India Development Foundation

SAFTA
India-Pakistan-Afghanistan Trade
Harsh Vivek
February 1, 2006 – Taj Mahal Palace and Towers, Mumbai
1

The Presentation Agenda

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

2

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 intrabloc trade
– E.g. Sri Lanka gaining relatively more from India-Sri Lanka trade
3

” • 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 (?) 4 .SAFTA • SAFTA Agreement – “Strengthen intra-SAARC economic cooperation to maximize the realization of the region’s potential for trade.

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 5 .

The Presentation Agenda SAFTA Trade: India-Pak-Afghan Customs duties The way forward 6 .

58 India 23.41 22.72 21.90 4.53 5.43 50.56 0.03 Pakistan Sri Lanka 46.38 1.69 98.00 India Maldives Nepal 37.63 27.55 0.42 Maldives Nepal Pakistan Sri Lanka 75.35 16.05 7 .47 0.24 25.19 99.45 32.Contribution to SAARC trade (2001) Export To/From Bangladesh Bangladesh Bhutan 1.45 1.22 0.75 7.

9 9.4 14.9 Imports 2001 Asia 22.2 2.5 5.6 Bangladesh 16.3 World 15.5 45.5 15.1 3.30 5.0 10.2 World 0.9 25.2 48.4 13.9 2.8 3.8 Imports 1991 Asia 26.1 World 15.1 1.5 2.1 7.9 India Nepal 9.0 93.9 1.4 21.1 15.0 37.2 3.5 16.9 87.3 0.Trade within SAARC as a per cent of trade with Asia and the World Countries Exports 1991 Asia World 4.2 4.4 1.7 8 .1 Exports 2001 Asia 8.9 3.8 Pakistan Sri Lanka 10.6 3.

India‟s trade with SAARC India's trade with SAARC nations 60.00 .00 10.00 2000-01 2001-02 Year Growth (%) Share (%) 2002-03 2003-04 4.00 40.00 0.00 50.00 20.00 Share (%) 9 3.00 30.00 Growth (%) 2.00 0.00 1.

00 50.Share of developing and Asian countries in India’s trade Share of developing and Asian countries in India's trade 60.00 10.00 20.00 40.00 30.00 2000 2001 2002 Year Developing Countries Asia 10 Percentage 2003 2004 .00 0.

80 163.00 Agri.90 21.40 Agri 36.50 37.20 29.Country profile of tariff structure Bound Tariff (in percentage terms) Country India Bangladesh China All 49.00 16.10 6.40 14.80 Mfg.20 Mfg.70 97. 114.70 9.70 19.20 11 .10 Applied Tariff (in percentage terms) All 29.40 2.70 19.10 25.30 35. 34.50 15.20 17.50 35.00 19.00 35.30 6.10 7.70 14.50 12.50 188.30 Pakistan Malaysia Indonesia Thailand 52.60 24.20 11.60 8.10 8.30 14. 27.90 35.10 12.10 20.80 10.20 47.90 16.

engineering and tourism) 12 .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. auto-components. textiles.

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 13 .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.

and allied Engg goods Petroleum 60% Ores and minerals Mfg goods Machinery Textiles 14 .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) Exports from India to Pakistan (2004-05) 2% 1% 6% 7% 20% 4% • Good potential for increase in trade – Textiles – Petroleum Agri.

22 9.18 124.79 1.Trade in agriculture commodities Commodity Name Pakistan Exports (USD Million) India Imports (USD Million) a) Tobacco b) Fish c) Natural honey d) Nuts 1.36 1.02 2.04 Commodity Name a) Wheat b) Sunflower oil c) Coconut oil India Exports (USD Million) 1.44 3.47 1.39 15 .63 Pakistan Imports (USD Million) 3.55 4.95 2.42 1.27 6.33 12.11 5.92 5.63 5.83 d) Tea e) Pepper f) Processed cereals 3.18 19.

Trade in engineering goods Commodity Name a) Hand tools b) Base metal fittings c) Gas turbines d) Turbo propellers e) Radar apparatus f) Electrical insulators g) Tractors Pakistan exports (USD Million) India imports (USD Million) 1.6 5.4 1.72 1.19 3.07 12.34 1. tapes i) Telephone sets 26.29 h) Records.77 1.75 16 .8 1.41 11.04 3.24 2.19 7.58 7.35 3.59 22.21 1.

