NON TARIFF BARRIERS ARE THE MAJOR IMPEDIMENT TO THE REGIONAL TRADE IN SAARC

- Mazharul Islam

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Published On - October 25, 2016 [Vol. 5, Jul - Dec, 2016]

INTRODUCTION

Regional assimilation in South Asia came into force in 1985[1] when the South Asian Association for Regional Cooperation (SAARC) accordingly the Preferential Trading Arrangement (SAPTA)[2] was formed.[3] In 2004 the SAARC associates decided to shape a South Asian Free Trade Area (SAFTA)[4] effective from 01 July 2006 as per the Article XXIV of the GATT[5] with the aim of increasing regional trade facilitation among the SAARC members and that was the key idea of the regional trade liberalization in South Asia. The SAARC associates are generally developing and Least Developed Countries[6] (LDCs).[7] Although, the tariff of the SAARC countries have been considerably abridged for the improvements of regional trade through SAFTA.[8] Thus, regional trade is not reduced by the high import tax, rather, is the consequence of the Non-Tariff Barriers (NTBs).

OVERVIEW OF NON-TARRIEF BARRIERS (NTBs)

It is predicted that when SAFTA instrument will completely come into force, then it will present the associate nations with enhanced market entree in South Asia, assist to increase their exports and progress regional trade and commerce.[9] Many aspects which could have challenged the possible profits from the SAFTA. The larger types of obstacles were classified i.e. negative list mechanism, technical obstacles to trade and sanitary and phyto-sanitary actions, trade competency and customs processes, economic measures, para-tariff procedures and Visa problems. Although, Article 3 (1) of SAFTA[10] mentioned the Objectives of this Agreement are to promote and enhance mutual trade and economic cooperation among Contracting States by, inter-alia: a) eliminating barriers to trade in, and facilitating the cross-border movement of goods between the territories of the Contracting States; (2) SAFTA shall be governed in accordance with the following principles: b) The Contracting States affirm their existing rights and obligations with respect to each other under Marrakesh Agreement Establishing the World Trade Organization and other Treaties/Agreements to which such Contracting States are signatories; d) SAFTA shall involve the free movement of goods, between countries through, inter alia, the elimination of tariffs, para tariffs and non-tariff restrictions on the movement of goods, and any other equivalent measures; f) The special needs of the Least Developed Contracting States shall be clearly recognized by adopting concrete preferential measures in their favour on a non-reciprocal basis and Article-6[11] reinforces that the SAFTA may, inter-alia, consist of arrangements relating to: a) tariffs; b) para-tariffs; c) non-tariff measures; d) direct trade measures. However, there is no obligatory pledge for countries within the provisions of SAFTA to remove NTBs. Therefore, NTBs would require to be addressed effectively with due significance for the promoting and protecting of regional trade among the SAARC countries.

NTBs AS ISSUES AND CONCERNS

At present, importance in regional trade and business assimilation in South Asia has enlarged.[12] Despite positive opinion in support of enlarged regional assimilation, reviewers have noted some issues which could challenge the prospective interest from the SAFTA. It is argued that there are restricted harmonized policies in South Asia. Thus, the liberal trade instrument and the development of regional trade would not be much effective.[13] These nations trade extremely small between themselves and main trading allies of all South Asian nations are situated in the West.[14] It is pointed that SAFTA may direct significant trade distraction than trade formation for a few of the associate nations. It may be considered an effort to assimilate an uncertain chunk of regional trade. These apprehensions have also been approved by a few authorities while reviewing the possible influences of SAFTA on the member nations.[15]

Apart from Afghanistan, Nepal and Bhutan, the entire South Asian countries have their key export marketplace not in South Asia. It also shows that trade within the South Asian nations is unfairly disseminated.[16] Comparatively only a small amount of trade subsists between Bangladesh, Bhutan, Nepal and Sri Lanka. On the other hand India is the leading import supplier for Bhutan and Nepal;[17] similarly it is also one of the major import supplier for Bangladesh.[18] Hence, the regional trade in South Asia, specially the trade with India is mainly one-sided,[19] as the amounts of importations from India to Bangladesh, Bhutan, Pakistan, Maldives, Nepal and Sri Lanka are significantly very big, while the amount of importation from these nations to India is very small.[20]

