A Decade of the World Trade Organization and the Trade Performance of Muslim Countries Ruzita Mohd. Amin Abstract The World Trade Organization (WTO), established on 1 January 1995 as a successor to the General Agreement on Tariffs and Trade (GATT), has played an important role in promoting global free trade. The implementation of its agreements, however, has not been smooth and easy. In fact this has been particularly diffi- cult for developing countries, since they are expected to be on a level playing field with the developed countries. After more than a decade of existence, it is worth looking at the WTO’s impact on developing countries, particularly Muslim countries. This paper focuses mainly on the performance of merchandise trade of Muslim countries after they joined the WTO. I first analyze their participation in world merchandise trade and highlight their trade characteristics in general. This is then followed by a short discus- sion on the implications of WTO agreements on Muslim coun- tries and some recommendations on how to face this challenge. Introduction Globalization is generally defined as the integration of production, distribu- tion, and use of goods and services among the world’s economies. It implies a free flow of these goods, services, and capital accompanied by a flow of technology, information, and ideas among the world’s countries. Free trade is an essential element in a world that is fast becoming a “bor- derless world” or a “global village.” It is deemed beneficial since the gains from such trade can be obtained through increased specialization, the real- Ruzita Mohd. Amin is a faculty member at the Kulliyyah of Economics and Management Sciences, International Islamic University Malaysia. The author can be reached at ruzita@ iiu.edu.my. 24 The American Journal of Islamic Social Sciences 27:4 ization of comparative advantages, the diffusion of international knowledge, and increased efficiency in the domestic economy. Trade openness can drive growth both directly, through its impact on resource allocation and effi- ciency, and indirectly, by raising the returns to investment. 1 Consequently, any sort of protection that restricts trade is considered a source of distortion in international markets and should “ideally” be eliminated. The establishment of the World Trade Organization (WTO) on 1 Janu- ary 1995, as a successor to the General Agreement on Tariffs and Trade (GATT), seeks to increase international trade by promoting lower trade bar- riers and providing a platform for trade negotiations. The WTO discussions ought to follow the fundamental principles of trading, where2: i. A trading system should be free of discrimination in the sense that one country can neither privilege a particular trading partner above others within the system discriminate against foreign prod- ucts and services. ii. A trading system should tend toward more freedom, that is, toward fewer trade barriers (tariffs and non-tariff barriers). iii. A trading system should be predictable, with foreign companies and governments reassured that trade barriers will not be raised arbitrarily and that markets will remain open. iv. A trading system should tend toward greater competition. v. A trading system should be more accommodating for less devel- oped countries, giving them more time to adjust, greater flexibil- ity, and more privileges. After seven ministerial conferences, the latest held in Geneva during 2009, the WTO has come under strong criticism with regard to its ability to promote free trade and stimulate economic growth. WTO treaties3 have also been said to have a partial and unfair bias toward multinational corporations and wealthy nations. Steinberg (2002),4 for instance, argues that although the WTO’s consensus governance model provides law-based initial bargaining, trading rounds close through power-based bargaining favoring Europe and the United States. Examples of such bias can be seen from the following: (a) rich countries are able to maintain high import duties and quotas in certain products, thereby blocking imports from developing countries (e.g., cloth- ing); (b) the increase in non-tariff barriers, such as anti-dumping measures, allowed against developing countries; (c) high protection of agriculture is maintained in developed countries while developing countries are pressed to open their markets; (d) many developing countries do not have the capacity to follow the negotiations and participate actively in the Uruguay Round; and (e) intellectual property rights ban developing countries from incorpo- rating technology that originates abroad in their local systems (including medicines and agricultural products).5 The bias against developing countries, which is also reflected in the fail- ure of various ministerial conferences, has made it even harder for them to be on a level playing field with the developed countries. Muslim countries are essentially categorized as either “developing countries” or “least developed countries.” Among the fifty-seven members of the Organization of Islamic Conferences (OIC), forty are WTO members. On 11 December 2005, Saudi Arabia became the latest country to gain accession. Twelve OIC countries are currently observer governments, while five are neither members nor observer governments (see appendix 1). More than a decade later, it is time to examine if the “freer trade” that is supposed to come with WTO membership has brought about the desired improvements in the trade performance of developing countries, particularly Muslim countries, given the problems and