Strengthening intra-regional trade cooperation
Sunday, 1 November 2009
Shahiduzzaman Khan
Regional commerce ministers, attending the annual meeting of South Asian Free Trade Area (SAFTA) Ministerial Council in the Nepalese capital, Kathmandu last week, struck a deal. They agreed to consider the proposal of the SAFTA Committee of Experts to reduce sensitive lists of products by 20 per cent while maintaining an overall balance in tangible preferential market access to the member-countries. This is a remarkable development.
The commerce ministers of the Association of South Asian Regional Cooperation (SAARC) also decided to constitute an ad-hoc Working Group to work on the revision of the size of the sensitive lists. The Working Group will complete its work by September 2010. They also approved the recommendation of the SAFTA Committee of Experts that at the end of the present TLP, tariffs on 30 per cent of the tariff lines outside the sensitive lists may be brought down to zero by all members. The committee is expected to expedite the process of finalising the formula of establishing a regional free trade area by 2016 by downsizing the sensitive lists of the member countries of the South Asian trade block. However, in order to promote regional trade, deeper cuts in tariff rates, removal of tariff and non-tariff barriers, wider product, simplification of customs rules and banking procedures, mutual recognition arrangements and encouraging cross-border investments are also needed badly.
The SAFTA agreement came into effect from January 1, 2006 under which trade liberalisation started taking place from July 1, 2006. According to the negative lists (NLs) of SAFTA member countries, Afghanistan has 1072 items for all member countries of the block, Bangladesh has 1249 items for least developed countries (LDC) of SAFTA and 1254 for non-LDC member countries, the NL of India comprised of 744 items for LDCs and 865 for non-LDCs, Pakistan has 1151 items on its NL for all seven member countries and the Maldives has 671 items on its list.
Bangladesh has long been pressing India to downsize its NL, particularly to exclude those, which have market demand in India. However, India has recently announced to downsize its NL. Bangladesh government contended that mere reduction of the list was not important. The country sent a list of products including battery, handicraft, pharmaceuticals to India to exclude those from its NL. As per the SAFTA roadmap, the developing members are to bring down their tariffs to 0-5 per cent in three years while the SAARC least developed countries (LDCs) like Bangladesh will do that in 10 years from the date of the first duty reduction taking place. It may be mentioned here that the SAARC member countries have completed four rounds of negotiation on regional Framework Agreement on trade in services among themselves.
Bangladesh's ministry of commerce has also identified some broad areas under the service sector, where the country's strength and weakness are being evaluated. The areas include research and development, real estate, advertising, telecommunication, audio-visual, distribution, educational, environmental, financial, health-related social services, tourism, recreational, news agency, sports, maritime, internal waterways, air transport, space transport, road and rail transport and pipeline transport.
Addressing the committee of experts meeting, Bangladesh Commerce Minister Faruk Khan said the major challenge for South Asia is to work its way out of the crisis towards a sustainable recovery from the shocks of the global economic recession. Intra-regional trade is an important tool in attaining sustainable recovery and would positively impact on bringing the economies of the region back onto the path of growth. He also highlighted Bangladesh's vulnerability to climate change and its negative impacts, particularly, on food security of the country.
With democratically elected governments in all the SAARC member-states, South Asia is now uniquely positioned to dismantle the physical and psychological barriers that stand in the way of prosperity and stability in the region. The region has. of course, food vulnerability. The only viable option to address it is to activate the SAARC Food Bank. It is needed to fight hunger and the 'perceived' shortage of staples in a region, which is home to half the world's poor. The proposal for setting up the food bank was approved by top regional leaders at the last SAARC Summit held in New Delhi. The idea of the food bank received wider backing at a crucial time, when world food and energy price hike made the lives of the poor miserable. Food prices almost doubled in 2007 and 2008 on the back of two floods and a devastating cyclone in the country's south-west region.
The 2009 Global Hunger Index puts South Asia at 'distressingly high' hunger index levels, with 'alarming' vulnerability rankings for the three populous countries -- India, Pakistan and Bangladesh. Sri Lanka and Nepal have also 'serious' vulnerability rankings, though not alarming. The proposed food bank is expected to ensure regional food shortage. It will also help strengthen relations among the member countries. The member countries of the SAARC need to make the food bank functional in the interest of the region's poor people.
However, while SAARC survived as a regional grouping for over two decades, its progress in all areas of cooperation amongst the member countries blunted because of numerous bilateral disputes that defied solutions for generations. Frustrations crept in amongst the member states as they silently watched how other regional groupings managed not only to survive but progressed by leaps and bounds both bilaterally as well as multilaterally.
Analysts tend to feel that SAFTA has the potentials to break down all the barriers and banish historical prejudices, promote and sustain tremendous growth amongst the member countries based on equality and mutual benefit. Although in South Asia regional cooperation in trade began in 1995 with the launching of SAPTA, the volume of intra-SAARC trade did not grow much despite the arrangement. Trade flow among South Asian countries account for only 4.0 percent of the region's total global trade.
Harmonisation of customs procedures, mutual recognition arrangements for standards, testing and conformity assessments, and above all, investment facilities are key to reaping benefits from intra-regional trade. Lack of confidence and conflicts amongst the SAARC member countries should be resolved to ensure a meaningful economic cooperation. Added to this, unilateral free trade facilities to LDCs by stronger SAARC economies and cooperation in the area of investment, technology transfer end technical assistance should be taken immediately to level up the current inequalities. Once greater equality and equilibrium is established, SAFTA would be able to deliver goods to strengthen regional trade cooperation.
