Khaled Ahmed

The world looks at the region of South Asia in fear because of the danger of war lurking permanently here. In particular, it worries about nuclear proliferation at the hands of two regional states who have fought wars in the past and are poised to go to war again. The region is also seen to be not sufficiently integrated through trade. There is a lot of negative jurisprudence in the history of bilateral relations among the regional states since they became free from British colonial rule in 1947. The region is dominated by India which is over 70 percent of the land-mass and population. India’s relations with its neighbours have seen ups and downs but most of the past history has been dominated by negative factors. Yet, South Asia minus India has not become integrated either. There is little solidarity among the smaller states alienated from India. Pakistan’s relations with Bangladesh have been as subject to variability as those of India; Pakistan has not been able to move forward in its relations with Sri Lanka and Nepal. The regional organisation, the South Asian Association for Regional Cooperation (SAARC), has not made much progress and, instead of gaining momentum, seems to be bogged down after the cancellation of recent summits.

The world focuses on South Asia because elsewhere in Asia, regional arrangements have made progress. Reference is often made to the Association of Southeast Asian Nations (ASEAN) where member states have been able to create a trading bloc since its foundation in 1967¹. SAARC came into being in 1985, pointedly dedicated to the non-political goal of promoting economic and social cooperation. In that sense both the regional organisations have an identical goal: avoid political wrangling and get together on the basis of shared economic goals. Both organisations pretended as if their enterprise was not in reaction to political developments in the region. ASEAN pretended that it was not aimed against a third entity, yet there were clear internal and external factors that motivated its birth: fear of internal movements of communism and fear of the external assertion of China in the region². Why couldn’t the same factors motivate South Asia? It is often said that regional blocs come into being under threat from an ‘external’ foe. In the case of South Asia, the external foe was not properly defined. Some critics of SAARC say that, instead of the foe being outside, it was sitting in the centre of it in the shape of India. By 1985, when SAARC was established, Pakistan and India had fought the third battle in their epochal war: the 1971 defeat of Pakistan and the establishment of Bangladesh. It is said that the idea of a regional bloc was conceived by Bangladesh as a small-state response to the big-state conflict³.

SAARC and ASEAN
ASEAN was supposed to be Indonesia-centric; SAARC was to be India-centric. But whereas Indonesia gave leadership to the idea of ASEAN, India was sceptical about the validity of SAARC. It is not true to say that South Asia had territorial disputes to resolve before ‘freezing’ them through normalisation as implied in the charter of SAARC. The truth is that three contenders in Southeast Asia, Mala(s)ya, Indonesia and the Philippines, had complex territorial claims on one another which had to be simply buried in favour of engagement in the trading bloc⁴. In South Asia, unresolved disputes assumed a higher priority than a collective response to internal and external challenges. In fact, while India wants members to adhere to the SAARC charter excluding political debate, Pakistan resents the fact that the charter excludes such a debate. India’s argument is that SAARC is undermined by the raising of issues disallowed by its charter; Pakistan’s argument is that excluding a ‘realistic’ political debate from the charter hinders the coming together of the members on other issues. There is no such thing as an Asian identity in Southeast Asia. The various member states of ASEAN are not united by any linguistic or cultural commonalty as in South Asia. Although a new commercial ethic is creating a kind of uniformity among them, they don’t feel any Asian adhesive in this relationship. On the other hand, in India-centric South Asia, a kind of bond of collective culture is felt by its inhabitants. Could this ‘intimacy’ be the dividing factor in South Asia?

The centre-piece in the obstruction to peace in South Asia is the Indo-Pakistan rivalry in the region. India doesn’t want the world to mediate the Indo-Pak disputes even when the world favours India’s recent emergence as the great democratic country in Asia doing well economically. India thinks of itself as the big power which must command deference from the peripheral states under a kind of Indian Monroe Doctrine. In its disputes with them it doesn’t want any external intervention. On the other hand, the smaller states can face India only by leaning on an extra-regional reference. Pakistan has passed the cold war period by exploiting this external reference. The smaller states give evidence of leaning on Pakistan to counter-balance India. This negative networking did not create conditions for cooperation in the region; in fact, all national strategies are geared to either maintaining the status quo or changing it through militarisation. The logic of war is stronger than the logic of peace. The upsurge of internal security crises has not improved matters by aligning and mixing the external threats with internal weaknesses that the states suffer from.

