Download Gauging the Long Term Benefits of Asia Pacific Trade (PNG)

Gauging the Long Term Benefits of Asia Pacific Trade
Agreement (APTA) Membership for Papua New Guinea
(PNG)
Updating the Paper
“Implication of Asia Pacific Trade Agreement (APTA) on
Papua New Guinea (PNG)”
For the National Seminar held at Port Moresby, PNG on 28-29th July 2009
BISWAJIT NAG
Associate Professor
Indian Institute of Foreign Trade
Qutab Institutional Area
New Delhi, 110016
INDIA
Email: [email protected]
The opinion expressed in the paper is of the Author not of the Institute he belongs to.
Gauging the Long Term Benefits of Asia Pacific Trade Agreement
(APTA) Membership for Papua New Guinea (PNG)
I.
APTA: A Snapshot
Asia-Pacific Trade Agreement (APTA) is one of the major preferential trade
agreements in the Asia-Pacific region. It aims to liberalize and expand trade
progressively in the ESCAP region through mutual relaxation of tariff and non-tariff
measures and the pursuit of various other means of economic cooperation consistent
with the members’ respective present and future development and trade needs.
Originally named as ‘Bangkok Agreement’1, APTA is the first trade agreement among
developing members of the ESCAP and was signed in July 1975. All developing
Member Countries of the ESCAP are eligible to accede to the Agreement. The original
signatories to the Agreement were Bangladesh, India, Lao PDR, the Republic of Korea
and Sri Lanka. Lao PDR has not issued customs notification on the tariff concessions
granted, and hence to this extent, is not an effective participating member. Some other
Members have however extended their concessions to include Lao PDR. China
formally became a member to the Agreement in 2001. China’s accession has provided
a fresh momentum to this agreement. Till now APTA concluded three rounds of
negotiation and third round is now operational. At the end of the Third Round,
participating countries had exchanged concessions on a consolidated basis on 4,270
products (apart from 587 that were offered exclusively to LDCs). China and Korea Rep.
offered maximum concessions followed by India, Sri Lanka and Bangladesh.
Members are now engaged in fourth round discussion. To ensure maximum trade
creation from APTA, further tariff reductions and broadening scope of the existing
trade agreement beyond trade in goods (services, investment, trade facilitation, NTMs
etc.) is expected during the current 4th round negotiation. The modalities of the Fourth
round negotiation were adopted during the Standing Committee Meeting at Sri Lanka
in March 2008. Exchange of information on latest tariff and trade data is now complete.
Currently discussion on bilateral exchange of requests lists is going on. Members are
also involved in collecting information on current NTMs from the notification list at
WTO and other sources. Two framework agreements have been adopted recently; one
on trade facilitation and other one on trade in services. Framework Agreement on
investment is expected to be adopted soon.
Box 1: Progress of APTA since the Third Round
•
1
Average Margin of Preferences after third round was around 29% (61% for
LDCs) meaning that tariff rates for APTA members on selected goods are
lower by the similar percentage with respect to existing MFN rates. For LDCs
concessions were more as bigger countries offered preferential rates to LDCs
which is lower than 61% of MFN duties.
During the Ministerial Council meeting in 2005, the name of the Agreement was changed to Asia
Pacific Trade Agreement (APTA).
•
•
•
•
•
•
•
Korea Rep and China offered significant discounts and their product coverage
is also quite high.
APTA imports from China show that the import shares relative to world
import of similar products have improved for most of the product categories
except for animal and animal products.
APTA imports from India are increasing for vegetables, footwear, pearls, base
metals etc.
Import from Korea Rep by other APTA members has increased in wood pulp
products, machineries, etc.
From Sri Lanka import has increased in vegetable and animal fats, wood pulp
products, articles of stones, plasters and cement etc.
This implies that the product concessions have been effective and it is expected
that over time the coverage of goods under the agreement will increase.
Of late, it has taken steps to include other issues such as streamlining
verification and certification procedures (especially for country of origin),
NTBs, investment, services and trade facilitation. Fourth round negotiation will
cover all these.
Diagram1: Scheme of Fourth Round Negotiation
Source: APTA Secretariat
APTA is also hoping to expand its membership and few new countries have already
been targeted for the same. Papua New Guinea (PNG) is one of the countries which
research shows will benefit from APTA membership. In 2007, a seminar was held at
Port Moresby, PNG on this where implication of APTA membership on Papua New
Guinea was analysed in details. As a part of the follow up exercise this paper makes an
attempt to update the earlier work. A fresh analysis has been made with the new set of
data and economic performance of PNG.