Non-tariff barriers NTBs within the South Asian nations have been identified as one of the main basis that lead to the small regional trade and business in South Asia. Therefore, it can be said that the decrease of non-tariff barriers among South Asian nations is one possible way to have essential implications in terms of enhanced market entrance of these nations to their adjoining countries.[21]

NON-TARIFF BARRIERS AND BANGLADESH

Since the third biggest economy in the South Asia, Bangladesh’s trade and business with the globe is important.[22] Despite being a third biggest trader in the South Asia, Bangladesh has narrow regional trade contrasted to its trade amount with the globe.[23] Reviewing the Bangladesh’s trade instructions and following communications among the specialist and associates of business society and govt. officials in the nation, the subsequent large kinds of NTBs surfaced most regularly.

Bangladeshi exporters often look for detailed seaport access due to prerequisite related restriction while inflowing India. The limitations are frequently imposed on a subjective basis by the Indian officials. Bangladesh also applies seaport access prerequisite for imports, for definite items, on the basis of different examination requirements.[24] Bangladeshi rules necessitate that the imports under Bonded Warehouse scheme to come into Bangladesh through Chittagong seaport only.[25] Nonetheless, there are few exemptions for the similar kinds of goods from Bhutan and Nepal inflowing Bangladesh through land ports.[26]

Barrister Harun ur Rashid in his writing ‘Barriers hamper exports to India’[27] mentioned the Researchers in both countries have found that Bangladesh is not able to export its products to India for many reasons namely: a) Bangladesh’s main exportable products are largely within the ambit of India’s negative list of goods; b) Non-tariff barriers in India, such as testing and certification, technical standards and banking impediments are some of the identifiable non-tariff barriers; c) Ordinarily, a quality standard certificate from Bangladesh is not accepted by India, and import-export number is issued from Kolkata, which is at least 1,680 km from Agartala; d) Non-tariff measures are turned into non-tariff barriers while complying with sanitary and phyto-sanitary measures and technical barriers to trade; e) There are poor logistics for land ports, only certain commodities can pass through land ports, cumbersome customs requirements, manual clearance, excessive inspection as an excuse for security, no customs cooperation or joint inspection, lack of harmonization of standards, lack of warehouse facilities in land ports, and no testing facility near any land port. (These impediments also apply for Indian exporters as well); f) Visa restrictions make it difficult for business people to travel to India to promote trade from Bangladesh.

A notable amount of informal business takes place between India and other two nations, i.e., Nepal and Bhutan, through India is taking place; dealers were often stated as a trouble primary to enlarged hassles at the boundaries. Poor highway communications in Bangladesh were also a key problem.[28] Nevertheless, opening of new technologies and the escalating height level of computerization at main border locations were renowned as optimistic improvements. Beginning of Border Haats (frontier markets) was also regarded as an affirmative advancement to encourage mutual and regional trade in South Asia.[29] The difficulty in banking dealings with India was a chief distress articulated by Bangladeshi business society.

POLICY IMPLICATIONS AND RECOMMENDATIONS

1. There is requirement for synchronization of the TBT and SPS procedures. All SAARC nations should continue parallel SPS brand Non Trade Measures (NTMs) for animal and animal items and plant and plant items. For these items, SAARC nations may think balancing their NTMs.[30] When these will be implemented then the receiving nation will be able to recognize permits issued by officials of other SAARC nation without performing scrutiny at the boundary points. This will be done in accordance with Article 2.3 of the WTO Agreement on Sanitary and Phyto-Sanitary measures which obliges non-discrimination among associate nations.[31]

2. The endorsement organizations or societies of associate’s nations may put in place ‘endorsement bodies’.

3. Quality control procedures imposed by the SAARC nations’ need for coordination of ‘minimum standards policy’.

4. Planned agendas should be started in order to decrease/eradicate technical impediments and duplication of certificates.

5. Every SAARC nation should accelerate and give precedence to improved computerization of their customs clearance process.

