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Regular T&SD News from South AsiaPlease click here to view News updates from 2004 TKN Session at the Hong Kong Ministerial The Trade Knowledge Network (TKN) is holding a dedicated session as part of the Hong Kong Trade and Development Symposium being held parallel to the WTO Hong Kong Ministerial. The session is titled “Challenges of market access and compliance under WTO: Case studies from South Asia”. The panel will present findings of the research conducted by TKN partners in South Asia (Pakistan, India, Bangladesh, Nepal) during the past year. In addition, TKN South Asia activities for the year and the idea of a research mechanism for young researchers will be introduced as well. Research Presentations: Producer-Consumer Linkage: The Case of Indian Seafood Sector Market Access Barriers on Select Agricultural Exports of Nepal Market Access Issues: EU-Bangladesh Trade Regimes A Case Study on Market Access - Myths and Realities Compliance Across the Supply Chain: Can it Be Done? - A Case Study of Pakistan's Coastal Fisheries Session date: December 17, 2005 13th SAARC Summit The two-day 13th South Asian Association for Regional Cooperation (SAARC) Summit took place in Dhaka from November 12-13, 2005. The Summit concluded with a 53-point Dhaka Declaration, which emphasized economic integration, arrest of terrorism, and development of human resource and poverty alleviation in the region. Other areas of cooperation stressed in the final declaration were energy, transportation and communication links and transit facilities among the member states. A special focus of the Summit was the implementation of the South Asia Free Trade Agreement (SAFTA). In line with the members’ Vision of South Asian Economic Union, SAARC leaders directed the early finalization of unsettled issues relating to SAFTA (see below for latest on SAFTA). SAFTA unlikely to meet implementation deadline The 11th meeting of Committee of Experts (CoE) seeking to finalize the SAFTA agreement took place on October 20, 2005 in Katmandu. The CoE failed to reach a final conclusion on any of the three outstanding issues, namely sensitive lists, rules of origin and revenue loss compensation mechanism for LDCs. While experts from SAARC countries were able to narrow down differences substantially on the sensitive lists and rules of origin, a consensus was still lacking. The indecisiveness has made SAFTA’s implementation by the January 1, 2006 deadline unlikely. At the meeting, all member countries presented their reduced sensitive lists to be traded under SAFTA. On the revenue loss compensation mechanism, the administrative arrangements regarding claims, processing thereof and payment of compensation were discussed. For the revenue compensation mechanism, Bangladesh presented a formula that all the member countries, except Maldives, accepted. The CoE have now agreed to resolve the remaining matters at commerce secretary level meeting, the date of which is yet to be announced (COURTESY: SAWTEE NEWSLETTER). Tenth Committee of Experts Meet on SAFTA Technical experts from SAARC countries met in Katmandu from 1-4 September 2005 for the tenth meeting of Committee of Experts (CoE) to finalize the South Asian Free Trade Area (SAFTA) draft accord. Although the officials have been expressing optimism on finalizing Rules of Origin (ROO), sensitive list, technical assistance and revenue compensation mechanism for least developed countries (LDCs), they only managed to finalize provisions on the technical assistance. They even failed to fully endorse the LDCs-submitted lists of products on which they sought special derogation, maintaining the value addition criteria for them at 20 percent. Developing country members – India, Pakistan and Sri Lanka – have asked the LDCs – Bangladesh, Bhutan, Maldives and Nepal – to come up with stronger list of products of their export interest during the next CoE meet. While discussions on sensitive lists could not be held at length, the members have agreed to come up with consolidated lists in the next meeting. Members also failed to converge on the span of revenue compensation mechanism’s effectiveness. The CoE decided to meet for yet another round in Islamabad from 18-19 October and forward the outstanding issues of SAFTA to the political level. The commerce secretary-level meeting will be held on 20 October and the SAARC ministerial-level standing committee will be held from 21-22 October (Courtesy: SAWTEE Newsletter). SAARC countries in ‘medium human development’ category The UNDP’s Human Development Report 2005 was released on 7 September 2005 a week before the UN Summit to review progress towards the Millennium Development Goals (MDGs). The theme of this year’s report is ‘International cooperation at a crossroads: Aid, trade and security in an unequal world’. In a nutshell, it calls for more aid, pro-poor trade reform and long-term peace building in order to end extreme poverty. The report shows that while there has been substantial overall progress globally, many individual countries are actually falling