World Trade Organization Implications for Bangladesh


Dhaka University Journal of Business Studies
Vol. )od, No. 2, December 2000, PP. 17-35, Faculty of Business Studies, ISBN -984-31-1397-2

World Trade Organization: Implications
for Bangladesh

Mohammed Masud Rahman 

Muhammad Mohiuddin 

Abstract: The WTO or former GATT started a process of trade liberalization, decades ago, with a view to contribute to global economic development by means of factor price equalization and economization of global cost of production. On the contrary, since 1995, the resurrection of the WTO experiences a costloading at least at a flat rate of 1 per cent, in general. The other basic of the GATT, factorprice equalization visavis perfect mobility of factors had also been departed in the WTO by the feature of a systematic transfer of resources from the developing economies to developed ones. Bangladesh being an LDC faces most of the problems in consequence of the WTO regulations typically known as the marginalization. There are other reasons for what Bangladesh should be particularly cautious to address the inevitable issues of trade liberalization. The dominance of ready made garments in our exports was largely attributed to a GATT effort in the form of GSP. The WTO persuasions under the banner of international standardization of products (like ISO 9000, ISO 14000, etc.) take too many factoryspecific and environmental issues into consideration. Regarding custom valuation, a new system of valuation had been warranted that needs structural changes. The WTO agreement calls for a mandatory preshipment inspection for imports in Bangladesh that leads to a flow of funds toward developed nations having recognized PSI firms. The TRIP issue may produce foreign copyrights in our local breeds of agricultural products because of our cultural backwardness. The present paper addresses such issues of globalization. It is imperative that the country is well placed in terms of compliance with the WTO regulations but at the cost of too many adversities

Introduction Liberalization as a concept is a reality today and trade liberalization is not an exception. The countries in the world under the umbrella of the WTO started this 

Messrs Mohammed Masud Rahman and Muhammad Mohiuddin are Associate Professor and Professor respectively in the Department of Finance and Banking and the Department of Management Studies, University of Dhaka

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process decades ago. With all its pros and cons, trade liberalization has been accepted by member countries of WTO as an inevitable strategy to overcome trade barriers in the way of globalization. It is true that countries are debating on not only current issues of trade but also are engaged in the debate of including new issues like labor standard, environmental norms, textiles, agriculture, investment policy and tariff reduction within the charter of WTO. This is of particular significance that the WTO should be capable of leading the world to a unity on trade related issues. There is a growing doubt among the developing member countries of the WTO about its potentialities to handle the trade issues neutrally. The failure of Seattle Meet is an example of this incapacity. This paper is an attempt to describe the present realities of the WTO propositions for trade liberalization and the consequences of these propositions on the economy of Bangladesh

The development history of Bangladesh experienced a sharp controversy between academics and policy markers. The former advocated for an inward looking selfreliant Bangladesh and the latter opined for an outwardlooking development through liberalization. As it turned up, policy makers outplayed academics in terms of practicable farsightedness although not necessarily in terms of achievements because reforms do not commensurate development. Present day demonstrates that a closed form of economy is an absurdity in the drift of globalization. For the sake of long range planning and development it is of vital significance to learn about the global code of trading conduct. The code was initiated by GATT and is presently held by the WTO. Trade liberalization in Bangladesh, in commensurate with the WTO. demonstration, experienced a yawning trade deficit. Possibility of price hike due to increased import dominance of the economy would be further deteriorated by cost loading in consequence of globalization. For developing countries this is of foremost significance that the WTO is still in a transitional stage and thus can accommodate demands of deficit prone economies

History of GATT and WTO The foundation of the General Agreement on Tariffs and Trade (GATT) was as early as in 1948 through the International Trade Organization (ITO). The charter 


