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MANAGING THE CHALLENGES OF WTO PARTICIPATION: CASE STUDY 30

Nepal: The Role of an NGO in Support of Accession

P. R. Rajkarnikar*

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Opinions expressed in the case studies and any errors or omissions therein are the responsibility of their authors and not of the editors of this volume or of the institutions with which they are affiliated. The authors of the case studies wish to disassociate the institutions with which they are associated from opinions expressed in the case studies and from any errors or omission therein.

Case Studies main page
Introduction

   

ON THIS PAGE: 
I. The problem in context
II. The local players and their roles
> III. Challenges faced and the outcome
Tariff binding for agricultural products
Resisting the imposition of UPOV
Ratification of the agreement on accession to the WTO
> IV. Lessons for others


I. The problem in context    back to top

Nepal is a small landlocked country situated between China and India. Access to sea is only through India, and India is also Nepal’s major trading partner. Trade with India constitutes 55.9% of total trade, according to 2003 data. A bilateral trade treaty between Nepal and India governs the trade between these two countries, and similarly the transit treaty between two countries provides Nepal with access to the sea.

The treaties could not be renewed in 1989, when they lapsed, due to certain disputes, and the impasse resulted in a serious shortage of goods in Nepal, including critical inputs to the manufacturing sector and goods meeting basic needs. The difficulties that Nepal had to face because of bilateralism compelled it to seek entry into the multilateral trading system. Thus shortly after the trade and transit treaties with India lapsed, Nepal applied for accession to the General Agreement on Tariffs and Trade (GATT — the WTO’s predecessor).

The impasse with India lasted for fifteen months. In 1990, there were political changes in Nepal; a multiparty system was restored and a new government came to power, which successfully renegotiated the Nepal-India trade and transit treaties. After this, the urgency for Nepal to accede to GATT, to be protected under Article V on transit rights, lessened and its interest in accession waned.

Until the mid-1980s, Nepal had adopted heavily inward-looking development strategies. In 1985 it introduced an economic reform programme in a modest way, and from the early 1990s geared up the process of economic reform and renewed its commitment to WTO membership, realizing that the membership of the WTO would help its better integration into the global economy, thereby making available wider markets for Nepalese exports and more sources of foreign investment.

Nepal gained GATT observer status in 1993 and participated in the final meeting of the Uruguay Round. In 1995 Nepal again presented a formal application to accede to the newly created WTO, this time with a desire to globalize the economy, not just to be protected with transit rights.

In 1998 Nepal, in accordance with WTO procedure for accession, submitted a memorandum of its foreign trade regime. This was followed by the formation of the working party for Nepal’s accession to the WTO, and the government was engaged in follow-up activities to expedite the process. However, as in other developing countries, there was fear in certain sections of Nepalese society that it would be difficult for the country to face the challenges that might emerge in the aftermath of WTO accession. Furthermore, a sizable section of society took the view that accession to the WTO would result in adverse effects on the Nepalese economy, resulting in closure of domestic industries due to weaker competitive strength and in an increase in unemployment. There was also the problem that the WTO was not completely understood: the pains were well understood but the gains were not. Thus public opinion was not strongly supportive of the membership bid. Against this backdrop, a smooth accession could not be expected, and it was feared that there might even be domestic opposition.

Some civil society organizations, including South Asia Watch on Trade, Economics and Environment (SAWTEE), were strongly in favour of Nepal’s obtaining WTO membership. They had faith in the multilateral trading system and took the view that Nepal would gain from it. Meanwhile, they were also critical of the ‘WTO-plus’ conditions often imposed by existing members on an acceding country. They were aware of the fact that countries wishing to accede to the WTO have to follow not only multilateral but also bilateral negotiations, during which applicant countries are asked to undertake ‘WTO-plus’ commitments. In their opinion the WTO is inherently power-based, which is the very antithesis of the WTO’s credo that countries do not receive what they desire but what they negotiate. Therefore they were concerned to build the strength and skill in negotiation of the Nepali negotiating team. They were also concerned about domestic preparations.

There was a legal provision under Nepal’s parliamentary system, according to which agreements made by the government with international organizations become effective only after ratification by the House of Representatives. In March 2002 Prime Minister Sher Bahadur Deuba had dissolved it, creating additional problems or uncertainty in obtaining WTO membership.

The fifth Ministerial Conference of the WTO held in Cancún in September 2003 approved Nepal’s accession to the WTO and offered membership, subject to ratification by the government. Nepal was required to ratify the protocol of accession by 31 March 2004, as per the terms of its accession. But since there was at the time no House of Representatives and the government was non-representative, ratification became uncertain. On one hand, the political parties could oppose ratification by a non-representative government on political and legal grounds, but on the other hand it would be disastrous for Nepal to defer ratification for the reason that Nepal would not be able to maintain the policy flexibilities it had been able to acquire during the tough negotiation process in any future attempts to gain membership. Deferring the accession process would mean additional commitments in such areas as investment, the environment, trade facilitation, transparency in government procurement, competition and most of the other areas which had been negotiated in a single package during the Cancún Ministerial Conference.

