Accession to WTO- where smartness will make a difference

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One way of ensuring economic strength in any given country is to export more goods services and than what are imported. The on going accession process of the country to joining the WTO was the blistering issue that triggered attendants to vehemently speak out their support on one hand and their concerns on the other. It so happened on the 4th Executive Idea Exchange Forum which was held on December 20 2013 at Eshetu Chole Hall, College of Business and Economics, Addis Ababa University under the theme “Implication of WTO accession for Ethiopian Business” in which high government officials, academicians, business people, development promoters and post graduate students participated.

As the world is becoming a small village as a result of globalization, there seems to be no choice but joining the group and becoming a family. The hypothesis is that the phenomenon of globalization according to some analysts, is the result of the booming technologies in the western world. Some claim that countries in the world would remain dependent on those technologies invented by industrialized countries which in turn gives advantage to the developed countries to continue dominating the rest. Similarly, as some claim the world is becoming one small village and is being ruled by the world’s largest organizations, such as WTO.

The WTO?

According to Geremew Ayalew, Director General of Trade Relations & Negotiation, Ministry of Trade the WTO is an organization having the objective to expand trade in goods and services with the objective of sustainable development. Geremew added that the WTO also aims to raise standard of living, by ensuring a large and steadily growing volume of real income and effective demand.

“From its inception more than 60 years ago to its present form as WTO, this organization is essentially meant for trade,” said Tsedeke Yihunie Woldu, Founder of Flintstone Engineering & Homes. Tsedeke added that contrary to popular belief, WTO may not always lead to more development let alone equitable development. It only leads to more trade among the member countries.

Yabowork Haile, Managing Director, Gasha MFI (Micro Finance Institution), on his part said that the WTO is umbrella international organization for the administration of global rules of trade between nations; it provides the principal contractual obligations; and provides a platform for negotiations amongst member (144) through period rounds.” “WTO is not a charity organization, rather market administering body,” he said.

Where is Ethiopia now in its accession to the WTO?

At the forum there were presentations that supported Ethiopia’s accession to the WTO while others claimed that the country managed to register a double digits economic growth without joining the WTO, so there is no need to rush and join the WTO. Meanwhile it was noted on the forum that the country has started the accession process some ten or so years before.

“Application for Observer Status was made in October 1997 two years after the establishment of WTO; and the formal application for accession was made in January 2003,” said Geremew, while he explaining the country’s status in the process of accession.

According to Geremew, the WTO accession is not an end by itself; it should rather be viewed as a means to accelerate economic development. For example, he said, the per capita of China, Cambodia and Vietnam showed increment after its accession to the WTO; while the per capita of countries such as Nepal and Cape Verde decreased. “Whether we are in or outside the WTO, we are abiding by the rules and regulations of the multilateral business rules internationally,” noted Geremew.

Geremew explained the significance of the country’s being a WTO member by citing the country’s Foreign Affairs & National Security Policy & Strategy (2002), that goes, “… The efforts in our country to bring about rapid development, democracy and good governance cannot be seen outside the regional and global contexts. In the process of globalization, the world economy has become interconnected and an international division of labor has been introduced. It is impossible to operate outside of this context. “ … We cannot attain development and democracy by closing our doors and taking refuge in our mountains. It is only when we accept the fact that we have no choice but to enter the global economy, and when we aim to transform ourselves from the state of dependency to that of being a producer, and a better producer in time.” Geremew further explained about the advantage of being a member to WTO that through fully exploiting the opportunities globalization provides us, lessening the constraints it creates, and becoming active participants in the process of globalization. Hence a policy that fully exploits the opportunities globalization provides us and that withstands the negative effects of the process, is useful and appropriate as is stated in the country’s foreign affairs and national security strategy.

Noting that the WTO is a huge economy of the world, Geremew told the attendants that 98% of the world trade is in the WTO, where seven big powers i.e., the United States, Australia, Canada, the EU, Japan, China and Russia together account for more than 70 per cent of world trade. Besides, he said WTO represents is 98 per cent of global GDP and, 96 per cent of the world’s population.

He, therefore, accentuated on the very need for Ethiopia to join the WTO and benefit from it as the organization is the world’s leading economy. “This signifies that it does not worth staying outside the multilateral system and is time to be part of the rule based family,” he said. Above all, he stressed the significance of joining the WTO by quoting the note from what is referred as the Lamy-Test, “accession should make countries better off, not worse of.”

What are the advantages of joining the WTO?

The forum also discussed the benefits and challenges of joining WTO for the Business sectors. It was noted that exporters will have more predictable access to foreign markets, and the WTO rules restrain arbitrary and discriminatory foreign practices to the business sectors. Plus to this, they will have better information on foreign market development and others.

The accession to WTO has its own positive and negative effects. Noting the potential advantages of joining the WTO, Geremew said that an acceding country will expand its trade in goods and services with the objective of sustainable development; and it also raises the standard of living of its people by ensuring a large and steadily growing volume of real income and effective demand. On top of this, the acceding government will have sustainable and predictable market access; and it can also build the confidence of investors and thereby attract foreign direct investment, FDI. Moreover an acceding country will improve the competitiveness of its local industries.

For domestic producers, more transparency on trade related regulations, having competitive service sectors to support their activities, developing their confidence for having stronger intellectual property laws, and improved access to foreign components and inputs are among the merits that accession to the WTO can offer.

Likewise, Zemedeneh Negatu, EY Managing Partner of Transaction Advisory Service, on his part asked, “how do we say that we are out of WTO, which constitutes 90 per cent of the world’s capital as a global community?” he said joining the WTO is by far better than not doing so. “It is inevitable for us to join WTO in a couple of years time; but we must be smart on our negotiations.” He suggested that job creation is the safety net that the government of Ethiopia has to think of in order to mitigate the impact of joining the WTO. Moreover, effective governmental machinery is needed to support negotiations; accession requires considerable strengthening of institutional infrastructure.

