Nafta identical trade model for india, nepal and china


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Nafta identical trade model for india, nepal and china

  1. 1. Introduction South East Asia has been a hub of mishaps from the beginning. Floods, Tsunamis, Draughts, Conflicts and other social issue were the common barricades before the traders to sell their produce. Farmers and natural product retails were the most affected community amongst. India, Nepal and China triangle mainly constitutes of farmers carrying out mainly unorganized farming. Several technical and non-technical factors have been resisting the local farmers to hang their product in organized markets. Technical factors are machinery, facility, hygiene, protocols, etc while non technical factors compromise of awareness, encouragement, guidance, economics, etc. Many models were proposed to eliminate these factors, but each one was marked unsuccessful. There is a strong need of a model that can encourage cross boundary trade between these countries and help farmers to increase their living standard. The reason why cross border trade is encouraged because the food production is mainly decentralized, the product that may be grown in certain region may be unavailable in other regions. I would like to propose a NAFTA identical model to eliminate these trade barriers.
  2. 2. NAFTA (North American Free Trade Agreement) The North American Free Trade Agreement or NAFTA is an agreement signed by the governments of: 1. Canada, 2. Mexico, and 3. United States
  3. 3. Creating a trilateral trade bloc in the North America. The agreement came into force on January 1, 1994. It superseded the Canada – United States Free Trade Agreement between the U.S. and Canada. In terms of combined GDP of its members, as of 2010 the trade bloc is the largest in the world. The North American Free Trade Agreement (NAFTA) has two supplements, 1. North American Agreement on Environmental Cooperation (NAAEC), and 2. North American Agreement on Labour Cooperation (NAALC) NAAEC looks after the environmental issues and checks the sustainability of the development. While NAALC looks after the labour issues; checks for the child, forced and underpowered labour. These two bodies run as a collateral part of NAFTA.
  4. 4. Provisions in NAFTA There were three main functions of NAFTA:- 1. Eliminating or reducing barriers to trade- The barriers to trade are mostly classified as tariff and non-tariff. Tariff barriers consist of taxes on exports and imports of commodities. These are imposed to protect the local producer from international competition. Some of the bodies that impose such tariffs are GATT (General Agreement on Tariffs and Trade), TRQ (Tariff Rate Quota), etc. The non-tariff barriers consist of licenses and quotas that resist the food product trade internationally. 2. Encouraging Foreign Investment and Trade- NAFTA encouraged FDI between the member countries. Another think that NAFTA encourages is the cross boundaries trade between Canada, Mexico and USA. 3. Checks the sustainability and enforcements- The supplementary bodies of the NAFTA check the ethical and sustainable aspects of trade. While some provisions are there in NAFTA for proper enforcement of apparels.
  5. 5. NAFTA Effect on Food Supply Chains From the earliest negotiation, agriculture was (and still remains) a controversial topic within NAFTA, as it has been with almost all free trade agreements that have been signed within the WTO framework. Agriculture is the only section that was not negotiated trilaterally; instead, three separate agreements were signed between each pair of parties. The Canada–U.S. agreement contains significant restrictions and tariff quotas on agricultural products (mainly sugar, dairy, and poultry products), whereas the Mexico–U.S. pact allows for a wider liberalization within a framework of phase-out periods (it was the first North–South FTA on agriculture to be signed). The overall effect of the Mexico–U.S. agricultural agreement is a matter of dispute. Mexico did not invest in the infrastructure necessary for competition, such as efficient railroads and highways, creating more difficult living conditions for the country's poor. Still,
  6. 6. the causes of rural poverty cannot be directly attributed to NAFTA; in fact, Mexico's agricultural exports increased 9.4 percent annually between 1994 and 2001, while imports increased by only 6.9 percent a year during the same period. One of the most affected agricultural sectors is the meat industry. Mexico has gone from a small-key player in the pre-1994 U.S. export market to the 2nd largest importer of U.S. agricultural products in 2004, and NAFTA may be credited as a major catalyst for this change. The allowance of free trade removed the hurdles that impeded business between the two countries. As a result, Mexico has provided a growing meat market for the U.S., leading to an increase in sales and profits for the U.S. meat industry. This coincides with a noticeable increase in Mexican