1. Trade in Goods: Progress and Impediments Uttam Deb
International Conference on
Organized by RIS and IIC September 2010; New Delhi
Trade in Goods:
Progress and Impediments
Uttam Deb
Principal Scientist (Economics), ICRISAT
and
Additional Director (on leave),
Centre for Policy Dialogue

2. Contents Section I: Introduction
Section II: State of Intra-regional Trade among SAARC Countries
Section III: Impediments in Intra-SAARC Trade
Section IV: Way Forward 2

3. Prime Minister of India At the 16th SAARC Summit in Thimphu, Bhutan
I: INTRODUCTION
“I believe we should challenge ourselves by acknowledging that the glass of regional cooperation, regional development and regional integration is half empty.”
“Intra-regional trade flows have grown and transport and telecommunication links have expanded. Yet, the share of intra-regional trade and investment flows in total trade and investment flows in South Asia is far below what we see in East and South-east Asia. It is also well below the potential”.
Dr. Manmohan Singh
Prime Minister of India
At the 16th SAARC Summit in
Thimphu, Bhutan
28 April 2010 3 3

4. preferential arrangement (PTA) to free trade area (FTA) to
I. Introduction
Group of Eminent Persons (GEP), constituted by the SAARC leaders, articulated a comprehensive road map towards an Economic Union in South Asia by 2020, through transition from
preferential arrangement (PTA) to
free trade area (FTA) to
Customs Union (CU), to common market (CM) to
a Economic Union (EU) in the span of about two decades.
The Road Map was placed at the tenth SAARC Summit held in Colombo in 1998. 4 4

5. II. State of Intra-regional Trade among SAARC Member Countries
SOUTH ASIA'S INTRA AND EXTRA-REGIONAL TRADE IN 2008
Export
Import
Total export (mil. US$)
Share of intra-regional export (%)
Share of extra-regional export (%)
Total import (mil. US$)
Share of intra-regional import (%)
Share of extra-regional import (%)
Afghanistan
421.95
41.75
58.25
40.65
59.35
Bangladesh
3.1
96.9
16.93
83.07
Bhutan NA
India
187405
5.1
94.9
300539
0.8
99.2
Maldives
202.63
8.78
91.22
15.13
84.87
Nepal
73.89
26.11
59.59
40.41
Pakistan
13.36
86.64
2.75
97.25
Sri Lanka
8.39
91.61
22.87
77.13
Total
6.29
93.71
3.94
96.06
Source: Hossain et al (2010) 5

6. II. State of Intra-regional Trade among SAARC Member Countries
Dynamics of Intra-SAARC Export, Import and Trade as % of Global Relevant Indicators of SAARC Countries
 Trade
1985
1990
1995
2000
2005
2008
Export
4.89
3.45
4.52
4.56
6.60
6.29
Import
2.11
2.18
3.94
4.26
4.70
Total
3.04
2.70
4.20
4.39
5.47
4.81
Source: Rahman (2010) 6

7. Average growth rate (2004-2008)
II. State of Intra-regional Trade among SAARC Member Countries
SOUTH ASIA'S EXPORT TO DIFFERENT REGIONS (Million US$)
2000
2004
2005
2006
2007
2008
Average growth rate ( )
South Asia
2894
6540
8580
9931
12233
14698
29.00
South East Asia
3354
8047
10665
10538
13206
17143
27.52
Europe
16865
26419
32145
37454
45987
53805
21.76
North America
16778
21459
26590
33294
35418
37441
16.40
Others
23607
40587
52030
67945
87629
110481
29.41
World
63498
103052
130010
159163
194473
233568
24.63
Source: Moazzem and Mahmud (2010) 7

