Trade liberalisation stagnant in SAARC region

by Gamini WARUSHAMANA

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All countries in the SAARC region have taken a conservative approach in the implementation of the South Asia Preferential Trade Agreement (SAPTA) and the trade liberalisation is stagnant, said the deputy director of the IFS Dr. Dushni Weerakoon.

Dr. Weerakoon was addressing the first South Asia Economic summit in Colombo organised parallel to the SAARC trade fair which was opened on the same day at the BMICH.

Speaking on SAPTA’s current status and future prospects Dr. Weerakoon pointed out the positive impact of the bilateral trade agreements between the member countries. She elaborated on the impact of the India-Sri Lanka, India-Nepal and Sri Lanka-Pakistan bilateral trade agreements and the changes in trade patterns among countries. Pointing out trade statistics, Dr.Weerakoon said that small countries are not losing by trade liberalisation though there is asymmetry between economies.

Member countries consistently adhere to reduce tariff lines and the sensitive list. However, SAARC member countries are not committed to liberalise trade under SAPTA. In economic integration in the SAARC region, the Indian factor is decisive, because India is the single largest trading partner of all member countries. India is emerging as a regional and global power.

India’s trade with the East Asia region is increasing while trade in the region is stagnant.SAARC member countries can reap benefits through SAPTA with India’s strong position, she said.

While regional trade is stagnant, other countries such as Pakistan and Bangladesh too have strong trade relations with East Asia.

There are other trade agreements such as BIMSTEC between member countries. However, SAPTA is the only trade agreement between India and Pakistan, she said.

The economic summit and the trade fair had been organised as successive events of the 15th SAARC summit held in Colombo. The summit focused on the economic integration in the region. However, political analysts said that in the summit the political leaders failed to reach any practical decision to implement the long awaited SAPTA.

The SAARC Chamber of Commerce and Industry too had expressed concern over the ignorance of trade related issues at the 15th SAARC summit, just after the summit.

‘Hunger and terrorism are undoubtedly vital issues for a region such as South Asia. But promoting trade and entrepreneurship could be best answered to curb such issues’ said President SAARC CCI who expressed surprise that the SAARC Summit remained silent on trade, which was the central theme of SAARC formed in 1985, President of the SAARC CCI Tariq Sayeed had said.

Sayeed expressed disappointment that the summit provided no concrete steps to invigorate the South Asian Free Trade Area (SAFTA) agreement which came into effect two years ago but which had failed to get off the ground.

The business community of SAARC had attached high expectations to the 15th SAARC Summit that the leadership of the region would take SAFTA as one of the priority agenda items but sadly it remained unnoticed.

President, SAARC CCI said that promoting trade for poverty alleviation and job creation was one of the prime objectives, for which SAARC was created 23 years ago but regrettably very little progress has been made towards this core issue that could be one of the best weapons to fight against poverty, hunger and unemployment and promotion of economic activities would ultimately help curbing terrorism.

Meanwhile, the Commonwealth and South Asia business leaders called upon the heads of Governments to drive regional growth through accelerated trade links.

The joint press release issued last week by the Commonwealth Business Council and the SAARC Chamber of Commerce and Industries made recommendations to enhance intra regional trade and remove of barriers.

The two business organisations have proposed the following recommendations that are light years ahead for political leaders in the region. Improve mobility of people; to facilitate business development and access to skills, knowledge and relationships, the visa regime in South Asia needs to be more open in letter and spirit.

Strengthen communication and transport links; The SAARC region lacks adequate communication infrastructure and some countries follow a restrictive policy when it comes to developing regional communication links. In particular, an open sky policy should be adopted in South Asia to fly unhindered within the region (for passengers and cargo) and telecommunication links should be uninterrupted and penetrable in the region with deregulation and foreign investment.

Finalise the agreement in the service sector; At the SAARC Summit in New Delhi in 2007, the SAARC leaders called for early finalisation of an agreement in the service sector and the SAFTA ministerial council in Delhi in March 2008 directed the drafting of the SAARC agreement on trade in service (SAFAS) under the SAFTA agreement.

Extending SAFTA to include service would considerably broaden its scope and impact and boost competitiveness in key emerging sectors such as banking, communication and aviation.

Foster cross border investment and regional energy trade; SAARC needs to take full advantage of the energy resources available within the region and its neighbourhood to meet shortages in energy supply.

Implement measures for trade facilitation; To enhance business and trade, there needs to be adequate infrastructure for transportation of goods.

Collaborative measures are required to improve trade facilitation by improving customs management and movement of goods through ports and airports.

SAARC Governments were urged to make faster progress on the road map and then implementation of a South Asian customs union as emphasised at the 2007 SAARC Summit.

Regional banking facilities should exist to expedite business transactions for increased business activity. Mutual certification and standards must be accepted through the region. Non tariff barriers are restrictive to trade and not only add costs but also increase time for delivery.

Enable direct cross border trade between India and Pakistan; Building on several key developments in 2008 such as improved air links, an agreement between India and Pakistan to renew direct cross border trade would advance regional integration, strengthen trust and lay the foundation for progress in SAFTA with tangible spill-over effects for other countries. The recommendations are based on a major report from CBC SCCI “Regional trade in South Asia” towards stronger linkages and growth.