 
 

II. The local players and their roles    back to top

SAWTEE was one of the non-governmental organizations (NGOs) which played an active and positive role in Nepal’s accession to WTO. It is a non-profit-making organization which was established in December 1994. It operates as a regional network through its secretariat in Kathmandu and eleven network institutions in five south Asian countries, namely Bangladesh, India, Nepal, Pakistan and Sri Lanka. Its mission is to enable south Asian communities to benefit from and minimize the adverse effects of changing regional and global economic paradigms. Its broad objective is to build the capacity of concerned stakeholders in south Asia by equipping them with knowledge, information and skills to voice their concerns in the context of globalization and liberalization. One of its specific objectives is to enhance the participation of developing countries, in particular least developed countries (LDCs) and landlocked countries, in the global trading system.

Of the member countries of SAWTEE, until its accession in April 2004 Nepal alone was not a member of the WTO. As it is within the scope of their work, SAWTEE, along with other NGOs, made a remarkable contribution to Nepal’s accession to the WTO.

Though critical of it, SAWTEE understood the WTO not only as a threat or challenge but also as an opportunity for Nepal. Its executive director, Ratnakar Adhikari, took the view that the survival of the multilateral trading system is more important for the developing countries than the developed countries, so that it is necessary for the former to support the system. He believed that SAWTEE should play a positive and active role in facilitating Nepal’s accession to the WTO, mainly for the following reasons.

  • The WTO trading system provides a degree of certainty of market access. Trade becomes more predictable, which in turn encourages trade and investment in the country. In this context, he recalled the bad experience of the sharp decline in Nepalese exports of woollen carpets to Germany when it unilaterally banned import of carpets from Nepal on the pretexts of the use of child labour or of azo dyes. WTO membership provides access to its dispute settlement procedure and legal recourse to contest capricious trade policies imposed by trading partners.
     
  • The WTO rules grant transit rights to the member countries. This is a most important benefit of WTO membership for a landlocked country such as Nepal. It has a crucial impact not only on Nepal’s foreign trade but also on the whole process of its development. An unhindered and cost-effective transit facility enhances the competitive strength of the economy.
     
  • There are several other international conventions on transit rights. But they are less effective in implementation, and also lack an effective regulatory authority, whereas the WTO provides a strong regulatory mechanism to enforce its rules.
     
  • WTO membership enforces a rules-based trade regime, increasing transparency and reducing corruption and uncertainties in trading activities.

SAWTEE played its role of facilitating Nepal’s accession to the WTO mainly in two areas, namely (i) creating a critical constituency, and (ii) strengthening the government’s hand. It launched a massive advocacy effort through its regular publications and monthly forum on globalization and the WTO, organized jointly with Action Aid Nepal (AAN),(1) to create a critical constituency.

SAWTEE publishes occasional briefing papers on various topics related to its mission. It published several papers on different aspects of the WTO and brought out a study report on the gender implications of Nepal’s accession to the WTO. In 2002, on the eve of Nepal’s accession, it published a briefing paper entitled ‘The Challenges of the WTO: Rethinking Strategies’. This paper offered the message to its readers that globalization was not an option for the developing countries, and that they should have strategies to adjust themselves to and manage the challenges of globalization. It had also published a book in July 2003, The Road to Cancún, which analyzed WTO agreements in the context of Nepal’s accession.

SAWTEE also brings out quarterly printed newsletters and monthly electronic newsletters. These, with a large readership including policy-makers, academics, media professionals and civil society activists, covered a wide range of issues related to Nepal’s accession.

From February 2003 SAWTEE and AAN started jointly organizing a monthly forum on globalization and the WTO in Kathmandu. These included as participants a wide range of stakeholders including policy-makers, the private business sector, academia, the media and civil society and activists. The one-year programme focused on various issues and agreements affecting Nepal’s accession and the way forward, and the regional agreements signed by Nepal and their pros and cons. The reports of monthly fora were posted on the official website and included in the e-newsletters.

On the part of strengthening the government’s hand in the process of accession, SAWTEE provided the government with suggestions on different issues, including the protection of farmers’ interests, anti-competitive and monopoly practices. Adhikari was included in the official delegation to the Cancún Ministerial Conference. He took it as a recognition of SAWTEE’s contribution on WTO issues and the co-operation it extended to the Nepalese government during the accession process.

