Cost of Economic Non-Cooperation to Consumers in South Asia and Nepal_2012!04!02

8/2/2019 Cost of Economic Non-Cooperation to Consumers in South Asia and Nepal_2012!04!02

1/25

Cost of Economic Non-cooperation toConsumers in South Asia and Nepal

Chandan SapkotaSouth Asia Watch on Trade, Economics and Environment (SAWTEE)

April 2, 2012

Presented at Cost of Economic Non-Cooperation to Consumers in South Asia event, April 2,

2012, Union House, Kathmandu, Nepal

2012-04-02 SAWTEE


2/25

Presentation outline

The study

Concept

Intra-regional trade in South Asia

Cost of Economic Non-cooperation to consumers in South Asia

Cost of Economic Non-cooperation to consumers in Nepal

RecommendationsPerception survey in South Asia

Way forward (based on perception survey in Nepal)

SAWTEE2012-04-02


3/25

1. The study

SAWTEE2012-04-02


4/25

Project

CUTS International implemented the projectwith help from The Asia Foundation andregional partner institutions in Bangladesh,India, Nepal, Pakistan and Sri Lanka

SAWTEE conducted the perception survey inNepal (Biratnagar and Kathmandu)

Extensive meta-analysis of existing literatureon economic integration in South Asia,quantities analysis and perception survey

SAWTEE2012-04-02


5/25

2. Concept

2012-04-02 SAWTEE


6/25

Concept

Usually, benefits of economic integration and impact onproducers is given importance

This study focuses on cost of economic non-cooperation Cost to consumer is the focus Potential consumer welfare accruing to each country is

computed by taking the difference between the total importexpenditure in selected products incurred by a country underconsideration and likely import expenditure if that country wereto import the same products from SAFTA trading partners at alower price.

Doesnt consider: Impact of displacement of domestic industries Loss of customs revenue Trade facilitation measures

2012-04-02 SAWTEE


7/25

Concept

2012-04-02 SAWTEE

Specifically, Products in sensitive lists of a SAFTA member country (m) with high shares in the total exports of

partner countries (p) to rest of the world (RoW), reflecting the export potential of partner countries insuch products

Further filtered by selecting products in which exports of partner countries to the member country isminimal

Consumer welfare gains for a member is calculated as:

CWmi = (pmiqmi ppiqmi)

where,

CWmi Consumer Welfare due to change in import price of country M in product i

pmi Import price of member country M in product i from ROW

ppi Export price of SAFTA partner country p in product i to ROW

qmi Import Quantity of member country (m) in product i from ROW


8/25

3. Intra-regional trade in South Asia

2012-04-02 SAWTEE


9/25

Trade in South Asia

2012-04-02 SAWTEE

South Asia Free Trade Agreement (SAFTA) came intoforce since January 2006

Progress in intra-regional trade has been miserableat approximately 5 percent in 2010, up from 2.5percent in 1995, of total world trade of the region

Reasons for limited integration: Limited tariff preferences extended to a countrys trading

interest

Limited depth in tariff cuts Prevalence of para tariff and non-tariff barriers

Difficult political relations between the most influentialmembers


10/25

4. Cost of economic non-cooperation to

consumers in South Asia

2012-04-02 SAWTEE


11/25

Cost of economic non-cooperation to

consumers in South Asia

Intra-regional trade at reduced priceswould generate 31.36 percent savingson South Asias import expenditure,

leading to annual savings of aboutIS$1948.15million (=US$2 billion) forbuyers in the region.

A minimum consumer welfare gain ofapproximately US$2 billion each year byway of savings on aggregate expenditureon imported products in selectedcategories.

