SAFTA: Tariff and OtherSAFTA: Tariff and OtherMeasures to Enhance IntegrationMeasures to Enhance Integration

Dr Zafar Mueen NasirDr Zafar Mueen NasirChief of ResearchChief of Research

Pakistan Institute of Development Pakistan Institute of Development EconomicsEconomics

OutlineOutline

Importance of regional economic Importance of regional economic integration in South Asiaintegration in South Asia

Factors which have so far hampered Factors which have so far hampered economic cooperation in the region economic cooperation in the region

Future course of actionFuture course of action

Regional Economic IntegrationRegional Economic Integration

Regional and bilateral trade agreementsRegional and bilateral trade agreements (make (make up almost 40 percent of total world trade)up almost 40 percent of total world trade) − Trade CreationTrade Creation

• more competition, efficient allocation of more competition, efficient allocation of resources, better productivity, enhanced economic resources, better productivity, enhanced economic growth growth

− Institutionalization of policy reformsInstitutionalization of policy reforms• improved policy credibilityimproved policy credibility

− Stepping stone to multilateral trade Stepping stone to multilateral trade liberalizationliberalization

− Enhanced regional securityEnhanced regional security

Impediments to Regional Impediments to Regional Integration in South Asia Integration in South Asia

Restrictive trade policiesRestrictive trade policies− Protective taxes and import dutiesProtective taxes and import duties− Complicated custom proceduresComplicated custom procedures

Similar comparative advantage & lack Similar comparative advantage & lack of trade complementaritiesof trade complementarities

Impediments to Regional Impediments to Regional Integration in South Asia Integration in South Asia (cont.)(cont.)

Political problemsPolitical problems

Lack of regional transport network & Lack of regional transport network & Transit systemTransit system− High handling and transport chargesHigh handling and transport charges

Measures to Enhance Measures to Enhance Economic CooperationEconomic Cooperation Confidence-building MeasuresConfidence-building Measures

– India and Pakistan must lead the wayIndia and Pakistan must lead the way– easing of travel and visa restrictions easing of travel and visa restrictions – Opening up of bilateral trade beyond what is Opening up of bilateral trade beyond what is

covered by SAPTA, though initially on a covered by SAPTA, though initially on a limited scale limited scale

– Create awareness about the potential benefits Create awareness about the potential benefits

Measures to Enhance Measures to Enhance Economic Cooperation Economic Cooperation (cont.)(cont.)

Reform and harmonize trade policies to Reform and harmonize trade policies to create a level playing field for create a level playing field for stakeholders stakeholders — Collective actions to lower trade barriers and Collective actions to lower trade barriers and

advance domestic reformsadvance domestic reforms— Reduce complexity of the tariff structureReduce complexity of the tariff structure— Improvement in custom proceduresImprovement in custom procedures

Facilitate the trade through improvement Facilitate the trade through improvement in regional transport and transit systemin regional transport and transit system

Measures to Enhance Measures to Enhance Economic Cooperation Economic Cooperation (cont.)(cont.)

Promoting CollectivismPromoting Collectivism

– To safeguard regional interests in To safeguard regional interests in multilateral foramultilateral fora

Minimizing Trade DiversionMinimizing Trade Diversion

– Reduction in level of external protectionReduction in level of external protection

Measures to Enhance Measures to Enhance Economic Cooperation Economic Cooperation (cont.)(cont.) Making SAFTA workMaking SAFTA work

− Effective implementationEffective implementation− Conducive political and economic Conducive political and economic

environment & strong willingness for environment & strong willingness for integrationintegration

− Acceptance for subsequent economic Acceptance for subsequent economic adjustmentsadjustments

− Continuous dialogues and interactionContinuous dialogues and interaction

Measures to Enhance Measures to Enhance Economic Cooperation Economic Cooperation (cont.)(cont.)

Making SAFTA work Making SAFTA work (cont.)(cont.)

– Reduced negative list and product specific Reduced negative list and product specific rulesrules

– Broader tariff liberalizationBroader tariff liberalization

– Transparent anti dumping and Transparent anti dumping and countervailing dutiescountervailing duties

Measures to Enhance Measures to Enhance Economic Cooperation Economic Cooperation (cont.)(cont.)

Exploring Potential in new areasExploring Potential in new areas

– Regional production sharing arrangementsRegional production sharing arrangements

– Intra-industry tradeIntra-industry trade

– Cooperation in technology development Cooperation in technology development and diffusionand diffusion

Concluding RemarksConcluding Remarks

To move the process of regional economic To move the process of regional economic integration forward we need:integration forward we need:− Reduction in trade barriersReduction in trade barriers− Harmonization of custom procedures and Harmonization of custom procedures and

tariff structuretariff structure− Improving transparency in policiesImproving transparency in policies− CollectivismCollectivism− Effective implementation of SAFTAEffective implementation of SAFTA