Transcript Elephants

International Conference on SAARC@25
Organized by RIS and IIC
16-17 September 2010; New Delhi
Trade in Goods:
Progress and Impediments
Uttam Deb
Principal Scientist (Economics), ICRISAT
and
Additional Director (on leave),
Centre for Policy Dialogue
Contents
Section I:
Introduction
Section II: State of Intra-regional Trade among SAARC Countries
Section III: Impediments in Intra-SAARC Trade
Section IV: Way Forward
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I: INTRODUCTION
• “I believe we should challenge ourselves by acknowledging that
the glass of regional cooperation, regional development and
regional integration is half empty.”
• “Intra-regional trade flows have grown and transport and
telecommunication links have expanded. Yet, the share of intraregional trade and investment flows in total trade and
investment flows in South Asia is far below what we see in East
and South-east Asia. It is also well below the potential”.
Dr. Manmohan Singh
Prime Minister of India
At the 16th SAARC Summit in
Thimphu, Bhutan
28 April 2010
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I. Introduction
• Group of Eminent Persons (GEP), constituted by the SAARC
leaders, articulated a comprehensive road map towards an
Economic Union in South Asia by 2020, through transition from
– preferential arrangement (PTA) to
– free trade area (FTA) to
– Customs Union (CU), to common market (CM) to
– a Economic Union (EU) in the span of about two decades.
• The Road Map was placed at the tenth SAARC Summit held in
Colombo in 1998.
4
II. State of Intra-regional Trade among SAARC Member Countries
SOUTH ASIA'S INTRA AND EXTRA-REGIONAL TRADE IN 2008
Export
Import
Total
export
(mil. US$)
Share of
intraregional
export
(%)
Share of
extraregional
export
(%)
Afghanistan
421.95
41.75
58.25
5734.71
40.65
59.35
Bangladesh
13907.4
3.1
96.9
23756.9
16.93
83.07
NA
NA
NA
NA
NA
NA
India
187405
5.1
94.9
300539
0.8
99.2
Maldives
202.63
8.78
91.22
1426.17
15.13
84.87
Nepal
1179.67
73.89
26.11
3540.44
59.59
40.41
Pakistan
21762.9
13.36
86.64
46292.8
2.75
97.25
Sri Lanka
8688.02
8.39
91.61
14051.1
22.87
77.13
233567.57
6.29
93.71
395341.12
3.94
96.06
Bhutan
Total
Source: Hossain et al (2010)
Share of
intraTotal
regional
import
import
(mil. US$)
(%)
Share of
extraregional
import
(%)
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II. State of Intra-regional Trade among SAARC Member Countries
Dynamics of Intra-SAARC Export, Import and Trade as % of Global
Relevant Indicators of SAARC Countries
Trade
1985
1990
1995
2000
2005
2008
Export
4.89
3.45
4.52
4.56
6.60
6.29
Import
2.11
2.18
3.94
4.26
4.70
3.94
Total
3.04
2.70
4.20
4.39
5.47
4.81
Source: Rahman (2010)
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II. State of Intra-regional Trade among SAARC Member Countries
SOUTH ASIA'S EXPORT TO DIFFERENT REGIONS (Million US$)
2000
2004
2005
2006
2007
2008
Average growth
rate (2004-2008)
South Asia
2894
6540
8580
9931
12233
14698
29.00
South East Asia
3354
8047
10665
10538
13206
17143
27.52
Europe
16865
26419
32145
37454
45987
53805
21.76
North America
16778
21459
26590
33294
35418
37441
16.40
Others
23607
40587
52030
67945
87629
110481
29.41
World
63498
103052
130010
159163
194473
233568
24.63
Source: Moazzem and Mahmud (2010)
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II. State of Intra-regional Trade among SAARC Member Countries
Intra-regional Exports of South Asian Countries in 2008
(in million USD)
Countries
Afghanista Banglan
desh
Share (%) of
Total
IntraSri
Export Exports to regional
Bhutan India Maldives Nepal Pakistan
Lanka (SAARC World
Exports to
)
World
Exports
Afghanistan
NA
2.84
88.65
0.00
84.68
0.00
176.17
421.95
