Policy Reearch Y P WORKING PAPERS Internatlonal Trade International Economics Department The World Bank March 1993 WPS 1119 The North American Free Trade Agreement Its Effect on South Asia Rued Safadi and Alexander Yeats South Asia's loss of exports to North America as a result of the North American Free Trade Agreement (NAFTA) is likely to be small, concentrated in the textiles and clothing sector. The trade gains South Asian countries could experience from successful completion of the Uruguay Round are about 100 times greater than the losses they might incur from NAFTA. PoicyRa hWoiingPapedsiminate thefindings ofwowkin progs nd encouragetheexchangeofideas amongBank staffand allothbeats iodi do the WoBa oardo ixctp.prs, m RcwAmbAdvnaStait. or any ftscanyb aeesoftioautics onlythiciviews.andshouldboused andcited accordingly.lhefindings,inueqnutions,and conclusionsaretheaabors'own.lbeyshould not be atttedM to die Wodd Bank, itS Board of Ditectors, its managemncn, or any of its member countries. Policy Reomerch| International Trade W?S 1119 This paper- a product of the Intemational Trade Division, Intemational Economics Department- is part of a largereffort inthe department to analyze and predict structural changes in trade and to -iantify factors affecting exports ofdeveioping countries. Copies of the paperare available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Jean Jacobson, room S7-035, extension 33710 (March 1993, 34 pages). Over the past three decades, free trade agree- amount of trade that Mexico may displace in ments were mostly a European phenomenon these sectors. (EFTA, EEC,and their regional arrangements). Recently, this phenomenon has reached the Using a partial equilibrium trade projection Americas and is growing. Safadi and Yeats show model developed by UNCTAD and the World that free trade agreements now cover about half Bank, Safadi and Yeats try to quantify the trade of world trade in manufactured goods and about diversion South Asia could experience in North 46 percent of total world trade. America as a result of NAFTA. The model focuses on NAFTA's short-run impact on South Free trade agreements discriminate in favor Asian trade. This study does not address dy- of member countries, so other exporters are namic long-run effects, such as changes in terms naturaily concerned about their trade being of trade, investment diversion, and extemalities displaced. Safadi and Yeats try to quantify the associated with the growth dividend. adverse third-party effects of the recently concluded North American Free Trade Agree- The results suggest that the total export ment (NAFTA) on the developing countries of decline could be about I percent, with projec- South Asia. tions for Bangladesh slightly higher (because textiles and clothing represent a higher-than- They find that because the NAFTA countries average share of Bangladesh's exports). and South Asia export different types of goods, exports from South Asia will be displaced for Safadi and Yeats argue that successful only a narrow range of products (probably little completion of the Uruguay Round would more than 10 four-digit SITC groups). The sector consiJerably reduce South Asia's potential most affected is textiles and clothing, given that losses, as it would lower the preferernce margins the preferential removal of tariffs (in the 15 to 30 that NAFTA could provide its member coun- percent range) and MFA quotas could give tries. Mexico a formidable competitive advantage in the U.S. market. To put the two events in perspective, Safadi and Yeats note that the trade gains South Asian But domestic supply constraints (Mexico countries could experience from successful seriously and consistently underutilizes its textile completion of the Uruguay Round are about 100 and clothing quotas), and NAFTA's domestic times greater than the losses they might incur import content regulations should limit the from NAFTA. ThePolicy ResearchWoTkig PapeTSeriesdisseinatesthefdingsofworktder wayintheBank.Anobjectiveoftheseries is to get these findings out quickly, even if presentations. are less than fully polished. The findings, interpretations, and conclusions in these papers do not necessarily represent o:ficial Bank policy. Produced by the Policy Research Dissemination Center NAFFA: Its Effect on South Asia by, Raed Safadi and Alexander Yeats InternationLi Trade Division The World Bank, Washington 20433 Table of Contents I. Introduction 1 II. The Relative Importance of NAFTA for South Asia's Exports 4 MIl. Potential Sectors for NAFTA-Induced Tiade Displacement 8 IV. Projecting NAFTA's Trade Diverting Effects 14 V. Assessing the Relative Importance of NAFTA 21 VI. Summary and Conclusions 23 Appendix 25 References 33 NAFTA: Its Effect on South Asia Raed Safadi and Alexander Yeats I. nLQductio Most developing countries have viewed the growing interest in regional trade arrangements among developed countries with concern. In part, the trend toward regionalism has been the result of growing dissatisfaction with multilateral trade negotiations (MTNs) as a means of achieving trade liberalization (Aho and Aronon, 1986; Patterson, 1989). One source of this dissatisfaction has been the pace of the GAIT negotiations. The Tokyo Round lasted seven years, from 1973 to 1979, while the Uruguay Round started in 1986 and was scheduled for completion in 1990, but the impasse at the Brussels Ministerial Meeting in December, 1990 led to its extension - probably for two years. In contrast, the United States-Canada free trade agreement (FTA) was negotiated in less than one year. Second, the GAIT multilateral negotiations involve very diverse interests of a large number of participating countries - a point that greatly complicates the agenda of the MTNs (15 different negotiating groups were originally established in the Uruguay Round covering topics from services to tropical products).' A third problem concerns the GAIT's de facto consensus rule which countries have used to block progress until their individual demands are met.2 I The groups reporting to the Trade Negotiating Committee during the first four years of the Uruguay Round were the following: safeguards, dispute settlement, agriculture, tropical products, natural resource-based products, textiles and clothing, tariffs, non-tariff measures, MTN agreements and arrangements, subsidies and countervailing measures, GAIT articles, functioning of the GATr system, trade related aspects of intellectual property, trade-related investment measures, and services. 2 For example, a few developing countries blocked the adoption of recommendations on intellectual property rights in the Ministerial Declaration at the Montreal midterm review of the GATr negotiations in December 1988. According to Hufbauer and Schott (1985), the problem of such "footdraggers" has become more acute as GAIT talks focus more on the negotiation of trading rules than on reciprocal trade liberalization. Schott (1989) argues that such problems would be far less important in bilateral or minilateral negotiations among "like-minded" countries. 2 Recent tabulations (Braga and Yeats, 1992) show that approximately 46 percent of world trade is now conducted under some form of regional trade arrangement while the affected share of world trade in manufacturea is approximately 50 percent (see Table 1 for a tabulation of existing regional arrangements and the value of trade covered by each). Clearly, Europe has been the focus of most previous FTAs - European regional arrangements now cover about one-third of world trade - but the focus for the most recent developments has shifted to the Americas. Specifi cally, recently concluded negotiations on a North American Free Trade Arrangement (NAFTA) have linked Canada, Mexico and the United States in a new FTA while other similar arrangements are being negotiated between various Latin American countries.3 In some quarters there is even talk of forming a free trade area for all the Americas. This apparent shift in emphasis in the Americas - toward regionalism and away from the GATT multilateral approach - has naturally stimulated an interest on the part of the non-associated countries in the magnitude of the (adverse) third party effects of these arrangements. 3 MERCOSUR and the separate Chile-Mexico arrangement are among notable developments. The MERCOSUR process is intended to lead to the creation of a common market - encompassing Argentina, Brazil, Paraguay, and Uruguay - by the end of 1994. The Asuncion Treaty, signed in March 1991, established this ambitious target based on the progress so far achieved in the context of the Argentine- Brazilian Integration Program initiated in 1986 (for a brief description of this program see Primo Braga, (1990)). The September 1991 treaty for a Chile and Mexico FTA, in turn, established a framework for the gradual reduction of tariffs affecting bilateral trade over the next four years. Accordingly, 90 percent of the goods traded between Chile and Mexico are expected to be exchanged under duty free status by the end of 1995. A first approximation of the impact of these arrangements can, however, be inferred from our data on Latin American Integration Association (LAIA) "affected" intra-regional trade (see Table 1). 3 Table 1: Value and Share of Merchandiwe World Trade Under FrAs and Similar Regional Arrangements Share of 1988 Trade (X) Value of 1988 Trade (SmiUlon) AU Itens AU Non-Oi All All Items All Non-oil AU Goods Manufactures Goods Manufactures TOTAL WORLD EXPORTS 100.00 100.00 100.00 2,829,098 2,562,252 1,980,066 OECD RELATED ARRANGMENTs 38.66 40.62 42.06 1,093,644 1,040,692 832,759 Intra/trade of Dev. Eutope 30.52 32.30 34.02 863,405 827,715 673,702 United States and Canada 5.32 S.49 5.20 150,391 140,562 103,028 EEC Regional Aragments 2.05 1.98 1.96 57,976 50,853 38,803 EFrA and Turkey (a) 0.46 0.51 0.54 12.985 12,952 10,625 United State and nael 0.19 0.21 0.24 5,507 5,449 4,730 Ausrli and New Zealand 0.10 0.10 0.08 2,795 2,646 1,612 Autr liand Papua New Guinea 0.02 0.02 0.01 585 515 259 DEVELOPING COUNTRY ARRANGEMENTS 2.74 3.13 3.13 77,619 80,320 61,918 Hong Kong-China 1.27 1.40 1.64 36,012 35,995 32,427 ASEAN 0.80 1.06 0.95 22,648 27,191 18,783 LAIA 0.37 0.40 0.32 10,562 10,149 6,376 Gulf CooperationCouncil 0.16 0.16 0.13 4,650 4,170 2,560 Economic Community Wed Africa 0.05 0.04 0.03 1,513 953 650 Centrl American Comnon Market 0.02 0.02 0.02 570 567 422 SADCC 0.02 0.01 0.01 537 375 210 Mahgreb 0.02 0.02 0.01 517 440 209 CARICOM 0.02 0.01 0.01 426 i0 170 UDEAC 0.01 0.01 0.01 184 160 120 TOTAL TRADE FLOWS UNDER MINILATERAL ARRANGEMENTS 41.40 43.75 45.18 1,171,263 1,121,012 894,677 POTENTIAL NEW ARRANGEMENTS 4.42 4.11 4.07 124,911 105,338 80,666 United Stes and Mexico 1.54 1.54 1.56 43,460 39,449 30,934 Canada NdMexico 0.05 0.05 0.05 1,439 1,388 1,002 Eastern Eurvoe and Dev. Euope 2.83 2.52 2.46 80,012 64,501 48,730 TRADE FLOWS UNDER POTENTIAL AND EXISTING ARRANGEMENTS 45.82 47.86 49.26 1,296,174 1,226,350 975,343 Meo Item: Collapsed Arragements 4.87 4.16 3.67 137,879 106,644 72,749 Easern Europe Ingm-Trad 4.47 3.78 3.45 126,459 96,775 68,357 Easn Europe and Cuba 0.40 0.39 0.22 11,420 9,869 4,392 ' Turkey and EFrA signed a free trade agreeent in October 1991. Tbis arrangement was expected to cone into force in Aprl 1992. Notes: Data compiled from UNCrAD (1989 and 1990) and Inotai (1991) with some staitics drwn directly from the United Nations COMTRADE date bane. Deveotped EBupe and Cuba were repoa in the COMTRADE base and are the sources for Eastern European data on thee trade flows. For som of the developing ountry aangem (SADCC, UDEA, tc.) mufacwe and non-oil trade valus were estimated by applying the shae of thes goods in a pmrvious yer to the 98 trade total. he 1976 Bagkok agement (Banglh, dia, Republc of Koa, Sri Lanka nd LAos) wa not included because at present only 3 percent of IC members' itr-trade b exchangd under tadff preferences. The above tabulation considers the exchang of goods between EEC member states to constitute inational trade. If the EEC were summed to be single unk, the global share of merchandise trade under exiding and potential FrAs would be about 31 percent. gMe: Primo Bgsp and Yeats (1992). 