The regional threat perception and strategic thinking stands squarely in the way of any initiative in favour of integrating South Asia. India always thought that it was threatened from the periphery because its neighbours were being lured away by the cold war power opposed to India: the United States. The Nehruvian legacy was sceptical of the United States; it was also ‘anti-neighbours’. While Gujral’s Nehruvianism in the 1990s sought to accommodate India’s neighbours and disarm their fears of India’s hegemonism, the militant Nehruvians, led by Indira Gandhi, thought India was threatened from all sides and that it had no friends in the world. Rajiv Gandhi’s government popularised the ‘destabilisation’ doctrine under which India’s smaller neighbours were being wheedled and coerced by the United States into exploiting India’s internal troubles to destabilise it. After 1971, America was seen as the arch enemy building up Pakistan as a proxy and aligning with China to threaten India from the north. While most Indians betray the various shades of paranoid Nehruvianism, Indian civil servants in the Ministry for External Affairs would like to help stiffen the anti-American jurisprudence with their well-kept record of grievances. Thus, while the right-wing BJP leaders seek close relations with the United States, almost the entire nation is primed to entertain negative thoughts about it.⁵

It is ironic that the United States should emphasise an Indian emotion that represents paranoia also about India’s smaller neighbours. Something can be said about the inclination of the smaller neighbours to call in the global power as a make-weight against what they perceive is India’s regional power. One can see this reliance on the extra-regional reference as a negative for peace in the region, but cannot help seeing in it also the negative psychology of a great regional state that feels unsure of its greatness. The irony deepens as the two big South Asian ‘Islamic’ states-Pakistan and Bangladesh-feel enraged by the recent actions of the United States in the Middle East and Afghanistan but see it aiding and abetting India too. Both are Islamic states and have added a religious element to their antagonism of India. In India, the party that wishes to break out of the straitjacket of the hegemonic regionalism of the early Nehruvian leaders, is the Hindu fundamentalist party trying to reach out to the United States and Israel. This has created a most confusing anti-regionalist scenario. The three states have deepened their animosity by adding religion to their ideology while being forced to court the same global power. One can sum up the confused situation like this: all the three states hate the United States but court it under strategic compulsions; they also use this extra-regional reference to postpone and destroy any chance there is of cooperation among themselves.

‘The threat of India’ and South Asia
While India’s threat perception is linked to its hegemonic self-image and translates into paranoia against ‘foreign intervention’ in South Asia, Pakistan’s is simply India-centric. It has taken upon itself the onus of overturning the status quo with regard to Kashmir. The temperament of the state of Pakistan has been determined by this extremely inflexible ‘mission statement’. It cannot live in peace with India unless it can force a many-times-stronger India to surrender Kashmir to it. The inflexibility of Pakistan’s stance on Kashmir derives from a sense of ‘moral correctness’ radiating from the UN Security Council resolutions of 1948. There are other less important factors that take Pakistan into the anti-peace league in South Asia. Pakistan felt uncertain about its survival in its early years and feared efforts afoot in India to destabilise the newborn state and reabsorb it. Pakistan shaped its nationalism in response to this fear of reabsorption. It propounded the two-nation idea as state doctrine and in time made any disavowal of it punishable under the Penal Code. It brought the army into the legislature to ensure that politicians didn’t ignore the reason of the state in deference to opportunism of politics. It wrote up textbooks that made permanent the narrative of partition and the ethnic cleansing that accompanied it. The homo pakistanicus grew up hating India as part of his nationalism and looked at regional peace as a ruse to yield hegemony to India. After fighting three wars with India with predictable results, Pakistan developed a negative nationalism akin to the Serbs of the Balkans who sang songs of their defeat at the hands of the Turks. And Pakistan yielded paramountcy to the army as an adjunct to its nationalism.

