The Hindu Business Line : Moving ahead with SAFTA

PAKISTAN'S RECENT RATIFICATION of the South Asian Free Trade Area agreement constitutes a big leap forward for the SAARC exercise. Trade is an important part of the regional cooperation envisioned under the umbrella of the South Asian Association, and SAFTA's objective is to free the trade between member-countries for mutual growth and development. But since the proof of the pudding lies in its eating, it remains to be seen to what extent SAFTA will be implemented in letter and spirit, especially as its faithful implementation is crucial to the opening up of India-Pakistan trade which, currently, is warped beyond recognition because of political reasons.

As of now, Pakistan's ratification of the agreement means little by way of effective implementation of SAFTA. Following up on the Marrakesh Agreement of 1994, which led to the establishment of the World Trade Organisation, the SAFTA agreement clearly stipulates that the most-favoured nation approach to international trade would also be followed by the SAARC member countries. It, therefore, follows that SAFTA signatories would automatically accept the MFN basis for trade which, however, has not been the case with Pakistan. (Incidentally, MFN status should have been accorded to trade with India some years ago, when both countries became members of the WTO.) In fact, in the run-up to the agreement's ratification, strenuous efforts have been made by Islamabad to underscore the point that Pakistan's implementation of SAFTA and its trade policy with India are two separate tracks of state policy, implying that though it enjoys MFN status vis-à-vis trade with India, it is still not prepared to give India a similar status, even after ratifying SAFTA.

Pakistan's formal ratification of the agreement will, therefore, have to be seen in this perspective if its real worth is to be evaluated in promoting intra-SAARC trade, which today is at an abysmally low level (5-6 per cent) of the combined exports of the member-countries. (The comparable figures for the European Union and North American Free Trade Agreement are more than 50 per cent in each case and, for Asean, it is around 20 per cent). What makes Islamabad's stand on the MFN issue even more regrettable is that, in the present circumstances, where a number of SAARC members have bilateral FTAs in place (and others are being negotiated), the true value of SAFTA will lie in its being able to promote trade between India and Pakistan, a benchmark which is already under threat in view of Pakistan's linking of economic and political issues. If Pakistan does not play ball, the future of SAFTA (not to speak of SAARC itself, considering that SAFTA should form the very foundation of a healthy association) may be bleak. However, SAARC member-states should not resign themselves to this fate. A determined effort should be made to get SAFTA off the ground (actual trade under it is slated to start around June) for this region of 1.4 billion people cannot afford to miss out on the advantages of a common market of such size.

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