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Seminar on: BangladeshPakistan FTA: Reaping Mutual Benefits

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Title: Seminar on: BangladeshPakistan FTA: Reaping Mutual Benefits


1
Seminar onBangladesh-Pakistan FTA Reaping
Mutual Benefits
2
  • Keynote Speech
  • Presented by
  • Saifuzzaman Chowdhury
  • President
  • Chittagong Chamber of Commerce Industry

3
Background of Bilateral FTA
  • Against the backdrop of global change-over in
    both political and economic arena, every country,
    is now busily engaged to pursue supportive and
    pragmatic policy interventions and strategy to
    attain the cherished goal of viable development.
  • In fact, in order to ensure durable national
    progress and security, every country is or ought
    to be very active to harness even an iota of
    opportunity and make a half chance full chance.
  • But attainment of this objective, is often
    impossible for an individual country without the
    collaborative help and collective effort of other
    country.
  • Contd

4
  • Multilateral, plurilateral or regional
    agreements and cooperation can yield best result
    in this regard.
  • But very often, negotiations on multilateral,
    plurilateral or regional basis are of complexed
    nature and time consuming.
  • It requires harmonization of divergent and
    conflicting interests and synthesizing of varying
    demands of many countries.
  • On the other hand, negotiation between two
    countries and accommodating each others
    different interests is much more easy to handle.
  • As a result, both the country can early harvest
    their economic complementarities and competitive
    advantages.
  • Contd

5
  • Bilateral accord for economic and other
    cooperation also helps both the countries to
    achieve competitive gains over other countries.
  • This realization of reaping early benefits, is
    now encouraging many countries of the world to
    enter into bilateral pact.
  • Signing of Free Trade Area (FTA) Agreement at
    bilateral level, is therefore on surge, in recent
    time, in international arena.
  • The impasse and looming difficulties in WTO
    trade talks are also fanning the ideas of
    entering into bilateral FTA Agreement

6
FTA and RTA (Regional Trade Agreement) under WTO
  • WTO Members are allowed to depart from the
    principle of non-discrimination defined in
    Article I of GATT, Article II of GATS, and
    elsewhere to enter into FTAs and RTAs under
    specific conditions which are spelled out in
    three sets of WTO rules
  • i. Paragraphs 4 to 10 of Article XXIV of GATT
    provide for the formation and operation of
    customs unions and free-trade areas covering
    trade in goods
  • ii. The so-called Enabling Clause refers to
    preferential trade arrangements in trade in goods
    between developing country Members and
  • iii. Article V of GATS governs the conclusion of
    RTAs in the area of trade in services.

7
Examples and purview of RTAs and FTAs
  • According to ICC, more than 200 RTAs and FTAs
    are currently in force which is likely to rise
    over the years.
  • Few examples of such RTA Agreements include
    NAFTA, ASEAN, COMESA, SAFTA, EC etc.
  • Bilateral FTA includes the Japan-Singapore,
    US-Singapore, US-Australia, Turkey-Preferential
    treatment for Bosnia-Herzegovina and the EC-ACP
    Partnership Agreement etc. These agreements are
    aimed at giving the member countries preferential
    access over others.
  • Contd

8
  • In December 1998 India and Sri Lanka signed a
    free trade agreement, with India agreeing to
    phase out of tariffs on a wide range of Sri
    Lankan goods within 3 years, while Sri Lanka
    agreed to remove tariffs on Indian goods over
    eight years.
  • Other FTAs, such as those being negotiated
    by the USA, are much more comprehensive and cover
    other issues including services and investment.
    These agreements usually take existing WTO
    agreements as their benchmark. They often strive
    to go further than what is set out in the WTO
    rules.