II. Economic Performance of PNG
PNG is richly endowed with natural resources, including minerals, timber, and fish,
and produces a variety of commercial agricultural products. The economy generally
can be separated into subsistence and market sectors, although the distinction is
blurred by smallholder cash cropping of coffee, cocoa, and copra. The main
components of the country’s formal economy are agriculture, forestry, fishery,
manufacturing and mineral resources. About 75% of the country's population relies
primarily on the subsistence economy. Manufacturing is limited, and the formal labor
sector consequently also is limited. The minerals, timber, and fish sectors are
dominated by foreign investors.
The economy is highly dualistic, with rural and urban segments poorly connected,
both physically and financially. Political and market economy conditions are still
evolving. Despite several efforts since 1996, per capita GDP growth is not impressive.
The low productivity gain due to poor development indicators (poor health, low
literacy, high poverty, etc) is responsible for poor GDP growth. Real GDP growth rate
increased substantially since 2006 and registered 6.3% in 2008. However, forecast for
2009 and 2010 shows considerable drop. This is explained in Diagram 2 and 3. Hence,
volatility of GDP growth of PNG is an important issue for the sustenance of the
development programme in the country.
Diagram 2
Real GDP Growth Rate of PNG
7
Percentage
6
5
4
3
2
1
0
2004
2005
2006
2007
2008
Year
Note: 2007 and 2008 figures are EIU estimates
Source: Calculated from Country report on Papua New Guinea by Economist Intelligence Unit (EIU),
January 2009
Diagram 3
Real GDP Growth Rate Forecast
7
Percentage
6
5
4
3
2
1
0
2008
2009
2010
Year
Source: Calculated from Country report on Papua New Guinea by Economist Intelligence Unit (EIU),
January 2009
One of the reasons of rising growth rate of PNG in post 2006 period is consistently
high growth in industries. Industry’s share in GDP has also increased substantially
(Table 1) implying more activities in manufacturing sector. Service growth has also
been high especially in communication, shipping and transport activities.
Table 1: Share of Major Activity as % of GDP in 2002 and 2007
2002
2007
31%
36%
12%
37%
34%
28%
Agriculture
Industry
Services
Excluding personal, community services,
Source: EIU, Govt. Documents, CIA fact book etc.
Table 2: Sectoral Growth Rates
2006 2007 2008
Agr
0.7 3.5
4.5
Ind
3.2
6.4
6.3
Srvc
4.3 8.4
8.1
Source: EIU and others
Economic forecast shows declining trend for most of the important variables due to
global slow down. Agricultural production is expected to drop significantly. Current
Account of BoP will also get eroded substantially and expected to register a deficit.
Inflation will drop making things cheaper but depreciation of exchange rate will not be
able to boost up exports much.
Table 3: Economic Forecast
2007
Real GDP Growth (%)
6.0
Gross Agricultural Production Growth (%)
3.5
Consumer Price Inflation (avg)
0.9
Current Account Balance % of GDP
0.1
Exports of goods (fob) US $ billion
4.7
Imports of goods (cif) US $ Billion
2.6
Exchange rate Kina: US$ (avg)
2.97
2008 (**)
6.3
4.5
9.8
0.4
5.6
3.0
2.70
2009(**)
2.4
1.5
3.5
-0.3
3.8
2.7
2.74
* EIU Estimates, ** EIU Forecast
Source: Country report on Papua New Guinea by Economist Intelligence Unit (EIU), January 2007
Box2: Economic Performance at a Glance
GDP in 2008 is US$6.7 bn compared to US $ 5.3 billion in 2007.
During 1996-2000, PNG economy experienced a decline but turning around thereafter.
However, slowing down in next couple of years is anticipated due to global recession.
Real GDP growth rate was -1.00% in 2002 and around 3.2% in 2006 and 6.0% in 2007
and expected to be 6.3% in 2008, slowing down to 2.4% in 2009.
GDP per capita (US$ at PPP) remained more or less stagnant in last few years and
declined slightly in recent times. It is around US$2320 in 2007.
Consumer price inflation decreased (11.8% in 2002 to 1.7% in 2005). Inflation (avg)
again has showed a tendency to go up and it is estimated to be around 9.8% in 2008.
EIU has expressed its concern about rise in prices of food and essential commodities.
More contrasting fact is that the inflation exists despite rise of Kina against foreign
currencies.
Public debt as % of GDP has reduced from 52.2% in 2005 to 45.7% in 2006 to 40% in
2007. This is expected to register 33% of GDP in 2008.
Central Govt. Budget Balance as % of GDP was -0.1% in 2005. It improved to 3.7% in
2005. At the end of 2008 it is expected to be 2.2% of GDP. This is due to slowing down
of govt.’s revenue collection.