 
 

III. Challenges faced and the outcome    back to top

The advocacy of SAWTEE and other NGOs had a positive impact in favour of WTO membership. Negative attitudes towards the WTO declined. People realized that entry into the WTO was inevitable, albeit they were concerned about the threat of ‘WTO-plus’ conditions and about the domestic preparations needed to ensure that accession would be favourable for Nepal.

In the course of the accession process, challenges emerged in three main areas, namely (i) tariff binding for agricultural products, (ii) resisting pressure to join UPOV, and (iii) domestic political support for ratification of the accession agreements. However, with the help of NGOs including SAWTEE, Nepal managed to meet the challenges successfully, which ultimately resulted in positive outcomes.

 

Tariff binding for agricultural products    back to top

Agriculture is the mainstay of the Nepalese economy; it is the source of livelihood for more than 80% of the population. But Nepal’s applied tariffs on agriculture were very low, ranging from zero to 10%. NGOs in Nepal including SAWTEE had realized the need to protect Nepalese farmers through an appropriate level of tariff binding at the time of accession to the WTO. At the initiative of AAN they formed a loose network of NGOs with the Federation of Nepalese Chambers of Commerce and Industries (FNCCI) and the Ministry of Agriculture and Co-operatives (MOACS) in April 2003. The network convinced the government of the need to protect Nepalese farmers and the food security of the Nepalese people by providing adequate tariff protection to sensitive agricultural products. They worked out the appropriate tariff bindings for sixty agricultural products with proper justifications and submitted them to the government. With this background, Nepal proposed binding tariffs on agricultural products at an average of 30%. Initially, developed member countries opposed the proposal in view of the existing applied rate, but with the help of the detailed work done by the Network, the Nepalese negotiators convinced them of the need to create a policy space for protecting the agriculture sector. Finally, the average tariff binding on sensitive agricultural products was fixed at 51% for the transition period and 42% thereafter. This was a remarkable achievement in view of the prevalent low level of the applied rate, at 10%.

 

Resisting the imposition of UPOV    back to top

At the final stage of its accession negotiations Nepal was under pressure from one trading partner country to become a member of the International Union for the Protection of New Varieties of Plants (UPOV). UPOV is seen as providing a high level of protection to plant breeders but as severely weakening the position of farmers, restricting their rights to save, reuse, exchange and sell seeds. This proposal came to the notice of the Nepalese authorities on 9 August 2003, only a day before the Nepalese delegation had to leave for Geneva to finalize its accession to the WTO.

After receiving this proposal the government authorities asked a member of SAWTEE to prepare a briefing for them. The brief, ‘Why Nepal cannot and should not join the UPOV’, was handed over to the head of the WTO Division of the Ministry of Industry, Commerce and Supplies at 10.30 p.m. on 9 August 2003, giving various reasons for not joining.

Government officials made a public announcement that they would not compromise the interests of Nepalese farmers while obtaining WTO membership. Prior to their departure for Geneva, they promised that they would deal with the issue bilaterally and close the chapter once and for all.

Members of SAWTEE remained in constant touch with the government delegates by phone. NGOs were seriously concerned about the possible infringement of the rights of Nepalese farmers over seeds and local biological resources as a result of Nepal’s entry into UPOV. A meeting of core members of the National Alliance for Food Security — Nepal (NAFOS)(2) was organized on 11 August to discuss possible future strategies. One of the major decisions of the meeting was to publish articles in various newsletters highlighting the need to ward off the pressure to join UPOV. Two members of SAWTEE published three articles within four days in two of the leading national dailies. Similarly, two posters, one in Nepali and the other in English, were also published and distributed to all the concerned stakeholder groups.

The NGOs also organized a press conference in Kathmandu on 13 August under the banner of NAFOS. Journalists from all the leading media organizations, farmer’s groups, lawyers and other stakeholder groups participated in the conference.

The press coverage of the event was among the best during the NGOs’ advocacy campaign. The next day, almost all the media provided prominent coverage, and it also came to the notice of the trading partner country’s trade representative’s office in Geneva.

On the final day of the accession negotiation, 15 August 2003, it was agreed to include only minimal text in the final working party report, which states:

Nepal would also look at other WIPO and IP-related Conventions, e.g. Geneva Phonograms Convention, UPOV 91, WIPO Copyright Treaty and WIPO Performances and Phonograms Treaty, in terms of the national interest and explore the possibility of joining them in the future, as appropriate.

  

Ratification of the agreement on accession to the WTO    back to top

After an effort lasting more than a decade and several rounds of both multilateral and bilateral negotiations, Nepal finally received an offer of WTO membership on 11 September 2003, subject to ratification of the protocol of accession by the Nepali government by 31 March 2004. According to the legal provisions of Nepal the protocol needed to be ratified by the House of Representatives.

