Caught in a web
India’s regional export has largely suffered due to barriers – both tariff and non-tariff
In spite of the great potential of Indian exports, the country's performance has remained weak. India's exports even in South Asia, where the Indian economy is relatively advanced and plays a significant role in shaping the economic and trade environment, are not encouraging. South Asia still remains one of the least economically integrated regions of the world. Forget Pakistan, India's potential has never been explored to the fullest even in SASEC (South Asia Subregional Economic Cooperation) countries – Bangladesh, Bhutan, India, Maldives, Myanmar, Nepal, and Sri Lanka.
India must take the lead to improve the economic activities in the region. It is important for India because the country has deep-rooted cultural, ethnic, historical, linguistic and social linkages with the SASEC countries. More so because India occupies 75 per cent of the region's geographic landscape and shares land boundaries with most of the countries. It's indeed a sorry state of affairs that India has not been able to take full advantage of these favourable conditions.
At the regional level, India has undertaken bold initiatives to promote intraregional trade and investment through the South Asia Preferential Trade Agreement in 1991, followed by the South Asia Free Trade Agreement (SAFTA) in 2004. However, such efforts have largely not been successful due to, among others, the agreement's shallow trade and investment provisions, the use of non-tariff barriers (NTBs), suboptimal regional connectivity and barriers at the border and beyond the border. As for India's trade integration with SASEC countries, it is affected by several factors, including high tariff barriers, NTBs, ineffective trade facilitation and suboptimal institutional coordinations.
Though India has engaged itself with SASEC countries for decades through various bilateral and regional trading agreements and a reduction in visible trade barriers have been witnessed, invisible trade barriers persist in the region. It is negatively affecting intraregional trade. Indian efforts have served to bring down tariff barriers but non-tariff barriers remain. These non-tariff barriers included administrative fees, labelling requirements, antidumping duties, import restrictions, countervailing measures, sanitary and phytosanitary (SPS) and technical barriers to trade (TBT) regulations, surcharges and other specific conditions related to trade.
There are also some common problems and challenges in the region related to trade facilitation. With regard to standards, development across the region remains relatively immature and there are considerable asymmetries in testing procedures. Trade facilitation is not smooth mainly due to excessive documentation, inadequate implementation of modern customs procedures, limited application of information and communication technology, lack of transparency in import-export requirements, lack of compliance with technical standards, lack of adequate border facilities and lack of through transport arrangements, among others. Legal and regulatory frameworks relevant for trade facilitation likewise require reform and modernisation.
India's exports to SASEC countries are highly concentrated in a few categories of products and there is much untapped potential for improvement. Additionally, India's exports to SASEC counties constitute some common products which underpin the potential fostering of the regional value chain in the region. High trade complementary is some sectors can create a good opportunity to develop a regional production network which will be beneficial for all countries in the region.
An ADB-SASEC study has recently been published which has noted gaps in domestic legislation and institutional structures related to the implementation of SPS and TBT measures in India. India has already undertaken several initiatives to address these gaps such as developing a comprehensive national standardisation strategy, setting up a standard portal and developing the Ayush Mark scheme and zero defect zero effect (ZED) certification scheme. Such initiatives demonstrate India's evolving stance on SPS and TBT measures in the current global trading environment. However, India has miles to go even in this regard.
Findings of the study also indicate that within other SASEC countries, there are significant gaps in the institutional and regulatory architecture, which often increase the potential risk of SPS and TBT measures being applied and hampering cross-border trade. One of the main issues observed in the SASEC region is a tendency for multiple regulating agencies to produced may unwanted regulations and this lack of coordination and consistency can lead to confusion, duplication and trade restricting measures. There are also gaps in infrastructure facilities necessary to implement SPS and TBT measures. It included a count of testing laboratories in India and other SASEC countries. The study has also revealed a significant infrastructure deficit in the region which affects the efficiency of export-import operation.
Potential Indian products for export to the SASEC countries suffer from several trade-restricting measures in India. The most important of them is that many agencies, institutions and other bodies are involved in setting standards which can result in a lack of harmonised compliance procedures at the domestic level. Secondly, large exporters that engage agents and draw on business connections are able to meet the required standards of an importer country, yet the same required standards, when applied to smaller exporters without the advantage of agents are costly and demanding and ultimately negatively affect competitiveness.
Labelling and language-restrictive requirements can also impose an additional burden on trade, resulting in higher costs and transaction time, the study emphasised. In addition, to SPS and TBT-related measures, many other types of non-tariff measures become barriers to international trade and transactions and sometimes lead to full trade diversion. For example, such measures can often include the physical inspection of goods and often disproportionately affect smaller exporters.
Based on the diagnostic study's identification of potential export products from India to other SASEC countries and its analysis of existing laws, policies and regulations related to SPS and TBT measures hindering exports, the study has made a series of recommendations directed both for domestic areas of reforms, such as overlapping SPS and TBT laws and regulations, absence of testing infrastructure facilities and lack of domestic regulations. It has recommended action at a regional level, through appropriate regional platforms.
Views expressed are strictly personal