6. Pertinent laws governing NTMs/NTBs should be adopted/ modernized and put into practice throughout entire South Asia.

7. The adopting of NTMs/NTBs-Desks should be approved by the SAARC which can help to maintain all relevant prerequisites for regional economic assimilation.

CONCLUSION

The SAFTA agreement embraced trade in goods only; it gives no orientation to trade in services, one of the fastest-growing mechanisms of global trade.[32] The SAFTA associates should consent on opening the access of professionals, trained, semiskilled (counting unskilled) workers. The agreement does not identify a time-frame for phasing out non-tariff and para-tariff barriers. This needs to be done immediately otherwise regional trade growth under SAFTA will remain far below potential. Thus, NTBs in South Asia would need to be pointed effectively with due significance, as NTBs are the key obstacles to amplification of regional economic and trade collaboration in South Asia. Moreover, deeper collaboration among SAARC nations could potentially effect in significant reductions of these barriers.

BIBLIOGRAPHY

ADB-FICCI, “Key proposals for harnessing business opportunities in South Asia” Mandaluyong City, the Philippines: The Asian Development Bank 2010.

De P Raihan, S, and Ghani, “What does MFN trade mean for India and Pakistan? Can MFN be a Panacea?” World Bank Policy Research Working Paper 6483, Washington DC: The
World Bank 2013

De P Raihan, and Kathuria S, “Unlocking Bangladesh-India Trade: Emerging Potential and the Way Forward”, World Bank Policy Research Working paper 6155, Washington DC: The World Bank 2012

GEP, “The Report of the SAARC Group of Eminent Persons” SAARC Secretariat, Kathmandu 1998

Hussain A, “The political economy of trade facilitation and regional connectivity in South
Asia” a paper presented at the Third SAARC Business Leaders Conclave, 22-23 November
Colombo 2009

Rahman M, “Addressing Non-Tariff Barriers to Trade in South Asia: The Next Challenge” a
paper presented at the conference on Regional Economic Integration, Climate Change and
Food Security Agenda for the Decade 2011-2020, organised by South Asia Watch on Trade,
Economics and Environment and South Asia Centre for Policy Studies, Kathmandu, 17-19
December 2010

Raihan S, “Export Potentials and Actual Exports in South Asia” a mimeo, Dhaka,
Bangladesh 2013

Raihan S, “Economic Corridors in South Asia: Exploring the Benefits of Market Access and
Trade Facilitation” A report prepared for the RIS, New Delhi, and the Asian Development
Bank, Manila 2011

Raihan S, and De P, “India-Pakistan Economic Cooperation: Implications for Regional Integration in South Asia” London: Commonwealth Secretariat 2013

Taneja N, “India Pakistan Trade Possibilities and Non-tariff Barriers” Working Paper No. 200, New Delhi: Indian Council for Research on International Economic Relations 2013

Endnote:

[1] The South Asian Association for Regional Cooperation (SAARC) is the regional intergovernmental organization and geopolitical union of nations in South Asia. Its member states include Afghanistan, Bangladesh, Bhutan, India, Nepal, the Maldives, Pakistan and Sri Lanka. It was founded in Dhaka in 1985. The organization promotes development of economic and regional integration.

[2] In December 1991, the Sixth Summit held in Colombo approved the establishment of an Inter-Governmental Group (IGG) to formulate an agreement to establish a SAARC Preferential Trading Arrangement (SAPTA) by 1997. Given the consensus within SAARC, the Agreement on SAPTA was signed on 11 April 1993 and entered into force on 7 December 1995 well in advance of the date stipulated by the Colombo Summit. The Agreement reflected the desire of the Member States to promote and sustain mutual trade and economic cooperation within the SAARC region through the exchange of concessions.

[3] Hossain, Sharif M. and Ishtiaque Selim “Regional Cooperation in South Asia: Future of SAFTA”, BIISS Journal, Vol. 28, No. 2 April 2007

[4] SAPTA was envisaged primarily as the first step towards the transition to a South Asian Free Trade Area (SAFTA) leading subsequently towards a Customs Union, Common Market and Economic Union. The SAFTA Agreement was signed on 6 January 2004 during Twelfth SAARC Summit held in Islamabad, Pakistan. The Agreement entered into force on 1 January 2006, and the Trade Liberalization Programme commenced from 1st July 2006.

