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Implications For The Muslim World
The
Muslim world in general, and the less developed countries (LDCs) in
particular, will be adversely affected by the Agreement's
implementation. As long as the United States and other potential
importers of textiles and clothing do not provide free access to
their markets, the Muslim world's share of textile exports will
drastically decline. Until the MFA is enacted, increasing the volume
of textile exports seems unlikely.
Analogous
to textile exports are carpet exports. This industry extensively
employs children under 15 years of age. The likelihood of raising
its magnitude seems slim in the prevailing sociopolitical scenario.
However, if the so-called child abuse and environmental issues are
incorporated into the Agreement, these already disadvantaged
countries will suffer all the more. After the culmination of the
Uruguay Round, one thing is quite obvious for all the developing
countries including the Muslim world, i.e., the oncoming cutthroat
competition in international markets. In this scenario, it is
essential that the Muslim world search for new markets for its
products, diversify its exports, enhance the quality of its
products, and increase economic cooperation and integration within
its regions. If the Muslim world succeeds in doing these things,
then the chances for increasing its share of world trade is bright;
otherwise, maintaining even its existing meager share will be
difficult.
The
characteristics of the new trade order are market openness, trade
liberalization, cutthroat competition, price and quality
competitiveness and technical sophistication. Thus, while it opens
up new avenues of world trade, only those who are efficient and
technologically advanced are ensured benefits. Special treatment at
any level and at any cost is no longer part of the emerging system.
Against this backdrop, the implications for the Muslim world have
been assessed.
Tariff Cuts:
The
universal reduction in tariffs will lead to a greater opening of
global markets for all nations, including the Muslim nations, and
thus provide an opportunity to expand exports.
It
seems that the implementation of this provision of the WTO is not
going to pose any problem to Muslim countries because most of them
have already liberalized their trade under their own
preferences-they have embarked upon a path of tariff reduction prior
to WTO reforms. Most of the South and Southeast Asian economies of
the Muslim world are rapidly reducing tariff rates. For instance, in
Pakistan, the maximum rate of tariff (including para tariffs) was
brought down to 72 percent in the 1994-95 budget, with plans to
reduce it further, to 50 percent in the 1995-96 budget and to 35
percent in the 1996-1997 budget. Thus, within a two-year period,
tariffs in Pakistan will range from a minimum of 10 percent to a
maximum of 35 percent. An analogous situation exists in other
countries, including Turkey and Egypt. However, in some African
countries the process of decreasing tariff rates is either
progressing very slowly or not at all.
Another
perception of the situation is that the demand for imports from the
Muslim world will decrease because their goods do not adhere to
standards and quality. Naturally, this further deteriorates their
balance of payments position. The short-term impact may be
discouragement of nascent domestic industries. In the long term, the
process of their industrialization may be stalled.
In
addition, a large number of developing countries are large importers
of cereals and other temperate food products from the developing
countries. As the developing country exporters continue to flood
their markets with agricultural products below their market price,
there will be little incentive for these countries to become more
self-sufficient in food. Furthermore, the reduction in export
subsidies will have the (adverse) effect of increasing the price
that the developing countries must pay for some of their food
imports from the developing countries. This eventuality was
recognized by the UR negotiators, and the Agreement on agriculture
has a provision to compensate net-importers for possible price
increases. However, most developing countries feel this provision is
too weak because the compensation will be no bigger than is
currently available from exporting countries.(9)
Competition:
The
universal reduction in tariffs would erode the tariff benefits under
the GSP (generalized system of preferences), implying greater
competition. The manufacturing sector of the Muslim world, which is
in its embryonic stage of growth, will have to compete with the
advanced and developed economies of the West. Doubtless, in fierce
international market competition it will be difficult for the Muslim
world to maintain its present share, and to increase its share will
be even more difficult. The Muslim world will face multidimensional
competition not only from the advanced nations of the West, but also
from the countries of the Pacific Rim and the Western Hemisphere.
Looking
at the prevailing trends in the manufacturing sector in the Muslim
world, we find that they reflect that the manufacturing sector is
still in its primary stage. It centers round consumer products only.
For instance, in Bangladesh 25 percent of manufacturing comes from
food, beverages, and tobacco. Figures for some other countries are:
Mali, 36 percent; Uganda, 40 percent; Nigeria, 36 percent; Pakistan
30 percent; Indonesia, 25 percent; Sudan, 39 percent; Egypt, 31
percent; Morocco, 31 percent; Jordan, 26 percent; Syria, 24 percent;
Algeria, 32 percent; and Iran, 30 percent.
Cutthroat
competition may force them to improve the standard of their consumer
goods, which ultimately means not to proceed toward semi- and
high-technological industries. If they decide to immediately move
toward high technology, they may further lower their present
standard. Eventually, their own domestic consumers may switch to
imported goods.
