Bhutan’s WTO dilemma

Bhutan’s WTO dilemma

An observer at the world trade body for 15 years, tiny Himalayan kingdom continues to agonise over whether it’s ready for full membership.

It is perhaps the longest time Bhutan has ever taken to make a decision. More than 15 years after it was granted an observer status to the World Trade Organization, opinions remain divided over what the benefits and dangers would be of joining the international body.

The debate gained more momentum after the ninth WTO Ministerial Conference in Bali, Indonesia, in December 2013 where many WTO member countries reportedly coaxed and cajoled Bhutan to come onboard, assuring it that they would only try to pull, and not push, the tiny country that is making the transition from self-imposed isolation to global integration.

“The WTO should serve as the vehicle to further the aspirations of our country, and whether the WTO is a good vehicle is what we have to determine,” said Economic Affairs Minister Norbu Wangchuk, whose office is ready with a presentation on the issue for consideration by the Cabinet.

Asked what the country would gain if it accedes to the WTO, the minister said Bhutan was a small country with an equally small economy. The domestic market may never be big enough for the country’s economic aspirations and trade, but the WTO could bridge the gap, he said.

“We do not know our potential,” he said. “We do not know what we can sell unless we know what is in demand in the world. We might discover that in one part of the world there is demand that we would be the best to fulfill.”

Since it was granted observer status in 1999, Bhutan has taken considerable capacity building measures, such as in the agriculture, ICT and tourism sectors.

“All the studies show there is nothing for Bhutan to be wary of,” said Sonam Wangchuk, Director of Trade, which is part of the Ministry of Economic Affairs.

However, not all are convinced. Some anticipate an unhealthy influx of goods, services and foreign competition.

“[But] Bhutan is not a WTO member and our market is already flooded with foreign goods,” argued the trade official.

Dorji Wangchuk, a consultant for a British financial institution, warned that liberalisation could have adverse consequences for an unprepared country such as Bhutan. He pointed to the lack of legal and physical infrastructure that is needed to implement WTO obligations. “Our infrastructure would be immediately overwhelmed.”

The consultant added that producers of goods and services in Bhutan are not in a position to comprehend or take on the challenges they would face in an open market. “They are ill-prepared in all aspects — technological, financial and managerial.”

The trade official has a different take. Joining the WTO does not mean Bhutan has to liberalise everything indiscriminately, he argued. In fact, he explained, a liberalised trade policy, which gives unrestricted flow to goods and services, leads to a healthy competition and thereby encourages innovation.

But what about the prolonged and costly negotiations that Bhutan is likely to face if it joins the WTO, asked Dorji Wangchuk.

Sonam Wangchuk sought to debunk the fear, saying there was no additional cost involved. Bhutan has already committed for tariff reductions, he said.

Under bilateral trade, the country has a preferential trade arrangement. Under the South Asian Association for Regional Cooperation (SAARC), Bhutan has the South Asian Free Trade Area, or Safta, providing for a reduction of customs duties to a range from zero to five percent until 2016.

In 2008, Bhutan was more than ready to join the WTO. However, the country took a U-turn after former prime minister Jigmi Y. Thinley stated that joining the WTO would go against the country’s guiding philosophy of Gross National Happiness (GNH), which seeks to balance economic growth with the preservation of culture and identity.

“We are not going to lose anything by waiting to be sure. But if we go ahead, it may be difficult for us to come out,” Thinley said at the time.

The incumbent government disagrees. The trade official said WTO membership could be a means to achieving or enhancing GNH if managed properly. “The WTO and free trade are clearly more than materialism.”

The official said every country had its own unique identity and problems, just like Bhutan. “The WTO has to accommodate the concerns of all.” If there are concerns, they should be discussed.

This is what Prime Minister Tshering Tobgay has also said. “The government’s stand is yet to be announced,” he said recently, adding that the cabinet would reach a decision with an open mind and address all concerns. Until then, it remains a dilemma.

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