SOUTH ASIA: Trade Could Soothe Political Tensions

By Kunda Dixit Reprint | | Print |

Kunda Dixit

NEW DELHI, Jan 17 1996 (IPS) - When the World Cup cricket tournament gets underway in South Asia next month, among the cricket balls being used by players from 12 participating teams will be ones made in Pakistan by Grays of Cambridge.

But although the balls are regarded as the best in the world, they are not officially exported to India. Even after the South Asian Preferential Trade Agreement (SAPTA) went into effect on Dec. 7, the Pakistan-made balls will not be competitive because sports goods are not in the list of items for which tariffs have been reduced.

South Asian countries are trying to use SAPTA to overcome years of protectionism — and in the case of India and Pakistan outright hostility — to forge closer regional trade ties. But as with the cricket balls, there is long way to go.

“Our cricket balls are the best in the world, and if everything was normal, it should have been selling in India,” said Mohammad Aslam Manda, chairman of the Pakistan Sports Goods Manufacturers and Exporters Association.

Manda was among hundreds of Pakistani businessmen and companies from other South Asian countries who came to India to take part in the first ever trade fair of South Asian Association for Regional Cooperation (SAARC) which ended in New Delhi on Sunday.

SAARC groups Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. Together, the South Asian countries have a population of 1.4 billion people — one-fifth of the world total. But they make up only 1.3 percent of global output and less than one percent of international merchandise trade.

Increasingly worried by the globalisation of the world economy and the marginalisation of their region by trading blocs in their neighbourhood, SAARC countries have been trying to get over political problems to streamline intra-regional trade.

Commerce ministers from the seven member countries agreed in New Delhi last week to bring forward the timetable for trade liberalisation to establish a South Asian Free Trade Area by the year 2000.

The newly-formed SAARC Chamber of Commerce and Industry organised the trade fair so that countries in the region can start taking advantage of the new SAPTA rules.

But critics point out the list of tariff-free items announced by SAARC countries show even more glaringly that they are trying to protect domestic industries from competition. Between them, SAARC countries have announced tariff cuts on less than 230 items — mostly low-volume goods from smaller SAARC countries.

For instance, Bangladesh will reduce by 10 percent duty concession on items like dental cement, glands and organs for transplants and fresh grapes. Pakistan will cut import duties on ornamental fish, bamboo and lamb skin. Nepal will reduce duty on only 14 items including chewing gum, fruits and canned fish.

Many of these cuts do not apply to Indian exports, only to products from smaller SAARC countries. But befitting its size, India’s concessions are the largest with tariff cuts in 106 items like paper and fertiliser.

Says SAARC Chamber vice-president from Nepal, Padma Jyoti: “We have to start somewhere and I think the trade fair is a start. It was not just a symbolic exercise, it opened up channels for trade by building contacts.”

Most regional experts agree that intra-regional SAARC trade will not get anywhere unless the two South Asian heavyweights, India and Pakistan patch up their political differences.

And in both Islamabad and New Delhi there is now a growing realisation in the bureaucracies of the two countries that freer trade will be mutually beneficial. In fact, trade could be the balm that may ultimately soothe political tensions.

“Politics used to come first and trade followed. But with India and Pakistan, if trade leads politics will follow,” Pakistan’s commerce minister Ahmad Mukhtar said at a conference that coincided with the SAARC Trade Fair here last week.

Proof of this was the fact that Pakistani products destined for the trade fair — including a gleaming metallic green Honda Civic assembled in Pakistan — travelled overland from Pakistan to India across the tense frontier. And Indian officials went out of their way to allow Pakistani businessmen to visit the Taj Mahal even though their visas were valid only for New Delhi.

And under new World Trade Organisation (WTO) rules, India automatically granted Pakistan most-favoured nation (MFN) status on Jan. 1. As WTO member, Pakistan is supposed to do the same but

sensitivity to domestic opinion has made Islamabad cautious.

Still, Pakistan’s Friday Times newspaper said: “Let us not be paranoid. There is no danger that India will swamp Pakistan. The bureaucrats in Islamabad trying to negotiate better terms are not about to abandon our national security interests.”

On this side, The Times of India echoed the view: “Political and military tensions have been allowed to cast an unhealthy shadow over economic relations right from 1947. The people of the subcontinent have been the main losers … it is tragic that greater economic cohesiveness in South Asia has been stymied by political grandstanding on all sides.”

Two-way trade between the two countries is officially only worth 100 million dollars annually. But estimates show that smuggling and indirect trade through third countries amounts to two billion dollars a year.

Indian and Pakistani businessmen say regularisation of this trade would benefit both governments, help normalise political ties and spread the free trade mantra in the rest of South Asia.