The Development in Afghanistan and Role of the World Trade Organization (WTO)
Afghanistan became a member of the World Trade Organization (WTO) in the year 2015 after 11 years of negotiations. The membership has been looked as a monumental moment in the history of Afghanistan but its effects on the development of the economy can only be rightly evaluated in the coming decade. The WTO membership promises significant advantages to the economy but it is up to the government to get the most out of this membership. In the absence of proper planning, the government might not fully utilize the benefits and end up coming out worst by getting hit by the unintended consequences of the policy decision.
Afghanistan Economy Overview:
According to the World Bank Group (WBG) reports, Afghanistan’s Gross Domestic Product (GDP) is five times greater than it was in the year 2002 and GDP per capita has increased by 64% since 2002. The country has seen double digit growth in GDP between from the year 2003 till 2016. In the recent years, the GDP growth has slowed down to 3.6% in 2017 and is projected to be 3.4% and 3.1% in 2018 and 2019 respectively. The growth in the initial years were mainly driven by the foreign aid money was spent by the US and other donor countries. In the addition to the huge influx of foreign aid inflow, Afghanistan has also experienced development in trade and business sector which can be seen in the export figures.
Afghanistan’s exports averaged at $486.66 million in the last decade but in the year 2017, the exports totaled to $596 million, experiencing a 4.5% growth in export from the previous year. The main export products include carpets, rugs, dried fruits, and medicinal plants and the major export partners were India, Pakistan, Russia, Iran, Iraq, and Turkey. Meanwhile, Afghanistan also experience a decrease in the importing of goods and as per reports, the imports decreased from $7,723 million in 2016 to $6,534 million in 2017. The main imported products include petroleum goods, machinery & equipment, food items, medicine, and base metals. Afghanistan imported most of the items from Pakistan, Russia, India, Uzbekistan, Iran, China, Malaysia, Indonesia, Turkmenistan, Japan, Kazakhstan and other Middle Eastern countries.
As it can be seen from the above stated figures, Afghanistan economy suffers from a massive trade deficit and the imports are ten-folds of the exports, which clearly is not a sustainable option for a developing country like Afghanistan. In order to tackle this problem, the Afghan government with the help and support of private sector and international partners has developed laws and policies to support trade, increase exports, transparency, and reduce trade barriers to help exporters in reconnecting them to the global markets. In an effort to promote private investment and private sector’s access to regional and international market, the government had worked closely with the international community and international partners to get a membership to WTO.
World Trade Organization (WTO) Membership:
In 2016 the Afghan government with the help of its international partners achieved the WTO’s official membership to compliance with its standards and become the 164th member of the organization. Afghanistan is the 9th underdeveloped country in the world which according to the membership terms and conditions can receive the advantage of WTO’s immunities and is obligated to implements the WTO accession requirements which can make the country negotiate agreements and establish large amount of exports. It is also worth mentioning that 97% of business in the world is managed by the WTO’s Members and because of this membership Afghanistan can remove its trade problems and facilitates a better trade for the traders in this country.
The experiences of the member countries of WTO have proved that well managed global trade relation can lead Afghanistan to develop it is economy and can easily attract foreign investments. World Trade Organization (WTO) can play very significant and important role in the development of Afghanistan, it can help Afghan traders to buy a lot of goods at very low price from international markets and as well enhance the industry to produce more goods. As result of WTO’s membership Afghanistan can get support of local industry and at the mean time Afghanistan can develop export and competition.
The Potential Benefits of WTO for Afghanistan:
As a landlocked country, the WTO’s membership privileges will make Afghanistan able to get WTO’s help and support to use the transit rights and also have access to the most economic transit route and mechanism. Those countries who are members of WTO are obligated to facilitate economic transit of Afghanistan’s commercial fabrics and remove any types of barriers against it. In case of violation of the transit right of Afghanistan; Afghanistan’s government can take this matter of violation to WTO.
Secondly, the Membership of WTO can bring more investment and job opportunities into Afghanistan as it is clear that like most of the mutual trade agreement countries being the member of WTO should lower their custom tariff and provide access to global market for the traders which will increase the market potential for afghan products and eventually resulting in more jobs and more investment in Afghanistan.
Thirdly, the consumers do have the choice to purchase lower price items as most of these items were considered exotic earlier prior to WTO membership while they can be simple needs of our daily life, such as household goods, books, music, movies fruits and etc. and by having access to the international markets, it makes the Afghan consumers to purchase these items at lower prices.
Fourthly, WTO members are treated equally in all decision, dispute settlement and negotiations a poor and a rich country may have equal power to bargain. All the members are obligated to settle their dispute under the Dispute Settlement Understanding (DSU) as per WTO rules DSU is the backbone for solving the disputes.
Additionally, WTO’s rules pave the way for the better government; it commits member nations to a more liberalized economy. As per WTO rules reduced tariffs and non-tariff barriers also reduce corruption, Increases transparency, clear regulations for product safety and standards and prevent cheating.
Also, WTO membership has effect on the development of Afghanistan by Access of this country to WTO grants and capacity building initiatives, as least developed country like Afghanistan will be entitled to the preferential treatment from WTO members. Provisions can include awarding longer time for implementing agreements and commitments, increased trade opportunities, protection of trade interests by other members, or capacity building in the handling of disputes and implementation of technical standards. Afghanistan can also request direct technical assistance from the WTO to improve national capacity for trade, policy-making, and dispute resolution.
Unintended Consequences of WTO Membership:
As with any major policy decisions, the WTO membership has some unintended consequences for the country. The unintended consequences of the WTO membership includes the threats to newly established industries, the removal of subsidies, and reduction of revenues for the government.
The governments use tariffs as a tool to protect their domestic industries against foreign competition. Countries in the initial stages of industrialization employ tariffs as tools to survive competition from foreign countries and foreign industries but after receiving the membership of WTO, the Afghanistan government does not have the luxury of increasing tariffs on importing goods. This WTO membership limits the government’s ability to protect the newly emerged local industries and it may never stand a chance against foreign competition.
Secondly, the WTO membership also requires the government to eliminate subsidies on agricultural and industrial goods. The elimination of subsidies on agriculture is damaging for Afghanistan because agriculture is the major export of the country. Furthermore, the inability of the government to impose tariff means that the government revenues will be negatively affected and the government will have to look for alternate source of revenue to meet their revenue targets.