CONTRIBUCIÓN AL PLAN DE FORMACIÓN DEL PROFESORADO

This section discusses the course of negotiations on Nepal’s WTO accessions. It then reviews the commitments made by Nepal for accession and technical assistance that the United Nations Development Program (UNDP) has provided to HMGN during negotiations and the next steps in that process.

Timeline of Events

Nepal first applied to the GATT in 1989, during a dispute with India over transit rights, but interest in membership waned after the Nepal-India Trade Treaty was successfully renegotiated in 1991.

The Government renewed its commitment to membership after the economic reform program was

41 The initial derogation in European Commission Regulation No. 1615/2000 (July 24, 2000), which was renewed until the end of 2004 in EC Regulation No. 293/2002 (February 15, 2002).

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launched and an accession working party was formed;⁴² Nepal gained observer status in 1993; it participated in the final meetings of the Uruguay Round; and, in December 1995, HMGN presented its formal application to accede to the newly created WTO. It submitted its Memorandum of the Foreign Trade Regime in 1998. The negotiating team delivered revised offers on goods market access and services in 2002. Two meetings of its working party were held in May 2000 and September 2002. After three informal meetings and a formal meeting on August 15, 2003, Nepal has now finalized its terms of accession. This agreement will now have to be ratified by Nepal before the accession is completed.

Information provided by officials and parties close to the negotiations suggests that Nepal’s efforts towards accession were favorably received. WTO members reportedly have voiced sensitivity to the general challenges facing LDCs in the accession process, as well as the specific difficulties confronting Nepal at this time. Below are the specific commitments that Nepal has made for its accession:

Nepal’s Commitments and Their Implications Market Access

Tariffs Bindings: During the course of multilateral trade negotiations, WTO members commit to “bind”

their tariffs at certain levels. Governments are free to apply their statutory rates below these bound levels, but imposing duties above those levels risks retaliation by other WTO members. Committing to tariff bindings helps insulate the government from protectionist pressures at home, thereby increasing policy transparency and reducing market uncertainty faced by traders. Nepal negotiated an average tariff binding of 42 percent on agricultural products and around 24 percent on industrial goods. The majority of the import items fall in the customs duty range of 10–20 percent. The maximum tariff rate of 130 percent applied to cars and jeeps will be reduced as specified in the goods schedule. A minimum tariff rate up to 5 percent will be applied on daily consumption items.

Other Duties and Charges: One key issue during later stages of accession negotiations involved what the WTO refers to as “other duties and charges,” which are simply trade taxes specified outside the schedule of ordinary customs duties. Nepal had no ODCs in 1998, when it submitted its Memorandum on the Foreign Trade Regime. In the last two years HMGN introduced a number of new import surcharges (documented in Chapter 2 of this volume) to finance domestic security and local development programs.

The emerging practice in WTO accession negotiations is for acceding countries to bind ODCs at zero, i.e., to commit to not applying any ODCs at all.⁴³ In its final goods offer, Nepal agreed to eliminate its ODCs over a period lasting from two to ten years, depending on the tariff line. The country also pledged not to introduce new ODCs. Replacing existing import surcharges with more broadly based taxes will increase economic welfare in the long run. HMGN must now integrate this WTO commitment into its broader fiscal policy. A number of donors, including the IMF, are actively working with the government on fiscal reform. The task now is to ensure close coordination between those working on WTO accession and those working on tax policies.

Services: As a result of the negotiation, Nepal agreed broad commitments in 11 services sectors, revealing its clear belief in the benefits of liberalization as an engine for future growth and prosperity. These sectors include business, communication, construction, education, environmental, and certain categories of

42 The working party is formed to consider a candidate country’s polices in detail and draft the terms under which the country will be allowed to join the WTO. A working party typically consists of the larger WTO members and the candidate country’s principal trading partners. As of April 2002, there were 25 members in Nepal’s working party.

43A recent WTO Secretariat report on members’ bound rates indicates that all new WTO members have bound ODCs at zero (TN/MA/S/4/Rev. 1, November 1, 2002).

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financial services, health, tourism, and transport. Most of Nepal’s commitments relate to liberalization in cross-border supply of services (called Mode 1), consumption of services abroad (Mode 2) and, with some restrictions, on foreign commercial presence (Mode 3) in these categories. Greater access to foreign providers of business services will help Nepali firms reduce costs and identify new foreign markets. On the other hand, practical, political, and economic considerations make liberalizing services trade considerably more complicated than goods trade liberalization. Trade negotiators must now work with domestic regulators to ensure that service trade liberalization commitments are carefully integrated with balance of payments considerations and overall regulatory policy.⁴⁴

Nepal’s Legislative Plan of Action for Regulatory Reforms

Nepal has also committed to a timetable of legislative reforms required to comply with WTO rules on trade-related domestic regulations, such as the Agreements on Trade-related Intellectual Property Rights (TRIPs), Customs Valuation, Sanitary and Phytosanitary Measures (SPS) and Technical Barriers to Trade (TBT). Nepal has agreed to the following legislative plan of Actions.

