regional economic cooperation and nepal

8/8/2019 Regional Economic Cooperation and Nepal

1/25

Regional Trade AgreementsRegional Trade Agreements

(RTAs) & Nepal(RTAs) & Nepal

ByByMukeshMukesh MishraMishra

Kathmandu, NepalKathmandu, Nepal


2/25

ContentsContents

Nepal and RTAsNepal and RTAs

SAFTA: History and major provisionsSAFTA: History and major provisions

BIMSTEC: major provisionsBIMSTEC: major provisions RTAs and Nepalese Business.RTAs and Nepalese Business.


3/25

Regional Trade Agreements and NepalRegional Trade Agreements and Nepal

Nepal is a contracting party of two regional andNepal is a contracting party of two regional and17 bi17 bi--lateral trade agreements.lateral trade agreements.

1.1. Agreement on South Asian Free Trade AreaAgreement on South Asian Free Trade Area --

SAFTASAFTA ((Bangladesh, Bhutan, IndiaBangladesh, Bhutan, India, Maldives,, Maldives,NepalNepal, Pakistan,, Pakistan, Sri LankaSri Lanka and Afghanistan).and Afghanistan).

2.2. Bay of Bengal Initiative for MultiBay of Bengal Initiative for Multi--SectoralSectoralTechnical and Economic CooperationTechnical and Economic Cooperation

BIMSTECBIMSTEC ((Bangladesh, Bhutan, IndiaBangladesh, Bhutan, India,,Myanmar,Myanmar, Nepal, Sri LankaNepal, Sri Lanka, Thailand)., Thailand).


4/25

SAFTA: A Brief HistorySAFTA: A Brief History

Formation of SAARC in 1985.Formation of SAARC in 1985. Objectives (SAARC Charter) are:Objectives (SAARC Charter) are:

Acceleration of economic growth,Acceleration of economic growth,

Social progress and cultural development in the region,Social progress and cultural development in the region,

Promotion of active collaboration and mutual assistance in thePromotion of active collaboration and mutual assistance in theeconomic, social, cultural, technical and scientific fields, andeconomic, social, cultural, technical and scientific fields, and

Strengthening of cooperation among the Member States inStrengthening of cooperation among the Member States in

international fora on matters of common interest.international fora on matters of common interest.

In 1991, Council of Ministers at their Ninth Session at MalIn 1991, Council of Ministers at their Ninth Session at Malendorsed the Study on Trade, Manufactures and Services in theendorsed the Study on Trade, Manufactures and Services in theSouth Asian region and established a highSouth Asian region and established a high--level Committee knownlevel Committee knownas the Committee on Economic Cooperation (CEC) comprisingas the Committee on Economic Cooperation (CEC) comprising

Commerce/Trade Secretaries of the Member States.Commerce/Trade Secretaries of the Member States.

The CEC was mandated to formulate and oversee implementationThe CEC was mandated to formulate and oversee implementationof specific measures, policies and programmes within the SAARCof specific measures, policies and programmes within the SAARCframework to strengthen and enhance intraframework to strengthen and enhance intra--regional cooperation inregional cooperation inthe fields of trade and economic relations.the fields of trade and economic relations.


5/25

SAPTA to SAFTASAPTA to SAFTA

TheThe SixthSixth SummitSummit ((19911991),), heldheld inin ColomboColombo approvedapproved thethe

establishmentestablishment ofof anan InterInter--GovernmentalGovernmental GroupGroup (IGG)(IGG) toto formulateformulateanan agreementagreement toto establishestablish aa SAARCSAARC PreferentialPreferential TradingTradingArrangementArrangement (SAPTA)(SAPTA) byby 19971997..

The framework Agreement on SAPTA was finalized in 1993, andThe framework Agreement on SAPTA was finalized in 1993, andformally came into operation in December 1995, well in advanceformally came into operation in December 1995, well in advance

of the date stipulated by the Colombo Summit.of the date stipulated by the Colombo Summit.

