Post-SAFTA NTMs for Agricultural Trade: Revelations from the India–South Asia Approach

Date01 February 2021
Published date01 February 2021
Subject MatterArticles
for Agricultural Trade:
Revelations from the
India–South Asia
Chandan Kumar1 and Nalin Bharti1
Commitment of South Asian Free Trade Agreement (SAFTA) from South Asian
Preferential Trading Agreement (SAPTA) for trade liberalisation was one of the
hopes in South Asia. This article highlights untapped trade potential in agro-trade
between India and its trading partners in South Asia through Trade Potential Index
(TPI). This article evaluates post-SAFTA effects of non-tariff measures (NTMs) on
agro-products (HS 6-digit level) over the period 2004–2016. After 2004, many
agro-products of South Asia have suffered trade restrictions which create chal-
lenges over SAFTA implementation. This article inquires whether NTMs in post-
SAFTA has been trade creating or trade inhibiting in agro-trade for member
countries as per the earlier commitments. Research methodology for this study
includes qualitative and quantitative approach. Qualitative approach examines
agri-trade constraints faced between India and rest seven South Asian countries
and vice versa. Quantitative analysis explores prevailing trade barriers in selected
agro-products during 2002–2016 applying Regional Trade Barrier Index and NTM
Coverage Ratio. Results establish the presence of agri-trade barriers from South
Asian countries against India as well as India’s barriers against rest seven coun-
tries of South Asia. Study concludes that agri-trade restrictions prevail in South
Asia despite SAFTA which shows the slow process of trade liberalisation.
JEL Codes: F13, F14, Q17
1 Department of Humanities & Social Sciences, Indian Institute of Technology Patna, Amhara, Bihta,
Patna, India.
Corresponding author:
Nalin Bharti, Department of Humanities & Social Sciences, Indian Institute of Technology Patna,
Amhara, Bihta, Patna 801103, India.
Foreign Trade Review
56(1) 117–135, 2021
© 2020 Indian Institute of
Foreign Trade
Reprints and permissions:
DOI: 10.1177/0015732520961309
118 Foreign Trade Review 56(1)
Non-tariff measures, trade potential, South Asia, RTB index
International trade has been affected by protectionism today (Murray, 1990).
Agriculture and food products have experienced widening and deepening of mar-
ket ties in the post-globalised world. Agriculture has become an emerging sector
with many challenges under the regime of World Trade Organization (WTO)
where non-tariff measures (NTMs) are constituent components in the construc-
tion, coordination and regulation of trade policies. NTMs are policy measures
other can ordinary custom tariffs that can potentially have an economic effect on
international trade in goods, or prices or both (UNCTAD, 2012). NTMs are hetero-
geneous policy tools prominently linked to international trade and used as alterna-
tives of tariffs to restrict trade (Deardorff, 1987; Fugazza, 2013). It has made
international trade costly in spite of presence of regulations favouring consumers,
environment and economy (Stiglitz, 2014). It distorts trade flows through various
channels (Chakraborty et al., 2019). NTMs reduce the export volumes and
decrease the gains from international trade (Jordaan, 2017).
South Asian countries have attracted the attention of policy makers due to sub-
stantial trade reforms (Pangariya, 1999). Forming South Asian Association for
Regional Cooperation and Agreement (SAARC) and South Asian Free Trade
Agreement (SAFTA) has considerably helped South Asia to improve trade connec-
tivity amongst selected trading partners to some extent. South Asia is regarded as
one of the least economically integrated regions in the world. South Asian
Preferential Trading Agreement (SAPTA) was adopted in 1995. Inefficiency of
SAPTA led to the formation of SAFTA in 2004 for trade generating capacities.
SAFTA came into effect on 1 January 2006, where member countries agreed to
reduce sensitive product list by different margins. The agreement aims to promote
trade and investment; reduce trade barriers and increase economic integration.
Article 6 of the agreement relates to tariffs, para-tariffs and NTMs. Article 8 relates
to harmonise standards and develop lab testing and certifications. There remains a
question that to what extent SAFTA has been trade creating or trade inhibiting. In
reality, despite this agreement in post-SAFTA, trade restrictions have prevailed.
In spite of large focus on NTMs, South Asian countries still prefer to import
agro-products from distant countries instead of availability of agro-products in
neighbouring countries. This is a serious concern as it leads to high prices for con-
sumers. Raihan et al. (2014) contended that NTMs are invisible barriers in South
Asia which acts as major constraints and affects trade liberalisation policies. Batra
(2007) opined that India has a more sustained growth amongst all the countries in
South Asia. Kelegama (2007) inquired that removal of trade impediments would
lead to more intra-regional trade in South Asia and high growth rate of India would
create spillovers for different regions of South Asia. In an interesting study, Mukherji
(2002) presented non-tariff barriers (NTBs) faced by selected South Asian countries
for the year 2007 and calculated the bilateral potential trade.

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