The aim of this report is to evaluate the effect of natural disaster, such as Japan Earthquake and Sichuan Earthquake on global economy on the World. The disaster causes an economic growth to slow by destructing the major industries and productive areas in Japan and China. But, the report shows that, the Japan’s Earthquake causes largest economic impacts on the World scale than Sichuan Earthquake.
This report focuses on global economic impacts on the World caused by these Earthquakes. The major areas affected are industries, export and import trading, oil sector and agriculture sector.
2.0. JAPAN EARTHQUAKE 2.1. Background
The Japan Earthquake occurred on March 11, 2011. It measured 8.9 on the Richter scale, and it is the biggest country earthquake and seventh largest on record since began (smh.com.au, march 11, 2011).The major areas affected are Sendai, Ichihara, Fukushima, Onagawa, Ofunato, and Kesennuma.This phenomena causes negative impacts on global economy. Furthermore, it depresses the production from the factories and cause derails on global economy.
2.2. Global Economic Impacts
2.2.1. Death of people
People are the main source of labour in the World. This research shows that, about 7,300 people are confirmed dead and nearly 11,000 missing (Sawer, P
Textile industry of Pakistan before and after the WTO
Industry before WTO: In 1947 among 23 founder of GATT Pakistan was one of them. Pakistan participated in all the GATT negotiations actively. WTO was formed due to the presence of Pakistan in Uruguay round. Among founding members of WTO which was established in 1995 Pakistan was also one of them. WTO has greatest impact on all sectors of Pakistan’s economy, especially on its agriculture, textile and services. We can predict only few sectors because other sectors are difficult to predict.
If we talk about industrial sector Pakistan’s main export is textile and products related to it. Under the WTO regime Pakistan’s non textile products are negligible but have potential to grow. On the import side Pakistan is improving its tariff structure because of trade liberalization principle said by WTO. Average tax in Pakistan is 17 percent so it is ensure that there are no worse effects of trade liberalization on the domestic industry or products. There is a need for proper adjustment for domestic industry so that they may face the competition in global market. Under the free trade environment an agreement was held named as textile and clothing ( ATC ) in January 2005. According to this all textile and clothing products were integrated and this was the significant change for Pakistan. Economy of Pakistan heavily dependent on the textile and clothing because the textile industry is labor intensive and less capital intensive. Exports are globally competitive under free Quota trade.
Now we come to agricultural sector as we all know Pakistan is an agrarian economy but still it is net importer of food items. Agricultural agreement by WTO plays significant role in molding Pakistan’s agricultural policies. This agreement is called Agreement on Agriculture (AOA). This agreement tells us about export subsidies, access to the market and domestic support. Pakistan needs to utilizes its resources, it should produce and export such things like meat, dairy products, fruits, vegetables, horticulture etc. Pakistan and other developing countries want a world trading system or fair system of trade. Pakistan also has a comparative advantage in many other primary commodities. Although Pakistan has a comparative advantage but it should complete the domestic requirements. An Agreement was signed named as Trade Related Aspects of Intellectual Property Rights (TRIPS ). According to this it is ensured that effective protection of property rights on imported goods and same assurity for domestic industry of Pakistan.
Services are the main and largest component of developed and developing countries. Under inefficient and expensive services infrastructure, it is not possible for any state to grow. The contribution services sector is more than half of the GDP. Pakistan signed an agreement named as General Agreement on Trade in Services (GATS). Pakistan signed it to make commitment on trade in services such as economic services, wellbeing as
well as public services, commerce services, telecommunication services, tourism and travel related services, structure and manufacturing services.
Pakistan faces domestic problem of increased imports. WTO Agreements have an natural method providing for trade corrective measures to offset the effect of removal, subsidy and flow of imports. as a result Pakistan come up with antidumping law through general legislation, countervailing duty against subsidy, and safeguard action laws against flow of imports to protect domestic industry.