per capita GDP that has created large changes in meat consumption patterns, implying that Mexicans can now afford to buy more meat and thus per capita meat consumption has grown. Production of corn in Mexico has increased since NAFTA's implementation. However, internal corn demand has increased beyond Mexico's sufficiency, and imports have become necessary, far beyond the quotas Mexico had originally negotiated. Zahniser & Coyle have also pointed out that corn prices in Mexico, adjusted for international prices, have drastically decreased, yet through a program of subsidies expanded by former president Vicente Fox, production has remained stable since 2000. The logical result of a lower commodity price is that more use of it is made downstream. Unfortunately, many of the same rural people who would have been likely to produce higher-margin value-added products in Mexico have instead emigrated. The rise in corn prices due to increased ethanol demand may improve the situation of corn farmers in Mexico. In a study published in the August 2008 issue of the American Journal of Agricultural Economics, NAFTA has increased U.S. agricultural exports to Mexico and Canada even though most of this increase
  7. 7. occurred a decade after its ratification. The study focused on the effects that gradual "phase-in" periods in regional trade agreements, including NAFTA, have on trade flows. Most of the increase in members’ agricultural trade, which was only recently brought under the purview of the World Trade Organization, was due to very high trade barriers before NAFTA or other regional trade agreements.
  8. 8. Proposed Model The proposed model consists of a trilateral trade agreement between the three South Asian countries: Trilateral Agreement China Nepal India Nepal China India
  9. 9. Background of proposal: Many questions can be raised while putting China in the trilateral loop. But the reality is this despite of being our enemy we share a major share of our food exports with China. A list of few important exports is given below: • Tobacco • Guar Gum • Oil seeds • Marine Products • Fresh fruits and vegetables • Dairy Products • Coffee And we even earn a handsome return from the enemy neighbor. Talking about Nepal, it is much dependent on us for food. Some of the major food commodities imported by Nepal from India are: • Cereals and Pulses • Spices • Tea • Coffee • Marine Products • Oil Cakes • Cashew
  10. 10. The Indian trade system with international interface is struggling due to many loop holes. Many farmers and small scale food processors are not able to sell their produce in international markets, some of the common problems are marked in the loop below:- So, there is a strong need of a rigid model to enhance trade between the three countries. Need of a free trade system Missing modes of Communication and Transportation Corruption Food safety and security issues Decentralization of Industry Lack of awareness Technical Barriers to Trade
  11. 11. Proposal: These are some provisions that can be included into the proposal:- 1. The tariff and non-tariff hurdles should be removed or reduced in the food trade between India, China and Nepal. The tariff and non-tariff hurdles are already described above. 2. Foreign direct investment (FDI) between the member countries. 3. Investment and encouragement schemes for produce specific groups. These schemes can serve as the backbone of this trade model. The schemes can be either eliminating/reducing tariffs or bringing in quota system. 4. Cultural exchange to encourage regional products. This is very important of a trade system. The cultural exchange gives an idea of one region to another region, about the functional food, there medicinal effect. So that they can be used in other country and functional benefits can be mutated. 5. Inter-country consumer forums and redressal system are necessary so that consumers are not cheated and any issue can be solved immediately. 6. Introducing quota system to protect the interest of local consumers. In this fashion there will be no adverse effect on the local trade and international trade will be encouraged.
  12. 12. How can this help? This proposal can change the life of struggling many. It can: The introduction of such a system will definitely affect the food trade in our country and neighbours. And life of struggling millions will transform, and the India food processing industry will attain new heights. Eradicate poverty Ensure food security Strengthen the diplomatic relations Prevent uncertain trade shocks Development of food processing (increase in GDP) New opportunities identification
  13. 13. Conclusion • A NAFTA identical trade system can transform the life of India, China and Nepal. • This system can bring boom in food processing and retails. • The subsequent risks of demand and supply can be mitigated. • More profit to producers and lesser taxes. • We can develop better diplomatic relations with China. References 1. ement 2. 3. 4. 5. 6. 7. 8. bhutan.aspx 9. pt 10. 11. World.pdf