Like Cuba, Pakistan had to pay a big price for taking on a big neighbour. The state has sacrificed too much of its internal resources in the cause of coercing India. Because India is big and un-defeatable, the state has encouraged the formation of a tactical rather than a strategic mind. The mainspring of Pakistan’s intellectual establishment is the army which passes off tactical thinking as strategic⁶. Since India can’t be defeated; Pakistan’s strategy should be one of tactical pinpricks that may quicken the process of India’s internal implosion. The theory of India’s implosion is the Pakistan military establishment’s singular contribution to the civilian mind in Pakistan. Within the security structures, the only active intellectual impulse is located within the prime intelligence apparatus. Intelligence agencies universally embody the paranoia of the state and are usually treated as ‘special cases’ and accepted as ‘necessary evil’, but in Pakistan they perform the intellectual function and have the coercive power and impunity from law to enforce their thinking. It is for this reason that one has to measure Pakistan’s intellectual performance on the question of security and threat perception against the intelligence agencies. Above all, one has to understand their reverse indoctrination during the Afghan war against the Soviet Union and then its induction of ‘holy warriors’ into the low-intensity proxy war with India in Kashmir⁷. Today the rise of the militant clergy in Pakistan has to be understood within the framework of clergy-barrack nexus that is in crisis since 9/11. Most of the damage, of course, was caused to Pakistan’s internal order and stability. But the end result was Pakistan’s unshakable resolve, as expressed by its ‘warrior priests’, to prevent normalisation and peace in the region unless its ‘mission statement’ was realised.

Bangladesh was made in an environment of intense anti-Pakistan emotion which could also be interpreted as an intense pro-India feeling. The East Pakistan political elite had disagreed with the West Pakistan ‘mission statement’ against India. When in 1971 it emerged as a new nation, it was anti-Pakistan and pro-India. That should have resulted in one region less where nationalisms clashed to the exclusion of cooperation and peace. But the second president of Bangladesh General Ziaur Rehman, ‘the freedom-fighter’ amended the 1972 Constitution of Sheikh Mujib and removed the word ‘secular’ from it. The same 5th Amendment introduced Islam as the ‘guiding principle’ of the Constitution, which his successor General Ershad bettered through his 8th Amendment which declared Islam state religion. Awami League, eclipsed by Sheikh Mujib’s corrupt and ruthless one-party administration, was dubbed a pro-India party and kept away by an army that under General Ershad, a ‘repatriate’ from Pakistan as opposed to ‘freedom-fighting’ General Ziaur Rehman, set up India as the big Bangladeshi bogey.

India is the big enemy in Bangladesh today. It shows in the anger the Bangladeshis feel over the waters dispute; it shows in the trade figures that reveal India as an exploiter of the misfortunes of Bangladesh. India has failed to arrive at an equitable division of waters from the Farakka Dam it built without consulting the lower riparian state. In its trade with Bangladesh, it pleads restrictive import policy to keep out Bangladeshi goods while Indian goods flood Bangladesh. India has signed a free-trade agreement with Bangladesh which is not performing well mainly because of the situation created by the alternation in power by Khaleda Zia’s Bangladesh National Party (BNP) and Hasina Wajed’s Awami League. As noted above, General Ziaur Rehman had thought of SAARC as a security guarantee against India.

