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Inept handling of trade agreements

Financial Express, Dhaka

Editorial: Inept handling of trade agreements


All trade agreements may fumble in delivering results if they take effect prior to completion of all modalities and arrangements, which are to govern and ease trade between the signatory countries. But both the South Asian Preferential Trade Agreement (SAPTA) and its successor agreement on free trade — South Asian Free Trade Agreement (SAFTA) — were signed before completing these essential formalities. The negotiators of these two trade agreements, concurrently aiming at promotion of economic cooperation and friendly mutual relations through progressive removal of misunderstanding to serve the broad purpose of South Asian cohesion, escaped discussions and decisions on these important matters. As such when the relevant agreement became operational, some issues like cumbersome process of opening letters of credit (LCs) in some importing countries, non-acceptability of certification of quality of products issued by the appropriate official agency of the exporting country, delay in settling business claims by exporters came up as non-tariff barriers to obstruct intra-SAARC trade. While Bangladeshi businessmen are known to have complained for long about the first two barriers faced by them in exporting to India, particularly to its north-eastern states, some Indian businessmen cited the third as a problem faced with Bangladesh. The non-tariff barriers like these are usually seen as covert measures to betray the purpose of publicly signed trade agreements. For obvious reasons, their existence creates a crisis of mutual trust and fuels suspicion among the partner countries.

Belatedly though, the member countries of the South Asian Association for Regional Cooperation (SAARC) seem to have realised that a new mechanism replacing the traditional one for settling business claims should be in place to ease and foster trade between the partner countries. The SAARCFINANCE, a high-powered body comprising the central bank governors and the finance secretaries of the member countries, has reportedly begun work on the proposed arrangement to ensure prompt settlement of business claims within SAARC. The group has also moved to streamline their monetary policies for encouraging more investment in the region. However, in spite of these measures, the main block obstructing intra-SAARC trade will remain untouched, which is the mutual recognition arrangement. The ministry of foreign affairs — the sponsor of the trade agreements, and the ministry of commerce — the focal point for purpose of these agreements, must activate the concerned authorities responsible for certification of standard to undertake all preparations for completing this arrangement without any further delay. The cart has already moved quite a distance haphazardly without the horses being joined with it. Further delay may derail the initiatives for increased intra-SAARC trade. The non-completion of this important arrangement years after the signing of the first trade agreement raises grave questions about the quality of inter-ministry coordination on SAARC matters.

There is indeed scarce solid ground to blow up public expectation in this country about the immediate benefits from SAPTA or its successor SAFTA which is yet to become operational. Though intra-SAARC trade has recorded a spectacular growth, most of the benefits accrued to India because of its large product basket that confers it the pride of being accountable for 82 per cent of SAARC gross domestic product. While the Indian export to Bangladesh in terms of value stood at about $2.0 billion last year, the latter’s export to India accounted for an earning of less than one thirteenth of income from export to this country. It stood at about $145 million. Bangladesh’s odd position of having a slim product basket with items almost similar to those that India also produces along with a large variety of other products is primarily responsible for the excessive tilt of mutual trade being in favour of India. However, the long-term prospect of bilateral trade will be better and more promising than what is generally perceived now if the SAARC countries consciously shorten their respective sensitive lists governing SAFTA in future negotiations.

 source: Financial Express