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Global trade alliances and Bangladesh

Having a population of 1.35 billion, the intra-regional trade of SAARC is currently limited to about 4 percent of global trade amounting to about $152 billion. It indicates that the intra-regional trade has remained stationary even after the formation of SAPTA. But the pace of economic growth in India has been at a blistering average of 9.7 percent a year from 1993 to 2003. Bangladesh and Sri Lanka have the average of 5.3 percent and 4.8 percent a year respectively during the same period. Pakistan although faced stagnation in 1990s, has been maintaining 4.3 percent growth average since 2000. These indicate tremendous possibilities to share the individual trade growth within the region.

Bijan Lal Dev
THERE have been as many as 160 allies in the trading world covering 55 percent of the global trade of $ 6.3 trillion in 2004. some are bilateral like the Us-singapore free trade area, some are regional like 25-nation European Union (EU), 3-nation North American Free Trade Area (NAFTA), 10-nation Association of south East Asian Nations (AsEAN) and a few are multi-lateral like 148-nation World Trade organisation (WTo), 21-nation Asia Pacific Economic cooperation (APEc), 30-nation organisation for Economic cooperation and Development (oEcD), 35-nation AsEAN-EU Meet (AsEM). These trade blocs have attained different levels of five-tiered economic cooperation. These in ascending order of cooperation are: 1) Preferential Trading Arrangement e.g., 7-
nation sAARc PTA, 2) Free Trade Area e.g., NAFTA, 3) customs Union e.g., 3-nation (Kenya, Uganda and Tanzania) East African community, 4) common Market e.g., WTo and 5) Economic Union e.g., EU.
Among all these trade blocs across the world, the rule-based institution WTo was formed in 1995 after long 47 years of protracted negotiations with a great hope, aspiration and enthusiasm to integrate the global trade under an umbrella. Recently, bilateralism and regionalism have come
to the forefront as the WTo has taken a back seat. other multilateral groups also prefer to engage in specific issues focusing on their bloc's interest.
Bangladesh like other countries including india, Pakistan and sri Lanka who have colonial experiences in recent past was skeptic to any trade pact. Joining of most of the developing countries in the Uruguay Round of GATT negotiations in 1986 was considered as a moral boosting for Bangladesh to enter into cross-border trade pact. The seven sAARc countries entered into sAPTA i.e., preferential trading arrangement in late 1993 indicating a positive shift from the original charter of sAARc which was founded in 1985. Within a span of eight months after signing sAPTA, Bangladesh signed WTo agreement on 15 April 1994 along with 124 founder members of the WTo. one may ask, did Bangladesh do sufficient homework or preparation before signing of the two important trade pacts? The answer would be rhetoric. But the fact is that Bangladesh was a bit jubilated at that time to enter into trade blocs.
The quest for bilateralism and regionalism has gained additional momentum with the comment of the then Us Trade Representative Robert Zoellick soon after the collapse in WTo negotiations in Mexican seaside resort, cancun in september 2003. He said, "The United states will favour bilateral
and regional trade deals with individual blocs or countries, instead of the multilateral accords bartered with all the WTo's 146 (now 148) members." The Us has already signed FTA with singapore and Qatar and is on the verge of FTA discussions with Thailand and other Middle East and central Asian countries. Free Trade Bloc of American Hemisphere involving 34 nations is also on the cards. 2005 has been set as the deadline for the FTA of
the America's Agreement to create the world's largest free trade area with a market of some 800 million people and $ 3.5 trillion in trade annually.
The Latin American trade bloc 'Mercosur' involving Argentina, Brazil, Uruguay, and Paraguay with chile and Bolivia as associate members and NAFTA involving the Us, canada, and Mexico are functioning effectively. AsEAN involving Brunei, Malaysia, indonesia, the Philippines, singapore, Thailand, cambodia,
Myanmar, Laos and Vietnam with 530 million people and annual trade worth $ 800 billion and the expanded EU involving 25 European countries with 450 million people and trade of over $ 2 trillion annually are also advancing properly. ASEAN will reach fullscale FTA by 2010 and has targeted entering FTA with China by 2010, with India by 2011 and with Japan by 2012. All are set to launch FT talks with South Korea, Australia and New Zealand. They
are preparing a road map to create a European-style single market by 2020.