Customs: Legislation on the valuation of imports for customs and taxation purposes conforming to the requirements of the Agreement on Customs Valuation would be enacted by 1 July 2004. Nepal would progressively implement the Agreement on Customs Valuation in accordance with the action plan and full implementation will start from 1 January 2007.

Sanitary and Phytosanitary Measures: Nepal will implement fully the provisions of the Agreement on Sanitary and Phytosanitary Measures by 1 January 2007 following an action plan in different stages which started with the adoption of the Food Act and the implementation of Codex Alimentarius, and will continue with the establishment and operation of a single enquiry point.

Technical Barriers to Trade: Nepal will progressively implement the Agreement on Technical Barriers to Trade in accordance with the Action Plan submitted during the negotiations and would implement fully the provisions of the Agreement on Technical Barriers to Trade by 1 January 2007.

Trade-Related Intellectual Property Rights: As a least-developed country, Nepal is preparing the new Industrial Property (Protection) Act, which would incorporate all the substantive provisions of the TRIPS Agreement. It would cover all categories of industrial property and would incorporate the basis for an adequate enforcement and be promulgated no later than 1 January 2006.

Implementing commitments under these agreements will require careful planning, technical assistance, and time. Implications are discussed in detail below in Section 3.3.

Other Negotiating Issues: Various other issues have emerged in the accession negotiations; while important, they have not generated much controversy. These include Nepal’s membership in preferential trade agreements, the Government’s plans for safeguards laws and competition policies, and possible membership in plurilateral agreements.⁴⁵ It is worth noting that the economics of these issues can be

44The optimal sequence of domestic reform and external liberalization varies with the sector. In telecommunications reform, opening market access works best when it occurs simultaneously with privatization (Rathindran, et al., 2002). A lesson many economists draw from the currency crises of the late 1990s is that domestic banking reform should precede capital account liberalization.

45 They include the Government Procurement Agreement and the Information Technology Agreement. Since only a subset of GATT signatories agreed to these codes, they were termed “plurilateral” to distinguish them from the multilateral commitments of the GATT itself, which are binding on all GATT signatories.

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complicated, and that TA may be useful to conducting cost-benefit analyses and in helping to write implementing legislation.

UNDP/UNCTAD Technical Assistance: One important factor in Nepal’s accession process is a TA package provided by UNDP. This project, entitled Nepal’s Accession to the WTO (NEP/96/10), started in 1999, was originally scheduled to terminate in June 2001, but was extended later. UNDP’s contribution is US$915,000. The United Nations Conference on Trade and Development (UNCTAD) is the executing agency, and MOICS is the implementing agency. Activities to date include:

! Preparing technical documents for submission to the WTO, including the Memorandum on Foreign Trade Regime, Questions and Answers on the MTR, Legislative Action Plan, and numerous other documents in the prescribed WTO format;

! Commissioning background papers, including reports assessing the conformity of Nepal’s laws to WTO obligations, evaluating the effect on bilateral and regional trade agreements, and reviewing options for Nepal’s service sector offer;

! Conducting seminars for MOICS staff; and

• Promoting public awareness about WTO membership.

What happens after accession? Nepal has now successfully concluded an agreement on the terms of its accession to the WTO. After this agreement is ratified, Nepal will have formally acceded. Ahead lies the major challenge of implementing its commitments to comply with the agreement and mobilizing technical assistance to help with compliance. The UNDP assistance program has concentrated on helping the government work through the accession negotiations, addressing the challenging tasks of responding to both WTO reporting requirements as well as substantive requests from members of the working party.

One expects that the capacity built during the past several years will enable the country to participate effectively as a WTO member in future rounds of multilateral trade negotiations, which is, after all, the original inspiration for creating the Integrated Framework. Moving beyond immediate support for negotiations, there is a pressing need for technical assistance with future implementation of WTO agreements. Successful implementation of WTO regulatory rules (such as those required by the SPS or TRIPS Agreements, for example) will require building different types of capacity than what is needed to conduct negotiations. There is clear need of technical assistance in this area. But the terms of reference of the technical assistance should explicitly identify the need to implement WTO rules in ways that will benefit the Nepali economy. We pick up these issues in the following section.