Leaders commit to strong trade growth in South Asia region Part 1
There is new evidence that it will actually happen now after 22 years of prolonged and unfruitful debate, in which seven South Asian countries have been engaged. The political commitment by presidents and prime ministers of South Asian Alliance for Regional Cooperation (SAARC) has just been made at the New Delhi Summit of the leadership of the region.
Afghanistan joined as the eighth member of SAARC, a community that was formed in 1985 with Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. Since then it has debated to death as to how to expand their mutual trade while the world, especially European Union, went ahead doing so, as the new WTO organization erupted two years ago.
South Asia, the plum of a market with rising per capita incomes, and part of Asia, the engine of global growth in 21st century, got out of its feuds and political slumbers at New Delhi and re-resolved to expand trade.
Pakistan and India embroiled in their mutual feuding, political disputes, and suspicions did not let the trade potential get unbottled since July, 2006 when SAARC’s prized baby, South Asia Free Trade Agreement (SAFTA) went operational.
After trading pre-summit allegations the two countries seem to have calmed down, at least on paper, and for the time being. This is what the summit’s 30-point declaration indicates; contrary to the pre-summit reports of likely still more fireworks between Pakistan and India.
Apparently, trade, business and political diplomacy of prime ministers Manmohan Singh and Shaukat Aziz saved the day. Singh a reputed economist and Aziz a high profile international banker, realized, trade will unbutton political tensions ranging from Kashmir to Baghlihar Dam, and military confrontation from Siachen to agony each other’s fishermen undergo in the Arabian Sea. Trade should now grow, unless Islamabad and New Delhi still have some grudges to settle and keep daggers hidden up their sleeves.
The controversy, between these two biggest countries of SAARC has revolved round Islamabad alleging New Delhi’s para-tariff and non-tariff obstacles have blocked Pakistani exports to India. Other SAARC members also have similar complaints against New Delhi which he later denies.
New Delhi, on the other hand, has been accusing Islamabad of restricting Indian exports through "the positive live" — the items which are importable from India. Islamabad claims the same positive list applies to all SAARC countries, and is "non-discriminatory." But, the list of its importable items is continuously being expanded. Several hundred more items will be added to it shortly.
SAFTA provides that its members will bring their existing tariff rates down to 20 percent within two years of coming into force of the agreement. They will then reduce tariffs from 20 percent or below to zero to 5 percent within a second period of five years.
Its LDC members will reduce their tariffs from their existing rates down to 30 percent within two years, and from 30 percent or below to down to zero to five percent in a second frame of eight years. All have still to do a lot of catching up on tariff cutting. SAFTA or no–SAFTA, trade has inched up—but not to the hoped-for volume.
Pakistan exported to India goods worth $ 50 million in fiscal 2002 that rose to $ 300 million in 2006. Indian exports to Pakistan rose, at the same, time from $186 million to $802 million. World Bank and other estimates put the India-Pakistan trade potential at $5.0 billion attainable within the next two to three years. The declaration at end of the summit said the SAARC leaders "noted with satisfaction" timely ratification of SAFTA Agreement by all member countries." "They stressed the need for ensuring effective market access through smooth implementation of trade liberalization program and directed the SAFTA bodies to review their progress on a regular basis." They emphasized, SAFTA should be implemented in letter and spirit. "Successful implementation of SAFTA will catalyze other areas of regional economic cooperation." The leaders stressed that in order "to realize its full potential, SAFTA should integrate trade in services." The summit called for finalization of an agreement in the services sector at the earliest. It also directed, the Agreement on Investment Promotion and Protection be finalized."
The summit underlined the importance of implementation of trade facilitation measure, especially standardization of basic customs nomenclature, documentation and clearing procedures. SAARC countries will sign a comprehensive agreement on harmonizing customs procedures. Harmonization of technical and phyto-sanitary standards, and their implementation in a trade-friendly manner, will be undertaken to boost regional trade. The summit appreciated the establishment of the SAARC Standards Coordination Board which will function as a precursor to the SAARC Regional Standards Body. The summit, in the global business context, reaffirmed its commitment to a rule-based multilateral trading system. The leaders said, "Doha Round was premised on the centrality of development." They directed the commerce ministers to work closely to coordinate their positions to ensure that the centrality of the development dimension in all areas of negotiations for creating new opportunities and economic growth for developing countries is fully realized." "The summit called upon all members of WTO to "show commitment for a successful conclusion of the Doha Round." SAARC will develop, at an early date, "a roadmap for a South Asian Customs Union and a South Asian Economic Union in a planned and phased manner." The leaders agreed to build a "Partnership for Prosperity," and work towards "shared Economic cooperation, regional prosperity, a better life for the people of South Asia, and equitable distribution of benefits and opportunities of integration among the peoples and the nations." (To be contd.)