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52 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA Lanka, sees a growth of about 4%. While relative changes in some of the products are quite high, their absolute outputs are quite low compared to the total output of the Sri Lankan economy. Negative employment and output effects are seen for wearing apparel and some agricultural products. In terms of impact of SAFTA on employment, the following sectors gain in terms of employment generation (Table 6.13): Table 6.13 Sri Lanka Employment Gaining Sectors (% change) Winning Sectors Employment Increase Oil seeds 42.22 Vegetable oils and fats 20.75 Dairy products 20.00 Transport equipment n.e.c. 11.05 Textiles 4.44 Metal products 2.23 Paper products, publishing 1.71 Raw milk 1.57 Machinery and equipment n.e.c. 1.45 Ferrous metals 0.90 However, SAFTA leads to loss of employment in the following sectors (Table 6.14): Table 6.14 Sri Lanka Employment Losing Sectors (% change) Losing Sectors Employment Decrease Manufactures n.e.c. –4.27 Processed rice –3.67 Motor vehicles and parts –2.72 Leather products –2.45 Paddy rice –1.69 Metals n.e.c. –1.45 Wearing apparel –1.24 Food products n.e.c. –1.20 Beverages and tobacco products –1.05 Minerals n.e.c. –0.81 ABMN Though the ABMN group gets 0 duty access to the developing countries by 2009 itself, its gains are limited on account of their inability to access agricultural products markets, which are blocked by the sensitive lists of the developing countries (Table 6.15). There are gains in primary commodities with complete liberalisation in 2016. With the removal of sensitive lists in a full liberalisation scenario, ABMN groups see good export growth in agriculture products and primary commodities. Given that the agriculture Table 6.15 Impact of SAFTA on Output, Employment and Trade: BMNA (% change) Year Output Effect on Exports Global Global Unskilled to Exports Imports Employ- South ment Asia 2008-09 0.03 –0.0004 20.82 0.74 1.96 2016 0.26 0.0002 60.32 7.89 11.99 and forestry sector in ABMN accounts for over 50% of domestic output, and given that these sectors are employment-intensive, a full SAFTA is beneficial to ABMN. However the manufacturing sectors in ABMN are by and large uncompetitive, and hence suffer output and employment losses. ABMN countries may therefore want to preserve the sensitive list flexibility for a longer time, especially in employment intensive sectors like apparel. In terms of impact of SAFTA on employment, the following sectors gain in terms of employment generation (Table 6.16): Table 6.16 BMNA Employment Gaining Sectors (% change) Winning Sectors Employment Increase Metals n.e.c. 29.44 Meat products n.e.c. 15.31 Crops n.e.c. 11.73 Ferrous metals 10.95 Animal products n.e.c. 8.02 Chemical, rubber, plastic products 7.90 Raw milk 7.85 Vegetable oils and fats 2.97 Sugarcane, sugarbeet 2.29 Vegetables, fruit, nuts 2.12 However, SAFTA leads to loss of employment in the following sectors (Table 6.17): Table 6.17 ABMN Employment-Losing Sectors (% change) Losing Sectors Employment Decrease Motor vehicles and parts –30.32 Transport equipment n.e.c. –22.68 Petroleum, coal products –9.09 Manufactures n.e.c. –8.71 Wheat –8.35 Machinery and equipment n.e.c. –8.07 Electronic equipment –7.07 Textiles –6.78 Wearing apparel –6.17 Plant-based fibers –5.68
I MPACT OF SAFTA ON MEMBER COUNTRIES: GENERAL EQUILIBRIUM ANALYSIS 53 CONCLUSION The results of the simulation indicate that the net economic impacts of SAFTA are beneficial, as a whole. However, the following points come out clearly: • Gains to LDCs are modest in the first phase of liberalisation. • LDC gains are significant in the second phase, provided there is complete liberalisation. • Bangladesh’s significant gains are in terms of higher employment in the apparel sector (5%) and leather sector (3%). Losses are there for some manufacturing products (electronics, transport and machinery/ equipment). • Bangladesh’s apparel sector gains more on account of its increase in global exports. • SAFTA may give Afghanistan an increased access to Pakistan’s market. • Interestingly, increase in gains to Bangladesh’s wearing apparel sector are more on account of its improved global exports which increase as much as 6% on account of SAFTA, presumably because Bangladesh’s own high textile tariffs are removed. As a result of SAFTA phase II, Bangladesh’s global exports of wearing apparel show increase of about USD million 262 million, of which only USD 3 million are apparel exports to South Asian countries. Thus 98% of wearing apparel exports are to the rest of the world. This is also corroborated by the fact that in