Opinions expressed in the case studies and any errors or omissions
therein are the responsibility of their authors and not of the
editors of this volume or of the institutions with which they are
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institutions with which they are associated from opinions expressed
in the case studies and from any errors or omission therein.
Studies main page
ON THIS PAGE:
The problem in context
> II. The local players and their roles
> III. Challenges faced and the outcome
> Tariff binding for agricultural products
> Resisting the imposition of UPOV
> Ratification of the agreement on accession to the WTO
> IV. Lessons for others
I. The problem in context back to top
Nepal is a small landlocked country situated
between China and India. Access to sea is only through India, and India
is also Nepal’s major trading partner. Trade with India constitutes
55.9% of total trade, according to 2003 data. A bilateral trade treaty
between Nepal and India governs the trade between these two countries,
and similarly the transit treaty between two countries provides Nepal
with access to the sea.
The treaties could not be renewed in 1989,
when they lapsed, due to certain disputes, and the impasse resulted in a
serious shortage of goods in Nepal, including critical inputs to the
manufacturing sector and goods meeting basic needs. The difficulties
that Nepal had to face because of bilateralism compelled it to seek
entry into the multilateral trading system. Thus shortly after the trade
and transit treaties with India lapsed, Nepal applied for accession to
the General Agreement on Tariffs and Trade (GATT — the WTO’s
The impasse with India lasted for fifteen
months. In 1990, there were political changes in Nepal; a multiparty
system was restored and a new government came to power, which
successfully renegotiated the Nepal-India trade and transit treaties.
After this, the urgency for Nepal to accede to GATT, to be protected
under Article V on transit rights, lessened and its interest in
Until the mid-1980s, Nepal had adopted heavily
inward-looking development strategies. In 1985 it introduced an economic
reform programme in a modest way, and from the early 1990s geared up the
process of economic reform and renewed its commitment to WTO membership,
realizing that the membership of the WTO would help its better
integration into the global economy, thereby making available wider
markets for Nepalese exports and more sources of foreign investment.
Nepal gained GATT observer status in 1993 and
participated in the final meeting of the Uruguay Round. In 1995 Nepal
again presented a formal application to accede to the newly created WTO,
this time with a desire to globalize the economy, not just to be
protected with transit rights.
In 1998 Nepal, in accordance with WTO
procedure for accession, submitted a memorandum of its foreign trade
regime. This was followed by the formation of the working party for
Nepal’s accession to the WTO, and the government was engaged in
follow-up activities to expedite the process. However, as in other
developing countries, there was fear in certain sections of Nepalese
society that it would be difficult for the country to face the
challenges that might emerge in the aftermath of WTO accession.
Furthermore, a sizable section of society took the view that accession
to the WTO would result in adverse effects on the Nepalese economy,
resulting in closure of domestic industries due to weaker competitive
strength and in an increase in unemployment. There was also the problem
that the WTO was not completely understood: the pains were well
understood but the gains were not. Thus public opinion was not strongly
supportive of the membership bid. Against this backdrop, a smooth
accession could not be expected, and it was feared that there might even
be domestic opposition.
Some civil society organizations, including
South Asia Watch on Trade, Economics and Environment (SAWTEE), were
strongly in favour of Nepal’s obtaining WTO membership. They had faith
in the multilateral trading system and took the view that Nepal would
gain from it. Meanwhile, they were also critical of the ‘WTO-plus’
conditions often imposed by existing members on an acceding country.
They were aware of the fact that countries wishing to accede to the WTO
have to follow not only multilateral but also bilateral negotiations,
during which applicant countries are asked to undertake ‘WTO-plus’
commitments. In their opinion the WTO is inherently power-based, which
is the very antithesis of the WTO’s credo that countries do not
receive what they desire but what they negotiate. Therefore they were
concerned to build the strength and skill in negotiation of the Nepali
negotiating team. They were also concerned about domestic preparations.
There was a legal provision under Nepal’s
parliamentary system, according to which agreements made by the
government with international organizations become effective only after
ratification by the House of Representatives. In March 2002 Prime
Minister Sher Bahadur Deuba had dissolved it, creating additional
problems or uncertainty in obtaining WTO membership.
The fifth Ministerial Conference of the WTO
held in Cancún in September 2003 approved Nepal’s accession to the
WTO and offered membership, subject to ratification by the government.
Nepal was required to ratify the protocol of accession by 31 March 2004,
as per the terms of its accession. But since there was at the time no
House of Representatives and the government was non-representative,
ratification became uncertain. On one hand, the political parties could
oppose ratification by a non-representative government on political and
legal grounds, but on the other hand it would be disastrous for Nepal to
defer ratification for the reason that Nepal would not be able to
maintain the policy flexibilities it had been able to acquire during the
tough negotiation process in any future attempts to gain membership.