Afghanistan‟s 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 Afghanistan‟s 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 17 .

Afghanistan trade destinations Exports by destination (2004) 13% 4% 6% Imports by destination (2004) 18% 8% 69% 46% 14% 9% 3% 6% 4% Pakistan India Russia Europe Others China Japan Pakistan India Germany Kenya Unspecified 18 .

00 6.00 Tea Vegetable oil Cement Medicines Sugar Bicycles Stationery Total trade (imports) 0.40 81.00 Medicinal seeds Fresh fruits Wool 33.90 10.80 0.80 1.80 India (%) 7.60 88.20 23.00 0.40 31.00 22.20 2.00 .40 82.60 14.00 9.40 0.70 37.10 69.30 8.00 22.Composition of Afghan.30 45.40 89.60 1.40 0.60 4.20 0.00 7.00 0.00 Cotton Others Total trade (exports) 99.80 0.00 19 3.10 0.80 3.00 0.20 8. trade (2004) Commodity (Exports) Dry fruits Animal skins and fur Carpets Pakistan (%) 69.90 Commodity (Imports) Pakistan (%) India (%) Fabrics Tyres and tubes Metals Wheat and flour 0.00 16.90 6.70 45.

The Presentation Agenda SAFTA Trade: India-Pak-Afghan Customs duties The way forward 20 .

• Processing delays often due to complex tariff structure and multiple exemptions.Customs Valuation • Indian Customs requires extensive documentation. which may vary according to product or user. 21 .

of copies No. documents required for importing or exporting one consignment in/out of India includes: Type of documents No. 29 118 256 7 10 % of consignment value 22 .Customs Valuation • On an average. of Signatures Manpower Required Cost of procedures Source: An UN ESCAP estimate.

varying from 25-100 % for LDCs and 10-90 % for all countries • The other countries offered much milder tariff cuts ranging from 7. which offered cuts up to 75 %) 23 .SAFTA .% of Tariff Cut • The tariff concessions varied in depth from 5-100 % • The tariff cuts offered by India have been the deepest.5-10 to15-20 % for all countries (except Sri Lanka.

verifiable evidences 24 .SAFTA . case based on scientific.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.

94 1.India‟s Trade with SAFTA Nations India's Export to SAARC Nations India's Import from SAARC Nations INR In billion SAARC Nations Afghanistan Bangladesh Nepal 200203 762.87 3.81 7.31 Pakistan 9.89 3.40 2.83 15.91 16.96 200304 936.00 13.57 60.55 41.86 3.76 2003-04 Apr-Oct 467.98 13.99 30.51 25 Sri Lanka 44.03 Pakistan Sri Lanka 2.77 SAARC Nations Afghanistan Bangladesh Nepal 200203 .82 56.17 4.00 6.56 13.14 2003-04 April-Oct .19 4.64 8.64 INR In billion 200304 1.77 2.62 32.31 Source: DGCI&S Source: DGCI&S .

iron & steel (articles). processed foods. slag & ash. articles of iron & steel. organic chemical. pharmaceutical products. spices. computers Medicines and drugs. pharmaceutical products 26 Pakistan Sri Lanka .g. mfg. products. computers. oil. slag & ash. processed foods. organic chemicals. electrical machinery. cotton. tea. auto-components and parts. jewelry. articles of iron & steel. sugar. electrical machinery. textiles Ores. iron & steel (articles). auto-components (e. Tyres) Ores. chemicals. ores.India's Market among SAFTA Nations • India‟s Market in SAARC for it‟s Major Export Commodities Bangladesh Nepal Organic chemical.

The Presentation Agenda SAFTA Trade: India-Pak-Afghan Customs and transit rights The way forward 27 .

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 28 .

and on the vigour and vision with which India and Pakistan – the two largest economies in the region – lead meaningful trade reforms.In conclusion… “The success of SAFTA greatly depends on the political commitment and harmony among all the signatory members.” 29 .

org 30 . www.org hvivek@idfresearch.idfresearch.Thank you.

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