“Deepening trade relations with neighbours will immensely benefit Indian consumers. This is possible by sourcing imports from the region at a considerably lower rate in many product categories which are currently imported from outside the region,” said Bipul Chatterjee, Deputy Executive Director of CUTS International.
He was briefing the media on the findings of a recently concluded CUTS study on Cost of Economic Non-Cooperation to Consumers in South Asia. The study, conducted with support from The Asia Foundation, underlined that a number of product categories with high regional trade potential are kept out of bounds of preferential tariff rates under the South Asian Free Trade Agreement. Tendency to protect domestic industries for fear of uncontrolled import surges is preventing South Asian countries from opening their markets to each other.
Speaking on the occasion, Nick Langton, Representative of The Asia Foundation in India said: “The objective of the study was to begin a process of research and dialogue that could help lead to incremental gains in trade in the region.”
According to Ashok Ganguly, Member of Parliament: “Being the largest economy in the region, India should follow a more active neighbourhood policy based on economic pragmatism and political magnanimity.”
EMS Natchiappan, Member of Parliament, underlined the importance of the Look East policy in India’s future growth and development. He commended CUTS for a timely study, saying “it would help to mobilise support for greater regional integration”.
Joseph George, Assistant Policy Analyst, CUTS International presented some major findings from the study. Of the total gain to consumers, India’s share is estimated to be 30.66 per cent, followed by Nepal (23.48%), Bangladesh (20.46%), Sri Lanka (14.81%) and Pakistan (10.58%). About 31 per cent of the current import expenditure of these five countries can be saved.
Annual gain to Indian consumers is estimated to be US$ 597.29 million on account of sourcing imports from its neighbours on 161 product categories.
An interesting feature is a major chunk of this gain would accrue on account of imports of polymer-based articles from Pakistan.
Though only 5 products, mainly iron and steel based articles, would come under such categories of imports from Nepal, India stands to gain 70 per cent on account of their import bill. There are 41 such product categories for imports from Bangladesh and 51 product categories from Sri Lanka.
The CUTS study derived potential savings to consumers by taking the difference between total import expenditure in selected products incurred by a country and likely import expenditure if that country were to import the same products at a lower price from its neighbours. Huge economic gains would result if political will permits separation of trade issues from non-trade issues and address the former with diligence and pragmatism.
The fear of uncontrolled import surge is misplaced as there are many products on which import demand is high because of insufficient domestic production capacity and they are exported elsewhere from neighbouring countries and at low prices. If South Asian countries continue to shy away from greater regional trade liberalisation, not only will they forgo huge possible savings on costlier imports from distant trading partners but also they will fail to utilise the opportunity to expand their exports to each other’s markets.
The study highlighted that deepening regionalism in other parts of the world is resulting in an erosion of South Asian countries’ access to markets of traditional export destinations as well as weakening their export expansion capacity.
It has come at a time when the South Asian business community awaits opportunities of better trade facilitation measures, procedural ease and better returns from investment in trade infrastructure. As tariffs account for only 15-20 per cent of trade cost, if these non-tariff barriers are addressed then gains would be much more that what is estimated in this study.
CUTS International is a non-profit, non-governmental think- and action-tank working, among others, on trade and regulatory issues.
Enhancing regional integration in South Asia through trade and its implications for consumer welfare is a major agenda of the organisation.
Based on the results of its work, the organisation is developing a long-term programme on regional trade integration, with particular focus on India-Pakistan trade relations. This Track-2 agenda will complement the
Track-1 agenda of enhancing regional trade which is gathering a momentum.
For more information, please contact:
Bipul Chatterjee, +91(0)9928207628, firstname.lastname@example.org
Joseph George, +91(0)8003766304, email@example.com
Vijay Singh,+91(0)9910264084, firstname.lastname@example.org