Bangladesh today lurches under the burden of two legacies: Pakistani atrocities in 1970-71 and atrocities committed by the father of the nation, Sheikh Mujib, after 1971. Awami League represents the legacy of Sheikh Mujib and favours a Bangla nationalism based on solidarity with India. The BNP favours what is called the Bangladeshi nationalism based on a sense of grievance against India and a ‘revisionist’ sympathy with Pakistan and its anti-India stance in the region⁸.
Because of Bangladesh’s ‘bicameral’ mind, India and Pakistan are fighting their spy wars there. The BNP has allowed the penetration of the country’s traditionally more pluralist society by jihad and its proselytising activities. The Awami League has had to shed some of its secular markers to be acceptable to an increasingly anti-Indian populace. Bangladesh is moving towards its irreducible anti-Indian identity simply because Pakistan is no longer there as the hated occupying power. The only restraint on Bangladesh is the United States and the donor states in the West that provide 40 percent of Bangladesh’s foreign exchange⁹. Although the third largest country in the region on the basis of population, Bangladesh is not a military power and is amenable to Indian pressure somewhat like landlocked Nepal because of its territorial vulnerability. The unstable borders may hurt India with penetration of refugee populations but they render Bangladesh susceptible to Indian pressure which Dhaka may try to ward off by seeking a strategic alliance with Pakistan¹⁰. In this situation, the only incentive towards cooperation rather than rivalry in South Asia comes from extra-regional powers that seek peace and cooperation in the region as a part of their global strategy.

Sri Lanka’s early threat perception has focused on India for two reasons. The demarcation of Palk Strait and Gulf of Mannar had to be settled with India and thereafter guarded. The other factor was the presence of a very large minority of Tamils that formed their 65 million strong state within the Indian Union and could present Sri Lanka with an irredentist challenge. Consequently, Sri Lankan relations were off to a bad start. A suspicion of India persisted into the 1970s when Srimavo Bandaranaike was Prime Minister of Sri Lanka. It is during this period that Sri Lanka made the proposal of turning the Indian Ocean into a zone of peace its central strategic plank. Relying on this unimplemented UN resolution, the country sought to meet its basic requirement of protecting its borders and territorial integrity. However, it was during the beginning of the Tamil uprising in the 1970s that Sri Lanka’s fear of India reached its apogee. When SAARC was mooted in 1985, Colombo was sceptical about it. It had instead sought linkages with ASEAN in 1981 and 1984. Then in 1987 Indian troops landed in northern Sri Lanka to save it from the Tamils. Sri Lankans saw the Indian military presence in Sri Lanka as a violation of state sovereignty. After the Indian army left in 1989, Indian scholars challenged the Sri Lankan fear of India by positing their own thesis: that the region was in fact threatened by a superpower (read: the United States)¹¹.

Both Bangladesh and Sri Lanka have signed free-trade agreements with India despite their threat perceptions. The trend started with Nepal with which India has a treaty that cannot really be called a free-trade treaty in some of its aspects. But with Bangladesh, the contents of the treaty improved, although, because of the reasons discussed above, relations between the two have not improved in its wake. With Sri Lanka, the treaty has improved to a great extent and is being cited as an example for South Asia. However, some economists look at the three treaties as obstacles to a great multilateral vision of South Asia Free Trade Area (SAFTA). The three treaties were seen by Pakistan as an India strategy under Prime Minister Gujral to isolate Pakistan in the region because it was not willing to liberalise trade with India and give it the Most Favoured Nation status in reciprocation of a similar gesture by India towards Pakistan in 1990. Sri Lanka’s own perception of security has turned inwards, seeing danger in the politics of the Tamils and the extremist Sinhala (JVP) reaction to the Tamils. This has brought about a change in the way Sri Lanka looks at India. A similar change could be coming over Pakistan - much more slowly - as the threat of internal terrorism mounts.

The negative role of nationalism
The biggest and probably the most insurmountable obstacles to peace are the various nationalisms of South Asia. They pit them against one another and they make the population xenophobic by interpreting the period of colonialism negatively on false evidence. The truth is-nationalism is valid only for people who feel it and decide not to question it. It applies to all nations who try to give themselves identity. It works nowhere and the fabrication as ‘social engineering’ mutates and fades over time. The world saw the rise of nationalism in the post-industrial era in the 18th century. Somehow the decay of religion in Europe made way for the passions of ‘fatherland’. No one thought it was a good thing to feel patriotic. But it was mostly in hostility to other peoples that this passion was nurtured. This led to two world wars in the 20th century. Europe got cured of nationalism after the Second World War, but the rest of the world carried on as of yore. Ideology kept it at bay for 70 years, but then the floodgates were opened for the most crude forms of nationalism. Religion got into the act and made it worse in these days of the nation-state.