further behind. According to Human Development Report 2005, all members of South Asian Association for Regional Cooperation (SAARC) - Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka - are now in the ‘medium human development’ category with a mean human development index (HDI) value of 0.628. Until last year, three SAARC member-states, viz., Bangladesh, Bhutan and Nepal were in the ‘low human development category’. The HDI ranks of the seven SAARC members - out of 177 countries - in ascending order are: Sri Lanka (93), Maldives (96), India (127), Bhutan (134), Pakistan (135), Nepal (136) and Bangladesh (139). The HDI values of the respective countries - in descending order - are Sri Lanka (0.751), Maldives (0.745), India (0.602), Bhutan (0.536), Pakistan (0.527), Nepal (0.526) and Bangladesh (0.520) (Courtesy: SAWTEE Newsletter). Capacity Building on Competition Policy in Select Countries of Eastern and Southern Africa (7Up3 Project) CUTS recently embarked on a multi-country project on competition policy and law. The project is titled “Capacity Building on Competition Policy in Select Countries of Eastern and Southern Africa”. Seven developing African countries have been included in the project: Botswana, Ethiopia, Malawi, Mauritius, Mozambique, Namibia and Uganda. The project was launched through a two-day meeting held on March 22-23, 2005 in Uganda. The first day consisted of a seminar where speakers discussed issues such as competition policy, economic development, competition concerns in the region and competition and regulation interface. The seminar was followed by a day-long workshop in which project partners discussed the project implementation structure (courtesy: CUTS newsletter) US slaps quotas on more Chinese textilesContinuing with its efforts to make US textile producers competitive in the face of Chinese textile imports, the US government announced restrictions on imports of two more Chinese garments. The US move came after the recent US-China talks on the issue of textile trade failed to reach a deal. The US government claims that Chinese textile shipments have rocketed since global quotas were scrapped at the start of the year, flooding US markets to the detriment of local textile firms. The Committee for the Implementation of Textile Agreements (CITA) upheld US industry requests for safeguards on imports of Chinese-made brassieres and synthetic filament fabric. The inter-agency panel said the US market for the categories “is being disrupted and that there is a threat of further disruption”. It is being speculated that further safeguards from the US are on the cards unless the Chinese government agrees to concede to some of the US demands in the next round of consultations. CITA is already reviewing another four types of Chinese textiles to bring them under quotas: cotton and man-made fibre sweaters; cotton and man-made fibre dressing gowns and robes; men’s and boys’ wool trousers; and knit fabric. Quantifying Informal Trade Between Pakistan and India SDPI has recently completed a study on Indo-Pak informal trade as part of a broader Government of Pakistan initiative to understand the potential for enhancing trade ties between the two countries. The study specifically focused on informal trade and had a three-fold purpose:
Study findings point to an overall informal trade volume approximating USD 545 million, ninety eight percent of which flows from India to Pakistan. Indian cloth, pharmaceutical and textile machinery, tires, and cosmetics and jewellery are the major traded items. The most important trade routes flow through Afghanistan, via Dubai, and directly across the Pakistani border of Sindh. Study results highlight that the likelihood of diverting informal trade to legal channels is low under an MFN regime, as existing tariffs would more than offset the net transaction costs on the circuitous but important informal trade routes. Revenue generation for the government in this scenario is also not likely to be significant. The policy implication is that free trade, a la SAFTA, is likely to yield higher trade gains. However, it would also constitute a threat to local industries, especially, cosmetics and drugs and medicines, and the engineering industry. The study also highlights the need for trade policies to consider the socio-economic consequences of disrupting informal trade practices, which are both historically, entrenched and generate employment. In fact, they cushion the effects of government neglect in marginalized and politically volatile areas. To download the full report, visit www.sdpi.org/tkn Negotiations on SAFTA to End by October 2005 The South Asian Free Trade Area (SAFTA) negotiations are expected to conclude by October 2005 as experts from member states hope to have resolved the remaining issues by then in order to give effect to the agreement on SAFTA. The October deadline came out of the ninth meeting of experts held in Kathmandu from July 19-22. During the meeting, South Asian Association for Regional Cooperation (SAARC) members exchanged their respective sensitive lists of products, with the