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Reducing import tariffs will help Saarc: report

Financial Express, India

Reducing import tariffs will help Saarc: report

By C Jayanthi

4 June 2008

After the recently released, ‘The Growth Report: Strategies for Sustained Growth and Inclusive Development’ released recently by the Commission on Growth and Development, supported by DFID, UK and World Bank among other international organisations, which mentions that in the last 30 years, absolute poverty has fallen dramatically fallen due to sustained growth, and that India is likely to grow at a fast pace for another 15 years, an upcoming report from the Commonwealth Business Council and the Saarc Chamber of Commerce and Industry, commenting on the Saarc region, says that the very limited intra-regional trade in South Asia in aggregate terms does not exceed 5% of the region’s total trade. The reason is mainly because trade relations of the largest economies in the region, India and Pakistan, with the other members, and particularly with each other, are of minor importance compared to their extra-regional trade. Arif Zaman, advisor, Commonwealth Business Council and Saarc Chamber, says, “Factors including the lack of trade complementarities among member countries and the homogenous nature of composition of exports of member countries still stand as constraints to intra-Saarc trade.”

Nevertheless, Saarc countries, especially India, are important trading partners for the smaller members of the bloc. In 2005-06 Saarc members accounted for 57% of Nepal’s exports and for 48% of its imports. The respective figures for Sri Lanka are 10% and 21%, for the Maldives 15% and 17%, and for Bangladesh 2% and 14%.

A recent FICCI report mentions that the India-Sri Lanka Free Trade Agreement (FTA), that was implemented by March 8, 2008, has increased bilateral trade by four times since 2000. The FICCI study remarks that the total bilateral trade went up four times in the post-FTA period to reach $2.7 billion in 2006-07 from merely $685 million in 2000-01. In 1999, India’s share was 9.5% in Sri Lanka’s imports and it was the second largest importer after Japan. However, in 2005, India got a share of over 17.3% in Lanka’s imports and became the island nation’s largest importer. Perhaps, FTAs with other neighbouring Saarc countries will help reduce trade imbalances.

Meanwhile, according to Zaman, “One reason that South Asia is among the least integrated of all regions is that tariffs, though lower now, remain high relative to other regions meaning that South Asian exporters are at a disadvantage. Developing countries impose higher tariffs on imports from other developing countries than industrial countries do on their imports. South Asian tariffs on developing imports are frequently five times as high as the rates imposed by industrial countries.”

The Growth Report mentions that India will be where China is today if it grows (which is likely) at a rapid pace for another 15 years. China has another 600 million people in agriculture yet to move into more productive employment in urban areas, it adds. That is India’s scourge too, that it needs to look into. Meanwhile, the Saarc region will benefit more if countries in the region set aside their rivalry to focus on exploring increasing trade between each other for overall benefit of its people.