Research shows that the nation is in fact shaped by the state, and those nations which came before the state, like Pakistan, were to find themselves mutated over time till they could not recognise themselves in the mirror of the past. The only way to survival is the adoption of a pluralist society in the states that wish to live in peace in South Asia. It was Lord Acton (1834-1902) who thought that the only civil society that would survive would be the one which allowed all its nationalities to prosper within it and subsumed them in one nationalism. This is what the British Raj tried to tell Hindus and Muslims of India with little success. Now both India and Pakistan have nationalisms that don’t stand up to scrutiny. The Indians will say to the Pakistanis: ‘we were brothers and lived in peace till the British divided us’. The Pakistanis will tell the Bangladeshis: ‘we were brothers till India pulled us asunder’. The truth is that nationalism doesn’t work and the state keeps on changing the people living in it in order to ensure its internal strength¹².

In the ASEAN region, the nations which cooperate and live in peace are not homogenous linguistically and culturally. In South Asia, there is strong sense of cultural unity, yet any advance towards cooperation and peace seems almost impossible to achieve. Is the feeling of cultural unity a myth or a reality? Is the Chinese community-spread out in Southeast Asia and allowed its own state in Singapore by the exigencies of Malay nationalism-responsible for inculcating a new work ethic in the region, while in South Asia the trading communities- originating in Gujrat and dominating Bombay and Karachi-have been sidelined by more warlike communities?¹³
Has the region of Southeast Asia developed into a high-trust society while South Asia has not?¹⁴ Recent studies have challenged the assumptions behind nation-building in both India and Pakistan. One reason Indians and Pakistanis don’t talk sense when put together is that their versions of what happened to them in the years leading to 1947 are so diametrically opposed. The two communities have been given two opposed narratives on the basis of which to talk among themselves and then talk to the ‘other’ party across the border. The two narratives have nurtured two nationalisms and in these days of the e-mail make for very confused dialogue on the web-sites. Very often an Indian responding to a Pakistani article refers to events that Pakistanis are unaware of. There is always a bitter edge of rejectionism in such responses; in other words, the Indian narrative will allow an Indian to accept the Pakistani version only at the risk of losing his place among his fellow Indians. In Pakistan, the rejection of India is entirely based on the narrative constructed around what is called the Pakistan Movement, and the state actually relies on the Penal Code to deter Pakistanis from accepting the Indian version. Ayesha Jalal, the historian, says the truth is too fragmented to lend itself to any nationalism easily. In fact there is a mosaic of narratives floating around, on the basis of religion, region and class, in the history of India since 1850; and no ‘thesis’ made in the communal narratives can be completely upheld. She has tried to look at this ‘existential’ multiple narrative at the risk of continuing to be unpopular with ‘official’ India and ‘official’ Pakistan.

In her monumental work¹⁵, Ayesha Jalal focuses on the Muslim individual and his personal space and on the collective consciousness of the Muslims under the rubric of sovereignty. Her thesis is that the idea of the Muslim nation and its ‘separation’ from the rest was not tenable given the fact that the Indian nation itself was not yet formed: separate from what? What was in evidence was a network of different affiliations that defied a single narrative. Ayesha Jalal has decided to study all the facets of history that have actually fallen through the cracks of ideological formatting. She studies the linguistic issues to see how the communities were presenting themselves to their followers and how the individual was able to ‘imagine’ himself into his environment. She examines the Khilafat movement to see if the blending of Islamic and Indian nationalist symbols had any permanent value, and finds that any application of an ‘Islamic normative theory’ could not be ‘an adequate gauge for the actual practice of politics’. Thus the thesis of separatism as presented by the Muslim League is subtly overthrown, just as the all-India construct of the majoritarian Congress gets a short shrift.

The book is, therefore, an unpalatable pabulum (to the nationalists of both sides) exposing the paradox of inclusionary nationalisms, whether Islamic or secular, unfolding as ‘exclusionary majoritarian identity’. The conclusions of Jalal’s work suggest that discord in South Asia is inherent in, and specific to, South Asia and unless the nation-building myths of the post-colonial state in the region are deconstructed and understood, no progress in the direction of regional cooperation will be possible.