8. II. State of Intra-regional Trade among SAARC Member Countries
Intra-regional Exports of South Asian Countries in 2008
(in million USD)
Countries  
Afghanistan
Bangla-desh
Bhutan
India
Maldives
Nepal
Pakistan
Sri Lanka
Total Export (SAARC)
Exports to World
Share (%) of Intra-regional Exports to World Exports NA
2.84
88.65
0.00
84.68
176.17
421.95
41.75
Bangladesh
2.23
3.27
329.69
6.03
78.96
10.87
431.06
3.10
252.01
167.23
109.09
5.10
1.75
16.05
17.80
202.63
8.78
70.25
797.63
0.01
3.65
0.08
871.62
73.89
257.18
0.42
590.79
5.14
3.41
184.79
13.36
18.73
588.28
58.10
0.21
63.30
728.62
8.39
Total
6.29
Source: Rahman (2010) 8

9. II. State of Intra-regional Trade among SAARC Member Countries
Intra-regional Imports of South Asian Countries in 2008
(in million USD)
Countries 
Afghanistan
Bangladesh
Bhutan
India
Maldives
Nepal
Pakistan
Sri Lanka
Total Imports from SAARC
Imports from World
Share (%) of Intra-regional Imports to World Imports
2.45 NA
277.21
0.00
40.65
3.13
14.81
77.28
282.89
17.15
16.93
97.51
362.66
147.78
2.87
877.39
274.65
647.10
0.80
146.85
0.01
5.03
63.91
215.80
15.13
6.64
3.75
0.23
59.59
93.15
86.86
1.01
6.03
4.01
69.63
2.75
12.54
17.65
0.09
203.27
22.87
Total
3.94
Source: Rahman (2010) 9

10. II. State of Intra-regional Trade among SAARC Member Countries
Taneja (2004, 2005) has estimated that total informal trade in South Asia is worth US $1.5 billion, which is 72 per cent of formal trade (for the years for which data were available)
The SAARC region experienced accelerated growth in intra-regional trade during 2006 to2008; however, extra-regional trade grew at a faster rate during the same period (Moazzem and Rahman, 2010). 10

11. III. Impediments in Intra-SAARC Trade
Limited product coverage and the extensive nature of negative lists
Non-tariff Barriers (NTBs)
Lack of intra-industry trade
Lack of trade facilitation
Energy scarcity 11

12. Number of Tariff Lines in Negative List
III. Impediments in Intra-SAARC Trade
Limited product coverage and the extensive nature of negative lists
Countries
Number of Tariff Lines in Negative List
Bangladesh
1249 (for LDCs) and 1254 (for non LDCs)
Bhutan
259
India
763 (for LDCs) and 884 (for non LDCs)
Maldives
671
Nepal
1300 (for LDCs) and 1350 (for non LDCs)
Pakistan
1183
Sri Lanka
1574
Source: Annex 1, SAFTA Agreement.

13. III. Impediments in Intra-SAARC Trade
Limited product coverage and the extensive nature of negative lists
India has a moderately low number of items on the sensitive list for non-LDCs, but it has the largest per cent of tariff lines in categories for vegetable products (20.2 per cent) and textile products (34.2 per cent).
India’s import of these items from South Asian countries constitutes only 12 per cent of its world imports (Taneja et. al., 2007).
About 53 per cent of the total import trade in SAFTA members has been subject to the negative list of the respective countries (Sawhney, 2008).
India and Sri Lanka have restricted up to 38 and 52 per cent respectively of their total imports by value from other SAFTA members under the sensitive list category (Sawhney, 2008).
The limited product coverage and the extensive nature of negative lists decrease the scope for intra-regional trade in South Asia (Rahman and Shadat, 2006).

