1

LECTURE ON:

“IMPLEMENTATIONS OF GLOBALIZATION ON PAKISTAN’S ENGINEERING SECTOR”

BY:

Engr. M. Mazhar-ul-IslamGeneral Manager &Convener, NESPAK WTO Cell

10-02-2005

2

What is Globalization? Globalization (Internationalization) means

integration of economies, knowledge and culture across the globe

Natural outcome of rapid growth in information technology and faster means of communication

Enable rapid flow of capital and trade across the globe

Accelerated from second half of the 20th century Part of the new economic world order Emergence of Bretton Woods institutions namely

the IMF, WB and ITO (GATT) in 1944 gave birth to modern theme of globalization

WTO is the latest instruments of globalization of economies

3

What is WTO:

• World Trade Organization – Geneva Based• GATT 1947 as provisional treaty till 1995• Renamed GATT in Uruguay Round (86-94)• Multilateral Trade Agreements among state/bodies –

Import/Export• International Treaty Under UN Provisions • Subject matter of commerce and law• Documented Agreements- Framework, Specific,

MFN exemptions, Annexes, Schedules

4

Objectives:

• Raising standards of living• Ensuring full employment• Expanding production of goods and services• Sustainable development• Securing share in trade of developing and least

developed countries• Designing reciprocal and mutually advantageous

arrangement directed to substantial reduction of discriminatory treatment in international trade relation

5

Function of the WTO:

• Facilitate implementation, administration, operation and further objectives

• Provide forum for negotiations among members• Administer settlement of disputes under DSU• Administer Trade Policy Review Mechanism (TPRM)

– Overseas national trade policy• Cooperation with IMF & IBRD and its affiliates for

greater coherence in global economic policy making

6

MINISTERIAL Conference

Committee on trade &

Environment

CouncilTrade in Goods

CouncilIntellectual

Property Rights

Trade Policy Review Body

CouncilTrade in Services

Dispute Settlement

Body

Appellate Body

Dispute Settlement

Panels

Director General(WTO

Secretariat)

General Council

WTO ORGANIZATIONAL STRUCTURE:

Committee on Trade in

Civil AircraftsSource: Ministry of Commerce

7

AGREEMENT ESTABLISHING THE WORLD TRADE ORAGNIZATION

Annex 1A:Multilateral Agreements on Trade in Goods

Annex 1B:General Agreement onTrade in Services

Annex 1C:Agreement on Trade- Related Aspects of Intellectual Property

LEGAL STRUCTURE OF WTO:

GATT 1994

Agriculture

Sanitary/Phytosanitary

Pre-shipment Inspection

Technical Barriers

Anti-dumping

Investment Measures

Custom Valuation

Rules of Origin

Import Licensing

Subsidies/Countervail

Safeguards

Annex 2: Understanding on Rules and Procedures Governing the settlements of disputes.

Annex 3: Trade Policy Review Mechanism .

Annex 4: Plurilateral Trade Agreements.

Civil Aircraft

Govt. Procurement

Dairy Products

Bovine Meat

8

AGREEMENT ESTABLISHING THE WORLD TRADE ORAGNIZATION

Annex 1A:Multilateral Agreements on Trade in Goods

Annex 1B:General Agreement onTrade in Services

Annex 1C:Agreement on Trade- Related Aspects ofIntellectual Property

LEGAL STRUCTURE OF WTO:

1. Construction and Engineering

2. Distribution3. Environmental4. Financial5. Health6. Tourism and Travel7. Communications8. Recreation and

Sporting9. Business10. Transport11. “Other”

• Copy Right• Trade Mark• Industrial Design

9

Membership:

• Original Members according to GAT 1994 (including Pakistan -23, now 148

• MC accepts new members by 2/3rd majority• MC may impose any condition to new Members• A Member may withdraw from WTO by 6 months

notice to DG-WTO

10

Principles of Trading:

• Without discrimination MFN treatment• Freer- Progressive liberalization of barriers• Predictable – Trade barriers (tariffs, non-tariff

barriers etc) and market opening are “bound”• Increased competitiveness – discouraging

subsidies, anti-dumping etc• Special treatment to developing and least –

developed countries

11

Principles of MFN:

• MFN: Treatment no less favourable than accorded to any other country without discrimination in the application and administration of import & export

• Treatment to all members equally• Applicable to GATT, GATS & TRIPS

12

Principles – Anti –dumping:

• Anti – Dumping: Measures against imports of aproduct at an export price below its “normal value”(usually the price of the product in the domesticmarket of the exporting country)