World Trade Organization: Implications for Bangladesh 

was drafted in consequence of Havana Conference in 1947 precisely known as the United Nations Conference on Trade and Employment. The initial charter was drafted by 23 countries with a view to liberalization of international trade. The combined package of trade rules and tariff concessions became known as GATT. For almost two decades GATT was confined to the tariff consideration with almost the same number of members despite having United Nation recognition as a specialized agency since 1948. There had been eight major round of negotiations through which GATT arrived at the form of creating the World Trade Organization (WTO). Among the earlier rounds, The Kennedy Round (196467) with 62 members added antidumping agreement and The Tokyo Round (197379) introduced nontariff measures with 102 member countries. Apart from increased number of members, a multilateral trading system could not be developed until the longest and the most extensive eight rounds known as the Uruguay Round (198694) that led to the creation of WTO. It resolved the longest stalemate among the members regarding the issue of subsidies in agricultural inputs and brought into consideration too many issues having direct and indirect bearing on global trade. The issues included tariffs and nontariff measures, services, intellectual property, investment measures, dispute settlement, etc. Two key features of Uruguay Round Articles of Agreement included a differential code of trading conduct for agricultural and industrial products and relatively favored treatment to developing countries compared to developed ones. The WTO came into force in January 1, 1995 as the institutional framework for global restructuring of economic relation under the guidelines of Uruguay Rounds

Considerable changes took place in the objectives of GATT over the period of half of a century that essentially went in favor of developed countries. The initial goal of factorpriceequalization by means of perfect mobility of factors of production had been constrained by stringent immigration policies of developed nations. The new goal of raising standards of living and ensuring full employment, however, under the head of globalization failed to ensure an 

It was the United Nations which convened the Havana Conference, provided it with preparatory support and later provided staff who went on to form the GATT Secretariat. However, the role of United Nation is often ignored at present as for example the UN Secretary General was not invited to the 50th anniversary of GATT in last November 

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equitable distribution of global resources. Of course, there is enough room for least developed countries to maneuver certain provisions to serve their interests

WTO and Bangladesh Bangladesh being one of the least developed countries specified by WTO enjoys certain advantages. Since the Uruguay Round it had been recognized that they may not be able to commit themselves to make substantial reduction of tariffs. In industrial sectors they are supposed to maintain only token reductions in tariffs on very limited number of items. In agricultural sectors these countries should not be required to reduce tariffs. However, these countries along with all other countries were required to bind their tariffs. Most LDCs have given bindings at rates significantly higher than the existing rates. Bangladesh had embarked significant reduction in her tariffstructure. The economy had gone through the structural adjustment process of the World BankIMF, which assumes trade liberalization as the means of economic reforms. Hence the average level of tariffs has declined from 85 per cent in 1991 to 17 per cent in 19982. The items subjected to quantitative restrictions have declined from 315 in 1998990 to 96 in 199798. Bangladesh has also bound only very limited items in the industrial sectors to an extent of 50 per cent. In the agricultural sector, the bound rates are much higher than the present applied rates. Thus policy makers enjoy a considerable extent of flexibility in raising tariffs if needed in industrial and agricultural sectors. The impact of liberalization is demonstrated in the fact that imports had increased four times and exports had increased six times over the last decade that resulted in a trade deficit of five thousand crore Takaļ

The various area of issues that require critical evaluation and understanding for having a policy stand in the face of new WTO propositions are taken into discussion in the following paragraphs. The policy makers of Bangladesh should have an inward view against global demonstration because of her own protection and progress. An abrupt engagement into any sort of agreement or contract in this regard could put the country into further macroeconomic 

2 Economic Impact of WTO, Ministry of Industry, GOB, Unpublished documents, 1999

3 Ibid

World Trade Organization: Implications for Bangladesh 

instability. The following discussion would facilitate the policy makers to envisage the intensity of the problem. 

Custom Valuation The present system of valuation of goods is based on the Brussels Definition of Value, a system developed by the World Customs organization. WTO Agreement on Customs Valuation is different from that. As a least developed country Bangladesh has a transitional period of five year since January 1995 for the implementation of the Agreement. By January 2000, Bangladesh would have to ensure that its custom authority collects duties and other taxes on imported goods based on the valuation of the WTO agreement. The new system of valuation is more precise and technical than the existing system. It assumes computer provision and professional expertise of custom authority. In view of institutional rigidity the custom authority needs more time for transition. Professionals need training abroad and computerization needs funds that WTO has earmarked for transition of the least developed countries. In principle, the new system is based on honest declaration of importers that needs certain evaluation. The practice of under value declaration in Bangladesh merits attention along with the fact that custom revenue currently accounts for as much as 30 per cent of the countrys total tax revenue that should not be affected any way

