In a victory for Pakistan, the World Trade Organization (WTO) has ruled in favour of Pakistan in a dispute with the European Union over tariff protections to slow down the export of resin. Last week, the WTO Appellate Body upheld an earlier determination in favour of Pakistan last year. The highest dispute settlement forum on trade has now ruled that the EU measures against Pakistani PET did not comply with the WTO’s Subsidies and Countervailing Measures Agreement (SCM). Resin is used to make disposable bottles for water and other drinking liquids. The duty of Pakistani resin was imposed in 2010. The unfair trade protections have caused Pakistani resin producers a loss of 300 million euros. The victory in the case will be celebrated for protecting Pakistan’s exports in the world as the WTO is the key forum for resolving trade disputes. After many losses in key arbitrations, the government will be looking to celebrate this victory at a time when Pakistan’s exports are coming under increased strain. But any victory in the WTO must be carefully analysed for its longer-term consequences. If Pakistan is to remain a participant in the WTO framework, then it stands to lose out in the long term.
The WTO regime does not favour import-dependent economies, such as Pakistan. If anything, it does little to favour countries at all. The key task of the WTO is to protect the right to free trade for businesses and weaken protections. It is quite possible that a similar challenge could be taken up in the WTO successfully against Pakistan’s protectionist measures on the import of automobiles assembled outside Pakistan. Moreover, the WTO regime remains skewed in favour of the EU and US. While the WTO has focused on getting developing countries to remove trade barriers, the developed world has continued to increase protections for their own industries. The EU provides massive subsidies and protections to European businesses against cheap imports from developing countries, like Pakistan. Small countries have traditionally found it hard to get decisions in their favour – so this is surely a moment to celebrate for Pakistan’s exporters. But the Pakistani ambassador to the WTO remains more optimistic than is reasonable. The WTO mechanisms have worked in Pakistan’s favour in this case as it was in our interest to have more open trade policies on resin. However, there are other commodities on which Pakistan’s interest is to protect local industry. It is good to see that the WTO has ruled against the EU. It will be positive for other developing countries too, but questions remain over whom free trade benefits in the long term.