ARTNeT CONFERENCE ASIA-PACIFIC RESEARCH AND TRAINING NETWORK ON TRADE ARTNeT Trade Economists’ Conference Trade in the Asian century - delivering on the promise of economic prosperity 22-23 rd September 2014 Parallel Session 7: Regional integration www.artnetontrade.org
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ARTNeT CONFERENCE ASIA-PACIFIC RESEARCH AND TRAINING NETWORK ON TRADE
ARTNeT Trade Economists’ Conference Trade in the Asian century - delivering on the promise of economic prosperity
ASEAN-India FTA •Working •Services and investment to be added soon
•Bilateral trade: US$ 80 billion in 2013 (India’s export to ASEAN US$ 35 billion, India’s import from ASEAN US$ 45 billion) •Emerging value chains, slowly •Rising deficit is a matter of concern.
RCEP •Being negotiated •Target deadline: 2015(?)
Trade facilitation (e.g. Customs cooperation)
•Unilateral initiatives •WTO TFA, signed in Bali, 2013
•ASEAN single window under implementation and India’s EDI system working already •Inter-linkages must
ASEAN-India transit transport agreement
•Proposed • Target – 2016(?) •India-Myanmar-Thailand taken-up first
ASEAN-India air transport agreement
•Proposed •High imbalance between carriers; major airlines (e.g. SQ or TG) utilise 100% slots
Overland connectivity
•Trilateral highway & extension to CLV •Railway link •MIEC
•Ongoing but slow pace •Myanmar to rebuilt Yargi to Monywa •Strong backward linkages must
ASEAN-India engagement, present scenario
ASEAN – India FTA (AIFTA) and Trade Facilitation
• Signed in 2009 and implemented in 2010
• Tariff liberalization to eliminate tariffs on 80% of the tariff lines accounting for 75% of the trade in a gradual manner
• Four tracks – normal (2 groups), sensitive track and sensitive lists
• Article 8 - NTMs
• Article 10 - safeguard measures
• Article 14 – customs procedures
– Prompt customs clearance
– Simplify customs procedures
– Harmonise customs procedures
AIFTA tariff liberalisation scheme
• Tariff lines are divided into four broad categories viz., Normal Track, Sensitive Track, Special Products.
• AIFTA covers elimination of tariffs for about 4000 products, of which – 3200 products are scheduled to have duties reduced by end of 2013
– duties on remaining 800 products would be lowered to zero or near zero by end of 2016
• The schedule of tariff reduction commitments members varies significantly: – Singapore (100%), Cambodia (88.4%), Brunei (85.3%), Philippines (80.9%), Lao
PDR (80.1%), Malaysia (79.8%), Vietnam (79.5%), Thailand (78.1%) and Myanmar (76.6%).
– Indonesia offers the lowest tariff elimination coverage at 48.7%
• Rules of Origin (RoOs) - the twin criteria of value addition – AIFTA content is not to be less than 35 percent of the fob value and a change
in tariff sub-heading (CTSH) of the Harmonized System is to be fulfilled to avail the tariff concession.
AIFTA tariff elimination schedule
ASEAN6 CLMV India
NT-1 NT-2/SL NT-1 NT-2/SL NT-1 NT-2
Jan. 2010-
Dec. 2013
(2018**)
Jan. 2010-
Dec. 2016
(2019**)
Jan. 2010-
Dec. 2018
Jan. 2010-
Dec. 2021
Jan. 2010-Dec.
2013(2018**)
Jan. 2010-Dec.
2016 (2019**)
Notes: NT: Normal Track; SL: Sensitive List **To the Philippines Source: Ministry of Commerce & Industry, Government of India
AIFTA tariff elimination schedule for special products
Base Rate 2010-2019 January 1, 2014
Palm Oil (crude)
80 37.5 60
Palm Oil (Refined)
90 45 70
Coffee 100 45 75
Black Tea 100 45 75
Pepper 70 50 60
Note: Figures in parentheses indicate tariff rates as of December, 2013. Source: Ministry of Commerce & Industry, Government of India
(%)
India’s trade potential with ASEAN+3 likely to cross US$ 500 billion by 2020
• India and ASEAN to strengthen regional connectivity and integration, particularly through cross-border infrastructure.
