1. 1 Presentation by:- R.S.RatnaDirector Department of Commerce Government of India

2. 2 TRADE LIBERALISATION Trade liberalisation is widely recognised as a cornerstone of economic development and growth, and, ultimately poverty reduction. Global multilateral trading system offers the best prospect for reducing barriers to trade & achieving the greatest gains from trade liberalisation. Preferential Trade Agreements (PTAs) are the second-best means of trade liberalisation.

3. 3 WTO RULES Permitted under Article XXIV of GATT 1994. Exception to MFN treatment within the Rules subject to fulfillment of conditions: –items on which there is substantial trade to be covered –the phase out of duties should be within a reasonable period of time –it should not have trade distorting effect

4. 4 M.F.N. EXCEPTIONS Exception to MFN is also available under the “Enabling Clause Decision” of 1979 wherein the WTO members may accord differential and more favourable treatment to developing countries, without according such treatment to other Contracting Parties.

5. 5 The Global Context Regional Trading Arrangements RTAs are viewed by most countries as building blocks towards eventual global free trade. Nearly all the members of WTO are participating in one or another RTA (PTA or FTA). More than 200 RTAs have been notified to GATT/WTO. 150 of these are still in force. 250 RTAs are expected by 2005.

6. 6 Regional Trading Arrangements RTAs can be used as a tool for –  Material management  Cheaper imports – domestic prices in control  Better quality products at competitive price  Better market access  Investments flow - JVs  Coverage of Services  Mutual recognition of standards & laboratories  Trade facilitation, Harmonisation of Customs procedures etc.

7. 7 The Regional Context South Asian countries are exchanging tariff preferences under SAPTA.South Asian countries are exchanging tariff preferences under SAPTA. China, RoK, India, Sri Lanka and Bangladesh are members of the Bangkok Agreement and are exchanging tariff preferences.China, RoK, India, Sri Lanka and Bangladesh are members of the Bangkok Agreement and are exchanging tariff preferences. G-77 countries are also exchanging preferences under GSTP (Global System of Trade Preferences).G-77 countries are also exchanging preferences under GSTP (Global System of Trade Preferences). Bangladesh, Bhutan, India, Nepal, Sri Lanka and Thailand are also members of other economic groupings like BIMST-EC.Bangladesh, Bhutan, India, Nepal, Sri Lanka and Thailand are also members of other economic groupings like BIMST-EC. India has signed Framework agreements for PTAs/FTAs - ASEAN, BIMST-EC, MERCOSUR, SAFTA, Singapore and Thailand.India has signed Framework agreements for PTAs/FTAs - ASEAN, BIMST-EC, MERCOSUR, SAFTA, Singapore and Thailand.

8. 8 Rules of Origin Objectives: to prevent trade deflection, transshipment to prevent trade deflection, transshipment enhance intra-regional trade & investment enhance intra-regional trade & investment transparent transparent Classification of products Wholly obtained or produced Wholly obtained or produced Not wholly obtained or produced Not wholly obtained or produced Products obtained through regional cumulation Products obtained through regional cumulation

9. 9 Rules of Origin Components: Local content / value addition Local content / value addition Insufficient manufacturing processes Insufficient manufacturing processes Substantial transformation Substantial transformation TRADE CREATION TRADE DISTORTION COST OF ISSUANCE ?

10. 10 Bilateral Trade The trade value for 2003 is approximately US $ 1.3 billion. India has favourable balance of trade. Main items that India exports are: natural or cultured pearls, precious or semiprecious stones, copper and articles thereof, iron & steel, organic chemicals, minerals fuels etc. Main items that India imports are: electronic goods, machinery, textiles, plastic materials, transport equipments, precious and semi-precious stones, metals, chemicals.

11. 11 INDIA THAILAND FA The Agreement was signed by the Trade Ministers during Indian PM’s visit to Thailand on 9 th October 2003. The key elements of the Framework Agreement cover FTA in Goods, Services and Investment, as well as Areas of Economic Cooperation. The Agreement also provides for an Early Harvest Programme with a common list of 82 items on which tariff will be gradually eliminated by 1.9.2006.

12. 12 INDIA THAILAND FA FTA in Goods Negotiations to commence from January, 2004 and to be concluded by March 2005. Negotiations to commence from January, 2004 and to be concluded by March 2005. The tariff reductions will start in 2005/2006 and MFN tariff rates to be gradually reduced/eliminated by 2010. The tariff reductions will start in 2005/2006 and MFN tariff rates to be gradually reduced/eliminated by 2010. Normal track Normal track Sensitive track Sensitive track Provisions for Safeguards, Disputes etc. Provisions for Safeguards, Disputes etc. Substantial coverage of trade. Substantial coverage of trade.

13. 13 INDIA THAILAND FA FTA in Services Negotiations to commence in January 2004 and concluded by January 2006. Negotiations to commence in January 2004 and concluded by January 2006. The identification, liberalisation etc. of the substantial sectors of services to be finalised for implementation subsequently. The identification, liberalisation etc. of the substantial sectors of services to be finalised for implementation subsequently. FTA in Investments Negotiations to commence in January 2004 and concluded by January 2006. Negotiations to commence in January 2004 and concluded by January 2006. BIPA signed on 10 th July 2000. BIPA signed on 10 th July 2000.

14. 14 Multiple membership to RTAs When a country is a member of more than one RTA it creates some advantages to such a country at times. “Hub and Spoke” – If one country has RTAs with a number of countries that maintain barriers between each other, this ‘hub’ country becomes the preferred location for investments – firms can reach more markets tariff-free than they can from any other locations – and this will tend to bid up factor prices and raise real income in the hub. But it can also create a “Spaghetti bowl” – a complex scenario.

15. 15 CHALLENGES AHEAD The industries must compete with each other so that they are efficient and cost effective. Improving the internal policies & taxes. Our (in)efficiencies and dependence on external factors. Presence of major players. Transfer of technology.

16. 16 STEPS AHEAD …… Promotion of Joint ventures, technology transfers Consider devising means for having industrial linkages (backward- forward linkages) to promote intra- regional investments. Mergers and acquisitions – timely. Act as a hub for some sectors.

17. 17 Future plans FTAs are a reality now. Play a pro-active role. Make concrete suggestions to Government. Utilise the trade facilitation measures. Harmonisation of customs documents, procedures and regulations. Harmonisation of standards.

18. 18 Thank You