Issues and Challenges for SMEs in WTO Era: Can RTA’s help?

1. TamannaChaturvedi Consultant Indian Institute of Foreign Trade Issues and Challenges for SMEs in WTO Era: Can RTA’s help?

2. Are you satisfied with the products that you have? Rate your level of satisfaction (between 1 to 5) 5 1 Highly dissatisfied Highly satisfied

3. Are you satisfied with the products that you have? Rate your level of satisfaction (between 1 to 5) 5 1 Highly dissatisfied Highly satisfied Globalization gives more satisfaction to the country

4. 1 Textiles Marine 2 Rice 3 Coffee 4 Wood 5 Who’s won the race?

5. Exports of CLMV countries by Principal Commodities

6. My exports are on a rise for last so many years? ….BUT!!.....does it mean the trend would remain for ever? Let’s see how & why?

7. Decline in Prices: Case of CLMV countries

8. Loosing Competition in International market…. Netherlands(24.45), Spain(23.51), Mexico(19.65),USA(4.79) USA(58.67), Brazil(23.64), Argentina(7.06), Paraguay(4) France(19.55),USA(14.83), Italy(10.56),Chile(8.66) Spain(35.89),USA(15.68),Mexico(5.39),Greece(5.14) Ecuador(22.85),Costa Rica(13.65),Colombia(11.05) USA(26.68), Australia(16.22), Canada(13.3), Netherlands(9.19)

9. EWEC countries: need for more ASEAN integration

10. Didn't we expect WTO to solve all these problems?

11. Some facts… The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. Location : Geneva, SwitzerlandEstablished : 1 January 1995Created by : Uruguay Round negotiations Membership : 153 countries Head : Pascal Lamy (DG) Secretariat staff : 550

12. Observer Status Countries • Russian Federation • Saudi Arabia • Serbia • Seychelles • Sudan • Tazakistan • Tonga • Ukraine • Uzbekistan • Yemen • Afghanistan • Algeria • Belarus • Bhutan • Bosnia • Ethipoia • Iran • Iraq • Kazakastan • Lao PDR • Libya

15. BASIC PRINCIPLES • 1. NON-DISCRIMINATION • MFN (Most Favored Nation) Members are bound to grant to the products of other members treatment not less favorable than that accorded to the products of any other country. • National Treatment Once goods have cleared customs, imported goods must be treated no less favorably than the equivalent domestically produced goods.

17. 2. PREDICTABLE AND GROWING ACCESS TO THE MARKETS • Prohibition of Quantitative Restrictions • Binding of Tariffs • Bound Tariffs cannot be increased • Progressive reduction in the protection. • Exceptions: Safeguards, BOP. 3. FAIR COMPETITION 4. TRANSPARENCY 5. ENCOURAGE DEVELOPMENT

18. Market Access S & D Domestic Support Export Subsidies

19. Market Access Bound Rate (max) Tariffs Non Tariffs Least Developed Countries do not have to undertake any tariff reduction

20. The Harmonized System (HS) codes are an international method of classifying products for trading purposes. This classification is used by customs officials around the world to determine the duties, taxes and regulations that apply to the product. The Harmonization Code System (HS-Code) is a system of progressively more specific identifiers for a commodity. This number is an aggregate of a series of codes starting with a broad category assigned a 2-digit identifier. It is then assigned a 4-digit identifier and goes down further. Now what is this HS Code?

21. Products of animal origin….HS code 04 Egg Feather Milk Honey Meat

22. ….HS code 4 digit Egg 0402 Feather 0407 Milk 0401 Honey 0405 Meat……

23. Butter 040150 Milk powder 040110 Butter oil 040120 Cheese 040130 04011010: Milk and cream containing fat not exceeding 1%. 04011020: Milk and cream containing fat > 1% but < 6% by wt. 04011030: Milk and cream containing fat > 6% by wt. Milk 0401……HS 6 dgt

24. Tariff Reductions for selected food items

26. What does this Tariff Rate Quota mean to GMS exporter? Decision making for Exporter on the basis of TRQ: case for rice exporter Mr. X is a rice exporter from your country. He is a consistent player in the rice trade with export capacity of 20,000 tons, however faces tough competition from Mr. Luan Hay of Thailand. He is looking for a right destination for his export consignment. As per the past trends , he shortlists three markets i.e Indonesia, Japan and Srilanka. Now considering the parameters under TRQ, which market will you suggest him to finally choose for his rice exports why?

27. Let’s use TRQ for identifying our target export market

30. Please go to www.wto.org Click on “Trade Topics” Then click on Agriculture Then click on “more on official documents and country notifications” Download your country’s list of products under “Tariff Rate Quota” Participant’s Exercise

32. In such a scenario……… Let’s see how RTAs can help SMEs?

34. Reduction in Import duty on goods Liberalization of Services Liberalization of Investments How can RTA’s help in this context? Development of International Production Networks

35. These are International Production Networks Finally sold in USA and EU Yarn purchased Rep of Malaysia Weaved & Dyed In Vietnam by subsidiary Cut in Laos subcontractor Stitched in Thailand Zipped in Indonesia

36. How will it help? Collective efficiency due to… • Scale: purchase of inputs, technology, pool of skilled workers, pooling production capacity to meet large volume orders • Specialization: by producing a joint output by div of labor • Joint Action: collaboration through producer association.. Learning jointly about new market standards • Enhanced attractiveness as suppliers: reduce transaction cost of buyers sourcing otherwise from small firms

37. RTA provide member countries with a comprehensive legal framework to provide greater market access for goods and services. Negotiations are certainly faster. It allows countries to develop partnerships in areas not covered by WTO. Going beyond WTO