India’s Accession to UN TIR Convention to Boost Foreign Trade
By Koushan Das
Earlier this year, the federal government approved India’s accession to the Convention on International Transport of Goods under cover of TIR Carnets (TIR Convention). This is an international transit system to facilitate seamless movement of goods amongst its member states.
Being party to this convention will enhance India’s connectivity with Southeast Asia and the Eurasian continent, and could make India a major transit and trading hub between the two regions.
The TIR Convention facilitates India’s efforts in the building of the International North-South Transport Corridor (INSTC), which will connect the India Ocean and Persian Gulf to the Caspian Sea, through Iran and then onwards to St. Petersburg in Russia and northern Europe.
The accession to the TIR Convention will also benefit the India-Myanmar-Thailand Trilateral Highway, along with the Bangladesh-Bhutan-India-Nepal Motor Vehicles Agreement.
The Customs Convention on International Transport of Goods under cover of TIR Carnets, 1975 (TIR Convention), is an international transit system under the United Nations Economic Commission for Europe (UNECE) to facilitate movement of goods within and among the parties to the Convention. At present, there are 70 parties to the Convention, including the European Union. The system covers transit by road, rail, waterways, and maritime transport.
TIR provides internationally valid harmonized documents known as TIR Carnets to transporters to streamline border crossing procedures. The convention allows customs clearances to take place at internal customs locations, thereby avoiding congestion at border crossing checkpoints and ports.
Sealed goods in transit are allowed by checking only the seals, which reduces transport and transaction costs and considerably reduces border delays. TIR Carnets also guarantee the payment of customs duty and taxes for transit goods, assuring security and supply chain efficiencies.
How the TIR Convention fits in with INSTC, EAEU
The INSTC is a 7,200 km multi-modal transportation route established in 2000 by Iran, India, and Russia. Other members include Armenia, Azerbaijan, Belarus, Bulgaria (observer status), Kazakhstan, Kyrgyzstan, Oman, Syria, Tajikistan, Turkey, and Ukraine. The trade route aims to connect the Indian Ocean and Northern Europe, navigating through the Persian Gulf, Caspian Sea, Iran, and St. Petersburg. India currently depends on trade routes through China and Europe to reach Russia and EU, which are expensive and time consuming.
Once implemented, the INSTC will reduce cost and time of deliveries by 30-40 percent. As per the trial runs in 2014 and 2016, goods transported from Mumbai to St. Petersburg through the INSTC took three weeks, compared to the six weeks it currently takes by sea.
Iran’s deep-sea port Chabahar, jointly developed by India and Iran is also expected to be integrated into INSTC upon completion, offering an alternate route to Central Asia.
Parallel to the INSTC, India has been in negotiations for an FTA with the Eurasian Economic Union (EAEU), which has an integrated single market exceeding a GDP of US$4 trillion. Such a deal will boost trade and reduce India’s trade deficit with the region.
The EAEU comprises of Russia, Kazakhstan, Belarus, Armenia, and Kyrgyzstan. An FTA with the EAEU will certainly be in India’s best trade interests given its accession to the TIR Convention. This is because the resource rich region offers a huge market, with a trade potential of US$37 to US$62 billion. India’s current trade with the EAEU countries stands at US$11 billion.
According to a recent Joint Feasibility Study conducted by India and EAEU for the FTA, the chemical, rubber, and plastic products sector is expected to witness the highest growth in exports followed by electronic equipment and crop products. In terms of Indian imports, chemical, rubber, and plastic products followed by minerals and metallurgy are predicted to rise once the FTA is in place, complemented by the newer trade route.
Improved linkages with Central Asia to Southeast Asia
While INSTC focuses on increasing cooperation with Central Asia and Europe, India is equally focused on increasing trade relations with South and Southeast Asia. In South Asia, the Bangladesh-Bhutan-India-Nepal Motor Vehicles Agreement is expected to increase inter-regional trade by 60 percent. In Southeast Asia, the India–Myanmar–Thailand Trilateral Highway, presently under construction, will offer an alternate trade route for Southeast Asian countries. The trilateral highway is planned to be extended further to Cambodia, Laos, and Vietnam, allowing easier access to the growing ASEAN market.
With increasing trade relations and development of efficient trading routes, India has the potential to become a major regional trading and transit hub in the near future.
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