The 10-member Economic Cooperation Organisation (ECO) is likely to miss the 2015 deadline to establish a free trade area in the region, as member countries have yet to finalise the list of concessionary items, missing an opportunity to enhance intra-regional trade by 800%.
A recent study conducted by Pakistan Institute of Development Economics (PIDE) states that trade in the ECO region can increase by eight times as a result of a potential free trade agreement among member countries.
“The ECO preferential trade agreement (ECOTA) is in doldrums as member countries have failed to finalise the list of products on which tariff concessions will be offered,” said the study prepared for the ECO Secretariat.
The 10 members of ECO are Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Turkey, Turkmenistan and Uzbekistan.
Pakistan, along with other large economies in Asia including Turkey and Iran, should strive to push for the effective implementation of ECOTA which can be instrumental in strengthening regional trade and investment ties, suggests the PIDE review.
Under the Izmir Treaty, the member countries are committed to establishing a free trade area in the region by 2015. The review has shown that Pakistan has the potential to export a broad range of commodities covering 30 productive sectors.
With the stalling of multilateral trade liberalisation efforts under the World Trade Organisation, the developing countries are rapidly moving towards formation of regional trading blocs to boost their trade. Pakistan has also recently made its intention public to give India the most-favoured nation status – a step expected to bring some normalcy in strained relations.
The study finds that despite various initiatives to strengthen regional economic cooperation, the region remains one of the least integrated in the world with weak intra-regional trade and investment linkages.
The study says that geographical proximity, shared social and cultural characteristics and diversity in economic structures all combine to make up a strong case for promoting regional economic integration in the ECO region.
The liberal trade policies can result in trade creation among member countries entailing several benefits including lower prices, more product variety and quality and improved incentives for innovation.
The benefits of regional economic integration can go far beyond trade creation. The study suggests that a greater level of economic integration can be instrumental in locking-in trade policy reforms allowing the countries to enhance their policy credibility.
Also, increased economic ties may create mutual stake-holding in the region, reduce the risk of conflict and thus enhance regional security.
The study suggests that at the institutional level, Pakistan needs to work closely with the ECO Secretariat to help set up a joint commission on economic and technological cooperation in the region. The commission may serve as an umbrella to oversee all initiatives of regional economic cooperation including trade in goods and services, mutual investment, technical collaboration and cross-border trade in energy.
“A greater level of economic integration in the ECO region can be instrumental in the restoration of regional peace and security that is so vital for the economic development and prosperity of Pakistan.”
The PIDE review emphasises that the potential for greater trade and investment ties in the region cannot be realised unless supportive measures are adopted to establish trade regimes that are open and responsive to the needs of intra-regional trade and investment.
Firstly, there is a need to further liberalise trade through reduction in tariff and non-tariff barriers. Whereas many countries, including Pakistan, have already carried out trade policy reforms to liberalise their trade regimes, some ECO members continue to impose high tariffs and non-tariff barriers. Besides a liberal tariff regime, there is a need to improve trade facilitation mechanisms in many ECO member countries especially Uzbekistan, Tajikistan, Turkmenistan and Kyrgyzstan.
Published in The Express Tribune, October 18th, 2011.
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