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SAARC AND SOUTH ASIAN TRADEInternational Conference On SAARC @ 25

16-17 September 2010

Faiqa Umer

Sustainable Development Policy Institute, Islamabad.

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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

anothers 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.

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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

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South Asian Trade

Intraregional trade is less than 5% of total trade in South Asia

(World Bank, 2009)

Presence ofTariff 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.

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Intra SAARC trade : exports

Growth in Intra-regional Flow of Exports (2003-5) in percent

Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka

Bangladesh 19.4 57.4 8.4 10.9 25.9

Bhutan

India 5.4 13.5 11.2 19.2 46.6 13.0

Maldives 25.1 6.3

Nepal -19.7 15.5 59.8 58.5

Pakistan -10.7 -15.2 57.9 -6.6 -13.9 41.8

Sri Lanka -9.1 14.3 13.3 -40.2 11.4

Source: Direction of Trade, 2006 IMF

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Intra SAARC trade: imports

Growth in Intra-regional Flow of Imports (2004-5) in percent

Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka

Bangladesh 86.1 15.3 -50.0 -19.7 25.3 4.3

Bhutan

India 38.7 11.2 32.8 15.5 40.1 59.0

Maldives -50.0 28.8 59.8 22.5 10.4

Nepal 8.4 19.2 -13.9 -40.2

Pakistan 16.6 -19.6 64.9 -33.5 58.5 10.8

Sri Lanka 35.9 26.4 0.0 36.9

Source: Direction of Trade, 2006 IMF

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Indo-Pak Trade

Indo-Pak trade:

% of Pakistans total exports: 1.93

% of Pakistans total imports: 3.74

% of Indias total exports: 1.13

% of Indias total imports: 0.31

(ITC, 2006)

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Indo-Pak Trade

2002-03 2003-04 2004-05 2005-06

Exports

US $mn

(Pakistan to India)

45 58 95 180

Imports

US $mn

(India to Pakistan)

206 287 521 689

Total

US $mn251 345 616 869

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.

Pakistans exports to India have grown, however imports from India

have grown at a faster pace.

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Trade Facilitation Measures

Source: World Trade Indicators 2008

Indicators South Asia ASEAN NAFTA EU25 World

No. of documents for export 8.38 7.69 4.50 4.82 7.22

Days forExport 32.88 29.13 20.50 28.80 28.80

Cost to Export (US$ percontainer)

1,221.10 732.50 1,101.50 875.30 1,232.00

No. of documents for import 11.31 9.31 5.17 5.64 8.68

Days for import 41.50 29.81 13.17 13.73 32.96

Cost to Import (US$ percontainer)

1,449.40 834.30 1,569.50 947.60 1,431.00

Comparison of different regions in the world:

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SAFTA- Key Features

South Asian Free Trade Agreement (SAFTA) signed at the 12th SAARCSummit in Islamabad, Pakistan.

Build on SAARC Preferential Trade Agreement (SAPTA)

Enhanced scope of regional trade dialogue to include competition, tradeand transportation, harmonization of legislation, banking procedures,forex regulations and immigration processes.

Trade Liberalisation Programme (TLP): reduce tariffs and eliminaterestrictions on quantity of goods traded.

Trade not only in goods, but in services and investment too!

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SAFTA Key features

Non-LDC member states required to reduce existing tariffs to 20

percent within 2 years and then to 05 percent in the next 5 years.

LDC member countries required to reduce existing tariffs to 30percent in 2 years and then to 05 percent in the next 8 years.

Rules ofOrigin: ensure domestic value addition.

Encouraged negotiations for setting ceiling on negative list by each

member country.

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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 aggravatecomplexity of issues.

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Way Forward

Need to move beyond mere framework and policy documents to

include practical provisions.

Official dialogue between South Asian governments throughconferences, 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.

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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.

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Thank You!