in East, south and southeast Asia, most economies within or outside the regional groups have been showing strong performances since 2002. According to ADB Report 2004, GDP growth for Asia reached 6.3 percent in 2003. Average inflation remained low at 2.3 percent. current account surplus was 4.2 percent of GDP. Foreign exchange reserves rose to $ 1.3 trillion in
2003. Obviously, China, India, Thailand and Vietnam have been playing major role in these significant performances. The regional economic development has been achieved due to sharp increase of intra-regional trade and increase of importance of consumer demand in most of the regional countries. Intra-regional trade has been increasing sharply mainly with the emergence of Chinese buoyant economy. China's import from the region
was $ 38 billion in 1995 and
reached to some $194 billion in 2003. so, china has become the single largest export market of the major regional countries. similarly, china is increasing export to the regional countries with a faster rate as it has been maintaining average annual export growth rate of 16.9 percent since 1995. With the increase of the intra-regional trade, an economic dynamism has been prevailing in the region that brings benefit to the regionalism in the years to
come. As a result, the region has achieved enhanced growth in most of the economic indicators in 2004 despite impact of sARs virus and tsunamis.
Bay of Bengal initiative for Multi-sector Training and Economic cooperation (BiMsTEc), another trade bloc in south Asia, initiated in 1997 with four countries and now comprises seven countries: the four original members Bangladesh, india, sri Lanka and Thailand and three new ones,
Myanmar, Nepal and Bhutan. it is now holding FTA talks under the FT framework agreement signed at the 6th BiMsTEc Ministerial meeting held in February 2004. Having a combined population of 1.3 billion people, the trade volume within the group is only 4 percent of the group's total transnational trade amounting to about $ 250 billion. Under the framework agreement, it was agreed that the three developing countries of india, sri Lanka and Thailand would cut import tariffs on
products on a "fast track" list to zero no later than 30 June 2009, while the other four LDcs would do the same in 2011.
With this backdrop, the south Asian Free Trade Agreement (sAFTA) was signed in the 12th sAARc summit in islamabad from 4-6 January 2004, with a view to bolster regional trade and economic cooperation and grab mutual opportunities and potentialities. The five countries of sAARc are also in BiMsTEc where Pakistan and Maldives have been replaced by Thailand and Myanmar of AsEAN. This overlapping may complicate customs appraisal at the early stages of implementation of the FTAs. Any way, having a population of 1.35 billion, the intra-regional trade of sAARc is currently limited to about 4 percent of global trade amounting to about $152 billion. it indicates that the intra-regional trade has remained stationary even after the formation of sAPTA. But the pace of economic growth in india has been at a blistering average of 9.7 percent a year from 1993 to 2003. Bangladesh and sri Lanka have the average of 5.3 percent and 4.8 percent a year respectively during the same period. Pakistan although faced stagnation in 1990s, has been maintaining 4.3 percent growth average since 2000. These indicate tremendous possibilities to share the individual trade growth within the region.
sAPTA agreement will come into effect from 1 January 2006. it has six core elements: 1) Trade liberalisation programme, 2) Rules of origin, 3) institutional arrangement, 4) safeguard measures, 5) special and differential treatment for LDcs and 6) Dispute settlement mechanism. The salient features of the FTA are: non-LDc (india, Pakistan and sri Lanka) will reduce tariff to 20 percent within 2 years and 0-5 percent within next 5 years and 05 percent for the products of LDcs within 3 years. on the other hand, LDcs will reduce tariff to 30 percent within 3 years and 0-5 percent within next 8 years. contracting parties shall eliminate all quantitative restrictions (QRs) to the products included in the Trade Liberalisation Programmes (TLP). TLP does not apply to the sensitive lists which shall be negotiated by the member countries and will be reviewed after every four years with a view to reducing the number of items in the sensitive list. it is interesting to note that india does not need to take extra initiative for sAFTA as it will have to cut in peak customs duties and QRs within next five years to reach the levels prevailing in AsEAN countries. Rather, it will match india's FTA deal with AsEAN by 2011.
Bijan Lal Dev, a trade analyst, is a freelance contributor.