Trade winds are not blowing our way
Tensions between India and Pakistan have scuppered a regional trade hug till date. South Asia Free Trade Agreement won’t take off so long as Pakistan doesn’t extend most favoured nation status to trade more freely with India.india Updated: Aug 02, 2008 00:45 IST
The World Trade Organisation negotiations to conclude the Doha trade round have broken down. Although Commerce Minister Kamal Nath prefers to treat it as a “pause, not a breakdown”, the prospects for salvaging them are dismal. The talks failed as developed countries like the United States remain adamant on not reducing trade-distorting farm subsidies and link any reduction to more market access, while developing countries like India and China fear that liberalising agricultural trade affects the livelihood of millions of their small farmers. The latter wanted a more robust safeguard mechanism to protect poor farmers from a surge in farm imports than the former was ready to concede. With both sides refusing to budge on this matter, the Doha round headed for the rocks.
What are our options now? Now that the multilateral trade option is off, India would ink bilateral or regional free trading agreements (FTAs) with as many countries as possible. FTAs are as much about ‘free’ trade for those outside the ambit of such agreements as IOU chits are about owing money for bankrupts. Trade is conducted predominantly today along the channels of bilateral or regional FTAs. In line with this global trend for FTAs, the members constituting the South Asian Association for Regional Cooperation (Saarc) — notably, India, Pakistan, Afghanistan, Nepal, Bhutan, Bangladesh, Sri Lanka and Maldives — operationalised a South Asian Free Trade Agreement (Safta) in July 2006.
With South Asia home to an overwhelming number of those economically poor, greater regional integration not only makes good sense, but makes the only sense. But politics has a nasty habit of playing spoilsport. Tensions between India and Pakistan have scuppered a regional trade hug till date. Safta won’t take off so long as Pakistan doesn’t extend most favoured nation status to trade more freely with India. Bangladesh and Nepal, too, resent India’s dominance. The big question is what Prime Minister Manmohan Singh hopes to achieve at the Colombo Saarc Summit. The truth is that there are no greener pastures in such regional agreements.