biases that persists in the WTO trading system. The main objective of this paper, however, is to overview the performance of merchandise trade by Muslim countries since becoming WTO members. Although trade in services has become more important, that area is beyond the scope of this paper. We define Muslim countries as the OIC countries, and the terms “Muslim” and “OIC” are used interchangeably. I first look into their participation in the world merchandise trade and high- light their trade characteristics in general. This is followed by a discussion of the WTO agreements’ implications on Muslim countries and some rec- ommendations on how to face this challenge. Participation of Muslim Countries in World Trade Muslim Countries’ Share in World Trade Muslim countries account for about 24.4% of the world’s total area, 1.34 bil- lion of the world population (2005), and 44% of the world’s oil production (1993-2003). Their gross domestic product (GDP), however, is only 4.7% of the world’s GDP,6 while their exports and imports are 7.87% and 6.32% of the world’s exports and imports, respectively (2004; see tables 1 and 2). It ranks fourth after Europe, Asia, and North America in both export and import shares of the world. Its export growth in 2004 was comparable to other coun- try groupings, and it ranked the fifth in 2004 at 26%, surpassing the export growth of North America at 14%, Europe at 19%, Asia at 25%, and that of the World at 21%. Growth in imports, on the other hand, ranked third from Amin: A Decade of the World Trade Organization 25 26 The American Journal of Islamic Social Sciences 27:4 below in 2004, at 26% before North America at 17%, Europe at 5%, and the World at 21%. Almost all groupings experienced higher growth in both exports and imports in 2004 as compared to 2003. From these figures, it can be seen that Muslim countries are performing as well as other country group- ings in world trade, with the growth in their share of world imports register- ing a higher increase from 2003 to 2004 by 10% as compared to the growth in the share of world exports for the same period by 7 percent. Table 1: Merchandise Exports by Region and Selected Economies Country Value Share of Annual Percentage Groupings (billion dollars) World Exports Change in Value 2004 2004 2003 2004 World 8907 100.00 17 21 North America 1327 14.9 5 14 South and 276 3.1 13 30 Central America Europe 4035 45.3 19 19 CIS 267 3.0 27 37 Africa 232 2.6 25 32 Middle East 392 4.4 20 29 Asia 2387 26.8 18 25 OIC Countries* 701 7.87 19 26 Source: Extracted from International Trade Statistics 2005, pg. 32 * Computed from International Financial Statistics CD-ROM 2006 for 22 OIC countries only due to unavailability of complete data. Table 2: Merchandise Imports by Region and Selected Economies Country Value Share of Annual Percentage Groupings (billion dollars) World Exports Change in Value 2004 2004 2003 2004 World 9250 100.00 17 21 North America 2017 21.8 8 17 South and 241 2.6 5 27 Central America Europe 4144 44.8 20 20 CIS 176 1.9 27 30 Africa 213 2.3 22 27 Middle East 250 2.7 13 27 Asia 2220 24.0 19 27 OIC Countries* 584.6 6.32 16 26 Source: Extracted from International Trade Statistics 2005, pg. 32 * Computed from International Financial Statistics CD-ROM 2006 for 22 OIC countries only due to unavailability of complete data. The Competitiveness of Muslim Countries The overall growth in imports for Muslim countries from 1997 to 2004 was found to be lower than the overall export growth during the same period (see table 3). Growth rates in exports, however, were found to be higher than growth in imports for only three (viz., 1999, 2000, and 2003) out of the eight years shown. This implies a rather high dependence on imports relative to exports. Another point that needs to be highlighted is that the growth rates of both exports and imports have fluctuated over time, as shown by table 3, thereby reflecting the instability of their external sector. Table 3: Annual Percentage Change in Total Export and Total Import of OIC Countries Year Annual % change Annual % change in export in import 1997 5.64 7.26 1998 -15.54 -9.16 1999 9.34 -11.09 2000 32.15 26.35 2001 -6.66 -1.90 2002 -2.90 -2.19 2003 18.65 16.40 2004 25.92 26.07 Overall growth rate (1997-2004) 65.25 43.70 Source: Computed from International Financial Statistics CD-ROM 2006 for 22 OIC countries. The individual member countries’ export competitiveness for 1983-94 can be seen in appendix 2. Unfortunately, similar data for recent years are no longer available in order to make comparison over the years. The growth of nominal exports over both periods (1983-84 to 1988-89 and 1988-89 to 1993- 94) were decomposed into three factors: (a) growth due to expansion of the world market for the country’s traditional exports, (b) growth due to expan- sion of its market share for its traditional exports, and (c) growth due to diver- sification into nontraditional exports (measured as a residual). Table 4 sum- marizes the average growth of exports and each of the three growth factors for two groups of Muslim countries: those that suffered a loss in nominal exports and those that increased their exports during these two periods. The data suggest that most of the Muslim economies that gained in exports man- aged to do so by expanding their traditional markets (world demand), while those who experienced a decline in exports suffered through losing their share Amin: A Decade of the World Trade Organization 27 28 The American Journal of Islamic Social Sciences 27:4 of traditional markets. This holds true for both