Zemedeneh urged the private sector in the country to be alert to follow what is going on in the global economy and update themselves accordingly. Ethiopia’s private sector needs to create juncture and make partnerships with the global businesses, according to Zemedeneh. Citing Ethiopian Airlines as a good example for its success in competing in the global market, he suggested the private sector to follow suit leaving aside the concern of joining the WTO. “If we do not join WTO, opportunities like AGOA might be taken away by the Americans.”

Tsedeke on his part stated how the country can get benefit from joining the WTO. “The country can_ benefit from WTO accession in four aspects: The accession streamlines government policy towards fair trade ; alerts local businesses from their complacent slumber to be competent in price and quality ; offers consumers and local businesses opportunities to get inputs from foreign suppliers; and finally, if all the three stages go unchecked by vested interests, makes national businesses become competitive enough to enjoy a predictable international market opened up by WTO accession as per the negotiated terms.”

It was also disclosed on the forum that the accession requires alignment of national legislation with WTO rules and commitments. Therefore, identifying conflicts between existing laws, regulations, practices, and preparing new laws and amending existing ones is said to be the responsibility of the government.

What are the challenges the private sector faces from joining the WTO?

Zemedeneh Nigatu of EY said that challenges such as facing stronger competition, having restricted policy space in relation to tariff management and flexibility and the like are what the business sectors should be aware of. In order to lessen the impact the private sector may face as a result of Ethiopia’s joining of the WTO, he suggested that actors in the private sector must be ready to make effective dialogue on trade and trade related issues with the government and international business sectors. And at the same time, the inputs from the private sectors should help identify sensitive economic sectors, and thereby avoid the dependency on policy protection rather to prepare for competition. Adding to this, he said, the Ethiopian private sector needs to upgrade its human capital and give efficient services.

Import quotas, voluntary export restraints, technical constraints, export subsidies and administrative and other regulations (safety regulations, health regulations, and labeling requirements) are the non-tariff barriers one has to look in to apart from the tariff barriers in the accession to the WTO, according to Yabowork.

International instruments like the WTO are hardly in favor of the developing countries, Yabowork said adding that ‘instruments’ including WTO, IMF and the World Bank were established with a sense of retaining Western supremacy in the name of trade. “All the agreements under WTO are signed only when developed countries have gained comparative advantages.” For example,” he said, “when exporting, developed countries give all the reasons to reject imports, even packaging; however, to the contrary of it, during importing Ethiopia may not have the necessary capacity to check all these. Further explaining the possible negative impacts of joining the WTO, Yabowork said, “none of Ethiopia’s industrial products is in a position to compete with any of the products from developed countries. He mentioned as an example the leather industry that would be under threat if the country joined the WTO as it would fail to compete with similar products from the developed world. Noting that Agriculture is not subsidized in our unlike in developed countries, Yabowork, therefore, urged the Ethiopian negotiators to put high bound tariff in it. Otherwise, he added that our agriculture will face a big problem.

Yabowork strengthened his concerns over joining the WTO by mentioning some challenges that await the negotiators. He said not always having equal opportunities for member countries to do their business, the high threat of non-trade impact (economic, social, political especially national sovereignty), huge cost in relation to implementing the complicated trade rules, the threat of being dominated by other country’s products due to the limitedness of our agricultural products that are vulnerable to price fluctuations, and lack of competitive capacity of infant industries among others are the challenges that the Ethiopian negotiators have to bear in mind during their talks with the WTO.

Tsedeke also expressed his doubt that Ethiopian exports will fare better under WTO’s Most Favored Nation (MFN) status than they are doing now with AGOA and EBA. This may lead to the eventual collapse of the nascent private sector, he stressed.

Negotiations in the accession process

“Yes, negotiations will work,” said Tsedeke adding, “the position of the consumer, the workforce and the state enterprises (CBE, ETC, METEC, ERC, etc. ) and the endowment giants ( of EFFORT ), these positions must be well defended and negotiated to yield maximum beneficial terms.” From this may come a strong and better position that can ensure competition among investors and lead to better prices for the consumer and less entry barrier for new investors, particularly local investors who will have finally learned to be as competent as the foreigners, Tsedeke said.

“Currently, Ethiopia cannot negotiate from the position of the national business interest. Given our low productive capacity, this is a very weak position and untenable in the short term,” he added.

“I hope the negotiators will play these cards – the consumer, the labor and the few but strong state enterprises – very well.”

Yabowork also stressed the significance of negotiations on market sensitive crops.

Prof. Fesehatsion, Vice President of International Leadership Institute on his part asked whether intellectuals were made to participate in the negotiation process. The professor also stressed the need to critically analyze the socio-economic benefits and impacts of foreign investments in job creation.

“WTO, basically has been a group of cramps where we have been co-opted to join,” he said. He added that the country must retain its unique features in its effort of acceding to the WTO. Professor Fsiehatsion also said that the contributions made by initiatives such as AGOA as far as job creation is concerned were insignificant.

Sourced:

http://www.ethpress.gov.et/herald/index.php/herald/development/5723-accession-to-wto-where-smartness-will-make-a-difference

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Related posts:

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–    Economic development: The good news from Ethiopia, and what might make it even better

–    Ethiopia’s Course of Development in the Eyes of Mark Lowcock

–    FACES OF Negotiation

–    Food Subsidies Could Stall WTO Deal

–    Trading freely by 2017

–    Ethiopia’s Fourth Round Negotiations with the World Trade Organisation Delayed

–    Single Trade Policy to be Drafted

–    World Trade What It Takes for Ethiopia to Join?

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