Date post: | 26-Dec-2015 |
Category: |
Documents |
Upload: | gabriel-rice |
View: | 213 times |
Download: | 0 times |
1
Trade Liberalisation & Consumer Welfare Trade Liberalisation & Consumer Welfare in South Asiain South Asia
Project Review MeetingProject Review Meeting
Dhaka, June 28, 2011Dhaka, June 28, 2011
Cost of Economic Non Cooperation to Cost of Economic Non Cooperation to
Consumers in South AsiaConsumers in South Asia
COENCOSACOENCOSA
1
Overview of the Project Background and Objectives Activities and Expected Outcomes
Theoretical Basis of Consumer Welfare Main Inferences from Meta-Analysis
Assessment of Consumer Welfare under SAFTA Method Partial Estimates (Indo-Bangla Case)
Usefulness of the Estimates
ContentContent
2
Background
Intra regional trade in South Asia is least as compared to other economic blocs in the world
Intra regional trade has stagnated at under 5% of total trade as against 27.06% for ASAEN
SAFTA, operational from January 2006, suffers from shortcomings such as:
Large Sensitive Lists retained by Members Minimal provisions on non tariff measures Strict value-addition requirements
3
Background
Though positive effects of export promotion on economic growth is well acknowledged, trade policy regimes in South Asia are still highly influenced by the notion of import-substitution
Impact of trade liberalisation on producer welfare is given thrust, while positive effects on consumer welfare is ignored
Deeper economic cooperation among the South Asian countries could avoid high costs to consumers
4
Objectives
To assess the potential consumer welfare gains from SAFTA through meta-analysis of existing literature and using secondary data
To study the reasons of and solutions for economic non-cooperation between South Asian countries in general and neglect of consumer welfare impacts of SAFTA in particular through a perception survey
To use the results thereof to garner support for enhanced trade integration in the SAARC region
5
Activities
Meta-analysis of the literature on regional trade integration in South Asia
Peer review of meta-analysis
Perception survey of selected stakeholders in five South Asian countries
Publication and dissemination of research results (December,
2011)
6
Expected Outcomes
Awareness generated amongst South Asian policy makers regarding loss of consumer welfare on account of regional economic non-cooperation
Policy actions leading to enhancement of intra-regional trade and investment relations in South Asia and resultant gains in consumer welfare in the region
7
Theoretical Basis
Classical trade theory and its modern derivations treat consumer welfare effects of trade as inseparable from producer welfare. Empirical literature consider them differently because of distinct incidence on importing and exporting country respectively.
Given that reciprocity is a basic element for the functioning of trade treaties, demands for tariff concessions in sectors with maximum export induced producer welfare should be accompanied by offers of tariff concessions in sectors with maximum import induced consumer welfare.
8
Inferences from Meta-Analysis
Low Levels of intra-regional trade implies possibility of trade diversion rather than trade creation – small shares in World GDP and trade flows indicates that the probability of finding the most efficient suppliers within the region is very less:
Beginning of import substitution and protectionism in the post independence era worked asymmetrically against regional trading partners for all SA countries
Empirical evidences exist for minimal impact of trade diversion The political economy of selection of sensitive lists indicates weak
possibility of trade diversion Argument of need for resistance to regionalism in other parts of the
world through SAFTA. It may quicken multilateral freeing of tariff barriers
9
Inferences from Meta-Analysis
▪ Rejection of significance of SAFTA based on “natural trading block” hypothesis based on geographical proximity (trade intensity index), degree of complementarity (complementarity index – matching export profiles and import demands):
Post-liberalisation trade diversification effects are ignored Existence of huge informal trade in the region could not be
explained
10
Inferences from Meta-Analysis
Quantitative assessments – general and partial equilibrium models, gravity models etc. predict that the impact of a South Asian FTA on trade flows will be small for India compared to its trading partners:
Wide variation in predictions on impacts depending on assumptions used
Reliance on past trends and ex-post analysis Ignores positive influence of RTAs in changing the
traditional rent-seeking behavior Ignores positive externalities of development of trade
infrastructure and related trade reforms for trade costs Excludes effects of changes in transaction costs due to
trade facilitation measures
11
Inferences from Meta-Analysis
Omission of spillover effects of comprehensive economic integration including simplification of banking facilities for import financing, transit facilities for the landlocked countries, removal of barriers to intra-SAARC investments, policy consultations, rules for fair competition and promotion of venture capital, development of communication systems and transportation infrastructure, easing foreign exchange controls on repatriation of profits, simplification of procedures for business visas, etc
Dearth of studies on consumer welfare effects – only passing references to consumer welfare gains in general equilibrium modeling exercises
12
Assessment of Consumer Welfare under SAFTA
Country wise assessment of potential consumer welfare gains due to subjecting items in the sensitive lists to Trade Liberalisation Programme of SAFTA
Calculates figures of minimum gains for product categories with maximum potential effects on consumer welfare
Country wise trade data for the analysis is accessed from
UNCOMTRADE database and data on import and export prices and quantity is accessed from Trade Maps, International Trade Centre
13
Assessment of Consumer Welfare under SAFTA (Methodology)
STAGE 1- Selection of products from sensitive lists (HS07 6-Digitlevel) of each country by sequentially applying the following twocriteria:
Products in sensitive lists of a SAFTA member country (m) with high shares in the total exports of partner countries (p) to rest of the world (RoW), reflecting the export potential of partner countries in such products
A list thus selected is further filtered by selecting products in which exports of partner countries to the member country is minimal
14
Assessment of Consumer Welfare under SAFTA (Methodology)
STAGE 2 – Consumer welfare gains for a member is calculated as:
∑CWmi = ∑ (pmiqmi – ppiqmi) where,
CWmi – Consumer Welfare due to change in import price of countryM in product i
pmi – Import price of member country M in product i from ROW
ppi – Export price of SAFTA partner country p in product i to ROW
qmi – Import Quantity of member country (m) in product i from ROW
15
Partial Estimates: Indo – Bangla CaseIndia’s major export items in Sensitive List of Bangladesh
Sr No.