Trade balance in goods was US$ 1753 million in 2005 and it improved to US$ million
2181 in 2006. It is expected to be around US$ million 2605 at the end of 2008. EIU
forecast says that there will be considerable erosion of positive trade balance by the
end of 2009 and it will be around US$ million 1058.
Service trade balance is negative consistently and rising significantly. It was -865 US$
million in 2005 and expected to be -1346 US$ million by the end of 2008.
The list of important policy issues which have been discussed widely in the economy
is given below.
•
•
•
•
•
•
•
Tight Monetary Policy has been taken up so that inflation is contained
Rise in minimum wage may lead to increase in cost of production further
making industries inefficient
Rise in private formal employment (but it accounts for only a small share of
overall employment)
Expected fiscal problem from district support grants as this may create
pressure on the government exchequer in short term. Its long term benefits are
also uncertain.
World Bank is upbeat about the economy but concerned about falling
commodity prices (affecting PNG’s main exportable products)
Deregulation of communication sector expected to unleash service sector
growth and making communication cheaper.
Govt. still holds stake in mining and petroleum sector understanding that
complete privatization may increase volatility in the economy also this being
an important sector government is willing to earn revenue to finance its budget.
III. Recent Trade Performance of PNG
Exports consist of 66% of PNG’s GDP and import 33% in 2007. Hence, the economy is
significantly dependant on external trade. Since 2002, PNG’s exports are increasing
mainly due to favourable prices for minerals but exports of agricultural products are
unable to derive benefits to that extent.
PNG has significant trade relationship with Asian and non-Asian countries. It is richly
endowed with gold, copper, oil, natural gas, and other minerals. In 2005 mineral
export receipts accounted for 49.7% of GDP. Government revenues and foreign
exchange earnings depend heavily on mineral exports. Exports of agricultural goods
and few industrial goods have also contributed significantly. Exports in goods sectors
are growing rapidly, as per EIU data during 2004-8, export growth rate was around 21
percent on an average while import grew by 20%. EIU forecasts that the export
growth will be fuelled by high international prices but domestic production base will
not grow much. In terms of volume, export has come down in 2008. Diagram 4 below
gives an overall view of export and import growth of PNG.
Diagram 4: Trend of PNG’s External Trade
6000
Export
Import
Values (US $ ml)
5000
4000
3000
2000
1000
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
Year
Source: Calculated from data available in World Integrated Trade Solutions (WITS) for the
period 2000-03. For the period 2004-08, data is taken from EIU.
Table 4: Total Trade of PNG (US$ Million)
2000
2001
2002
2003
2004
2005
2006
2007* 2008*
1805
1625
2260
2555
3278
4172
4686
5612
Export 2407
1309
1186
1302
1459
1525
1990
2629
3007
Import 1035
*EIU Estimates, ** EIU Forecast
Source: Calculated from data available in WITS (for 2000-03). For the period 2004-08, data is taken from
EIU.
Diagram 5
Source: EIU Country Report, 2009
However, the scenario is expected to change dramatically due to global recession.
According to ADB Outlook, PNG’s exports will fall due to drop in international prices
of copper, crude oil, and many agricultural commodities, and the expected reduction
in their production. Furthermore, severe flooding in the Highlands region in February
and March 2009 has damaged coffee and tea production, which usually peaks between
March and June. Merchandise imports will also decline as domestic demand softens.
The trade surplus is expected to narrow and the current account to dip into deficit,
equivalent to 7.0% of GDP in 2009 and 6.0% in 2010. Diagram 5 provides ADB’s
forecast.
Diagram 5: Currant Account Forecast
Source: ADB
Trend and Direction of PNG’s Trade
• Australia is PNG’s most important trade partner. Though export to Australia has
significantly increased in recent years import from it has observed a negative
growth rate.
• Other important export destinations are Japan, UK, Germany, USA etc. Apart from
Australia other import sourcing countries are USA, Singapore, Japan and New
Zealand.
• PNG’s export share to developing Asian countries declined between 2001-03 (14%
in 2001 and 9% in 2003). However, it increased substantially to 14% in 2004.
•
Between 2003 and 2004 PNG experienced large increase in exports to China, India
and Korea Rep. However, import from these countries declined slightly.
• In case of imports, PNG sources almost 15% of its global import from developing
Asia Pacific countries in 2003. It increased to 21% in 2004. Import from Singapore
and Japan has declined during 2001-03 but increased substantially in 2004.
