10 June, 2004

ZNet: Nepal in the WTO

ZNet Top More South Asia

......... by Sushma Joshi June 10, 2004
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The buzz of excitement around Nepal’s entry into the World Trade Organization (WTO), its 147th member, has been tempered by a school of thought that warns of the dangers posed to Nepal’s economy by the new international membership.

Will the WTO membership harm or benefit Nepal? This depends upon who is asking the question, and who is answering it.

“It’s a question of interpretation,” says Dr. Gopi Sedai, who is with Pro-Public, an organization that, among others, lobbies for small farmers. “Not all countries are on the same playing field. Some are stronger than others.” The basic problem, says Sedai, is that the WTO is a spin-off of the General Agreement on Trade and Tariffs (GATT), an international organization whose rules were designed for industrialized countries. The least-developed countries were only allowed entry much later. The rules and regulations, therefore, are geared to help countries with stronger economies and trading systems.

A huge chunk of Nepal’s economy is based on subsistence agriculture, and is non-taxable and non-commercialized. Small farmers, who used to receive subsidies for pesticides and chemical fertilizers in the 1950s, were cut off from subsidies as the 80s brought a new era of liberalization and privatization.

The fertilizer story illustrates how liberalization might not work for countries where basic monitoring institutions are not yet in place. In the 1980s, Dr. Prakash Chandra Lohani, the current finance minister, ushered in the Nepal Fertilizer Policy, which cut off public subsidies. Private companies took over the import of chemical fertilizers. The lack of controls soon led to sub-standard products being brought in. The government then nominated individuals with no training to be “fertilizer inspectors” to make sure the products were authentic, and not manufactured at unregistered factories. A small bribe, however, was enough to get the paperwork certifying quality. The farmers had no legal institutions to complain about the sub-standard fertilizers being pushed onto them by private companies.

Nepali farmers, who today fund their own fertilizers and pesticides, are at a tremendous disadvantage vis-รก-vis multi-national corporations and even small farms from countries like the United States whose farms are heavily government-subsidized.

The industrialized nations are not averse to protecting their own domestic economies. “The WTO says its members cannot have trade barriers, but if you look at the actual practice of developed countries, they have many laws that restrict free trade,” says Sedai. He points out that raw milk, which would be very expensive to airlift from other countries, has zero tax in the United States, but yak cheese, which would sell very well, has an approximate 400-500 percent tax slapped on it.

“I cannot answer whether the WTO membership would benefit or harm Nepal in general,” says Anil Bhattarai, a community health researcher at Martin Chautari. “But I can tell you how it will affect specific groups.” The WTO, he says, would significantly benefit trading classes and people who have access to international funding. But small-scale farmers would lose. Bhattarai, who is researching the privatization of health care systems in Nepal, observes that even the rudimentary public health care system that is in place will be in danger of collapsing if the WTO’s conditionalities are to be imposed.

Small farms and health-care are not the only institutions at risk. Basic services like water, electricity and telecommunications, which are currently state-run, may have to be privatized under WTO’s arm-twisting policies. The Asian Development Bank, which is providing a $40 million loan to Nepal, has asked that the Dairy Development Program in Pokhara be privatized.

“Three to four lakh litres of milk is consumed daily in Kathmandu,” says Dr. Sedai. “Around two lakh families produce this milk. If that were to be commercialized, a multi-national could take over a village, pay a high salary to two managers, hire 30 laborers, and keep cows that are engineered to produce a lot of milk. The milk will become much more expensive. Thousands would lose their livelihood.” Sedai’s figures are not derived from highly funded research projects, but his model of lost livelihood is concrete enough.

Small business-people who see larger corporate houses taking over their traditional turf are also concerned. In Khokana, the hub of Nepal’s mustard oil industry, hundreds of small oil presses have gone out of business as industrial houses have taken over their market. “Business is not like it was before,” says Suryabahadur Maharjan of the Khokana Oil Mill, shaking his head. “We used to sell a lot more before.” Maharjan has seen the insidious work of globalization first hand, as the oil crop of Khokana has given way to those from France and Denmark.

History proves that catering to big business is not always good for the poor. After the garment factories of Kathmandu lobbied the government to lower taxes on imported raw cloth, the market became flooded with cheap cotton from India. Small handloom farmers found their woven clothes were out of reach for even middle-class families. Today, even the cotton homespun dhoti worn by Padma Kanya students are imported from India.

The gap between rich and poor gets worse with liberalization, say its critics. In Nepal, where employment opportunities are not being created, people will lose their traditional livelihoods to multi-national corporations. Thousands will end up being displaced to industrialized countries as cheap labor.

Sources at international organizations are also concerned about the impact of WTO laws on intellectual property rights, on wildlife, herbs, and traditional and indigenous knowledge.

As with any other package, the WTO one is a mixed bag—richer countries can ask truant states to impose environmental and health standards on level with international ones, providing benefits to all people in the long run. But the harm far outweighs the benefits, observe its critics.

“The WTO is a group that protects the interests of big business. We are going to them and begging them to let us in, promising to conform to their rules and regulations,” says Dr. Sedai.

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