Globalization, WTO and Nepal’s

commitments in agriculture

R. K. JHA
Presentation outline
• Introduction to globalization and the WTO
• Five pillars of the WTO and WTO agreements
• Major agreements related to food and agriculture
• Nepal’s commitments in the WTO in relation to agriculture
• Status of Nepal’s food and agricultural trade
Introduction to globalization
• No universally agreed definition of globalization. According to
economists, it is the integration of commodity, capital and labour
markets around the world.

• No consensus view on when it started. Some say it is as old as

civilization, but modern economic historians say that in real
sense, globalization started in the 19th century after a drop in
transport costs.

• There are widely differing views on the pros and cons of

globalization. Free market economists such as Jagdish Bhagwati
view globalization as benefitting everyone, whereas critics of free
market such as Joseph Stiglitz view that it has increased
inequality.
Globalization and WTO
• Three main drivers of globalization
▫ Economic policies (Bretton Woods, GATT, European integration,
etc.)
▫ Political changes (United Nations, Marshall Plan, Berlin Wall, etc.)
▫ Technological innovations (Transportation, green revolution,
computer, internet, etc.)

• One of the most obvious forms of globalization is the rapid

expansion of international trade.

• Trade expansion led to the establishment of the WTO, which, in

turn, helped further expand global trade.
The WTO
A brief history
• Bretton Woods Conference
◦ After WWII, three organizations were formed. International Trade
Organization was one of them.
◦ General Agreement on Tariffs and Trade (GATT) was established in
1947
• Main principles of GATT
◦ Rules-based trading system
◦ Reciprocity of concessions (mainly tariff reductions)
◦ Non-discrimination
• Achievements of GATT
◦ Reduction in tariff
◦ Incorporation of “development dimension” in the system
◦ Launching of comprehensive negotiations (Uruguay Round) in 1986
• As a result of the conclusion of the Uruguay Round, WTO came
into being on 1 January 1995
In a nutshell
• As of now, there are 164 WTO members
• More than 98 percent of global trade takes place among WTO
members
• Decisions are made through consensus following a multilateral
approach; scope for unilateralism is curtailed
• It is based on five pillars (Figure 1)
• It is responsible to enforce the WTO Agreements (Figure 2)
 Effective dispute settlement system
Promoting rules-based multilateral trading system
Figure 1: Five pillars of the WTO

Special treatment for DCs

Transparency
Non-discrimination
Reciprocity
Figure 2: WTO Agreements
Major WTO Agreements

General Agreement on Agreement on Trade Related

General Agreement on Tariffs
Trade in Services Aspects of Intellectual
and Trade (GATT)
(GATS) Property Rights (TRIPS)

Policy issues, such as: trade Sectoral agreements Standard-related agreements

facilitation measures, quantitative Agreement on Agriculture Agreement on Technical
restriction, Agreement on Trade (AoA) Barriers to Trade (TBT)
Related Investment Measures Agreement on Textiles and Agreement on Sanitary
(TRIMS), institutional Clothing (ATC) Phyto-sanitary (SPS)
mechanism, balance of payment, measures
transparency, exceptions and
Procedural issues
trade and development
Agreement on Customs
Valuation (ACV)
Trade remedy measures Agreement on Import
Plurilateral agreements
Agreement on Subsidies and Licensing Procedure (AILP)
Agreement on Government
Countervailing Measures (ASCV) Agreement on Pre-shipment
Procurement (AGP)
Agreement on Antidumping (ADD) Inspection (API)
Agreement on Civil Aircraft
Agreement on Safeguards (AS) Agreement on Rules of
(ACA)
Origin (RoO)
Agreement on Trade
Agreement on Agriculture (I)
• Post WWII, governments focused on agricultural development
and introduced different support measures.

• Insulation of domestic markets on the one hand, and on the

other, dumping of surplus production in world markets depressed
world market prices.

• GATT 1947 covered trade in agricultural products.

• Why the need of a separate agreement then?