hope of finalizing the negotiations in the next meeting in September in Kathmandu. The members will explain their respective position on the sensitive lists in the 10th meeting. Negotiators came closer on three other outstanding issues, viz., rules of origin (ROO), compensation mechanism for the revenue losses by the LDCs and technical assistance for the LDCs within the region. The 10th COE meeting in Kathmandu will try to finalize the ROO under which the member-states will be able to identify the actual place of manufacturing or production for offering duty concessions. SAFTA is scheduled to go into effect on January 1, 2006. Readymade Garments’ Export Faltering Pakistan’s readymade garments have taken a hard beating in the open price war environment since the phasing out of the textile export quota regime in January this year. Readymade garments export in five months during January to May 2005 amounted to $553.75 million as against $581.46 million in July-December 2004. Total export of textile products during January to May 2005 were worth $3.85 billion as against $4.07 billion in first six months of 2004-05. Domestic production of readymade garments is down by more than 11 percent and there has been a decline in export and fall in the average unit price in the USA market during January to June 2005. In Europe and other markets too, Pakistan’s readymade garments are not in an enviable position and are likely to be gradually pushed out signaling death for a multitude of small enterprises, fear many exporters. India, on the other hand, is reported to have made big inroads in the USA market and is now the second biggest apparel supplier in the USA and European markets. Apparel market in USA is said to be worth $60 billion a year in which China’s share is highest and is followed by other Asian countries including India. Auto Makers Fear Arrival of Indian Cars Pakistan’s fears with opening up its automobile sector to international competition continue to be in the limelight. The latest alarms have been raised over the possibility of arrival of Indian cars through Sri Lanka. Local manufacturers expressed their apprehension after scrutinizing lists of items under the free trade agreement (FTA) signed between Pakistan and Sri Lanka and between Sri Lanka and India, which could amount to Indian vehicles and parts finding their way into Pakistan through Sri Lanka free of duty. Preferential items for Sri Lanka would be at zero percent rate of duty by the year 2007-08 when the same items for local manufacturers will be at 35 percent for CKD, 35 percent for auto parts, 75 percent for CBU of cars, and from 5 to 25 percent on raw materials for vendor parts. In effect, Indian automobiles can make their way to Sri Lanka free of duty, as India is allowed to export everything related to the auto sector to Sri Lanka under the free trade agreement. The items on which Pakistan has provided Sri Lanka preferential access can in turn enter Pakistan free of duty as well, thus undermining local manufacturers. Local manufacturers suggest that this situation raises many questions about the future investment of carmakers in Pakistan and transfer of technology by the principals and vendors who have made recent investments in the expansion and BMR and created additional employment due to the expansion. Regional Training Seminar: ‘Road to Hong Kong’ South Asia Watch on Trade, Economics and Environment (SAWTEE), Kathmandu and CENTAD (Centre for Trade and Development), an Oxfam GB Initiative, New Delhi; jointly organized a three-day regional training seminar for South Asian journalists called ‘Road to Hong Kong’ from 11-13 July 2005 in Pokhara, Nepal.
The following issues were discussed: introduction to the multilateral trading system, agriculture, non-agricultural market access, standards, services, trade facilitation, intellectual property rights, trade and development, dispute settlement, trade and environment. Discussions held, among others, on agriculture and industrial market access, underscored the significance of taking public interest dimensions on board. They also emphasized the need to safeguard the food security, rural development and livelihood interests of the poor, marginalized and vulnerable communities of the developing countries in general and South Asian countries in particular. The outcome of the seminar is vital in identifying the main issues facing developing countries in the run up to the upcoming WTO Ministerial and preparing the respective governments in the region during the ongoing negotiations of the multilateral trading system. LDCs Adopt Common Position for Hong Kong Least-developed countries (LDCs), including South Asian LDCs (Bangladesh, Nepal, Bhutan) recently adopted a common negotiating position in the Doha round WTO talks ahead of the global trade body's December Ministerial Conference in Hong Kong. LDC trade ministers met in Livingstone, Zambia, on June 27, 2005, to deliberate on bargaining positions and strategy in the ongoing multilateral trade negotiations. The 'Livingstone Declaration' articulates a shared LDC position on the Doha