Preshipment Inspection The WTO Agreement calls for Preshipment Inspection for mandatory physical inspection of the goods to be imported as well as verification of their prices prior to the importation. Goods should not be imported unless import documents include Clean Report of Findings (CRF) from the PSI company. Bangladesh uses services of PSI companies on a voluntary basis. It is left to the importers to decide whether to use PSI services or not. However, when the importer engages the services of the PSI company and obtains certificate that quality, quantity, price and tariff classification has been verifiedthe customs shall accept the certificate as a basis for the determination of custom duty. The arrangement largely resolved the complains of importers against custom officials in Bangladesh. It 

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expedites the process of custom clearance and resolves the problem of uncertainty and ambiguity in determination of price. Also that it allows the government to ensure full collection of revenue. Because of the voluntary nature of the scheme, importers resort to the scheme where they find by using PSI services they could derive practical and financial benefits. The majority of importers appear to use PSI services when they find that PSI prices are less than the published tariff values. In cases of disagreement with the prices, custom officials are supposed to forward their reservations to the National Board of Revenue (NBR)

In future PSI would be mandatory for importers as is the case, at present, in many countries including some least developed countries. This certainly would impose an addition to import prices and the financial flow would concentrate in developed countries as the PSI companies belong to them. Small and medium industries and traders being scared of additional cost of PSI would resent the introduction of mandatory PSI. Government can compensate the financial burden, if not directly, through indirect incentives. It would be necessary for the government to inform business community of the advantages of using PSI services. Government should also be prepared to face an additional rate of inflation by an extent of around 1 per cent in consequence of the inclusion of PSI changes to import prices

Product Standard Countries often require that a wide range of imported products must meet the mandatory international standards for protection of health and safety of the people. The products include machinery and equipment (like electric machinery and medical equipment), consumer articles (like pharmaceutical and toys), and raw materials and agricultural inputs (like fertilizers and insecticides). The rules of international standards are contained in Agreement on Technical Barriers to Trade. Accordingly, imported products can be marketed only if the manufacturer and exporter is able to obtain a certificate of positive assurance from a recognized institution or laboratory in the importing country that the product is in conformity with standard. In view of industrial products in Bangladesh, the use of such standards would not only improve the ability to market their products in 

World Trade Organization: Implications for Bangladesh 

foreign markets, but would also lead to gradual enhancement of the quality of the products marketed. The practice however has gone in far more detail. Buyers in industrialized and some other countries are not contained only with quality standards. They want to ensure that the producing unit where the product is processed and manufactured had adopted quality management systemwhich ensure uniform level of quality standards throughout the production process. Such a comprehensive standard is the ISO 9000, developed by the International Standards Organization. It assumes that maintenance of quality is managements responsibility and lays down requirements that must be complied with in respect of all the activities of the company. Due to the fact of growing popularity of the ISO 9000 among the buyers, producers among a number of newly industrialized countries are obtaining the ISO registration to improve their competitive advantage in outside markets. The garments sector is the typical example where most factories have incurred huge costs and have thoroughly reshuffled the producing units so that the units obtain the ISO 9000 certificates

The trend presents a dilemma for most of small and medium sized industries in Bangladesh. They are not sure whether the goal should be the national or international standard. There is increasing awareness on the part of these enterprises that foreign buyers may turn to firms in other countries, if they do not have such registration. Preparation to obtain ISO registration involves not only considerable financial costs but also some organizational and structural changes. It needs huge paper works as detailed and continuous records have to be maintained on as many as twenty different elements. The semiliterate workers employed in small enterprises may have serious difficulties in maintaining such records. In fact, it needs a through technological change that our enterprises, constrained by institutional rigidities, do not often afford. A gradual change is not possible as the country does not have enough expertise and institutional machinery to provide consultancy services in this regard. The result is that firms have to turn to foreign multinational companies whose reputation is known in foreign target markets. Their fees are often exorbitantly high. The only local institution is Bangladesh Standard and Testing Institute (BSTI) which is authorized to issue accreditation certificates. The BSTI takes the product in consideration but ignores the management issues of the factory

