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Moving beyond reciprocity

Prime Minister Manmohan Singh's announcement at the South Asian Association for Regional Cooperation (SAARC) summit, to allow duty-free access to the less developed neighbours in the region has come not a day too soon. This means India has virtually decided to operationalise the South Asian Free Trade Area (SAFTA), minus Pakistan, from 2008. Bangladesh, Nepal, Bhutan, Maldives, and Afghanistan will benefit from this offer— New Delhi has a Free Trade Area agreement already in operation with Sri Lanka. Unfortunately, the coming into force of SAFTA is being delayed because the two big players — India and Pakistan — have still some contentious issues to sort out. All through the tortuous negotiations that have taken place over the past few years on SAFTA, Islamabad has been reluctant to provide even the `Most Favourved Nation' (MFN) status to India. Mr. Singh's announcement at the opening of the SAARC summit amounts only to acting upon what India has been promising over the past decade — in the spirit of the Gujral doctrine of a non-reciprocal duty-free access to the neighbours, especially the less developed among them. As the biggest economy in South Asia, it is only in the fitness of things that India should take the first step and throw open its doors to free imports from within the region.

Bangladesh may benefit the most from India's offer of zero-duty imports to the neighbours. It has been urging India for quite some time to make such a concession. New Delhi did move some part of the way last year, when the government reduced the rates on 380 tariff lines. India has border trade agreements going with land-locked Nepal and Bhutan, as also with Myanmar. These arrangements, along with the free trade agreement with Sri Lanka, have not led to any substantial flow of imports from the neighbourhood. India's imports from the original SAARC countries — excluding Afghanistan, which has been admitted as its eighth member-state at this summit — add up to just one-fourth of its exports to the region. Indian exports to SAARC countries are itself very low — just about $5.5 billion. South Asia in fact remains the least integrated of the various regional groupings in terms of trade. For a variety of reasons, SAFTA has remained elusive, though a basic agreement is in place. Mr. Singh has also unveiled a grander plan and spoken about an ongoing process of building an open and integrated market from the Himalayas to the Pacific. In his scheme, SAFTA could have a major role to play in the new, emerging architecture. South Asia needs to achieve better integration within the region before moving towards integration with South East and East Asia.

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