SAFTA India-Pakistan-Afghanistan Trade

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SAFTAIndia-Pakistan-Afghanistan Trade
India Development Foundation

• Harsh Vivek
• February 1, 2006 Taj Mahal Palace and Towers,
  Mumbai

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The Presentation Agenda

• SAFTA
• Trade India-Pak-Afghan
• Customs duties
• The way forward

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Why regional trade?

• More integrated markets
• Benefits of trade multipliers in the region
• Intra-bloc trade cluster approach to
  development
• Exploit trade complementarities of neighbouring
  countries
• Cooperate to compete (India-China energy example)
• Price competitiveness of intra-bloc trade
• More benefits (relatively) to small countries in
  intra-bloc trade
• E.g. Sri Lanka gaining relatively more from
  India-Sri Lanka trade

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SAFTA

• SAFTA Agreement Strengthen intra-SAARC
  economic cooperation to maximize the realization
  of the regions potential for trade.
• Governed by WTO principles
• Reciprocity, special and differential treatment
• Awareness of the needs of least developed members
  (Revenue Compensation Mechanism)
• Focus on elimination of tariff and non-tariff
  barriers
• Two institutions to oversee implementation
• SAFTA Ministerial Council (highest
  decision-making body)
• Committee of Experts (senior economic official
  from each member-state)
• Role of the SAARC Secretariat (?)

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Tariffs and Non-tariff barriers

• Tariffs (10 year phase-out of tariffs)
• Least developed members reduce tariffs to a
  maximum of 30 per cent (in first 2 years).
• Tariffs already below 30 per cent will be reduced
  by 5 per cent annually for least developed
  members
• Non-least developed members reduce tariffs to a
  maximum of 20 per cent (first 2 years)
• Tariffs already below 20 per cent will be reduced
  by 10 per cent annually for non-least developed
  members
• Non-tariff barriers QRs eliminated for products
  not on sensitive-list

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The Presentation Agenda

• SAFTA
• Trade India-Pak-Afghan
• Customs duties
• The way forward

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Contribution to SAARC trade (2001)
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Trade within SAARC as a per cent of trade with
Asia and the World
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Indias trade with SAARC
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Share of developing and Asian countries in
Indias trade
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Country profile of tariff structure
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Trade with Pakistan

• Bilateral trade a precursor to peace and security
  in the region
• Economic-ties a good confidence-building measure
• Dramatic increase in trade between India and
  Pakistan 76 per cent growth in 2004-2005
• More than USD 600 million (2004-05), likely to
  cross USD 1 billion by 2005-2006
• Exist complementarities in many sectors in the
  two countries (agri-business, textiles,
  auto-components, engineering and tourism)

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List of export-import commodities

• Pakistan import list / India export list
• Electric and power machinery
• Iron-ore, pig iron
• Medicine and pharma products
• Organic chemicals, pesticides and insecticides
• Rubber tyres
• Pulp and paper

• Pakistan export list/ India import list
• Animal hides and skins
• Raw cotton
• Edible nuts
• Metal scrap
• Precious and semi-precious stones
• Jewelry

Source International Trade Statistics Yearbook
(2001), United Nations
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Composition of India-Pak trade

• Major trade in mfg. goods (60 per cent)
• Bulk trade in agriculture and allied products
• Sugar and onions (recent examples)
• Good potential for increase in trade
• Textiles
• Petroleum

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Trade in agriculture commodities
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Trade in engineering goods
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Afghanistans trade

• Trade suffered a setback due to prolonged strife,
  civil wars and political turmoil
• Total exports to India and Pakistan (2004) USD
  150 million (approx)
• Bulk of Afghanistans exports go to Pakistan (69
  per cent in 2004)
• India (8) and Russia (6) other major trading
  partners
• Imports from a larger number of countries

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Afghanistan trade destinations
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Composition of Afghan. trade (2004)
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The Presentation Agenda

• SAFTA
• Trade India-Pak-Afghan
• Customs duties
• The way forward

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Customs Valuation

• Indian Customs requires extensive documentation.
• Processing delays often due to complex tariff
  structure and multiple exemptions, which may vary
  according to product or user.

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Customs Valuation

• On an average, documents required for importing
  or exporting one consignment in/out of India
  includes

Source An UN ESCAP estimate.
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SAFTA - of Tariff Cut

• The tariff concessions varied in depth from 5-100
  
• The tariff cuts offered by India have been the
  deepest, varying from 25-100 for LDCs and 10-90
  for all countries
• The other countries offered much milder tariff
  cuts ranging from 7.5-10 to15-20 for all
  countries (except Sri Lanka, which offered cuts
  up to 75 )

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SAFTA - Tariff Structure

• Provides free trade in goods
• The Agreement does not look at trade in services
• The issue of cross-border investments is also not
  dealt with strongly in the Agreement
• Each SAFTA nation will maintain a Sensitive List
  to protect the interests of the domestic
  stakeholders
• The Agreement also provides for an institutional
  mechanism of the SAFTA Ministerial Council (SMC)
• Detailed Dispute Settlement Mechanism (on the
  lines of the WTO)
• Proper documentation, case based on scientific,
  verifiable evidences

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Indias Trade with SAFTA Nations
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India's Market among SAFTA Nations

• Indias Market in SAARC for its Major Export
  Commodities

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The Presentation Agenda

• SAFTA
• Trade India-Pak-Afghan
• Customs and transit rights
• The way forward

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The Way Forward

• Need to strengthen the Agreement
• Expanding the scope to include trade in services
• Focus on cross-border investments
• Simplification of trade procedures and
  documentation
• Strengthening the implementation of the Agreement
  focus on trade reforms in SAARC
• Involvement of international organisations
• Harmonizing tariffs and standards between nations
• Working-out a compensation mechanism for the
  revenue loss by the least developed countries in
  the region

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In conclusion

• The success of SAFTA greatly depends on the
  political commitment and harmony among all the
  signatory members, and on the vigour and vision
  with which India and Pakistan the two largest
  economies in the region lead meaningful trade
  reforms.

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