The Furniture Sector in Pakistan: Export performance and ... - TRTA i

Box 3.2 Regional Trade Agreements (RTAs)
Governments often take action to liberalize trade on a regional level through formation of
free trade areas or preferential trade areas. Under these arrangements, goods can enter
each other’s country market either without payment of any tariff or on some preferential
terms and conditions. RTA, which includes bilateral free trade agreements between
countries that are not in the same region, have become so widespread that all but one WTO
member are now parties to one or more of them. It is estimated that more than half of world
trade is now conducted under RTAs. Some 197 such agreements in force have been
notified to the GATT/WTO.
Many experts regard these arrangements as building blocks for a freer non-discriminatory
multilateral trading system. Many other experts, however, perceive these arrangements to
be obstacles to the growth of multilateral system. Regional arrangements are allowed (as
exception to the Most Favoured Nation principle) under Article XXIV of the GATT 94 as well
as under the Enabling Clause (trade arrangements between developing countries).
Pakistan is a signatory to an Agreement on South Asian Free Trade Area (SAFTA) which is
transformation of the SAARC Preferential Trading Arrangement (SAPTA operational albeit
half-heartedly since 1995) into a Free Trade Area among the SAARC members
(Bangladesh, Bhutan, India, Nepal, Maldives, Pakistan and Sri Lanka).
SAFTA’s framework agreement envisages reduction of tariffs to 0-5% level and removing
quantitative barriers to trade (a) within 10 years by its LDCs members—Nepal, Bhutan and
Maldives and (b) between 7 – 8 years in case of India, Pakistan, Bangladesh and Sri Lanka.
In addition to the above, a FTA has been signed with Sri Lanka. Early harvest agreements
have been signed with China and Malaysia. Besides this, a FTA agreement has been
signed with China in November 2006. Negotiations are ongoing for signing FTA with
Bangladesh, Turkey and Kenya. Discussions are also ongoing with Indonesia, Laos,
Singapore and Thailand for exploring the possibility of entering into FTAs.
Source: WTO Cell, Planning & Development Department, Government of the Punjab
National Treatment Obligation (Article lll)
Once foreign goods have entered a country’s market, these and locally produced goods are to
be treated equally (as if foreign goods have acquired importing country’s nationality).
This article embodies the same principle of non-discrimination as set out in the MFN
commitment. It also establishes the principle that no tax will be imposed on imports in excess
of the amount of the indirect taxes levied on the like domestic products.
Reduction and bindings of National Tariffs (Articles II, XI)
In order to make trade predictable, WTO member countries are generally binding their
commitments (Article-Xl) i.e. ceilings are imposed on tariff rates that can be charged by a
country 12 . Under the WTO system tariffs (i.e. custom duties) are the only form of the
permissible measure for trade protection (Article II & Article XI). The bound tariffs cannot be
increased above the bound rates unless compensation is paid to the other adversely affected
WTO member.
12
Pakistan has bound more than 99% of tariff lines.
International Trade Centre 61