The WTO requirements for Yemen’s Accession process [Archives:2004/763/Business & Economy]

August 12 2004

By Economist Taufik Al-Dobhani
For the Yemen Times

In an earlier article, published in the first half of 1999, we presented the World Trade Organization (WTO) as integrated part of the currently applied international economic order. Like the WB and the IMF, the WTO was dealt with as an international complementary tool or instrument (an integrated Organization within the UN- system) participating in leveling the path for a new Era.
In this context, WTO was discussed in terms of its contribution towards the creation of a rather uniformed global system and in relationship with the WB and the IMF. In that article (refer to Yemen Times March/April 1999), many effects and world wide implications were outlined with some consequences indicated being currently apparent. By referring to the overall common concept of all three originations, including the WTO, one observes that their performances are based on the application of classical, neo-classical and post neo-classical economic theories, including all related and evolved concepts, thus, their operations and progressive performance have a rather complementary and an accumulating effect on any given economy, despite the fact that they seem to be operating in different fields and / or at different levels.
As this article will focus on the WTO, it is important to have indicated this operational overlapping and interrelationships between the WTO and the WB and the IMF as this will be useful for, and have implications on, any applicable qualitative or quantitative argumentations. Initially, the aim here will be to, briefly, outline the evolutionary process of the WTO creation and to translate the main issues related to its operation into rather simplified economic aspects.
In a further discussion, the main official steps undertaken so far by the Yemeni government towards its accession into the WTO will be addressed. On this basis, it is further intended to review the most important requirements that must focused upon by the assigned authorities, while working for the accession process and after getting WTO membership.
Taking into account these issues, the actual practices necessary for Yemen's accession into the WTO, including their deviation, will be qualitatively assessed in order to enable decision makers to intervene and adjust accordingly where applicable.
The WTO, the WB, and the IMF, were all proposed to be established under the economic and social organization of the UN-system, as part of the reform undertaken after the WWII, aimed at creating more adequate conditions and better frameworks for managing and controlling international relations.
Due to various political disagreements, unlike the WB and the IMF, the WTO could not be established.
Instead, it was replaced by the General Agreement on tariffs and trade (GATT) which was created in 1947 as a voluntary institutional frame and where countries join to negotiate for reciprocal tariff reduction based on the application of certain principles, i.e. non discrimination, mutual trade concessions, transparency, disputes settlement procedures and the provision of pre-defined agreed exceptions.
The GATT framework has operated with the overall objective of eliminating trade distorting measures, and towards the achievement of trade liberalization between member countries (ie contracting parties). Some 23 countries initiated GATT round talks in Geneva in 1947, nevertheless, a further 7 rounds were held until 1993, with an increasing number of countries joining this agreement. At the last GATT round (the URUGUAY round) which was signed by more than 120 member countries in Marrakech in 1994, it was agreed that the replacement of the GATT by the WTO was to be enforced from 1995 on.
All previous GATT rounds, trade related rights and obligations of respective member countries, that have accumulated, were to be forwarded to become part of the new WTO system.
Beyond this, negotiations were conducted under the WTO umbrella. The introduction of all trade related rules and regulations applied under the WTO regime, including the basic principles employed, have been formulated in accordance with the interests of major supper economies which have more economic barging power, and have adjusted their long term local economic polices in favor of trade liberalization. Consequently, small economies and in particular the majority of developing countries, including the least developed countries among them, were, as individual GATT or WTO members, in weak positions to represent their interests. Instead they were integrated within the system as given, hoping to acquire short term gains and the benefit of some provisions and exemptions applied under the WTO system, at the cost of terminating other preferential treatments applied through other bi-lateral and multi-lateral agreements and arrangements.
This particular phenomena of developing countries, in general, has been acknowledged by the UN and other WTO members, resulting in the creation of UNCTAD during the 1960s as a permanent origination attached to the UN organizational structure, aiming at representing developing countries, assisting them, and protecting their interests in trade related issues.
This very brief descriptive review of accumulative events and dynamic developments has been presented here to highlight the complexity of the WTO regime, its rather multi-dimensional consequences, and hence the wide scope of the topic under consideration. The overall objective of WTO refers, basically, to the promotion of liberal trade activities among member countries in almost all economic and economic related fields justified by the possible gains generated through liberal trade, and based on more efficient resource allocations and the freedom of market competition.
However the path to achieve these rather long term (and ambitious) results, implies that each member country has to reform and adjust its local based economic policies, measures, and procedures, so as to comply with WTO rules and regulations. This is the core of the issue. However, the resulting implications for any given country will differ, being largely dependent on the prevailing economic and socio-economic circumstances of that country, and on how it was prepared for the accession process, as well as on how it is performing with regards to understanding related rules and regulations and their macro economic short and long term implications.
In this context, some important questions can be raised, e.g. what are main rules and regulations applied under the WTO? What does this imply for any given WTO member? And how should a country act to accede into the WTO and to gain from its membership? The answer to these and other related questions will be explored with reference to Yemen, hereunder, including a qualitative assessment of all the main related and applicable issues.
As it will be beyond the scope of this article to cover the entire WTO- system, focus will be given to the main aspects related to the underlying rules and regulations applicable for Yemen, and present them in terms of their overall, direct and indirect, implications for the Yemeni economy.
Undoubtedly, the WTO is functioning to facilitate and promote the application of free international trade activities and to ensure the movement towards liberal trade among its members. This is done through its official HQ based in Geneva and its underlying specialized committees and bodies. Since liberal trade is based on liberal trade policies and policy measures, it is obvious that WTO members are enforced, in the long term, to adept transparent economic policies and measures. This may be an easy task for some countries that have a well defined, predictable, open economy – which is applicable for the majority of developed countries. In contrast, for the majority of developing economies and in particular for the least developed countries (of which Yemen is one), the application of liberal economic policies implies major changes in their economic and socio-economic characteristics, both on macro and micro levels.
