gnh defies wto


With the WTO ascension policy having failed the GNH test once, the PM has reiterated that Bhutan will never join the WTO if it fails the test

Phuntsho Wangdi & Sonam Pelden

from Thimphu

A pilot test carried out to see whether Bhutan’s policy on ascension to the World Trade Organization (WTO) is in tandem with the country’s development philosophy of Gross National Happiness (GNH) failed three years ago.

Now, the prime minister has added fresh impetus on the issue declaring to Business Bhutan that any policy that fails the GNH screening test will not be adopted.

Under the status quo, the debate on Bhutan’s ascension to the WTO stands as good as sealed. Bhutan will not join the WTO. 

“The ascension of Bhutan to WTO will have to wait until we have enough reasons and positive aspects of the WTO to pass the GNH screening tool,” said Prime Minister Jigmi Y. Thinley.

“The GNH screening tool process is of critical importance. So those policies and programs which do not pass through the screening test cannot be undertaken,” he said.

The WTO ascension policy was put to the GNH screening test by the Gross National Happiness Commission (GNHC) as an experiment to evaluate the screening tools in 2008. It was the first policy to be tested.

The secretary of the GNHC, Karma Tshiteem, underplayed the pilot test saying that it was not a formal test. He said “A formal screening requires participation from all the stakeholders.” He described it as an experiment.

In the pilot test, 24 officials from the GNHC took part and 19 voted not to join the WTO with the remaining five in favor of it.  

Nonetheless, the prime minister said the government will strictly abide by the result of the GNH test and will not go against it. He said nothing will be compromised if a policy fails the test.

The ascension to the WTO has been a burning issue with even the cabinet ministers divided on it. While the prime minister has made his lets-take-it-slowly stand public several times in the past, other minister including the economic affairs minister, Lyonpo khandu Wangchuk and the works and human settlement minister, lyonpo Yeshey Zimba, are for joining the global organization.

The secretary of economic affairs, Dasho Sonam Tshering, also downplayed the authenticity of the pilot test saying “It would be wrong to assume that the WTO ascension policy will not qualify through the GNH screening tools test.”

He said in the last three years, the government has put numerous legislative reforms pertaining to trade, investment, phyto-sanitary, and intellectual property issues and many have passed the test. 

Dasho Sonam Tshering said that before the WTO ascension policy is tested by the GNH screening tools, the evaluators need to be fully aware of the WTO to ensure that the tools can be applied in an objective manner.

“If it does not get through some of the tools then we need to revisit our ascension process so that we take care of those areas that are of concern, during the negotiation process,” he said.

A presentation in 2009 by an official of the Research and Evaluation Division of the GNHC gives a detailed account of why the WTO policy failed the GNH test. It states that the ascension will have serious implications on the trade and economy of the country. 

It says that the principle of the most favored nation which explains that while there can be free trade or concessions among the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and other bilateral trade agreement member countries, non-member countries cannot be discriminated by imposing higher trade barrier.

This can have serious implications on Bhutan as it would prefer to have selective trade agreements rather than opening its economy to all countries.

Having an indiscriminate trade policy would also mean opening up the economy to countries like China for which Bhutan may not be prepared at the moment.

The presentation cites that ascension to WTO will have adverse effect on the principle of national treatment. It says that the domestically manufactured goods and services cannot be differentially protected and promoted if Bhutan joins the WTO.

It also says that the ascension will limit the scope of promoting and protecting domestic goods and services citing example that Bhutan cannot grant tax holiday to domestic hotels and not grant tax holiday to FDI resorts such as Aman resorts and Hotel Tashi Taj.

It also states that the import tariff for luxury cars may have to be brought down and eventually be reduced to 0% unless balance of payment becomes a problem. As for now, Bhutan charges certain percentage for an average binding tariff for consumer and industrial goods.

It is mentioned that Bhutan can discourage vehicle import by levying other taxes such as sales tax but the current way of restricting import of certain specific vehicles such as the Japanese Toyota Land Cruiser and Toyota Prado may not be possible as it can go against WTO’s principle of most favored nation with Japan being the member of WTO.

The requirement of protecting Intellectual Property Rights would be major challenge for Bhutan as the WTO members especially the developed countries will be pressurizing Bhutan.

It is also pointed out that if Bhutan has to protect intellectual property rights, it will certainly question the affordability of Bhutanese consumers. Currently, the software is available at cheap prices from neighboring countries in the market and when the Intellectual Property Rights is protected, Bhutanese consumers will not be able to afford original software.

The ascension can also have political implications. Joining WTO will mean opening up the market to Chinese goods and services (as per the principle of most favored nation) and this will not be in the interest of Bhutan.

Bhutan would prefer not to be subjected to open up its northern border for trade even if it is cheaper to do so.

Ascension to WTO would also contradict the GNH policy and affect the image of Brand Bhutan. With the government declaring its intent to limit junk foods from flooding the market, joining WTO would mean a free entry of western lifestyle foods like McDonalds, KFC, Domino’s Pizzas, etc.

The idea of having the GNH screening tool was first conceptualized in 2008.

The screening tools became applicable in 2010. According to it, all policies and projects must undergo the screening process and must correspond to the nine domains and 72 indicators of GNH. One of the main objectives of the GNH screening tool is to select GNH enhancing policies and projects and reject projects and policies that adversely affect key indications of GNH.

Dasho Sonam Tshering said that an important pillar of GNH is good governance and the WTO promotes it as is entirely based on the rule of law. “Any country that wants to be a member of WTO must first put in place the entire required legal framework to be able to comply with all the requirements of being a member,” he said.

The prime minister has always taken a resolute stand to buy time before making the final decision to join WTO. He has reiterated time and again that the principles of GNH cannot be traded off for any other alternative.

In such a scenario, with no talk of when the WTO policy will undergo the next GNH test, joining WTO looks to be a distant dream, as of now.