round. It also calls for rich countries to grant immediate, non-reciprocal and binding commitments on duty and quota free market access for all products from Zambian Commerce Trade and Industry Minister Dipak Patel, who chairs the group of 50 LDC WTO Members, noted that the main areas of concern for the LDCs were agriculture, non-agricultural market access (NAMA), special and differential treatment (S&D) for LDCs, services trade and issues related to trade facilitation (Courtesy: SAWTEE Newsletter). LDCs Push to Pass Trade Act 2005 Readymade garment (RMG) manufacturers of 14 least developed countries (LDCs) in the Asia and Pacific region have agreed to urge the United States (US) for an early endorsement of a trade bill, which seeks duty-free access for export from these poor countries. Representatives of leading business chambers from seven Asian-Pacific LDCs held a two-day conference in the context of the US Trade Bill 2005 in Dhaka on June 21-22, 2005 and adopted a Dhaka Declaration. A precipitous loss of employment in apparel industries would be catastrophic for the region in economic, social and political terms, reads the declaration. “Large-scale loss of employment and widespread poverty continue to pose huge challenges to the region. Indeed, the situation is urgent and needs urgent attention.” The alliance of 14 Asian-Pacific LDCs and tsunami-devastated Sri Lanka has been seeking duty free access to the US markets, particularly for RMG and apparel products following the end of global quota system from January 1, 2005. Four US senators have sponsored the Tariff Relief Assistance for Developing Economies Act (TRADE Act 2005) in the US Congress representing the 14 Asia-Pacific LDCs and Sri Lanka (Courtesy: SAWTEE Newsletter). Nepal's GDP Growth Rate Slides Down With the dismal performance of agriculture and tourism sector, the GDP growth rate of Nepal has been scaled down to 2.05 percent, which is less than half the budgetary target of the current fiscal year 2004-2005. The government of Nepal had set the target growth at 4.5 percent. According to the Central Bureau of Statistics (CBS), agriculture sector’s contribution to GDP was 3.86 percent last year where as it declined to 2.8 percent as per the preliminary estimates this year. The construction sector also posted negative growth by 2.43 percent in the fiscal year 2004-2005, which was only 0.19 percent last year. Not only trade, restaurants and hotel sectors also posted a negative growth of 3.02 percent. The same sectors had posted 6.03 percent growth last year (Courtesy: SAWTEE Newsletter). US, EU to Probe IPRS Violation in Pakistan The United States and the European Union will jointly carry out a survey in Pakistan to measure the quantum of violation of intellectual property rights (IPRs). This has been stated as a condition for entering into any preferential market access program with Pakistan. Currently, the US and EU are reportedly dissatisfied with steps taken by Pakistan for the elimination of piracy in the country. The US and the EU would soon start a survey to measure the quantum of infringed IPRs before entering into any preferential market access programme with Pakistan, added the official. Pakistan has thus far taken a defensive approach. The ministry of commerce has stated that Pakistan had established an independent IPRs institution and also conducted a series of raids on the suspected factories involved in the business of pirate CDs. Earlier, the US had rejected Pakistan’s request for preferential market access for its textile products. “Washington will not consider any textile related product and 50 minor products under any referential trade agreement with Pakistan.” The US had, however, offered Pakistan to include maximum non-traditional items under the US Generalized System of Preferences (GSP) scheme —zero rate of duty. Pakistan is working out a list of items to be sent to the US for inclusion in the GSP scheme, the official adds. Pakistan had announced on May 5, 2005 to allow duty free import of five essential commodities—meat, live animal, onion, tomatoes and garlic — particularly from India through land route to offset the rise in the prices of these commodities in the domestic market. Indian livestock and meat for one, is significantly cheaper than Pakistan. The average price of high quality beef in New Delhi is at Rs76 per kg while good quality mutton is selling at Rs197 per kg. While in Pakistan beef is sold at Rs110 per kg with bone and Rs230 per kg of mutton. Now, the Indian government has conveyed that it would not permit export of some other products particularly the pharmaceutical products unless the land route is completely opened. They have also demanded that the route be further used for transportation of their goods meant for Afghanistan and Central Asian Republics (CARs). SAARC to Miss FTA Deadline South Asian Association for Regional Cooperation (SAARC) is set to miss the deadline to finalize the regional free trade area accord: South Asia Free Trade Area (SAFTA). This was stated after the Committee of Experts (CoE), comprising of technical teams of