▫ Issue of agriculture normalism versus agriculture exceptionalism
▫ GATT 1947 allowed the use of export subsidies on primary agricultural
products, import restrictions such as quotas under certain conditions.
▫ Arbitrary use of various non-tariff barriers.
Agreement on Agriculture (II)
• Three pillars of the AoA

▫ Market access
 Bound tariff and reduction commitments
 Existence of few tariff quotas, but as binding commitments
 Prohibition of non-tariff measures, except under some exceptions
such as during BoP imbalances, and volume and price trigger

▫ Domestic support
 Two categories of support: (i) with no, or minimal, distortive effect
on trade (Green Box) (ii) trade distorting support (Amber Box)
 Other exempt measures: (i) Developmental measures such as to
encourage agricultural and rural development (ii) Blue box
subsidies for production-limiting programmes (iii) De minimis
 Reduction commitments

▫ Export subsidies
 Limited use of export subsidies
 Reduction commitments
Some other provisions in the AoA
• Export restrictions
▫ Prohibition in the use of export restrictions
▫ Notification to the Committee on Agriculture if such restrictions
are required and would be applied

• Negative effects on least-developed and net food-importing

developing countries
▫ Food aid
▫ Provision of technical and financial assistance
The SPS Agreement
• Finalized during the UR to elaborate the general exception
relating to protecting human, plant and animal health [Art. XX
(b) of the GATT]
• Exclusively related to food and agricultural products
• Measures could include all relevant laws, decrees, regulations,
requirements and procedures
• To prevent risks relating to spread of pest, disease, contaminated
and toxic food products and other damages
• Limitations on the use of SPS measures
▫ Necessity test
▫ Scientific principles
▫ Sensitivity to international trade concerns
▫ Least-trade restrictiveness rule
Agreement on TRIPS
• This too entered into force along with the establishment of the
WTO in 1995

• Covers all forms of IPRs such as patents, copyrights,

trademarks, and so on.

• Article 27.3(b) relates directly to farmers’ rights, and is one of

the most contentious issues under negotiation in the WTO.
▫ Members may exclude from patentability “plants and animals
other than micro-organisms, and essentially biological processes
for the production of plants or animals other than non-biological
and microbiological processes. However, Members shall provide
for the protection of plant varieties either by patents or by an
effective sui generis system or by any combination thereof. The
provisions of this subparagraph shall be reviewed four years after
the date of entry into force of the WTO Agreement.”
27 years of WTO
• WTO has not had smooth sailing ever since it came into being
• After acrimonious discussions, Doha Development Agenda (DDA) was
eventually launched in November 2001
• Cancun Ministerial Conference of the WTO (September 2003), which
was supposed to be the mid-term evaluation of the DDA, failed
• The DDA was salvaged through July Framework, which decided to
launch negotiations on the following five issues:
▫ Agriculture
▫ Non-agriculture market access
▫ Services
▫ Trade facilitation
▫ Development dimension
• Ninth Ministerial Conference (Bali, December 2013)
▫ Two major decisions
 Agreement on Trade Facilitation
 Decision on public stockholding for food security
WTO and Nepal
Nepal’s membership
• Nepal became the 147th member of the WTO on 23 April 2004

• It is the first LDC to have joined the WTO through full working
party negotiation

• Why WTO membership?

▫ Full participation in the global trading system
▫ Better negotiating position in bilateral/regional negotiations
▫ Securing the rights of freedom of transit
▫ Predictable and stable trading environment
▫ Better economic good governance
▫ Increased market access
▫ Access to dispute settlement body
▫ Avoiding cost of non-membership
Nepal’s commitments
• Accepted all mandatory provisions but with transition period

• Commitments in the agriculture sector

▫ Phasing out of other duties and charges (ODCs) in 10 years
▫ 100 percent tariff binding and no reduction commitments
▫ Unweighted average bound rate: from 51 to 42 within 3 years, with
maximum of 200 percent
▫ Will explore the possibility of joining UPOV 1991 in the future, as
appropriate, in terms of national interest
THANK YOU