SAARC: the organisation that didn’t work¹⁶
On 13 May, 2003, a TV discussion among three Pakistanis (a politician from the MMA- Muttahida Majlis-e-Amal, an alliance of religious parties, the federal trade minister and a businessman) had the cleric and the minister united against free trade with India while the businessman thought it was safe and indeed necessary for Pakistan to open up. On 28 May, 2003, another TV discussion had two Pakistani Members of the National Assembly (MNAs) who had just returned from a ‘goodwill’ visit to India favouring the giving of the Most Favoured Nation (MFN) status to India and trading with it, while expressing some apprehension about the relative competitive advantage of India over Pakistan. While the government exercises ambiguity over its intent (saying it means only gas when it says trade) the economic writers in the country are in favour of free trade with India, one and all. Now that the barrier seems to be breaking down, one suddenly finds Pakistanis completely at sea about how to go about doing trade with India once the decision is taken.

The Lahore University of Management Sciences (LUMS) hosted a seminar of the South Asia Centre for Policy Studies (SACEP) of Bangladesh, on 21 May 2003, which answered many questions about trade the Pakistanis usually ask. Dr Saman Kalegama of Sri Lanka told the audience that South Asia thought of free trade in the region under SAARC (South Asia Association for Regional Cooperation) in the 1990s. A Preferential Trade Area (SAPTA) was mooted in 1993 and became operational after it was ratified by the SAARC ‘seven’ in 1995. Then in 1996, the seven agreed to set up a free trade area (SAFTA) to be operationalised by 2000 or 2005 at the latest. At the 10th SAARC summit in Colombo, the year 2001 was actually set for the finalisation of a Treaty on SAFTA. Then something ‘political’ intervened (read: a near-war between India and Pakistan) and the date with SAFTA was not kept. Then at the 11th summit in Kathmandu it was decided that the treaty would be ready by 2002. The 12th summit in January 2003, at which the draft treaty was to be presented, hasn’t taken place because India and Pakistan are still quarrelling. Now some ‘insiders’ think that SAFTA will come into its own in 2008; others say in 2010.

Why are the SAARC seven bothered about a free trade area in the South Asian region? Traditionally, they have not traded with each other; they have mostly fought among themselves. Trading in South Asia means trading with India because it stands in the middle, occupying 70 percent of the region’s territory and being the only state with contiguous borders with all the others except with Maldives. But as globalisation creeps up, regional trade is seen as a kind of local shield against the exploitative edge of global capital. Another incentive to regionalism has come from ASEAN which now trades intra-regionally up to 21 percent of its total trade. (In 1975, when it started, ASEAN traded only 7 percent intra-regionally). The European Union (EU) trades 63 percent within itself and is thus quite sheltered from the global shocks if and when they come.
Some movement towards free trade at the bilateral level has taken place since 1996 when SAARC first decided to write up a regional free trade treaty. India signed a free trade treaty with Nepal in 1996, then signed one with Sri Lanka in 1998. While the treaty with Nepal is based on a ‘positive list’ of commodities under duty free trade, the Indo-Sri Lanka free trade treaty could furnish the answers Pakistanis look for when they think of trading freely with India. Scholars think that while SAFTA hangs fire at SAARC for political reasons, bilateral treaties being signed among member states may actually accumulate a jurisprudence that could stand in the way of the finalisation of SAFTA. So far India’s free trade treaties with Nepal, Sri Lanka and Bangladesh seem to be carving out a sub-region in which Pakistan seems to be becoming economically isolated. To counter this, Pakistan is in the process of negotiating its own free trade treaty with Sri Lanka.

