ECO-PIDE Study on Regional Trading Patterns Pakistan Institute of Development Economics

Outline of the Presentation  Importance of regional economic integration in the ECO Region  Factors which have so far hampered economic cooperation in the region  Preliminary Findings of the Study  Future course of action

Regional Economic Integration  Regional and bilateral trade agreements (make up almost 40 percent of total world trade) − Trade Creation more competition, efficient allocation of resources, better productivity, enhanced economic growth − Institutionalization of policy reforms improved policy credibility − Stepping stone to multilateral trade liberalization − Enhanced regional security

Impediments in ECO Region − Protective import duties and taxes − Non-tariff barriers − Complicated custom procedures − Lack of regional transport network and transit system − Lack of regional trade facilitation measures − Similar comparative advantage and lack of trade complementarity

Measures to Enhance Economic Cooperation Large countries must lead the way Easing of travel and visa restrictions Strengthening of bilateral trade Create awareness about the potential benefits

Measures to Enhance Economic Cooperation (cont.)  Reform and harmonize trade policies to create a level playing field for stakeholders — Collective actions to lower trade barriers and advance domestic reforms — Reduce complexity of the tariff structure — Improvement in custom procedures  Facilitate trade through improvement in regional transport and transit system

Measures to Enhance Economic Cooperation (cont.)  Promoting Collectivism To safeguard regional interests in multilateral fora  Minimizing Trade Diversion Reduction in level of external protection

Measures to Enhance Economic Cooperation (cont.) − Effective implementation of policies and program − Conducive political and economic environment & strong willingness for integration − Acceptance for subsequent economic adjustments − Continuous dialogues and interaction

Measures to Enhance Economic Cooperation (cont.)  Exploring Potential in new areas Regional production sharing arrangements Intra-industry trade Cooperation in technology development and diffusion

Analysis of Bilateral Trade Flows: Some Preliminary Findings Revealed Comparative Advantage Indices Indicate export potential of a country Trade complementarity Index Indicates the level of complementarity in the bilateral trade structures

Revealed Comparative Advantage Index Revealed Comparative Advantage The numerator is the share of a country’s total exports of the commodity of interest in its total exports. The denominator is share of world exports of the same commodity in total world exports

Pakistan Products ShareRCASharesRCA made up textile Cotton Leather Products Agro Food Processing Carpets Leather Raw Materials Man-made fibers Embroidery clothing Vegetable Wheat Milling Processing

Azerbaijan Products SharesRCASharesRCA Sugars & confectionery Mineral fuels, Fruit and nuts Fats & oils Vegetables Cotton Ships & boats Agro food Processing Inorganic chemical Fruit & Vegetable

Iran Products ShareRCASharesRCA Carpets Oils & fuels fruit & nuts Animal Products Zinc & articles Vegetable plaiting materials Vegetables Lead & articles Coffee, tea & spices Cereals

Kazakhstan Products ShareRCAShareRCA Zinc & articles Lead & articles Malt & starches Copper & articles Mineral fuels Inorganic chemical Cereals Ores Raw hides and skins Other base metals

Turkey Products ShareRCAShareRCA Carpets & Flooring Made up textile Fabric Designing Special woven fabric Knitted Fabrics Fruit and nuts Malt & starches Salt, sulphur etc Cotton Apparel & clothing

Kyrgyzstan Products ShareRCASharesRCA Precious stones Stone processing Cotton Wool Salt; sulphur etc Rail Equipment Vegetables Glass & glassware Furniture & beddings Reactors & boilers

Trade Complementarity Index TCI: measures the degree of matching products between one country’s exports composition and another country’s import composition

Trade Complementarity Index Importing Countries Exporting Countries IranAzerKyrgKazhaTurk Pakistan

Concluding Remarks  Strengthening trade and economic relations would be beneficial for all countries  To move the process of regional economic integration forward we need: − Reduction in trade barriers − Harmonization of custom procedures and tariff structure − Improving transparency in policies − Trade facilitation