Table 5: Direction of PNG’s Trade (Value in US $ Thousands)
Export
2001
2002
2003
2004
CAGR (%)
Australia
64947.62
740183.44
358216.69 286163.22
63.94
Japan
80895.68
1187.04
96104.11
103137.71
8.43
UK
21231.63
3029.42
78871.45
56843.66
38.86
Germany
32798.24
115696.21
76612.56
164160.94
71.06
USA
21784.73
1511.51
59760.08
73302.90
49.85
Asia-Pacific
245911.5
46046.46
198513.00 363836.48
13.95
Developing
countries
Import
Australia
USA
Singapore
Japan
New Zealand
Asia-Pacific
Developing
countries
2001
786112.3
92442.9
101985.3
110950.9
43798.1
223607.53
2002
702322.0
103017.5
68250.0
62215.2
47365.6
182014.59
2003
729699.4
115638.6
89106.1
65345.7
62995.5
259995.83
2004
CAGR (%)
919383.13
5.36
118483.04
8.62
113409.83
3.60
82473.21
-9.41
48259.59
3.29
307913.60
11.25
Source: Calculated from WITS
Major products of Exports and Imports
• During 2001-07, export of cocoa beans has increased significantly (61%) followed
by wood and related products (41%).
• Petroleum oils and gold being two major exportable products actually experienced
declining trend and registered a negative growth up to 2003, but 2004 onwards
they have showed positive growth. Same is true for exports of logs. Increasing
world prices of petroleum products contributed to the growth exports in value
terms.
• Other products such as copper ores and concentrates, palm oil and its fractions,
coffee etc experienced positive growth. Same is true for copra. The chronic
underperformance in agriculture except palm-oil is a matter of concern in PNG.
• Fish and marine products are one of major exportable products from many islands
of PNG. However, export has declined both for fresh and dried fish and CAGR
registered a negative figure.
• Other products which experienced high positive growth rates in recent times are
oil cake, veneer sheets, silver and some automobile components.
• PNG’s major imports are machinery, transport equipment, automobiles, food &
live animals including bovine meat, rice and wheat, iron & steel products, chemical
products including paints and tyres, medicines, etc.
• PNG imports lot of food products. Rice import has declined in last few years but
import of meat has increased.
• It is involved both in export and import of petroleum products. PNG mainly
exports crude oil and imports refined petroleum products. Refining facilities in
PNG though limited is increasing.
• PNG experienced a consistent rise in Imports of motor vehicles, parts of light and
heavy vehicles. Other products whose imports have increased are machinery of
sorting and screening, automatic data processing machines, transmission
apparatuses, pumps etc. High growth in the economy has increased demand of
certain products mainly used by industries.
Table 6: Export Values (US $ Thousands) of Major Products and their Growth (%)
Product
2616
2709
Product Name
Precious metal ores and
concentrate
Petroleum oils and oils
obtained from
Bituminus
2001
2003
2005
2007
CAGR
228879.8
645019.5
21573
49544
-22.51
561095.1
458061.3
886,030
1,254,115
14.34
2603
7108
1511
0901
1801
4403
0905
8802
1530
0305
0302
Copper ores and
concentrates.
Gold (including gold
plated with platinum
255122.8
396786.8
567,555
1,093,810
27.46
392113.2
143932.7
706,875
872,120
14.25
Palm oil and its fractions
Coffee, whether or not
roasted or dried
Cocoa beans, whole or
broken, raw or roasted
Wood in the rough,
whether or not stripped
73662.32
122812.5
170,688
304,679
26.7
84414.31
148,923
136,609
12.79
6623.426
65801.34
96,239
117,982
61.61
63805.56
37596.58
362,926
507,363
41.28
Vanilla.
Other aircraft (for
example, helicopter etc)
Coconut (copra), palm
kernel
Fish dried, salted or in
brine
Fish, fresh or chilled
excluding fish fillets
554.546
36157.19
5,125
3,669
37.02
37232.57
34695.6
401
970
-45.55
15624.01
23367.76
26772.48
25949.56
748
1,599
-37.48
22985.66
19767.19
6,705
9,778
-13.28
-100
Source: Calculated from data available in World Integrated Trade Solutions and Trade Map
Table 7: Import Values (US $ Thousands) of Major Products and their Growth (%)
CAGR
Product
Product Name
2001
2003
2005
2007
(%)
2710
Petroleum oils and others
290752.62 168149.311 128,718 153,956
1006
Rice.
Parts suitable for use in
heavy automobiles
Other aircraft (for example,
helicopter)
Meat of sheep or goats,
fresh, chilled
Motor vehicles for the
transport of goods
Parts and accessories of the
motor vehicles
New pneumatic tyres, of
rubber.