The offer came at a time when the country was in a state of political turmoil. The House of Representatives had been dissolved by the then Prime Minster a year previously. The incumbent government, appointed by the king, was hence non-representative, and political parties were protesting in the street against it. The task of ratification was thus politically and legally challenging.

As it was uncertain when the country would have a House of Representatives in place, the government was also not in a position to ask for extension for the ratification period, since it could not ask for an indefinite extension. It had an option to amend the legal provisions through promulgation of an ordinance, but the political parties, including the Nepali Congress and the Nepali Congress (Democratic), who were in the government as a united party at the time of applying for the membership, were likely to oppose such a move on political and legal grounds. In such a critical situation NGOs, including SAWTEE, through their various advocacy mechanisms, were able to persuade public opinion to be in favour of not deferring accession to the WTO. Through their articles and deliberations in different fora they expressed the view that if Nepal missed the opportunity of entering the WTO, it would cost the country very dear.

Towards the third week of March 2004 the government promulgated an ordinance paving the way for ratification, and were not opposed by the political parties. On 24 March 2004 Nepal notified the WTO that the process of ratification and acceptance of the protocol of accession had been completed. According to established practice, the entry into force of the protocol occurred thirty days later, on 23 April 2004. Nepal obtained membership of the WTO as the 147th member and the first least developed country (LDC) member.

 
 

IV. Lessons for others    back to top

As elsewhere, people in Nepal had differing views on the WTO; the debate on the pros and cons of the WTO system would probably never end. However, it was widely accepted that countries need to be integrated with the global economy through the multilateral trading system. It was also recognized that Nepal could not remain in isolation from the fast integrating global economic system. With membership of the WTO Nepal would be able to participate in future important trade-related decision-making. From Nepal’s experience, it has become clear that NGOs can play a meaningful role in influencing public opinion. It was the advocacy of NGOs that helped people to understand the nature of the WTO and reduce negative attitudes towards it. This created a domestic political environment conducive to the accession of Nepal. The approach of the NGOs created opportunities for them to work closely with the government to some extent. This, in turn had enhanced transparency in government activities in relation to WTO accession.

The Nepalese experience showed that even the efforts of the larger countries to impose ‘WTO-plus’ conditions could be avoided with the help of NGOs by means of networking, which had also corrected the perception that the WTO is the tool of powerful lobbies. What is important is the power of and skill in negotiations, through which the acceding country can convince the working party.

Another important lesson that Nepal learned is that the approach of networking, rather than the efforts of a single NGO, is more effective in advocacy, and that advocacy becomes effective if it covers all stakeholders.

The commitment of the government to enact and enforce competition law in a time-bound manner in the process of obtaining WTO membership was another important aspect of the Nepalese experience. NGOs, by lending a helping hand to the government, can also advance the cause of fair trade in the country.

Accession to the WTO is not only the business of government. It is the concern of the country as a whole, including NGOs, farmers, consumers and others. Socio-economic conditions differ between developed and developing countries. Hence the implications of WTO accession also differ.

Based on his experience in the course of Nepal’s accession process, Ratnakar Adhikari, SAWTEE’s executive director, believes that NGOs in acceding countries should, first, conduct research on the impact of the various WTO agreements on the poor, marginalized and vulnerable. They should also find out which of the agreements reduce the policy space of governments seeking to protect and promote their national development priorities.

Second, NGOs should determine which ‘WTO-plus’ conditions the members of the accession working party are trying to impose on their countries. Third, they should work closely with the government not only to elicit the information (which is invariably otherwise kept confidential) about the terms of accession but should also provide suggestions to the government on how to fend off the pressure on them to agree to things that are ‘WTO-plus’ in nature. Fourth, they should gain strong public support and make use of the media to make themselves heard. Finally, if the government does not take notice of them through the regular channels, they should use other pressure tactics (campaigns, demonstrations) to make their message loud and clear.

 
 

NOTES:
1.- Action Aid has been in Nepal since 1982. From the very beginning, AAN has been working with the poorest and most downtrodden. It encourages communities to take an active role in their own development process and aims to develop links by working with the government and with NGOs. It is also geared towards advocating the rights of the poor and influencing policy in their favour. back to text
2.- NAFOS is a network of NGOs and INGOs working in Nepal for the cause of protecting and promoting food security and farmers’ rights. It was founded by Action Aid Nepal, together with other like-minded organizations, including SAWTEE, in 1999. SAWTEE is currently the secretariat of this network. back to text
 

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* Executive Director, Institute for Policy, Research and Development, Kathmandu. This study was prepared on the basis of secondary information and in consultation with Ratnakar Adhikari, executive director, SAWTEE. As the title suggests this case study is focused on SAWTEE, but in no way does this mean that the role of other NGOs is less important.