Deferring the accession process would mean additional commitments in
such areas as investment, the environment, trade facilitation,
transparency in government procurement, competition and most of the
other areas which had been negotiated in a single package during the
Cancún Ministerial Conference.
II. The local players
and their roles back to top
SAWTEE was one of the non-governmental
organizations (NGOs) which played an active and positive role in Nepal’s
accession to WTO. It is a non-profit-making organization which was
established in December 1994. It operates as a regional network through
its secretariat in Kathmandu and eleven network institutions in five
south Asian countries, namely Bangladesh, India, Nepal, Pakistan and Sri
Lanka. Its mission is to enable south Asian communities to benefit from
and minimize the adverse effects of changing regional and global
economic paradigms. Its broad objective is to build the capacity of
concerned stakeholders in south Asia by equipping them with knowledge,
information and skills to voice their concerns in the context of
globalization and liberalization. One of its specific objectives is to
enhance the participation of developing countries, in particular least
developed countries (LDCs) and landlocked countries, in the global
Of the member countries of SAWTEE, until its
accession in April 2004 Nepal alone was not a member of the WTO. As it
is within the scope of their work, SAWTEE, along with other NGOs, made a
remarkable contribution to Nepal’s accession to the WTO.
Though critical of it, SAWTEE understood the
WTO not only as a threat or challenge but also as an opportunity for
Nepal. Its executive director, Ratnakar Adhikari, took the view that the
survival of the multilateral trading system is more important for the
developing countries than the developed countries, so that it is
necessary for the former to support the system. He believed that SAWTEE
should play a positive and active role in facilitating Nepal’s
accession to the WTO, mainly for the following reasons.
- The WTO trading system provides a degree of certainty of market
access. Trade becomes more predictable, which in turn encourages
trade and investment in the country. In this context, he recalled
the bad experience of the sharp decline in Nepalese exports of
woollen carpets to Germany when it unilaterally banned import of
carpets from Nepal on the pretexts of the use of child labour or of
azo dyes. WTO membership provides access to its dispute settlement
procedure and legal recourse to contest capricious trade policies
imposed by trading partners.
- The WTO rules grant transit rights to the member countries.
This is a most important benefit of WTO membership for a landlocked
country such as Nepal. It has a crucial impact not only on Nepal’s
foreign trade but also on the whole process of its development. An
unhindered and cost-effective transit facility enhances the
competitive strength of the economy.
- There are several other international conventions on transit
rights. But they are less effective in implementation, and also lack
an effective regulatory authority, whereas the WTO provides a strong
regulatory mechanism to enforce its rules.
- WTO membership enforces a rules-based trade regime, increasing
transparency and reducing corruption and uncertainties in trading
SAWTEE played its role of facilitating Nepal’s
accession to the WTO mainly in two areas, namely (i) creating a critical
constituency, and (ii) strengthening the government’s hand. It
launched a massive advocacy effort through its regular publications and
monthly forum on globalization and the WTO, organized jointly with
Action Aid Nepal (AAN),(1)
to create a critical constituency.
SAWTEE publishes occasional briefing papers on
various topics related to its mission. It published several papers on
different aspects of the WTO and brought out a study report on the
gender implications of Nepal’s accession to the WTO. In 2002, on the
eve of Nepal’s accession, it published a briefing paper entitled ‘The
Challenges of the WTO: Rethinking Strategies’. This paper offered the
message to its readers that globalization was not an option for the
developing countries, and that they should have strategies to adjust
themselves to and manage the challenges of globalization. It had also
published a book in July 2003, The Road to Cancún, which
analyzed WTO agreements in the context of Nepal’s accession.
SAWTEE also brings out quarterly printed
newsletters and monthly electronic newsletters. These, with a large
readership including policy-makers, academics, media professionals and
civil society activists, covered a wide range of issues related to Nepal’s
From February 2003 SAWTEE and AAN started
jointly organizing a monthly forum on globalization and the WTO in
Kathmandu. These included as participants a wide range of stakeholders
including policy-makers, the private business sector, academia, the
media and civil society and activists. The one-year programme focused on
various issues and agreements affecting Nepal’s accession and the way
forward, and the regional agreements signed by Nepal and their pros and
cons. The reports of monthly fora were posted on the official website
and included in the e-newsletters.
On the part of strengthening the government’s
hand in the process of accession, SAWTEE provided the government with
suggestions on different issues, including the protection of farmers’
interests, anti-competitive and monopoly practices. Adhikari was
included in the official delegation to the Cancún Ministerial
Conference. He took it as a recognition of SAWTEE’s contribution on
WTO issues and the co-operation it extended to the Nepalese government
during the accession process.
faced and the outcome back to top
The advocacy of SAWTEE and other NGOs had a
positive impact in favour of WTO membership. Negative attitudes towards
the WTO declined. People realized that entry into the WTO was
inevitable, albeit they were concerned about the threat of ‘WTO-plus’
conditions and about the domestic preparations needed to ensure that
accession would be favourable for Nepal.
