December 17, 2015, marked a monumental moment for Afghanistan. After 11 years of negotiations, The World Trade Organization (WTO) formally adopted Afghanistan’s terms of accession at its 10th Ministerial Conference in Nairobi, Kenya. What does this mean for Afghanistan’s future? Here are eight reasons why WTO membership will benefit Afghanistan.
1. Economic growth, investment, and job creation
Afghanistan’s export structure is dominated by agricultural products and some manufacturing of goods, such as textiles and carpets. As a WTO member, Afghanistan will benefit from access to new markets, global supply chains, and lower tariffs, ultimately creating a better and more competitive job market in which more Afghans can earn better wages.
2. More support for local industry
WTO membership will provide access to international markets and commodities, allowing Afghan businesses to purchase inputs at a lower price and enabling industry to produce goods more competitively. Membership will also give rise to both export and competition, which will support quality improvement and standardization to exports. Imports will be used as materials, components, and equipment for local production. Trade will allow Afghanistan to import more and will also allow the world to buy more of Afghanistan’s exports.
3. Wider choice of lower-cost products for consumers
Afghans will be able to buy fruits and vegetables out of season, a variety of products that used to be considered “exotic,” and all kinds of household goods, books, music, and movies from across the globe. More choice will allow consumers to buy domestic and foreign finished products more inexpensively. This will reduce the costs of production (because raw imports used in production are cheaper) along with the prices of finished goods and services.
4. Fair playing field with WTO members
Decisions in the WTO are made by consensus. The WTO agreements are negotiated by all members, approved by consensus, and ratified in all members’ parliaments. The agreements apply to everyone. There is a single set of rules that applies to all members which simplifies the entire trade regime and gives governments a clear view of which trade policies are acceptable. Rich and poor countries alike have an equal right to challenge each other in the WTO’s dispute settlement procedures. Afghanistan will benefit from increased bargaining power and the opportunity to form alliances with larger economic powers and to pool resources.
5. Protection from regional trading powers
Members bring their disputes to the WTO and do not act unilaterally. Dispute Settlement Understanding (“DSU’’), considered the backbone of dispute settlement under the WTO, allows all members to be treated according to a rule-based system and ensures their trade rights under international trade are fairly secured during dispute settlement. Article 24 of DSU requires members to give particular consideration to the situations of least developed countries, which Afghanistan will benefit from immensely.
6. Path toward better government
WTO rules commit member nations to a more liberalized economy and vibrant trade sector that is difficult to reverse. WTO rules, as well as reduced tariffs and non-tariff barriers, also discourage a range of unwise policies and helps reduce corruption. For example, transparency, clear regulations for product safety and standards, and non-discrimination prevent cheating and arbitrary decision-making.
7. Access to WTO grants and capacity building initiatives
As a least-developed country, Afghanistan will be entitled to the preferential treatment from WTO members under the special and differential treatment provisions enshrined within the WTO agreements. 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.
8. Peace through trade
Last but certainly not least, trade brings prosperity, and prosperous people are less likely to cause or revert to conflict. If trade flows freely and healthy commercial relationships are formed, political conflict becomes less likely between nations. With its agreement by consensus and strong focus on abiding by the rules, the WTO is a critical trust builder. Members do not need to fear that other members will raise trade barriers and are in a better frame of mind to cooperate.
Afghanistan remains a land locked, war-torn, and aid dependent economy that suffers from political infighting and a deteriorating security situation. However, progression on trade reform is a stepping stone toward improving the lives of the Afghan people both politically and economically. A vibrant and freer trade environment can help Afghan businesses bounce back and interact in the global economy.
As Afghan President Ashraf Ghani said, “Our country’s accession to the WTO will serve as a catalyst for domestic reforms and transformation to an effective and functioning market economy that attracts investment, creates jobs and improves the welfare of the people of Afghanistan.”