41.75
Bangladesh
2.23
NA
3.27 329.69
0.00
6.03
78.96
10.87
431.06
13907.40
3.10
Bhutan
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
252.01
3296.95
167.23
NA
109.09
0.00
1.75
NA
0.00
0.00
16.05
17.80
202.63
8.78
0.00
70.25
797.63
0.01
NA
3.65
0.08
871.62
1179.67
73.89
Pakistan
1864.99
257.18
0.42 590.79
5.14
3.41
NA
184.79 2906.71 21762.90
13.36
Sri Lanka
0.00
18.73
588.28 58.10
0.21
63.30
India
Maldives
Nepal
Total
1908.1
1123.57 2709.01 9566.05 187405.00
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NA
728.62
8688.02
14698.03 233567.57
Source: Rahman (2010)
5.10
8.39
6.29
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II. State of Intra-regional Trade among SAARC Member Countries
Intra-regional Imports of South Asian Countries in 2008
(in million USD)
Countries
Afghanist
Bangladesh Bhutan
an
Afghanistan
2.45
NA
India Maldives Nepal Pakistan
277.21
NA
0.00
2051.49
0.00
2331.15
5734.71
40.65
14.81 3626.64
0.00
77.28
282.89
17.15
4021.91
23756.90
16.93
NA
NA
NA
NA
NA
NA
NA
Bangladesh
3.13
Bhutan
NA
NA
97.51
362.66
147.78
Maldives
NA
0.00
NA
146.85
Nepal
0.00
6.64
NA
2099.01
NA
Pakistan
93.15
86.86
1.01
1011.06
6.03
4.01
Sri Lanka
0.00
12.54
NA
2979.91
17.65
0.09
India
Total
Source: Rahman (2010)
Sri
Lanka
Share (%)
Total
of IntraImports Imports regional
from from World Imports
SAARC
to World
Imports
NA
2.87
877.39 274.65
0.01
647.10
2409.97 300539.00
0.80
5.03
63.91
215.80
1426.17
15.13
3.75
0.23
2109.63
3540.44
59.59
69.63
1271.74
46292.80
2.75
3213.46
14051.10
22.87
203.27
15573.66 395341.12
3.94
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II. State of Intra-regional Trade among SAARC Member Countries
• Taneja (2004, 2005) has estimated that total informal trade in South
Asia is worth US $1.5 billion, which is 72 per cent of formal trade (for
the years for which data were available)
• The SAARC region experienced accelerated growth in intra-regional
trade during 2006 to2008; however, extra-regional trade grew at a
faster rate during the same period (Moazzem and Rahman, 2010).
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III. Impediments in Intra-SAARC Trade
• Limited product coverage and the extensive nature of negative
lists
• Non-tariff Barriers (NTBs)
• Lack of intra-industry trade
• Lack of trade facilitation
• Energy scarcity
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III. Impediments in Intra-SAARC Trade
Limited product coverage and the extensive nature of negative lists
Countries
Bangladesh
Bhutan
Number of Tariff Lines in Negative List
1249 (for LDCs) and 1254 (for non LDCs)
259
India
Maldives
Nepal
763 (for LDCs) and 884 (for non LDCs)
671
1300 (for LDCs) and 1350 (for non LDCs)
Pakistan
Sri Lanka
1183
1574
Source: Annex 1, SAFTA Agreement.
III. Impediments in Intra-SAARC Trade
Limited product coverage and the extensive nature of negative lists
• India has a moderately low number of items on the sensitive list for nonLDCs, but it has the largest per cent of tariff lines in categories for
vegetable products (20.2 per cent) and textile products (34.2 per cent).
• India’s import of these items from South Asian countries constitutes only
12 per cent of its world imports (Taneja et. al., 2007).
• About 53 per cent of the total import trade in SAFTA members has been
subject to the negative list of the respective countries (Sawhney, 2008).
• India and Sri Lanka have restricted up to 38 and 52 per cent
respectively of their total imports by value from other SAFTA members
under the sensitive list category (Sawhney, 2008).
• The limited product coverage and the extensive nature of negative lists
decrease the scope for intra-regional trade in South Asia (Rahman and
Shadat, 2006).