4 The purpose of this paper is to examine the likely third party impact of NAFTA on the developing countries of South Asia and, in particular, Bangladesh, India, Pakistan and Sri Lanka. Tnis region was selected primarily on the basis of its global size - South Asia accounts for roughly one quarter of world population- and the fact that its economies may be more vulnerable-due to lower levols of industrialization-to adverse external developments than (say) more advanced nations like Singapore and Republic of Korea.4 The study attempts to identify the specific South Asian export sectors that may be adversely affected by NAFTA; it assesses the vulnerability of each to competition from NAFTA members, as well as quantifying the trade losses that South Asian countries might incur. II. The Relative Im.ortance of NAFTA for South Asia's Export Any assessment of the impact of NAFTA's formation on South Asian economies must first consider the relative importance of the North American market as a destination for their exports. As shown in Table 2, in 1990 approximately $4.6 billion or 17 percent of all South Asia's exports went to Canada, Mexico and the United States. The EEC-12 was the larger market, receiving $7.6 billion or 28 percent of all exports. However, these results are highly influenced by India, which accounts for about 66 percent of the regions total exports. Only 16 percent of India's exports go to North America. About one third of the exports of Bangladesh, Nepal and the Maldives go to North America, as does 27 to 28 percent of Bhutan and Sri Lanka's trade. Of the eight South Asian countries, Myanmar has the lowest North American dependence with roughly 3 percent of total exports destined for these markets.5 ' Following the World Bank (1992, p. 40) the developing countries of South Asia are taken to include Bangladesh, Bhutan, India, Maldives, Myamnar, Nepal, Pakistan and Sri Lanka. S Of the three North American countries the United States is by far the largest single destination for South Asia's exports. In 1990, the United States imported $5.4 billion from South Asia while Mexico and Canada combined imported some $415 million. See Box 1 for information on Mexico and Canada's trade barriers ficing key South Asian products. Table 2. The Destination of South Asian Exports in 1990 Destiation of Expo North 1/ OECD East LaTn South Midle Sub-Shara Other South Asian Exporter World America EEC(12) EFTA Asia 2/ Asia Aneria 31 Aim East Arica Couies 41 (values in terms of USS nillions) Bangladesh 1,194 406 288 25 84 100 12 39 87 54 99 Bhutan 2 1 - - - - - 1 - - - India 17,859 2,815 4,932 474 1,873 1,803 73 527 1,142 321 3,896 Maldives 45 15 3 - 1 19 - 5 - - - Myanmar 215 7 17 5 18 128 - 29 6 1 3 Nepal 149 50 68 16 1 3 - 3 5 - 4 Pakistan 5,522 779 1,763 293 530 927 13 222 445 100 450 Sri Lanka 1,889 538 483 32 127 111 32 70 324 4 167 AlU South Asia 26,875 4,611 7,555 847 2,634 3,091 132 896 2,011 480 4,619 (percentage share by desdnation - 9) Bangladesh 100 34 25 2 7 8 1 3 7 5 8 Bhutan 100 27 3 2 - 23 3 39 3 - - India 100 16 28 3 10 10 - 3 6 2 22 Maldives 100 34 7 1 3 43 - 12 - - - Myanmar 100 3 8 2 8 60 - 13 3 1 2 Nepal 100 33 46 11 1 2 - 2 3 - 2 Pakistan 100 14 32 5 10 17 - 4 8 2 8 Sri Lanka 100 28 26 2 7 6 2 4 17 - 8 Al South Asia 100 17 28 3 10 12 1 3 7 2 17 I United States, Canada and Mexico. 2 Japan, Australia and New Zealand. 3 Inludes the Caribbean countries. 4 Includes Fasrn JEurpe, developing Oceania, North Africa and nriscellaneous categories like 'for ships.' Note: Trade data shown above are for 1990 or ae latest year available in the UNSO COMTRADE data base. 6 While there may be considerable variation in South Asia's dependence on North American markets, there are similarities in the types of goods that are traded (Table 3). Clothing is b: far the dominakAt export item with 38 percent ($2.2 billion) of South Asian exports consisting of these goods; individually, the proportion is as high as 79 percent for Bangladesh, 99 percent for the Maldives, 88 percent for Nepal, and for 44 percent for Pakistan. Taken together, textiles and clothing comprise about 50 percent of all South Asia's exports to this market, with about 25 percent of total trade consisting of other types of labor-intensive manufactured goods (e.g., wood products and furniture, travel goods and haudbags, and jewellery). A concentration in one or two specific products accourts for most of the major inter- country differences observed in Table 3. For example, Bhutan's exports of feathers (SITC 291.96) and cut foliage (SITC 292.72) are this country's secone and third largest five-digit export products; while Myanmar's $5.3 million of shellfish exports (SITC 031.3) are the primary renson why foods comprise over one-fifth of its total. India's exports of kerosene (SITC 332.2) are over $250 million dollars, which accounts for the 8 percent share of energy products in total trade. However, aside from these few unusual examples, the main message that emerges from Table 3 is that South Asia's exports to North America are largely concentrated in manufactures, and that textiles and clothing are the major traded products within this group. 7 Table 3. lhe Prodt Composkion of US, Cnadian and Mexican Impots from Sauth Asia, in 1990 Product Conposionof Export AR Agkulur Ors and All Mis. Souh Asin Exporter hem F od Materias metals Fuels Manufaus Chemicals Lather Textils Clothing t'ootAw Manufctur (vahles in trms of US$ millions) Bangladesh 626.4 62.9 0.6 - - 562.1 - 0.8 60.9 497.6 - 0.8 Ihun 0.2 - - - - 0.2 - - - odit 3,658.9 341.2 108.8 17.9 299.2 2,897.4 115.5 62.2 350.4 801.7 50.0 111.6 Maldives 18.8 - - - - 18.8 - - - 18.6 - 0.1 Myamn 25.4 5.3 1.6 0.2 - 18.2 1.3 - 0.2 10.0 - 0.3 Nepal 62.8 1.1 1.2 - - 61.0 - - 3.6 55.2 - 1.4 Pakistan 740.0 38.8 24.3 - - 671.2 0.3 17.7 246.8 326.2 0.2 27.7 Sr I nka 639.6 43.5 14.3 0.8 - 578.9 5.8 - 12.3 492.9 2.4 11.8 Al Saudi Asia 5,772.3 492.8 150.9 19.0 299.2 4,807.5 123.0 80.7 674.1 2,202.1 52.7 150.7 (perentage sare by destition - Bangbd 100 10 - - - 90 - - 10 79 - - Bhutan 100 - 24 - - 73 - - - - - - Iia" 100 9 3 - 8 79 3 2 .0 22 1 3 Maldives 100 - - - - 99 - - - 99 - - Myanmar 100 21 6 1 - 71 S - 1 39 - 1 Nepal 100 2 2 - - 97 - - 6 88 - 2 Pakisan 100 5 3 - - 91 - 2 33 44 - 3 Sri Lanka 100 7 2 - - 90 1 - 2 77 - 2 AD SouthAsia 100 9 3 - 5 83 2 1 12 38 1 3 Note: IDnterusofhieSLrC Revisionl ,prodctgroupsare defined as follows: all items (Oto9); food 0+1+22+4);agricuflrl naterials (2-27-28); ores and metals (27+28+68);a afiacutres(5 to 8-68); chemicals (S); leather (61); textiles (65); clothing (84); footwear (85); misc. manufaces (89). 8 III. Potential Sectors for NAFTA-Induced Trade Displacement While Table 3 identified the major products currently exported by South Asia to North America, two separate pre-conditions must exist for any of this trade to be diverted. First, trade barriers (tariffs and/or NTBs) must be currently applied to the product in North America. Under tie terms of NAFTA, existing trade restrictions are to be removed against the intra-trade of the United States, Mexico, and Canada but will continue to be applied to imports from third parties (like South Asia). This preferential removal of trade barriers within NAFTA will cause some South Asian exports to be diverted (displaced) by NAFTA members. Stated differently, if South Asian countries currently do not face trade barriers in North America, NAFrA will not induce any trade displacement because no erosion of competitive position will occur.6 The second requirt. condition is that NAFTA countries be viable competitors in products traded by South Asia. In order to identify products that meet these conditions the following procedures were adopted. First, in order to eliminate items that are clearly unimportant to South Asia, a list of four-digit S1TO products was compiled whose value was at least one-quarter of one percent of South Asia's total exports to NAFTA. Items falling below this cut-off were dropped from further analysis. Next, products were dropped from this "one-quarter of one percent" list if similar exports did not originate within 6 There are several broad classes of goods that enter the US free of duty or NTBs. These include metal ores and minerals, energy products like crude petroleum, many agricultural raw materials, and other raw materials used &. production inputs. Also, under the terms of the Generalized System of Preferences (GSP), the United States imports many designated manufactured goods from South Asia at zero or very low import duties. A further point to note is that GAIT Article XXIV requires that FTAs Oike NAFTA) meet three conditions: (1) duties and other restrictive regulations are eliminated on "substantially all" trade between partner countries; (2) the agreement contains a plan and schedule for its complete formation within a reasonable length of time; and (3) the general incidence of duties and regulations affecting third parties is not higher after than it was before the establishment of the agreement. This last provision, as well as the legal binding of many tariffs within GATT, would prevent barriers facing South Asia's exports from being raised. It should be noted that the EEC and US-Canada FTAs were consummated under the provisions of Article XXIV. 9 Canada and Mexico for the U.S. market.7 The United States was the focus of this analysis since it is