Therefore, Yemen's accession into the WTO is being made subject to series of macro economic adjustment measures, which consequently result in the obligation to change many applied legal frameworks, including the termination of some traditional legislative concepts.
On the other hand, liberal trade means that WTO members have eliminated and / or terminated all economic and non-economic measures that are considered to have a trade distorting impact. By converting the main rules and regulations of the WTO- regime, the accession process will, eventually, have the following main rules for any given country including Yemen:
(1)-application of free market mechanisms based on market information which implies generally the creation of powerful local monopolies and the gradual elimination of government interventions in key economic activities.
(2)- increasing dependency of local economic industries on fluctuations occurring in international markets and hence the lose of control over food security issues trough expected rises in the price level of basic food stuffs (with the most impact being expected on least developed and net food importing countries).
(3)-the shifting of investment towards limited and selected economically profitable activities, based purely on apparent comparative economic advantage and independent from any other social, environmental, traditional or other local characteristics and considerations.
(4)- widening up the poverty gap, which is expected to occur in particular within the rules society.
(5)- increased foreign investment at the cost of local based environmental resources.
(6)- decreasing representation of local governments to reflect the interests of the local population, and the creation of increased protection of the environment for rather large local based and international monopolies.
(7)- despite any likely efforts made in favor of income redistribution or other compensatory measures, the overall trend will be featured through unequal income distribution and the evolution of powerful minority social groups, which is likely to result in political instabilities.
(8)- any likely created local industries will represent, generally, an additional burden (and source of income for internationally based monopolies through WTO regulations imposed under intellectual property rights, and the protective measures provided for patents and inventions).
These and many other expected results on macro level will, consequently, have further implications on micro and sub-sector levels which are expected to be vast and more complicated than any one can imagine, however, it is beyond the scope of this article to go any further in this direction.
Obviously, the ultimate aggregated consequences will have different impacts on each country depending mainly on individual development status, the composition of individual economies, and on how each country acts prior to WTO accession, during the accession process, and thereafter. Based on this, it may be interesting to review, hereunder, the Yemen case.
Officially, Yemen applied in the year 2000 for WTO membership and it is currently still working for the accession procedures and the fulfillment of all prerequisites to the satisfaction of WTO arrangements. Among the procedures and requirements applied by the WTO, Yemen has responded outwardly through officially establishing a coordination and communication office, under the Ministry of industry and trade as the lonely official canal between Yemen and the WTO.
In addition many decisions have been made by the government to support the accession process, by means of establishing the required committees at ministerial levels headed by many respective deputy ministers. Through its authority, the nominated office has worked throughout the last period with line ministries and its underlying committees and technical staff members to gather all the necessary required official documents, resulting in the presentation of the details applicable to the Yemeni foreign trade regime (YFTR) which contained all trade related Yemeni policies, measures and procedures, and deliver it to the WTO.
The latter has replied upon the YFTR with further questions on some unclear aspects made by major WTO members. Accordingly, Yemen, has responded with the necessary answers to those questions.
So far, this has been a one- sided game, i.e. during the last 4 years Yemen has responded to the requirements of the WTO accession process and it has been considered as a major priority by the concerned authorities. However, this is a purely administrative and routine responsibility of the officially assigned office.
From an economic point of view, more attention should have been given to assessing and quantifying the expected implications of Yemeni membership, and measurement of the consequences of the WTO regime on Yemeni economic sectors and sub-sectors, based on certain priorities.
This vision seems to have been largely neglected. Based on past performance, assigned management has focused on coordinating administration and documentation activities with line ministries and other official national institutions involved with trade and trade legislation issues. An equally important aspect in this regard for Yemen should have been to concentrate on following up on (and the acquisition of) all possible technical assistances guaranteed to Yemen, as a least developed country, by leading Donors and by the WTO, and utilizing them in the most efficient way possible through enhancing sector and sub-sector capacities.
Again, this has been largely omitted, (though some limited acquired assistance and donations have been either partially utilized or used in an efficient way). As many consequences are likely to effect the agricultural sector, high priority should be given to this sector, and its underlying sub-sectors, while assessing the implications of Yemen's membership into the WTO.
The first thing which should have been done by any given authority, (preferably prior to the application of accession ie prior to 2000), is to have developed and constructed an applicable conceptual economic model, reflecting the strengths and weaknesses of the Yemeni economy and its various economic sectors, relative to other countries and the rest of the world, so that any further adjustments and / or analytical activities can be based on it.
Even this was not done aside from one exceptional activity executed in 2002 which resulted in producing a rather inadequate and unclear descriptive modeling proposal. There are many aspects with regards to the performance of the official authorities, represented mainly through the MIT, which have to be assessed and re-adjusted towards making a more appropriate operation, and functioning for the interest of all economic sectors rather than just to lobby for certain narrow interests, based on a biased technical vision.
Currently, one of the main issues related to Yemen's assistance for its WTO accession, is an ongoing project under the MIT. It was due to start activities during the second half of 2003 but was actually initiated at the beginning of this year. Despite this delay, this EU funded, 7 million Euro, project is still unknown in terms of its contribution to different economic sectors – which seems to be due to biased management.
If well executed, this may help a lot in covering and assisting many to overcome and clarify technical aspects, helping towards maximizing benefits and minimizing risks during the ongoing accession process and thereafter – if allocated project funds (local and international) are utilized fully and used efficiently for prioritized purposes. Nevertheless, this remains subject to the further performance and follow up of assigned authorities.