Major Items exported by India to the ROW HS07 4 Digit Level) Product Description
No. of items present in Bangladesh's Sensitive List
Percentage of total exports
1 8703 Cars (incl. station wagon) 5 3.46
2 3004 Medicament mixtures (not 3002, 3005, 3006), put in dosage 2 2.42
3 8517 Electric app for line telephony,incl curr line system 7 2.28
4 8708 Parts & access of motor vehicles 14 1.71
5 8528 Television receivers (incl video monitors & video projectors) 6 0.83
6 2701 Coal; briquettes, ovoids & similar solid fuels manufactured from coal 2 0.77
7 9018 Electro-medical apparatus (electro-cardiographs, infra-red ray app, sy 3 0.61
Total 39 12.08
16
Partial Estimates: Indo – Bangla CaseBangladesh’s major export items in Sensitive List of India
Sr. No
Major Items exported by Bangladesh to the ROW HS CODE(4 DIGIT LEVEL)
Product Description No. of items present under India’s Sensitive List
Percentage of Total Exports
1 6109 T-shirts, singlets and other vests, knitted or crocheted
2 16.63
2 6110 Jerseys, pullovers, cardigans, etc, knitted or crocheted
3 15.64
3 6203 Men's suits, jackets, trousers etc & shorts
8 14.46
4 6204 Women's suits, jackets, dresses skirts etc&shorts
17 8.21
5 6205 Men's shirts 3 6.49 6 6104 Women's suits, dresses, skirt etc &
short, knit/croch 12 3.19
7 6105 Men's shirts, knitted or crocheted 3 3.13 8 0306 Crustaceans 0 2.25 9 6302 Bed, table, toilet and kitchen linens 0 2.4 10 6206 Women's blouses & shirts 4 1.79 11 6108 Women's slips, panties, pyjamas,
bathrobes etc, knitted/crocheted 10 1.76
12 5307 Yarn of jute or of other textile bast fibres of hd no 53.03
0 1.64
Total 62 77.86
17
Partial Estimates: Indo – Bangla Case Filtered Sensitive List of India – items of minimal exports from Bangladesh
Sr. No
Major Items exported by Bangladesh to the ROW HS CODE(4 DIGIT LEVEL)
Product Description Number of items with 0 trade between India and Bangladesh
Total Value of Imports from the Rest of the World (in US$)
Total Consumer Welfare (in US$)
Percentage share of consumer welfare in imports from ROW
1 6203 Men's suits, jackets, trousers etc & shorts
5 2579000 877123 34.01
2 6204 Women's suits, jackets, dresses skirts etc&shorts
12 3471000 2090777 60.23
3 6104 Women's suits, dresses, skirt etc & short, knit/croch
8 806000 367938 45.64
4 6206 Bed, table, toilet and kitchen linens
2 940000 613190 65.23
5 6108 Women's slips, panties, pyjamas, bathrobes etc, knitted/crocheted
9 1657000 466869 28.17
TOTAL 36 9453000 4614753 48.82
18
Partial Estimates: Indo – Bangla CaseFiltered Sensitive List of Bangladesh– items of minimal exports from India
Sr No.
Major Items exported by India to the ROW HS CODE (4 Digit Level) Product Description
No. of items present in
Bangladesh's Sensitive List
Total Value of Imports from ROW
(in US$)
Consumer Welfare (in US$)
Percentage of
Consumer Welfare in Imports
1 3004 Medicament mixtures (not 3002, 3005, 3006), put in dosage 2 33262000
25668520
77
2 8517 Electric app for line telephony,incl curr line system 7 362173000
94494668
26
3 8528 Television receivers (incl video monitors & video projectors) 6 21555000
1762036
8
4 8443 Printing machinery; machines for uses ancillary to printing 1 17341000
5 9018
Electro-medical apparatus (electro-cardiographs, infra-red ray app, sy 3 14794000
12663610
86
Total 19 449125000
134588834
30
19
From Minimum to Maximum Estimates of Consumer Welfare Gains
These estimates only show the effects of change in import price with fixed quantity of imports. The following three effects will be taken into account to arrive at revised figures:
Effects of domestic price reduction due to import competition by using data for total quantity consumed in the importing country, instead of import quantity
Effects of trade creation due to increase in import demand by using estimates of potential trade creation
Effects of reduction in trade costs within the SAARC region
following trade facilitation measures
22
Usefulness of the Estimates
The estimation method helps to identify products with maximum potential consumer welfare gains for each country and therefore, qualifies for removal from their respective sensitive list
The estimates form the basis for more detailed studies on the effects of reduction in transportation costs and other trade facilitation measures on consumer welfare
The estimates will facilitate comparison with other trade costs
and relative merits of tariff liberalisation in each product category can be assessed
23