The agreement would serve as a catalyst to boost trade besides increasing volume of investment in the region

July  28 - Aug 03 , 2003 

The decisions taken at the second ministerial meeting of the Economic Corporation Organization (ECO), held in Islamabad last week will prove a milestone in promoting regional trade between Pakistan, Iran, Turkey, Afghanistan and Central Asian States.

The ECO ministers termed the signing of ECO trade agreement as a major development at a joint press conference. They were highly optimistic that the agreement would serve as a catalyst to boost trade besides increasing volume of investment in the region.

The agreement provides that all the members would bring down their tariff to 15 per cent in 8 years in various phases. As per agreement, the ECO countries trade ministers would meet once a year to review progress of implementation of the accord. The next conference would be held in Turkey in 2003-04.

While giving details of the agreement, Commerce Minister Humayun Akhtar Khan, said that the reduction in tariff would be 10 per cent per annum and one of the six groups formed to review the progress of ECO accord would meet once a year for a follow up. Other five groups would cover the remaining five major areas and submit their review report on their respective fields such as transportation, agriculture, bilateral trade, investment and exploration of new areas to enhance cooperation among member countries. Moreover, an ECO data bank would be set up to exchange information among member countries.

Addressing the inaugural meeting of ECO ministerial conference, the Prime Minister asked member countries to seriously ponder over making a free trade region to boost trade and improve economic conditions of the masses. "The ECO countries have to move ahead and remove the barriers in free flow of trade," he added.

The prime minister offered the ECO member countries to utilize Pakistan's geographical advantage as a gateway to the Indian Ocean and an avenue for access to South East Asia. "The establishment of Gwadar Deep Sea Port is not only an achievement for Pakistan but also a milestone in generating greater trade for ECO countries," he added. He invited the landlocked ECO countries to use the Gwadar Port as key to greater trade through sea routes.

The signing of the Regional Trade Agreement providing for a uniform tariff of 15 per cent for inter-ECO trade, can appropriately be described as a historic event as this would facilitate liberalized market access and increase volume of regional trade. The agreement also aims at removing non-tariff barriers and initiating effective steps to identify goods and services that may be traded between the ECO countries. The reduction in tariff would however, be implemented in a phased manner over the next eight year. At the same time, it has also been decided that about 80 per cent of the goods normally covered under customs tariff, would be brought within the agreed regime of 15 per cent duty.

The agreement in the first step by the ECO member countries seriously address the issue of effectively boosting regional trade that has remained deplorably low over the last so many years as pointed out by the Commerce Minister in his speech. He was right in his observations that the existing policies to maintain a restrictive travel visa procedure and the absence of any preferential treatment to each other in imports and exports have continued to discourage expansion in trade between them. The proposed lowering of customs tariffs by the ECO member countries appears to have been inspired by the WTO policies to liberalize global, trade exchanges. By the year 2005, a number of countries who have signed the WTO agreement would bring down their customs tariffs to minimum levels in compliance with the WTO requirements.

In this process, the maximum tariff is likely to come down below 15 per cent in many of the developed countries over the next three years. Pakistan would also have to reciprocate in the transaction with its major trade partners. It is already making efforts to sign free trade agreements with friendly countries, notably with USA in addition to other countries like Sri Lanka, Bangladesh.

At the same time special agreements have been signed with the European Union for greater market access in textile. As a reciprocal action, Pakistan would allow lower tariffs on the import of agreed items from the friendly countries. Against this background, the lowering of tariff between ECO member countries would appear to be inadequate compared with the present global trend. Moreover, the decision to implement the process of reduction tariff in phases over the next eight years will mean a tardy movement towards the objective of bringing the ECO countries closer in respect of bilateral trade. It would be preferable to implement the decision for reduction in tariff with immediate effect and thereby afford an opportunity to the member countries for entering into bilateral agreements for quicker expansion of trade. Further, the ECO members should also make a move to accord most favoured national treatment to each other and should make necessary changes in their foreign trade policies towards that end.