By Alexandra Sander
The World Trade Organization (WTO) General Council, which includes representatives from all member governments, formally approved Laos’s membership at its October 26 meeting. Laos first applied for WTO membership in 1997 and, 15 years later, will be the last member of ASEAN to join the multilateral trading system. The Lao National Assembly must now ratify the package and submit its instrument of accession to the WTO Secretariat.
Thirty days after that is done, Laos will formally become a WTO member. Minister of Industry and Commerce Nam Viyaketh, in a statement at the final Laos WTO working party meeting, said he expects the National Assembly to ratify the membership package in December.
Laos, a one-party communist state since 1975, follows the precedent of economic liberalization established earlier by neighbors China (WTO member since 2001) and Vietnam (member since 2007). In 1988, the land-locked country gradually launched reforms to allow for private enterprise and encourage foreign investment. Since its bid to join the WTO, Laos has achieved consistent, if not dramatic, economic growth, although it is expected to grow over 8 percent this year.
The U.S. Agency for International Development (USAID) began providing technical support to Laos in 2007 to institute the legal reforms and institutional upgrades necessary to effectively integrate Laos into the WTO, implement the U.S.-Laos bilateral trade agreement (BTA), and prepare the country for integration into the ASEAN Economic Community (AEC) in 2015.
WTO membership is not expected to dramatically affect Laos’s economic performance and global relations in the near-term. U.S. companies have enjoyed access to the Lao market since the ratification of the U.S.-Lao BTA in 2005 and few new opportunities are anticipated immediately from accession to the WTO.
Laos has attracted less buzz than China and Vietnam when they joined the WTO earlier. In part this is due to its relatively small economy; its GDP stands at about $9 billion dollars. In addition, Laos, with its population of only 6.2 million, cannot boast the same giant labor force that China and Vietnam have for low-cost manufacturing. Its small population also translates into a smaller market for foreign goods and services.
Where Laos stands to gain most from its accession is in developing a stronger legal system and the institutions necessary to achieve integration into the global economy. Transparency International ranks Laos 154th in its 2011 Corruption Perceptions Index, placing it between Cambodia, at 164th, and Vietnam, at 112th. Minister Viyaketh reported to the WTO Working Party that, during the accession process, Laos has “amended and enacted more than 90 pieces of laws and regulations, all in compliance with WTO Agreements.”
With the hurdle of WTO membership under its belt, Laos can continue to implement reforms, benefiting from the institutional knowledge of best practices within the WTO and continued support from USAID. Rule of law provides the platform that will help Laos achieve its future goals of integrating into the 2015 AEC and graduating from Least Developed Country status by 2020.
Ms. Alexandra Sander is a researcher with the CSIS Chair for Southeast Asia Studies.