Evaluating Business Implications of RTA

Tamanna ChaturvediConsultantIndian Institute of Foreign TradeStrategy to enhance RTA utilization amongst SMEs by understanding its Business Implications

How is RTA better than WTO?Can these RTAs that my country has signed help my business grow?RTA provide member countries with a comprehensive legal framework to provide greater market access for goods and services.

Negotiations are certainly faster.

It allows countries to develop partnerships in areas not covered by WTO.

Going beyond WTO

but how was that possible?

If yes, which were these areas?

but how was that possible?

Partner CountriesType of AgreementChina- Japan-South KoreaFree Trade AgreementIndia-ChilePreferential Trading AgreementASEAN-ChinaComprehensive Economic Co-operation Agreement (CEPA)ASEAN-Japan/South KoreaComprehensive Economic Partnership Agreement (CEPA)India-MauritiusCECPAIndia-NepalTreaty of TradeEconomic Co-operation in identified sectorsInstitutional framework to enable environment for greater flow of investments

SPS-TBT considerationsMRA on standards, mutual recognition, assessment procedures, equivalence MOU on harmonization on Ayurvedic/traditional medicinesCustom clearance agreement

Consumer Protection and legal meteorologyTrade defense measuresDouble taxation Avoidance Convention (DTAC)Bilateral Investment Promotion & Protection Agreement (BIPA)Treatment of Shell CompaniesAir services agreement & open skies for charter flightsHealth care, education, media, tourismUnauthorized tradeGovn procurement, IPRs & GIsDispute Settlement process

Which were these areas?

Stages of an Regional Trading ArrangementCETFree movement of factors of production

Macroeconomic policy coordination

Common currency8

Up gradation from PTA to FTA: COMESA

The Common Market for Eastern and Southern Africa, is an FTA with twenty member states stretching from Libya to Zimbabwe. COMESA formed in December 1994, replacing a Preferential Trade Area which had existed since 1981. Up gradation from Customs Union to Monetary Union: case of UDEACThe Customs and Economic Union of Central Africa UDEAC formed a customs union with free trade area between members and a common external tariff for imports from other countries.

The Economic and Monetary Community of Central Africa ( CEMAC) is an organization of states of Central Africa established by Cameroon, Central African Republic, Chad, Republic of Congo, Equatorial Guinea and Gabon to promote economic integration among countries that share a common currency, the CFA franc.

Currently, CEMAC countries share a common financial, regulatory, and legal structure, and maintain a common external tariff on imports from non-CEMAC countries. Movement of capital within CEMAC is free.Up gradation from Common Market to CSME: Caribbean Single Market and Economy : learning for ASEAN

Participants exerciseWhat steps your country should take to integrate from FTA to Economic Union?Learning for ASEAN: steps towards Economic IntegrationThe outline of the Development Vision and the Regional Development Strategy The extension of categories of free movement of labour and the streamlining of existing procedures, including contingent rights Full implementation of free movement of service providers, with streamlined procedures Implementation of Legal status (i.e. legal entrenchment) for the CARICOM Charter for Civil Society Establishment and commencement of operations of the Regional Development Fund Approval of the CARICOM Investment Regime and CARICOM Financial Services Agreement, to come into effect by January 1, 2009 Establishment of the Regional Stock Exchange

Learning for ASEAN: steps towards Economic IntegrationNegotiation and political approval of the Protocol on Enhanced Monetary Cooperation Agreement among Central Banks on common CARICOM currency.Harmonization of taxation systems, incentives and the financial and regulatory environment Implementation of common policies in agriculture, energy-related industries, transport, small and medium enterprises, sustainable tourism and agro-tourism Implementation of the Regional Competition Policy and Regional Intellectual Property Regime Harmonization of fiscal and monetary policies Implementation of a CARICOM Monetary Union.

Efforts to promote integration of CLMV into ASEAN as AECFormation of ASEAN development fund: In order to narrow the development gap within ASEAN, the ASEAN Development Fund which could advance the development of ASEAN-CLMV countries was signed on 26 July 2005.

Initiative for ASEAN Integration (IAI): In the IAI, signed on 23 July 2001, the member countries declared to take special efforts to help the development of ASEAN-CLMV with priority given to infrastructure, human resource development and ICT. However, an integrated approach should be developed to widen transport linkages to narrow the development gaps.

Roadmap for the Integration of ASEAN (RIA): The RIA specifies milestones including specific steps and timetables. In 2003, the AEM identified 11 priority sectors, chosen for their comparative advantage, for accelerated economic integration. A twelfth sector, logistics, was added in 2006. Member states took on the coordination role for each of the 12 sectors.