Cost to export (US$ per container) Cost to import (US$ per container)
US
$ p
er
con
tain
er
Cost to import and export (Doing Business_World Bank)
Note: Missing values were treated as zero, to have Balanced Data.
High NTMs
Overall Core Non-core
Brunei 46 29 32
Cambodia 6 4 4
Indonesia 100 45 100
Lao PDR 20 20
Malaysia 43 36 21
Myanmar 100 100 8
Philippines 100 5 100
Singapore 27 21 14
Thailand 11 4 9
Vietnam 34 22 14
ASEAN 49 27 32
Overall Core Non-core
Food 63 29 51
Cheminals 59 39 36
Light manufacturing 39 18 23
Metals 37 15 25
Machineries 48 30 33
Others 48 24 28
Thai NTM on Pharma Products (HS 3003.90)
8130: labelling; 8150: inspection
Imports of medicaments are subject to product registration, labelling, advertisement control, inspection, and quarantine requirement by the Thai FDA on the basis of public health and life protection.
Food and Drug Administration, Ministry of Public Health
(%)
Singapore NTM on Pharma Products
Technical Measures-Labelling
Labelling is required for medicines (incl. Chinese proprietary medicines), poisons and cosmetic products for reasons of public health and safety.
Medicines Act (Chapter 176) - Health Products Regulation Group
TBT measures under the AIFTA: 2000 to 2013 (HS 4 digit Products)
13
166
312
225
394
224
161
462
366
11
101
72
48
28
51
42
10
41
184
62
32
76
69
0 100 200 300 400 500 600
Brunei
Cambodia
India
Indonesia
Lao
Malaysia
Myanmar
Philippines
Singapore
Thailand
Vietnam
TBT Barriers and Tariff Categorisation
Complete Preferential Access No Prerential Access Partial Preferential Access
Source: Kallummal (2014)
SPS measures under the AIFTA: 2000 to 2013 (HS 4 digit Products)
203
130
191
17
95
110
344
185
315
5
89
44
7
72
1
44
12
1
9
55
17
18
39
24
0 50 100 150 200 250 300 350
Brunei
Cambodia
India
Indonesia
Lao
Malaysia
Myanmar
Philippines
Singapore
Thailand
Vietnam
TBT Barriers and Tariff Categorisation: AIFTA
Complete Preferential Access No Prerential Access Partial Preferential Access
Source: Kallummal (2014)
Cumbersome trade procedures
• Manual customs operation at border crossings
– Building a common template for running and maintenance of transport corridor(s) and MRA on value added services.
– MRAs have to be signed on motor vehicles, driving license, vehicle certificates, insurance, etc.
Source: ADB
Taxes on domestic transportation
Journey Travel through Tax payable
(Rs.) Period Speed
money (Rs.) Departments
Delhi to Manali
When it enters Haryana 2000 6 months, multiple entry 100 Finance
when it enters Punjab 250 Single entry 150 Finance
When it enters Himachal 500 7 days, multiple entry 100 Finance When it enters Simla (Himachal) 600 7 days, multiple entry 0 Municipality When in enters Manali (Himachal) 650 8 days, multiple entry 0 Municipality
Manali to Delhi (return)
When it enters Punjab 250 Single entry 150 Finance
When it enters Delhi 300 Single entry 50 Municipality
Toll
Toll on roads, at 7 places 250 Single entry 0 NHAI, Private operators Toll on roads, at 6 places 230 Single entry 1
Sub-total 5230 550
(US$) 84.35 Share (%) 8.87
Freight (US$) 293.55
Total fixed cost (US$) 386.77 Taxes as % of total fixed cost 22
*Author’s own travel experience
Travel from Delhi to Manali by road, total distance 650 km one way
Duties collected on imports Exporter: Thailand, Importer: India, Product: ACE(HS Code 84151010)
• Consolidation of FTAs needed – RCEP is correct step forward
• But, trade liberalization must be supplemented by trade facilitation – Streamlining NTMs
– Paperless trade
• Value added services of connectivity crucial for economic integration and RVC – Economic corridor
– Transit agreement
– Air and maritime transport liberalization
• An integrated action plan for achieving a larger common market by 2020 is required.