by far the most important outlet for South Asia's exports to NAFTA (see Box I for information on South Asia's trade with Mexico and Canada). This selection procedure produced a list of 27 four-digit SITC products where its is likely there is competition between South Asia and Canada/Mexico. Using World Bank records on US trade barriers, the four-digit SITC items w-re then separated into two groups--the first consisting of 12 items which faced important US tariffs and/or NTBs and a second group (15 products) having no NTBs and zero or very low US import duties.8 Table 4 identifies the products that were classified in these "core" groups; it also indicates the value of South Asian and Canadian/Mexican exports to the United States along with the share of each item in total South Asian exports and the tariffs and NTBs facing South Asian exports to the US market.9 The main message emerging from Table 4 is that textiles and clothing are by far the products of major concern for South Asian countries. Of the approximately $2.5 billion of South Asian exports facing trade barriers and competition from Canada and Mexico, over 93 percent are textile 7 The four-digit 'evel was selected since this is the lowest level of product detail in the SITC system where there are few "leakages" in terms of lost products. In other words, many four-digit S1TC products do not further decompose into five-digit items so, if the comparisons were made at the latter level, some products would have been omitted. It should also be noted that the criteriono used in the elimination of four-digit products only required that the value of Canadian and Mexican exports are at least one-quarter of one percent of fouth Asian exports. As such, the requirement was that the item has value of at least one-hundredth of one percent of Canada and Mexico's exports to the United States. s In distinguishing between important and "very low" tariffs, a cut-off value of 2.5 percent was used although a higher value might have been employed. During the Tokyo Round negotiations several countries including Canada indicated tariffs of 5 percent or below only had a "nuisance" value and should be abolished without discussion. I A point to note is that the US Multi-Fibre Arrangement (MFA) restrictions apply to developing countries like Mexico, but not to developed countries like Canada. Similarly, Canada's MFA restrictions apply to Mexico, but not to the United States. Within NAFTA, US and Canadian textile and clothing exports should increase due to the preferential liberalization of tariffs while there should be a Mexican response due to the removal of ariffs and nontariff barriers by Canada and the United States. 10 Box 1 NAFTA's Effects in Mexico and Canada on South Asian Exports Although the United States is by far the most important NAFTA market for South Asia's exports - the United States imported $5.4 billion from South Asia in 1990 compared to $415 million imported by Mexico and Canada combined ' -- there is still an interest in identifying the primary sectors in the latter two markets where South Asia's trade is most vulnerable to displacement. In Canada the trade pattern is very similar to the United States with 70 prcent of all imports from South Asia consisting of textiles and clothing and the level of protection against these products is very high. The following tabulation provides trade and trade barrier information on the major four-digit SITC products Canada and Mexico import from South Asia. As was the case with the United States, South Asia faces the greatst potential for diversion in its textile and clothing exports to Canada since: (1) there is significant competition with Mexico and the United States in these sectors; (2) tariffs are relatively high, averaging just under 20 percent so NAFTA would create important preferential margins; and (3) the removal of MFA restrictions on Mexico's exports will further augment the effects of NAFTA's tariff preferences. Importer/ 1990 Imports SITC Description NTBs ApRlied Tariff !%) Value (S mill.) Share Canada 8411 Clothing of textile fabric MFA restrictions 18.7 117 33.8 8414 Knitted clothing MFA restrictioas 18.2 27 7.7 8413 Leather clothing MFA restrictions 14.1 14 4.0 6575 Carpets MFA restrictions 8.4 13 3.8 6522 Woven cotton fabrics MFA restrictions 17.5 12 3.3 Mexico 0752 Spices None reported 22.6 19 28.4 2218 Oil seeds and nuts Licensing 20.9 11 16.1 0542 Leguminous vegetables Licensing 3.3 6 9.1 5128 Organic-inorganic compounds None reported 5.6 2 2.7 2311 Natural rubber None reported 0.2 1 2.1 In the Mexican market, South Asia's major exports appear to face little potential for diversion as a result of NAFTA. Neither the United States nor Canada is a significant exporter of spices or natural rubber. Little competition also exists for oilseeds as South Asian exports are heavily concentrated in palm kernels and copra. Although the US and Canada both export organo-inorganic compounds to Mexico, it is unlikely that preferences created under Mexico's 5.6 percent average tariff would have a significant trade diverting impact on these high value added products. ' At $348 million Canada's imports from South Asia are more than five times those of Mexico. About 55 percent of Canada's imports from South Asia originate in India as opposed to 63 percent in the case of Mtexico. 11 and clothing products (SITC 65 and 84) with the largest single four-digit core group of products (clothing of textile fabric - SITC 8411) alone accounting for 60 percent of the total. The competitive position of South Asian exporters will be eroded (by how much, however, is a key question--see Box 2) by NAFTA's preferential removal of the relatively high US tariffs on clothing--these average about 22 percent on knitted clothing (SITC 8414) and about 18 percent on the single key product, namely, clothing of textile fabric (SITC 8411) -- as well as by the removal of MFA restrictions. The importance of the latter is likely greater than that of tariffs as the World Bank (1992, p. 19) estimates the ad valorem incidence of the MFA restrictions generally falls in the 40 to 80 percent range. As indicated in Table 4 (memo item) approx.mately 54 percent of all South Asian exports to the United states face neither tariffs nor NTBs, nor any significant competition from either Canada or Mexico. Of the remaining 46 percent, South Asian exports are highly concentrated in textiles and clothing. A key question centers on the likely magnitude (i.e., dollar value) of losses South Asian countries could experience in these sectors as well as in the other core group products. 12 Table 4. US nptoxt Sectors with Subantial Competition Between Mexico, Canada and South Asian Counties 1990 Value of US Inmorta (Smill.) Share of South Asia's Totdal Average US Tariff SflC Description South Asia Canada and Mexico US NTBa Facing South Asia Erports to the US (F) Facing Soulh Asia (%) 1 Cw4metitive Products with US Banie S127 Nitroge fiunction couwporad 20 72 None 0.4 8.6 5310 Syniheic organic dyestuffs 36 15 None 0.7 16.9 6521 Woven cotton fbrics 104 37 MFA quota; MFA conskation 1.9 7.5 6569 Made up textie icles 123 154 MFA quota; MFA conutation 2.3 9.7 6576 Carpds and rugs 53 60 MFA quota; MFA conulation 1.0 3.8 6741 Univenals and plates of iron 23 90 Quota by country 0.4 6.0 8310 Travel goods ahandbags 44 64 MFA quota; MFA consultion 0.8 11.9 8411 Clothing of textile fSbric 1,481 609 MFA quota; MFA constation 27.7 17.5 8412 Clothing aceories 28 60 MFA quota; MFA conslaon 0.5 15.6 8413 Leather appael 91 39 None 1.7 5.7 8414 Knitted clothing 425 155 MFA quota; MNA conutation 7.9 22.1 8510 Footwear 46 154 Non 0.9 5.3 AU aboe items 2,474 1,509 462 B. Conmztitve Poducts with No Maior Barriers 0313 Custacea and moucs 155 505 None 2.9 0.1 0517 Edible mts 110 58 None 2.1 0.0 2218 Oilaeeds andur 14 73 None 0.3 0 0 2929 Material of vegetable origin, n.e.s. 49 31 None 0.9 0.0 3322 Refind petroleum products 274 395 None 5.1 0.0 6123 Upperpartsoffoowear 22 66 None 0.4 0.1 6291 Rubber tims and tubes 31 661 None 0.6 0.0 6791 Ion catinp in rough state 25 20 None 0.5 0 0 6972 Domestic utensi of bse mel 41 40 None 0.8 0.0 6989 Articles of base metal, n.e.s 25 369 None 0.5 0.0 7115 ltemal combustion engines 18 2,445 Nonw 0.3 0.0 8124 lighting fixtures and lmps 15 129 None 0.3 0.0 8617 Medical instruuents, n.e.s. 33 264 None 0.6 0.0 8944 Other qorting eqnt 16 157 None 0.3 2.4 1971 Redal Jewelery 80 69 None 1.5 0.0 Al above items 906 5,282 17.1 Memo Item: Shae of South Asia's Exzota Facing US Barrier and Candian-Mexican conpetition 46.2 Facing Candian-MexicanCorpeititon but no major US Barriers 17.1 No US Bariers and no Candian-Mexican competition 36.8 13 Box 2 The Implications of Mexican and South Asian lInport Penetration Ratios for Textile and Clothing Exports to North Amenica One important quesdon relating to Mexico's ability to divert third country textile and clothing exports to the United Staes and Canda cncems the pret importance of Mexico as an established supplier. There are reasons to believe that it could more easily and quickly expand from a large existing trade base than it could if it were only a marginal supplier with limited production capacity and marketing and distribution systems, i.e., a marginal supplier might, for example, be faced with important logistical problems that would constrain a rapid trade expansion. One measure that can provide useful insights on this question is the Mexican import penetration ratio, i.e., the share of US and Canadian apparent consumption of textile and clothing products that originate in Mexico. The statistics shown below indicate Mexico's import penetration in North America for selected years over the 1970 to 1988 period. This information suggests that Mexico is not in a strong position to cause a major displacement of third-country exports in the near-term (see Box 3 for further evidence on this point). Mexico's 1987-88 import penetration ratio for clothing (less than one half of one percent) is about one-third that for South Asia and has been increasng at a slower pace than the average for all developing countries combined. This lackluster performance suggests that special supply constraints exist that should limit Mexico's ability to displace third countries in North America. Much the same conclusions apply in the textle sector where Mexico's import penetraton ratio (about one-fifth of one percent) is well below that for clothing. I! . ~~~~~~~~~Textile Clo2thing 1970-71 1980-81 1987-88 1970-71 1980-81 1987-88 North American Apparent Consumption (S million) 31,271 63,846 91,934 29,178 64,078 98,265 Import Penetration Ratios (Percent) All Countries 4.93 4.72 7.83 8.61 18.65 36.81 Developed Countries 3.60 2.64 4.27 4.98 4.30 8.87 Developing Countries 1.33 2.08 3.56 3.63 14.35 27.94 Mexico 0.09 0.12 0.22 0.14 0.39 0.45 All South Asia 0.80 0.68 0.65 0.02 0.56 1.50 Source: Apparent consumption ratios were derived from UNCTAD, while the trade data were obtained from UN Series D trade tapes. l Apparent consumption (C.) is defined as C. = P8 - E + I, where P represents domestic production of the good, E is the value of exports, and I is imports. From this it follows that Mexico's import penetration ratio (MN) is given by: Mp = L/ l C., wher-e t represents North American imports from Mexico. 