.........................................................
szkhan@thefinancialexpress-bd.com
Regional commerce ministers, attending the annual meeting of South Asian Free Trade Area (SAFTA) Ministerial Council in the Nepalese capital, Kathmandu last week, struck a deal. They agreed to consider the proposal of the SAFTA Committee of Experts to reduce sensitive lists of products by 20 per cent while maintaining an overall balance in tangible preferential market access to the member-countries. This is a remarkable development.
The commerce ministers of the Association of South Asian Regional Cooperation (SAARC) also decided to constitute an ad-hoc Working Group to work on the revision of the size of the sensitive lists. The Working Group will complete its work by September 2010. They also approved the recommendation of the SAFTA Committee of Experts that at the end of the present TLP, tariffs on 30 per cent of the tariff lines outside the sensitive lists may be brought down to zero by all members. The committee is expected to expedite the process of finalising the formula of establishing a regional free trade area by 2016 by downsizing the sensitive lists of the member countries of the South Asian trade block. However, in order to promote regional trade, deeper cuts in tariff rates, removal of tariff and non-tariff barriers, wider product, simplification of customs rules and banking procedures, mutual recognition arrangements and encouraging cross-border investments are also needed badly.
The SAFTA agreement came into effect from January 1, 2006 under which trade liberalisation started taking place from July 1, 2006. According to the negative lists (NLs) of SAFTA member countries, Afghanistan has 1072 items for all member countries of the block, Bangladesh has 1249 items for least developed countries (LDC) of SAFTA and 1254 for non-LDC member countries, the NL of India comprised of 744 items for LDCs and 865 for non-LDCs, Pakistan has 1151 items on its NL for all seven member countries and the Maldives has 671 items on its list.
Bangladesh has long been pressing India to downsize its NL, particularly to exclude those, which have market demand in India. However, India has recently announced to downsize its NL. Bangladesh government contended that mere reduction of the list was not important. The country sent a list of products including battery, handicraft, pharmaceuticals to India to exclude those from its NL. As per the SAFTA roadmap, the developing members are to bring down their tariffs to 0-5 per cent in three years while the SAARC least developed countries (LDCs) like Bangladesh will do that in 10 years from the date of the first duty reduction taking place. It may be mentioned here that the SAARC member countries have completed four rounds of negotiation on regional Framework Agreement on trade in services among themselves.
Bangladesh's ministry of commerce has also identified some broad areas under the service sector, where the country's strength and weakness are being evaluated. The areas include research and development, real estate, advertising, telecommunication, audio-visual, distribution, educational, environmental, financial, health-related social services, tourism, recreational, news agency, sports, maritime, internal waterways, air transport, space transport, road and rail transport and pipeline transport.
Addressing the committee of experts meeting, Bangladesh Commerce Minister Faruk Khan said the major challenge for South Asia is to work its way out of the crisis towards a sustainable recovery from the shocks of the global economic recession. Intra-regional trade is an important tool in attaining sustainable recovery and would positively impact on bringing the economies of the region back onto the path of growth. He also highlighted Bangladesh's vulnerability to climate change and its negative impacts, particularly, on food security of the country.
With democratically elected governments in all the SAARC member-states, South Asia is now uniquely positioned to dismantle the physical and psychological barriers that stand in the way of prosperity and stability in the region. The region has. of course, food vulnerability. The only viable option to address it is to activate the SAARC Food Bank. It is needed to fight hunger and the 'perceived' shortage of staples in a region, which is home to half the world's poor. The proposal for setting up the food bank was approved by top regional leaders at the last SAARC Summit held in New Delhi. The idea of the food bank received wider backing at a crucial time, when world food and energy price hike made the lives of the poor miserable. Food prices almost doubled in 2007 and 2008 on the back of two floods and a devastating cyclone in the country's south-west region.
The 2009 Global Hunger Index puts South Asia at 'distressingly high' hunger index levels, with 'alarming' vulnerability rankings for the three populous countries -- India, Pakistan and Bangladesh. Sri Lanka and Nepal have also 'serious' vulnerability rankings, though not alarming. The proposed food bank is expected to ensure regional food shortage. It will also help strengthen relations among the member countries. The member countries of the SAARC need to make the food bank functional in the interest of the region's poor people.
However, while SAARC survived as a regional grouping for over two decades, its progress in all areas of cooperation amongst the member countries blunted because of numerous bilateral disputes that defied solutions for generations. Frustrations crept in amongst the member states as they silently watched how other regional groupings managed not only to survive but progressed by leaps and bounds both bilaterally as well as multilaterally.
Analysts tend to feel that SAFTA has the potentials to break down all the barriers and banish historical prejudices, promote and sustain tremendous growth amongst the member countries based on equality and mutual benefit. Although in South Asia regional cooperation in trade began in 1995 with the launching of SAPTA, the volume of intra-SAARC trade did not grow much despite the arrangement. Trade flow among South Asian countries account for only 4.0 percent of the region's total global trade.
Harmonisation of customs procedures, mutual recognition arrangements for standards, testing and conformity assessments, and above all, investment facilities are key to reaping benefits from intra-regional trade. Lack of confidence and conflicts amongst the SAARC member countries should be resolved to ensure a meaningful economic cooperation. Added to this, unilateral free trade facilities to LDCs by stronger SAARC economies and cooperation in the area of investment, technology transfer end technical assistance should be taken immediately to level up the current inequalities. Once greater equality and equilibrium is established, SAFTA would be able to deliver goods to strengthen regional trade cooperation.
.........................................................
szkhan@thefinancialexpress-bd.com