On 29 May, 2003, the head of Islamabad’s Institute of Strategic Studies, Dr Shirin Mazari hosted a discussion on the subject of trade on PTV World with the visiting dignitaries of Bangladesh and Sri Lanka. She lashed out against India’s move to write up unfair and coercive bilateral free trade treaties with its smaller neighbours. She said India didn’t want SAFTA because it felt more comfortable with bilateral treaties arrived at under duress. She focused particularly on the 1998 India-Sri Lanka treaty and said that Sri Lanka ‘discovered to its shock’ that the treaty did not allow export of Sri Lankan tea to India. A more informed view would have taken into account the period of one and a half years the two countries took to arrive at the ‘negative list’ of items under the treaty. Pakistan has a ‘positive list’ with India, allowing trade in of only a few items, which means that it is not a free trade agreement in the complete sense.

There is a misunderstanding about the concept of free trade which must be removed. It doesn’t mean unhampered duty-free trade in all goods under the sun. The idea of the ‘negative list’, goods excluded from trade, is a part of the free trade regime. If India and Sri Lanka have agreed to free trade, they have also agreed not to trade in certain goods. Sri Lanka, negotiating a free trade agreement with Pakistan, is facing the same obstacle in respect to its tea export to Pakistan. But these issues are a part of the free trade regime and belong to the shifting focus in the thinking of the trading partners. The ‘negative list’ can be revised at any time. In the case of India-Nepal trade agreement, however, there are certain aspects that need to be looked at before it can qualify as a genuine free trade treaty. There is no negative list, which can be taken to mean that there is an across-the-board protection to goods. This makes the treaty somewhat like the arrangement India and Pakistan have today. There is also no dispute settlement arrangement in the India-Nepal treaty.
There is another misunderstanding that even otherwise knowledgeable people in Pakistan seem to entertain: that cheap and better quality Indian goods will overwhelm Pakistan and force the industry here to close down. This is simply not true. Once the two countries decide to enter into a bilateral free trade regime, they will negotiate a ‘negative list’ which simply means protecting some crucial areas of each economy. If there is a disadvantageous exchange in goods not on the ‘negative list’, the affected country can lean on a clause against ‘import surge’ and ban imports in that good alone. In other words, there is a clause that can allow a country to pull out substantially from the free trade regime if a massive imbalance occurs. Such a clause against ‘import surge’ exists in the India-Sri Lanka treaty. Under this treaty, Sri Lanka will export its goods to India duty free from 2003 and India will have duty-free access to Sri Lanka in 2008. The treaty has a provision for charging duty on goods that are ‘dumped’ or are subject to subsidies in the exporting country. This is another ‘complaint’ put forward by those in Pakistan who oppose free trade with India.

Pakistani industrialist, Mr Tariq Saigol, who spoke at the LUMS seminar, thought that Pakistan should give the MFN status to India and open up trade with it. He made a telling point when he said that politics worked in Pakistan against the economy in two ways: trade with India was not liberalised and remained on the ‘positive list’ because of ‘politics of enmity’, but Pakistan was exposed to unhampered ‘dumping’ of the Chinese goods because of ‘politics of friendship’. He said he had favoured arriving at a sensible free trade arrangement with India when he was head of the Lahore Chamber of Commerce and Industry. He referred to a positive study made on the subject by a World Bank officer for the finance ministry in Islamabad in 1995. He thought that Pakistan simply could not indefinitely postpone the award of the MFN status to India. Dr Kalegama took into consideration the opinion that SAFTA might not benefit the regional states as much as hoped because they traded in the same category of goods, but he thought that such a situation could change gradually with time. He also noted that SAFTA had no regional leadership engagement. In ASEAN a free trade area was pursued with great vigour by President Suharto of Indonesia and NAFTA was championed by President Clinton of the United States, but in South Asia SAFTA was still not made a mission by any big leader. He also looked at the investment flow into the ASEAN region as an ancillary to free trade, but noted that such an inflow of the FDI (foreign direct investment) had not taken place in South Asia after the signing of the bilateral free trade agreements. He computed that SAFTA will inflict the highest level of revenue loss to India, followed by Pakistan, but it will curb smuggling, which was equally inflicting revenue loss in addition to undermining national products.

(Khaled Ahmed is Consulting Editor of The Friday Times, Lahore).

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