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Efforts should be taken to promote their skills in management review. The recent introduction of international standard is ISO 14000 that takes environmental issues in consideration along with the considerations under the ISO 9000. The WTO agreement requires each country to establish inquiry pointfrom which information on standards and technical regulations could be obtained by interested business enterprises. At present such information is available with BSTI. BSTI needs to be further equipped to furnish the information required to get ISO 9000 or even ISO 14000 registration. In the context of LDCs having severe fund constraints, efforts should be taken to explore WTO assistance for technical and structural orientation to international standardization and factory specification 


There had been long stalemates on global trade negotiations regarding the point of subsidies and finally, the WTO rules recognize that governments use subsidies for the attainment of varied policy objectives. The rules therefore, do not restrict the rights of countries to use subsidies but aim at prohibiting governments from using subsidies that distort or affect adversely the development of international 

Rules related to subsidies of industrial sectors are different from those of agricultural sectors. For industrial sectors, prohibited subsidies include export subsidies and import displacing subsidies. The developing countries with per capita income of less than US$ 1000 and the least developed countries are exempted from the rule of prohibited subsidies. The rule thus not in any way restrain the right of Bangladesh to grant export subsidies on industrial products. The country however has to rationalize such subsidies as necessary for promotion and development of exports. There is another limit that the country does not share 3.5 per cent of the global export for two consecutive years under which case subsidies would be phased out in a period of eight years. In practice, the line of export of Bangladesh does not seem to be concerned with the limit

Readymade Garments 

The basic objective of the Agreement on Textile and Clothing (ATC) was negotiated in the Uruguay Round and came into force on January 1995. It brings 

4 WTO Charter 1999 

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textile under the WTO rules. Over a period of ten years, trade restrictions should be removed in phases. After January 2005, if any country wants to apply restrictions to imports of textiles, it could do so under safeguard provisions by applying restrictions to imports from all sources and not as at present for imports from developing countries. One of the features of the ATC is that it permits countries to introduce quantitative restrictions on imports during the ten year period. Such restrictions was to be made as the last means and only when the domestic industry is suffering serious damage as a result of sharp and substantial increase in imports. It is due to the fact of poorly defined provision of imposition of restrictions that the United States has initiated 40 such actions during the first two years of the operations of the Agreement. Also evident is a departure from the schedule of removal phases by developed countries like the members of the European Market. Export of textile and readymade garment account at present more than 60 per cent of our export earnings. Sudden imposition of import restriction is a growing threat against the survival of the sector particularly when it is in violation of the WTO code of congenial trading. The sector is heavily dependant on fabrics supplied by outside countries which accounts to 90 per cent of the fabrics used by the sector. As a result the value added in producing ready made garments is only about 25 to 39 per cent, which had certain bearing on export potential. According to a recent report, certain items like T shirts may not be eligible for duty free entry in the United kingdom as the value added in processing in the country is less than that required under the Rules of Origin of the Generalized System of Preferences (GSP). Finally, the sector needs huge preparation to sustain under global competitiveness once the restrictions are withdrawn as had been argued on the sustainability against the main competitors like Korea, India and Pakistan

Trade Related Aspects on Intellectual Property Rights (TRIPS) The TRIPS Agreement, which came into effect in January 1995 along with the commencement of the WTO, is to date the most comprehensive agreement on intellectual property. The area of intellectual property it covers include copyright and related rights (i.e., rights of performers, producers of sound recording and broadcasting organizations), industrial designs, trademarks including service marks, appellation of origin (geographical indication), patents including the 


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protection of new varieties of plants, the layoutdesign of integrated circuits and undisclosed information including trade secrets and test data. Any unauthorized use of intellectual property constitutes an infringement of the right of the owner. The basic principles of the Agreement states that in regard to the availability, acquisition, scope, maintenance and enforcement of intellectual property rights foreign nationals shall not be accorded treatment that is less favorable than that accorded by a country to its own national. The Agreements lay down the minimum standards of protection for different intellectual property rights. Each of the WTO members, particularly the developing and the least developed countries, requires to modify their legislation to bring them in conformity with the Agreements standard. The agreement provides for transitional period of eleven years for developing and least developed countries (i.e. up to January 2006) and five years for developed countries

