SAPTA-Preferential Trading Agreement.ppt

SAPTA-To Augment Socio economic and Cultural Development of South Asian states through Economic Cooperation

1. SAARC Preferential Trading Arrangement Minithra Ravichandran SAPTA

2. Table of Content Introduction Reasons for formation Objectives Preferential Trading Arrangement Member & Observer Key Features SAPTA Progress Problems & Prospects SAFTA

3. Introduction Regional Intergovernmental organization for countries in South Asia The concept of SAARC was first envisaged by Bangladeshi president Late Zia-Ur-Rahman in 1980 Established on December 8,1985 , Dhaka, Bangladesh. SAARC was started initially with Seven member countries (Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri-Lanka) Afghanistan joined as the 8th member of SAARC in 2007

4. Observer countries of SAARC In addition to the eight Member States, it has 10 observer states, namely, Australia, China, the European Union, Iran, Japan, Mauritius, Myanmar, South Korea, and the United States.

5. It occupies a land area greater than the EU and ASEAN, and enjoys superiority in terms of population over the two. In terms of GDP, it stands second to the EU ORGANISATION POPULATION South Asian Association for Regional Cooperation 1,467,255,669 European Union 500,900,000 ASEAN 558,812,200 Source: SAARAC Website

6. The SAARC member countries differ greatly in land area, GDP (Gross Domestic Product), and population, although they share a similar human and economic development level. They also share an unusual feature of having a common border with another member country Predominance of Agriculture Got Independence after Second world War Democratic principles SAARC accounts for 3.8% (US$2.9 trillion) of the world’s GDP, 21% of its people, and 3% of its territory. The common issues faced by all SAARC nations include poverty, illiteracy, malnutrition, natural disasters, industrial and technological backwardness, low GDP, and poor socio-economic conditions . Reason for formation of SAARC Motto- Deeper Integration for Peace and Prosperity.

7. To promote the welfare of the peoples of South Asia and to improve their quality of life; To accelerate economic growth , social progress and cultural development in the region and to provide all individuals the opportunity to live in dignity and to realize their full potentials. To strengthen cooperation with other developing countries and to cooperate with international and regional organizations with similar aims and purposes. Objectives Core Objective: To Augment Socio economic and Cultural Development of South Asian states through Economic Cooperation

8. Broad Sphere which SAARC countries Initially Agreed to cooperate

9. SAPTA, SAARC Preferential Trading Arrangement is Trade arrangement formulated by seven South Asian Countries, i.e., India, Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan and Maldives on the basis of awareness that expansion of trade in South Asian region could act as a powerful stimulus to the development of region’s economy. SAPTA This Agreement was signed on 11th April 1993 at Dhaka Summit and entered into force on 7th December, 1995. SAPTA is a stepping stone to higher levels of trade liberalization and economic co-operation among the SAARC member countries was Initiated by Sri Lank

10. Preferential Trade Agreement (PTA) is a trading bloc that gives preferential access to certain products from the participating countries. This is done by reducing tariffs but not by abolishing them completely. A PTA can be established through a trade pact. A trade pact between countries that reduces tariffs for certain products to the countries who sign the agreement. While the tariffs are not necessarily eliminated, they are lower than countries not party to the agreement. Preferential Trade Agreement

11. The aim of the agreement was to reduce trade barriers and increase trade among the member states, with the goal of boosting economic growth and development in the region. Under the SAPTA agreement, member states agreed to gradually reduce tariffs on goods traded between them, with the aim of eventually achieving a free trade area. The agreement also provided for the creation of a dispute settlement mechanism to resolve any trade disputes that might arise between member states. Objectives

12. Option/Approaches for member countries Product by product basis Across the board tariff reduction Sectoral basis Direct trade measure Key Features-Trade Negotiations SAPTA inter-alia, consist of Components (a) tariffs; (b) para-tariffs; (c) non-tariff measures; (d) direct trade measures.

13. Conspicuous Failures-SAPTA Like various other regional trade agreements SAPTA was expected to generate greater regional output and more effective resource utilization. But the volume of intra-regional trade increased only marginally. The list of concessions offered under SAPTA included 3857 tariff lines but the major limitation was the actual trade coverage of preferential trade granted. The concessions granted by the countries were not substantial enough to increase the overall trade of the region. SAPTA failed to take into account the diverse needs of each member state . The Stringent rules of origin prescribed was also one of the reason So, In 2006 another attempt was made to strengthen the economic integration of SAARC members..

14. SAFTA South Asian Free Trade Agreement (SAFTA) Came into force in the year 2006 SAFTA covers trade in goods, services, and investment. SAFTA Required developing countries (India, Pakistan and Sri Lank)to bring down their duties to 20 % in first phase of the two year period ending 2007 It was also decided that in final five year phase ending 2012,the 20% duty will be reduced to zero in series of annual cuts. SAFTA Required Least developing countries to have additional three years to cut down their duties to zero.

15. Objectives-SAFTA To promote and sustain mutual trade and Economic Cooperation within SSARC Countries through exchange of concessions To reduce custom duties of traded goods to zero by 2016 To create an environment for investment opportunities in the South Asian region. To enhance the competitiveness of industries in the region through cooperation in the following areas: Technology transfer,  Research and development Capacity building

16. Factors of Comparison SAFTA SAPTA Full Form The full form of SAFTA is South Asian Free Trade Area SAPTA stands for South Asian Preferential Trade Arrangement Year of Establishment 2004 1993 Coverage Trade in goods, services, investment, and so on. Trade in goods. Trade Facilitation Aims to simplify customs procedures and regulations.  Promotes trade facilitation measures. Less emphasis on trade facilitation measures. Tariff Reduction Progressive reduction of tariffs on a wide range of products. Reduction of tariffs on limited products. Objectives Increase regional trade,  foster economic cooperation, reduce poverty and inequality. Enhance trade among member countries. Areas of Cooperation Investment, services trade, agriculture, infrastructure development, etc. Primarily focused on reducing tariffs on goods. Membership Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka Initially, only seven SAARC member countries. Trade Imbalances Efforts to address trade imbalances among member countries. Less focus on addressing trade imbalances.

17. Source: UNCTAD-Author own prediction

18. Implacable Failures of SAARC

19. Cooperation and integration in the Economic, Trade and Financial sectors is the key to achieve the objective of promote welfare of the people. Therefore, deeper integration in Economic Field is the key. Remove all Non-tariff, para tariff barriers and reduce the items under sensitive lists with a view to promote intra-regional trade. Member States need to focus on deeper cooperation in infrastructure development as Infrastructure is the lifeline for economic development. Project-based cooperation in the region Remove physical and non-physical barriers to enhance connectivity in the region Policy initiatives concerning economic integration Strengthen existing mechanisms Holding of activities on time as per approved calendar of activities Consider new initiatives to improve efficiency in all sectors including the private and public sectors. Way Forward

20. Data Source: UNCTAD

21. Reference SAARC. (1998). Declaration of the Tenth SAARC Summit Colombo 31 July 1998. Kathmandu: SAARC Secretariat Retrieved from http://www.saarcsec. org/ userfiles /Summit Declarations/10 - Colombo - 10th Summit 1998.pdf. SAARC. (2002). Declaration of the Eleventh SAARC Summit. Kathmandu: SAARC Secretariat Retrieved from http://www.saarcsecorg/userfiles/Summit Declarations/11- Kathmandu 11th Summit 2002.pdf . SAARC Charter. (1985). Kathmandu Retrieved from http://www.saarc-sec.org . https://unctadstat.unctad.org/datacentre/dataviewer/US.IntraTrade