seven member states entrusted for finalizing the accord by May, on the conclusion of eighth round of their negotiation on 27 April in Kathmandu. CoE need additional rounds of negotiations to deal with the four unresolved issues viz. rules of origin, sensitive list, technical assistance and revenue compensation mechanism for the least developed countries (LDCs) in SAARC. During the eighth round of the CoE meeting, the members failed to make any headway on the issue of revenue compensation mechanism - a unique facility pledged for the LDCs in SAFTA. This is because the technical teams were finding it tough to establish the volume of possible revenue loss and the mechanism to deal with it. On the Rules of Origin, however, the differences are narrowing down. The members, in general terms, have agreed to the broader proposal of 40 percent value addition for developing countries with 10 percent derogation for the LDCs. However, difference still persists on tariff preferences and value addition clauses. No final decision was made on the issue of sensitive lists either. Members have requested each other to exclude products of their export interest from their sensitive lists. All members have now agreed to come up with a final list of sensitive products, addressing all sides concerns, during the next round of negotiation. Meanwhile, India and Pakistan agreed in general to pledge technical Pak Urges India to Remove Tariff Barriers Pakistan has recently declared that it will consider granting India Most favoured nation (MFN) status, but only after India removes all tariff and non-tariff barriers on Pakistani exports. This statement resonates the perception that although India has granted MFN status to Pakistan, exports are subject to a number of tariff and non-tariff barriers in India. Due to this, Pakistani exports to India have shown little increase over the years. Furthermore, four decisions on the economic front were taken after recent talks between President Musharraf and Indian Prime Minister Dr Manmohan Singh. These were: creation of a Joint Economic Commission, reviving the Joint Business Council, a meeting of the petroleum ministers to carry forward proposals for trans-national gas pipeline from Iran and Central Asia, and to permit trade through road transport (courtesy: SAWTEE Newsletter). Eu Offers Tariff Rate Quota to Pakistan: Bedlinen Export The European Union has offered a tariff rate quota on Pakistan's bedlinen exports in order to reduce the impact of anti-dumping duty which was previously imposed on the export of the commodity. Reportedly, EU had initially offered around 35,000 tons yearly quota for the export of bedlinen to the EU states. Pakistan's export of bedlinen to the EU-member countries was in the range of around 60,000 tons. With the definitive 13.1 per cent anti-dumping duty, Pakistani bedlinen attracted customs duty at the rate of 25 per cent (13.1 per cent anti- dumping duty and 12 per cent normal duty earlier exempted under the GSP scheme) from January 1, 2005 in the EU markets. This high duty has affected the export of bedlinen to the EU severely and has also led to an increase in the prices of Pakistani bedlinen in the EU market. Eight More Categories Come Under Us Quota: Chinese Textiles Last week, the US slapped quotas on eight more categories of textiles and apparels originating from China thereby bringing the total number of categories under restrictive ceiling during last two weeks to eleven. Ever since the start of quota free regime from January 1, 2005, there had been growing concern in the US and EU member states that thousands of jobs are at stake as domestic industry was unable to compete with imported textile goods The US commerce department committee, which took the decision, was of the opinion that these categories from China threatened to disrupt the domestic market as shipments from China surged since the end of global quotas on January 1, 2005. As per the arrangements, the US has the power to set the limits on Chinese goods under an agreement that cleared the way for Beijing's membership in the World Trade Organization in 2001. The EU has also imposed quotas on a number of apparel and textile imports from China. Seventh SAFTA CoE Meet Concludes Deletion: Pakistan’s Application Deferred The World Trade Organization (WTO) Council for Trade in Goods (CTG) has deferred Pakistan’s application seeking extension for the continuation of deletion programme for the local auto-manufacturers. According to experts, this time it would be a difficult task for Pakistan to get an extension in the scheme as the scheme was not in practice anywhere else in the world. Top of this pagePakistan Offers Bangladesh Garment Sector Raw Material The textile industry leaders in Pakistan have offered Bangladesh to meet its garment sector’s raw material need and suggested drawing up some benchmarking arrangement system between the two textile bodies to ensure quality and pricing of textile products. This was decided in a recent meeting between the Bangladesh Textile Mills Association (BTMA) and the All Pakistan Textile Mills Association (Aptma). Bangladesh exports about $4 to 5 billion of garments every year and it has a big appetite for cloth and fabrics. This complements Pakistan’s advantage in cloth and fabric manufacturing. Another avenue explored was for Pakistani textile operators to take advantage of Bangladesh’s access in EU and the US market, something that Bangladesh currently holds an advantageous position in. Top of this pageIndia Adopts VAT Amidst Nation-wide Protests The Indian government pushed ahead with the implementation of a nationwide Value Added Tax (VAT) on 1 April, 2005 despite protests by traders across the country who warned consumers to brace for a price rise shock. Traders accused that the law was being introduced haphazardly and was causing confusion and duplication of taxes. Thousands of protestors staged rallies and demonstrations across the 20 states in which the tax was implemented, calling for a rollback. VAT is designed to cut multiple layers of levies, boost revenues, reduce inter-state barriers to trade and check tax evasion. Seven Indian states controlled by the opposition Bharatiya Janata Party (BJP) have refused to implement the tax, saying they will lose revenue and that administrative problems remain in assessing the levy. Traders say the new system will increase their paperwork, bureaucratic hurdles and the tax burden they have to shoulder. VAT sets new rates on 500 items, with 250 essentials ranging from farm products to medicines taxed at 4 per cent and the rest at 12.5 percent. Top of this pageThe Pakistan Development Forum On April 25-26, 2005, Pakistan hosted its biggest development related event, the Pakistan Development Forum (PDF). The PDF is extremely important, as GoP discusses all its major development related initiatives on this forum. The event attracts significant Donor attention. This year’s event was co-hosted by GoP and the World Bank. The theme for the current year is “Sustaining growth and improving quality of life”. Top of this pageKathmandu Hosts BIMSTEC TNC Meeting The four-day meeting of the third round of BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) TNC (Trade Negotiating Committee) meeting concluded on 10 March in Kathmandu. Technical teams from the seven-member countries - Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka and Thailand - adopted preliminary framework of rules of origin (ROO) and dispute settlement mechanism (DSM). The frameworks were developed by separate working groups constituted to facilitate the negotiations and approved by the main technical body incorporating all the concerns and issues raised by the respective representatives of member countries. However, both the frameworks would require additional negotiations before they are finalized. All members expressed concern about providing special concessions for Least Developed Country (LDC) members. The meeting also discussed other outstanding issues related to the free trade agreement (FTA) accord on trade in goods, which needs to be finalized by the end of 2005 as BIMSTEC has already adopted a programme to enforce it from July 2006. The bloc has also endorsed enforcement of FTA on trade in services and investment promotion from July 2007 (courtesy:SAWTEE newsletter). Top of this pageIndia and Pakistan Agree on Removing Barriers and Promoting Trade Pakistan and India constituted two working sub-groups - on customs cooperation and trade facilitation, and non-tariff barriers (NTBs) - to facilitate increase in trade and remove barriers for enhancing economic cooperation after two days of meetings of the Joint Study Group (JSG), which ended on February 23 in New Delhi. The recommendations made during the discussions would be presented to their respective governments for consideration under the framework of the composite dialogue. The terms of reference (TOR) for the sub-groups were mutually agreed upon. The two sides identified issues relating to bilateral trade and deliberated upon the future roadmap in order to enhance trade and economic cooperation. The JSG was set up to explore trade prospects at the behest of the foreign ministers of both countries to take the trade forward between the two countries by removing bureaucratic and other obstacles. One of these obstacles was the issue of non-tariff barriers and para-tariff obstacles. While these were discussed in considerable depth, India’s quest to get Pakistan to grant it Most Favoured Nation (MFN) status was left out because of its political nature. India wants transit rights through Pakistan to Afghanistan, but that too has to be cleared at the political level (courtesy:SAWTEE newsletter). Top of this pagePakistan Leather Garment Exporters Get 25 pc Freight Subsidy Facing a 28 percent decline in exports of leather garments in the second half of 2004, manufacturers in Pakistan have raised alarms of a collapse of the leather garment industry. In view of the sector’s difficulties, the Government of Pakistan has agreed to provide a 25 percent subsidy on export freight to the manufacturers. In addition to the freight subsidy, the leather manufacturers had demanded