periods. Both gainers and los- ers experienced lower diversification in the second period; however, the lower diversification was more striking for the gainers, falling from 4.49% to 0.37 percent. On the average, the Muslim countries as a whole gained in exports by expanding their traditional markets while simultaneously losing their share of traditional markets for both periods. As a whole, they also expe- rienced a lower diversification in the second period. Data for all economies for that period show a similar pattern as the Muslim countries, whereas the first period saw an increase in their share of traditional markets. Table 4: Annual Average Growth of Exports and Export Growth Factors, 1983-1994 Country group 1983-84 to 1988-89 Total World Market Diversification exports demand share Positive growth 13.33 5.96 2.61 4.49 Negative growth -5.54 0.21 -6.44 0.95 OIC economies 5.38 3.54 -1.20 3.00 All economies* 11.2 8.3 1.6 1.0 1988-89 to 1993-94 Positive growth 8.92 5.80 2.81 0.37 Negative growth -9.43 4.48 -13.84 0.61 OIC economies 3.12 5.38 -2.45 0.44 All economies* 6.7 7.0 -0.9 0.6 Note: Computed from Appendix 2 unless otherwise stated. Extracted from World Development Indicators 1997, Table 5.7a, p. 258. Degree of Openness of Muslim Countries Trade openness is measured by the trade-to-GDP ratio. For the Muslim countries as a whole, the ratio shows a fluctuating trend over the years, with trade ranging from 47% to 79% of GDP (see table 5). For individual coun- tries, however, this ratio shows a wide variation in the degree of openness, with Malaysia showing the highest ratio of 205.9% of GDP and Burkina Faso showing the lowest ratio of only 30.2% of GDP in 2003 (see appendix 3). The value of trade for Malaysia, Bahrain, Brunei, Suriname, Azerbaijan, Gabon, and Togo exceeded their value of GDP. Appendix 3 also shows the ranking of individual countries based on their export-to-GDP and import-to- GDP ratios. The data show that only eight countries had exports exceeding 50% of GDP and five countries had imports exceeding 50% of GDP. Amin: A Decade of the World Trade Organization 29 Table 5: OIC Countries’ Trade Share of GDP Year X/GDP M/GDP Trade/ GDP 1996 0.24 0.23 0.47 1997 0.25 0.24 0.49 1998 0.43 0.36 0.79 1999 0.32 0.24 0.55 2000 0.36 0.27 0.62 2001 0.33 0.27 0.60 2002 0.30 0.25 0.55 2003 0.29 0.24 0.53 2004 0.31 0.27 0.58 Source: Computed from International Financial Statistics CD-ROM 2006 for 22 OIC countries. The majority of Muslim countries are very dependent on exports of fuels, as shown in table 6.7 Egypt, Syria, and the UAE showed an increasing dependence from 1990 to 2003, while Indonesia, Malaysia, Oman, and Tunisia showed a decline in their percentage of fuel exports. Manufacturing is also important in many Muslim countries, particularly Bangladesh, Pakistan, Turkey, Tunisia, and Malaysia, where it represents more than 70% of their respective total exports. These countries, as well as Jordan, Morocco, Togo, Indonesia, and others show an increasing share of total exports, while Egypt, Syria, and the UAE show a marked decrease. Gambia, Sierra Leone, and Uganda are highly dependent on food exports, while Mauritania, Mozambique, and Niger were dependent upon ores and metals in 2003. Agricultural raw materials made up the largest percentage share of exports from Benin and Mali. Table 6: Structure of Merchandise Exports of Selected Muslim Countries Country Food Agri. Raw Fuels Ores & Manufactures % of Total Materials % of Total Metals % of Total % of Total % of Total 1990 2003 1990 2003 1990 2003 1990 2003 1990 2003 Algeria 0 0 0 0 96 97 0 0 3 2 Bangladesh 14 8 7 2 1 1 - 0 77 89 Benin 15 33 56 59 15 0 0 0 13 8 Cameroon 20 20 14 20 50 49 7 4 9 7 Chad - - - - - - - - - - Egypt 10 9 10 7 29 44 9 3 42 31 Gabon - - - - - - - - - - 30 The American Journal of Islamic Social Sciences 27:4 Country Food Agri. Raw Fuels Ores & Manufactures % of Total Materials % of Total Metals % of Total % of Total % of Total 1990 2003 1990 2003 1990 2003 1990 2003 1990 2003 Gambia - 100 - 0 - 0 - 0 - 0 Indonesia 11 11 5 5 44 26 4 6 35 52 Iran - 4 - 0 - 88 - 1 - 8 Iraq - - - - - - - - - - Jordan 11 15 0 0 0 0 38 16 51 69 Kuwait 1 0 0 0 93 92 0 0 6 7 Lebanon - 19 - 2 - 0 - 10 - 68 Libya 0 - 0 - 94 - 0 - 5 - Malaysia 12 9 14 2 18 10 2 1 54 77 Mali 36 17 62 42 - 0 0 1 2 40 Mauritania - 8 - 2 - 1 - 68 - 21 Morocco 26 21 3 2 4 1 15 7 52 69 Mozambique - 23 - 4 - 10 - 55 - 8 Niger - 30 - 4 - 2 - 55 - 8 Nigeria 1 - 1 - 97 - 0 - 1 - Oman 1 5 0 0 92 80 1 1 5 14 Pakistan 9 10 10 2 1 2 0 0 79 85 Saudi Arabia 1 1 0 0 92 89 0 0 7 10 Senegal 53 37 3 3 12 20 9 3 23 34 Sierra Leone - 92 - 1 - - - 0 - 7 Sudan 61 18 38 6 - 72 0 0 1 3 Syria 14 14 4 3 45 71 1 1 36 11 Togo 23 15 21 17 0 0 45 9 9 58 Tunisia 11 8 1 1 17 9 2 1 69 81 Turkey 22 10 3 1 2 2 4 2 68 84 Uganda - 67 - 23 - 0 - 0 - 0 UAE 8 1 1 0 5 92 39 4 46 4 Yemen 75 - 10 - 8 - 7 - 1 - Source: Extracted from World Development Indicators 2005, Table 4.5, pp. 214-216. Notes: i. Only reported data are included. ii. Merchandise exports are the f.o.b. value of goods provided to the rest of the world, valued in US dollars. iii. Food corresponds to the commodities in SITC section 0 (food and live animals), 1 (bev- erages and tobacco), and 4 (animal and vegetable oils and fats) and SITC division 22 (oil seeds, oil nuts, and oil kernels). iv. Agricultural raw materials corresponds to SITC section 2 (crude material except fuels) excluding division 22, 27 (crude fertilizer and mineral excluding coal, petroleum, and pre- cious stones), and 28 (metalliferous ores and scrap). v. Fuels correspond to SITC