The Hindu Business Line : SAFTA stymied

No matter what the Pakistan President, Gen Pervez Musharraf, may say from time to time about the need to normalise economic ties with India, Islamabad's stand on the South Asian Free Trade Agreement (SAFTA) vis-à-vis New Delhi clearly suggests that such contact is firmly tied to a settlement of the Kashmir issue, and that unless there is `progress' on this front (from Pakistan's perspective) no meaningful advance can be expected on the business front. As much was unambiguously indicated when Islamabad recently made it clear that the SAFTA trade guidelines (operationalised from July 1) would not be extended to India.

What this means is that Pakistan will continue to allow into its market only those Indian products that are on its `positive list' (numbering 773 items) and that it would persist with the policy of refusing to accord India the `most favoured nation' (MFN) status that it has extended to all other SAFTA members. Clearly, both these stands are incompatible with the SAFTA regime, which stipulates the extension of MFN status to all participants and also lays down that trade will be conducted on the basis of a small `negative' list, tariff and other barriers on items not covered by this list being progressively scaled down, the pace of liberalisation differing for the poorest and the slightly better-off members of the South Asian Association for Regional Cooperation (SAARC). It remains to be seen how this problem will be sorted out, for it is clear that the principle of equity and fairness embedded in SAFTA will be breached if India is not permitted to enjoy the same trade facilities extended by Pakistan to the other SAFTA participants. The problem is that New Delhi can act formally only if it is officially intimated of Islamabad's stand, which may take a while in coming.

It is indeed unfortunate that Islamabad should take the stand it has on its trade links with India under SAFTA because there is ample evidence of the strong urge of Pakistani businessmen and investors to have normal economic ties with India. True, there is bound to be apprehension about the nature of the impact freer access accorded to Indian products will have on Pakistani industry, but this is something that will affect all SAFTA members and, more importantly, studies have shown that the smaller partners of a free-trade grouping usually tend to benefit more than the larger members. As it is SAFTA will be useful in promoting only trade among the SAARC members when there is an equally urgent need to boost investment and the services exchange in the region. Pakistan's truant behaviour will only help to minimise the utility of SAFTA even further.

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