GARMENT exporters will now be required to go through one more hassle. Exporters will have to acquire licences before they can send their goods abroad. At a time when licences are an anathema to the world of trade, this must be shocking news to liberalization enthusiasts of the day. The news is shocking even to protectionists who understand trade only in terms of exports. Is the new millennium coming up with new twists to liberalization or is this case just an aberration?
The answer is neither. Looking at the Nepalese trade scenario through a free trader’s eyes has its own set of complications, and this is one of them. Most Nepalese exports are made up of goods being traded under the preferential regime. Garment exports fall under the so-called GSP- general system of preferences- or the quota system. The importing country imports only a certain amount of goods from Nepal, unconcerned about their competitiveness in the free market. Set guidelines and standards need to be fulfilled if you are to export your ware and that too only until your quota amount is fulfilled. This is a special privilege enjoyed only by the developing world provided by the developed markets.
What has been noticed over the years is that there is a sort of competition even among the quota countries. Some countries appear to be more competitive in exploiting the quota system than others. And, Nepalese are losers in this game. They have been witness to finished goods coming from abroad to be re-exported as Nepalese goods. This takes up the Nepalese quota space without benefitting the Nepalese in any way. The Commerce Ministry has therefore come up with this belated idea of licensing the quota products originating from Nepal so that other countries cannot cheat the Nepalese of their trade facilities.
Although the remedy appears logical, the question of timing of the licensing could unearth unpleasant questions. Since the quota-cheating has remained a phenomenon for so long, why have the Nepalese finally tried to find a remedy to it through licensing now? The global trading regime is phasing out the quota system in a couple of years any way.
Leaving this motive-question aside, under the new arrangement, the Chamber of Commerce will be playing a crucial role in certifying the origin of the exportable. The thinking of the government appears to be thus: The government, or more precisely, the customs people, are not to be trusted because they have been involved in this quota violation by allowing importation of finished goods illegally. If the businessmen themselves are given a hand in determining the origin of the finished products, then there would be no problem.
If indeed there were wrong-doers, they have not been brought to book. Is this how we handle lapses in trade? Apart from eroding the credibility of the government in matters as vital as exports, the new arrangement has added one more burden on the exporter, not to mention the additional work being given to the chamber- a non governmental entity. The lost time in arranging for the final shipping of products in an area where time is of utmost importance is another matter to be considered. Still, all the trouble will be worth it, if only Nepalese garments reach their destination with the ‘Made in Nepal’ stamp. Only time will tell if the new initiative has paid off so that other preferential exports, like carpets, too can emulate the idea.
The Big Picture: The emerging Nepalese export scenario appears to be one brought right out of the books of the 1960s and 70s, not one from the new millennium that came after the 1990s- an era of aggressive push by free trade lobbyists and policies- as being made to believe. The big picture could indeed be confusing.
What is more, the recently concluded UNCTAD meet saw many developing countries calling for the scrapping of the quota system. This was in fact the main sore point in the discussions between developing and developed countries. If the developing ones wanted free access to the developed markets, the developed ones were willing to provide only ‘almost free access’. Clearly, the Nepalese position in this debate is different, if we are to look at the new arrangement to license the quota products.
The Nepalese want to stick to the quota system until their production capabilities are efficient and compititive, in spite of the developing country call for ‘free access’. So dire is the Nepalese state of competitiveness that they cannot even compete to keep their own quota for themselves- allowing others to benefit from it.
One may conclude that whatever others may think, the Nepalese, like other LDCs, need the quota system badly. But, again, the quota system is not going to remain here forever. The World Trade Organisation will phase them out as time progresses. In other words, Nepal will have to work out its place in the emerging world trade scenario in a very calculated manner. And, this means much more than last-ditch attempts to salvage, and benefit from, a dying system.
Nepalese officials are confident that they can deal with the negotiating process due to be initiated in a few months time. They might be wanting everyone to believe that preparations are complete for them to start negotiating. But the fact that even a preferential system like the quota system could not be exploited by the Nepalese for decades surely makes their confidence sound hollow.
The world of free trade is a whole new ball game altogether. Additionally, the issue of acquiring concessions from the world trade body, normally given to LDCs, is a separate subject requiring the knowledge of the uniqueness of the Nepalese economy in so many aspects. Just look at the Nepalese need to licence its exports when even import licences are being scrapped throughout the world.
On the one hand, the needs of the world trading system is getting more and more complicated by the day. On the other hand, the Nepalese experience with the trade regimes the country has devised for itself over the years, or has been subjected to, leave a lot of room for doubt about the Nepalese ability to do any better than to pin all their hopes on the concessions provided by the WTO. If experience were the actual pointer to future outcome, even those concessions will be swindled by someone else from right under their nose. After all, the quota system was a concession provided by the developed countries to Nepal. Was it not?