For A South Asian Bloc

The South Asian Association for Regional Co-operation (Saarc) has a Committee on Economic Co-operation (CEC). The eighth meeting of the CEC is going on in Delhi "� to discuss harmonisation of customs procedures, value addition norms for re-exports, the conversion of the South Asian Preferential Trading Arrangement (Sapta) into a South Asian Free Trade Agreement (Safta) by the year 2000 and even a South Asian Economic Union in 25 years. This is a prelude to the ninth Saarc summit, to be held in the Maldives next month. For years, Saarc did nothing on economic co-operation. The present compulsion stems from the spectre of the global trading system splintering into a tri-polar world, with the poles centred in western Europe, North America and the South-East Asia and Pacific region. Africa and South Asia are two regions that are not members of any potentially major trading bloc and market access can thus constitute a problem. Whether Safta will have significant economic clout is a moot question. However, such a

bloc does increase the collective bargaining strength of bloc members. Historically, there are several reasons why Safta has not taken off, the most important constraint being a political one and the fogging up of all negotiations by Indo-Pakistan distrust. There is also the point that a process of bloc formation needs to be subsidised by the larger countries, with benefits primarily accruing to the smaller countries. Is India interested in subsidising Safta? Or does India believe that its future is linked more to the Indian Ocean and Pacific rim, with the roping in of Australia and South Africa? While the two options are not mutually exclusive, trade-offs do exist.

With Mr Gujral as the prime minister, the prospects of India becoming more pro-active have brightened. For example, India granted unilateral concessions to Bangladesh, and justified on the ground that Bangladesh is a least developed country. However, such concessions are now proposed for Sri Lanka and this is more of a test case.

In a general sense, the focus of Sapta negotiations has so far been tariff concessions, concessions on 1975 tariff lines having been offered as part of the second round of negotiations. One ought to move on to non-tariff barriers and systemic problems like arrangements for settling trade disputes and clearing arrangements. If one is stuck with conventional trade, the complementarity of the economies shackles the prospects for boosting intra-Saarc trade. One needs to switch focus to cross-border investments and issues like investment protection, repatriation of profits and avoidance of double taxation. Since cross-border economic relationships take place because of commercial principles and not because governments decree them to be desirable, the best that individual governments can do is to offer an enabling framework. The easing of visa restrictions is a case in point. Since Indo-Pakistan relationships will continue to plague the exercise (granting most favoured nation status is an instance), there is a

valid argument that Safta negotiations should adopt two parallel tracks. While one track operates at the regional level, a parallel track works at the sub-regional level. This is how many growth triangles in the East Asian region emerged. The basic point is that seriousness about Safta requires more of doing and less of talking.