section 3 (mineral fuels). vi. Ores and metals correspond to the commodities in SITC divisions 27, 28,68 (nonferrous metals). vii. Manufactures correspond to the commodities in SITC section 5 (chemicals), 6 (basic manufactures), 7 (machinery and transport equipment) and 8 (miscellaneous manufac- tured goods), excluding division 68. The importance of oil exports from these countries, in terms of Muslim countries’ share in world oil production and exports, is shown in table 7. The share of crude petroleum production from Muslim countries alone stands at 44.03% of world oil production in 2003, while their share of oil exports stands at 56.14% of world exports of oil in 2003. Table 7: Muslim Countries’ Share in the World Production and Exports of Oil Crude Petroleum Production Crude Petroleum Exports ‘000 (mt) (thousand dollars) 1993 2003 2001 2002 2003 World 2985362 3431864 319066800 328539800 385323000 Albania 620 375 36 - - Algeria 35086 55683 7132900 7956400 11346300 Azerbaijan 10295 15251 1725479 1476266 1816098 Bahrain 2029 9408 - - - Bangladesh 30 85 - - 5 Benin 302 - - - - Brunei 7869 9769 1556500 1688900 2022100 Cameroon 6210 6419 809516 824598 999321 Egypt 46266 30549 297619 316736 340920 Gabon 15068 11056 2154500 2217100 2405700 Indonesia 74158 53773 5714700 5227600 5621000 Iran 170920 187814 18997200 23919600 28179000 Iraq 32298 65270 15648600 13030900 15556500 Jordan 3 1 - - - Kazakhstan 19289 45376 4268100 5267000 7012500 Kuwait 94530 106782 9586800 9148500 11488800 Kyrghyzistan 88 69 - - - Libya 65487 68182 7230600 8386300 10300000 Malaysia 31586 38318 2999100 3114300 4184300 Morocco 10 10 - - - Nigeria 95260 113914 17731400 15051800 17075300 Oman 38571 42999 7632800 7533400 7762000 Pakistan 2937 3032 77576 62575 27564 Qatar 18786 33594 5610500 2881400 3520400 Saudi Arabia 401132 435328 55290200 53271100 58467600 Surinam 271 - - - - Amin: A Decade of the World Trade Organization 31 32 The American Journal of Islamic Social Sciences 27:4 Crude Petroleum Production Crude Petroleum Exports ‘000 (mt) (thousand dollars) 1993 2003 2001 2002 2003 Syrian 26767 28000 3410900 4044600 3583600 Tajikistan 39 18 - - - Tunisia 4650 3136 484913 504361 399617 Turkey 3892 2351 2928 3217 2772 Turkmenistan 4900 9600 - - - UAE 99058 109846 16607200 17297900 20540800 Uzbekistan 2404 4328 - - - Yemen 11460 20639 2897400 2990100 3664200 Total 1322271 1510975 187867467 186214653 216316397 % of World Total 44.3 44.03 58.88 56.68 56.14 Source: IEA Energy Statistics (www.iea.org/Textbase/stats/index) and International Trade Statistics Yearbook , 2003, vol. 2, pp.144-145. The present structure of merchandise exports for Muslim countries shows that there still exists a certain degree of dependence upon oil and pri- mary commodity exports. Although manufacturing exports have shown an increased contribution, its share of total exports is substantial only in several of the thirty-five selected Muslim countries. From looking at the factors that contribute to growth in the previous section, the low contribution to growth due to diversification implies that not much has been done to improve the export structure for the majority of Muslim countries. WTO Participation: Implications on Muslim and Developing Countries The WTO, a continuation of the GATT’s institutional ideas, practices, and agreements achieved in the Uruguay Round, is expected to do many things, such as prevent the misuse of subsidies, countervailing duties, and technical barriers as well as tighten anti-dumping rules, eliminate certain restrictive trade-related investment measures, regulate the misuse of the safeguard action, strengthen and clarify procedures for trade dispute settlements, and increase the transparency of national trading practices and policies.8 WTO agreements commit signatory countries to complying with the new trading rules and obligations and, consequently, to ensuring the conformity of their national laws, regulations, and administrative procedures. Some of the major areas that have important implications on developing countries in general, and on Muslim countries in particular, are discussed below. Trade Liberalization Under the WTO, trade liberalization agreements are expected to increase market access for all countries involved in international trade. Among the main agreements in terms of market access as a major outcome of the Uru- guay Round are the developed countries’ agreement to lower their average tariff rates on industrial products by 40%, the contracting parties’ agreement to replace various border taxes with tariffs (also called “tariffication”) in agri- culture, and the contracting parties’ agreement to integrate the Multifibre Arrangement (MFA) in textiles and apparels into the WTO in ten years.9 The consequent significant tariff reductions negotiated on industrial products by the “Quad” countries (Canada, the United States, the European Union, and Japan) are expected to enable developing countries to secure greater access to the developed countries’ markets. Most developing countries also had to make substantial tariff concessions, as part of their commitment under the Round and also as part of their unilateral domestic liberalization policies, and bound their tariffs to a considerable extent.10 Appendix 4 shows the trade policies adopted by selected Muslim coun- tries in 1990-93.11 The data show that most Muslim countries had high mean tariffs, the highest being Bangladesh: 84.1% for all products, 79.6% for pri- mary products, and 26.2% for manufactured products. By 2004, however, the mean tariffs had been reduced to 16.5% for