14 IV. Projecting NAFITA's Trade D2iverting Effects To assess the likely magnitude of the trade losses that South Asia could experience due to NAFTA, we employ a partial equilibrium trade projection model developed by UNCTAD and the World Bank (1989) to simulate the impact of the exchange of preferences. The model is of the same type as that used by Cline (1978) to evaluate the Tokyo Round results and by Baldwin and Murray (1977) to quantify the effects of losing GSP tariff margins on developing countries' exports. Two reduced form equations are estimated to calculate trade creation (for NAFTA countries) and trade diversion (from non- NAFTA countries to NAFTA) at the most detailed tariff line level. The projections were then aggregated to four-digit SITC groups and higher levels.'0 It is important to note that the model only incorporates the short-term effects of the trade barrier changes considered here and does not include longer-term economy-wide effects, such as changes in investment flows or in capacity utilization that may occur over a more extended (say 5 to 10 year) interval, nor does it take into consideration developments in the Indian economy that may derive from its economic reform program. Several key assumptions concerning the impact of NAFTA were incorporated in our simulations with the first concernihg the time element. Under the terms of the agreement, trade barriers facing member countries are to be phased out over an extended period that may be more than 15 years. We have not attempted to project the separate impact of each of the staged cuts but instead have focused on the final stage in which all barriers have been eliminated. Second, we have also assumed that all tariffs and nontariff barriers facing NAFTA members will be removed. To the extent that some restrictions 10 As a point of reference the current US tariff schedule distinguishes over 8,500 tariff line items and the projections are made at this level. The World Bank (1992) used the model to quantify the likely impact of a Uruguay Round agreement while Erzan and Yeats (1992) employed it to simulate the effects of FTAs with the United States on the exports of major Latin American countries. The latter study (see its Appendix 1) provides a full technical discussion of the features and limitations of the model. 15 remain, our projections will overstate the agreement's trade effects."1 Third, we have little reliable information about supply constraints within NAFTA countries. Therefore, our initial projections are based on the assumption of infinitely elastic supply (i.e., no supply constraints) with sensitivity tests employed to determine how the results would change if different values were used for the supply response parameter. Finally, our projections do not incorporate any possible effects resulting from a higher rate of growth in the NAFTA region. If growth rates do accelerate this would potentially increase imports from South Asia (i.e, it would cause our projected trade losses to be upward biased). Table 5 summarizes our projections of NAFTA's potential trade-diverting impact on total South Asian exports to the United States as well as for the 12 key four-digit SITC core products. Shown here are the actual 1989 values of US imports from each South Asian country-the trade of Bhutan, Maldives, Myanmar and Nepal is reported as a combined total-along with the projected percentage decline that would result from NAFTA.12 To assist in evaluating their importance, the table also shows the share of each South Asian countries' total exports accounted for by the core product group. 11 We have employed two sources (Laird and Yeats, 1990 and World Bank, 1992) of information for estimates of NTB ad valorem equivalents that were needed for our simulations. It should be noted that the Canadian-US free trade agreement contains a number of specific product exclusions, like imports of wood shingles from Canada, where existing barriers are retained or kept in a modified form. Such exclusions will no doubt also be carried over to the NAFTA agreement. Erzan and Yeats (1992) argue that sugar, textiles, and clothing are sectors where a complete removal of US barriers may be most difficult. 12 The 1989 statistics shown in Table 5 reflect US imports valued on a free-on-board (f.o.b.) basis since the United States applies its import duties using this valuation base (most other countries apply duties on the cost-insurance-freight (c.i.f.) value of imports-Canada, Australia, and New Zealand are exceptions). In order to make the US trade data comparable to that of all other countries, all other tables report US trade on a c.i.f. values. 16 Table S: Projected Efflt of NAFPA on Souh Asis's Expons of Core Pmducts and Al ms 1989 US mportu in Tems of USS ('000) Projected Change in Impons due to NAFTA Formtion (%) srrc Description Bdia Pakistan Sn Ianka Other South Bangladesh India Pakistn Sri 1anka Other Asia Soudh Ada 5127 Ntogen function compond 21 20,269 - -1.4 -1.6 - _ - 5310 Syihetic oganic dye=frl - 35,003 - _ 58 - -0.5 _ _-0.2 6512 Woven ctton fabrics - 46,066 58,296 _- - -1.8 -2.1 - - 6569 Made up texfile auticles 7,121 41,304 68,847 5,809 is -0.5 -0.6 -0.6 -0.4 -0.2 6576 Capets anm MP 734 50,705 1,388 1 54 -0.1 -0.4 -0.4 -0.1 - 6741 Univerua & plates of iron - 23,064 - - - - -1.1 - - 8310 Tavel goods & bsbap 466 38,340 1,029 4,143 207 -1.6 -1.2 -0.9 -1.0 -0.8 8411 Cothing of textile fubric 373,632 605,938 94,008 336,741 70,424 -0.9 -1.3 -1.1 -0.9 -0.7 8412 Clothing aessories 681 15,388 4,758 7,046 51 -1.3 -2.2 -2.6 -2.5 -1.2 8413 Ler arel 30 52,797 35,640 2,714 - - -0.7 -0.7 - - 8414 Knited clothing 99,342 43,814 153,750 117,270 11,266 -0.8 -0.7 -1.2 -1.1 -0.6 8510 Footwear - 43,828 232 2,145 4 - -0.5 -1.3 -0.9 -0.8 0 to 9 AlB goods 593,601 3,421,438 656,124 581,871 103,217 -0.7 -0.5 -0.8 -0.8 -0.6 Al Core Products 482,027 1,016,516 417,948 475,869 82,882 -0.9 -1.1 -1.2 -1.0 -0.7 Core Pmduct Share in Total(%) 81.2 29.7 63.7 81.8 80.3 _____ Source: Acta 1989 US Imports drawn fiun United Nations COMTRADE records. NAFFA -nduced trade changes were s;mUlated uSing die UNCrAD/World ank (1989) SMART trade prOjection model. 17 Box 3 Implications of Mexican and South Asian MFA Quota Utilization Rates The preceding anaysis demonstrated that the potential for a NAFTA-induced diversion of South Asian exports is mainly concentrated in textiles and clothing. However, whether Mexico's accession into NAFTA will in fact cause a major displacement of South Asia's exports to the United States depends to a great extent on how competitive Mexico has been, or is likely to become, in these two sectors. Some evidence on this point can be gained by examining Mexico's ability to fill its established US MPA quotas. If a relatively large portion of the Mexican quotas typicaly are unfilled, this could indicate important supply constraints exist that will constrain Mexico's ability to displace third-country exports under NAFTA.- The statistics given below show Mexican and selected South Asian countries' US import share and MFA quota utilization rates for all textile and clothing products over the 1985-89 period (1989 is the latest year for which comprehensive data are available). During this period Mexico only filled about three-quart-trs of its (trade weighted) MFA quotas, while Bangladesh, India and Pakistan had utilization rates of 90 percent or more. Due largely to domestic disturbances, Sri LAnka only filled about 64 percent of its 1985 quotas but operated above the 90 percent level in 1986 and 1987. Avera Wehted MFA Quota Utilization Rate (%) b 1985-89 Average US Exporter Import Share (%r 1985 1986 1987 1988 1989 1985-89 Mexico 2.2 77.8 81.7 86.0 73.9 68.9 77.7 Bangladesh 2.5 97.3 n.a. 96.5 94.2 92.5 95.1 India 4.4 92.2 96.8 97.6 95.6 88.7 94.2 Pakistan 2.0 87.3 82.2 96.1 88.1 94.2 89.6 Sri Lanka 2.7 64.4 97.0 90.7 80.8 n.a. 83.2 a/ Share of al imports under the MFA quotas. b/ Weights are based on the value of exports within each MFA quota group. Mexico's 1985-89 simple average quota utilization rate was 54.2 percent while that for the four South Asian countries was 71 Percent. Source: World Bank MFA Data Base. The relatively low Mexican utilization rates come as something of a surprise since US textile and clothing restrictions have already been considerably relaxed for Mexico and the Caribbean countries. In 1989, Mexico exported US$728 million of textiles and clothing products to the United States and it is estimated that US$655 (or 90%) benefitted from duty relief provisions under subheading 9802 of the Harmonized Tariff System (Huflauer and Schott, 1992). Under these provisions, duty is only levied on value added outside the United States. These shipments accounted for 16% of total US imports in 1989 compared with 10% in 1986 (Bannister and Low, 1992 and USITC 2365, 1991). Of these, only US$195 million (or 30%) worth of textiles and clothing imports from Mexico were subjected to duties. Thus, the average effective duty rate for 9802 imports was around 6.5% (Bannister and Low, 1992), making the weighted average duty on all US imports of textiles and clothing from Mexico equal to about 14%. All in all, the evidence suggests that internal constraints will limit Mexico's capacity to displace other textile and clothing exporters. 