Of the US$2 billion total consumer gain

Indias share is estimated to be 30.66percent

Nepals 23.48 percent

Bangladeshs 20.46 percent

Sri Lankas 14.81 percent

Pakistans 10.58 percent

2012-04-02 SAWTEE


12/25

5. Cost of economic non-cooperation toconsumers in Nepal

2012-04-02 SAWTEE


13/25


14/25

Cost of economic non-cooperation toconsumers in Nepal

2012-04-02 SAWTEE

Consumer Welfare Gains for Nepal (US$ million)

SAFTAtradingpartner

No. of products insensitivelist

Consumerwelfare gains

Valueimports fromROW

% of welfare gainsin imports

Bangladesh 45 11.23 25.55 43.96

Pakistan 20 255.04 586.59 43.48

Sri Lanka 4 0.12 0.85 12.56

India 4 191.12 455.28 41.98

Total 73 457.5 1068.27 42.83


15/25

Welfare gain to consumers in Nepal

2012-04-02 SAWTEE


16/25

Export opportunities of Nepal to South Asia

2012-04-02 SAWTEE


17/25

6. Recommendations

2012-04-02 SAWTEE


18/25

Recommendations

2012-04-02 SAWTEE

Separate non-trade issues from trade issuesduring negotiations

Raise awareness about untapped andneglected aspects of consumer welfare gains

Expedite initiatives for networking amongstconsumer organizations at the national andinternational level in South Asia


19/25

7. Perception survey in South Asia

2012-04-02 SAWTEE


20/25

Perception survey in South Asia

2012-04-02 SAWTEE

Opinions about regional trade varies widelybetween and within different stakeholdergroups in all South Asian countries

Such perceptions had an important role inshaping up the course of regional tradenegotiations

Stakeholders believe lack of success fromSAFTA till date is owing to political ratherthan economic reasons


21/25

8. Perception survey in Biratnagar andKathmandu

2012-04-02 SAWTEE


22/25

Perception survey in Nepal (Biratnagar andKathmandu)

2012-04-02 SAWTEE

High possibility for regional integration due tosocial, political, cultural similarities

Enormous scope in cooperation in power

generation, environment protection,addressing vulnerable population and reducingpoverty

Level of cooperation in the region at present is

not encouraging when compared to theexpectation of the interviewees when SAFTAwas signed


23/25

Perception survey in Nepal (Biratnagar andKathmandu)

2012-04-02 SAWTEE

Slow regional cooperation: Political misunderstanding in general and tussle between India and Pakistan in particular

Small economies in the region suffer from small-nation psyche and spend more energy onthinking over if India is suppressing them unfairly

Wide disparity growth between India and the rest of the countries has created mismatch ofpreferences

Cooperation is not working: A long list of items in sensitive list

Existence of non tariff barriers

SAFTA has not led to direct, efficient and cheaper transportation system (a container from Nepalheading to Karachi port through Kolkata port is not allowed to go directly; it has to pass throughSingapore)

Nepal is not tapping available opportunities: Very high trade concentration with India; negligible trade share with other South Asian countries

Nepal has not identified its area of comparative advantages for regional trade Business community is unaware about advantageous Nepali products for trading in the region

beyond India Businessmen run for tariff differences and preferences instead of long run business profitability

only 20-25 km distance to reach the nearest Bangladeshi market via India. But, the additional costof transporting goods along that route is NRs 2/kg per container

India's state governments are not respecting agreements/understandings made at central level


24/25

Way forward(Based on perception survey in Biratnagar and Kathmandu)

2012-04-02 SAWTEE

Reduce the size of negative list, minimize non tariff barriers,make policy predictable, and ensure effective implementation ofwhat is already agreed upon

Promote infrastructure development and enhance partnershipin energy

Increase land connectivity among all countries and make thecross-transportation smooth

Simplify trading procedures and enhance logistic facilities Ensure transit rights and, importantly, be honest while granting

the rights

Increase domestic awareness and explore the areas forexploiting regional comparative advantages Open negotiations for sub regional arrangements


25/25

Thank you

2012-04-02 SAWTEESAWTEE

Documents

Cost of Economic Non-Cooperation to Consumers in South Asia and Nepal_2012!04!02