NTMs continue to hamper regional trade in South Asia

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Observer Report

Karachi—The NTMs (Non-tariff measures) continue to hinder trade among South Asian countries despite most favoured nation (MFN) status and preferential trade agreements (FTAs), according to a research released recently. In order to move forward, the regional countries needed to identify country-specific constraints, which could then be addressed through mutual cooperation under South Asia Free Trade Agreement (Safta), said the research titled ‘Policy Advocacy Strategy for Intra-regional Trade: Dealing with NTMs in South Asia’. It was prepared by South Asian Association for Regional Cooperation (Saarc) Trade Promotion Network group which deals with NTMs in the region.
It suggested that the situation warranted for active participation of public-private leadership, stakeholders and development partners using innovative approaches to address NTMs and harness opportunities for the reduction and removal of prevailing NTMs across the region. In the initial years of the formation of Saarc in the 1980s, the popular hypothesis for the reason behind limited intra-regional trade was the prevailing high tariff rate among the member countries. Now that the rates have come down substantially over the years due to increased globalisation of trade, and the establishment of the World Trade Organisation and the South Asian Free Trade Agreement (SAFTA), yet intra-Saarc trade remained stagnant at about only 5 per cent of total regional trade.
Based on these findings it has now emerged that NTMs and the resulting trade barriers, i.e., non-tariff barriers (NTBs), are the main reasons behind limited intra-regional trade, the study observed. The study further disclosed that regional exports as a percentage of country’s total exports vary widely, from 74pc in the case of Bhutan to only 2pc for Bangladesh and 7pc for India and The Maldives. Intra-regional exports account for 61pc and 62pc, respectively, of Afghanistan’s and Nepal’s total exports. Similar to exports, there are wide variations in the relative importance of intra-regional imports for Saarc countries. Around 73pc of Bhutan’s imports and 52pc of Nepal’s imports are from Saarc countries.
In sharp contrast, only 1pc of India’s imports are from other Saarc member countries. Low intra-regional dependency is also evident for Pakistan, where imports from other Saarc member countries account for only 4pc of total imports. Total exports of a Saarc member country as a percentage of total exports of all the eight members of the bloc is a measure of their relative trade openness and size. India accounts for 65pc of the region’s combined total exports. Pakistan accounts for 21pc while Afghanistan and The Maldives together account for only about 1pc.
In term of imports, Sri Lanka accounts for 24pc of total intra-regional imports, followed closely by Bangladesh at 22pc. Bhutan and The Maldives account for only 1pc of total imports by Saarc member countries. However, the study shows that under a full implementation of Safta, some of the South Asian countries would be able to increase their exports within the region quite substantially. India would appear to be the largest gainer as its exports to this region would increase by $858 million.
For Pakistan, Bangladesh and Nepal the rise in exports would be $169 million, $122 million and $90 million, respectively. Sri Lanka’s exports to the region would rise, but because of an FTA between India and Sri Lanka its exports to the Indian market would increase only in small amount. The study recommended the formation of a regional advocacy group for policy advocacy in South Asia. The group would comprise vice-presidents of the Saarc Chamber of Commerce and Indus­try as its members. They can also be the members of their respective national advocacy groups.