52975.023
61518.598
53,055
52,428
-0.17
43631.389
45525.371
64,659
83,532
11.43
9261.643
25832.924
2,647
8,366
-1.68
24740.135
22468.761
30,749
40,878
8.73
40013.901
20762.982
52,499 105,516
17.54
17776.053
20301.671
39,971
35,679
12.31
18969.114
19070.997
21,005
33,001
9.67
8431
8802
0204
8704
8708
4011
-10.05
Source: Calculated from data available in World Integrated Trade Solutions and Trade Map
IV. Trade relationship with APTA Members
Till 2002 PNG had a trade deficit with APTA as a partner. Diagram 6 below explains
that the trade deficit narrowed down between 2002 and 2003. PNG enjoys trade
surplus thereafter with APTA. Large jump of its exports to China, India and Korea Rep
has made this happen. These three are the large players in APTA and hence, PNG will
enjoy better opportunity in terms of market access once it becomes member of the Bloc.
Diagram 6
Trade with APTA members
US $ thousand
250000
200000
150000
100000
50000
0
1999
2000
2001
2002
2003
2004
Year
Export
Import
Source: Calculated from WITS
PNG’s export share to APTA was less than 1% and import share from the Bloc was
around 5.5% in 1999. This means it was significantly dependant on APTA members for
its imports. However, turn around since 2001 makes these countries as major market
of PNG’s exports. In 2004, PNG exports more than 7% of its exports to APTA. On the
other hand, its import share from APTA was only 4.33% in 2004. This provides another
strong point in favour of PNG to join APTA. PNG’s trade share with APTA members
are given in the Digram7 below. PNG’s trade share in individual APTA member’s
market is described in Diagram 8. It is important to note that almost 4% of PNG’s
exports go to China in 2004, 2% to Korea Rep and 1% to India. Data on exports and
imports to individual countries are given in the Table 8.
Diagram 7
Percentage
APTA members in PNG's trade share (%)
8
7
6
5
4
3
2
1
0
1999
2000
2001
2002
2003
year
Export share
Source: Calculated from WITS
Import share
2004
Diagram 8
Export and Import share (%) of APTA members
inPNG's total export and import in 2004
8
6
4
2
0
Bangladesh
China
India
Export share
Korea, Rep. Sri Lanka
APTA
Import share
Source: Calculated from WITS
Table 8: PNG’s Trade with APTA Members
Partner
Countries
Bangladesh
China
India
Korea, Rep.
Sri Lanka
APTA
World
APTA’s Share
(%)
Bangladesh
China
India
Korea, Rep.
Sri Lanka
APTA
World
APTA’s Share
(%)
(Values in US $ Thousand)
PNG’s Export
1999
2000
2001
2002
2003
2004
50.805
69.238
25.244
8171.17 12869.66 26945.38
67.245 28919.18 108299.669
207.14
269.78
19.79
216.923 15399.02 30716.973
8799.21
9962.55 8849.332 4015.493
24995.7
56204.83
97.94
60.28
29.94 11869.98
10.881
1586.277
17275.45 23162.27 35895.25 16169.64 69394.01 196901.155
2433951 2407399
1804715
1625124
2260152 2722217.2
0.71
0.96
266.73
112.11
19840.97 20750.25
8114.29
8147.67
38243.47 11707.31
329.17
245.42
66794.63 40962.75
1197593.2 1035126.53
5.58
3.96
1.99
0.99
3.07
7.23
PNG’s Import
149.824
199.678
393.294
424.468
16412.87 20463.77 57349.27 50746.878
10874.3 7567.119 10248.33
9970.986
9803.45 8004.025 6544.126
6705.746
160.296
115.385
72.928
37400.74 36349.98 74535.02 67921.006
1309390.91 1185992.04 1302434.98 1567153.423
2.86
3.06
5.72
4.33
Note: No data available for PNG in 1999 (in WITS). In this table, 1999 data has been calculated through
interpolation
Source: Calculated from data available in World Integrated Trade Solutions
PNG’s Exports to APTA members
• Bangladesh mainly buys copra (coconut kernel) from PNG (almost 95%).
• Its export growth with India is spectacular (CAGR is around 154% during 19982003). India is mainly buying copper from PNG. Other products exported to
India are vanilla, green tea, etc.
• China is buying wood and logs treated with paints and preservatives and
copper ores. PNG’s export to China is highest among APTA members.
• PNG’s export basket to Korea Rep mainly consists of copper ores and
concentrates (almost 70%), fuel, metal waste, etc.
• PNG sold a large amount of earth moving machineries (HS 843069) used in
mining sector to Sri Lanka in 2002. It shows that PNG has gradually moving
towards export of manufacturing goods.
PNG’s Imports from APTA members
• From Bangladesh, PNG imports mainly jute products, textile and garments and
some medicines.
• It imports rice and rice products, fishing vehicles, footwear and textile products
from China.