0 We assume that the Canadian potential for trade diversion in these sectors is very limited due, among other factors, to its relatively high unit labor costs. Canada is not constrained by the effects of the MFA-nor is Mexico- but still its 1990 clothing exports to the United States ($239 million) were less than one-third of Mexico's. 18 For the eight South Asian countries combined, the NAFTA-induced losses on the 12 four-digit SfTC core products average about one percent of the 1989 value of exports, with the combined losses on all goods ranging from one-half a percent (India) to eight-tenths of a percent (Pakistan and Sri Lanka) of total exports to the United States. For all South Asian countries combined, this translates into a total loss of roughly $35 million with India accounting for about 43 percent of this total (a trade loss of about $17.1 million).13 Within the key clothing sector, South Asian export losses range up to 2.5 percent for the clothing accessories group (SITC 8412), but average only slightly more than one percent for all the clothing products (SITC 84) listed in Table 5. While losses of such magnitudes may appear surprisingly small, two related points should be noted. First, the underlying projections suggest that although NAFTA could, under the most favorable assumptions concerning supply constraints, almost double Mexico's present textile and clothing exports to the United States (they could increase from $1.0 to $1.9 billion).14 The impact of such a development on non-NAFTA countries would be relatively minor since Mexico would still control only a small share of the US market for these products (i.e., its share would expand from Is These projections are based on what we considered to be the best estimates for the parameters in our simulation model. However, we did pose the question of what losses would the South Asian countries experience if we had underestimated two of the model's key parameters-the elasticity of import demand and the cross elasticity of demand between NAFTA and third country exports -by as much as 50 percent. In this case the total South Asian trade losses would be in the range $50 to $55 million- about 2 percent of the total 1989 value of South Asian exports. It should be noted, however, that both these and our 'best estimate" projections are based on the most optimistic scenario for Mexican supply conditions (infinitely elastic supply). There is evidence that Mexican supply constraints would hold South Asian losses to totals below both sets of projections (see Box 3). 14 Whether or not Mexico is able to achieve an export expansion of this magnitude will clearly depend on the volume of new investment in textile, clothing and other sectors. New investment would certainly be required for Mexico to increase its MFA capacity utilization rates that have averaged about 75 percent (see Box 3) but, at present, there is little information about which industries would direcdy benefit. Under one scenario new FDI by the U.S. in Mexico could conceivably be in sectors like automotive parts and computer assembly. This could draw Mexican resources ay from textiles and clothing and open new opportunities for third-party exporters to the NAFPA region. 19 about 2.9 to about 5.6 percent). Approximately one-half of the Mexican export expansion would result from trade creation (i.e., new trade opportunities in which Mexican suppliers displace domestic US producers) with the balance (about $460 million) being trade diversion which reflects losses incurred by all other non-NAFIA exports. A second point is that there are certain provisions, such as the domestic input content regulations, that might seriously constrain Mexico's ability to be fully competitive in the US market."5 I- Rules of origin for the textiles and apparel industry are usually defined in terms of changes in tariff nomenclature headings in the productive process, so that a final product using foreign inputs can quality for "domestic" status (in practice, there is often the need to complement this procedure with a value-added test). A simple transformation rule requires a single tariff heading change. A double (triple) transformation rule demands two (three) changes in tariff classifications. In the context of clothing, for instance, a simple transformation rule requires that the product be cut and sewn in a member country to qualify as local. Double transformation requires that the inputs into the final product also pass this test- i.e., that the fabric be formed in the FTA member countries. Triple transformation, in turn, requires that all productive processes from yarn forward be implemented within the FTA. The NAFTA is expected to adopt at least a double transformation rule (as was the case for most textile and clothing products under the Canadian-United States FTA), with a triple transformation rule being considered the most likely outcome. Bannister and Low (1992) point out that the Mexican textile and clothing industry already displays a high level of dependence on US inputs. Accordingly, compliance with more strict rules of origin should not impose major adjustment costs for Mexico. Strict rules of origin may, however, impair investment from non-NAFTA countries in the Mexican industry, by tying its competitiveness to the efficiency of the US textile sector and discriminating against outsourcing. 20 Box 4 WM South Asia's Textile and Clothing Exports be Displaced in Europe? As previously indicated (Table 2) Europe is a more important destination for South Asian exports than North America. In 1990, 31 percent ($8.4 biHion) of South Asian exports went to the EC (12) and EFTA, while 17 percent went to North America. it is important, therefore, to inquire if NAFTA might have certain global "spill- over' effects that would adversely imnpact on South Asia's trade with Europe. One possible scenario is that the trade of major East Asian textile and clothing exporters (i.e., Republic of Korea, Hong Kong, Taiwan (China), etc.) is displaced in North America by NAPTA and these countries then attempt to divert this 'lost' trade to Europe. If this were to occur it could, in turn, result in some South Asian exports being displaced by East Asian competitors. If South Asian trade is not actually displaced the redirected East Asian trade could still depress textile and clothing export prices and earnings. However, as the following statistics on MFA quota utilizatfon rates indicate this outconvt is very unlikely. Weighted MFA Quota Utilization Rates in the EC (%) 1985-89 Average Exporter EC Import share 1985 1986 1987 1988 1989 1985-89 lEast Asi_ _ China 8.5 110.9 135.3 185.0 188.6 124.1 148.8 Hong Kong 26.1 87.2 116.8 130.4 127.3 118.9 116.1 Rep. of Korea 13.5 106.5 137.4 131.7 150.4 119.2 129.0 South Ai India 6.9 53.1 66.4 98.8 82.3 89.9 78.1 Pakistan 2.4 114.7 106.1 90.8 105.3 119.2 107.2 Sri T anka 0.7 61.2 69.9 77.6 71.7 59.7 68.0 a/ Share of all imports under MFA quotas. Source: World Bank MFA Data Base. Data for Bangladesh are not available. For most of the 1985-89 period, the East Asian countries surpassed their MFA quotas in the EC with China actually exceeding a 180 percent utilization rate in 1987 and 1988. The key point that emerges from these statistics, however, is that a NAFTA-induced surge in EC imports from East Asia-with an accompanying displacement of South Asia's trade-is prevented by the operation of the MFA. As indicated above East Asia has (at best) only a very limited capacity to increase textile and clothing exports, due to the operation of the MFA ceilings. Some quotas under the MFA are designated as "consultation ceilings" where further imports may be allowed once the predetermined limits are reached. Others in sensitive sectors trigger a surveiUlance mechanism to monitor additional imports. These types of deviations from strict quotas under which further imports are not allowed explain why some utilization rates exceed 100 percent. 21 V. Assessing the Relative Importance of NAFTA From the perspective of South Asian exporters a key question is whether the formation of NAFTA is relatively important or unimportant when compared to various other events that will influence the level and direction of their trade. The projected one percent decline in South Asian exports to the United States suggests that NAFTA is of relatively minor consequence, but it would appear helpful to have some alternative (to percentage or absolute value reduction) standard for comparisons. For example, what trade gains (or losses) would South Asian countries experience from (say) a given change in economic conditions in their major export markets and how would this trade change compare with that associated with the NAFTA agreement? One useful standard for NAFTA comparisons is the likely effect of a successful Uruguay Round completion. Under this scenario, the World Bank (1992, Appendix Table C2) estimates that South Asian exports would expand by some US$2.7 to US$4.5 billion annually."5 Table 6 allocates these estimated aggregate South Asian tradc gains to individual countries and also compares these results with the projected (NAFTA induced) export losses in the present study."6 TO) assist in the comparisons the table also shows the actual 1991 value of combined EC, Japan, and US imports from South Asia. 15 The difference in projections is due to differences in the assumed level of liberalization that the Uruguay Round would achieve. The US$2.7 billion estimate is based on a 30 percent cut in all EC, Japan and US tariffs and NTBs while the higher figure ($4.5 billion) assumes a 50 percent cut in trade barriers. Two points concerning these projections should be noted. First, they clearly understate the importance of the Uruguay Round to South Asian countries since they do not include the effects of trade barrier reductions in Australia, Canada, New Zealand, or EFTA markets. Second, these projections include the effects of any losses that South Asian countries might experience as a result of erosion of their Generalized System of Preference (GSP) tariff margins. '6 The World Bank's projections were made on a regional basis, i.e., East Asia, South Asia, Sub- Saharan Africa, etc. and the results were not further broken down into individual countries. In Table 6, the Bank's projected trade expansion was allocated to individual South Asian countries on the basis of their shares in the combined EC, Japan and US markets. 22 Table : Comparisonsof South Asia's Uruguay Round Trade Gains with NAFTA-lnduced Trade Losses (all figures in US$ millions) 'rojected Uruguay Round Trade Gains 1991 Total EC, Estimated Japan and US 30% 50% NAFTA Induced South Asian Exporter Imnports liberalization liberalization Losses BanglaOssh 639 190 315 6 India 5,614 1,780 2,970 1/ Pakistan 1,361 430 720 6 Sri Lanka 786 245 405 5 Other South Asiaa 176 55 90 1 All Souti Asia 8,576 2,700 4,500 35 a/ Includes Bhutan, Myanmar, Maldives and Nepal. Source: Projected Uruguay Round trade effects taken from World Bank (1992, Appendix Table C2 on page 52). Estimated NAFTA-induced trade losses are projected by the authors using the same trade model. Table 6 confirms the overwhelming importance of the Uruguay Round relative to NAFTA under the 50 percent or even the 30 percent liberalization scenario." In the former case, South Asian trade gains are more than 100 times the NAFTA-induced losses while under a 30 percent Uruguay Road liberalization the gains are almost 80 times greater. On a relative basis the message that emerges from Table 6 is that the formation of NAFTA is almost a non-event from the South Asian perspective. 