Bangladesh has laws covering patents, industrial designs, trade marks, copyrights and related rights. The Patent and Industrial Design laws are administered by Patent Office which is under the Ministry of Industry. The Trade Marks Office which administers Trade Marks Law is also under the Ministry of Industry. The responsibility of administering the copyright laws is left with the Copy Right Office which works under the Ministry of Cultural Affairs. In consideration to the minimum standard warranted by the WTO, significant changes would have to be made in the existing national legislation to bring them in conformity with the provisions of the TRIPS Agreement. Patents need to be provided to plants and plant verities under patent law. Provision is needed for protection of geographical indications and computer programs. Besides, legislation may have to be adopted to provide protection for lay out design of integrated circuits for which there is no protection at present. The existing machinery of patent is constrained by resources, manpower, skill and techniques. It is in no way capable to serve the standards in conformity with the TRIPS agreement. In addition to improving the efficiency of the offices to process applications and to deal with the intellectual property rights it would be necessary to give consideration as to how the enforcement of rights could be improved. The agreement lays considerable emphasis on enforcement and provides that a member country could request for consultations in the WTO

World Trade Organization: Implications for Bangladesh 

As like many least developed countries the transition to TRIPS standard is indeed a challenging task for Bangladesh. In the process of maintaining the minimum standard for patents and other rights, prices of relevant product would increase depriving some consumers of the consumption and affecting the WTO goal of promotion of living standard. Stronger protection will make it difficult for Bangladeshs industries to use through reverse engineering and other means of technology developed by foreign companies who hold the patent rights. The reverse engineering is the commonly used technology for small and medium size enterprises in Bangladesh. Under the TRIPS provision they would have to pay for the patent rights to foreign firms and therefore the sector would have to pay for patent rights of plant and plant varieties. This would result in foreign multinationals getting patents for varieties of seeds and plants used in local production. In view of our agricultural getting patents for varieties of seeds and plants used in local production, In view of our agricultural sector being in its subsistence level it would be a real threat. The Agreement however provides an alternative under the provision of the International Union of the Protection of New Varieties of Plant (UPOV). Under the system, the patented seeds or variety can be used without authorization from the right holder by farmers for their own use and for research purposes. Of course, this would not apply in case of commercial agricultural production. This is a common problem for least developed countries, for what, they should be united to force the WTO for certain exemptions for the sake of survival of agricultural sector

Foreign Direct Investment and TRIM There are some orthodox measures adopted by governments to attract and regulate foreign investment in certain sectors under certain manner that include fiscal incentives, tax rebates and provision of land on preferential terms. Government makes efforts to encourage investment according to national priorities by means of technological choice or utilization of local resources in terms of local content requirement. Use of tariffs and quantitative restrictions to encourage local industries is another example. Such conditions have adverse effects on trade and are known as TRIMs.. The TRIMs Agreement was negotiated in the Uruguay Round and prohibits countries from using TRIMs that are considered to be inconsistent with GATT rules. In consideration to ensure the 

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goal of attracting FDI, Bangladesh had been committed to ensure most congenial investment climate since quite a few years. In consequence, Bangladesh does not have TRIMs at present that are prohibited under the agreement. The Agreement provides transitional periods for elimination of prohibited treatment of two years for developed countries and five years for developing countries and seven years for transitional economies 5

It should be mentioned that most of the developed countries followed such measures during their pretakeoff and takeoff stages of growth. The economy of Bangladesh is still going through such stages. Most industries are still in their infancy for what these are the right measures traditionally known as infant industry arguments. The economy does not afford such luxuries of liberalization. This leads to the common crisis of unemployment in many developing countries of the South. It had been observed that despite the process of TRIM liberalization, very few developing economies were capable of attracting capital flows of developed countries. Countries facing severe economic crisis in consequence of TRIM liberalization should be allowed some extent of protections that do not distort global capital flows. An associated consideration can be the stage of economic development, a country belongs to, rather than equal treatment for all the economies in general. In fact, academics questioned the relevance of a multilateral framework of investment to the core issue of trade. Some of them suggested that twotrack approach may be a better one, where the WTO continues discussions on trade issues, whereas investment issues are discussed at a different forum. Based on statistical evidence, some of them opined that such an agreement was neither necessary for developing countries to increases investment flow (because it is the market size that matters) nor for transnational companies as they have access to political leaders for what they do not feel for investment rules as such. It raises the question whether WTO takes wrong issues at the expense of poverty and unemployment of developing countries

