South Asia should cut tariff to increase trade

The Daily Star, February 3, 2009
By Refayet Ullah Mirdha
South Asian leaders should reach a consensus on downsizing tariffs to boost intra-regional trade, which will ultimately help cut poverty, now running deep in the region, says a trade analyst.

But it is not an easy task, Saman Kelegama, executive director of Colombo-based Institute of Policy Studies (IPS) in Sri Lanka, says in an exclusive interview with The Daily Star.

Consensus-building comes from hard work and continuous negotiations, but the task is not impossible, he says. Many loggerhead trade issues were resolved through negotiations among leaders worldwide, according to Kelegama.

Kelegama, a policy pundit, visited Dhaka to attend the two-day seminar on “Mainstreaming Inter-national Trade into National Development and A Southern Agenda on Global Trade Governance”, organised by the South Asian Network on Economic Modelling (SANEM) and CUTS International at Dhaka Sheraton Hotel.

Kelegama refers to a consensus reached in the Association of Southeast Asian Nations (Asean), which is not far away.

Kelegama says Asean took some important decisions to boost trade within member nations through negotiations, although four members are directly recognised as the least developed countries (LDCs).

He suggests the South Asian leaders come forward to remove all barriers to increase trade volume for poverty reduction, as a significant number of people in this region still live under the poverty line.

The South Asian region can hardly reap the benefits of global trade, as the countries have limited negotiating skills, he says.

Since the South Asian leaders could not reach a consensus on different issues, they have failed to demonstrate a unified strength in global trade negotiations such as at the World Trade Organisation (WTO), Kelegama says.

The analyst is all for fair trade, not for free trade, to benefit from the global trade practices.

“We need fair trade, not free trade,” Kelegama says. He backs restricted movement of capital, not free movement of capital.

Foreign entrepreneurs tend to invest in some rosy sectors such as power and telecoms if governments allow free movement of capital out of their countries. “The investors are interested to invest in those sectors as they get easy returns,” he says.

Asked to comment on a failed plan by Indian industrial conglomerate TATA to invest in power, fertiliser and steel sectors, Kelegama declines to comment.

Kelegama says some countries in South Asian face problems with an unfair tariff structure of the global trading system, as it has not been addressed efficiently until now.

“We need a regional consensus to address the unfair tariff structure in the WTO,” Kelegama says.

Bangladesh paid the same amount of tariff as France, for exporting goods to the EU, even though Bangladesh is one of the LDCs.

“It’s just unfair.”

Bangladesh paid $510 million in tariff for exporting goods to the EU, while France also paid the same amount to the EU in fiscal 2007-08, but the volume of trade between Bangladesh and the EU, compared to France, is insignificant.

It is the time to rethink the export of human resources from South Asian nations, as remittance is one of the pillars of the economies in this region, he says.

“Capital can move freely worldwide, so can human resources,” Kelegama says. The leaders of this region should address the issues in the WTO.

According to Kelegama, developed countries always prefer to recruit skilled workers from the LDCs and developing countries, which is not always right.

Urging leaders of this region to expedite the discussion of the WTO’s MODE-4, Kelegama says the developed countries should also come forward to recruit unskilled workers.

He says although the movement of “natural persons” (MODE-4) under the General Agreement on Trade in Services (GATS) ensures the movement of human resources for trade in services worldwide, the South Asian leaders are not utilising such potentials.

Kelegama particularly mentions the role of India in spearheading the MODE-4 discussions to open a new window of opportunity for the skilled and unskilled workers of this region.

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