1 It should be noted that the US$35 million loss projected in Table 6 occurs under pre-Uruguay Round trade barriers. A successful completion of the Round would lower margins of preference that NAFTA could provide member countries, with the result that South Asian losses would also be smaller, i.e., less of their exports would be diverted to NAFTA countries. 23 VI. Summary and Conclusions Since FTAs discriminate in favor of member countries, other exporters are naturally concerned about their trade being displaced. This study attempted to quantify these adverse 'third party" effects of NAFTA on the countries of South Asia. The empirical evidence examined in this study suggests that, due to the types of goods exported, the latter's losses will be marginal-probably about one percent of total exports to North America are involved, and will occur in a narrow range of products, i.e., about 10 four-digit SITC groups. Textiles and clothing is clearly the key sector for concern as the preferential removal of tariffs in the 15 to 30 percent range as well as MFA quotas could give Mexico a formidable competitive advantage in Canada and the United States. However, domestic supply constraints (which have caused Mexico to seriously and consistently under-utilize its textile and clothing quotas), as well as NAFTA's domestic import content regulations, should effectively constrain the amount of trade in this sector that Mexico might displace (See Bannister and Low, 1982 for an excellent discussion of the nature and effects of the Mexican supply constraints). While it has not proved possible to quantify the effects of these factors, they could hold the South Asian trade losses to levels below those projected in this study. A key point to note is that the potential levels of (NAFTA-induced) trade diversion projected in this study are based on present levels of protection. Any successful completion of the Uruguay Round or independently negotiated phase-out of the Multifibre Agreement would reduce the value of third country exports that might be diverted since NAFrA members' preferences would be eroded. In this respect, Page, et. al. (1991) argue that "the advanced stage which [Uruguay Round] negotiations have reached, and the practical point that no other negotiations for a renewal of the MFA have been held [because this was not expected to become necessary] means that it now seems very likely that, even if the Uruguay Round should fail, the consensus reached would form the basis of an agreement undet the 24 MFA system for phasing out over a 10-year MFA-V from 1993.1"n The World Bank's (1992, p. 52) assessment of the implications of a successful completion of the Uruguay Round-or independent phaseout of the MFA-suggests that South Asian countries might expect a resulting trade expansion of $3.5 billion. To put NAFTA and the Uruguay Round in proper perspective, this study noted that the potential gains from the latter are more than 100 times greater than the trade losses that South Asian countries might experience due to NAFTA. "' The draft Uruguay Round agreement stipulates that quotas will be increased in three stages, and removed after 10 years. The issues to be settled are: the date from which 10 years is measured; the amounts by which quotas will rise in each stage, and how these will be measured (including weighing systems for comparing different commodity and quantity mixes by the importers); whether the discretion to introduce new or tighter controls (safeguard measures) will remain during the transition; and whether any form of selective safeguard will remain after 10 years. As the transition is now expected to begin on 1 January 1993, presumably the 10 years will be measured from then. The suggestion in the end-1990 draft agreement was that goods be removed from the quotas in steps, proposed to be 10%, 15%, 20%, and then the rest. This gives a heavy bias towards the end period, even before countries decide which goods to choose for the intervening steps. Similarly, the increases in the permitted growth rates for those goods not yet removed from the scheme would be increased in steps, with each step greater than the one before. (No increase was proposed in the flexibility provisions, namely the possibility of switching quotas among products or forward or back a year). Although the draft does not give formal separate treatment (as proposed earlier in the negotiations) to least developed countries or those with very low exports, they are signalled out for more favorable treatment. 25 Appendix Detailed Statistls on Trade and Trade Barriers Facing South Asian Countries' Key Export Products Which Appear Vulnerable to the Trade Diverting Effects of NAFTA This appendix identifies and tabulates produo spc cific information on key South Asian exports that appear especially vulnerable to the trade-diverting effects of NAFTA. The tariff-line level products listed in the following tables were chosen on the basis of two criteria. First, they had to be major export products in the trade of the individual South Asian country. To account for differences in the size of each country's total exports, different values were chosen for determining which products would be included or excluded. For India, the value of the product's exports had to total at least $1 million; for Bangladesh, Pakistan and Sri Lanka, a cut-off of $250 thousand was used. Given the relatively small size of their total exports, the limit was set at $50 thousand for Bhutan, Maldives, Myanmar and Nepal. Second, the product also had to face important trade barriers in the United States. The limits chosen for the latter were an applied tariff of at least 10 percent and/or some form of "hard core" nontariff measure. Following World Bank (1992) practice, the latter were taken to include: all quantitative restrictions including discretionary licensing; all restrictions negotiated under the MFA; anti-dumping and countervailing duties; "voluntary" export restraints; and variable import levies. The second criteria was added in recognition of the fact that trade barriers were required for NAFTA to have a "diversion" effect on South Asian exports. The tables that follow list the items that filled these criteria in the exports of each South Asian country. The items are identified by TSUSA tariff number with related information given on the applied tariff rate and any existing NTBs. In addition. the tables also indicate the value and share of US imports from the South Asian country, as well as the share of United States. 26 Appendix Table 1: US Trade Barriers Facing Major Tariff-Line Level Products Exported by Bangladesh Share in the US Market US Tariff --- TSUSA No. Desc. Percent US NTS Bangladesh Canada Mexico ----- --- - ----- ----- ----- ----- ----- ----- ----- ----- --- - ----- ---- ....... . ......... ........... .. .. . 42029230 Travel, sports and similar bags with oute 20.0 None reported 0.1 0.1 2.1 61013020 Men's or boy's overcoats, carcoats capes, 30.0 None reported 1.3 0.2 2.0 61023020 Women's or girls' overcoats, carcoats, ca 30.0 MFA Quota 7.3 0.2 1.1 61034210 Men's or boys' track suits or other garme 17.1 MFA Quota 1.2 2.2 0.9 61034315 Men's or boys' trousers, breeches and sho 30.0 MFA Quota 1.0 0.8 0.6 61044200 Men's or boys' trousers, breeches and sho 12.2 MFA Quota 0.4 1.4 1.8 61044320 Women's or girLs' dresses, knitted or cro 17.0 MFA Quota 2.1 0.8 1.0 61046220 Women's or girls' trousers, breeches and 16.7 MFA Quota 0.2 3.6 1.1 61046320 Women's or girls' trousers, breeches and 30.0 MFA Quota 0.2 0.5 0.5 61051000 Men's or boys' shirts, knitted or crochet 21.0 MFA Quota 1.0 0.3 0.3 61052020 Men's or boys' shirts, knitted or crochet 34.6 MFA Quota 1.9 0.4 0.2 61061000 Women's or girls' blouses and shirts, kni 21.0 MFA Quota 1.6 1.0 2.2 61062020 Women's or girls' blouses and shirts, kni 34.6 MFA Quota 0.3 0.2 1.0 61072200 Men's or boys' nightshirts and pajamas, k 17.0 MFA Quota 3.8 0.4 9.7 61083200 Women's or girls' nightdresses a-' pajama 17.0 MFA Quota 2.1 0.4 8.3 61089200 Women's or girls' negligees, bathrobes 17.0 None reported 1.6 2.8 5.2 61091000 T-shirts, singlets, tank tops and similar 21.0 MFA Quota 1.6 0.7 0.9 61099010 T-shirts, singlets, tank tops and similar 34.0 MFA Quota 0.6 .10 0.4 61102020 Sweaters, pullovers and similar articles, 20.7 MFA Quota 0.8 0.6 0.2 61103030 Sweaters, pullovers and similar articles, 34.2 MFA Quota 0.4 0.2 0.1 61121200 track suits, knitted or crocheted, of syn 30.0 NFA Quota 1.0 0.2 0.1 61169220 Gloves, mittens and mitts, knitted or cro 25.0 MFA Quota 2.1 0.0 0.4 62011220 Men's or boys' overcoats, capes 10.0 MFA Quota 3.5 1.2 0.0 62011340 Men's or boys' overcoats, carcoats capes, 29.5 None Reported 1.6 1.0 0.1 62019220 Men's or boys' anoraks, windbreakers & si 10.0 MFA Quota 3.4 0.2 0.8 62019335 Men's or boys' anoraks, windbreakers and 29.5 MFA Quota 1.0 0.3 1.0 62029350 Women's or girls' anoraks, windbreakers a 29.5 MFA Quota 0.4 0.3 1.1 62034240 Men's or boys' trousers, breeches and sho 17.7 NFA Quota 1.7 0.3 9.3 62034340 Men's or boys' trousers, breeches and sho 29.7 MFA Quota 2.6 0.4 11.9 62034920 Men's or boys' trousers, breeches and sho 29.7 MFA Quota 3.2 0.3 1.0 62042230 Women's or girls' ensembles, not knitted 14.0 MFA Quota 7.1 0.5 0.5 62042920 Women's or girls' ensembles, not knitted 25.0 MFA Quota 1.8 0.4 0.6 62043220 Women's or girls' suit-type jackets and b 10.0 MFA Quota 1.8 1.0 0.8 62044230 Womens' or girls' dresses, not knitted or 12.6 MFA Quota 2.4 0.9 3.0 62044340 Women's or girls' dresses, not knitted or 17.0 MFA Quota 0.4 0.8 1.6 62044440 Women's or girls' dresses, not knitted or 17.0 MFA Quota 0.4 0.5 0.5 62045930 Women's or girls' skirts and divided skir 17.0 MFA Quota 0.5 0.3 1.3 62046240 Women's or girls' trousers, breeches and 17.7 MFA Quota 2.1 0.4 4.9 62046335 Women's or girls' trousers, breeches and 30.4 MFA Quota 3.3 0.2 2.0 62046925 Women's or girls' trousers, breeches and 30.4 MFA Quota 1.3 0.3 1.5 62052020 Men's or boys' shirts, not knitted or cro 21.0 MFA Quota 7.3 0.1 1.4 62053020 Men's or boys' shirts, not knitted or cro 29.5 MFA Quota 0.5 0.1 0.5 62063030 Women's or girls' blouses and shirts, not 16.4 MFA Quota 5.6 0.3 1.3 62064030 Women's or girls' blouses and shirts, not 28.6 MFA Quota 1.5 0.2 2.9 62072200 Men's or boys' nightshirts and pajamas 17.0 MFA Quota 8.8 0.2 8.5 62089200 Women's or girls' sifnlets & other 17.0 None Reported 2.1 0.6 3.3 62111110 men's or boys' swiuiear, not knitted or c 29.6 None Reported 1.4 0.1 2.0 62113300 Men's or boys' track suits or other garments 17.0 MFA Quota 0.4 0.3 9.7 62114300 Women's or girls' track suits or other gs 17.0 MFA Quota 0.6 1.0 2.7 62144000 Shawls, scarves, muffters, mantillas, vei 10.6 None reported 1.2 0.3 0.1 62160038 Gloves, mittens and mitts, not ski not kn 25.0 MFA Quota 1.4 0.2 0.1 62160048 Gloves, mittens and mitts, not ski not kn 11.5 None reported 2.8 0.0 1.1 63026000 Toilet linen and kitchen linen, of terry 10.3 None Reported 1.7 0.4 1.9 63071020 Floorcloths, dishcloths, dusters and simi 10.5 None reported 0.9 0.2 0.3 ....................................................................................................... 