14. III. Impediments in Intra-SAARC Trade
Limited product coverage and the extensive nature of negative lists
India has a moderately low number of items on the sensitive list for non-LDCs, but it has the largest per cent of tariff lines in categories for vegetable products (20.2 per cent) and textile products (34.2 per cent) (Rahman, 2010)
India’s import of these items from South Asian countries constitutes only 12 per cent of its world imports (Taneja et. al., 2007).
About 53 per cent of the total import trade in SAFTA members has been subject to the negative list of the respective countries (Sawhney, 2008).
India and Sri Lanka have restricted up to 38 and 52 per cent respectively of their total imports by value from other SAFTA members under the sensitive list category (Sawhney, 2008).
The limited product coverage and the extensive nature of negative lists decrease the scope for intra-regional trade in South Asia (Rahman and Shadat, 2006). 14 14

15. Percentage Share of Specific NTBs to all NTBs in SAARC
III. Impediments in Intra-SAARC Trade
Percentage Share of Specific NTBs to all NTBs in SAARC
Non-Tariff Measures
Share
SPS, TBT, and Other Related Measures
86.3
Tariff Quota
9.8
Anti-Dumping Measures
7.4
License Requirement
5.3
Countervailing Measures
1.2
SAARC countries have in place several ad hoc restrictions and NTBs on imports. The general consensus has been that whilst SAFTA had failed to address NTB issues, the SAFTA Agreement also is yet to address the NTB issues squarely and with due diligence (Rahman 2010) 15

16. Lack of Trade Facilitation
III. Impediments in Intra-SAARC Trade
Lack of Trade Facilitation
Lack of adequate transit facilities
for Bangladesh (from Nepal and Bhutan via India), for India (from north east states to western states of India through Bangladesh) and for Pakistan (to Bangladesh through India)
Infrastructure Related Constraints
Lack of physical, industrial, and communication infrastructure in the region had restricted trade in South Asia
While it takes 2 hours to clear a vessel in Singapore and Laem Chabang, Thailand, it takes 2-3 days in Chittagong
At Delhi airport, average cargo dwell time is 2.5 days
A UNESCAP study conducted on South Asian Trade in 2007 found that disparity in infrastructure facilities has indeed been increasing over the years 16

17. III. Impediments in Intra-SAARC Trade
Other Barriers
Lack of Border Infrastructure and Traffic Planning: Traffic congestion and delays in handling the shipments
Land Ports at the Border: The storage dwell times has been increasing and the port storage is grossly inadequate. For example, at the Petrapole-Benapole border, it takes longer time to unload vehicles into the land port than the physical clearance time
Lack of Cross-Border Transport Agreements: Due to lack of through-transport movement, formidable transport inefficiencies exist at the interface 17 17

18. Elimination of negative lists for LDCs
IV. Way Forward
Elimination of negative lists for LDCs
under a “duty free” scenario, the possible revenue loss to India would be around only USD 4.9 million (0.023 per cent of India’s custom duty and per cent of total government revenue earnings of India) on an export of about USD 15.2 million from Bangladesh in Thus, India does not stand to lose in any significant manner if the entire sensitive list is eliminated for Bangladesh, on an immediate basis. (Rahman, 2010)
Promoting Foreign Direct Investment (FDI)
Promotion of intra-industry trade 18 18

19. Revisiting Rules of Origin in SAFTA
IV. Way Forward
Revisiting Rules of Origin in SAFTA
Under the SAFTA, the general RoO is 40 per cent value addition plus change in classification at the four digit level (CTH).
For LDCs, the RoO is 30 per cent value addition plus change of tariff heading (CTH).
There is a need to make these rules less cumbersome and more export-friendly.
A 25 per cent flat RoO for LDCs (as in the Canadian GSP) will make both compliance and implementation easier. 19 19

20. Strengthening the Financing of Intra-SAARC Trade
IV. Way Forward
Removal of para-tariffs and surcharges for exports from SAARC countries
Trade facilitation
Effective and rapid establishments of standards and mutual recognition of standards
Removal of NTBs
Automation of customs
Strengthening the Financing of Intra-SAARC Trade
Using WTO DSB Mechanism
Cooperation for energy security
Capacity building 20 20

21. Thank You for Your Attention21 21 21
CPD: TPA Workshop 2006