In the course of the accession process,
challenges emerged in three main areas, namely (i) tariff binding for
agricultural products, (ii) resisting pressure to join UPOV, and (iii)
domestic political support for ratification of the accession agreements.
However, with the help of NGOs including SAWTEE, Nepal managed to meet
the challenges successfully, which ultimately resulted in positive
Tariff binding for agricultural products
back to top
Agriculture is the mainstay of the Nepalese
economy; it is the source of livelihood for more than 80% of the
population. But Nepal’s applied tariffs on agriculture were very low,
ranging from zero to 10%. NGOs in Nepal including SAWTEE had realized
the need to protect Nepalese farmers through an appropriate level of
tariff binding at the time of accession to the WTO. At the initiative of
AAN they formed a loose network of NGOs with the Federation of Nepalese
Chambers of Commerce and Industries (FNCCI) and the Ministry of
Agriculture and Co-operatives (MOACS) in April 2003. The network
convinced the government of the need to protect Nepalese farmers and the
food security of the Nepalese people by providing adequate tariff
protection to sensitive agricultural products. They worked out the
appropriate tariff bindings for sixty agricultural products with proper
justifications and submitted them to the government. With this
background, Nepal proposed binding tariffs on agricultural products at
an average of 30%. Initially, developed member countries opposed the
proposal in view of the existing applied rate, but with the help of the
detailed work done by the Network, the Nepalese negotiators convinced
them of the need to create a policy space for protecting the agriculture
sector. Finally, the average tariff binding on sensitive agricultural
products was fixed at 51% for the transition period and 42% thereafter.
This was a remarkable achievement in view of the prevalent low level of
the applied rate, at 10%.
Resisting the imposition of UPOV
back to top
At the final stage of its accession
negotiations Nepal was under pressure from one trading partner country
to become a member of the International Union for the Protection of New
Varieties of Plants (UPOV). UPOV is seen as providing a high level of
protection to plant breeders but as severely weakening the position of
farmers, restricting their rights to save, reuse, exchange and sell
seeds. This proposal came to the notice of the Nepalese authorities on 9
August 2003, only a day before the Nepalese delegation had to leave for
Geneva to finalize its accession to the WTO.
After receiving this proposal the government
authorities asked a member of SAWTEE to prepare a briefing for them. The
brief, ‘Why Nepal cannot and should not join the UPOV’, was handed
over to the head of the WTO Division of the Ministry of Industry,
Commerce and Supplies at 10.30 p.m. on 9 August 2003, giving various
reasons for not joining.
Government officials made a public
announcement that they would not compromise the interests of Nepalese
farmers while obtaining WTO membership. Prior to their departure for
Geneva, they promised that they would deal with the issue bilaterally
and close the chapter once and for all.
Members of SAWTEE remained in constant touch
with the government delegates by phone. NGOs were seriously concerned
about the possible infringement of the rights of Nepalese farmers over
seeds and local biological resources as a result of Nepal’s entry into
UPOV. A meeting of core members of the National Alliance for Food
Security — Nepal (NAFOS)(2)
was organized on 11 August to discuss possible future strategies. One of
the major decisions of the meeting was to publish articles in various
newsletters highlighting the need to ward off the pressure to join UPOV.
Two members of SAWTEE published three articles within four days in two
of the leading national dailies. Similarly, two posters, one in Nepali
and the other in English, were also published and distributed to all the
concerned stakeholder groups.
The NGOs also organized a press conference in
Kathmandu on 13 August under the banner of NAFOS. Journalists from all
the leading media organizations, farmer’s groups, lawyers and other
stakeholder groups participated in the conference.
The press coverage of the event was among the
best during the NGOs’ advocacy campaign. The next day, almost all the
media provided prominent coverage, and it also came to the notice of the
trading partner country’s trade representative’s office in Geneva.
On the final day of the accession negotiation,
15 August 2003, it was agreed to include only minimal text in the final
working party report, which states:
Nepal would also look at other WIPO and IP-related
Conventions, e.g. Geneva Phonograms Convention, UPOV 91, WIPO Copyright
Treaty and WIPO Performances and Phonograms Treaty, in terms of the
national interest and explore the possibility of joining them in the
future, as appropriate.
Ratification of the agreement on accession
to the WTO back to top
After an effort lasting more than a decade and
several rounds of both multilateral and bilateral negotiations, Nepal
finally received an offer of WTO membership on 11 September 2003,
subject to ratification of the protocol of accession by the Nepali
government by 31 March 2004. According to the legal provisions of Nepal
the protocol needed to be ratified by the House of Representatives.