all products, 16.4% for pri- mary products, and 16.5% for manufactured products. Apart from Bang- ladesh, Indonesia, Iran, Jordan, Morocco, and Pakistan also experienced large reductions in mean tariffs for all three categories. Although it may be argued that these reductions would have occurred even if the countries were non-signatories of the WTO, their speed and extent would not have been possible without the driving force of the WTO agreements. Despite the pres- sures posed by these agreements, four countries recorded an increase in mean tariffs for the three categories: Mozambique (5-12.9% for all products, 5-15.8% for primary products and 5-12.3% for manufactured products from 1994 to 2003), Nigeria (26-26.7% for all products, 33.4-40.1% for primary products and 25.3-24.9% for manufactured products from 1998 to 2002), Oman (5.5-8% for all products, 7.2-9.5% for primary products and 5.1-7.6% for manufactured products from 1992-2002), and Sudan (5-21.5% for all products, 12-28.8% for primary products and 4.4-20.8% for manufactured products from 1996-2002). Table 8 shows the export and import duties as percentages of exports and imports, respectively. The data show that most of the countries experi- enced a reduction in export duties as a percentage of exports from 1980 to Amin: A Decade of the World Trade Organization 33 34 The American Journal of Islamic Social Sciences 27:4 1995, except for Syria. Import duties as a percentage of imports, however, increased for Cameroon, Indonesia, Oman, Pakistan, Syria, and Turkey dur- ing the same period. In 2003, the percentage share declined for Indonesia and Pakistan. Bangladesh and Iran recorded a high share of import duties out of imports, namely, 34.9% and 43.2%, respectively. Table 8: Tax Policies of Selected OIC Countries Country Export Duties Import Duties % of exports % of imports 1980 1995 2003 1980 1995 2003 Bangladesh 3.5 - 0.0 16.5 - 34.9 Benin 2.2 - - - - - Cameroon 6.5 1 - 19 29.3 Egypt 5.3 0 - 26 16.1 - Gabon 1.7 - - 38.3 - - Gambia 12.7 0.1 - 22.1 17 - Indonesia 0.9 0.2 0.3 5.1 5.9 4.7 Iran - - - 20.8 13.6 43.2 Jordan - - - 15.8 15.4 15.9 Kuwait - - - 2.7 3 - Malaysia 9 0.9 1.9 8.9 3.9 5.6 Oman - - - 1.6 2.7 10.3 Pakistan 1.8 0 - 22.4 23.9 13.2 Syria 1.7 6.7 - 11.6 23.9 - Turkey - - - 8.9 3.2 - Yemen - - - - 30.1 - Source: Extracted from World Development Indicators 1997, Table 5.8, pp. 260-262, World Development Indicators 2005, Table 5.6, pp. 290-292. Note: Only countries with data are included. During the WTO’s first few years, many experts predicted that in the post-Uruguay Round era some formidable barriers would remain for devel- oping countries: the demand for anti-dumping was likely to increase and remain a favored device of protectionists in the developed countries,12 world agriculture would remain highly protected and subsidized, and the MFA would continue to be a major distortion. Eliminating MFA quotas and com- mitting to reduce tariffs to zero by 2010 could result in a shift on the part of the affected import competing countries toward anti-dumping and other forms of contingent protection.13 After ten years, a string of failed negotia- tions prove that these predictions were not far wrong. Although the principles and policies of trade liberalization were main- tained and improved upon at the Uruguay Round, as mentioned earlier, Amin: A Decade of the World Trade Organization 35 WTO negotiations in the trading rounds often close through a power-based bargaining favoring Europe and the United States. In addition, several escape clauses allow some countries to delay, restrict, or deny market access to the developing world in general. These are not necessarily tariff barriers, but rather non-tariff barriers. For example, the developed countries keep changing the International Organization for Standardization (ISO) standards and making them more stringent without consulting the developing/export- ing countries or taking into account the resulting problems. Although such standards are supposed to ensure the quality of goods being imported, at times technicalities and obscure clauses are used to deprive the exporters of their legitimate access to the developed countries’ markets, in effect violat- ing the principle of free trade. Another introduced standard is eco-labeling, which seeks to discourage methods of production that threaten or damage the environment. However, it is almost certain that this labeling would create problems for many devel- oping countries that do not have the technology or the financial means to ensure that their exports are produced by environment-friendly industries. Other non-tariff barriers include denying market access through allegations of child labor, prison labor, and the violation of human rights. In the past, these have been used as instruments to threaten countries with the loss of their Most Favored Nation (MFN) status.14 Agriculture Extensive negotiations were held during the Uruguay Round on agriculture. Most of the negotiations, however, were conducted primarily between the United States and the European countries and concentrated on agricultural subsidies. Even though Muslim countries are not major players in this field, they are net importers of agricultural products, especially staple foods. Food prices have been relatively stable in the past partly due to heavy agri- cultural subsidies. If these were removed, there could be a decrease in pro- duction that would cause prices to rise. Efforts for self-sufficiency in food production may also be hindered by imposing restrictions on transferring