The New Year has begun with enough optimism regarding further progress towards a South Asian Free Trade Agreement.
Let's trade, trust will follow: PM
Although the idea was mooted in 1988 and many earlier deadlines were missed, expectations of a meaningful agreement now run high because there is an all round realisation that trade is not only a powerful tool to promote growth but also an instrument that creates and nurtures constituencies for peace.
Economic growth is also seen as a strong weapon, with which terrorism and extremist elements can be countered.
The excitement of substantial progress towards Safta is tempered with the realisation that most of the member countries in South Asia have competing with each other and not complementing their strengths.
At best, that can lead to reallocation of resources but not an all-round expansion of trade. Moreover, less than 500 tariff lines (against over 8,000 tariff lines that exist at the eight-digit level) are targeted for tariff cuts at this stage.
Yet, it is a good beginning even if the least developed countries, like Bangladesh, Bhutan, Nepal and Maldives, ask for more time for opening up their markets.
As the biggest member country of the South Asian Association for Regional Co-operation, India should lead the way with unilateral concessions to its neighbours within the framework of the agreements at the World Trade Organisation.
But, whether this will happen is anyone's guess. In the past, Indian businesses have displayed notoriously low threshold levels for pains that tariff cuts can bring.
Even goods from Nepal have not been spared from anti-dumping duties. India, however, has moved aggressively to sign framework agreements to put in place free trade deals with Thailand and Asean (Association of Southeast Asian Nations), after the Cancun ministerial conference of the WTO failed, a few months back.
The talks to liberalise trade through BIMSTEC (Bangladesh, India, Myanmar, Sri Lanka, Thailand Economic Co-operation) are also likely to get a boost at the meet due at Phuket next month.
BIMSTEK is expected to admit Nepal and Bhutan. India's overall trade interests, however, might be better served by strengthening the multilateralism through the WTO.
So, while the regional groupings can help promote peace in the region, substantial economic gains can be sought through WTO agreements. In its proposals, India has taken positive steps by agreeing to liberalise trade in services. India has also agreed to cut the industrial tariffs.
