WTO has important contributions to international trade since its inception. The trade policy review mechanism has created a process which continuously monitors the developments of trade policies in the member countries. Most importantly, the under developed countries have undertaken exchange rate, trade and domestic reforms which have improved the efficiency in use of resources, opened up new opportunities and ultimately contributing to economic growth.
The organization has been under criticism for sidelining the developing countries and has been favoring the developed nations in its policies and decisions. For example, in developed countries, high protection of agriculture is maintained while developing countries are pressed to open their markets. Following these criticisms in 2001, it was proposed that the needs of developing countries should be put at the center of international trade negotiation agenda. However, not much has been done practically on this front.
The accession process to WTO is unique for each country depending on the economic development stage and the current trade regime of the given country. After a country wishing to join WTO submits its application, the rules, policies and laws of domestic and international trade of applicant country is compared with that of WTO for compliance and any discrepancies. After this, the terms and conditions are determined for the applicant country and some transitional period may be allowed to comply with WTO rules.
The accession of Afghanistan has not been an easy process and it took around ten years during which conditions were met to become a member. The country was required to introduce trade reforms and establish stable trade rules. For example, efforts were needed to introduce a more efficient, transparent and accountable customs and tax system. In response to these requirements, reforms were introduced in customs system, tax codes were simplified and rationalized and the trade agreements were renewed. As a result, improvements in system were visible in different areas of the economy.
Afghanistan’s accession to WTO was a much needed step after the country opted for an open market economy based on amendments in the constitution. As the country is aiming for regional and international trade and attracting international investment, the membership would help in creating an economic environment able to attract foreign investment and trade. It gives credibility to Afghan economy as it sends signal to international investors that now Afghanistan abides by the rules of WTO which gives them confidence and surety when they think about investment here. In the same way, Afghanistan Investment Support Agency (AISA) is now in a better position to attract Foreign Direct Investment (FDI).
Afghanistan is striving to become trade and transit hub through economic integration and cooperation in the region and accession to WTO will accelerate the process. Further, being a landlocked country, most of its trade is through Pakistan) has been facilitating the process. However, there have been issues and disputes from time to time in enforcing the terms of agreement. As Pakistan is also a WTO member, now there will be more pressure on her to obey the agreement. In case of any violation, Afghanistan can now seek help from WTO platform and even claim compensation through dispute settlement mechanism of the organization.
The export of Afghan products has been a major issue. Afghanistan produces one of the best quality dry and fresh fruits, valuable herbs like saffron and non- agricultural products like carpet and gems. Now these products can easily reach international markets. Further, Afghanistan’s exports will be treated equally like that of any other country. With presence at such a large platform, Afghanistan can enter into trade ties with different countries.
A good example is the bilateral agreement with European Union (EU) in backdrop of Afghanistan’s WTO accession. EU is an important trading partner of Afghanistan. In 2012, the exports to EU amounted € 56 million. As per bilateral agreement, Afghanistan’s products will have duty and quota free access to EU market after its accession to WTO. This flexibility is mainly due to least developed economy status of Afghanistan. This and other similar agreements will boast the exports of the country.
A major issue is that the industry of Afghanistan is infant and far from competing in the international market. As such, the development of private sector in the country would become more challenging as the competition rises. However, considering the stage of industry and overall economy, Afghanistan will be receiving a preferential treatment from WTO and other member countries, which would secure the industry to some extent. At the same time, the government is required to take exceptional steps to increase efficiency and standardize products as per international standards.
It is important to remember that accession to WTO was one part while effective participation and capitalizing on available opportunities is the other one. We need to engage a very technically competent team which can follow negotiations and participate actively to reap maximum benefits for the country. In this regard, the country can benefit from the grants, technical assistance and capacity building support of WTO.
In the same way, there is need to work seriously on education of business community on terms, conditions and policies under WTO. As it has been the case with open market economy, the public has had a negative perception about the concept and unfortunately not much has been done about it. Therefore, learning from this experience, it is important to work for public awareness on the issue of WTO accession and how the government will utilize the platform to boast national economy.
The interventions to jump start the private sector during the last decade have not met the expectations. The weak factors market, quick fix approaches and lack of access to international markets were impediments to development of sectors in which the country had great potential. The problem of access to international market will be partly solved with this accession. However, the government must learn lessons from the work done so far and take extra ordinary steps to increase domestic production and standardize products.
In a nut shell, after opting for an open market economy, the accession of Afghanistan to WTO was a major and much needed step towards its integration in the global economy. This will give credibility to the economy, increase FDI, facilitate transit trade and boast exports. However, the competition for the infant industries of Afghanistan will rise. The preferential treatment would help secure the industry. But, the government would be required to take extraordinary steps in efficient production and standardization of local products. In the same way, there is need to work with business community and educate them on policies and ways to utilize and capitalize on the available opportunities.
View expressed in this article are of the author’s own and do not necessarily reflect Pajhwok’s editorial policy.