9
Rationale of Bangladesh-Pakistan FTA
  • - Cultural homogeneity mutual acquaintance
  • - Same historical tradition
  • - Economic complementarities
  • - Huge market of about 300 million people
  • - Similar social structure and family
    bondage
  • - Homogenous consumer behaviour and buying
    pattern
  • - Scope to maintain almost similar
    distribution system and selling strategy
  • Contd

10
  • - Almost symmetric economic development
    state
  • - Similarity in life style and standard of
    living
  • - Existence of agreement for avoidance of
    double taxation (DTT)
  • - Huge scopes to exploit each others
    competitive advantages
  • - Scope to attaining greater collective
    bargaining power at regional and international
    trade negotiation

11
General Benefits of Bangladesh-Pakistan FTA
  • - Greater market access of each others products
  • - Attainment of more economies of scale with no
    or minimum adaptation in existing technology and
    production pattern
  • - More FDI attraction in both the countries
  • - Promotion of bilateral investment to tap each
    others comparative advantages
  • Contd

12
  • - Facilitation of joint venture as well as
    technology transfer and knowledge sharing
  • - Greater consumer satisfaction with low price
    index
  • - Scope of greater collaboration at the time of
    each others needs
  • - Better exploitation of each others economic
    complementarities and thus infuse dynamism and
    impetus to holistic economic development effort

13
Most Conspicuous Benefits of Bangladesh-Pakistan
FTA
  • - Bangladesh has been granted duty and quota free
    market access by EU, Norway, Canada, Japan,
    Australia and New Zealand and also preferential
    market access by many other developed and higher
    developing countries. Pakistani entrepreneurs can
    easily exploit this opportunity by availing of
    the sops to be granted under FTA.
  • - Bangladesh can use Pakistan as a Springboard
    for the markets of Afghanistan, Central Asia,
    Iran and Gulf countries.
  • Contd

14
  • - Bangladesh enjoys a strategically advantageous
    geographic location linking SAARC and ASEAN at
    the middle for all mode of transportation viz.
    road, rail, air and sea. Pakistani entrepreneurs
    can easily avail of this opportunity by
    exploiting preferential advantage to be granted
    under FTA.
  • - Both the countries can exploit their economic
    complementarities. For example Bangladesh has
    huge domestic and overseas apparel markets and
    Pakistan has good raw material supply source,
    technology and strong backward linkage in textile
    fabrics, which can be good combination for
    collective growth of both the economies. There
    are also other fields for such mutually
    beneficial cooperation.

15
Bilateral trade and economic relations between
Bangladesh and Pakistan
16
Other Economic Relations
  • - FDI from Pakistan to Bangladesh registered
    with BOI goes to the tune of about 90 million US
    dollar
  • - 4 Pakistani companies are currently operating
    in Bangladeshs EPZs
  • - Altogether more than 50 Pakistani companies
    are operating in Bangladesh
  • - Pakistan has offered Bangladesh duty free
    access of raw jute and upto 15000 metric ton of
    Tea per annum.
  • - Bangladesh has also submitted a list of 73
    items under nine categories to Pakistan for
    providing duty free access.

17
Major Export Import Items
18
Deterrents to bilateral trade and economic
cooperation
  • - Perceived political uncertainties of both the
    countries
  • - Lack of direct shipping links between
    Bangladesh and Pakistan
  • - Absence of cargo flights and lack of enough
    passenger flights
  • - Lack of frequent interaction and exchange of
    required information between the private sector
    of both the countries
  • Contd

19
  • - Lack of exchange of frequent private sector
    delegations
  • - Failure to participate in each others trade
    fairs
  • - Absence of required cooperation at Government
    level of both the countries
  • - Myopic views of the business community of both
    the countries on each others prospects and
    competitive edge

20
History of Bangladesh-Pakistan FTA
  • Both the countries in a meeting at Foreign
    Minister level on July, 2003 at Islamabad agreed
    to enter into a FTA Agreement.
  • A first formal meeting on the proposed FTA was
    held in Dhaka on December, 2003 at Joint
    Secretary level. But no headway could be made in
    the meeting due to the significant difference
    between the two countries on Special and
    Differential (SD) Treatment issue.
  • During the visit of Prime Minister Begum
    Khaleda Zia to Pakistan on 13th February, 2006,
    both the countries agreed to finalize the FTA
    Agreement by September, 2006.

