will face free competition in the international market due to the expiry of the multifibre agreement. Further, strengthening the role of globalisation process of trade and investment and advent of post-MFA will push Bangladesh to face a highly competitive global environment.
During the year 2002-03 income from total export of Bangladesh was USD 6548.88 million, while in the first nine months of 2003-04, it was USD 5986.09 Million. Ironically, Bangladesh's earnings from export sector depend on few products: Readymade Garments and Knitwear supply 75% of the total export earnings. Frozen Food supplies 6% of the total export earnings.
Though Bangladesh is also exporting other products like tea, leather, jute, pharmaceuticals etc, export earnings from these are very low. We are gradually losing the market of jute. In long term we may also lose the tea market as there is no measures to improve the production process of tea. Though we have competitive advantage in blue leather, we have not been able to develop leather industry properly. Rather countries like China, Hongkong etc. are doing well in the leather sector. Despite the government's continuous support for the ICT sector, it is still at an infant stage and generates an export earring which is much below the target level. Moreover, we are mainly exporting our products (around 88%) to four markets i.e. in the EU -56%, the USA-26%, Canada-4% and Japan-2%.
One of the major reasons of the success of the RMG industry has been the derogation of certain rules of GATT under MFA. But neither forward linkage industries nor backward linkage industries of this sector have been properly created. If the garments sector cannot face the free competition, the macro economic situation of the country will be in a difficult situation. However, Bangladeshi garments firms may get scope to change their business through business process reengineering as 600 to 800 firms may be closed down out of around 3900 firms and 0.4 to 0.5 million garments workers may lose their jobs gradually.
Still now stable political atmosphere, infrastructural development and diversified exportable commodities cannot be produced. Moreover, we are mainly a supplier of primary products. Prices of those products are regularly facing deterioration. The government of Bangladesh has carried out major changes in the cash incentive scheme. Besides, the RMG sector, it has decided to provide cash incentives to the following sectors: frozen food; leather goods; agro-based product i.e. vegetables, fresh fruits, agro-process items; by-product from Hugla/straw/ Sugar cane straw; and light engineering/bicycle.
Markets in Bangladesh are small in economic terms, even though the size of the population is large. The purchasing power of the large majority of the people is minimal and around one-fifth of the total population is outside the market. Only those firms, which have competitiveness, may survive with the economies of scale.
Michael Porter (1990) describes four attributes to achieve competitive advantage for local firms: factor endowments; demand conditions; related supporting industries; and firm's strategy, structure and rivalry. But most of the domestic firms in this country cannot fulfil these attributes.
Lack of product- and market diversification of Bangladesh's exports coupled with the dismantling of the Multi-Fibre Agreement and the Generalised System of Preferences (GSP) facilities may act as hindrance to the growth of exports and output of the country. Regarding the implementation of the SAARC cumulation, rift between BGMEA and BTMA marks a bad precedent for the country. This indicates how our policymakers are inefficient in taking effective decisions. But bonded warehouse can easily be established. New GSP facilities may be started from 2006 and the benefits of SAARC cumulation may be provided to Bangladesh during the interim period.
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