• Import basket from India consists of pharmaceutical products, rock cutter and
other mining machineries, railway track construction materials, glassware, and
some chemical products such as manganese dioxide.
• PNG imports, fish, iron & steel products, vehicles, refined petroleum products,
tyres and tubes, vaccines and chemical products from Korea Rep.
Table 9: PNG’s Main Exports to APTA : Top 5 Products in 2004
(Value in Thousand US$)
Country
Product 1
Product 2
Product 3
Product 4
Product 5
Copra
(24.837)
Other
Ferrous
waste and
scrap(0.407)
Wood
products
(96275.746)
Copper ores
and
concentrates.
(9186.072)
Beech wood
in rough
(2475.412)
Virola,
Mahogany
(Swietenia
spp.),
(129.951)
Other
articles of
iron and
steel(45.493)
Green tea
(782.544)
Some
engines/ma
chines
(120.743)
Vanilla.
(89.962)
Other
containers
(70.144)
India
Copper ores
and
concentrates.
(29415.69)
Wood
products
(7306.453)
Other oil
and fuel
(776.575)
Aluminium
waste and
scrap.(369.293)
Coniferous
(276.895)
Korea, Rep.
Copper ores
and
concentrates.
(40487.518)
Bangladesh
China
Value in brackets is the export of PNG in US $ 000)
Source: calculated from data available in WITS
Trade Complmentarity Index (TCI)
TCI provides information on the prospects for interregional trade. It shows how well
the structure of a country’s imports and exports match. The index is zero when no
goods are exported by one country or imported by the other and 100 when export and
import shares exactly match2.
•
•
•
•
TCI of PNG with APTA members are growing (except slight decline for
Bangladesh) implying that the match between PNG’s export basket and APTA
members’ import basket is improving over the years.
TCI is highest with India followed by Korea and Sri Lanka.
Though China is a major destination of PNG’s exports among APTA members,
the exported products are not so significant in China’s import basket. Hence,
potentiality of further increase in exports of those products to China requires
attention.
TCI for India is relatively high implying that exported products are having
significant share in India’s import basket and as a result, the potential gain
from exporting more to India. Same is true for Korea Rep. India’s import of
copper from PNG has experienced major jump in last few years.
Table 10: Trade Complementarity Index (TCI)
between PNG’s exports and imports of APTA members
Importing
Countries
Bangladesh
2001
NA
2003
2004
8.59
8.20
China
8.15
8.05
10.61
India
36.52
30.96
34.64
Korea
18.26
17.23
19.30
Sri Lanka
8.67
8.94
13.75
Source: calculated from data available in WITS
V: Potential Gain of PNG from APTA Membership
APTA received a fresh momentum after joining of China in 2001 and extension of
concessions thereafter. After completion of the third round, concessions have been
offered in more than 4000 products. The preferences offered by different member
countries in various rounds are given in the Table 11. Apart from general concessions,
special concessions are offered to LDC members. China and Korea Rep. offered
concession on large number of products compared to other members. According to
2
The TCI between the countries k and j is defined asn
m ik − xij
i =1
2
TC kj = 100 − ∑
Mukherji3 regional imports of APTA members are showing an increasing trend. It is
interesting to note that import share of all the APTA members through the preference
route is also increasing after the third round. This implies that the product concessions
have been effective and it is expected that over time the coverage of goods under the
agreement will increase.
Table: 11
Source: Asia Pacific Trade Agreement: Implications of Exchange of Trade Preferences For Member And
Prospective Member Countries, by I N Mukherji for UNESCAP (2006).
From an earlier exercise4, it has been observed that at HS-6 digit level, PNG’s export
basket matches with more than 900 importable products in APTA countries. This
implies that PNG exports these products to the world and APTA countries import
them from the world. PNG could be a potential supplier of all these products to APTA
members.
It may be noted that potentially PNG alone can satisfy largely the import demand of
Bangladesh and Sri Lanka of matched products. However, for large countries such as
India, China and Korea Rep it is not true. PNG exports to these countries mainly those
products which are not in the concession list of APTA.
So under current
circumstances PNG will not able to access preferential mode even it becomes member
of APTA. If PNG becomes member of APTA, it can bring out this issue and can
negotiate for preferential/free market access of some of its exportable products in
APTA countries.
In Table 12 and 13, PNG’s exports have been described for those products in which
PNG is a positive supplier (Exporter) and APTA members are potential markets
(Importer). Between 2003 and 2004, PNG’s exports of these products have increased
3
Asia Pacific Trade Agreement: Implications of Exchange of Trade Preferences For Member And
Prospective Member Countries, by I N Mukherji for UNESCAP (2006).
