Preferential Trading Arrangement
Viability And Progress In South Asia

By Bhubanesh Pant

OVER the past two decades, the upcoming of preferential trading arrangements (PTAs) in various parts of the world has witnessed a noticeable development. Countries all over the world are regrouping in trade and political blocks such as the North American Free Trade Area (NAFTA), the European Union (EU), the Association of South-east Asian Nations (ASEAN) and the Shanghai Five. Moreover, there has been a recent initiative to form a BIMSTEC (Bangladesh, India Myanmar, Sri Lanka and Thailand) Free Trade Area, which is expected to come about in five years’ time. Under the planned BIMSTEC Free Trade Area, member countries would reduce import tariffs to 0-5 per cent, the same level of those in the ASEAN Free Trade Area (AFTA). The South Asian region is no exception as seven South Asian nations set up the South Asian Association of Regional Cooperation (SAARC) in 1985 as a first move towards regional cooperation.

It was only after the 1990s that economic integration was accorded top priority within the SAARC and the first step towards this path was the commission of a study on Trade, Manufactures and Services by the SAARC Secretariat. The South Asian Preferential Trading Agreement (SAPTA) was launched by the SAARC in 1995 as the second move.

Studies of PTAs have revealed that most of the conditions for a successful PTA do not exist in the case of South Asia. These conditions include, inter alia, geographical proximity, the presence of trade complementarity, high pre-PTA tariffs, high degree of intra-regional trade, variations in economic structure based on competitiveness, and little political tensions, if any, among member nations.

According to the natural trading blocks argument of Paul Krugman, geographical proximity does promote trade. Regional trading arrangements should be undertaken on the basis that it is natural for neighbours to indulge in trade with each other. However, the South Asian case moves away from this argument in the sense that although India and Pakistan are neighbours, trade between the two countries has been low historically. Again, in terms of trade complementarity, the trade indices developed by Drysdale has revealed that there is an absence of strong trade complementarity in the bilateral trade structures of South Asia.

It has been empirically shown that average nominal tariff rate has taken a downward trend in South Asia with the undertaking of trade liberalisation reform measures over the last two decades. Still, the average for South Asia is higher compared with other regions in the world which means that high pre-PTA tariff as a precondition for creating a PTA holds true of South Asia.

The share of intra-regional trade in South Asia’s total trade went up from 2.4 per cent in 1990 to 4.6 per cent in 1999. Yet, this figure is much less than that of other PTAs. Another concern in India’s growing trade surplus with other SAARC countries. Although an increasing trend has been noticed in the exports of India to other SAARC countries (excluding Pakistan) (from 3.9 per cent in 1970 to 5.5 per cent in 1999), its import share from the region fell from 1.4 per cent to 0.9 per cent during the same period. This demonstrates India’s role in attracting imports from other South Asian countries is limited.

Another principal issue related to South Asian economic integration is that countries in the region are producing and trading similar commodities. The Revealed Comparative Advantage indices estimated by economists have shown that South Asian nations have an almost identical pattern of comparative advantage in a relatively narrow range of commodities; moreover, these countries do not have comparative advantages in a wide range of capital goods and advanced manufactured products.

The political tension between the two major countries in South Asian, India and Pakistan, has been another primary hurdle to regional integration.

Despite these constraints, progress has been made to some extent. After the launch of SAPTA in 1995, three rounds of preferential tariff reductions have been conducted, namely SAPTA-I (concluded in 1995), SAPTA-II (concluded in 1997) and SAPTA-III (concluded in 1998), under the preferential trading arrangement.

Under SAPTA-I, member countries offered trade concessions for 226 commodities that formed just about 6 per cent of traded goods. The issue of non-tariff barriers was not taken up in this round. The product coverage and proposed tariff cuts appeared more significant under SAPTA-II where concessions were provided to all countries on about 1800 commodities. Non-tariff measures were also given prominence. However, both SAPTA-I and SAPTA-II seemed artificial in the sense that there was an almost total absence of demand for the products offered. Thus SAPTA-III appeared more significant in the sense that concessions were offered to all countries on about 3000 commodities with the aim of boosting intra-regional trade. Still, most of the items kept in such list of goods are those that are rarely imported by the country that has granted the so-called concessions. The negotiations for the fourth round were initiated in 1999, but no progress has been made so far.

