ISLAMABAD, Nov 17: South Asian countries are facing numerous barriers in exporting services to developed countries, besides restricting services trade and investment flows into their markets, says a report.

The services contribute between 40 and 50 per cent of GDP and absorb about 20-29 per cent of the labour force in Bangladesh, Sri Lanka, Pakistan and India.

The report, “South Asian Yearbook of Trade and Development 2005: Mainstreaming Development in Trade Negotiation — Run up to Hong Kong”, a copy of which is available with Dawn, indicates that services from South Asia face barriers like immigration problems and stringent recognition requirements in key destination markets.

The report, prepared by the Centre for Trade and Development (Centad), says there are also numerous domestic infrastructure related problems and capacity constraints that impede South Asia’s trade in services. Moreover, the offers made by developed countries did not offer much viz-a-viz key sectors and modes of interest in exports and imports.

The key areas of trade interest to South Asia in services are the movement of natural persons, commercial presence and consumption abroad. It was recommended that South Asian countries need to develop their negotiating strategies on trade in services in order to further their developmental gains. They also need to develop their domestic infrastructure, build domestic capacity and undertake domestic reforms to derive the benefits arising from improvements in market access under GATS.

The report says that two methodologies would be adopted at the Hong Kong ministerial conference for tariff reduction on industrial goods — a Swiss formula and a Swiss type formula. The Swiss formula calls for drastic cuts in tariff of all developing countries, including South Asian countries, while the Swiss type formula incorporating the principle of less than full reciprocity will not result in drastic reduction of the bound rates of South Asian countries.

It was recommended that South Asian countries in negotiation on agriculture should pursue for proper definition of blue and green box subsidies. The exemption from investment subsidy to low income and resource poor farmers to move away from narcotic crops should be adequately addressed. The negotiation process should also ensure that the target date for elimination of export subsidies is not too distant earmarking 2010 as the terminal year for export subsidies.

The report says that it would be difficult for South Asian countries at this stage to refuse an agreement on trade facilitation. They must, however, make best efforts to keep their obligations to a minimum. They should also see that they achieve sufficient gains in other areas, especially in agriculture.

The report recommends that South Asian countries need to protect their domestic policy space. Also, it is time to move beyond mere rhetoric. In most instances, South Asian countries have not used the flexibilities provided by the current WTO agreements.

“Governments can no longer blame voter unfriendly legislations on the WTO and need to take the onus themselves to ensure that domestic stakeholders are not left neglected,” said the report.

The current negotiations also reveal that it is possible to revisit allegedly unfriendly agreements and address imperfections, particularly where the existing inequalities have been institutionalized by a rule-based system. The Doha agenda is all about addressing imperfections and ensuring that developing countries are able to ensure benefits from the global trading system.