SAARC is 25 years old compared to EC's 53 years
Saturday, 1 May 2010
Enayet Rasul Bhuiyan
The European Community (EC) is regarded as the oldest and the most successful example of regional economic integration for deriving the common benefits from such an integration by its member countries. EC as it stands today did not evolve to its present state in a decade or two. It took some fifty three years after its founding through the Treaty of Rome in 1957 to come to where it is now, a continent size economic and monetary union of sovereign countries which often were entangled in the worst of conflicts in the past.
From 1957, it took another 35 years for the EC to take the initiatives to transform itself from a limited free trading area into a fuller and integrated monetary, economic and political union as well through the Maastricht Treaty signed between the EC countries in 1992. From that date the EC came to be known as the European Union (EU) embracing goals of establishing an European parliament, common currency and defence and foreign policies. The common currency was introduced only in the later part of the last decade and the tasks of achieving fuller forms of the European parliament and common foreign and defence policies have progressed quite a lot.
EU at present is a success story but that success was not tasted in haste. It came bit by bit, year after year, as the outcome of painstaking negotiations, sincere gestures made on one side and their reciprocation on the other side, the outcome of often exasperating negotiations dragging over years to gradually reconcile narrower national interests to the needs for wider collective actions that assured greater benefits to everybody. Under phase by phase agreements, member nations of the EC ceded their national powers to the supranational organisation but not before they had ensured the preservation or even promotion of their individual national interests even after embracing united obligations. The decision to have common policies on products, the move towards the formation of an economic community or common market, the actual lowering of trade barriers within the community, all were attained over a long drawn out process.
The EU has progressed as far as having a common currency, the Euro. But the United Kingdom which was one of the original enthusiastic founders of the European Economic Community(EC), the forerunner of the EU, has still not introduced the Euro as its only currency. From the European Coal and Steel Community to European Economic Community, European Free Trade Association and the introduction of the Euro, the EU had to go through a long journey, step by step, to blend national interests with the goals of the organisation.
This aspect of gradualism as the precondition of success and consolidation of the gains of a regional economic organisation comes to mind as the leaders of the South Asian Association for Regional Cooperation (SAARC) are meeting for their sixteenth summit at Thimpu, Bhutan. One need not feel too disheartened that SAARC is not progressing as fast as it can or should keeping in mind the experiences of the EU. Considering the things EU accomplished in over half a century of its existence, what the SAARC has achieved in a little over half that time counts for quite a lot. The SAARC members may think of improving upon EC's experiences. But it may not be realistic thinking. Probably, we will not require a half century to realise targets but attempts at leap frogging could land us in a ditch and not in the rose garden.
The South Asian heads of governments could put their signatures on a landmark treaty, the South Asian Free Trade Agreement (SAFTA) in 2004. The SAFTA agreement has also taken effect from 2006. The two heavyweights in SAARC -- India and Pakistan -- were required to complete their tasks of zero tariff creation to give a boost to regional trading in line with the agreement by 2009, Sri Lanka was allowed another year to achieve the same end and Bangladesh and other SAARC entities will be allowed till 2013 to bring tariffs down to nil.
As it is, SAFTA is still at a largely framework stage. A framework is always capable of absorbing additions, modifications, adjustments and readjustments including rescheduling of tasks to be completed. Such has also been the way of progress in the EU.
The SAFTA agreement looks fine on paper. The strongest economies were directed to bring down their tariff walls in five years whereas weaker ones like Bangladesh were given about nine years to complete the same task. In theory, this could mean the weaker countries exporting greater amounts to the stronger ones in tariff less conditions before they also become subjected to the same . So, the architects of SAFTA can always contend that there is in built justice in it.
But one has to look at the hard realities. India has a foreign currency reserve of over 100 billion US dollars and the reserve is set to grow in coming years . The capacities of India to undertake vast transformations of its economy even in the medium term to meet the challenges of tariff less regional trade would surely be many times more than fledgling Bangladesh which presently has a forex reserve of a little over 10 billion dollars only.
India's capacity to import new technologies, to introduce new production processes, acquiring of latest infrastructures to be able to introduce further economies of scale to expand market shares in the expanded regional market, will surely be greater than economically more humble entities like Bangladesh in SAARC. India has already a long lead over other South Asian countries to reap wider market opportunities from SAFTA and it is likely to ruthlessly hone its capacities in the coming years. It would be enabled to do so from the sheer size of its foreign currency earnings to meet the investment needs in technologies, capital equipment and infrastructures to become the strongest economy in South Asia .
Can Bangladesh expect to catch up with India with its present relatively modest foreign exchange reserve, the present incapacity of many of its industries to invest in modernisation and research and development (R &D) ? The answer must be in the negative because the present economic scenario in Bangladesh or the attitude of its government do not suggest that they are adequate plans at implementation stages to enhance the country's competitiveness to the level that would be required to face up to the challenges of regional trade minus tariff and other barriers.
Thus, for countries like Bangladesh, there will be no option but to fall back on a policy of gradualism in respect of their obligations under the SAARC. They are very unlikely to be able to move in tandem with the powerful countries in SAARC. Even the grace period allowed to them to become competitive in line with SAFTA could prove to be insufficient for their actual needs. Therefore, SAFTA will have to be operated with enough safeguards and flexibilities specially in respect of the weaker economies.
Bangladesh and other disadvantaged countries in SAARC must insist on commitments of the sort that would allow them time for revision of deadline for lifting tariffs. The time table of 2013 may be too soon for their need ; therefore, they will need to be allowed further substantial extension of time, on demand, to prepare their economies to fully meet the challenges of SAFTA. Negotiators of countries like Bangladesh must adopt this position with no loss of time.