In a nutshell, Pakistan establishes liberal trade regimes where restrictions on quantity import was abolished or change in tariff. . It is important that the practical tariff in Pakistan are below the hurdle tariff in WTO, translate into market entrance. on the other hand, value control is necessary to competitiveness of Pakistan’s export. Low quality goods get low price in the international market. The obvious harms of quality for Pakistan are lack of scientific accuracy, lack of grade and lack of specialization. The WTO Agreement on Technical Barriers to Trade is relevant in this regard. correct support and sensible policies for the industry, beside quick balancing of import and export is major for the sustainability and development of Pakistan’s economy and this lead towards a intense prospect and trade development under the WTO system.
WTO AND TEXTILES: A significant success of the Uruguay Round was the decision to phase out restrictions on imports of textiles and clothing. These restrictions were imposed by certain developed countries. The Agreement on Textiles and Clothing (ATC) of WTO which replaced the Multi Fiber Agreement (MFA), provided for the removal of these restrictions in four phases over a period of 10 years. The phasing out program ended on January 1, 2005. As a consequence the quotas have been completely abolished and the importing countries can no longer discriminate between exports of textiles and clothing. Moreover, the trade in textiles and clothing has now completely integrated into General Agreement on Tariffs and Trade (GATT) 1994 and will continue to be governed by its rules.Pakistan was the greatest sufferer of the quota regime as it had a high percentage of textiles and clothing exports which were restrained due to quotas by importing countries. Pakistan can, therefore, benefit greatly from the present non-quota regime of WTO in textiles and clothing sector.
However, there are a number of opportunities and challenges awaiting the textiles and clothing industry of Pakistan in the international market place. For instance, it is being expected that the importing countries would subsequently try to resort to other trade restrictions to take the place of quotas. These can be in form of non-tariff barriers such as importing countries’ requirements for the industry to comply with environmental, labor, sanitary, phytosanitary or technical regulations. The compliance to quality standards and regulations is a cost factor, which the industry will have to face and prepare for. Moreover, countries like China and India have already began giving a tough competition to Pakistan’s industry under the present quota free environment. A strategy needs to be made in this regard as well.
As the future global market is of clothing, Pakistan has been advised by certain analysts to concentrate more on value addition. Moreover, the success of Pakistan in the WTO regime lies not only in diversification of quality but also in the direction of trade. Majority of the exports are directed towards Europe and North America. It would be worthwhile for the industry to workout new markets in other parts of the world.
INTERNATIONAL TRADE ARRANGEMENTS IN TEXTILES AND CLOTHING: MULTI FIBER ARRANGEMENT (MFA) 1974-94:
Under the Multi Fiber arrangement (MFA) developed countries controlled inputs of textiles and clothing into their countries through quotas on a country-by-country basis when increase in imports threatened their industries. Furthermore, it allowed bilateral or unilateral arrangement for not only quota imposition but also in the case of product categories, restrained levels and administrative arrangements.
Under this agreement the developed countries were required to enhance their quotas at the growth rate of 1% to 6%.. The MFA became effective since 1974 and lasted until the end of 1994 when Uruguay round negotiations was applied. It was a extended 5 times during the 21 year period and enlarged the product coverage for restrictions from cotton products to wool and man made fiber products and certain vegetable fiber products since 1986. MFA had 44 members, which were less than half of the GATT members but accounted for most members with an interest in textiles and clothing trade.
MFA was not successful because:
It did not protect jobs in developed countries
It led to loss of consumer surplus in importing countries.
The producers had to purchase quota rights (corruption).
The production decisions were based on quota restrictions and not on optimal
It led to oversupply and depressed world prices: loss to producers.
AGREEMENT ON TEXTILE AND CLOTHING (ATC) OF WTO:
Since 1995, the WTO contract on textile and clothes capture from the Multi fiber Arrangement. But from 1st January 2005, this Agreement has expired and the sector has been fully integrated into normal GATT rules. The quotas have thus come to an end, and importing countries are no longer clever to separate among exporters. Textiles and clothing products have returned to GATT rules more than 10-years period.