21
Supporting Factors and Incidences of proposed
FTA
  • After the proposal, private sector
    representatives of both the countries, argued for
    rapid signing of FTA, taking into account the
    asymmetric development state of either country.
  • With the mounting pressure from private
    sector, Government of both the countries also
    became very active to expedite their economic
    cooperation.
  • As a result, the 8th meeting of the
    Bangladesh-Pakistan JEC was held on September,
    2005 in Dhaka after 6 years.
  • The JEC meeting worked out a common strategy
    to raise both way trade to one billion dollar by
    2007.
  • Contd

22
  • The JEC meeting also signed an agreement to
    form a Joint Working Group which would look into
    the progress of following strategy-
  • i. Establishing direct shipping links between
    Bangladesh and Pakistan
  • ii. Exchange of private sector delegations
  • iii. Enhancing air flights of both passenger and
    cargo
  • iv. Participation in each others trade fairs
    and holding single country exhibitions.
  • Contd

23
  •  Other Common concerns identified in the JEC
    Meeting-
  • i. Finding areas for joint venture initiatives
  • ii. Strengthening and expanding technical
    cooperation
  • iii. Exploring the possibility of investment in
    tourism and allied projects
  • iv. Enhancing cooperation in fisheries and
    livestock
  • v. Creating a Joint Fund to undertake
    investment-promotion activities and linkages
    among export processing agencies of the two
    countries.
  • ? The meeting of the JEC and its decision was
    aimed at facilitating the signing of FTA
    Agreement between Bangladesh and Pakistan.
  •  

24
4 MOUs signed between Bangladesh and Pakistan
  • During the recent visit of Prime Minister
    Begum Khaleda Zia to Pakistan, 4 MOUs was signed
    between Bangladesh and Pakistan in a bid to
    accelerate the signing of FTA Agreement
  • i. Cooperation in Agriculture
  • ii. Cooperation in Tourism
  • iii. Cooperation in export Promotion and
  • iv. Cooperation in product standardization and
    quality assurance.
  • Contd 

25
  •  Pakistan Agricultural Research Council and
    Bangladesh Agricultural Research Council entered
    into the MOU in the farm sector cooperation.
  • The MOU on tourism was signed by Bangladesh
    Foreign Minister Mr. M. Morshed Khan and Pakistan
    Tourism Minister Mr. Syed GG Jamal.
  • The 3rd MOU on export promotion, was signed by
    Foreign Minister Mr. M. Morshed Khan Pak
    Commerce Minister Mr. Humayun Akhter Khan.
  • The fourth one between Pakistan Standards and
    Quality Control Authority (PSQCA) and Bangladesh
    Standards and Testing Institution (BSTI) in the
    field of standardization and quality assurance
    was signed by Foreign Minister Mr. M. Morshed
    Khan and Pak Science and IT Minister Mr. Nouraiz
    Shakoor.
  • All these agreements are to facilitate the
    signing of FTA Agreement between Bangladesh and
    Pakistan.

26
Salient Features of the proposed FTA
  • Early Harvest Approach Both Bangladesh and
    Pakistan can implement an Early Harvest Programme
    to deliver benefits to the private sectors ahead
    of FTA and to provide impetus for early
    conclusion of FTA negotiation.
  • Under this programme Pakistan should grant
    immediate duty free access to 73 Bangladeshi
    products under 9 categories as requested for. The
    products include jute jute goods,
    pharmaceuticals, plastic products, porcelain,
    melamine and readymade garments.
  • Pakistan can also provide a list of products
    under this programme.
  •  Contd

