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Strategy to enhance RTA utilization amongst SMEs by understanding it’s Business Implications TamannaChaturvedi Consultant Indian Institute of Foreign Trade
How is RTA better than WTO? Can these RTAs that my country has signed help my business grow?
Going beyond WTO • 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.
but how was that possible? • If yes, which were these areas?
Which were these areas? • Economic Co-operation in identified sectors • Institutional framework to enable environment for greater flow of investments • SPS-TBT considerations • MRA on standards, mutual recognition, assessment procedures, equivalence • MOU on harmonization on Ayurvedic/traditional medicines • Custom clearance agreement • Consumer Protection and legal meteorology • Trade defense measures • Double taxation Avoidance Convention (DTAC) • Bilateral Investment Promotion & Protection Agreement (BIPA) • Treatment of “Shell Companies” • Air services agreement & open skies for charter flights • Health care, education, media, tourism • Unauthorized trade • Govn procurement, IPRs & GIs • Dispute Settlement process
Stages of an Regional Trading Arrangement Common currency Macroeconomic policy coordination Free movement of factors of production CET
Up gradation from PTA to FTA: COMESA The Common Market for Eastern and Southern Africa, is an FTA with twenty member states stretching from Libya to Zimbabwe. COMESA formed in December 1994, replacing a Preferential Trade Area which had existed since 1981.
Up gradation from Customs Union to Monetary Union: case of UDEAC • The Customs and Economic Union of Central Africa UDEAC formed a customs union with free trade area between members and a common external tariff for imports from other countries. • The Economic and Monetary Community of Central Africa ( CEMAC) is an organization of states of Central Africa established by Cameroon, Central African Republic, Chad, Republic of Congo, Equatorial Guinea and Gabon to promote economic integration among countries that share a common currency, the CFA franc. • Currently, CEMAC countries share a common financial, regulatory, and legal structure, and maintain a common external tariff on imports from non-CEMAC countries. Movement of capital within CEMAC is free.
Up gradation from Common Market to CSME: Caribbean Single Market and Economy : learning for ASEAN
Participant’s exercise What steps your country should take to integrate from FTA to Economic Union?
Learning for ASEAN: steps towards Economic Integration • The outline of the Development Vision and the Regional Development Strategy • The extension of categories of free movement of labour and the streamlining of existing procedures, including contingent rights • Full implementation of free movement of service providers, with streamlined procedures • Implementation of Legal status (i.e. legal entrenchment) for the CARICOM Charter for Civil Society • Establishment and commencement of operations of the Regional Development Fund • Approval of the CARICOM Investment Regime and CARICOM Financial Services Agreement, to come into effect by January 1, 2009 • Establishment of the Regional Stock Exchange
Learning for ASEAN: steps towards Economic Integration • Negotiation and political approval of the Protocol on Enhanced Monetary Cooperation • Agreement among Central Banks on common CARICOM currency. • Harmonization of taxation systems, incentives and the financial and regulatory environment • Implementation of common policies in agriculture, energy-related industries, transport, small and medium enterprises, sustainable tourism and agro-tourism • Implementation of the Regional Competition Policy and Regional Intellectual Property Regime • Harmonization of fiscal and monetary policies • Implementation of a CARICOM Monetary Union.
Efforts to promote integration of CLMV into ASEAN as AEC • Formation of ASEAN development fund: In order to narrow the development gap within ASEAN, the ASEAN Development Fund which could advance the development of ASEAN-CLMV countries was signed on 26 July 2005. • Initiative for ASEAN Integration (IAI): In the IAI, signed on 23 July 2001, the member countries declared to take special efforts to help the development of ASEAN-CLMV with priority given to infrastructure, human resource development and ICT. However, an integrated approach should be developed to widen transport linkages to narrow the development gaps. • Roadmap for the Integration of ASEAN (RIA): The RIA specifies milestones including specific steps and timetables. In 2003, the AEM identified 11 priority sectors, chosen for their comparative advantage, for accelerated economic integration. A twelfth sector, logistics, was added in 2006. Member states took on the coordination role for each of the 12 sectors.
The Rules of Origin (RoO) criteria have also been defined under ISLFTA. The preferential duties will be applicable only if the domestic value-addition is at a minimum of 35 percent or 25 percent when Indian inputs comprise 10 percent.
Rice from Lao PDR Vietnamese Rice Thai rice Understanding consumer demands while negotiations As a foreign buyer, can you make out a difference?
Understanding Consumer Specificity Mango season overlaps Christmas. During this season, mangoes are eaten for breakfast and first box of mangoes is auctioned for charity. Unripe mangoes eaten with bagoong Mangoes used to make juices, icecream,fruit bars, pies,stick dipped in hot chili powder and salt Mangoes eaten green with salt & pepper.. In gautemala they eat with roasted pumpkin seed
Understanding consumer demands while negotiations • EU self suff in apples and grapes • Import demand for mangoes, banana, avocadoes, pineapple & kiwi • Northern EU consume less fruits and vegetables than Southern EU • Change in production system have changed demand patterns • Consumption in new EU states < old EU member countries • Southern EU still prefers fresh and unprocessed fruits and veg. • Weight loss products, gluten free in demand • Cross varietal products in demand • Demand for organic products is on high
Understanding specificity of Consumer demands • EU is large producer of fruit juice but limited producer of fruit juice concentrate. • Fruit juice processing (Germany, UK) • Orange conc (Italy, Spain & Greece)+USA+Brazil • Lemon conc (Italy) • Apple conc (Poland, Italy, Germany, Hungary & Spain) • Consumption of preserved fruits and vegetables: canned, frozen, jams and purees increased by 7%.Dried grapes, dates, prunes and apricots consumption on rise.(Italy, UK and Germany)
Proper Competition Analysis…..not all producers are my competitors Seasonal calendar for the production of mangoes throughout the world