high quality seeds and seed technology to developing countries.15 Another outcome is that developed countries are required to reduce tar- iffs by at least 36%, while the developing countries must reduce theirs by 24 percent. Certain agricultural sectors may benefit from this reduction; others may see a worsening in their trade performance. Tariff escalation involving higher duties for more processed products is still present in major developed countries, such as the EU and Japan. This 36 The American Journal of Islamic Social Sciences 27:4 discourages diversification into the export of processed products instead of primary commodities. Therefore, even if tariffs and subsidies are reduced in the agricultural sector, their net impact depends on where the affected coun- tries are in terms of agricultural exports as well as their domestic consump- tion of food products. Recommendations and Conclusion The post-Uruguay Round trading order is not making life easier for devel- oping countries, including Muslim countries. First, the distribution of the gains from trade between the developed and developing countries is unequal due to pre-existing imbalances in economic power. Second, the protection of infant industries is far more difficult to implement while tariff and nontariff barriers are being sharply reduced. Third, the corresponding benefits in the form of greater market access to developed countries’ markets have not been substantial. Fourth, globalization’s asymmetrical nature in general does not favor developing countries. Muslim countries, therefore, must seek to take advantage of the exist- ing benefits in terms of greater market access, however small, for various industrial and agricultural products. Countries that are already producing the products that will experience tariff reductions should try to improve their output capacity and penetrate further into these markets. On the other hand, countries that are still lagging behind in the production of these goods (e.g., manufacturing goods) should quickly plan to develop the advantaged sectors. This goes hand-in-hand with their need to diversify into non-traditional exports, such as the manufacturing sector, in order to improve export performance. Given that higher production efficiency is closely associated with technological capability, Muslim countries have to develop their own indigenous technology, as they cannot rely on technology transfer in the long-run. In order to do this, the development of human capital must be intensified in strategic areas and the necessary infrastructure for scientific development must be provided. Serious efforts must also be taken to pre- vent any brain drain, as this represents a loss in terms of technological know-how. All of this will not only help in terms of higher production effi- ciency, but will also serve to improve product quality and going a long way toward establishing a country’s competitive edge in international trade. Invention and innovation should also be encouraged to improve product quality. Once countries have established good reputations in terms of the quality of their exports, they will not lose much in terms of market access even when there is erosion in preferential treatment, such as with the MFN setup. Despite the problems in negotiations at the ministerial conference level, Muslim countries have undertaken efforts to reduce their tariffs, as reflected in their trade policies. They must now learn to coordinate their actions with other developing countries in order to enable themselves to compete suc- cessfully in today’s international trading order, which is more competitive than ever before. Endnotes 1. K. Kesavapany, “Debating the Merits of Trade Liberalization,” Seminar on the World Trade Organization (Kuala Lumpur: Institute of Diplomacy and Foreign Relations, 4 December 1997): 1. 2. Online at http://en.wikipedia.org/wiki/World_Trade_Organization. Retrieved 12 August 2006. 3. The WTO oversees about thirty different agreements that have the status of international legal texts. 4. Richard H. Steinberg, “In the Shadow of Law or Power? Consensus-based Bar- gaining and Outcomes in the GATT/WTO,” International Organization 56, no. 2 (2002): 339-74. 5. Online at http://en.wikipedia.org/wiki/World_Trade_Organization. 6. Computed from the International Financial Statistics CD-ROM 2006. 7. Data for Iran, Iraq, Gabon, Nigeria, and Sierra Leone as regards the percent- age of fuel exports are not available in World Development Indicators 2005 . However, an earlier report shows that the percentage of fuel out of total exports were 93%, 99%, 100%, 97%, and 35%, respectively, in 1980, and 93%, n.a., 85%, 94% and 45% in 1995 (World Development Indicators 1997 , Table 4.8, pp. 158-160). 8. Syed Nawab Haider Naqvi, “Globalization, Regionalism, and the OIC,” Jour- nal of Economic Cooperation among Islamic Countries 19, no. 1-2 (1998): 285-308. 9. Mohamed Aslam and K. S. Jomo, “Implications of the GATT Uruguay Round for the Malaysian Economy” (paper presented at the International Conference on Globalization and Development: Lessons for the Malaysian Economy, Kuala Lumpur, August 1996), 3. 10. United Nations Conference on Trade and Development, World Investment Report, 1994. 11. Since the tariff bounds under the Uruguay Round will be phased over five years (beginning in 1995), the rates shown are generally representative of cur- rent levels of protection. Amin: A Decade of the World Trade Organization 37 38 The American Journal of Islamic Social Sciences 27:4 12. Rokiah Alavi, “Trade Protectionism under the WTO: The Impact on Muslim Countries,” Journal of Economic Cooperation among Islamic Countries 23, no. 4 (2002): 1-32. 