SAARC: Pruning the negatives

New Delhi expects SAFTA to make concrete progress as quickly as possible, leading to an increase in regional trade. Last November, the Prime Minister, Dr Manmohan Singh, had directed the Commerce Ministry to examine the possibility of reducing the 744-item trade negative list for the SAARC least developed member countries (LDCs). That direction has just been fulfilled with the recent announcement that the list will be restricted to just 500 items. In fact, the enhanced trade liberalisation programme affecting the LDCs within SAARC has been speeded up by New Delhi, under which the im port duty on all items outside of the negative list will be zero from January 1 this year instead of from next year. The message being sent out by New Delhi is clear: It expects the South Asian Free Trade Agreement (SAFTA) to make concrete progress as quickly as possible, leading to an increase in regional trade. The Union Commerce Minister, Mr Kamal Nath, said as much when he announced the initiative at the third SAFTA Council meeting in New Delhi earlier in the week. Indeed, New Delhi's earnestness in this direction is underscored by the fact that it has taken trade-promotion steps not only at the SAARC level but also bilaterally, with Sri Lanka and Bangladesh being offered special trade incentives last year. Now, with the LDC negative-list announcement, Bhutan, Nepal and the Maldives have been brought under the incentive ambit. Clearly, these measures should strengthen regional cooperation generally, and SAFTA, in particular, the latter being more important because of the engine-driver role it has been accorded in the SAARC set-up. But since it takes two hands to clap, there is a strong chance of the trade-promotion initiative stalling because of the lack of progress on the most-favoured-nation status issue. Briefly, in contravention of SAARC (and WTO) guidelines on the subject, Pakistan has till now not accorded India such a status which, among other things, has affected SAARC's march towards effective regional cooperation. Of interest is the fact that India accorded Pakistan the status some years ago. At the Delhi meeting of the SAFTA Council, the Pakistani representative did say that Indian and Pakistani banks may be allowed to open branches, but one will have to wait for some concrete development before hailing the statement. Several regional schemes are in the pipeline such as operationalising the development fund and setting up food bank and a South Asian university. Preliminary work on a services agreement has also been kicked off with the completion of a regional study on the potential of such an accord. Being the two largest economies in the grouping, both India and Pakistan will have to join hands if the SAARC promise is to be fulfilled. As of now, only New Delhi has been extending its hand, which is simply not enough for SAARC to have a bright future.