Textiles:
Over
the last few years, the MFA clause concerning textiles in
international trade has seriously injured the interests of the
Muslim world. The Muslim countries have a significant share in the
international market. In some Muslim countries, textile and clothing
sectors contribute around 40 percent to their manufacturing sectors.
The contribution of textiles and clothing to manufacturing is 35
percent in Bangladesh, 40 percent in Mali, 26 percent in Nigeria, 20
percent in Pakistan, 34 percent in Sudan, nearly 20 percent in
Egypt, 20 percent in Algeria, and 20 percent in Iran.
The
six Central Asian Republics together with Pakistan, Bangladesh, and
Egypt capture around 50 percent of the cotton for clothing and
textiles in the international market. Being technologically
backward, Muslim countries cannot add much value to the cotton fiber
they grow; therefore, raw cotton is exported to the advanced
countries, which receive multiple earnings out of the arrangement.
The removal of textile quota restrictions is expected to benefit the
textile exporting countries-including Pakistan, which is guardedly
optimistic.
First,
the phasing out of MFA quotas has been spread out over a 10-year
period, thus delaying its full benefits for 10 years. Second,
competition will become more fierce, causing any gains to be
dependent on efficiency. Third, the provision of antidumping
safeguards empower an importing country to take unilateral action to
curb textile imports. Moreover, the phasing out has been linked to
the lowering of tariffs against textile imports by the developing
countries themselves.
Nevertheless,
the Muslim countries have somehow been afforded an opportunity,
before quotas are fully phased out, to restructure their textile
industry and specialize in sectors like yarn, fabrics, and premade
clothes where they have an advantage. In most Muslim countries, the
textile, clothing, and cotton industries employ many children, owing
to its cost effectiveness. If the so-called child abuse issue is
linked with international trade, it may adversely affect the textile
industry.
Agriculture:
Agriculture
remained the most controversial issue during the Uruguay Round of
talks. Japan showed a very keen interest in the issue. However, this
was the first occasion it was brought into the purview of GATT.
Since 3 to 5 percent of the rice market in Japan and Korea will now
be open to foreign exporters, Muslim countries in general and
Pakistan, Bangladesh, and Egypt in particular, which are capable of
producing good quality rice, can benefit. America and Thailand will
be the larger beneficiaries. The Agreement provides an opportunity
to compete and get a share. However, the question is, Can these
Muslim countries produce more rice with better quality? If they can,
then chances are they will benefit; otherwise, little advantage will
be obtained.
Commodity
prices are likely to rise over the longer term with freer trade,
which is good news; but LDCs will also face increased competition
among themselves. As tariffs on farm products are lowered, a number
of Muslim countries shall also lose the benefits now drawn from
preferential tariffs accorded under the GSP. Nevertheless, subsidies
on rice and cotton, maintained by the United States, the European
Community, Japan and South Korea, would be reduced, opening these
markets to other countries. Yet the prospects of getting a share of
the rice markets in Southeast Asia are not immediately bright. After
the reduction in agricultural subsidies on wheat, LDCs may have to
spend more on wheat imports.(10)
Services:
In
Muslim countries, the services sector has achieved a tremendous
importance in terms of its share in GDP. The minimal contribution by
this sector in any economy is 26 percent and may be as high as 58
percent. In most countries it is about 40 percent of GDP. Although
the Muslim world has an abundance of human resources, its population
is relatively uneducated and unskilled. Most of its labor force work
in unskilled and nontechnical jobs. Nevertheless, in some Muslim
countries, including Pakistan, Iran, Turkey, and Bangladesh, the
labor force may undertake some low-level managerial task. The Muslim
world can only take some share in simple nontechnical tasks,
particularly in construction. There is likely to be an onslaught of
multinationals in the services sector. The Muslim world can benefit
at least from the opening of trade in construction services where it
has some advantage due to abundant cheap labor. The service industry
of the Muslim world, especially telecommunications, financial
services, and maritime services, will be under great pressure,
especially when they have to extend similar concessions to foreign
firms that they accord to local firms.
TRIPS
and TRIMS:
In
several areas, the Uruguay negotiations were engineered to serve the
interests of the developed countries exclusively. These included
TRIPS and TRIMS. These were the longest debated, arrogant, and
controversial issues upon which consensus was reached after lengthy
and acrimonious discussions. China and India were among those who
criticized the proposals, on behalf of nations likely to be
adversely affected by the Agreement. The TRIPS may retard technology
advancement in developing countries, including the Muslim world. It
makes the transfer of technology difficult. TRIMS would erode
flexibility in adopting policy instruments to support investment
objectives by the developing countries.
Due
to the effective use of the regulation on intellectual property
rights, patent seed would especially affect small farmers. This is
because the reusing of patented seed would not be allowed. This will
constrain the productivity of the agricultural sector. The Agreement
may restrict the Muslim world's access to scientific and
technological knowledge for a period of twenty years or so. This
would mean that Muslim countries will be at the mercy of the
transnational corporations for access to modern technology, at a
rising price.
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