WTO : Global Considerations 

The USA actively entered into the WTO in 1995. Before that she had kept herself apart from the active participation in the GATT because of its reservation about 

5 Ibid

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the prospects of the GATT. It is evident from the Seattle Meet that the member countries are sharply divided into two parts one led by the developed countries like USA and EU and the other led by the LDCs. The problems seem to be culminated in the future and may cause a threat to the survival of the WTO itself unless it is addressed in the right manner i.e. keeping in focus the unique conditions of the individual member country. The nature of conflicts and contradictions between this two warring parties are illustrated below in brief

Status of developed and developing countries in WTO International trade and investment flows have increased more rapidly than world GDP over last two decades for what GATT efforts are often focused. The rapid growth of international transactions has sometimes been referred to as globalizationwith a deliberate attempt to ignore the fact of increased inequality and unemployment. Even then, researchers argued that globalization has not contributed to overall world growth, but only benefited a small number of countries, while many others have failed to reap the benefits. In other words, globalization process contains an inbuilt bias that leads to a concentration of trade and investment flows and greater inequality. Africas share of world export, for example, was half its 1985 level in 1996. Latin America has lost 14 per cent of its share during the same period, where as Western Europe increased its share of world trade by 11 per cent during the same period. As for FDI, the figures suggest similar state of affairs; nine developing countries receive 41 per cent of total FDI to developing countries in 1993 where as they represent only 17 per cent of developing countriesGDP. These figures exclude China, which represents 40 per cent of developing countries total inflows. Similar inference can be drawn in the context of Bangladesh. The rates of liberalization had increased from 17 per cent in 1985 to 28 per cent in 1998 with doubled trade deficit over the period. Such a problem of least developed countries being deprived of the benefits of globalization is called marginalization‘. 

The vast majority of developing countries have very little real say in the WTO system. Many lack the financial and human resources to adequately participate, even in the formal meeting, let alone the informal meeting to which they are invited. Sometimes pressure may also be exerted on selected developing 

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countries to get them to go along the decision or position which they have originally opposed. Especially vulnerable are the developing countries that are indebted to WIMF and World Bank. As a result, the decisions and agreements at the WTO tend to be biased against developing countriesinterests. The unfairness of the situation was highlighted at the Singapore Ministerial Conference. New issuesof investment, competition and government procurement did not enjoy consensus (and were in fact opposed by many developing countries) found their way into the Ministerial via a small informal groupset up during the Ministerial. Evidently, the Ministers of most developing country members were not invited to participate in the samllgroup negotiations that produced the key points of the Ministerial Declaration. The rationale usually put forward (for example by the DirectorGeneral at the Singapore Ministerial) that for the sake of efficiencyonly a few countries can be invited to negotiate, is unacceptable. The decisions at the WTO are too important to be rushed through, and instead should arise out of wellconsidered discussions where every member (big or small, weak or strong) has opportunities to effectively express its opinions. The undemocratic and nontransparent nature of this process is in stark contrast to the image of equal participation by all members through consensus that the WTO tries to focus. Up to now, the public in TWO member countries have been kept in the dark about the negotiations, and public knowledge even about the existing agreements and their effects is most inadequate. As India stressed on greater participation and opinion building by mass people including business communities, other professionals and academics to come forward and suggest the least developed countries regarding their course of action, it is largely constrained by inadequate information particularly during the most crucial Uruguay Rounds and continued in the 2nd Ministerial. Should the same mistake be made during the 2001 ministerial, then credibility and legitimacy of the WTO system will suffer an even bigger blow

In the 2nd Ministerial Meet of the WTO last year, Bangladesh said that the meet should seriously address the problem of marginalization. During the same meet the uninvited United Nations Secretary General called for a similar mission in that The challenges of the globalization, particularly that of avoiding the marginalization of the weaker members of the international community must be 


