Implementations of Globalization on Pakistan's Engineering Sector

1. LECTURE ON: “IMPLEMENTATIONS OF GLOBALIZATION ON PAKISTAN’S ENGINEERING SECTOR” BY: Engr. M. Mazhar-ul-Islam General Manager & Convener, NESPAK WTO Cell 10-02-2005

2. What is Globalization? • Globalization (Internationalization) means integration of economies, knowledge and culture across the globe • Natural outcome of rapid growth in information technology and faster means of communication • Enable rapid flow of capital and trade across the globe • Accelerated from second half of the 20th century • Part of the new economic world order • Emergence of Bretton Woods institutions namely the IMF, WB and ITO (GATT) in 1944 gave birth to modern theme of globalization • WTO is the latest instruments of globalization of economies

3. What is WTO: • World Trade Organization – Geneva Based • GATT 1947 as provisional treaty till 1995 • Renamed GATT in Uruguay Round (86-94) • Multilateral Trade Agreements among state/bodies – Import/Export • International Treaty Under UN Provisions • Subject matter of commerce and law • Documented Agreements- Framework, Specific, MFN exemptions, Annexes, Schedules

4. Objectives: • Raising standards of living • Ensuring full employment • Expanding production of goods and services • Sustainable development • Securing share in trade of developing and least developed countries • Designing reciprocal and mutually advantageous arrangement directed to substantial reduction of discriminatory treatment in international trade relation

5. Function of the WTO: • Facilitate implementation, administration, operation and further objectives • Provide forum for negotiations among members • Administer settlement of disputes under DSU • Administer Trade Policy Review Mechanism (TPRM) – Overseas national trade policy • Cooperation with IMF & IBRD and its affiliates for greater coherence in global economic policy making

6. WTO ORGANIZATIONAL STRUCTURE: Director General (WTO Secretariat) MINISTERIAL Conference General Council Dispute Settlement Body Trade Policy Review Body Appellate Body Dispute Settlement Panels Committee on trade & Environment Council Intellectual Property Rights Council Trade in Services Council Trade in Goods Committee on Trade in Civil Aircrafts Source: Ministry of Commerce

7. LEGAL STRUCTURE OF WTO: AGREEMENT ESTABLISHING THE WORLD TRADE ORAGNIZATION Annex 1A: Multilateral Agreements on Trade in Goods Annex 1B: General Agreement on Trade in Services Annex 1C: Agreement on Trade- Related Aspects of Intellectual Property GATT 1994 Agriculture Annex 2: Understanding on Rules and Procedures Governing the settlements of disputes. Sanitary/Phytosanitary Technical Barriers Annex 3: Trade Policy Review Mechanism . Investment Measures Annex 4: Plurilateral Trade Agreements. Anti-dumping Custom Valuation Civil Aircraft Pre-shipment Inspection Govt. Procurement Rules of Origin Dairy Products Import Licensing Subsidies/Countervail Bovine Meat Safeguards

8. LEGAL STRUCTURE OF WTO: AGREEMENT ESTABLISHING THE WORLD TRADE ORAGNIZATION Annex 1B: General Agreement on Trade in Services Annex 1A: Multilateral Agreements on Trade in Goods Annex 1C: Agreement on Trade- Related Aspects of Intellectual Property • Construction and Engineering • Distribution • Environmental • Financial • Health • Tourism and Travel • Communications • Recreation and Sporting • Business • Transport • “Other” • Copy Right • Trade Mark • Industrial Design

9. Membership: • Original Members according to GAT 1994 (including Pakistan -23, now 148 • MC accepts new members by 2/3rd majority • MC may impose any condition to new Members • A Member may withdraw from WTO by 6 months notice to DG-WTO

10. Principles of Trading: • Without discrimination MFN treatment • Freer- Progressive liberalization of barriers • Predictable – Trade barriers (tariffs, non-tariff barriers etc) and market opening are “bound” • Increased competitiveness – discouraging subsidies, anti-dumping etc • Special treatment to developing and least – developed countries

11. Principles of MFN: • MFN: Treatment no less favourable than accorded to any other country without discrimination in the application and administration of import & export • Treatment to all members equally • Applicable to GATT, GATS & TRIPS

12. Principles – Anti –dumping: • Anti – Dumping: Measures against imports of a product at an export price below its “normal value” (usually the price of the product in the domestic market of the exporting country) • Countervailing opposite to anti – dumping • Old practice to remove competitors • Pakistan case study – solution 70% from France – Notice by National Tariff commission

