SAFTA and BIMSTEC

Regional Economic Integration

Group MembersAkshaya AgrawalSujita KhadkaSiddhant ShresthaOjashri BasnyatSajeev Ranjit

What is SAFTA? The South Asian Free Trade Area or SAFTA is a pact signed in 6 January

2004

It would gradually eliminate most tariffs and other trade barriers on products and services passing between Bangladesh, Bhutan, Nepal, Pakisthan, Afghanisthan and Srilanka

The pact would effectively create a free-trade bloc among the eight countries of South Asia

SAFTA’s main provisions called for the gradual reduction of tariffs, customs duties, and other trade barriers between the seven members, with some tariffs being removed immediately and others over periods of several years.

SAFTA ensured eventual duty-free access for a vast range of manufactured goods and commodities traded between the signatories.

Objectives of SAFTAPromoting and enhancing mutual trade and economic

cooperation by eliminating barriers in tradePromoting conditions of fair competition in the free

trade area, Ensuring equitable benefits to allEstablishing a framework for further regional

cooperation to expand the mutual benefits of the agreement.

creating effective mechanism for the implementation and application of this Agreement, for its joint administration and for the resolution of disputes;

Principles of SAFTA 

1. Governed by the Provisions of this Agreement

2. Existing Rights and Obligations

 

3. Overall Reciprocity

 

 4. Free Movement of Goods

 

 5. Adoption of Trade Facilitation and Other Measures

 

 6. Recognization of the Needs of LDCs

 

Instruments

Trade Liberalization ProgramRules of OriginInstitutional Arrangements Consultations and Dispute Settlement ProceduresSafeguard Measures Any other instrument that may be agreed upon

Trade Liberalization Program

Rules Of Origin

Non LDC 40% value addition criteria

LDC 30% value addition criteria

Sensitive listS. No. Name of the

Contracting StatesNo of tariff lines for LDCS(total number of sensitive list)

No of tariff lines for Non- LDCS (Total number of sensitive list)

Consolidated list

1 Bangladesh 1249 1254 -------

2 Bhutan ----- ----- 137

3 India 744 865 ------

4 Maldives ----- ----- 671

5 Nepal ----- ----- 1335

6 Pakistan ----- ----- 1183

7 Sri Lanka ---- ------ 1065

SAFTA will bring significant gains for the small economies of the region.

It will attract foreign capital.

It will be a step toward better political relations and peace.

Part of the informal trade will be diverted to official channels and bring revenue and other benefits.

Elimination of tariffs will increase intra-regional trade by 1.6 times the existing trade.

Dynamic gains will be more significant than static gains.

Likely Effects of SAFTA : Positive Views

Likely Effects of SAFTA : Negative Views

• SAFTA does not meet the standard economic criteria for successful integration (other than high pre-FTA tariff and geographical contiguity).

• Other requisite criteria are high levels of international trade before the formation of the FTA, high degree of trade complementarity, secure market access (no tariff, no NTBs).

• Long sensitive lists of members will lower the benefits of trade.

• SAFTA will benefit India the most. Some member countries may even lose

Because of similar production structures in member countries, the expansion of intra-regional trade will be limited.

SAFTA will lead to trade diversion.

SAFTA will contribute to the “Spaghetti bowl” phenomenon, where many applicable tariff rates and multiple sources of origin will create confusion and difficulty among customs officials and producers.

Likely Effects of SAFTA : Negative Views Contd/1

BIMSTEC

BIMSTEC

Bay of Bengal Initiative for MultiSectoral Technical and Economic Cooperation (BIMSTEC)

an international organisation involving a group of countries in South Asia and South East Asia

The member countries of this group are: Bangladesh, India, Myanmar, Sri Lanka, Thailand, Bhutan and Nepal.