The European Community (EC) is regarded as the oldest and the most successful example of regional economic integration for deriving the common benefits from such an integration by its member countries. EC as it stands today did not evolve to its present state in a decade or two. It took some fifty three years after its founding through the Treaty of Rome in 1957 to come to where it is now, a continent size economic and monetary union of sovereign countries which often were entangled in the worst of conflicts in the past.
From 1957, it took another 35 years for the EC to take the initiatives to transform itself from a limited free trading area into a fuller and integrated monetary, economic and political union as well through the Maastricht Treaty signed between the EC countries in 1992. From that date the EC came to be known as the European Union (EU) embracing goals of establishing an European parliament, common currency and defence and foreign policies. The common currency was introduced only in the later part of the last decade and the tasks of achieving fuller forms of the European parliament and common foreign and defence policies have progressed quite a lot.
EU at present is a success story but that success was not tasted in haste. It came bit by bit, year after year, as the outcome of painstaking negotiations, sincere gestures made on one side and their reciprocation on the other side, the outcome of often exasperating negotiations dragging over years to gradually reconcile narrower national interests to the needs for wider collective actions that assured greater benefits to everybody. Under phase by phase agreements, member nations of the EC ceded their national powers to the supranational organisation but not before they had ensured the preservation or even promotion of their individual national interests even after embracing united obligations. The decision to have common policies on products, the move towards the formation of an economic community or common market, the actual lowering of trade barriers within the community, all were attained over a long drawn out process.
The EU has progressed as far as having a common currency, the Euro. But the United Kingdom which was one of the original enthusiastic founders of the European Economic Community(EC), the forerunner of the EU, has still not introduced the Euro as its only currency. From the European Coal and Steel Community to European Economic Community, European Free Trade Association and the introduction of the Euro, the EU had to go through a long journey, step by step, to blend national interests with the goals of the organisation.
This aspect of gradualism as the precondition of success and consolidation of the gains of a regional economic organisation comes to mind as the leaders of the South Asian Association for Regional Cooperation (SAARC) are meeting for their sixteenth summit at Thimpu, Bhutan. One need not feel too disheartened that SAARC is not progressing as fast as it can or should keeping in mind the experiences of the EU. Considering the things EU accomplished in over half a century of its existence, what the SAARC has achieved in a little over half that time counts for quite a lot. The SAARC members may think of improving upon EC's experiences. But it may not be realistic thinking. Probably, we will not require a half century to realise targets but attempts at leap frogging could land us in a ditch and not in the rose garden.
The South Asian heads of governments could put their signatures on a landmark treaty, the South Asian Free Trade Agreement (SAFTA) in 2004. The SAFTA agreement has also taken effect from 2006. The two heavyweights in SAARC -- India and Pakistan -- were required to complete their tasks of zero tariff creation to give a boost to regional trading in line with the agreement by 2009, Sri Lanka was allowed another year to achieve the same end and Bangladesh and other SAARC entities will be allowed till 2013 to bring tariffs down to nil.
As it is, SAFTA is still at a largely framework stage. A framework is always capable of absorbing additions, modifications, adjustments and readjustments including rescheduling of tasks to be completed. Such has also been the way of progress in the EU.
The SAFTA agreement looks fine on paper. The strongest economies were directed to bring down their tariff walls in five years whereas weaker ones like Bangladesh were given about nine years to complete the same task. In theory, this could mean the weaker countries exporting greater amounts to the stronger ones in tariff less conditions before they also become subjected to the same . So, the architects of SAFTA can always contend that there is in built justice in it.
But one has to look at the hard realities. India has a foreign currency reserve of over 100 billion US dollars and the reserve is set to grow in coming years . The capacities of India to undertake vast transformations of its economy even in the medium term to meet the challenges of tariff less regional trade would surely be many times more than fledgling Bangladesh which presently has a forex reserve of a little over 10 billion dollars only.
India's capacity to import new technologies, to introduce new production processes, acquiring of latest infrastructures to be able to introduce further economies of scale to expand market shares in the expanded regional market, will surely be greater than economically more humble entities like Bangladesh in SAARC. India has already a long lead over other South Asian countries to reap wider market opportunities from SAFTA and it is likely to ruthlessly hone its capacities in the coming years. It would be enabled to do so from the sheer size of its foreign currency earnings to meet the investment needs in technologies, capital equipment and infrastructures to become the strongest economy in South Asia .
Can Bangladesh expect to catch up with India with its present relatively modest foreign exchange reserve, the present incapacity of many of its industries to invest in modernisation and research and development (R &D) ? The answer must be in the negative because the present economic scenario in Bangladesh or the attitude of its government do not suggest that they are adequate plans at implementation stages to enhance the country's competitiveness to the level that would be required to face up to the challenges of regional trade minus tariff and other barriers.
Thus, for countries like Bangladesh, there will be no option but to fall back on a policy of gradualism in respect of their obligations under the SAARC. They are very unlikely to be able to move in tandem with the powerful countries in SAARC. Even the grace period allowed to them to become competitive in line with SAFTA could prove to be insufficient for their actual needs. Therefore, SAFTA will have to be operated with enough safeguards and flexibilities specially in respect of the weaker economies.
Bangladesh and other disadvantaged countries in SAARC must insist on commitments of the sort that would allow them time for revision of deadline for lifting tariffs. The time table of 2013 may be too soon for their need ; therefore, they will need to be allowed further substantial extension of time, on demand, to prepare their economies to fully meet the challenges of SAFTA. Negotiators of countries like Bangladesh must adopt this position with no loss of time.