13. Suat Oksuz, “Globalization – Global Integration – With or Without Regional Economic Integration? Challenges Confronting the OIC Countries,” Journal of Economic Cooperation among Islamic Countries 19, nos. 1-2 (1998): 269- 70. 14. Imam ul Haque, “Implications of the Uruguay Round of Trade Negotiations for the External Trade of the OIC Member States,” Journal of Islamic Cooperation among Islamic Countries 16, no. 3-4 (1995): 44-45. The first principle of the WTO trading system requires non-discrimination among trad- ing partners. Hence, any trade advantages (e.g., low tariffs or high import quo- tas) accorded to a “Most Favored Nation” must be granted to all other trading partners. 15. Ibid., 47. APPENDIX 1 OIC Countries’ Membership in the WTO as at December 2006 Countries Status Date of Countries Status Date of Accession Accession Afghanistan observer Malaysia member 1/1/95 gov’t. Albania member 11/23/96 Maldives member 5/31/95 Algeria observer Mali member 5/31/95 gov’t. Azerbaijan observer Mauritania member 5/31/95 gov’t. Bahrain member 1/1/95 Morocco member 1/1/95 Bangladesh member 1/1/95 Mozambique member 8/26/95 Benin member 2/22/96 Niger member 12/13/96 Brunei member 1/1/95 Nigeria member 1/1/95 Burkina Faso member 6/3/95 Oman member 11/9/00 Cameroon member 12/13/95 Pakistan member 1/1/95 Chad member 12/19/96 Palestine - Comoros - Qatar member 1/13/95 Cote D'Ivoire member 1/1/95 Saudi Arabia member 12/11/05 Djibouti member 5/31/95 Senegal member 1/1/95 Egypt member 6/30/95 Sierra Leone member 7/23/95 Gabon member 1/1/95 Somalia - Gambia member 10/23/96 Sudan observer gov’t. Countries Status Date of Countries Status Date of Accession Accession Guinea member 10/25/95 Suriname member 1/1/95 Guinea-Bissau member 5/31/95 Syria - Guyana member 1/1/1995 Tajikistan observer gov’t. Indonesia member 1/1/95 Togo member 5/31/95 Iran observer Tunisia member 3/29/95 gov’t. Iraq observer Turkey member 3/26/95 gov’t. Jordan member 4/11/00 Turkmenistan - Kazakhstan observer Uganda member 1/1/95 gov’t. Kuwait member 1/1/95 U.A.E. member 4/10/96 Kyrgyztan member 12/20/98 Uzbekistan observer gov’t. Lebanon observer Yemen observer gov’t. gov’t. Libya observer gov’t. APPENDIX 2 Export Competitiveness of Selected Muslim Countries Country Nominal Export Growth Nominal Export Growth 1983-84 to 1988-89 1988-89 to 1993-94 Annual From From From Annual From From From Average World Market Export Avr. World Market Export % Demand Share Diversi- % Demand Share Diversi- % % cation % % cation Algeria -6.5 -1.8 -5.2 0.5 2.2 5.5 -2.8 -0.2 Bangladesh 14.5 8 6.2 -0.2 16.4 7 8.8 0 Benin -4.8 -3.4 -4.9 3.6 10.6 4.9 7.3 -1.7 Burkina Faso 6.8 10.4 -4 0.7 -2.5 5.4 -7.6 0.1 Cameroon -3.4 -3.1 -1 0.7 -0.4 4.2 -4.2 -0.2 Chad -13 5.2 -18.6 1.7 -2.3 5.5 -11.3 4.3 Egypt -3.6 -0.7 -4.6 1.8 7.5 5.2 -1.7 4 Gabon -5.8 -3.5 -2.6 0.3 11.2 4.1 6.9 -0.2 Gambia 24.4 13.6 9.1 0.4 2.4 8.8 -8 2.3 Guinea 3.1 13 -9.5 0.8 31.2 6 24.8 -0.8 Guinea-Bissau 5.1 11.3 -6.1 0.6 3.6 4.5 -2 1.1 Indonesia 1.1 -4.7 1 5 12.1 4.3 0.3 7.1 Iran -10.9 -2.7 -8.8 0.4 10 4.6 4.3 0.8 Amin: A Decade of the World Trade Organization 39 40 The American Journal of Islamic Social Sciences 27:4 Country Nominal Export Growth Nominal Export Growth 1983-84 to 1988-89 1988-89 to 1993-94 Annual From From From Annual From From From Avr. World Market Export Avr. World Market Export % Demand Share Diversi- % Demand Share Diversi- % % cation % % cation Iraq 5.5 -2.7 8.2 0.2 -47.3 5.4 -49.9 -0.1 Jordan 7.8 3.4 5.5 -1.2 -2.8 5.3 -8.4 0.8 Kuwait -1 -3.5 2.3 0.3 1.7 5.5 -3.5 -0.1 Lebanon 1.2 15 -13.5 1.8 1.2 6.6 -6.6 1.7 Libya -8.2 0.5 -8.9 0.2 2.9 5.4 -2.6 0.2 Malaysia 10.2 0.8 5.4 3.7 17 8.7 1.9 5.6 Mali 7.2 11.7 -5.6 1.6 7.6 4.3 1.5 1.7 Mauritania 10.4 -1.6 12 0.2 -2 6.1 -7.6 0 Morocco 13.2 14.1 -1.1 0.3 7.1 6.4 0 0.6 Mozambique 14.8 5.1 2.7 6.4 -13 4 -14.4 -2.3 Niger 8.6 -2.2 8.9 2 -17.2 3.1 -20.4 0.9 Nigeria -6.2 -5.1 -1.4 0.3 5.1 4.2 0.6 0.3 Oman -3.1 3.5 -6.9 0.7 6.3 8 -2.4 0.9 Pakistan 18.3 7.5 11.5 -1.3 8.4 6.4 1.2 0.7 Saudi Arabia -8.4 4 -13 1.2 8.9 6.3 2.5 0 Senegal 9.1 9.4 -1.4 1.1 -8.3 3.4 -11.5 0.2 SierraLeone 8.2 3.1 4.2 0.7 0.1 3.1 -4.1 1.2 Sudan -2.5 6.7 -9.6 1.1 -5.4 2.9 -9.6 1.8 Syria -2.6 -0.4 -3.2 1 23 6.2 16.2 -0.4 Togo 7.5 9.6 -3.9 2.1 -9.4 4.6 -13.3 -0.1 Tunisia 10.9 -0.7 9.3 2.1 9.8 5.8 3.4 0.3 Turkey 19.9 -0.1 15.6 3.8 7.4 5.9 -1.2 2.7 Uganda -4.3 9.4 -12.6 0.1 -2.6 3.8 -7.9 1.9 UAE -4.4 -1.7 -4 1.3 8.5 5.4 1.4 1.5 Yemen 85.4 7.1 3 67.9 9.7 7.7 26.8 -19.7 Source: Extracted from World Development Indicators 1997, Table 5.7, 256-258. Note: 1. Total export growth is the compound annual rate of growth in the value of merchandise exports. 2. Export growth from world demand measures the compound annual growth in exports due to growth of the world market for the country’s traditional exports. Traditional exports are defined as the ten largest three-digit commodity groups or the groups that made up at least 75% of the country’s trade in the base year, whichever is greater. 3. Export growth from market share measures the compound annual growth in exports due to growth in the country’s share of the world market in its traditional exports. 4. Export growth from export diversification measures the compound annual growth in exports due to growth of nontraditional exports. APPENDIX 3 Export and Import Share of GDP of Selected Muslim Countries in 2003 Countries Export/ Countries Import/ Countries Total trade/ GDP GDP GDP Malaysia 1.134 Malaysia 0.925 Malaysia 2.059 Brunei 0.933 Azerbaijan 0.655 Bahrain 1.418 Bahrain 0.798 Suriname 0.646 Brunei 1.213 Gabon 0.624 Bahrain 0.619 Suriname 1.188 Oman 0.565 Togo 0.593 Azerbaijan 1.076 Suriname 0.542 Tunisia 0.476 Gabon 1.034 Kuwait 0.540 Albania 0.458 Togo 1.015 Kazakhstan 0.500 Kyrgyz Repub. 