SAARC and south Asian trade

1. Arpan Shrivastava Asst. Professor , IBMR IPS Academy, Indore SAARC and south Asian trade

2. Introduction • SAARC established in 1985.Member countries: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka. • Core objectives: • To promote and strengthen collective self-reliance among the countries of South Asia • To contribute to develop mutual trust, understanding and appreciation of one another’s problem • To promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields • To strengthen cooperation with other developing countries • To strengthen cooperation among themselves in international forums on matters of common interest • To cooperate with international and regional organizations with similar aims and purposes.

3. Progress so far • SAARC celebrated 25 years of existence at its 16th summit held on 28-29 April 2010 in the Bhutanese capital, Thimphu. • Formed instruments of regional cooperation • South Asian Free Trade Agreement (SAFTA) • Convention on Fighting Terrorism • SAARC Developmental Goals (SDGs) • SAARC Development Fund • SAARC Food Bank • Observer states include US, Japan, China. • Regional agreement on ‘Trade in Services’ • Institutions need to address issues of empowerment, and formulate appropriate implementation and monitoring strategies

4. South Asian Trade • Intraregional trade is less than 5% of total trade in South Asia (World Bank, 2009) • Presence of Tariff and non-tariff barriers • Substantial potential for trade due to high population density and geographical proximity. • Trade essential to achieve investment, generate employment and mitigate poverty in the region.

5. Intra SAARC trade : exports • Growth in Intra-regional Flow of Exports (2003-5) in percent Source: Direction of Trade, 2006 IMF

6. Intra SAARC trade: imports • Growth in Intra-regional Flow of Imports (2004-5) in percent Source: Direction of Trade, 2006 IMF

7. Indo-Pak Trade • Indo-Pak trade: • % of Pakistan’s total exports: 1.93 • % of Pakistan’s total imports: 3.74 • % of India’s total exports: 1.13 • % of India’s total imports: 0.31 (ITC, 2006)

8. Indo-Pak Trade • Pakistan indicates that NTBs need to be tackled first before it grants MFN status to India. • Indo-Pak trade is being done on the basis of a positive list. • Pakistan’s exports to India have grown, however imports from India have grown at a faster pace.

9. Trade Facilitation Measures Comparison of different regions in the world: Source: World Trade Indicators 2008

10. SAFTA- Key Features… • South Asian Free Trade Agreement (SAFTA) signed at the 12th SAARC Summit in Islamabad, Pakistan. • Build on SAARC Preferential Trade Agreement (SAPTA) • Enhanced scope of regional trade dialogue to include competition, trade and transportation, harmonization of legislation, banking procedures, forex regulations and immigration processes. • Trade Liberalisation Programme (TLP): reduce tariffs and eliminate restrictions on quantity of goods traded. • Trade not only in goods, but in services and investment too!

11. SAFTA – Key features • Non-LDC member states required to reduce existing tariffs to 20 percent within 2 years and then to 0–5 percent in the next 5 years. • LDC member countries required to reduce existing tariffs to 30 percent in 2 years and then to 0–5 percent in the next 8 years. • Rules of Origin: ensure domestic value addition. • Encouraged negotiations for setting ceiling on negative list by each member country.

12. SAARC SAARC-Current Observers • Australia • China • Burmah • European Union • Iran • Japan • Mauritius • South Korea • United States • Intention Expressed • Indonesia • Russia • South Africa

13. UNIQUE FEATURES The oldest ancient living civilizations World’s sleeping giant-started moving People of all religions, faiths, ideologies live Economic force-common market The largest irrigated area The second largest railway network The largest English speaking area The largest labour force: 425m people

14. Challenges • Political tensions and conflicts in the South Asia region. • Obstructions to free movement of people, labor, currency and other forms of capital. • Presence of protectionist trade barriers. • Multiple bilateral/regional issues or agreements aggravate complexity of issues.

15. CHALLENGES • Poverty • Unemployment • Literacy • Governance • Education • Development • Enabling environment • Defense expenditure

16. Way Forward… • Need to move beyond mere framework and policy documents to include practical provisions. • Official dialogue between South Asian governments through conferences, meetings and seminars. • Advocacy and Outreach campaign: civil society organizations to encourage policy dialogue with South Asian parliamentarians. • Develop network of South Asian research institutions focusing on regional trade.

17. Way Forward • Ease of travel restrictions between countries. • Expand positive list of trade items. • Explicit requirement to reduce negative lists over time (instead of 4 year review). • Explicit requirement to reduce NTBs. • Make rules of origin flexible. • Fight against terrorism: regional peace essential to encourage environment conducive to domestic and foreign investment. • Economic integration can in turn, pave the way for regional security and social development.

18. Thank You!