Dismal state of South Asian trade  

Published: June 07, 2018 22:16:27 | Updated: June 09, 2018 22:03:57

It is quite disappointing that South Asia is still considered as one of the least integrated regions in the world in terms of trade, infrastructure, water, and energy cooperation. This view has once again been highlighted by a report published in this paper a few days ago. The study by Bangladesh Tariff Commission (BTC) has found a disappointingly slow growth of Bangladesh's exports to other South Asian countries in recent years. Thus, its exports to other member-countries of the South Asian Association for Regional Cooperation (SAARC) stood at US$ 670 million in the financial year (FY), 2011-12; the same increased by only US$ 39 million after a gap of five years. Similarly, its imports from the SAARC countries rose from US$ 5,376 million in FY 2011-12 to US$ 6,725 million in FY 2016-17.

Regrettably, the ratio of intra-regional trade in SAARC still hovers around 6.0 per cent of the total. This is much below 25 per cent for Association of South East Asian Nations (ASEAN), 35 per cent for East Asia, 45 per cent for ASEAN Plus-3, and 60 per cent for Europe. The BTC study attributed the current dismal state of trade-related affairs to different kinds of non-tariff and para-tariff barriers imposed by Bangladesh's neighbours. All these are happening despite the 'operationalisation' of South Asian Free Trade Area (SAFTA) since January 01, 2006.

SAFTA was meant to create a free trade area for a population currently estimated to be around 1.8 billion. Founded on reciprocity and mutuality, it was aimed at equitable benefits for all contracting states with due considerations for their levels of economic development, patterns of external trade, and tariff-cum-trading systems. Its main objective was to increase the level of trade cooperation among the SAARC countries by reducing tariffs and trade barriers. It recommended step-by-step negotiations for crossing successive stages through periodic reviews of tariffs. Recognition of the special needs of the least developed contracting states and preferential measures in their favour were also envisaged. But unfortunately, progress has been very sluggish in reducing tariffs and non-tariff barriers since the 'materialisation' of SAFTA. 

As pointed out by the BTC study, the non-tariff barriers being put up against Bangladeshi exports mainly relate to technical issues such as laboratory and chemical testing, labelling, packaging, sanitary requirements and quarantine. In addition, exports are also subjected to customs procedures like imposition of anti-dumping and countervailing duties, cess and para-tariffs.

This poor state of intra-regional trade in South Asia restricts the region's growth potential. Circuitous routes to markets, congested border crossings, dearth of communication infrastructure, high transportation costs and cumbersome regulatory requirements have been frequently identified as the causes for this situation. Many prescriptions have also been put forward over the years for improving it. In addition to eliminating tariffs and reducing non-tariff barriers, these include leveraging intra-regional investments, investing in efficient connectivity, harmonising standards through mutual recognition, and liberalising services, logistics, transportation. But sadly, the progress has been very slow and scanty in all these areas.

Originally, SAFTA aimed to bring down the customs duties of all traded goods to zero level by 2016. That deadline has already passed without any semblance of reaching the target. Going by the trend, full tariff elimination and sensitive list reduction will require, at least, another decade. But the non-tariff barriers remain a constant challenge to expansion of trade in South Asia. These barriers distort the market, discourage imports and often lead to higher prices for goods. Coordinated measures are therefore required at the regional level for addressing this chronic problem in order to gear up the growth of intra-regional trade. Accords like SAFTA make no sense unless they are enforced and implemented properly by the relevant parties.

Share if you like