BACKGROUND: Central Asian States are facing water problems that may still worsen due to climate changes, ineffective and wasteful water use due to poor infrastructure as well as poor maintenance, and inadequate development strategies relying on ambitious hydraulic schemes (e.g. the Lake of the Golden Century in Turkmenistan). Cotton growing, a major source of water use, is one of the key industries of the area. Uzbekistan, for instance, is the world fifth biggest cotton producer after China, the U.S., India and Pakistan. Moreover, increase in cotton output has been planned in the region, particularly in Turkmenistan and Uzbekistan, which will only add to current water problems. On the other hand, the countries are willing to diversify their economic base, widen the range of export products and reduce dependency on raw materials and primary products. In view of that, development of a domestic textile and clothing industry has been attracting much attention. To this end, WTO accession is not only a very effective, but also necessary first step. First of all, the development of a textile industry and the promotion of related exports without WTO accession is very likely to be confronted with protectionist policies of other WTO member states. Until now only Kyrgyzstan in the region has joined the organisation. WTO membership would allow Central Asian states to benefit from the Most Favoured Nation (MFN) status when trading with other WTO members. At present Uzbekistan, has MFN status with about thirty trading partners, but the status is not guaranteed as a permanent right without WTO accession and, therefore, is subjected to regular re-negotiations. At the same time, Uzbekistan and Turkmenistan will remain unable to benefit from the phasing out of the so-called \"Multi Fibre Agreement\" (MFA), which is to be completed in 2005. MFA has been regarded as one of the major obstacles to trade for developing countries as it allows developed countries to set quotas on textiles and clothing. In other words, staying out of the WTO means the loss of development opportunities and might possibly make environmental threats more acute.

IMPLICATIONS: Uzbekistan started negotiating its accession to the Geneva-based organisation already in December 1994, but the path has already been prolonged. It was not until September 1998 that Uzbekistan submitted its \"Memorandum on the Foreign Trade Regime\" and the first meeting of the Working Party only took place in October 1999. Special commissions have been established by the Uzbek authorities to address WTO matters but Uzbek resistance to the liberalization of the financial and banking sectors remains one a major obstacle in the negotiation process. Soviet-type structures have been well preserved in Uzbekistan, where the state is still exercising a strong control over the economic system, and a small number of the elite runs international trade. Confronted with difficulties such as governmental interference, an ever-changing legislative environment as well as a judicial system that does not provide sufficient protection for contracts, the private sector is in a relative deadlock. At the same time, autocracy flourishes. Uzbek industries under the control of the State benefit from apparent and less apparent protectionism, which WTO accession will force out to allow for competitive markets. While plans for a more open political system have been envisaged, economic reforms are progressing at a slow pace. For instance, to date, the government has failed to meet any of the major requirements set out in the plan developed in co-operation with the IMF. There is little rationale for such a resistance to liberalization, should Uzbekistan hope to work out the accession, and address environmental challenges convincingly. In the case of Turkmenistan, the situation is even more behind, as the country has not even started negotiating with the WTO. In a market-oriented economy, the role of state is limited. In order to attract foreign investors, which could back up the growth of a sound and competitive textile industry in Uzbekistan and Turkmenistan, there is a need to establish sound economic institutions, including a healthy banking sector, and develop conducive policies.

CONCLUSIONS: It is all the more essential for Uzbekistan and Turkmenistan to speed up the process of WTO accession, which will make their trade policies fully transparent, and therefore, facilitate an environment favourable for business, investment and growth. If they aspire to export textile products, the two countries would substantially benefit from the MFN status. Liberalization within the framework of the General Agreement on Trade in Services (GATS) would support the establishment of a competitive banking system. All that can help diversify the economy of these countries, which would eventually lead to reducing their dependence on cotton growing, saving scarce water resources and contributing to the alleviation of ecological problems in the region. In other words, WTO membership could be a concrete and valuable step toward sustainable development in Central Asia, at the same time challenging some anti-globalist views on the organization and international trade.

AUTHORS BIO: Dr. Daniel Linotte earned his D.Phil. at Oxford University (St. Antony\'s College). He is currently Senior Economic Adviser to the OSCE and spent three years in Georgia as Chief Economic Adviser on trade and economic issues. He also taught in the US, Russia, Belgium and Holland. Megumi Yoshii is a graduate from LSE and she is research assistant at the OSCE. She had worked for two years for a major Japanese industrial organisation in Tokyo. The views expressed in this article are those of the authors only and do not reflect an OSCE official position.