0.453 Kazakhstan 0.945 Nigeria 0.484 Kazakhstan 0.445 Oman 0.944 Cote d Ivorie 0.467 Nigeria 0.431 Nigeria 0.914 Saudi Arabia 0.461 G-Bissau 0.428 Tunisia 0.914 Libya 0.443 Gabon 0.410 Kuwait 0.897 Tunisia 0.438 Oman 0.379 Kyrgyz Repub. 0.839 Togo 0.423 Sierra Leone 0.366 Cote d Ivorie 0.826 Azerbaijan 0.420 Cote d Ivorie 0.359 Libya 0.778 Kyrgyz Repub. 0.387 Kuwait 0.357 G-Bissau 0.753 G-Bissau 0.325 Yemen 0.353 Saudi Arabia 0.702 Yemen 0.311 Libya 0.335 Albania 0.665 Indonesia 0.301 Mali 0.334 Yemen 0.664 Morocco 0.279 Morocco 0.321 Mali 0.605 Turkey 0.274 Benin 0.311 Morocco 0.599 Iran 0.272 Turkey 0.307 Turkey 0.580 Mali 0.271 Chad 0.286 Iran 0.529 Mozambique 0.249 Brunei 0.280 Indonesia 0.529 Chad 0.221 Niger 0.277 Benin 0.520 Egypt 0.216 Uganda 0.272 Mozambique 0.511 Benin 0.210 Mozambique 0.262 Chad 0.507 Albania 0.207 Iran 0.257 Sierra Leone 0.505 Pakistan 0.169 Egypt 0.242 Egypt 0.458 Niger 0.164 Saudi Arabia 0.241 Niger 0.441 Bangladesh 0.142 Indonesia 0.227 Uganda 0.401 Sierra Leone 0.139 Burkina Faso 0.214 Bangladesh 0.342 Uganda 0.129 Bangladesh 0.200 Pakistan 0.332 Burkina Faso 0.087 Pakistan 0.163 Burkina Faso 0.302 Source: Computed from International Financial Statistics CD-ROM 2006. Amin: A Decade of the World Trade Organization 41 42 The American Journal of Islamic Social Sciences 27:4 APPENDIX 4 Trade Policies of Selected OIC Countries (I) Country All Primary Manufactured Products Products Products Mean SDTR CNB Mean SDTR CNB Mean SDTR CNB tariff % tariff % tariff % 90-93 90-93 90-93 90-93 90-93 90-93 90-93 90-93 90-93 Algeria 24.8 19.6 9.5 21.6 20.5 26.8 26.2 19.4 2.8 Bangladesh 84.1 26.1 - 79.6 37.4 - 85.6 22.3 - Benin 37.4 - 17 35 - 24.3 38.3 - 14.2 Cameroon 18.7 12 - 21.3 9.6 - 18 12.6 - Egypt 28.3 28.9 45.2 26.6 45 43.8 29.5 24.2 45.6 Guinea 8.9 - 38.2 9.2 - 46.9 8.8 - 35.1 Indonesia 19.4 16.1 2.7 17.4 12.5 4.6 20.3 17.1 2 Iran 20.7 - 99.3 16.8 - 99 22.2 - 99.4 Jordan 13.8 - 12.9 7.2 - 37 16.2 - 3.6 Kuwait - - 3.5 - - 6.8 - - 1.8 Libya 18.3 - 10.3 14.2 - 15 19.7 - 8.4 Malaysia 14.3 14 2.1 11.9 13.2 1.2 15.2 14.3 2.4 Mali 3 2.4 - 3.9 2.1 - 2.8 2.5 - Morocco 24.5 13.2 - 23.7 15.4 - 25.3 12.4 - Mozambique 5 0 - 5 0 - 5 0 - Nigeria 34.3 25 8.8 32.2 22.5 22.7 35.1 25.6 3.1 Oman 5.7 9.2 - 8.1 19.5 - 5.1 3.3 - Pakistan 51 21.9 14.5 44.4 23.1 6.8 53 21.2 17.3 Saudi Arabia 12.1 3.3 3.9 12 3.6 4.4 12.2 3.2 3.4 Senegal 34.2 - 7.2 38.9 - 8.4 32.3 - 6.1 Sierra Leone 25.8 - 100 19.4 - 100 28 - 100 Sudan 56.6 - 10 56.6 - 12 56.4 - 9.4 Syria 14.8 - 36.6 13.1 - 30.7 15.5 - 38.7 Tunisia 30 11.7 32.7 30.3 13 37.3 30.2 11.2 30.5 Turkey 9.5 5.7 96.4 9.9 9.1 93.9 9.5 4.4 97.3 Uganda 17.1 9.1 - 20.9 10.5 - 16.3 8.5 - UAE 4.5 - 1 3.2 - 2.9 4.9 - 0.3 Yemen 16.2 - 28.7 17.9 - 25.2 15.6 - 30.2 Source: Extracted from World Development Indicators 1997, Table 5.6, 252-254. Note: SDTR: Standard deviation of tariff rates. CNB: Covered by nontariff barriers. Trade Policies of Selected OIC Countries (II) Country All Primary Manufactured Products Products Products % % % Year SMT WMT AVE SMT WMT SMT WMT NB Algeria 1993 21.9 15.4 - 22.5 8.9 21.7 18.7 2003 18.4 12 1.1 18.5 10.5 18.3 12.5 Bangladesh 1989 106.5 88.4 - 79.8 53.6 109 109.9 2004 16.5 15.9 1.7 16.4 13.1 16.5 17.4 Benin 2001 14.3 12.7 - 15.5 12.9 14.1 12.4 2004 14.3 12.7 - 15.4 12.9 14.1 12.5 Cameroon 1994 19.2 13.8 - 23.5 14.7 18.7 13.5 2002 18.3 15.1 0.1 21.5 19.1 17.9 14.2 Egypt 1995 24.4 16.7 - 26 7.7 24.1 22.2 2002 19.1 13.7 0.1 18.3 7.7 19.1 16.7 Indonesia 1989 19.2 13 - 18.2 5.9 19.2 15.1 2003 6.4 5.2 0.5 8 3.1 6.1 5.8 Iran 2000 37.5 22.7 - 23.9 6.6 38.2 28.6 2004 17.8 14.8 - 14.3 13.6 18 15 Jordan 2000 24 18.9 - 28 16.9 23.4 19.8 2003 14.5 11.4 10.2 20.2 11.9 13.6 11 Kuwait 2002 3.5 3.9 - 1.5 3.7 4 4 Libya 1996 23 21.3 - 24.9 9.6 22.5 25.6 2002 20 25.2 - 19.2 15 19.9 28.6 Malaysia 1988 14.5 9.7 - 10.9 4.6 14.9 10.8 2003 7.3 4.2 1.7 4.5 2.1 7.8 4.6 Mali 1995 16.3 10.3 - 19.3 13.4 16 8.5 2004 13.1 10.6 - 15.7 11.5 12.7 10.3 Morocco 1993 64.4 45.4 - 55 30.2 65 55.2 2003 28.9 24.9 0.5 33.7 25.4 28.4 24.6 Mozambique 1994 5 5 - 5 5 5 5 2003 12.9 9.9 - 15.8 9.9 12.3 9.9 Nigeria 1988 26 23.8 - 33.4 32.3 25.3 21.4 2002 26.7 16.9 0.4 40.1 20.6 24.9 15.5 Oman 1992 5.5 7.5 - 7.2 14.2 5.1 5.4 2002 8 13.6 0.9 9.5 31.6 7.6 6.5 Pakistan 1995 50.1 44.4 - 40.5 36.1 51.3 49.2 2004 15.9 13 - 13.9 8.9 16.1 15.7 Saudia Arabia 1994 12.3 10.9 - 12 9.1 12.4 11.5 2004 6.6 7.3 0.9 5.9 10.5 6.7 6.6 Senegal 2001 13.9 9.4 - 14.5 8.3 13.8 10.4 2004 13.9 9.2 0.00 14.8 8.1 13.8 10.5 Sudan 1996 5 3.7 - 12 3.3 4.4 3.9 2002 21.5 19.6 - 28.8 24 20.8 18.9 Amin: A Decade of the World Trade Organization 43 44 The American Journal of Islamic Social Sciences 27:4 Country All Primary Manufactured Products Products Products % % % Year SMT WMT AVE SMT WMT SMT WMT NB Syria 2002 14.7 15.5 - 14.4 11.7 14.5 16.6 Tunisia 1990 28.1 25.8 - 25.1 17.4 28.3 28.4 2004 25.6 23.2 0.8 36.8 21.8 24.5 23.5 Turkey 1993 7.3 6.1 - 6.3 7.9 7.4 5.3 2003 2.6 2 0.2 11.6 3.5 1.7 1.5 Uganda 1994 17 13.6 - 19.3 17.4 16.7 12.3 2004 7.3 5.5 0.1 9.6 5.7 7 5.3 Yemen 2000 13 11.7 - 14.3 9.8 12.8 12.9 Source: Extracted from World Development Indicators 2005, Table 6.6, 338-340. Data for Guinea, Sierra Leone, and the United Arab Emirates are not reported. Notes: SMT: Simple mean tariff. WMT: Weighted mean tariff. AVENB: Ad valorem equivalent of nontariff barriers.