SAARC in South Asia-II

REYAZ AHMED JAN
http://www.greaterkashmir.com/full_story.asp?Date=1_5_2007&ItemID=2&cat=11

Cooperation Troubles:

India and Pakistan are the biggest countries and account 80% of the GDP of SAARC countries. The rivalry between India and Pakistan is proving increasingly expensive for both the countries. The cost is not only to be measured in terms of military expenditure, but also on the basis of varied parameters such as reduced GDP growth, diplomatic losses and most importantly loss of human lives. The conflictual relation between these two largest member states hindered the progress of SAARC. India has granted Most Favoured Nation (MFN) status to Pakistan in 1995 - 96. According to which imported goods from Pakistan will be treated no less favourably than imports of similar goods from any other country. In the case of tariffs, this means no other foreign good in India face a lower tariff than those imported from Pakistan. But Pakistan has not reciprocated to India’s MFN status. Pakistan’s longstanding position that talks with India on trade could progress in tandem with progress on Kashmir solution.

On the eve of 14th SAARC Summit, Pakistan Prime Minister, Mr. Showkat Aziz reiterated his country position that Kashmir question is the “Core Issue” between the two neighbours. He also made it clear that improvement in trade relations between the two countries is dependent on a solution to Kashmir Issue. Another problem in cooperation is that SAARC is structured in a way that often makes regional cooperation difficult. In the case of SAARC, India is the most powerful country in terms of its military power, economic might and international influence. Pakistan was initially reluctant to join SAARC due to fears of SAARC succumbing to Indian hegemony, while the smaller states in South Asia recognize that they will need India’s help to facilitate faster economic growth, but they are reluctant to work with India, fearing that such cooperation will admit Indian dominance in SAARC.

Aside from a few overtures to its neighbours, India has done little to allay the fears of other South Asian States. Realizing its considerable advantages in military and economic power, India has consistently acted in an arrogant and uncompromising manner with its neighbors. Bangladesh is afraid of India exploiting its geographical position to redirect water flows, vital to Bangladeshi agricultural production. Nepal and Bhutan are still worried about India’s control over their world trade and transit links as their geographical position will always make them dependent on India. These disputes between India and its neighbours have directly affected SAARC. Disputes between South Asian States and have undermined SAARC efforts to promote regional trade.

Benefits of Trade for SAARC States:

Trade provides benefits by allowing countries to export goods whose production makes heavy use of resources that are locally abundant while importing goods whose production makes heavy use of resources that are locally scarce. A large body of theoretical and empirical literature has investigated the role of regional economic integration. Regional integration can result in trade creation by allowing low-cost foreign producers freer access to the domestic market, reducing domestic prices, and displacing higher-cost domestic producers. However it can also result in trade diversion by allowing less efficient producers that are regional trade agreement members to displace more efficient producers from the rest of world.

Regional economic integration is like to yield net economic benefit when it leads to trade creation rather than trade diversion. However the problem of trade diversion can be minimized by keeping external tariff low. As far as trade creation by Regional Trade Agreements (RTA) is concerned, it is expected to spur competition in the domestic market. Increased import competition results in lower prices for consumers, more product variety, higher quality and increased incentives for innovation. SAARC region with just 3% of the world’s area houses 21% of the global population and also it is the most densely populated part of the world with about 263 people for every square kilometer. Such huge population in relatively small area could definitely create a market for member state’s commodities. The region is characterized by large income disparities, with 43% of its population living below the poverty line. By indulging in trade between member states there would be a decrease in the below poverty population through exploitation of benefits of regional trade. Unlike EU, the ASEAN or the NAFTA, the SAARC countries have a shared history and heritage, which provides one more advantage to their countries to enjoy all the benefits of RTA.

Among the regional economic groupings SAARC is relatively one of the younger one, as it is just 22 years old. Where as regional economic groupings of its kind have gone through dramatic transformation in this period, bringing their members so closer in the chosen area, such as trade and economic cooperation. SAARC has provided a strong base for member states to discuss all issues and help in mutual cooperation. It is believed that these countries would settle all their political and other disputes and will move towards a greater economic cooperation and make the South Asia a prosperous region. India and Pakistan being the largest economies of the region must forget their past and start a new era for regional economic cooperation in South Asian region. The actions of these economies have a strong influence on policies of other South Asian Countries. Both countries need to work together to ensure that the interests of the smaller regional countries are safeguarded. This would improve the economic cooperation between SAARC members, which would result in the reduction of poverty and will improve the socio-economic conditions of the population in this region.

--Concluded
(Author is M.phil scholar at the Centre of Central Asian Studies, University of Kashmir. He can be mailed at reayazjan@yahoo.co.in)