World Trade Organization: Implications for Bangladesh 

addressed by the WTO. The message invokes a united stand for the developing nations to resist the crisis in consequence of the dominance of the West in WTO. Observers suggest the outcome of second Ministerial Meeting of May 1998 could have been worse. Both Africa and Pakistan along with the support of other least developed countries asserted for a greater commitment to the issue of implementation that the final declaration failed to reciprocate. Although no new issues were adopted (except the nonbinding declaration on duty free treatment for goods and services traded electronically which was proposed by the United States), at the end, the real focus of the meeting became the new agenda of opening up more. As the African diplomat pointed out that it is clear that the US and Europe want to add in more issues and that may even cause more instability to the developing world, for example issues of investment, government procurement, competition policy, trade and environment. The way United States managed the second Ministerial to get its proposal on electronic commerce at the last minute demonstrates the power of the US in the organization. The opposition was quite strong in the argument that asking for taxfree status for things transmitted through electronic means has many implications. The benefits will almost exclusively accrue to corporations of the developed countries whose aim is increasing market access through the move. The fact that the next Ministerial meet is going to be held in Qater where demonstration is highly unlikely as was the case in Seattle, makes it even more likely that the implementation and marginalization issues will be pushed aside further and the US and Europe will try to bring new issues to be agreed for negotiations. It should be recalled that GATT failed to have the institutional setup of the WTO until the United States wanted GATT to have an institution of its own that must not be a argument to use WTO as a marketing agent of the North in the South

The Nature of Debate in Ministerial Meet 

It is well evident by now that the WTO initiated golbalization contributed to greater inequality between developed countries and developing countries and in particular failed to resolve the crisis commonly faced by the least developed countries. Despite the fact majority of the 132 members being the developing countries in the WTO, in recent ministerial meets, had been observed in an unhealthy dominance by the quadof the United States, the European Union

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Japan and Canada. The third Ministerial Meeting was going to be held in Seattle, United States, on 30 November to 3 December 1999. The European Union, backed by Japan, Canada and other developed nations, have announced to launch a new comprehensive Roundof trade negotiations at this meeting under the glamorous term the Millennium Round. Developing countries are against such new Round. Their position is that the WTO should allow developing countries the time and space to tackle the problems of implementation of the existing Agreements. The three issues that should especially worry developing countries are investment, competition policy and government procurement. If there is a new Round, it could lead to new WTO Agreements on these topics. On the investment issue, the rich countries are pushing to introduce new rules that makes it mandatory for all WTO countries to give foreign investment the right to regulate the entry of foreign investors. This includes not only long term direct investment but also short term investment. This implies the flow in the stock market that evidently was the reason behind the stock market crash in Dhaka in 1997 and in future, we have to accept such a shock because the government would be ceased of regulating such capital flows. If such an agreement were to be passed within the WTO, developing countries would no longer be able to give preferences or protection to local investors even for time being during their infancy

On competition policy, the European Union is advocating a new agreement against domestic laws or practices in developing countries that favor local firms, on the ground that this is against free competition. By implication, if there are policies that give importing or distribution rights to local firms or if there are practices among local firms that give them superior marketing channels, these are likely to be banned. Developing countries argue that only if local firms and agencies are given certain advantages that they can remain viable. If these smaller enterprises were treated on par with foreign conglomerates enjoying largescale economies, the consequence in developing countries would be further deprival and unemployment. It had been argued that the aim of the quadin WTO appears to be centered on protecting the rights of foreign investors, rather 

than ensuring the flow of investment into the developing countries


World Trade Organization: Implications for Bangladesh 

Under the issue of government procurement, the aim of the rich countries is to bring government spending policies, decisions and procedures of all member countries under the umbrella of the WTO. Rich countries have a twostage plan for the issue; firstly, to have an agreement only to bring in greater transparency in government procurement; and secondly, to have a broader agreement that would cover the national treatment principle. By an implication, Bangladesh 

government would not be allowed to exert certain criteria to screen projects of gas exploration unless foreign firms are satisfied with the outcome or the way it had been dealt. The agreement would provide industries of only developed countries with a marketing opportunity as developing countries have very limited capacity for supply of goods for government procurement in developed countries

