logo logo

TNC fails to finalize free trade accord

Kantipur Online, Nepal

TNC fails to finalize free trade accord

16 February 2006

KATHMANDU, Feb 16 - The seven BIMSTEC member countries failed to agree on rules of origin criteria and other outstanding issues, which left text of FTA accord on trade in goods undecided in Bangkok this week.

"The 11th round of Trade Negotiation Committee (TNC) finalized Dispute Settlement Mechanism (DSM) though," said Naindra Prasad Upadhyaya, joint secretary of Ministry of Industry, Commerce and Supplies (MoICS).

Sources told the Post that the differences ran deep among members on the core issue of rules of origin, and the sub-group entrusted to work out the percentage of value addition failed to come up with specific recommendations.

The problem emerged when some of the members submitted a longer list of items for RoO’s product specific rule (PSR). The members had built an understanding to limit the items at 500 for PSR earlier.

PSR, general rule and customs tariff sub-heading (CTSH) change are RoO criteria, which the members have agreed to determine whether the products originated in the bloc.

"While broader understanding on all these criteria has already been reached, the percentage of value addition is still to be decided," said the source. Nepal has pushed for 25 percent value addition for general rule and 20 percent for PSR.

The members are also positive to maintain regional cumulation at a level similar to SAFTA, fixing it at 50 percent regional material content and 20 percent domestic content.

"TNC sought additional time to right size the negative list and the list of fast track of trade liberalization, and finalize the safeguard measures" the source stated.

Since the bloc’s FTA on goods is scheduled to come into place from July this year, concerned officials were optimistic of 11th TNC sealing the negotiation. It, however, called for the next round of negotiations in April.

RoO, Negative List, DSM and Safeguard Measures are four major components of the FTA accord on trade in goods. Of those only DSM has been agreed upon so far.

On negative list, the members including Nepal agreed on limiting the items to 20 percent of total tariff lines. Nepal had proposed a list of 1,308 products, which stands at about 25 percent of the tariff line.

They also agreed to increase the number of items to 10 percent of tariff line for fast track of trade liberalization. Nepal had proposed 172 items in the list, which was less than 5 percent.

Under the tariff liberalization program, BIMSTEC members have agreed to reduce tariff under fast track (directly to zero percent) and normal track (gradual reduction to zero to 5 percent within 10 years of FTA enforcement).

No breakthrough was recorded on the issue of safeguard measures as well, said the source. On negotiation of FTA draft on services and investment, the TNC approved the concept draft paper developed by India. "It further entrusted India to develop the texts of the accord on the basis of the paper," the source added.