ObjectiveObjective:: to establish and promote regional preferentialto establish and promote regional preferentialtrading arrangement for strengthening intratrading arrangement for strengthening intra--regional traderegional tradecooperation and development of national economies throughcooperation and development of national economies throughstep by step liberalization of tradestep by step liberalization of trade..

Four Round of trade negotiationsFour Round of trade negotiations were held under SAPTA towere held under SAPTA toliberalize trade.liberalize trade. The last (fourth) round of negotiation focused onThe last (fourth) round of negotiation focused oncreation of SAFTA.creation of SAFTA.

A Journey Towards SAFTA.A Journey Towards SAFTA.


6/25

A Journey Towards SAFTAA Journey Towards SAFTA

99thth SAARCSAARC SummitSummit (Male(Male 19971997)) HeadHead of of States/GovernmentsStates/Governments

recognizedrecognized thethe importanceimportance ofof achievingachieving aa freefree tradetrade areaarea byby thethe yearyear20012001..

1010thth SummitSummit (Colombo(Colombo 19981998)) reiteratedreiterated thethe mandatemandate ofof 99thth SummitSummitandand decideddecided toto constituteconstitute aa CommitteeCommittee ofof ExpertsExperts (CoE)(CoE) toto draftdrafttreatytreaty..

1111thth SummitSummit (Kathmandu(Kathmandu 20022002))

thethe LeadersLeaders agreedagreed toto accelerateaccelerate cooperationcooperation inin thethe corecore areasareasofof trade,trade, financefinance andand investmentinvestment toto realizerealize thethe goalgoal of of ananintegratedintegrated SouthSouth AsianAsian economy,economy, graduallygradually..

thethe LeaderLeader directeddirected thethe CouncilCouncil ofof MinistersMinisters toto finalizefinalize thethe texttext ofofthethe DraftDraft TreatyTreaty FrameworkFramework byby thethe endend ofof 20022002..

1212thth summit (Islamabad 2004)summit (Islamabad 2004) Head of sates endorsed the framework agreement of SAFTA.Head of sates endorsed the framework agreement of SAFTA.

The Islamabad Declaration aims to launch the SAFTA onThe Islamabad Declaration aims to launch the SAFTA onJanuary 1, 2006January 1, 2006

1 January 20061 January 2006: SAFTA into Operation.: SAFTA into Operation.


7/25

SAFTA for What?SAFTA for What?

PreamblePreamble::

To strengthen intra SAARC economicTo strengthen intra SAARC economic

cooperation to maximize the realization ofcooperation to maximize the realization of

the regions potential for trade andthe regions potential for trade anddevelopment for the benefit of their people,development for the benefit of their people,

in a spirit of mutual accommodation, with fullin a spirit of mutual accommodation, with full

respect for the principles of sovereignrespect for the principles of sovereign

equality, independence and territorialequality, independence and territorialintegrality of all sates.integrality of all sates.


8/25

SAFTA: ObjectivesSAFTA: Objectives

Article 3Article 3: Promote and enhance mutual trade and: Promote and enhance mutual trade and

economic cooperation among contracting states by:economic cooperation among contracting states by:

a)a) eliminating barriers to trade in, and facilitating the crosseliminating barriers to trade in, and facilitating the cross--borderbordermovement of goods between the territories of the Contractingmovement of goods between the territories of the ContractingStates;States;

b)b) Promoting conditions of fair competition in the free trade area,Promoting conditions of fair competition in the free trade area,and ensuring equitable benefits to all Contracting States, takingand ensuring equitable benefits to all Contracting States, takinginto account their respective levels and pattern of economicinto account their respective levels and pattern of economicdevelopment;development;

c)c) Creating effective mechanism for the implementation andCreating effective mechanism for the implementation andapplication of this Agreement, for its joint administration andapplication of this Agreement, for its joint administration andfor the resolution of disputes; andfor the resolution of disputes; and

d)d) Establishing a framework for further regional cooperation toEstablishing a framework for further regional cooperation toexpand and enhance the mutual benefits of this Agreement.expand and enhance the mutual benefits of this Agreement.


