Nafta identical trade model for india, nepal and china
Published on: Mar 3, 2016
Transcripts - Nafta identical trade model for india, nepal and china
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
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
NAFTA (North American Free Trade
The North American Free Trade Agreement or NAFTA is an
agreement signed by the governments of:
2. Mexico, and
3. United States
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 It superseded the Canada –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
1. North American Agreement on Environmental Cooperation
2. North American Agreement on Labour Cooperation
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.
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
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.
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,
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
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
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.
The proposed model consists of a trilateral trade agreement between
the three South Asian countries:
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:
• Guar Gum
• Oil seeds
• Marine Products
• Fresh fruits and vegetables
• Dairy Products
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
• Marine Products
• Oil Cakes
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
Food safety and security
Decentralization of Industry
Lack of awareness
Technical Barriers to Trade
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
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.
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
Ensure food security
Strengthen the diplomatic relations
Prevent uncertain trade shocks
Development of food processing (increase in GDP)
New opportunities identification
• 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.