Integrate or perish

SAARC should show greater determination on SAFTA

The pledge taken by the leaders of the seven South Asian Association for Regional Cooperation (SAARC) countries at their 11th summit in Kathmandu to establish a South Asian Free Trade Area (SAFTA) can be taken only with a pinch of salt. If the association had been serious about SAFTA, a treaty for the purpose would have been signed in 2001 as decided at the previous summit in Colombo. The latest pledge should, therefore, be considered as at best a reaffirmation of their commitment to this concept. Realistically, it will take at least a decade for SAFTA to become a reality, i.e., if the member nations take systematic and timely steps. However, the Kathmandu pledge raises hopes as it lists the various initiatives to be taken independently and collectively to realise the goal of an integrated South Asian economy. The need for collective action in the new globalised world order cannot be overemphasised, particularly when SAARC’s performance on this front has been far from confidence-inspiring. Unlike the European Union and the Association of Southeast Asian Nations (ASEAN), SAARC has not proved itself an effective force in protecting domestic and international trade and economic interests against the rapidly changing external environment. This is despite the emphasis the SAARC charter lays on economic relations.

The scope for trade relations is immense as can be gauged from the fact that the volume of goods smuggled between India and Pakistan and India and Nepal is much larger than the official trade between these countries. The lack of political understanding is said to be the main cause of the poor economic relations. Obviously, the fact that better trade relations can result in better political relations is not given due consideration. India’s demand for the most favoured nation (MFN) status from Pakistan has been pending on the plea that the “core” issue of Kashmir should be resolved before such a status can be conferred. Incidentally, India had granted Pakistan the MFN status a long time ago. That this attitude bleeds both countries is often overlooked. Take, for instance, the case of the Maruti 800 car, which costs just $4,000 in India. If a Pakistani were to import the Japanese version of the same car, it will cost him upwards of $6,000. Power is one commodity which Pakistan can sell profitably to India. What is true about India and Pakistan is also true about the five other countries.

The region where half of the world’s poor live will suffer the bitter medicine of globalisation if it remains a prisoner of political disputes like Kashmir. The SAARC countries, like other Third World nations, have made huge efforts to reduce import tariffs, causing huge losses in trade-related tax revenues. Yet, their exports have not shown any significant growth since the inception of the World Trade Organisation. In sharp contrast, developed countries have been able to take advantage of the situation by protecting their trade markets through quota restrictions and other measures. There is a lesson in this for SAARC countries: integrate their economies and measure up to the challenges of globalisation.