27 Appendix Table 2: US Trade Barriers Facing Major Tariff-Line Level Products Exported by India Share in the US Marl US Tariff- TSUSA No. Description Percent US NTB India Canada 20031000 Mushrooms, prepared or preserved otherwise than 13.9 None Reported 2.4 0.9 29146100 Anthraquinone 11.0 None Reported 18.2 0.0 29146950 Quinones, nesi 11.0 None Reported 7.2 0.0 29153935 Aromatic esters of acetic acid, nesi 18.0 None Reported 29.0 0.0 29215920 4,4'-Diamino-2,2'-stilbenedisulfonic acid 10.5 None Reported 19.3 0.0 29222150 Aminohydroxynaphthalene sulfonic acids and their 16.0 None Reported 15.3 0.0 32041250 Synthetic acid and mordant dyes and preparations 20.0 None Reported 4.9 0.0 32041350 Basic dyes and preparations based thereon, nesi 20.0 None Reported 12.4 0.2 32041550 Vat dyes (including those usable as pigments) an 20.0 None Reported 40.4 0.0 32041630 Reactive dyes and preparations based thereon nes 15.0 None Reported 4.7 0.0 32041650 Synthetic reactive dyes and preparations based 20.0 None Reported 33.3 0.0 42022160 Handbags, with or without shoulder strap or with 10.0 None Reported 9.3 0.1 42032930 Men's gloves, mittens and mitts of leather or co 15.1 None Reported 7.0 0.1 52084180 Plain weave fabrics of cotton, 85% or more cotto 14.7 MFA Quota 25.8 0.0 52084240 Plain weave fabrics of cotton, 85% or more cotto 11.4 MFA Quota 30.6 0.0 52084250 Plain weave fabrics of cotton, 85% or more cotto 14.7 MFA Quota 14.7 0.0 55151310 Woven fabrics of polyester staple fibers, mixed 14.3 MFA Consultation 1.8 0.4 61044420 Women's or girls' dresses, knitted or crocheted, 17.0 MFA Quota 27.9 0.4 61046220 Women's or girls' trousers, breeches and shorts, 16.7 MFA Quota 1.3 3.6 61062020 Women's or girls' blouses and shirts, knitted or 34.6 MFA Quota, MFA Consultation 0.3 0.2 61091000 T-shirts, singlets, tank tops and similar garmen 21.0 MFA Quota, NFA Consultation 0.8 0.7 61099010 T-shirts, singlets, tank tops and similar garmen 34.0 MFA Consultation 2.5 1.0 61101020 Sweaters, pullovers, waistcoats (vests) and simi 17.0 MFA ConsuLtation 0.3 0.2 61102020 Sweaters, pullovers and similar articles, knitte 20.7 MFA Quota, NFA Consultation 1.0 0.6 61103030 Sweaters, pullovers and similar articles, knitte 34.2 MFA Quota, NFA Consultation 0.1 0.2 62019220 Men's or boys' anoraks, windbreakers & similar 10.0 MFA Consultation 0.9 0.2 62034240 Men's or boys' trousers, breeches and shorts, no 17.7 MFA Quota 0.5 0.3 62034920 Men's or boys' trousers, breeches and shorts, no 29.7 MFA Quota 3.0 0.3 62041920 Women's or girls' suits, not knitted or crochete 29.7 MFA Consultation 2.4 0.1 62042230 Women's or girls' ensembtles, not knitted or croc 14.0 MFA Quota, NFA Consultation 25.3 0.5 62042920 Women's or girls' ensembtles, not knitted or croc 25.0 NFA Quota, MFA Consultation 37.5 0.4 62043220 Women's or girls' suit-type jackets and blazers, 10.0 MFA Quota 9.2 1.0 62043930 Women's or girls' suit-type jackets and blazers, 29.0 MFA Consultation 2.0 0.9 62044230 Womens' or girls' dresses, not knitted or croche 12.6 MFA Quota 21.0 0.9 62044440 Women's or girls' dresses, not knitted or croche 17.0 MFA Quota 13.5 0.5 62045930 Women's or girls' skirts and divided skirts, not 17.0 MFA Quota 12.2 0.3 62046240 Women's or girls' trousers, breeches and shorts, 17.7 NFA Quota 1.3 0.4 62046925 Women's or girls' trousers, breeches and shorts, 30.4 MFA Quota 16.0 0.3 62052020 Men's or boys' shirts, not knitted or crocheted, 21.0 NFA Quota 7.2 0.1 62053020 Men's or boys' shirts, not knitted or crocheted, 29.5 NFA Quota 2.0 0.1 62063030 Women's or girls' blouses and shirts, not knitte 16.4 MFA Quota 22.6 0.3 62064030 Women's or girls' blouses and shirts, not knitte 28.6 MFA Quota 7.0 0.2 62113300 Men's or boys' track suits or other garments nes 17.0 MFA Quota, MFA Consultation 1.7 0.3 62114300 Women's or girls' track suits or other garments 17.0 MFA Quota, MFA Consultation 13.1 1.0 62143000 Shawls, scarves, mufflers, mantillas, veils and 10.6 MFA Consultation 2.4 0.0 62144000 Shawls, scarves, mufflers, mantillas, veils and 10.6 MFA Consultation 63.2 0.3 62149000 Shawls, scarves, mufflers, mantdltas, veils and 12.0 MFA Consultation 20.^ 0.1 62179000 Parts of garments or of clothing accessories, no 16.5 MFA Quota, MFA Consultation 16.6 4.3 63026000 Toilet linen and kitchen linen, of terry towelin 10.3 NFA Quota 3.5 0.4 63029100 Toilet and kitchen linen, other than terry towel 10.5 MFA Quota 2.4 0.2 63039100 Curtains (including drapes), interior blinds and 11.7 hFA Quota 23.6 1.2 63071020 Floorcloths, dishcloths, dusters and similar cte 10.5 MFA Quota 4.8 0.2 64035990 Nonwelt footwear with outer soles and uppers of 10.0 None Reported 0.2 0.1 64039990 Nonwelt footwear with outer soles of rubber, pta 10.0 None Reported 0.1 0.0 85322900 Fixed electrical capacitors, nesi 10.0 None Reported 2.3 1.0 94049090 Articles of bedding and similar furnishings (for 14.5 MFA Consultation 8.8 4.9 .......…... 28 Appendix Table 3: US Trade Barriers Facing Major Tariff-Line Level Products Exported by kepal Share in the US Market US Tariff ............................. TSUSA No. Description Percent US NTB Nepal Canada Mexico ......... ......... ................... ... ......... ...... ........ .. ............. 61034210 Men's or boys' trousers, breeches a 17.1 Textile Quota 0.2 2.2 0.9 61046220 Women's or girls' trousers, breeche 16.7 Textile Quota 0.6 3.6 1.1 61051000 Men's or boys' shirts, knitted or c 21.0 None Reported 0.0 0.3 0.3 61061000 Women's or girls' blouses and shirt 21.0 None Reported 0.0 1.0 2.2 61091000 T-shirts, singlets, tank tops and s 21.0 None Reported 0.2 0.7 0.9 61101020 Sweaters, pullovers, waistcoats (ve 17.0 None Reported 0.0 0.2 0.0 61102020 Sweaters, pullovers and similar art 20.7 None Reported 0.0 0.6 0.2 62034240 Men's or boys' trousers, breeches a 17.7 Textile Quota 0.6 0.3 9.3 62042230 Women's or girls' ensembles, not kn 14.0 Textile Quota 5.2 0.5 0.5 62042920 Women's or girls' ensembles, not kn 25.0 None Reported 1.6 0.4 0.6 62043220 Women's or girls' suit-type jackets 10.0 None Reported 0.3 1.0 0.8 62044230 Womens' or girls' dresses, not knit 12.6 None Reported 1.1 0.9 3.0 62044440 Women's or girls' dresses, not knit 17.0 None Reported 0.8 0.5 0.5 62045330 Women's or girls' skiirts and divid 17.0 None Reported 0.1 0.7 1.4 62045930 Women's or girls' skirts and divide 17.0 None Reported 0.6 0.3 1.3 62046240 Women's or girls' trousers, breeche 17.7 Textile Quota 1.2 0.4 4.9 62046925 Women's or girls' trousers, breeche 30.4 None Reported 0.8 0.3 1.5 62052020 Men's or boys' shirts, not knitted 21.0 Textile Quota 0.7 0.1 1.4 62053020 Men's or boys' shirts, not knitted 29.5 None Reported 0.3 0.1 0.5 62063030 Women's or girls' blouses and shirt 16.4 Textile Quota 0.4 0.3 1.3 62064030 Women's or girls' blouses and shirt 28.6 None Reported 0.5 0.2 2.9 62114300 Women's or girls' track suits or ot 17.0 None Reported 0.3 1.0 2.7 62144000 Shawls, scarves, mufflers, mantilla 10.6 None Reported 0.3 0.3 0.1 29 Appendix Table 4: US Trade Barriers Facing Makor Tariff-Line LeveL Products Exported by Pakistan Share in the US Market US Tariff TSUSA No. Description Percent US NTB Pakistan Canada Mexico _.---- . ....................... ................................ _. ............ --------------------- .................. . ..... ...... .............. ... - 08041080 Dates, other than whole, fresh or d 35.0 None Reported 88.1 6.5 0.0 20089925 Dates, otherwise prepared or preser 35.0 None Reported 93.8 0.0 0.0 39262040 Gloves, nesl, of plastics 14.0 None Reported 5.5 2.6 0.0 42032908 GLoves, wholly of horsehide or cowh 14.0 None Reported 0.7 0.2 2.6 42032930 Men's gloves, mittens and mitts of 15.1 None Reported 1.5 0.1 2.2 52101160 Unbleached plain weave fabrics of c 10.2 MFA Quota, MFA Consultation 8.7 0.0 0.0 55131100 Woven fabrics, cont. less than 85X 17.0 NFA Quota 9.3 3.4 0.0 55131200 3- or 4-thread twill,cont. Less the 17.0 MFA Consultation 12.4 0.5 0.0 58063100 Narrow cotton woven fabrics, not pi 10.0 MFA Consultation 3.6 0.9 0.0 60029200 Knitted or crocheted fabrics of cot 14.0 MFA Consultation 1.0 0.8 0.0 61034315 Men's or boys' trousers, breeches a 30.0 MFA Quota, NFA Consultation 0.6 0.8 0.6 61042200 Women's or girls' ensembles, knitte 16.5 MFA Quota, MFA ConsuLtation 16.5 0.1 6.0 61044200 Women's or girls' dresses, knitted 12.2 MFA Quota 2.4 1.4 1.8 61046220 Women's or girls' trousers, breeche 16.7 MFA Quota, NFA Consultation 0.2 3.6 1.1 61046320 Women's or girls' trousers, breeche 30.0 MFA Quota, MFA Consultation 0.2 0.5 0.5 61051000 Men's or boys' shirts, knitted or c 21.0 MFA Quota, MFA Consultation 2.4 0.3 0.3 61061000 Women's or girls' blouses and shirt 21.0 MFA Quota, MFA Consultatfon 2.7 1.0 2.2 61091000 T-shirts, singlets, tank tops and s 21.0 NFA Quota 12.3 0.7 0.9 61099010 T-shirts. singlets, tank tops and s 34.0 MFA Quota 0.2 1.0 0.4 61102020 Sweaters, pullovers and similar art 20.7 MFA Quota, NFA Consultation 2.8 0.6 0.2 61103030 Sweaters, pullovers and similar art 34.2 NFA Quota, MFA Consultation 0.0 0.2 0.1 61142000 Garments nesl, knitted or crocheted 11.5 MFA Quota, NFA Consultation 0.8 1.0 0.6 61161035 Gloves, mittens & mitts (excl. ski/ 14.0 NFA Quota, MFA Consultation 6.2 14.7 0.3 61169220 Gloves, mittens and mitts, knitted 25.0 MFA Quota 3.6 0.0 0.4 61169320 Gloves, mittens and mitts, nesi, kn 19.8 NFA Quota 0.5 0.0 0.2 62011220 Men's or boys' overcoats, carcoats 10.0 NFA Quota 1.7 1.2 0.0 62019220 Men's or boys' anoraks, windbreaker 10.0 MFA Quota, MFA Consultation 1.0 0.2 0.8 62019335 Men's or boys' anoraks, windbreaker 29.5 NFA Consultation 0.4 0.3 1.0 62029350 Women's or girls' anoraks, windbrea 29.5 MFA Consultation 0.3 0.3 1.1 62032230 Men's or boys' ensembles, not knitt 14.0 MFA Quota, NFA Consultation 25.5 9.4 0.1 62034240 Men's or boys' trousers, breeches a 17.7 NFA Quota, NFA Consultation 0.3 0.3 9.3 62034340 Men's or boys' trousers, breeches a 29.7 NFA Quota, NFA Consultation 0.8 0.4 11.9 62034920 Men's or boys' trousers, breeches a 29.7 MFA Quota, MFA Consultation 0.7 0.3 1.0 62042230 Women's or girls' ensembles, not kn 14.0 MFA Quota, MFA Consultation 33.2 0.5 0.5 62042300 Women's or girls' ensembles, not kn 25.0 NFA Quota, MFA Consultation 10.7 4.3 0.0 62042920 Women's or girls' ensemrbles, not kn 25.0 NFA Quota, NFA Consultation 4.1 0.4 0.6 62043220 Women's or girls' suit-type jackets 10.0 MFA Quota 0.7 1.0 0.8 62044230 Womens' or girls' dresses, not knit 12.6 MFA Quota 3.6 0.9 3.0 62044340 Women s or girls' dresses, not knit 17.0 MFA Quota 0.2 0.8 1.6 62044440 Women s or girls' dresses, not knit 17.0 MFA Quota 0.2 0.5 0.5 62045330 Women's or girls' skirts and divide 17.0 MFA Consultation 0.3 0.7 1.4 62045930 Women's or girls skirts and divide 17.0 MFA Consultation 0.3 0.3 1.3 62046240 Women's or girls' trousers, breeche 17.7 FA Quota, NFA Consultation 0.9 0.4 4.9 62046335 Women's or girls' trousers, breeche 30.4 MFA Quota 0.3 0.2 2.0 62046925 Women's or girls trousers, breeche 30.4 MFA Quota, MFA Consultation 0.3 0.3 1.5 62052020 Men's or boys' shirts, not knitted 21.0 MFA Quota, MFA Consultation 0.9 0.1 1.4 62053020 Men's or boys' shirts, not knitted 29.5 NFA Consultation 0.1 0.1 0.5 62063030 Womns or girls blouses and shirt 16.4 MFA Qwta, MFA Consultation 1.4 0.3 1.9 62064030 Wown s or girls blouses and shirt 28.6 NFA Quota, NFA Consultation 0.2 0.2 2.9 62089200 Women s or girls' singlets & other 17.0 NFA Consultation 0.3 0.6 3.3 62114300 Women's or girls' track suits or ot 17.0 MFA Quota, MFA Consultation 0.9 1.0 2.7 62121020 Brassieres, other than containing t 18.0 MFA Consultation 0.2 0.3 10.1 30 Appendix Table 4: US Trade Barriers Facing Makor Tariff-Line Level Products Exported by Pakistan Share in the US Market US Tariff . ......... TSUSA No. Description Percent US NTB Pakistan Canada Mexico 62143000 Shawls, ................. . ......... ................................ ........................... . . . 62143000 Shawls, scarves, mufflers, mantllta 10.6 MFA Consultation 0.4 0.0 0.4 6216000 Shawls, scarves, muffters, mnntiska 10 M6 FA Consuo tation 1.1 0.3 0.1 62160038 Gloves, mittens and mitts, not ski 21.5 MFA Quota 6.5 0.2 0.1 62160048 Gloves, mittens and mitts, not ski ll. N FA Quota 6.7 0.0 1.1 63012000 slankets (other than electric blank 15.1 None Reported 8.1 0.1 2.5 63022220 Bed linen, printed, not knitted or 13.0 MFA Consultation 48.3 0.0 2.3 63023220 Bed linen, not printed, not knitted 13.0 MFA ConsuLtation 15.9 0.3 0.8 63026000 Toilet linen and kitchen linen, of 10.3 MFA Quota, MFA Consultation 23.5 0.4 1.9 63029100 Toilet and kitchen linen, other tha 10.5 MFA Quota, MFA Consultation 4.7 0.2 0.3 63071020 Flooreloths, dishcloths, dusters cn 10.5 NFA Quota, MFA Consultation, CVD 49.5 0.2 0.3 82130090 Scfssors, tailors' shears and simlt 20.2 None Reported 1.2 0.0 0.6 ~~~~~~. ............... ................................. .................. ........................................ ........ ........... 31 Appendix Table 5: US Trade Barriers Facing Makor Tariff-Line Level Products Exported by Sri Lanka Share in the US market US Tariff ---. . TSUSA No. Description Percent US NT8 Sri Lanka Canada Mexico ......... …-- - - - - - - - - - - - - - - ......... ......................................................... 61012000 Men's or boys' overcoats, carcoats 16.9 MFA Quota, CVD 2.2 0.2 0.1 61013020 Men's or boy's overcoats, carcoats 30.0 MFA Quota, CVD 3.6 0.2 0.2 61023020 Women's or girls' overcoats, carcoa 30.0 NFA Quota, CVD 3.4 0.2 1.1 61034210 Men's or boys' trousers, breeches a 17.1 MFA Quota 1.4 2.2 0.9 61034315 Men's or boys' trousers, breeches a 30.0 MFA Quota, CVD 1.5 0.8 0.6 61043320 Women's or girls' suit-type Jackets 30.0 MFA Quota 3.9 0.3 0 61044200 Women's or girls' dresses, knitted 12.2 MFA Quota, CVD 0.5 1.4 1.8 61044320 Women's or girls' dresses, knitted 17.0 MFA Quota, CVD 2.8 0.8 1 61045320 Women's or girls' skirts and divide 17.0 MFA Quota 1.3 1.1 0.5 61046220 Women's or girls' trousers, breeche 16.7 MFA Quota, CVD 1.6 3.6 1.1 61046320 Women's or girls' trousers, breeche 30.0 MFA Quota, CVD 0.3 0.5 0.5 61051000 Men's or boys' shirts, knitted or c 21.0 MFA Quota, CVD 3.0 0.3 0.3 61052020 Men's or boys' shirts, knitted or c 34.6 MFA Quota, CVD 0.9 0.4 0.2 61061000 Women's or girls' blouses and shirt 21.0 MFA Quota, CVD 2.6 1 2.2 61062020 Women's or girls' blouses and shirt 34.6 MFA Quota, CVD 1.4 0.2 1 61091000 T-shirts, singlets, tank tops and s 21.0 MFA Quota, CVD 0.5 0.7 0.9 61099010 T-shirts, singlets, tank tops and a 34.0 MFA Quota, CVD 0.6 1 0.4 61101020 Sweaters, pullovers, waistcoats (ve 17.0 NFA Quota, MFA Consultation, CVD 0.5 0.2 0 61102020 Sweaters, pullovers and similar art 20.7 MFA Quota, MFA Consultation, CVD 2.6 0.6 0.2 61103015 Sweaters, etc., knitted or crochet. 17.0 MFA Quota, MFA Consultation, CVD 0.7 0.2 0 61103030 Sweaters, pullovers and similar art 34.2 MFA Quota, MFA Consultation, CVD 0.7 0.2 0.1 61121200 Track suits, knitted or crocheted, 30.0 MFA Quota, CVD 0.3 0.2 0.1 61151900 Panty hose and tights, of textile m 17.0 NFA Quota, MFA Consultation 1.6 1.7 0 61161015 Gloves, mittens S mitts (excl. ski/ 25.0 MFA Quota, MFA Consultation 14.1 3.7 0 61161025 Gloves, mittens & mitts (excl. ski/ 19.8 MFA Quota, MFA Consultation 3.2 2.9 0 61169220 Gloves, mittens and mitts, knitted 25.0 MFA Quota, CVD 13.0 0 0.4 62011220 Men's or boys' overcoats, carcoats 10.0 CVD 4.7 1.2 0 62011340 Men's or boys' overcoats, carcoats 29.5 NFA Quota, CVD 4.9 1 0.1 62019120 Men's or boys' anoraks, windbreaker 22.3 NFA Quota 2.6 6.8 1.4 62019220 Men's or boys' anoraks, windbreaker 10.0 MFA Quota, MFA Consultation, CVD 10.1 0.2 0.8 62019335 Men's or boys' anoraks, windbreaker 29.5 NFA Quota, CVD 1.0 0.3 1 62021340 Women's or girls' overcoats, carcoa 29.5 MFA Quota, CVD 2.2 0.7 3.2 62029350 Women's or girls' anoraks, windbrea 29.5 MFA Quota, CVD 3.1 0.3 1.1 62034110 Men's or boys' trousers, breeches a 21.5 MFA Consultation, CVD 0.4 2.2 0.6 62034240 Men's or boys' trousers, breeches a 17.7 MFA Quota, CVD 2.8 0.3 9.3 62034340 Men's or boys' trousers, breeches a 29.7 MFA Quota, CVD 2.5 0.4 11.9 62041320 Women's or girls' suits, not knitte 28.0 MFA Quota, CVD 1.4 0.3 0 62042300 Women's or girls' ensembles, not kn 25.0 MFA Quota, MFA Consultation, CVD 2.3 4.3 0 62043220 Women's or girls' suit-type jackets 10.0 MFA Quota, CVD 2.2 1 0.8 62043350 Women's or girls' suit-type jackets 29.0 MFA Quota, CVD 1.5 1.4 1.9 62043930 Women's or girls' suit-type jackets 29.0 MFA Quota, CVD 1.2 0.9 1.4 62044230 Womens' or girls' dresses, not knit 12.6 MFA Quota, CVD 3.0 0.9 3 62044340 Women's or girls' dresses, not knit 17.0 MFA Quota, CVD 2.1 0.8 1.6 62044440 Women's or girls' dresses, not knit 17.0 MFA Quota, CVD 2.6 0.5 0.5 62045100 Womaen's or girls' skirts and divide 17.0 NFA Quota, CVD 0.5 2 0.4 62045330 Women's or girls' skirts and divide 17.0 MFA Quota, CVD 2.6 0.7 1.4 62045930 Women's or girls' skirts and divide 17.0 MFA Quota, CVD 2.2 0.3 1.3 62046100 Women's or girls' trousers, bib and 17.0 MFA Quota, MFA Consultation, CVD 1.4 0.9 0.5 62046240 Women's or girls' trousers, breeche 17.7 MFA Quota, CVD 1.8 0.4 4.9 62046335 Women's or girls' trousers, breeche 30.4 MFA Quota, CVD 1.5 0.2 2 62046925 Women's or girls' trousers, breeche 30.4 MFA Quota, CVD 0.7 0.3 1.5 62052020 Men's or boys' shirts, not knitted 21.0 MFA Quota 2.6 0.1 1.4 32 Appendix Table 5: US Trade Barriers Facing Nakor Tariff-Line Level Products Exported by Sri Lanka Share In the US market US Tariff .. TSUSA No. Description Percent US NT8 Srf Lanka Canada Nexico ........ .... . ............................................ . .......... . ................. ...... ........... ... . ....................... 62053020 Men's or boys' shirts, not knitted 29.5 NFA Quota, CVD 0.7 0.1 0.5 62063030 Women's or girls' blouses and shirt 16.4 NFA Quota, CVD 2.6 0.3 1.3 62064030 Women's or girls' blouses and shirt 28.6 NFA Quota, CVD 5.3 0.2 2.9 62081100 Women's or girls' slip. and pettico 17.0 NFA Quota 10.6 0.4 0 62082200 Women's or girlst nightdresses and 17.0 MFA Quota 4.6 0.1 2.3 62089200 Women's or girlst singlets & other 17.0 NFA Quota, CVD 4.0 0.6 3.3 62114300 Women's or girls' track suits or ot 17.0 NFA Quota, MFA Consultation, CVD 2.4 1 2.7 62121020 Brassieres, other than containing l 18.0 NFA Consultation, CVD 0.6 0.3 10.1 62123000 Corsets 25.0 MFA Consultation 27.8 3.5 14.4 62160038 Gloves, mittens and mitts, not ski 25.0 NFA Quota, CVD 3.0 0.2 0.1 62160048 Gloves, mittens and mitts, not ski 11.5 NFA Quota, NFA Consultation, CVD 2.8 0 1.1 63026000 Toilet linen and kitchen linen, of 10.3 MFA Quota, NFA Consultation, CVD 2.8 0.4 1.9 63029100 Toilet and kitchen linen, other tha 10.5 NFA Quota, NFA Consultation, CVD 0.3 0.2 0.3 63071020 Floorcloths, dishcloths, dusters an 10.5 NFA Quota, NFA Consultation, CVD 2.3 0.2 0.3 64041150 Sports and athletic footwear with o 48.0 None Reported 1.6 0 0 r4041950 Footwear with outer soles of rubber 48.0 None Reported 0.8 0 1.5 69089000 Glazed cermic flags and paving, he 19.0 None Reported 0.7 0.2 13.8 -..... .--..... ----- . - . .- --..- . --.---- .. --- .. --.---- . --.....-..--...-.- . ---.--- .. --- .. ---..-- -.-..- Aho, C. 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Troncoso and the Caribbean in the 1980s Sarath Rajapatirana 37826 WPS1 105 Estimating Quasi-Fiscal Deficits in Philippe Le Houerou February 1993 N. Velasco a Consistency Framework: The Case Hector Sierra 34346 of Madagascar WPS1 106 Improving Women's Access to Halil Dundar February 1993 S. David Higher Education: A Review of World Jennifer Haworth 33752 Bank Project Experience WPS1 107 Financial Reform Lessons and Gerard Caprio, Jr. February 1993 W. Pitayatonakarn Strategies Izak Atiyas 37664 James Hanson WPS1 108 Public Output and Private Decisions: Thanos Catsambas February 1993 A. Correa Conceptual Issues in the Evaluation 38549 of Govemment Activities and Their Implications for Fiscal Policy WPS1 109 Risk Management and Stable Andrew Sheng March 1993 M. Raggambi Financial Structures Yoon Je Cho 37664 WPS1110 What Would Happen I All Developing Will Martin March 1993 D. Gustafson Countries Expanded Their Manufactured 33714 Exports? WPS1 111 Foreign Investment Law in Central Cheryl W. Gray March 1993 M. Berg and Eastern Europe William Jarosz 31450 WPS1 112 Privatization, Concentration, and Ying Oian March 1993 S. Lipscomb Pressure for Protection: A Steel Ronald C. Duncan 33718 Sector Study WPSI 1113 The Lucky Few Amidst Economic Christiaan Grootaert March 1993 E. Vitanov Decline: Distributional Change in Ravi Kanbur 38400 C6te d'lvoire As Seen Through Panel Data Sets, 1985-88 WPS1114 Does Price Uncertainty Really Anita George March 1993 D. Bievenour Reduce Private Investment? Jacques Morisset 37899 A Small Model Applied to Chile Policy Research Working Paper Series Contact Titl Author Date for paper WPS1115 Looking at the Facts: What We Know Ross Levine March 1993 D. Evans about Policy and Growth from Cross- Sara Zervos 38526 Country Analysis WPS1116 Impications of Agriultural Trade Antonio Salazar Brandao March 1993 D. Gustafson Liberalization for the Developing Will Martin 33714 Countries WPS1 117 Portfolio Investment Fbws to Sudarshan Gooptu March 1993 R. Vo Emerging Markets 31047 WPS1118 Trends in Retirement Systems and Olivia S. Mitchell March 1993 ESP Lessons for Reform 33680 WPS1119 The North American Free Trade Raed Safadi March 1993 J. Jacobson Agreement: Its Effect on South Asia Alexander Yeats 33710