[5] Article XXIV: Territorial Application – Frontier Traffic – Customs Unions and Free-trade Areas.

[6] List of Least Developed Countries (as of May 2016) by United Nations Committee for Development Policy Development Policy and Analysis Division Department of Economic and Social Affairs, Available- <http://www.un.org/en/development/desa/policy/cdp/ldc/ldc_list.pdf>

[7] Kabir, A. S. M. “Sanguinity and Aspiration toward South Asian Regional Integration: A Case Study of the South Asian Free Trade Area (SAFTA) Agreement”, Munich, Germany: Munich Personal RePEc Archive (MPRA), Paper No. 3871 November 2007; available at: <http://mpra.ub.uni-muenchen.de/3871/>

[8] Ayubur Rahman Bhuyan, “Economic Effects of South Asian Free Trade Area on Intra-regional Trade and Investment”, Thoughts on Economics Vol. 18, No. 04

[9] “Neighbourhood First, Navigating Ties Under Modi”, Edited by Aryaman Bhatnagar Ritika Passi, Observer Research Foundation and Global Policy Journal, Printed by: Vinset Advertising, Delhi available <http://www.orfonline.org/wp-content/uploads/2016/03/GP-ORF_Indias-Neighbourhood.pdf>

[10] The SAFTA Agreement was signed on 6 January 2004 during Twelfth SAARC Summit held in Islamabad, Pakistan. The Agreement entered into force on 1 January 2006, and the Trade Liberalization Programme commenced from 1st July 2006.

[11] Ibid

[12] Mahmud, Wahiduddin “Employment, Income and Poverty: Prospects of Pro- Poor-Growth in Bangladesh”, in: Sadiq Ahmed and Wahiduddin Mahmud (eds.) Growth and Poverty: The Development Experience in Bangladesh, Dhaka: University Press Ltd. 2006

[13] Raihan, Selim “SAFTA and the Bangladesh Economy: Assessments of Potential Implications”, Dhaka, Bangladesh: South Asian Network on Economic Modeling (SANEM), SANEM Discussion Paper, No. 3, January 2008; available at: <www.thecommonwealth.org/files/178425/FileName/SAFTA%20and%20Bangladesh.pdf.>

[14] T.N. Srinivasan, “Preferential Trade Agreements with Special Reference to Asia”, available <http://aida.wss.yale.edu/~srinivas/PrefTradeAgreements.pdf>

[15] D I L I P K D A S, “The South Asian Free Trade Agreement:

Evolution and Challenges”, MIT INTERNATIONAL REVIEW, Spring 2008, available <http://web.mit.edu/mitir/2008/spring/south.pdf>

[16] SHARMIN SULTANA and JUMANA ASRAT, “South Asian Countries in Regional

Integration Perspective: A Critical Review”, Volume–IX, Issue–02, July -December, 2014, available <https://www.google.com.bd/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwi1gNm_ssbPAhUKpI8KHXMvBb8QFggcMAA&url=http%3A%2F%2Fwww.banglajol.info%2Findex.php%2FJBT%2Farticle%2Fdownload%2F26195%2F17578&usg=AFQjCNFrBW4nHp-WxfEw_Edd6owoBoTaow&sig2=MT1AF9e3vnyZtBCz2_qExQ>

[17] Consulate General of India, Birgunj Shreepur, Birgunj, Nepal, available <http://www.cgibirgunj.org/page/detail/194>; International Trade Centre, Country Brief ‘Bhutan’, available <http://www.intracen.org/country/bhutan/>; see <http://atlas.media.mit.edu/en/profile/country/btn/#Imports>

[18] India-Bangladesh Chamber of Commerce and Industry, “India Bangladesh Trade”, available <http://www.ibcci.net/india-bangladesh-trade/>

[19] Mohammad Enayet Rabbani Chowdhury, “Our trade with Saarc countries”, published: The Daily Star, October 19, 2011 available <http://www.thedailystar.net/news-detail-207046>