9/25

SAFTA: PrinciplesSAFTA: PrinciplesArticle 3Article 3::

a)a) SAFTA shall be governed by the provisions of this agreementSAFTA shall be governed by the provisions of this agreementand also by the rules, regulations, decisions, understandingsand also by the rules, regulations, decisions, understandingsand protocols to be agreed upon within its framework;and protocols to be agreed upon within its framework;

b)b) Affirmation of rights and obligations under WTO and otherAffirmation of rights and obligations under WTO and other

Treaties/Agreements signed by the Contracting States;Treaties/Agreements signed by the Contracting States;

c)c) Shall be based and applied on overall reciprocity and mutualityShall be based and applied on overall reciprocity and mutualityof advantages;of advantages;

d)d) Involve the free movement of goods;Involve the free movement of goods;

e)e) Adoption of trade facilitation and other measures andAdoption of trade facilitation and other measures andprogressive harmonization of legislation;progressive harmonization of legislation;

f)f) Special and differential treatment for LDCs : on nonSpecial and differential treatment for LDCs : on non--reciprocalreciprocalbasis.basis.


10/25

SAFTA: Major provisionsSAFTA: Major provisions

Instruments (Article 4): The Agreement will be implementedInstruments (Article 4): The Agreement will be implementedthrough:through:

1.1. Trade liberalization programme (Trade liberalization programme (Tariffs on all productsTariffs on all productsexcept the products under the sensitive lists will beexcept the products under the sensitive lists will bereduced to 0reduced to 0--5% within the agreed time frame (Article 7).5% within the agreed time frame (Article 7).

2.2. Rules of Origin.Rules of Origin.

3.3. Institutional Arrangements: committee of experts, councilInstitutional Arrangements: committee of experts, councilof ministersof ministers

4.4. Consultations and Dispute Settlement ProceduresConsultations and Dispute Settlement Procedures

5.5. Safeguard MeasuresSafeguard Measures

6.6. Any other instrument that may be agreed upon.Any other instrument that may be agreed upon.


11/25

Trade Liberalization Programme (Article 7)Trade Liberalization Programme (Article 7)

A.A. NonNon--LDCsLDCs

First Phase (2006First Phase (2006--2007)2007)

fortariffs higherthan 20 per cent, reductionoffortariffs higherthan 20 per cent, reductionof

tariffsto 20 per cent within 2 years.tariffsto 20 per cent within 2 years.

fortariffs lowerthan 20 per cent, annual 10fortariffs lowerthan 20 per cent, annual 10per cent reduction.per cent reduction.

Second Phase (2008Second Phase (2008--2012)2012) from 20 per centor below to 0from 20 per centor below to 0--5 per cent5 per cent

within 5 years, Sri Lanka 6 years.within 5 years, Sri Lanka 6 years.


12/25

Trade Liberalization Programme (Article 7)Trade Liberalization Programme (Article 7)

B.B. LDCsLDCs

First Phase (2006First Phase (2006--2007)2007)

fortariffs higherthan 30 per cent, reductionoftariffsfortariffs higherthan 30 per cent, reductionoftariffs

to 30 per cent within 2 years.to 30 per cent within 2 years.

fortariffs lowerthan 30 per cent, annual 5 per centfortariffs lowerthan 30 per cent, annual 5 per centreduction.reduction.

Second Phase (2008Second Phase (2008--2012)2012) from 30 per centor below to 0from 30 per centor below to 0--5 per cent within 85 per cent within 8

years.years.


13/25

Other important provisions (Article 7)Other important provisions (Article 7)

provisionofsensitive listprovisionofsensitive list -- negotiable,negotiable,subjecttomaximum ceiling,to besubjecttomaximum ceiling,to bereviewed afterevery four years.reviewed afterevery four years.

eliminationof quantitative restrictions.eliminationof quantitative restrictions.

NonNon--LDCsto reducetariffsto 0LDCsto reducetariffsto 0--5 per cent5 per centwithin 3 years for LDCs products.within 3 years for LDCs products.

mechanism for compensatory mechanismmechanism for compensatory mechanismfor revenue lossof LDCs.for revenue lossof LDCs.


