Laos’ accession to the WTO - implications for agricultural policy and agricultural exports

Project description

Lao PDR is preparing for WTO membership. It will be the last country in the region to join the WTO. All neighbouring countries are long-time WTO members or have joined the WTO since 2001. For Laos, WTO accession will only be the final step of regional and international economic integration. The pace of trade liberalization is set by ASEAN / AFTA, whereas WTO membership will require a number of additional disciplines on trade-related policies.

The brunt of adjustment costs will be born by agriculture. Lao agriculture has been protected up to date through a system of licenses and non-tariff barriers (NTBs) that will have to be phased out or transformed into tariffs (tarrification), and these tariffs will have to be reduced in the long run in accordance with general WTO negotiations. In addition to the commitment to market opening with its potential effect on domestic producers through increasing competition from imports, the WTO Agreement on Agriculture limits the policy space for domestic agricultural policies and disciplines subsidization of exports. The details of these limits and constraints on agricultural policies of WTO member states are still contested in the current debates and negotiations in the Doha Development Round of multilateral trade negations under the umbrella of the WTO. What seems to be clear already today is that developing countries will have to accept a certain confinement of agricultural policy space if they expect the same discipline from the developed WTO members so that they can make full use of their comparative advantages in the area of agricultural exports. On the other hand, Lao agricultural exports will have to meet the ever stricter health and quality requirements set by developed countries for both domestic and imported goods. Improving the quality of Lao agricultural exports would be a precondition for export success even if Laos would not become a WTO member. WTO membership requires certain legislative and administrative reforms to make Laos’ system of quality controls and product certification compliant with the WTO Agreement on Sanitary and Phytosanitary Standards (SPS Agreement).

Adjusting Lao agriculture to the challenges of international economic integration and WTO membership takes place at a time of extraordinarily high and rising world market prices for food and most other agricultural commodities. To cope with the additional challenge of a global food and commodities crisis – which could be aggravated by the global banking crisis – will require special flexibility and creativity from economic policy makers in every country exposed to global markets. Higher prices on export markets could facilitate venturing into new export crops. But at the same time, the Lao Government will have to take care that food availability, especially for the poor and urban consumers, will not be undermined by excessive price increases. Under the present world market conditions, to design an agricultural policy which is balancing the interests of farmers and consumers and is compliant with the WTO principles and agreements, is becoming a tightrope walk.

Five years after the DIE study on Vietnam’s WTO accession and the implications for industrial policy and export promotion, a country working group within the current DIE postgraduate training course studied the implications of Laos’ planned WTO accession – and its economic integration in the region and the global economy – on the agricultural sector, agricultural policy and exports. The study covered three major areas:

1. The international framework conditions for the Lao economy (global economic trends, agricultural markets, financial crisis, regional trade agreements, WTO agreements on agriculture, SPS, TRIPs, subsidies and countervailing duties etc.)
   
   
2. The Lao economy, especially agriculture and agriculture-based value chains, conditions for doing business, agricultural policies, export promotion, standards setting, testing and certification of export goods, major bottlenecks for efficient production and exporting, trade facilitation. What will be the impact of import liberalization on domestic producers? What agricultural policy measures will still be allowed to protect the interests of the domestic farmers against a surge of imports? What reforms of agricultural policies and administrative practices have to be implemented in order to make the Lao system compliant with the requirements of the WTO? What changes in the multilateral framework for world food markets will the final round of negotiations in the Doha Development Round bring and how will they affect Lao agriculture and agricultural policy? How can producers of agricultural exports be encouraged to adopt international standards and quality requirements?
   
   
3. Development cooperation geared to making Laos fit for regional and international economic integration and to paving the way toward WTO accession. Which donors (bilateral and multilateral) are involved in this field with what programmes and activities? What was the outcome of the Integrated Framework of trade development for the least developed country Laos? What conclusions and recommendations can be derived from our study for an effective Aid-for-Trade programme (of German and other donors) for Laos?

During the empirical research phase in Laos, farmers and their associations were interviewed on their perception of the challenges they will face from increasing import competition as a result of tariff reductions Laos will have to offer for joining the WTO. Farmers and exporters of agricultural goods were interviewed about their experience with exporting to the neighbouring countries, to the EU and the US. What trade barriers have their exports faced and what other requirements have they to comply with? Technical norms, health and environmental standards on export markets, e.g., have to be met by every exporter, whether his or her own country is WTO member or not. What support have exporting firms received from government agencies or private firms, e.g. foreign buyers for venturing into export business and meeting the quality requirements of export markets? What lessons can be learnt from aid agencies’ technical assistance in the field of export promotion programmes in other countries that could be transferred to the Vietnamese situation?

The study on Laos’ WTO accession was supported by the Ministry of Commerce and Industry in Vientiane, the main partner organization during the interview phase will be the Lao National Chamber of Commerce and Industry (LNCCI).

Publications

• Laos on its way to WTO membership: challenges and opportunities for developing high-value agricultural exports
  Wiemann, Jürgen / Verena Ashoff / Melanie Grad / Anna Katharina Meyer / Stefanie(2009)
  Studies 51