Priority SectorCo-odinatorAgro based products & FisheriesMyanmarAir Travel & TourismThailandAutomotives & wood based productsIndonesiae-ASEAN & Health careSingaporeElectronicsPhilippinesLogisticsVietnamRubber, textiles & apparelsMalaysiaSource: ASEAN Secretariat

Stages of Economic Integration around the WorldEurasian Economic Community or the Customs Union of Belarus, Kazakhstan and RussiaEast African Community (EAC), CES: Common Economic Space of CIS CEFTA: Central European FTA, CISFTA,17

E-0Tariff will be entirely eliminated on the date the agreement enters into force (January 01, 2010)E-5Tariff will be removed in 5 equal annual stages beginning on the date the agreement enters into force, effective January 1 of the year* fourE-8Tariff will be removed in 8 equal annual stages beginning on the date the agreement enters into force, effective January 1 of the year* sevenREDTariff will be reduced to 1 5 % from the base rate (2006) in 8 equal annual stages beginning on the date the agreement enters into force, effective January 1 of the year sevenSENTariff will be reduced by 50% of the base rate (2006) in 8 equal annual stages for India and 10 annual stages for Korea on the date the agreement enters into force, effective January 1 of the year seven (for Korea) and year nine (for India)EXCTariff is exempted from the obligation of tariff reduction or eliminationCEPA: Tariff Elimination on goods

India's Export to KoreaHS 2 DigitHS 6 DigitTariff rates in KoreaKorea's Schedule of tariff concessions127 (Mineral Fuel, Oil, etc)271011 (Light Oil, Preps (Not Crude))5RED229 (Organic Chemicals)290124 (Buta-1,3-Diene and Isoprene)0E-0326 (Ores, Slag, Ash)262030 (Mainly Containing Cooper)2E-0452 (Cotton + Yarn, Fabric)520523 (Single Yarn, Combed, 43-52Nm)8EXC572 (Iron & Steel)720241 (Chromium >4% Carbon)3E-0671 (Precious Stones, Metals)711299 (Waste And Scrap of Precious metals)2E-0784 (Machinery)840999 (Spark-ignition Parts)5E-0823 (Food Waste; Animal Feed)230649 (Rape/Colza Seed Oilcake)0E-0976 (Aluminum)760110 (Not Alloy)3E-01079 (Zinc + Articles Thereof)790111 (N Al=>99.99% Zinc Weight)5E-01132 (Tanning, Dye, Paint, Putty)320417 (Pigments & Preparations)8E-51285 (Electrical Electrodes)854511 (Furnace Carbon Electrode)5E-01324 (Tobacco)240120 (Stemmed/Stripped)20EXC1412 (Misc Grain, Seed, Fruit)120740 (Sesame Seed)630% or 6660/kgEXC1538 (Misc Chemical Products)380891 (Insecticides, In Forms)6.5E-01678 (Lead)780199 (Other Non Refined)5E-01741 (Hides & Skins)411410 (CHAMOIS Leather Prep Tan/Crust )5E-51887 (Vehicles, Not Railway)870899 (Other 8708)8E-01973 (Iron/Steel Products)730490 (Other 7304)0E-02003 (Fish & Seafood)030379 (Other 0303)10 to 63E-8 & EXC at 8th HS level

Duty Concessions for Sri Lankan Exports to IndiaTariff ReductionRemarks50%To be made duty free from 200450%-Tea50% fixed tariff concession for imports of tea from Sri Lanka (Annual maximum quota of 15 million Kilograms)50%-GarmentsGarments covering Chapters 61 & 62 while remaining in the negative list, will be given 50 percent tariff concessions on a fixed basis, subject to an annual restriction of eight million pieces, of which six million shall be extended the concession only if made of Indian fabric. On utilization of the unrestricted quota, an additional quota of 2 million pieces out of 8 million pieces is permitted. The quota level per category is increased from 1.5 million to 2 million pieces per category per year.25%-TextilesConcessions of Textile items restricted to 25 percent on Chapters 51-56, 58-60, & 63. Four Chapters under the Textile sector retained in the negative list (Chapters 50, 57, 61, and 62)The Rules of Origin (RoO) criteria have also been defined under ISLFTA. The preferential duties will be applicable only if the domestic value-addition is at a minimum of 35 percent or 25 percent when Indian inputs comprise 10 percent. Understanding consumer demands while negotiations

Rice from Lao PDRVietnamese RiceThai riceAs a foreign buyer, can you make out a difference?

Understanding Consumer SpecificityMango season overlaps Christmas. During this season, mangoes are eaten for breakfast and first box of mangoes is auctioned for charity.

Unripe mangoes eaten with bagoong

Mangoes used to make juices, icecream,fruit bars, pies,stick dipped in hot chili powder and salt

Mangoes eaten green with salt & pepper.. In gautemala they eat with roasted pumpkin seedUnderstanding Consumer SpecificityUnderstanding consumer demands while negotiationsEU self suff in apples and grapes Import demand for mangoes, banana, avocadoes, pineapple & kiwiNorthern EU consume less fruits and vegetables than Southern EUChange in production system have changed demand patternsConsumption in new EU states < old EU member countriesSouthern EU still prefers fresh and unprocessed fruits and veg.Weight loss products, gluten free in demandCross varietal products in demandDemand for organic products is on high

Understanding specificity of Consumer demandsEU is large producer of fruit juice but limited producer of fruit juice concentrate.Fruit juice processing (Germany, UK)Orange conc (Italy, Spain & Greece)+USA+BrazilLemon conc (Italy)Apple conc (Poland, Italy, Germany, Hungary & Spain)

Consumption of preserved fruits and vegetables: canned, frozen, jams and purees increased by 7%.Dried grapes, dates, prunes and apricots consumption on rise.(Italy, UK and Germany)

Customization of the ProductProper Competition Analysis..not all producers are my competitorsSeasonal calendar for the production of mangoes throughout the world