4
Nag B (2007): Implication of Asia Pacific Trade Agreement (APTA) on Papua New Guinea (PNG)
published in Asia Pacific Trade and Investment Review, vol 3. no.2, 2007 , December, pg. 109-131.
http://www.unescap.org/tid/publication/aptir2470_biswajit.pdf
substantially except for those products in which there is a matching between PNG and
China. APTA’s import from the World of these selected products has also increased
substantially between 2003 and 2004.
Table 12: PNG as a Supplier (Exporter) and APTA Members as Market (Importer)
Value in US $ Million, for the year 2003
For Matched Products
No. of
PNG as Supplier
APTA Member as
Matched
(value of Exports to
Market
(value
Market
Products
World)
of Imports from World)
897
802.27
3652.86
Bangladesh
977
2109.59
204701.13
China
949
1664.65
46628.92
India
986
2250.45
102897.97
Korea Rep
936
1130.80
2819.14
Sri Lanka
Source: Calculated from data available in WITS
Table 13: PNG as a Supplier (Exporter) and APTA Members as Market (Importer)
Value in US $ Million, for the year 2004
For Matched Products
No. of
PNG as Supplier
APTA Member as
Matched
(value of Exports to
Market
(value
Market
Products
World)
of Imports from World)
900
1571.53
4668.72
Bangladesh
970
1822.14
269813.39
China
932
2647.37
67322.91
India
976
2697.76
111842.56
Korea Rep
935
1925.44
3558.32
Sri Lanka
Source: Calculated from data available in WITS
It has been noticed that there are many products for which concessions have been
offered by APTA countries and PNG is having an export interest in them. Table 14 and
15 below explain this. It is striking to note that though PNG is exporting many of these
products to the world but very few are going to APTA members. However, within one
year (between 2003 and 2004), import from PNG by APTA members of the products in
which concessions have been offered increased substantially. For example, during
2003, China did not import anything from PNG in which it has offered concession.
However, in 2004 China imported almost US$ 59 thousand from PNG of those goods
in which concessions were offered. Korea Republic’s import from PNG also increased
substantially (from US$2315 thousand to US$4441 thousand) of those products in
which concession were offered. PNG’s exports of all these products to world also
increased considerably and implying that had it been PNG was member of APTA, it
would get a better market access in those markets. APTA Members’ import of those
products from the world is also increasing. This implies that in short run APTA
membership will help PNG to export through preferential route and have better
market access in APTA countries.
Table 14: Matching of products with concession offered by APTA members and
PNG as Supplier (in 2003),
Import and Export values in US $ Thousands
For Matched products on which
concession is offered
PNG’s
Import
Import
export to
Matched from PNG from World
the World
by APTA
Products by APTA
of matched
member
member
products
3
0
6924.86
22616
Bangladesh
94
0
4031980.59
87951
China
80
0
19869.80
112907
India
87
2314.89 24205587.30
572518
Korea Rep
14
0
46381.92
4528
Sri Lanka
Note: National and Special list of concession offered by each APTA members are considered,
Matching is done at HS-6 digit level
Source: Calculated from data available in World Integrated Trade Solutions
Table 15: Matching of products with concession offered by APTA members and
PNG as Supplier (in 2004),
Import and Export values in US $ Thousands
For Matched products on which
concession is offered
PNG’s
Import from
Import
export to
World by
Matched from PNG
the World
APTA
Products by APTA
of matched
member
member
products
3
0
6218.028
24827.909
Bangladesh
94
58.79 5993817.224
142387.724
China
80
0
29279.224
125688.409
India
87
4440.91 31115360.085
631502.427
Korea Rep
14
0
44205.073
5107.291
Sri Lanka
Note: National and Special list of concession offered by each APTA members are considered,
Matching is done at HS-6 digit level
Source: Calculated from data available in World Integrated Trade Solutions
Let us now see it from other angle. Though, currently PNG’s exports of matched
products are not very high to APTA members, their import from the world of all those
products are quite significant. At the same time, PNG’s exports to the world of those
products are also soaring. PNG is unable to export to APTA members perhaps due to
price disadvantage or high trade barriers. Trade negotiation with APTA members will
provide an opportunity to PNG to increase its exports of matched products.