This happened gradually, in four steps, to allow time for both importers and exporters to adjust to the new situation. The respective durations and characteristics of the four phases for the elimination of quotas under the Agreement on Textiles and Clothing beginning from 1st January 1995 and ending on 31st December 2004 are as follows:
4 step period
% of goods to be brought in GATT
% of goods to be brought in GATT
Step 1: 1st January 1995 to 31st December 1997
16 % least amount, taking 1990 imports as base
6.96 % per year
Step 2: 1st January 1998 to 31st December 2001
8.7 % per year
Step 3: 1st January 2002 to 31st December 2004
11.05 %per year
Step 4: 1st January 2005
49 % highest
WTO REGIME RESULTS IN EMPLOYMENT LOSSES TO TEXTILE SECTOR: The expert are claiming service losses in fabric zone follow the conclusion of Multi fiber agreement in stir of WTO rule, but, the policy makers are up to now focus on the labor problems in post quota system, official sources in department of Commerce established. Sources in Textile department of Ministry of Commerce told capital even with the fact the government had spent Rs 4 billion during last years to assemble the challenge of WTO execution, but unhappily, the government has yet to focus labor implication as Pakistan fabric started facing the impact of post quota system.
variety of dues with department and giant industrial energy tariff, which are disturbing cost of production, desires to be bring down to a significant level. These types of impediment not only are threading for being without a job but also dampening more job opening in the area. Policymakers, FPCCI and researchers should have paying attention the decline situation of workforce, especially females, of fiber making zone, ignoring them would eventually damage the fabric manufacturing of Pakistan in WTO system. The loss of job is a common problem and we should not see only wealth and financial side because service loss is a loss of generation and the quota regime were not blessing and disguise for Pakistan slightly a sentence, the expert believed.
Dr Karin Astrid Siegmann, examiner of Sustainable growth Policy institution (SDPI) while distributing her research study on “The Agreement on Textiles and Clothing: possible effects on sex parity in Pakistan”, told currency that enlarged competition would not only lead to decline situation of female employees in the area but would also raise the risks about their fitness and security. She said that the complete execution of the ATC from January 2005 shows a quantum rise in the global trade liberalization in textile and clothes. She said the reality of quota has condensed the supply of these commodities in the limited market up to now and had raised their prices.
Dr Karin suggested additional strain and execution of labor standards, improved training opportunity for female staff, better transport to job services after post quota period system. She said that female rather than male workers would accept the consequences of a prospective decline of operational conditions due to their attention in unit where quantity rates and other kinds of unstable contracts are general. Stressing on labor standards she said it was essential to protect worker from risky consequences of trade growth. This, she said, included the establishment of valuable enforcement mechanism to guarantee agreement with labor legislation, mainly in ensuring the female workers’ enrolment to a social security system for wellbeing, motherhood, disability, and departure benefits. Workers’, especially female workers’, right to manage should be emphasized. She suggested that constructive incentive, such as tariff cuts or subsidy for those companies that protect workers right were imaginable. she said that for the manufacturing, it strengthens the welcome side effects to help guarantee quality, and to counter expect NTBs related to poor labor standards.
Displaced female employees have more hurdels in finding job alternative than male due to their higher attention in little area in the labor market in Pakistan. Thus, to protect female employees from possible durable job losses, policy reactions should contain improved exercise opportunity for female staff. Information center linked to employment opportunity and commands may be reputable. Moreover, the industry’s class requirements that are possible to raise after the quota system has been abolish will call for better-educated workforce. Human resources development is therefore advocated by the sect oral strategy “Textile Vision 2005”, by the World Bank (2004), and others (e,g. Kazmi, 2002).
On the other hand, it is not reflected in company’s policies. What is desirable is a unique focus on female staff due to their better exposure on the labor market.
The experts suggested for the improvement of transport to work, which is necessary to enhance female access to jobs. Given the voiced interest of manager in the fabric and clothes industry to have greater entrée to female labor supply, the manufacturing should take the guide here. This does not only hold true for service in the fabric and clothes manufacturing but for all other kinds of business service as well.
Vice President of federation of Pakistan Chamber