III. Impediments in Intra-SAARC Trade
•
•
•
•
•
Limited product coverage and the extensive nature of negative lists
India has a moderately low number of items on the sensitive list
for non-LDCs, but it has the largest per cent of tariff lines in
categories for vegetable products (20.2 per cent) and textile
products (34.2 per cent) (Rahman, 2010)
India’s import of these items from South Asian countries
constitutes only 12 per cent of its world imports (Taneja et. al.,
2007).
About 53 per cent of the total import trade in SAFTA members
has been subject to the negative list of the respective countries
(Sawhney, 2008).
India and Sri Lanka have restricted up to 38 and 52 per cent
respectively of their total imports by value from other SAFTA
members under the sensitive list category (Sawhney, 2008).
The limited product coverage and the extensive nature of
negative lists decrease the scope for intra-regional trade in South
Asia (Rahman and Shadat, 2006).
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III. Impediments in Intra-SAARC Trade
Percentage Share of Specific NTBs to all NTBs in SAARC
Non-Tariff Measures
Share
SPS, TBT, and Other Related Measures
86.3
Tariff Quota
9.8
Anti-Dumping Measures
7.4
License Requirement
5.3
Countervailing Measures
1.2
• SAARC countries have in place several ad hoc restrictions and NTBs
on imports. The general consensus has been that whilst SAFTA had
failed to address NTB issues, the SAFTA Agreement also is yet to
address the NTB issues squarely and with due diligence (Rahman
2010)
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III. Impediments in Intra-SAARC Trade
Lack of Trade Facilitation
Lack of adequate transit facilities
• for Bangladesh (from Nepal and Bhutan via India), for India (from
north east states to western states of India through Bangladesh) and
for Pakistan (to Bangladesh through India)
Infrastructure Related Constraints
• Lack of physical, industrial, and communication infrastructure in the
region had restricted trade in South Asia
• While it takes 2 hours to clear a vessel in Singapore and Laem
Chabang,Thailand, it takes 2-3 days in Chittagong
• At Delhi airport, average cargo dwell time is 2.5 days
• A UNESCAP study conducted on South Asian Trade in 2007 found
that disparity in infrastructure facilities has indeed been increasing
over the years
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III. Impediments in Intra-SAARC Trade
Other Barriers
• Lack of Border Infrastructure and Traffic Planning: Traffic congestion
and delays in handling the shipments
• Land Ports at the Border: The storage dwell times has been
increasing and the port storage is grossly inadequate. For example,
at the Petrapole-Benapole border, it takes longer time to unload
vehicles into the land port than the physical clearance time
• Lack of Cross-Border Transport Agreements: Due to lack of throughtransport movement, formidable transport inefficiencies exist at
the interface
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IV. Way Forward
• Elimination of negative lists for LDCs
– under a “duty free” scenario, the possible revenue loss to
India would be around only USD 4.9 million (0.023 per
cent of India’s custom duty and 0.004 per cent of total
government revenue earnings of India) on an export of
about USD 15.2 million from Bangladesh in 2008. Thus,
India does not stand to lose in any significant manner if
the entire sensitive list is eliminated for Bangladesh, on
an immediate basis. (Rahman, 2010)
• Promoting Foreign Direct Investment (FDI)
• Promotion of intra-industry trade
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IV. Way Forward
• Revisiting Rules of Origin in SAFTA
– Under the SAFTA, the general RoO is 40 per cent value
addition plus change in classification at the four digit
level (CTH).
– For LDCs, the RoO is 30 per cent value addition plus
change of tariff heading (CTH).
– There is a need to make these rules less cumbersome
and more export-friendly.
– A 25 per cent flat RoO for LDCs (as in the Canadian
GSP) will make both compliance and implementation
easier.
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IV. Way Forward
• Removal of para-tariffs and surcharges for exports
from SAARC countries
• Trade facilitation
– Effective and rapid establishments of standards and
mutual recognition of standards
– Removal of NTBs
– Automation of customs
• Strengthening the Financing of Intra-SAARC Trade
• Using WTO DSB Mechanism
• Cooperation for energy security
• Capacity building
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Thank You
for
Your Attention
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