• Countervailing opposite to anti – dumping• Old practice to remove competitors• Pakistan case study – solution 70% from

France – Notice by National Tariff commission

13

Principles – Subsidies:

• Undue benefit to producers to increasecompetitiveness by lowering the price of aproduct

14

Principles – Safeguard Measures

• Permissible barriers to protect domesticindustry which may be damages due to increased imports

• 10 years for developing countries and 6 yearsfor Developed countries commencing 1995

• Open ended provision for countries less than $ 1000 per capita GNP

15

Trade in Services- (GATS)

• All measures affecting trade in services- Measures: procedures, rules, law, decision

• Exclude those services supplies in exercise of governmental authority – not on commercial basis

Supply of services in 4 modes

- Mode 1: Cross-border supply (e-commerce)- Mode 2: Consumption abroad (tourism)- Mode 3: Commercial Presence (Branch-office)- Mode 4: Movement of natural persons (travel)

16

Importance of Const. Sector:

• Oldest Activity in Human History• Fundamental for National Development• 20% of the World Trade in Service Sector• 51% of Pak GNP in Services Sector• 80% of Budget for Development Projects• Single Sector of economic activities to generate

maximum employment• Potential to grow lateral industries – Cement,

Steel, Sanitary etc

17

Potential of Construction Sector:

• PEC statistics as on June, 2004:- 84,221 Professional graduate engineers- 22,784 PEC Licensed Constructors- 76 PEC Licensed Operators- 1,016 PEC Registered Engineering Consultants

• Individuals and Constructors acquired domestic as well as international experiences

• PEC regulatory regime provide effective regulation for complete construction sector Source: Pakistan Engineering Council

18

Analysis of WTO Regime:

• Stated provisions demand Good Governance/Transparency

• Individual’s gain – possible loss to country• Obstructions to developing countries

- Quality Standards- Environmental Standards- Technical Standards & Labour Standards- International Engineer- Visa restrictions/Political biases- Repayment of debt (80% Interest)

(continued)

19

Analysis of WTO Regime:

• Forced Trade for opening up; not Free Trade on Demand & Supply principles

• WTO Regime is too complex and ever expanding encompassing all aspects of life

• Legal documents are in the terminology and standards of developed countries

(continued)

20

Analysis of WTO Regime:

• Negotiation is name of the game.• Require economical & quality products following

western standards• Anti-globalization protests signifies deprivation of

the poor• Developing countries will remain as consumer

countries

21

IMPLECATIONS ON PAKISTAN:

• Limited export- due to higher costs of Pakistani Products and restrictions

• Increased Imports• Obstruction to self-reliance• Reduced Industrialization• Less Employment – 10% unemployment• GDP declines from 6% to 4%• 54 countries poorer – UNDP• Loss of economic sovereignty

22

IMPLECATIONS ENG. INDUSTRIES:

• Automobile Sector failed to meet the deletion programme to:- Improve trade balance- Become self –reliance- Generate Employment

• Further extension requested for 3 years upto December 2006

23

IMPLECATIONS - ENG. EDUCATION:

• Engineering degree are not recognized by the developed countries

• More students will undertake education abroad• Business in education in the name of foreign

universities will increase• Pakistani degree will be less attractive if rapid

remedial measures are not taken

24

IMPLICATIONS – CONSTRUCTION SECTOR:

• Due to weak Pak. Construction Sector – After Transitional Period:

- Foreign Constructors will increase- Local Constructors will be subservient- More Un-Employment- Obstructions to self-reliance- Reduced growth/capacity of const. sector

25

WHAT TO DO:

• Form regional trading block among Muslim and third world countries

• Liaise with Malaysia, South Africa etc. for creating pressure group

• Accountability for non-preparedness in Pakistan• Up hold good governance, merits and

Transparency• Investment policy – what is cost & conditions• Initiate domestic capacity building measures in

selected sectors (Light Eng., Construction) on urgent basis

(continued)

26

What to do:

• Reduce costs of Infrastructures and margin of profits

• Involve stake holders; Statutory bodies/Associations for their part of WTO regime

• Re-model relevant education on International Standards

• Accelerate research and development• Expedite domestic legislation conforming to

Agreements• Increase Negotiation skills• Commit less-discuss more in WTO

27

Conclusions:

• WTO- an International compulsion• Wide gap between stated objectives and achieved

results• Both opportunity and challenges• Pakistan should liberalize its market but not

without reciprocity• Pakistan must initiate efforts to meet the

challenges of WTO immediately to boost exports in WTO environment or otherwise

28

THANK YOU