14/25

Major Provisions of SAFTAMajor Provisions of SAFTA

Rules of OriginRules of Origin

Products with at least 40% domestic value addition will enjoy theProducts with at least 40% domestic value addition will enjoy thetariff reduction preferences under the SAFTA.tariff reduction preferences under the SAFTA.

Special and differential treatment is provided for products of LDCsSpecial and differential treatment is provided for products of LDCs((30% value addition is required for LDCs to qualify tariff reductions).30% value addition is required for LDCs to qualify tariff reductions).

Any product having 50% regional cumulative value addition withAny product having 50% regional cumulative value addition with

20% value addition in the final manufacturing/exporting country will20% value addition in the final manufacturing/exporting country willqualify for tariff reduction.qualify for tariff reduction.


15/25

Sensitive listSensitive list

To protectsome relevantdomestic industries,memberTo protectsome relevantdomestic industries,membercountriesmay maintaincountriesmay maintainSensitive ListsSensitive Lists, i.e. listsof products,, i.e. listsof products,which will not be covered by SAFTA.which will not be covered by SAFTA.

Thenumberof products inthe listshall besubjectto aThenumberof products inthe listshall besubjectto amaximum ceiling to bemutually agreed among themaximum ceiling to bemutually agreed among theContracting States with flexibility to LDCs.Contracting States with flexibility to LDCs.

Membersmay havetwo listsMembersmay havetwo lists-- one forthenonone forthenon--LDCs andtheLDCs andtheother, a more permissiveone forthe LDCs.other, a more permissiveone forthe LDCs.

The Sensitive List is reviewedevery four yearsorearlier asThe Sensitive List is reviewedevery four yearsorearlier asmay bedecided by the SAFTA Ministerial Council (SMC).may bedecided by the SAFTA Ministerial Council (SMC).

Major Provisions of SAFTA..Major Provisions of SAFTA..


16/25

Sensitive Lists of MembersSensitive Lists of Members

CountryCountryProducts under sensitive listProducts under sensitive list

(Number)(Number)

For NonFor Non--

LDCsLDCsFor LDCsFor LDCs

BangladeshBangladesh 12541254 12491249BhutanBhutan 157157 157157

IndiaIndia 865865 744744

MaldivesMaldives 671671 671671

NepalNepal 13351335 12991299

PakistanPakistan 11911191 11911191

Sri LankaSri Lanka 10791079 10791079


17/25

NonNon--Tariff and ParaTariff and Para--Tariff barriersTariff barriers

All quantitative restrictions, not compatible with GATT 1994All quantitative restrictions, not compatible with GATT 1994

shall be eliminated (Article 7.5).shall be eliminated (Article 7.5).

The COE reviews the nonThe COE reviews the non--tariff and paratariff and para--tariff barriers in itstariff barriers in itsregular meeting to make recommendations for theirregular meeting to make recommendations for their

elimination to facilitate intraelimination to facilitate intra-- SAARC trade and make it nonSAARC trade and make it non--

restrictive (Article 7.4).restrictive (Article 7.4).

The countries notify the measures (nonThe countries notify the measures (non--tariff and paratariff and para--tariff)tariff)to SAARC Secretariat on an annual basis.to SAARC Secretariat on an annual basis.

Major Provisions of SAFTA..Major Provisions of SAFTA..


18/25


Additional Measures (Article 8)Additional Measures (Article 8)

Harmonization of standards, reciprocal reorganization of tests andHarmonization of standards, reciprocal reorganization of tests and

accreditation of testing laboratories;accreditation of testing laboratories;

Simplification and harmonization of customs administrationSimplification and harmonization of customs administration

Simplification of banking procedures for import financingSimplification of banking procedures for import financing

Transit facility for efficient IntraTransit facility for efficient Intra--SAARC trade, especially for theSAARC trade, especially for the

landlocked countrieslandlocked countries

Removal of barriers to intraRemoval of barriers to intra--SAARC investmentSAARC investment

Development of transport and communication systemDevelopment of transport and communication system

Harmonization of Macroeconomic policyHarmonization of Macroeconomic policy


19/25


Institutional Arrangements (Article 10)Institutional Arrangements (Article 10)