SAFTA phase II, India’s textiles exports to Bangladesh increase by 84%, and from that 90% of India’s total South Asian textile exports increase goes to Bangladesh. Similarly with Pakistan, where 95% of the rise in exports are to Bangladesh. • ABMN gain in some agricultural and chemical products. There are losses in manufacturing including textiles and apparel. • But overall employment effects are positive for Bangladesh and ABMN. • India’s gains are limited to some agricultural sectors like sugar, poultry, dairy and manufactures like motor vehicles. There are losses to sectors like wearing apparel and leather. • Pakistan gains mainly in wheat, horticulture and textiles. Losses likely in sugar and wearing apparel. • Sri Lanka gains are limited since it already has an FTA with India, and is about to conclude an FTA with Pakistan. • Bhutan and Nepal may have only limited gains since they already have an FTA with India. • India and Pakistan gain in terms of exports to Bangladesh. • India’s gains are not much if Pakistan partially participates in SAFTA. • SAFTA is likely to lead to stronger economic growth, notwithstanding the controversies pertaining to trade and development policies, and the mixed results of specific impacts from various studies • By ‘locking in’ uniform trade and investment policies among member countries, an RTA may help to promote policy credibility. Group action may influence all members to abide by a common reform agenda. Of course, RTAs do not guarantee equal distribution of benefits to members. • Since India is a large and rapidly growing member country of SAFTA it has the potential to serve as a ‘growth-pole’ for the region, and could have growth enhancing effects for the region. This is also due to the fact that India’s MFN tariffs are among the highest in the region. • SAFTA will present firms in member countries with the opportunity to exploit economies of scale through access to a enlarged and diversified market. • The economic benefits from an RTA has been justified in terms of greater trade creation than trade diversion by its members. Net trade creation offer dynamic gains from trade and provide the fundamental argument for free trade and economic growth. The GTAP modeling results point to net welfare gains for the region as a whole and suggests that SAFTA will be trade creating. • Intra-SAARC trade was quite small till about 1999, has grown significantly since then, largely on account of increased exports from India. • SAFTA may promote greater rapprochement, diplomacy and stability. GTAP results suggest that all countries experience welfare gains, but it would be important to give flexibilities for countries to protect their vulnerable sectors – this is particularly the case for manufacturing sector in the smaller LDCs.
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QUANTIFICATION OF BENEFITS FROM ECO
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QUANTIFICATION OF BENEFITS FROM ECO
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Preface Our consultations with seni
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viii CONTENTS 7. Revenue and Welfar
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Executive Summary OBJECTIVE This st
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EXECUTIVE SUMMARY xiii Table 1 EAMA
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EXECUTIVE SUMMARY xv India A full S
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EXECUTIVE SUMMARY xvii indicates th
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EXECUTIVE SUMMARY xix ments on basi
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15 Prospects for the Telecommunicat
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APPENDICES
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Appendix 8 Intra SAARC FDI Collabor
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Appendix 11 Table A11.1 On an Emplo
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Appendix 12 Original Commitments/In
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Appendix 14 Table A14.1 Telecommuni
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Appendix 15 REFERENCE PAPER Scope T
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Bibliography Abelson, P. (1996),
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BIBLIOGRAPHY 241 Cuba (2002), Negot
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BIBLIOGRAPHY 243 (2004), Impacts of
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BIBLIOGRAPHY 245 Silva, Patricia an
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BIBLIOGRAPHY 247 (1998), Tourism Se
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