13. Principles – Subsidies: • Undue benefit to producers to increase competitiveness by lowering the price of a product

14. Principles – Safeguard Measures • Permissible barriers to protect domestic industry which may be damages due to increased imports • 10 years for developing countries and 6 years for Developed countries commencing 1995 • Open ended provision for countries less than $ 1000 per capita GNP

15. Trade in Services- (GATS) • All measures affecting trade in services - Measures: procedures, rules, law, decision • Exclude those services supplies in exercise of governmental authority – not on commercial basis Supply of services in 4 modes - Mode 1: Cross-border supply (e-commerce) - Mode 2: Consumption abroad (tourism) - Mode 3: Commercial Presence (Branch-office) - Mode 4: Movement of natural persons (travel)

16. Importance of Const. Sector: • Oldest Activity in Human History • Fundamental for National Development • 20% of the World Trade in Service Sector • 51% of Pak GNP in Services Sector • 80% of Budget for Development Projects • Single Sector of economic activities to generate maximum employment • Potential to grow lateral industries – Cement, Steel, Sanitary etc

17. Potential of Construction Sector: • PEC statistics as on June, 2004: - 84,221 Professional graduate engineers - 22,784 PEC Licensed Constructors - 76 PEC Licensed Operators - 1,016 PEC Registered Engineering Consultants • Individuals and Constructors acquired domestic as well as international experiences • PEC regulatory regime provide effective regulation for complete construction sector Source: Pakistan Engineering Council

18. Analysis of WTO Regime: • Stated provisions demand Good Governance/Transparency • Individual’s gain – possible loss to country • Obstructions to developing countries - Quality Standards - Environmental Standards - Technical Standards & Labour Standards - International Engineer - Visa restrictions/Political biases - Repayment of debt (80% Interest) (continued)

19. Analysis of WTO Regime: • Forced Trade for opening up; not Free Trade on Demand & Supply principles • WTO Regime is too complex and ever expanding encompassing all aspects of life • Legal documents are in the terminology and standards of developed countries (continued)

20. Analysis of WTO Regime: • Negotiation is name of the game. • Require economical & quality products following western standards • Anti-globalization protests signifies deprivation of the poor • Developing countries will remain as consumer countries

21. IMPLECATIONS ON PAKISTAN: • Limited export- due to higher costs of Pakistani Products and restrictions • Increased Imports • Obstruction to self-reliance • Reduced Industrialization • Less Employment – 10% unemployment • GDP declines from 6% to 4% • 54 countries poorer – UNDP • Loss of economic sovereignty

22. IMPLECATIONS ENG. INDUSTRIES: • Automobile Sector failed to meet the deletion programme to: - Improve trade balance - Become self –reliance - Generate Employment • Further extension requested for 3 years upto December 2006

23. IMPLECATIONS - ENG. EDUCATION: • Engineering degree are not recognized by the developed countries • More students will undertake education abroad • Business in education in the name of foreign universities will increase • Pakistani degree will be less attractive if rapid remedial measures are not taken

24. IMPLICATIONS – CONSTRUCTION SECTOR: • Due to weak Pak. Construction Sector – After Transitional Period: - Foreign Constructors will increase - Local Constructors will be subservient - More Un-Employment - Obstructions to self-reliance - Reduced growth/capacity of const. sector

25. WHAT TO DO: • Form regional trading block among Muslim and third world countries • Liaise with Malaysia, South Africa etc. for creating pressure group • Accountability for non-preparedness in Pakistan • Up hold good governance, merits and Transparency • Investment policy – what is cost & conditions • Initiate domestic capacity building measures in selected sectors (Light Eng., Construction) on urgent basis (continued)

26. What to do: • Reduce costs of Infrastructures and margin of profits • Involve stake holders; Statutory bodies/Associations for their part of WTO regime • Re-model relevant education on International Standards • Accelerate research and development • Expedite domestic legislation conforming to Agreements • Increase Negotiation skills • Commit less-discuss more in WTO

27. Conclusions: • WTO- an International compulsion • Wide gap between stated objectives and achieved results • Both opportunity and challenges • Pakistan should liberalize its market but not without reciprocity • Pakistan must initiate efforts to meet the challenges of WTO immediately to boost exports in WTO environment or otherwise

28. THANK YOU