SAFTA Ministerial Council (SMC): administration andSAFTA Ministerial Council (SMC): administration and

implementation of the agreementimplementation of the agreement

SAFTA CoE : to monitor, review and facilitate implementationSAFTA CoE : to monitor, review and facilitate implementation

Special and differential treatment for LDCs (Article 11)Special and differential treatment for LDCs (Article 11)

give special regards; consider, wherever practical; specialgive special regards; consider, wherever practical; special

consideration shall be given Safeguard Mechanism : importconsideration shall be given Safeguard Mechanism : import

surge causes or threaten to cause serious injury to like orsurge causes or threaten to cause serious injury to like or

directly competitive productdirectly competitive product

Dispute Settlement Procedure (Article 20): bilateral consultations,Dispute Settlement Procedure (Article 20): bilateral consultations,

CoE, Appeal to SMC.CoE, Appeal to SMC.


20/25

BIMSTECBIMSTEC BIMSTEC: Bay of Bengal Initiative for MultiBIMSTEC: Bay of Bengal Initiative for Multi--SectoralSectoral

Technical and Economic Cooperation.Technical and Economic Cooperation. The first BIMSTEC Summit held on 31 July 2004.The first BIMSTEC Summit held on 31 July 2004.

Objectives (Article 1):Objectives (Article 1):

(a)(a) strengthen and enhance economic, trade andstrengthen and enhance economic, trade and

investment cooperation among the parties;investment cooperation among the parties;(b)(b) progressively liberalize and promote trade in goodsprogressively liberalize and promote trade in goods

and services, create a transparent, liberal andand services, create a transparent, liberal andfacilitative investment regime;facilitative investment regime;

(c)(c) explore new areas and develop appropriateexplore new areas and develop appropriatemeasures for closer cooperation among the Parties,measures for closer cooperation among the Parties,andand

(d)(d) facilitate the more effective economic integration offacilitate the more effective economic integration ofthe least developed countries in the region, andthe least developed countries in the region, andbridge the development gap among the Parties.bridge the development gap among the Parties.


21/25

BIMSTEC: Major ProvisionsBIMSTEC: Major Provisions

Article 2: Measures for Comprehensive FreeArticle 2: Measures for Comprehensive FreeTrade Area (FTA):Trade Area (FTA): Strengthen andenhanceStrengthen andenhance

economic cooperationthrough the:economic cooperationthrough the:

Progressiveeliminationoftariffs andnonProgressiveeliminationoftariffs andnon--tarifftariff

barriers.barriers.

Establishing anopen and competitive investmentEstablishing anopen and competitive investment

regime.regime.

Provision for S&DT and flexibility tothe LDCs intheProvision for S&DT and flexibility tothe LDCs intheregion.region.

Establishing effectivetrade and investment facilitatingEstablishing effectivetrade and investment facilitating

measures.measures.


22/25

BIMSTEC: Major ProvisionsBIMSTEC: Major Provisions Article 3: Trade in GoodsArticle 3: Trade in Goods

elimination of tariff and nonelimination of tariff and non--tariff barriers in substantially alltariff barriers in substantially alltrade in goods, except those in the Negative List, between thetrade in goods, except those in the Negative List, between theparties,parties,

Fast Track (Shorter time frame).Fast Track (Shorter time frame).

Normal Track (longer timeframe).Normal Track (longer timeframe).

Article 4: Trade in ServicesArticle 4: Trade in Services

Article 5: InvestmentArticle 5: Investment

Article 6: Areas of Economic Cooperation (MRAs, CustomsArticle 6: Areas of Economic Cooperation (MRAs, Customscooperation, trade finance, Ecooperation, trade finance, E--commerce, Business VISA and Travelcommerce, Business VISA and Travel

facilitation.facilitation. Article 9: Dispute Settlement Mechanism.Article 9: Dispute Settlement Mechanism.

Article 10: Institutional Arrangements.Article 10: Institutional Arrangements.

Article 14: AccessionArticle 14: Accession


23/25


24/25


25/25

THANK YOUTHANK YOU

regional economic cooperation and nepal

Documents