The offer came at a time when the country was
in a state of political turmoil. The House of Representatives had been
dissolved by the then Prime Minster a year previously. The incumbent
government, appointed by the king, was hence non-representative, and
political parties were protesting in the street against it. The task of
ratification was thus politically and legally challenging.
As it was uncertain when the country would
have a House of Representatives in place, the government was also not in
a position to ask for extension for the ratification period, since it
could not ask for an indefinite extension. It had an option to amend the
legal provisions through promulgation of an ordinance, but the political
parties, including the Nepali Congress and the Nepali Congress
(Democratic), who were in the government as a united party at the time
of applying for the membership, were likely to oppose such a move on
political and legal grounds. In such a critical situation NGOs,
including SAWTEE, through their various advocacy mechanisms, were able
to persuade public opinion to be in favour of not deferring accession to
the WTO. Through their articles and deliberations in different fora they
expressed the view that if Nepal missed the opportunity of entering the
WTO, it would cost the country very dear.
Towards the third week of March 2004 the
government promulgated an ordinance paving the way for ratification, and
were not opposed by the political parties. On 24 March 2004 Nepal
notified the WTO that the process of ratification and acceptance of the
protocol of accession had been completed. According to established
practice, the entry into force of the protocol occurred thirty days
later, on 23 April 2004. Nepal obtained membership of the WTO as the
147th member and the first least developed country (LDC) member.
IV. Lessons for
others back to top
As elsewhere, people in Nepal had differing
views on the WTO; the debate on the pros and cons of the WTO system
would probably never end. However, it was widely accepted that countries
need to be integrated with the global economy through the multilateral
trading system. It was also recognized that Nepal could not remain in
isolation from the fast integrating global economic system. With
membership of the WTO Nepal would be able to participate in future
important trade-related decision-making. From Nepal’s experience, it
has become clear that NGOs can play a meaningful role in influencing
public opinion. It was the advocacy of NGOs that helped people to
understand the nature of the WTO and reduce negative attitudes towards
it. This created a domestic political environment conducive to the
accession of Nepal. The approach of the NGOs created opportunities for
them to work closely with the government to some extent. This, in turn
had enhanced transparency in government activities in relation to WTO
The Nepalese experience showed that even the
efforts of the larger countries to impose ‘WTO-plus’ conditions
could be avoided with the help of NGOs by means of networking, which had
also corrected the perception that the WTO is the tool of powerful
lobbies. What is important is the power of and skill in negotiations,
through which the acceding country can convince the working party.
Another important lesson that Nepal learned is
that the approach of networking, rather than the efforts of a single
NGO, is more effective in advocacy, and that advocacy becomes effective
if it covers all stakeholders.
The commitment of the government to enact and
enforce competition law in a time-bound manner in the process of
obtaining WTO membership was another important aspect of the Nepalese
experience. NGOs, by lending a helping hand to the government, can also
advance the cause of fair trade in the country.
Accession to the WTO is not only the business
of government. It is the concern of the country as a whole, including
NGOs, farmers, consumers and others. Socio-economic conditions differ
between developed and developing countries. Hence the implications of
WTO accession also differ.
Based on his experience in the course of Nepal’s
accession process, Ratnakar Adhikari, SAWTEE’s executive director,
believes that NGOs in acceding countries should, first, conduct research
on the impact of the various WTO agreements on the poor, marginalized
and vulnerable. They should also find out which of the agreements reduce
the policy space of governments seeking to protect and promote their
national development priorities.
Second, NGOs should determine which ‘WTO-plus’
conditions the members of the accession working party are trying to
impose on their countries. Third, they should work closely with the
government not only to elicit the information (which is invariably
otherwise kept confidential) about the terms of accession but should
also provide suggestions to the government on how to fend off the
pressure on them to agree to things that are ‘WTO-plus’ in nature.
Fourth, they should gain strong public support and make use of the media
to make themselves heard. Finally, if the government does not take
notice of them through the regular channels, they should use other
pressure tactics (campaigns, demonstrations) to make their message loud
1.- Action Aid has been in Nepal since 1982.
From the very beginning, AAN has been working with the poorest and most
downtrodden. It encourages communities to take an active role in their
own development process and aims to develop links by working with the
government and with NGOs. It is also geared towards advocating the
rights of the poor and influencing policy in their favour. back to text
2.- NAFOS is a network of NGOs and INGOs
working in Nepal for the cause of protecting and promoting food security
and farmers’ rights. It was founded by Action Aid Nepal, together with
other like-minded organizations, including SAWTEE, in 1999. SAWTEE is
currently the secretariat of this network. back to text
* Executive Director, Institute for Policy, Research and Development,
Kathmandu. This study was prepared on the basis of secondary information
and in consultation with Ratnakar Adhikari, executive director, SAWTEE. As
the title suggests this case study is focused on SAWTEE, but in no way
does this mean that the role of other NGOs is less important.