Trade barriers force Nepalis to pay more: Report

Republica, February 04, 2012
Nepali consumers can save around US$457.5 million (Rs 35.48 billion) every year if South Asian countries remove certain items from sensitive lists to bring down tariffs, according to a latest study of CUTS International and The Asia Foundation.

The study conducted in five South Asian nations – Bangladesh, India, Nepal, Pakistan and Sri Lanka – shows Nepali consumers stand to benefit the most from Pakistan, saving approximately $255 million per year, if items like cement clinkers, Portland cement and aviation spirit are removed from the sensitive list, which contains goods that are not entitled to tariff concessions.

India is another country that could help Nepalis slash spending by at least $191 million per year if items like aviation spirit and antibiotics are taken out of the list. Removal of other items like textile and readymade garments from the list, which are cheaper in Bangladesh and Sri Lanka, can also benefit Nepalis more than $11 million per year, the report says.

Overall, consumers in five major economies of South Asia – Bangladesh, India, Nepal, Pakistan and Sri Lanka – stand to save $1.9 billion per year if trade barriers in the form of sensitive lists are removed, says the report titled ´Cost of Economic Non-cooperation to Consumers in South Asia´.

The calculations on consumer welfare are made solely by “taking the difference between total import expenditure in selected products incurred by the country under consideration and likely import expenditure if that country were to import the same products from South Asian trading partners at lower price currently offered to them”.

Besides, only those products with potential for savings on imports, leading to reduction in consumer expenditure, were considered. This means these products qualify for removal from their respective sensitive lists, the report says.

Currently, the sensitive lists of five major South Asian economies contain around 20 percent of products churned out in these countries. Of these, a total of 355 product categories have both high intra-regional trade potential and high prospects of improving consumer welfare. Yet many countries do not want to remove them from the list.

“This protectionist tendency is detrimental to expansion of production and exports as well,” the report says.

One of the reasons for growing protectionist sentiment in the region is individual country´s failure to discuss benefits of rise in imports in the similar manner they focus on expansion of their export markets.

This behavior practically makes it impossible for a trade agreement to function, as such agreements cannot operate without reciprocal exchange of an import concession for an export opportunity, meaning they cannot serve a unilateral agenda of export promotion along with import substitution, the report says.

Because of this practice, which undermines the importance of imports, intra-regional trade in South Asia has stagnated at around 5 percent of the total trade volume of the region since 1995. This has put consumer welfare at stake as people in the region are being forced to pay more for goods that could have been bought at a cheaper rate.

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