Reforming Non-Tariff Barriers in South Asia Case for a Participatory Approach Pradeep S Mehta Pradeep S Mehta Secretary General SASA VIII WESTMINSTER COLLEGE, SALT LAKE CITY APRIL 11-13, 2014

Need to Address NTBs for Trade Normalisation 2  Bilateral intra-regional trade costs in South Asian amongst the highest in the World  NTBs account for more than a third of aggregate trade costs  Stagnant regional trade because of high trade costs  Lack of regional NTB reforms because of skewed national trade policies favouring trade with traditional markets  Deepening regionalism in other parts of the world and receding market access for South Asian countries

3 Prevalence of NTBs in South Asia South Asia suffers from wide range of trade barriers: (i) Commonly reported procedural NTBs requiring short- and medium- term reforms  Excessive logistic (including documentation) costs  Excessive trade financing costs (ii) Unaccounted procedural NTBs which factually hinder trade more than other barriers

4 Treatment of NTBs at the Multilateral Level (WTO) Shortcomings of the bifurcated multilateral approach to NTB reforms: (i) Policy Induced NTBs (Non-Tariff Measures, NTMs) -Limitations of WTO dispute settlement system -Difficult to determine legitimacy of NTMs -Costly and time consuming litigation process (ii) Non-Policy Induced NTBs (Trade Facilitation Requirements, Shortcomings in Trade Infrastructure) -Involves costly reform measures -Difficult to implement for budget-constrained developing countries -Lack of incentives for reforms

5 Treatment of NTBs under SAFTA: Status Quo  SAFTA follows the multilateral approach for NTB reforms and suffers from its shortcomings  A dispute settlement mechanism is yet to be instituted under SAFTA  Only a few NTMs/NTBs are notified by member states  Slow process for review of notified NTMs/NTBs and subsequent reforms thereof  Trade/Industry organisations have no direct access to the institutional mechanism for NTB reviews under SAFTA

6  Both policy induced and non-policy induced NTBs translates into unwarranted trade costs which burdens traders/industry  Traders/industry possess first-hand data on cheaper alternatives necessary for NTB reforms  Traders/industry have the right incentive to raise NTB reform measures as the direct victims  NTB review and resolution system can only be made effective by make it more participatory by involving trade/industry organisations Treatment of NTBs under SAFTA: Need for a Participatory Approach

7 Some of the Notable Benefits of Participatory Approach are as follows:  Promotes transparency and efficiency  Offers a simple and administratively easier system  Facilitates responsibility sharing and reduces the burden of governments  Brings back the focus of policy makers on economic costs and benefits Treatment of NTBs under SAFTA: Need for a Participatory Approach (Contd.)

8 Instituting a Participatory Approach for NTB Reforms: Policy Implications for South Asia Article 3 (Objectives and Principles) and Article 10 (Institutional Arrangements) of SAFTA already have adequate provisions for a participatory approach The charter of SAARC Chamber of Commerce and Industry (SAARC CCI) empowers it to represent the concerns of businesses on trade related issues Individual sectors and industries can have access SAARC CCI through membership in national level trade and industry organisations

9 Instituting a Participatory Approach for NTB Reforms: Policy Implications for South Asia (Contd.) Trade/Industries organisations should be sensitised about their potential role in NTB reforms through a participatory approach Some recent initiatives to promote the involvement of private sector in trade liberalisation in other regions (EU, SACU, MERCOSUR) are to be studied The SAARC Secretariat and the SAARC CCI have to take proactive steps for sensitising member governments and organisations across the SA region

Thank You 10