[20] M. Kabir Hassan, “Trade relations With SAARC Countries and Trade Policies of Bangladesh”, Journal of Economic Cooperation 21, 3 (2000) 99-151 available <http://www.sesrtcic.org/files/article/190.pdf>

[21] Rahman, Mustafizur; Wasel Bin Shadat; and Narayan Chandra Das “Trade Potential in SAFTA: An Application of Augmented Gravity Model”, Dhaka, Bangladesh: Centre for Policy Dialogue (CPD), CPD Occasional Paper Series, No. 61, December 2006; available at: <http://www.cpd.org.bd/pub_attach/OP61.pdf.>

[22] “Promoting Economic Cooperation in South Asia, B e y o n d S A F TA”, Edited by Sadiq Ahmed, Saman Kelegama and Ejaz Ghani, First published in 2010 by

SAGE Publications India Pvt Ltd, India, www.sagepub.in, available <http://siteresources.worldbank.org/SOUTHASIAEXT/Resources/223546-1192413140459/4281804-1192413178157/4281806-1265938468438/BeyondSAFTAFeb2010FullText.pdf>

[23] Gilberto M. Llanto, “BINDING CONSTRAINTS TO REGIONAL COOPERATION AND INTEGRATION IN SOUTH ASIA”, available <https://www.adb.org/sites/default/files/linked-documents/rcs-south-asia-2011-2015-oth-03.pdf>

[24] Bangladesh Trade Information, “Import Policy of Bangladesh”, available- <http://www.bdtradeinfo.com/business-investment/import_policy.php>

[25] B.M. Syedur Rahman, “Bonded Warehouse Facilities, Customs Bond Commissionerate”, available <http://www.cbc.gov.bd/index.php?option=com_content&view=article&id=46:bonded-warehouse-facilities&catid=25:the-project>

[26] Reports of The Independent Bangladesh, “Gateway to north reopens today”, Banglabandha land port to link Bangladesh, Bhutan, India, Nepal available- <http://www.theindependentbd.com/printversion/details/34393>

[27] Barrister Harun ur Rashid, “Barriers hamper exports to India”, published: The Daily Star, available <http://www.thedailystar.net/news-detail-183285>, April 27, 2011; see Dr Muinul Islam, “Non-tariff barriers in Indo-Bangla trade”, published: The Daily Star, available- <http://www.thedailystar.net/news-detail-184960>, May 10, 2011

[28] Rashid, M. Ali and A. K. M. Atiqur Rahman “Implementing the South Asian Free Trade Agreement (SAFTA): Challenges and Possible Roadmap”, BIISS Journal, Vol. 25, No. 4, October 2004

[29] The Openion Pages Published: bdnews24.com, “Benefits of border “haats” along India-Bangladesh frontier”, available <http://opinion.bdnews24.com/2015/05/15/benefits-of-border-%E2%80%9Chaats%E2%80%9D-along-india-bangladesh-frontier/>

[30] Tewari, Meenu “Deepening Intraregional Trade and Investment in South Asia: The Case of the Textiles and Clothing Industry”, New Delhi, India: Indian Council for Research on International Economic Relations, New Delhi 2008, Working Papers, No. 213; available at: <www.icrier.org/publication/working_paper_213.pdf>

[31] The Agreement on the Application of Sanitary and Phytosanitary Measures (the “SPS Agreement”) entered into force with the establishment of the World Trade Organization on 1 January 1995. It concerns the application of food safety and animal and plant health regulations.

[32] NTMs in South Asia: Assessment and Analysis, SAARC Trade Promotion Network (SAARC-TPN), Published: Kathmandu, Nepal, May 2014

About The Writer

Article Author Image

Mazharul Islam

Advocate, Dhaka Judge Court.

PhD Research Scholar in Law at South Asian University (A University Jointly Established by SAARC Nations) India; He is currently working with the European Commission (EC) on a Research Project “Case Studies on the Integration of EU Development, Trade and Human Rights Policies”; He received LLB (H) 2013; LL.M. 2015, South Asian University, India; PDG in Int’l law and Diplomacy 2016 and PGD in HR, IHL and Refugee Law 2015, Indian Academy of International Law, India; Research Intern at SAARC 2014, SAARC Secretariat, Nepal.

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