Understanding Free Trade Zones in Asia. Rajiv Nayan The Institute for Defence Studies and Analyses, New Delhi

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1 Understanding Free Trade Zones in Asia Rajiv Nayan The Institute for Defence Studies and Analyses, New Delhi

2 FTZ in Asia Late entry Struggle over the definition of the region Proliferation of such a zone Geographically integrating Changes after TPP and APEC Investment oriented

3 Trends Developing economies forming alliances multi-speed and multi-track approach Regional Comprehensive Economic Partnership Export zones R & D Technology

4 Hardware & Software issues Adequate port and other infrastructure to facilitate trade Regional and sub-regional transport corridors Issues relating to liberalisation of regulation Harmonisation of standards customs and trade facilitation Tough negotiations in sensitive and strategic sector

5 South Asia Old idea becoming popular Idea within SAARC with SAPTA Struggling South Asia FTZ Linkage to other regions India accounts for nearly 80 per cent of the subregion's output Emphasis of the new Indian PM Make in India Manufacturing sector High technology sector priority

6 Issues in South Asia Physical infrastructure issues Accession to different versions of conventions for regional transportation Contracting parties to the Convention on Road Traffic (1949), but have not ratified the new version of the convention (1968) Most of the South Asian countries are yet to ratify international conventions for cross-border movements of goods and vehicles Harmonized set of rules, regulations, and standards Institutions Political issues and border security

7 Strategic Trade Control: Relaxed oversight concerns Gateways for smuggling Transshipment issues Operation of criminal network Proliferators can locate themselves in one of the zones to escape enforcement authorities from neighbouring countries Complaint of the lack of desired transparency

8 Controls Liberal treatment on tax and tariff but general regulation of export of goods from zones Not usual procedures for control in most of the zones Relaxation of authorised activities Growing awareness of the need for control of export of strategic goods National, rudimentary regional and evolving international institutional frameworks Balancing facilitation and control

9 National Controls US Warning Flags Country or Shipping Indicators End-user or consignee in a foreign free trade zone ASEAN countries Japan and Korea Australia and New Zealand Middle East and Central Asia South Asia

10 National Controls in South Asia India Relaxation of license requirements Export of SCOMET items from SEZ to outside the country needs license All supplied SCOMET items from DTA to SEZ needs reporting in the prescribed format within a week Pakistan All consignments are examined and checked within a zone area by Customs License Other South Asian countries

11 WCO Revised Kyoto Convention: Annex D Chapter-2 Recognises the authority and authority of Customs Supports controls of retransfer Origin of the goods rules transit and transhipment procedures SAFE Framework of standards

12 Challenges Revised Kyoto Convention: Not binding A proper understanding regarding the Free Trade Zones Several agreements silent Difficulties in development of Asian regional regime Need for creating a favourable climate for dialogue and exchange of information Evolution of new standard and practices

13 In sum FTZ is becoming very popular Important link of the proliferation network Control system for FTZs exist Balance between regulation for facilitation and regulation for control Challenges remain Outreach and exchange of information Improving practices to regulate in the zones