Currently, PNG is exporting copra to Bangladesh. However, it can avail the concession
offered by Bangladesh on different varieties of copra (crude, refined etc). Similarly,
PNG can export different types of animal and vegetable fat to Bangladesh through
APTA route. There are three products where this kind of matching exists. PNG’s
potential of exporting fish and marine products to China through APTA route is
significant. Currently, PNG is exporting fresh, chilled, frozen and dried fish to the
world. China has offered concessions on these products under APTA. Out of 94
matched products for which China has offered concession and PNG is having export
potentiality, 70 are fish products. Apart from these, other products where PNG can
increase exports to China through APTA route are tea and coffee, copra and some
aviation instruments. With India through APTA route, PNG can avail concession in 80
products. A large number of these products belong to fish and marine products
category. However, India itself is a large exporter of fish products. Hence, benefits
through APTA will be less compared to China in case of India under the current
situation. In long run, India’s import of copper is expected to increase from PNG in
which it is having huge potential gain. In case of Korean Rep trade is expected to rise
through APTA route. The number of matched products is 87. Out which a large
number of products are fish products, wood & logs and mineral fuels. PNG is already
having some comparative advantage in those products and hence its gain through
increasing exports via APTA route with Korea Rep is large. Comparing Table 14 and
15 it may also be observed that within one year span PNG’s export of all these selected
products increased substantially meaning its capability to export to APTA has also
increased. Hence, APTA membership is deemed to be beneficial for PNG.
Analysing the tables above, it is clear that PNG’s export potentiality is very high in
China, and Korea Rep. India’s import of the products for which it has offered
concession is much less than PNG’s current export to the world. India is not a major
market for the products in which PNG is having advantage under the existing
concession list. Korea and China are large importer of products for which they have
offered concession and APTA route could be potentially very much beneficial for PNG.
Hence, we can conclude that if PNG has the access to the existing level of concessions
offered by APTA members, in short run it will gain from exporting to Korea Rep. and
China. However, PNG will gain in the long run through its export to India as it is
having highest TCI among all other APTA members. Moreover, membership of APTA
will enable PNG to negotiate for better market access of number of products beyond
the current concession list. Hence, in the long run PNG will have a sustained market
access to these countries. Through negotiation, PNG can overcome price disadvantage
and other trade barriers which has been obstructing its exports to APTA members.
VI. Conclusion:
•
•
•
APTA is expected to bring the issues related to services and investment under
the fourth round of negotiation. If PNG becomes member of APTA, it will be
able to participate in this and can seek investment in desired areas from APTA
members. Investment from APTA members can come with relatively cheaper
technology which can make new production facilities more cost effective which
in turn will help PNG’s export industry more efficient.
As APTA is making an effort to address the trade facilitation issues, it can offer
in near future a significant benefit to PNG by reducing the costs of transactions
across international borders and removing non-border obstacles and thus can
help to achieve multilateral goals.
Multilateral processes are slow and, although they may deliver benefits in the
long term, countries still face short- and medium-term challenges. In the long
•
•
run, it is expected that APTA will gradually integrate the issues of trade,
transport and other areas focusing the region’s priorities. This will make the
process sound and leave less scope for backsliding. PNG may consider this an
effective instrument to get integrated with the world.
PNG’s economy has become stronger in last few years. Its growth rate has
increased, share of industry in GDP rose substantially, exports have been rising
and the country has been enjoying current account surplus in last few years.
However, volatile commodity prices, global recession and stronger currency
may put some pressure on the export front. It is important to note that export
sector alone contributes more than 65% of country’s GDP. In this context, PNG
needs to seize the opportunity available in APTA as it contains few very big
markets. The study shows that PNG’s export share in APTA market is
improving rapidly despite the fact it is not a member of the Bloc. In short run,
it can avail the benefits of concession offered by these countries. In the long run
APTA membership will enable PNG to negotiate for better market access of
number of products beyond the current concession list. This will help PNG to
derive sustained benefits overcoming the size of economies.
The sectors in which PNG can derive long run benefits are gas resources,
petroleum, forestry, fish and marine products, agro-industries, wood and
wood product, ores & metal scraps, light machinery and instruments, plastic&
linoleum products, tourism, etc.
************
References
Asian Development Bank (2009): Asian Development Outlook
Economist Intelligence Unit (EIU), (2008); Country report on Papua New Guinea,
January
Economist Intelligence Unit (EIU), (2009); Country report on Papua New Guinea,
January, www.economywatch.com/world_economy/papua-new-guinea
Mukherji, I. N. (2006): Asia Pacific Trade Agreement: Implications of Exchange of
Trade Preferences For Member And Prospective Member Countries, report
submitted to UNESCAP
Nag B (2007): Background paper on Implication of Asia Pacific Trade Agreement
(APTA) on Papua New Guinea (PNG), report submitted to UNESCAP.
Nag B (2007): Implication of Asia Pacific Trade Agreement (APTA) on Papua New
Guinea (PNG) published in Asia Pacific Trade and Investment Review, vol 3.
no.2,
2007,
December,
pg.
109-131.
http://www.unescap.org/tid/publication/aptir2470_biswajit.pdf
World Bank (2009): World Integrated Trade Solutions (WITS) online database