Introduction to WTO for Pakistan’s agriculture

Pakistan is a contracting party of the World Trade Organization, (WTO), which came into existence on January 1, 1995. This organization was established to regulate international trade issues through the process of dialogue and dispute settlement of the WTO. It has already emerged as one of the most significant institutions, impacting on a progressively wider spectrum of economies anywhere in the world. No one can claim that the WTO is an unmixed blessing for Pakistan. There are both positive and negative implications of the Pakistan’s membership of the WTO. In this context, Pakistan may face many challenges and threats under the WTO regime. Equally important is the fact that a variety of opportunities are available to Pakistan which can lead to increase in international trade and economic growth. There is also every present possibility to convert threats into opportunities. Much depends on our policies and strategies- not by the government alone but also on responses of the private sectors. Pakistan may avail maximum benefits through the instrument of public-private partnership (PPP) in agriculture sector, because the WTO obligations, among other things, have placed new demands on the capacity building and skill of both public and private sector in relation to agriculture sector. This is a critical issue and Pakistan’s failure to measure up these demands would make challenges more daunting and opportunities elusive. It is pertinent to mention here that the Pakistan is an agro-based country and the agriculture is the back bone of the economic growth. It accounts for 19.8 percent of GDP and 42.3 percent of employment; the sector has direct and indirect linkages with other sector of the economy and plays significant role in socio-economic development of the country. We can optimize opportunities, among other things, through increasing “public investment, rationalizing public expenditure, reforming market regulations, expanding market infrastructure, improving market information system, developing agricultural infrastructure, establishing grades and standards/accreditation of laboratories, upgrading the agriculture innovation system, enhancing access to credit, diversifying export making it more value added and adoption of better farming practices”. It is the need of the time to develop a sound and comprehensive strategy for sustainable accelerated growth in the agriculture sector. Pakistan has to make our agriculture sector fit for the 21st century. Agriculture should be transformed from a traditional producer of basic food grain crops and provide raw materials for indigenous markets, to a sector that excels in crop production for international markets and adds value to raw materials through agro-based industries. As it has been rightly reported in Punjab’s vision 2020, such types of transition will have to be based on provision of top quality distribution, top quality agricultural research, top quality seed production, provision of top quality input package and marketing infrastructure. 

The impact of the WTO regime on our agriculture sector, which absorbs 42.3% of the large labor force, contributes to 19.8 % of the GDP [2], forms foundation of agro-based exports and in-fact the back bone of the economy of Pakistan. The agricultural sector was covered under the old GATT (GATT, 1947) system, but there were many loopholes in the system. As a consequence, it became highly fainted, unfair, especially because of the use of export subsidies by the rich countries such as USA. Keeping in view this historical problem the Uruguay Round produced the first multilateral agreement viz the Agreement on Agriculture (AOA) which brought agriculture sector under the more better and attractive discipline. In-case of violation of this agreement by any member state the WTO is empowered to take legal actions against the violator (Country), in accordance with law and impose penalties under the dispute settlement body (DSB) of WTO. Therefore, AOA is a significant first step towards establishing a “fair and market oriented agriculture trading system” and a less fainted area.  (It was implemented over a six years period for developed countries and for developing countries within a ten year period), that begin in 1995. This agreement was launched in DOHA (2000) and is ongoing.  The AOA is germane with agreements to SPS, TBT and TRIPS.

WTO Agreements related to Agriculture

1. “Agreement on Agriculture (AOA)”

• To setup “a fair and market oriented agriculture trading market
• Purpose to major  reduction in agriculture support and assistance
• “Rules regarding market access, domestic support, export subsidies”

2. “Agreement on Sanitary and Phytosanitary Measures (SPS)”
This agreement empowers the member states to initiate necessary steps to protect (human, animal or plant life or health). These actions subject to conditions such as

• Not arbitrary
• Not justifiable
• Not discriminatory

If an importing country imposed unjustified restriction on the export of a particular country then under the WTO Law the aggrieved party may challenge these restrictions in the Dispute Settlement Body (DSB).

3. “Agreement on Technical Barriers to Trade (TBT)”
This agreement is relevant with the regulations, standards, testing, marking certification methods, packing and labeling requirements. Under this agreement the exporting country is empowered to make law for quality assurance and “protection of human, animal or plant life or health, of environment or for the prevention of deceptive practices”.

4. “Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)”
This agreement protects the rights of the creator, inventor and discoverer in relation with the intellectual property rights (IPRs) such as, Patents and Plant varieties etc.

The Position of Pakistan in the Light of Three Pillars of the Agreement on Agriculture (AOA) is as under:

1. Market Access
Position has fully complied with the AOA. It has lessened tariffs on this sector (more than 36% on average and more than 15% on each tariff line from the base year 1986-1988 “from maximum 65% in 1995 to 25% on agricultural products). Regulation duty has been converted into fixed specific duty on import of selected products. The agricultural items which are harmful to animal, human and plant life are prohibited according to existing WTO rules and import policy orders. Pakistan is bound tariff providing upper ceiling on import tariff is 102% on average; however applied rates on the import of agricultural items are much lower”.

2. Domestic Support
Domestic support covers subsidies and other programs, including those that raise or guarantee farm-gate prices and farmers’ incomes. Until a few years ago agriculture sector received a maximum domestic support.  Pakistan’s domestic support price programme, at present, is restricted to wheat and cotton only. As a matter of fact, the aggregate measure of support (AMS) i.e. the annual level of support provided to agricultural products is negative. Phasing out of domestic support by the rich countries will have a positive impact on Pakistan’s agriculture exports. Pakistan will receive the fair price for export of cotton in the international market.

3. Export Subsidies
Export subsidies and other measures used to enhance exports falls in this category. Pakistan always not in a position to give subsidies to its farmers in any shape, however, in exceptional circumstances, provides subsidies (up-gradation and transportation of agricultural commodities).  Important crops like wheat, rice, cotton and sugar-cane. Pakistan has comparative advantage in these crops but due to lack of infrastructure and modern facilities, Pakistan is not in a position to export these crops. In this context Pakistani local farmers are unable to export their agricultural items in international market because government of Pakistan does not give any subsides to its local farmers. However, the developed countries are giving subsides to their farmers to enhance their export in agricultural products. It has created artificial competitive edge to develop countries, which hurt the export prospects for Pakistan.