payment of duty drawback, restriction on import of raw skin and wet blue leather, market access to new markets, most importantly Russia, installation of new machinery, and the like in their ‘survival package’. Thus, far the freight subsidy request has been met. It is expected that this move would provide leather garment manufacturers some breathing space and allow them to remain competitive in the international market, at least in the near term future. Top of this page4th Ministerial meeting of the Asia Cooperation Dialogue The Asia Cooperation Dialogue (ACD) is an Asian forum by virtue of which Asian countries seek to work in close collaboration with each other. Currently, ACD has 26 members, but it eventually aims to include all Asian countries under its umbrella. Pakistani Economy Growing but Poverty Still Endemic: IMF The IMF directors said the near-term economic outlook is ‘positive,’ with growth of around 6 percent expected to continue over the 2004-2005 period. Pakistan’s GDP accelerated to 6.5 percent in the 2003-2004 period from July to June, with inflation at a modest 4.6 percent. Notwithstanding these significant achievements, poverty remains widespread and social indicators are weak in the country. The IMF recommends that Pakistan must find ways to boost social spending to cut poverty while lowering the country’s heavy debt levels. The global financial institution is encouraging the Pakistani authorities to expand the tax base further into the services and agricultural sectors whereas the fiscal strategy calls for subsidies to the energy sector to be reduced significantly (courtesy:SAWTEE newsletter). Top of this pagePakistan’s Trade Agreements In a liberalized trade environment, bilateral trade agreements have gained added significance. In the past few months, Pakistan has been negotiating Preferential and Free trade agreements with various countries. The most recent talks on signing a Preferential Trade Agreement (PTA) have been with Malaysia, which were conducted during the Malaysian Prime Minister’s visit to Pakistan last month. The two countries have formally agreed to discuss the possibility of a PTA—to be turned into a Free Trade Agreement (FTA) eventually. Anti-Dumping and WTO With the WTO regime taking full effect, experts fear that anti-dumping charges would be used as a trade restricting measure. The number of anti-dumping charges has already been significantly high in recent years. Interestingly, however, there has been a sharp decline in the number of final anti-dumping measures in the first half of 2004. The charges declined from 114 in the first half of 2003 to just 52 during January-June, 2004. India, along with EU and US imposed the highest number, six each. Preservation of Traditional Knowledge Within South Asia there is growing emphasis on preservation of traditional knowledge. India has taken the lead by urging documentation and registration of traditional knowledge within SAARC countries in order to set up a traditional knowledge digital library (TKDL). These efforts are coming since traditional knowledge in public domain is becoming an easy source of misappropriation. India has already experienced cases of biopiracy relating to neem, turmeric, and basmati rice (courtesy: Economiquity, CUTS). Top of this pageNepali Garments Losing Ground In US Export of readymade garments (RMG) to the United States (US), the largest market absorbing over 80 per cent of the Nepali garment products, has gone down by 46 percent in the first month of quota-free regime. In 2005, export of RMG to the US was valued at US $6.08 million, according to trade statistics of Garment Association - Nepal (GAN). During the same month last year, exports were valued at US $11.34 million. In quantitative terms, Nepal exported some 136,997 dozen pieces of RMG in January 2005 while it was 291,143 dozen pieces during January 2004. Nepal's RMG exports to the US, the largest garment market of the world, had passed through a rough phase in 2004 too, when exports had declined by over 30 percent. Except for the month of October, exports had witnessed a slide throughout the year in 2004. In December 2004 alone, the decline was by 61 percent, according to GAN statistics. In 2003, however, exports had recovered by 16 percent, although the monthly export figures had gone through periodic upheavals (courtesy: SAWTEE newsletter). Top of this pageIndia's Economic Growth Slows To 6.6 Percent India's economic growth slowed to 6.6 percent in the second quarter of the financial year 2004 from 7.4 percent in the first quarter due to a fall in the growth of agriculture, according to government data released on 1 January, 2005. The farm sector, which has pushed India to the ranks of the world's fastest growing economies, fell 0.8 percent from 3.4 percent the previous quarter. Robust growth in the manufacturing sector helped to cushion the impact of the slowdown in farm output, which was largely due to delayed monsoon rains. Economists say the lower growth rate will still be among the highest in the world (courtesy: SAWTEE newsletter). Top of this pageMalaysian PM Moots