Yet another is the United States proposed electronic commerce to have an agreement for zero duty for indefinite period. The pressure violates sectional treatment and imposes special rule for a certain type of communication media. The proposal addresses itself not to any particular goods and services sector; it is targeted, rather, at a specific mode of conduction commercial transaction in goods and services. It therefore opens an entirely new chapter in the scope of work of the WTO. It does not appear to be desirable when so many subjects of the past have to be addressed by the system already strained by the load. What is much more relevant is that the country making the proposal has not so far placed any offer on the table as a reciprocal concession in return for zero duty on electronic commerce. In the usual GATT/WTO practice, the country should make some offers of elimination its duties on some products of interests of others. In fact, the developing countries may themselves ask the United States to eliminate its duties on products of their interest. In case of Bangladesh, this provides an ample opportunity to negotiate the quota restrictions of the United States on certain items of readymade garments. Right now it is totally one sided affair which appears very infair and un-GATT like. Thus instead of asking the developing countries to agree to continue the zero duty, the proponent country should make its reciprocal offer and only then negotiations can take place. For developing countries, in fact, there is a good rationale for imposing entry taxes on such transactions

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In any case, what is important for developing countries is to be united at first keeping in mind that they are the majority, and should convince the developed nations that it is time enough to review the impact of the agreements already made. The WTO should address the crisis of the millennium in the fact of marginalization as a direct impact of globalization


Economic liberalization in Bangladesh was characterized by the World BankIMF sponsored Structural Adjustment Program. In consequence, the economy is well placed in terms of compliance with the WTO regulations. The liberalization index increased from 21 per cent in 198889 to 28 per cent in 199899. Tariff reduction had been done more than that done in neighboring countries. Just like a typical least developed country, the economy of Bangladesh fails to benefit from globalization. The experience demonstrates marginalization. Trade deficit increased, inequality increased, unemployment increased, foreign capital inflow decreased and inflation increased. Compliance with the WTO agreements appears to be costly for the economy

The present paper made an attempt to reveal the standing of Bangladesh both in references to domestic policies that assumed WTO regulations as inevitable, as well as, the participation in the context of global debates on WTO where Bangladesh like a typical LDC argues against the crisis of marginalization. The two phases may appear to have certain inconsistencies but can duly be rationalized by being realistic. Inward looking policy aims at structural changes as warranted by the WTO. Constraints of funds had not been acute as the WTO provides the primary costs. It is imperative that such provision will not last long. Once the structural change is made the economy would have to provide these costs through sustainable development. That certainly would create some burden for the poor economy. Besides these primary costs, the paper revealed immense consequences of secondary nature. To assess the effects financially was not possible. The economy as a whole is not prepared to face global competition. Certain domestic resources need protection that the WTO needs to be convinced. Import liberalization constrained our annual export earnings to provide for three monthsimports. Neither the IMFWorld Bank, nor the WTO would provide the 

World Trade Organization: Implications for Bangladesh 

imports of the rest of the year. The golden age of jute is long over. That of ready made garments would be gone by 2005 in compliance with the WTO rules. No perspective plan to confront the crisis had been observed. Long run preparations are urgently warranted to salvage the economy once been taken under the WTO umbrella. Observations suggest the umbrella would predominantly protect the western multinational companies. Certain skepticism as to its effectiveness to protect LDCs seems justified


Bhagirath Lal Das, The WTO Agreements: Deficienceis, Imbalances and Required Changes, Third World 

Network, Malaysia, 1999

Carlos Correa, Implementing the TRIPs Agreement, Third World Network, Penang, Malaysia, 1999

Kevin Watkins, Free Trade and Farm fallacies, The Ecologists, Vol.6, No.6, Nov/Dec. 1996

Martin Kohr, Macroeconomic policies that affect the Souths agriculture, Third World Resurgence

No. 100/101, 1999

Bhagirath Lal Das, The Big Bangin Agriculture, Third World Resurgence, No. 100/101, 1999. pp. 21 

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Chatravarthi Reghavan, India calls for a marketplusapproach to agriculture, Third World 

Resurgence, No. 100/101, 1999. pp. 1920


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