ECO-PIDE Study on Regional Trading Patterns

Pakistan Institute of Development Economics

Outline of the Presentation

Importance of regional economic integration in the ECO Region

Factors which have so far hampered economic cooperation in the region

Preliminary Findings of the StudyFuture course of action

Regional Economic IntegrationRegional and bilateral trade

agreements (make up almost 40 percent of total world trade) −Trade Creation

• more competition, efficient allocation of resources, better productivity, enhanced economic growth

−Institutionalization of policy reforms• improved policy credibility

−Stepping stone to multilateral trade liberalization

−Enhanced regional security

Impediments in ECO Region

− Protective import duties and taxes− Non-tariff barriers− Complicated custom procedures− Lack of regional transport network and transit

system− Lack of regional trade facilitation measures− Similar comparative advantage and lack of trade

complementarity

Measures to Enhance Economic Cooperation

Large countries must lead the way

Easing of travel and visa restrictions

Strengthening of bilateral tradeCreate awareness about the potential benefits

Measures to Enhance Economic Cooperation (cont.)

Reform and harmonize trade policies to create a level playing field for stakeholders — Collective actions to lower trade barriers and advance domestic reforms

— Reduce complexity of the tariff structure

— Improvement in custom proceduresFacilitate trade through improvement in

regional transport and transit system

Measures to Enhance Economic Cooperation (cont.)

Promoting Collectivism

To safeguard regional interests in multilateral fora

Minimizing Trade Diversion

Reduction in level of external protection

Measures to Enhance Economic Cooperation (cont.)

−Effective implementation of policies and program

−Conducive political and economic environment & strong willingness for integration

−Acceptance for subsequent economic adjustments

−Continuous dialogues and interaction

Measures to Enhance Economic Cooperation (cont.)

Exploring Potential in new areasRegional production sharing arrangements

Intra-industry tradeCooperation in technology development and diffusion

Analysis of Bilateral Trade Flows: Some Preliminary Findings

Revealed Comparative Advantage IndicesIndicate export potential of a country

Trade complementarity IndexIndicates the level of complementarity in the bilateral trade structures

Revealed Comparative Advantage Index

Revealed Comparative Advantage

The numerator is the share of a country’s total exports of the commodity of interest in its total exports. The denominator is share of world exports of the same commodity in total world exports

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Pakistan

Azerbaijan

Iran

Kazakhstan

Turkey2007 2003

Products Share RCA Share RCACarpets & Flooring 0.9 9.2 3.5 9.9Made up textile 2.0 6.5 12.1 9.3Fabric Designing 7.5 6.4 0.8 6.2Special woven fabric 0.6 6.2 0.8 6.1Knitted Fabrics 0.9 5.8 2.9 5.8Fruit and nuts 2.5 5.7 1.6 5.7Malt & starches 0.5 5.1 0.3 5.7Salt, sulphur etc. 1.2 5.0 0.0 5.4Cotton 1.5 4.4 8.1 5.1Apparel & clothing 5.1 4.3 1.6 5.1

Kyrgyzstan

Trade Complementarity Index TCI: measures the degree of matching products between one country’s exports composition and another country’s import composition

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Trade Complementarity Index

Importing Countries

Exporting Countries

  Iran Azer Kyrg Kazha Turk

Pakistan 2003 1.1 0.9 1.2 0.7 1.6

 

2004 0.6 1.1 1.0 0.5 1.5

2005 0.7 1.1 1.1 0.5 1.4

2006 0.4 0.9 1.2 0.6 1.4

2007 - 1 1.2 0.6 1.6

Concluding RemarksStrengthening trade and economic relations would

be beneficial for all countriesTo move the process of regional economic

integration forward we need:−Reduction in trade barriers−Harmonization of custom procedures and tariff

structure−Improving transparency in policies−Trade facilitation