GNH and our accession to the WTO

(This article was prompted by an Outlook on Kuensel. This should have been printed in Kuensel but couldn't confirm it.. so here it is as my first contribution to the blog with some editing - MJ/Tara)

I read with interest the current debate on our impending accession to the WTO.

Free trade and market liberalisation are credited with the economic progress made by many countries in recent years. Free trade generates income for communities through trading of goods and services, and ensures the optimal use of capabilities and natural resources distributed unequally across different geographies. According to the World Bank figures, international trade growth has outpaced national output growth for many decades now.

Joining the World Trade Organisation (WTO) is a way of accessing a slice of the multilateral trading system. There are costs and benefits to being a member of the WTO. While it offers Bhutan the possibilities of finding new markets and customers we are also obliged to open our markets to the influx of goods, services and foreign competition. Competition will make our producers more efficient and provide customers with goods of better quality at cheaper prices which is a desirable outcome.

But liberalisation can have consequences for an unprepared country such as ours. We do not have the legal and the physical infrastructure that would be required to implement our obligations to the WTO. Our infrastructure would be immediately overwhelmed. Though many suggest that we have very limited to offer in terms of market, the minimal political risk Bhutan has, the cheap energy costs and our natural resources can entice many companies to come to Bhutan.

Our producers of goods and services are also not in a position to comprehend and take on the challenges that they would face in an open market. They are ill-prepared in all aspects – technological, financial and managerial. They are not very competitive and they deserve to be better informed and more engaged in the run up to our final accession. Otherwise we risk the fate of Mexico’s financial markets where foreign banks control over 80% of Mexico’s banking assets (Financial Times 2004 September). I would ascribe this to the measured and reluctant liberalisation of certain markets by developed economies where they took time to develop the required competitiveness. It would be intensely difficult for a firm from a developing country to compete with one from the developed world.

There you are – even access to certain markets cannot be guaranteed by our accession to the WTO. Negotiations to open some markets can be very prolonged and costly for a nation. Even if there were markets for our products, I am not sure if we would be able to compete within them. India, as our major trading partner, is stable at the moment and there is no urgent need to diversify our markets. The regional agreements, SAFTA and BIMSTEC, though considerably slow, would ensure some more markets for Bhutan. I think we can be more competitive in Thailand than in the US or the EU.  The Economist in October reported if the multilateral talks continue to fail, “the negotiating momentum will shift to (far less desirable) regional and bilateral trade deals, of which there are already some 400 in place or under negotiation.”

Globalisation has resulted in the integration of global supply chains and Bhutan must definitely partake in the multilateral trading system. Accession to the WTO is not a race and there are no trophies for becoming a member in a record time. Vietnam took over 11 years and China took over 15 years. I suggest the Government take some more time to evaluate the concessions and the obligations we are making. A few years from now our infrastructure would be ready, markets would have been explored and identified, and the capability of our industries developed. This will demand educating the private sector, the corporations and our farmers, and supporting them in their efforts to ready themselves. More proaction, inclusiveness and leadership from the Department of Trade, the lead agency in WTO negotiations, would deliver a lot.

Market liberalisation and free trade have lifted millions of people from poverty and improved their living standards through economic development. Governance can be enhanced when our public and private institutions are required to adhere to performance and product standards. There is a worldwide movement towards ‘going green’ and all goods and services will have to be environmentally friendly and liberalisation can provide us new, niche markets for our traditional goods and services. Joining the WTO in no way contradicts our philosophy of GNH. In fact it can be a means to achieving or enhancing GNH if managed properly. WTO and free trade is clearly more than materialism.

Professor Layard of the London School of Economics has found out that happiness increases with the increase in income and after a certain level it is independent of income (Financial Times, April 2006). I can clearly see why it is easier for our politicians and bureaucrats to condone our accession to the WTO (read materialism).