FTA with India The Malaysian Prime Minister, Datuk Seri Abdullah Ahmad Badawi, has underlined the need to deepen Indo-Malaysian economic and trade cooperation through a free trade agreement (FTA). Speaking on a 5-day official visit to India (19 – 23 December 2004), he invited Indian businessmen to suggest a framework to maximize the gains from such a trading arrangement. Among the Association of South East Asian Nations (ASEAN) member-states, Malaysia is India’s largest trading partner and bilateral trade is projected to cross US$ 4 billion in 2004. India's strengths lie in machinery and engineering, pharmaceuticals, high technology and knowledge-driven industries. Malaysia, on the other hand, is strong in education, tourism, health services, finance and banking, biotechnology as well as high-value agriculture (courtesy SAWTEE newsletter). Top of this pagePakistan Garment Exports Pakistan has announced a relief package for its garment exporters. Post-MFA phase out, Pakistani garment exports to the EU have been put under tremendous strain. Its major competition is coming from within South Asia. Given that Pakistan exports more than 1% of total EU garment imports it no longer is part of the generalized scheme of preferences (GSP) and will not be provided any duty concession. Its imports would now face a 12 % duty. This puts it in the same bracket as India and China. However, both these countries are more cost competitive than Pakistan. For example, the cost of a dozen pique polo shirts from Pakistan is $35.26 as against $32.25 in India and $30.25 in China. On the other hand, South Asian countries that are otherwise not competitive receive duty concessions from the EU and thus undercut Pakistani garments. Bangladesh receives total duty exemption while Sri Lanka enjoys 50% duty exemption. In view of the above, the government of Pakistan has announced a relief package to bring down the cost of Pakistani garment exports. The specific nature of the package is still to be disclosed. Top of this pageAnti-Dumping Duty on Pakistani Bed Linen The EU has voted against suspension of the 13.1 % definitive anti-dumping duty imposed on Pakistan’s bed linen. The duty was initially levied early last year. Despite intense lobbying by the government, the recent EU vote went against Pakistan by a 13-11 margin. This is a serious setback to the Pakistani bed linen exports to EU. With a 25.1 % cumulative duty (12 % is the rate of actual duty), it has become virtually impossible for Pakistani bed linen to compete. The government, on the other hand, has initiated a fresh advocacy campaign and is pleading with the EU to send a review mission to reconsider the anti-dumping duty. Exporters, however, remain pessimistic about the outcome of government efforts. Top of this pageSCCI Plans to Set Up SMEs Council South Asian Association for Regional Cooperation (SAARC) Chamber of Commerce and Industry (SCCI) has decided to set up a Small & Medium Enterprises (SMEs) Council. The SAARC countries agreed to set up the Council following a proposal from the Federation of Associations of Cottage & Small-scale Industries (FACSI), India. A survey by the SCCI and FACSI has identified lack of information dissemination as one of the reasons behind the poor growth of the SMEs despite its significant role in boosting GDP and employment generation. To overcome this problem, the proposed SME council will be required to create a database of the SMEs of SAARC countries and develop a strong platform to spread awareness on such units and their products. In this connection, the first ever exhibition-cum-conference of small-scale industries from SAARC countries is scheduled to be held in Kolkata, India from 12-15 January. The proposed council would also help in cross-border selling within SAARC by SMEs. Top of this pageUS Offers Duty Free Access To LDCs The United States (US) - the largest readymade garment market for the Least Developed Countries (LDCs) - has floated a proposal that it would provide duty free market access to 14 LDCs of Asia and Pacific. However, the proposal is only applicable to countries that use raw materials from the US to produce garments. This leaves some of the LDCs ineligible for the concessions. Within South Asia, Nepal, which had benefited tremendously from the quota regime, does not qualify for this concession and is thus facing a major setback to its economy. Realizing the potential impact of the quota-free regime, the Nepalese government has been desperately trying to strike a bilateral deal with the US, allowing its products duty free access. Other LDCs faced with the same dilemma are also looking to bilateral treaties with various countries to absorb the shock from expiration of textile quotas. Top of this pageIndia Amends Patent Law India has recently amended its existing patent law in order to comply with WTO commitments. Till now, India had patents for processes but not for products. The new law will cover a range of products from drugs to chemicals to mobile phones and computer software. Top of this page
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