27
  • Recognition of Special and Deferential Treatment
    for Bangladesh Pakistan should recognize the LDC
    status of Bangladesh and provide the Special and
    Deferential (SD) Treatment to it. As an LDC,
    Bangladesh is the legitimate claimer of the
    facility.
  •  
  • Tariff reduction schedule Under SAFTA
    Agreement, Pakistan is to reduce their tariff to
    0-5 for Bangladeshi products within 3 years
    beginning from the date of coming into the force
    of the Agreement. Under the bilateral FTA,
    Pakistan should reduce its tariff to 0-5 for
    Bangladesh with effect from coming into force of
    this bilateral FTA Agreement. On the other hand,
    as an LDC, Bangladesh should be allowed to comply
    with its obligations as same as under SAFTA.
  • Contd 

28
  • Sensitive List FTA between Bangladesh and
    Pakistan should be more liberal and cooperative
    than SAFTA. So, any items of interest of
    Bangladesh, must be excluded from the sensitive
    list. At the same time, Bangladesh should be
    allowed to maintain a wider negative list. Any
    products already under preferential treatment
    should not be included in the sensitive or
    negative list.
  •  
  • Rules of Origin Rules of Origin under the
    proposed FTA, should be more flexible and liberal
    than that of SAFTA/SAPTA. It should be based on
    simple value addition criteria and not on Heading
    or Sub-Heading change criteria or combination of
    both of them. To getting preferential access to
    Pakistan market, value addition for Bangladeshi
    products should be 25 as the percentage is 30
    in SAPTA/SAFTA. A derogation in value addition
    criteria for RMG and other labour incentive goods
    of Bangladesh should be allowed and it would be
    not more than 20.
  • Contd

29
  • Recognition of Testing Institutes and
    Laboratories for Conformity Assessment
    Conformity assessment certificates on technical
    regulations and product standards, to be issued
    by the respective designated national agencies,
    should be accepted until mutual recognition
    Agreement is reached between the two countries.
    Non-acceptability of conformity assessment
    certificates of any product, if and when arise,
    should be resolved by mutual cooperation and
    discussion without restricting the flow of trade.
  •  
  • Imposition of Restrictive Measures Exports from
    Bangladesh should be exempted from antidumping,
    countervailing and safeguard measures on
    non-reciprocal basis until Bangladeshs export
    share reaches more than 10 and the combined LDC
    share reaches more than 25 of the total market
    share of Pakistan for that particular product.
  • Contd

30
  • Settlement of Disputes All disputes relating to
    any transaction should be referred for settlement
    to an arbitration body to be mutually agreed upon
    by both the countries, unless both parties agree
    to settle the dispute in any other peaceful
    manner.
  •  
  • Negotiations on trade in services and
    investment Trade in Services and investments
    should be expedited by negotiations between the
    two countries on the basis of respective offers
    and requests on preferential basis taking into
    cognizance of the varying development state of
    both the countries.
  • Contd

31
  • Formation of a joint trade facilitating
    Committee
  • A joint trade facilitating committee should be
    set up consisting of the officials of the
    concerned agencies and representatives from the
    private sector to identify and remove trade
    barriers and facilitate mutual trade and
    investment.
  • The recommendations of the joint trade
    facilitating committee made from time to time
    should be the basis for regulatory framework and
    trade policy formulation between the two
    countries.
  • Contd

32
Areas for joint efforts to reap benefits of FTA
  • - Harmonization of H.S. Codes of both the
    countries.
  • - Simplification and harmonization of customs
    procedure.
  • - Recognition of certifying and testing
    institutes of both the countries.
  • - Establishment of direct shipping and air links
  • Contd

33
  • - Establishment of an active network of
    Government and private sector agencies related to
    trade and economy.
  • - Building up a strong interaction and exchange
    of business information between the businessmen
    of both the countries.
  • - Making the Government functionaries responsive
    to the needs and problems of the private sector
    of both the countries.

34
  • Thank you
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