BIMSTEC has thirteen priority sectors cover all areas of cooperation. Six priority sectors of cooperation were identified at the 2nd Ministerial Meeting in Dhaka on 19 November 1998. They include the followings:

Trade and Investment, led by BangladeshTransport and Communication, led by IndiaEnergy, led by MyanmarTourism, led by IndiaTechnology, led by Sri LankaFisheries, led by Thailand

Agriculture, led by MyanmarPublic Health, led by ThailandPoverty Alleviation, led by NepalCounter-Terrorism and Transnational Crime, led by

IndiaEnvironment and Natural Disaster Management,

led by IndiaCulture, led by BhutanPeople to People contact, led by Thailand

The aims and purposes of BIMSTEC

To create an enabling environment for rapid economic development;

Accelerate social progress in the sub-region, promote active collaboration and mutual assistance on matters of common interest;

Provide assistance to each other in the form of training and research facilities;

Cooperate more effectively in joint efforts that are supportive of, and complementary to national development plans of member states;

Maintain close and beneficial cooperation with existing international and regional organizations;

Cooperate in projects that can be dealt with most productively on a sub-regional basis and which make best use of available synergies

Cooperation with ADBADB has become BIMSTEC's development partner since

2005, to undertake a study which is designed to help promote and improve transport infrastructure and logistic among the BIMSTEC countries

So far, ADB has already finished the project so called BIMSTEC Transport Infrastructure and Logistic Study (BTILS)

The final report of the said study from ADB has already been conveyed to all members and being awaited for the feedback

Membership Criteria

Eligibility: Countries seeking membership should satisfy the conditions of territorial contiguity to, or direct opening into, or primary dependence on the Bay of Bengal for trade and transportation purposes

Procedure: All applications should be submitted in writing to the Chairman of BIMSTEC. The decision on admitting new members will be taken on the basis of consensus by all the BIMSTEC members

Institutional Structure and ArrangementsThe BIMST-EC Declaration provides for the following

institutional mechanisms:Annual Ministerial Meetings, which shall be hosted by the Member States on the basis of alphabetical rotation;Senior Officials Committee, which shall meet on a regular basis as and when required;

A Working Group, under the chairmanship of Thailand and having as its members the accredited Ambassadors to Thailand, or their representatives, of the other Member States, to carry on the work in between Annual Ministerial Meetings;

And Specialized task forces and other mechanisms as may be deemed necessary by the senior Officials to be coordinated by Member States as appropriate

Economic significance The BIMSTEC agreement aimed to create a free trade zone where tariffs would

be brought down to zero by 2012

BIMSTEC would facilitate improvement in the trade at institutional and people level, most of the member countries are suffering from the menace of corruption, so the trade links at institutional and private level be positively resulted in enhanced trade links

The members of BIMSTEC realize well that to benefit mutually in emerging globalization, they are to support and cooperate with each other whole heartedly

it is important that all the countries should strive not only for the economic Cooperation, but also for the cultural and social links so that more closure and beneficial ties could take place

Political Significance

With an aim of economic cooperation, exploiting the potentials available in the member nations, it provides a useful platform from political point of view

For the nations of South Asia, it provides an alternative framework for bilateral and multilateral cooperation other than SAARC

The political benefits based on the economic cooperation have far-reaching impact and may result into closure ties

The success of BIMSTEC depends mainly on the sincere and honest cooperation of the member nations, keeping aside the political differences if there exist any

Article 2 :measures for comprehensive FTA

Article 3: trade in goods

Article 4:Trade in services

Article 5: Investment

Article 6: Areas of economic cooperation

SAFTA and BIMSTEC Comparision

BIMSTEC-FTA is a wide scope agreement covering trade in service, investment and tourism which are not included by SAFTA

BIMSTEC aimed to serve as a bridge between the five SAARC countries and two ASEAN countries whereas SAFTA provisions called for the gradual reduction of tariffs, customs duties, and other trade barriers between the eight members of South Asia

In BIMSTEC Tariff reduction/elimination will be divided into 2 tracks : Fast Track and Normal Track. Other than that, some of the products will be listed in the Negative List, to which no tariff reduction will be granted at this point whereas in SAFTA no such tracks are divided for tariff reduction

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