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A Sudden Wakening on WTO Membership

In an article in the Bangkok Post on 3 February 2014, titled, “Bhutan’s WTO Dilemma” Karma Dolma pointed out, “It is perhaps the longest time Bhutan has ever taken to make a decision.” She was right, because this was 15 years after Bhutan became an observer of the WTO in 1999, signifying the first step towards joining WTO. And a quarter of a century since then, the present government has now decided to join WTO. The million dollar question is will the next government honor this decision or will we see the matter lying dormant indefinately?

It is unfortunate that since the introduction of parliamentary democracy, the Bhutanese people are now getting used to the governments’ indecisiveness. A few such issues include the start of some hydropower projects, construction of industrial estates, ratification of the BBIN Motor Vehicle Agreement (MVA) signed in 2016 in Thimphu, implementation of value-added tax, and the recent flip-flopping on tourism policies.

In 2008, Bhutan had actually reached a very advanced stage in negotiations for accession to WTO and would have been a member like seven other LDCs including Afghanistan, if the DPT government had not aborted the process. The reasons cited were that the membership could adversely impact implementation of the GNH philosophy, in particular, and the agriculture sector. Sadly, neither that government nor its successors took the trouble to examine the pros and cons of membership to evolve a national consensus. They could have easily invited WTO experts from Geneva and held public discussions to clarify and clear any doubts on WTO membership. Whatsmore, no one in the government including the concerned ministries, bothered to seek the views of officials and diplomats who were actively involved in the accession process and had even published articles in the national media on the merits of WTO membership.

Achyut Bhandari, the then Director-General of Trade and national coordinator of WTO Task Force (TF) wrote an article in the Bhutan Times, far back as in August 2008, analyzing the merits and demerits of membership. He concluded that it would neither harm the agricultural sector and GNH philosophy, nor hurt the private sector by reducing import tariffs and opening trade sector to external competition. As an LDC, Bhutan could negotiate necessary safeguards under the WTO Agreements in order to neutralize any negative effects. He also stressed that, “…the longer the wait, the more costly and onerous the accession process will become, especially if Bhutan graduates from the LDC status in the near future.” And this is exactly what is happening now.

Similarly, Ambassador (Rtd.) Sonam Tobden Rabgye who was the Permanent Representative of Bhutan to the United Nations in Geneva from 2003 to 2008, when Bhutan's accession process began in earnest and when "...about 90 % of the work on accession was completed," according to the former Trade DG, shared similar views. Ambassador Rabgye even wrote articles in Kuensel (24 October 2020) and in the Bhutanese (23 July 2022) urging the government to participate in the BBIN MVA and revive membership negotiations to WTO as these steps would benefit the country. He also appealed to the government to examine the implications of Bhutan's graduation from the LDC category carefully and strategize as Bangladesh and Nepal had done, and listed the challenges and opportunities for Bhutan in this respect.

The question we should now ask is, will Bhutan receive the same favorable treatment during the renewed accession negotiation as it did in the 2000s? With graduation from the LDC status, the developed countries in particular could press for much greater concessions from Bhutan. But this is negotiable if Bhutan can convince WTO members which want to hold negotiations with Bhutan regarding its development challenges. One advantage is that our current tariff levels are low with little room for further reductions. This shows that Bhutan is an open economy, dictated by the small size of its population and domestic market when it comes to merchandize imports. But, they may corner us for greater liberalization in the 12 main services sector and 150 sub-sectors covering economic activities such as business, communication, finance, banking and insurance, health, education, transport, travel and tourism. Against a small export sector, Bhutan may derive more benefits from foreign collaboration in domestic production and export of selected services.

The expertise that was developed in the 2000s may no longer exist as the officials in the former Task Force (TF) have either resigned, superannuated or transferred to different organizations. So, internal technical capacity may have to be developed to steer the preparatory process. This, inter alia, involves establishment of a multi-sectoral TF comprising of representatives of relevant public and private sector agencies. It must be coordinated by senior officers from the Department of Trade and recently created Ministry of Foreign Affairs and External Trade.

The TF’s first task would be to draft the Memorandum of Foreign Trade Regime (MFTR) that provides comprehensive data and information on the Bhutanese economy to WTO members, as the basis to enter bilateral and multilateral negotiations with them. MFTR and other documents prepared in the first phase may serve as guidelines but these have to be updated extensively, if not re-written entirely. The government should take immediate and committed steps to jumpstart the process. It may be advisable to draw on the expertise and experiences of former diplomats and officials as it does so, because it is an involved and extended journey.

For those who are not familair with WTO, it will be useful to know that this institution lays down rules and offers guidelines on multilateral trade on goods and services. This is to create a rules-based system for fair competition among trading partners by opening and liberalizing trade. It ensures that domestic industries can be protected from foreign competition through tariffs and not by quantitative restrictions; member countries have to reduce and legally bind tariffs rates, and remove other trade barriers; apply the rule of most-favored-nation (MFN) treatment whereby a member cannot discriminate the other members in application of tariffs and other trade restrictive measures except under bilateral or regional preferential trade agreements or under exceptional measures permitted by WTO; and, the rules on national treatment have to be followed, in which domestic and imported products have to be treated in the same manner in the application of tariffs, taxes and other levies. These rules create a level-paying field in international trade for all members with certain safeguards, and special and differential treatment for developing countries including the use of permissible subsides in agricultural and industrial production.

There are economic and political advantages for Bhutan in becoming a WTO member. On the economic front, Bhutan can secure market access for its export products and services as well as gain from consequent economic efficiency, despite the need to take reciprocal action to open its economy for imports of goods and services from WTO members. While real benefits may be marginal at the beginning, given Bhutan’s concentration in exports in South Asia and limited exportable products, Bhutan can produce or manufacture goods that may fetch higher prices in global markets, provided quality standards can be met.

Bhutan’s economic and trade policies would also become more stable, reliable and predictable through periodic reviews needed under WTO, and be comparable to similar policy standards in other WTO countries. This would be beneficial to the Bhutanese private sector for doing business at national and international levels, and to the Government as the opportunity to obtain FDI and foreign collaboration in the desired sectors would be more promising. It will also receive the needed technical assistance for capacity building so as to comply with the rules of membership.

Politically, Bhutan will become an equal partner with other 164 WTO members notwithstanding the size of its economy and population. It can contribute to a fairer and safer trading system, articulate and advance its development policies, thereby enhancing its global profile and status as a sovereign nation. WTO will become another major platform to complement and reinforce Bhutan’s views in the UN and other multilateral forums. Hence, by becoming a WTO member, Bhutan will no longer carry the dubious distinction of not being a party to the WTO and send mixed signals to the international trade community, which is damaging for the credibility and image of the country.

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