SAPTA is considered to be a step on the path to creating SAPTA. As SAPTA is confined to trade in goods, unless SAPTA is expanded to encompass trade in services, there is possibility of SAFTA not being a real FTA. For landlocked countries such as Nepal and Bhutan, the service sector could be much more viable and cost-effective as compared to the manufacturing sector.

Before operationalising SAFTA, there is a need to resolve an array of complex issues such as rules of origin, identification and dismantling of non-tariff measures, a mechanism for the compensation for revenue loss, implementation timetable, monitoring mechanism, and protection of bilateral agreements and treaties, among others. Currently, there prevails no mechanism in SAARC for ensuring that targets agreed to are strictly pursued.

The initial target of the South Asian nations to activate the South Asian Free Trade Area (SAFTA) by 2001 did not materialise, neither did the signing of the draft treaty as later envisaged.

However, the recent statements made by the South Asian leaders in Kathmandu on 6 January 2002 have raised hopes that the SAARC Free Trade Area (SAFTA) would, after all, materialise sooner or later. The first action will be by finalising the text of the Draft Treaty Framework by the end of 2002.

Conflict Resolution: New Global Impetus Needed

By Nishchal Nath Pandey

A multi-regional project on preventive diplomacy and conflict resolution participated by senior government officials, community leaders and non-government individuals from 23 different countries was held in the United States from Jan 17 to Feb.7th. A term coined by UN Secretary General Dag Hammarskjold to describe UN mediation and peacekeeping efforts to regional conflicts, preventive diplomacy is relevant now like never before in history. After the end of the cold war, a few inter-state rather than inner state conflicts have erupted having far-reaching regional and even global ramifications, therefore today preventive diplomacy includes national crises such as gross violations of human rights, genocide, ethnic cleansing, collapsing states etc.

An enduring coordinated worldwide approach to responding to conflicts increasingly centering around ethnicity, religion and other aspects of identity, economic disparity etc. with appropriate strategies for early warning, confidence building and actual initiatives has become the order of the day. As if as a further reminder of the importance of conflict resolution and preventive diplomacy, the events of Sep. 11, 2001 provided further evidence that the resolution of international conflicts by peaceful means remains to be one of the most contested debates. But there are ample numbers of conflicts whether in Africa or the Balkans, the Middle East or different parts of Asia that still loom large and remain to be a challenge to international peace and stability.

Michael Lund while writing on preventive diplomacy says "the most useful definition (of preventive diplomacy) might read: actions, policies, and institutions used to keep particular states or groups within them from threatening or using organised violence, armed force, or related forms of coercion as the way to settle either interstate or national political disputes, especially where and when the existing means cannot peacefully manage the destabilising effects of economic, social, political, and international change." However, crisis prevention has become more wearisome as even well known institutions and NGOs get entangled into influenced or prejudiced approaches and attitudes.

But, Institute for Multi-Track Diplomacy based in Washington is one such organisation that has been diligent in pressing for peaceful resolution of domestic and regional conflicts. Chairman and Co-Founder of the Institute which holds a multi-disciplinary view of peace building Ambassador John W. MacDonald himself has been traveling extensively around the world in order to bring together activists, politicians and eager individuals for conflict prevention not necessarily by publicising the initiatives even before the work has already been accomplished. While interacting with the participants that included this scribe, Mr. Joseph Montville, Director of the Preventive Diplomacy Program of the Center for Strategic and International Studies (CSIS), elaborated on the overall characteristics of early warning and building up strategies and tactics to prevent them. With nearly 160 staff of which half are research scholars, the Center focuses on international policy issues through interdisciplinary study of emerging world problems in a variety of regional and functional program areas. Ambassador Teresita Schaffer, former American Ambassador to Sri Lanka who heads this division also painstakingly brings out the ‘South Asia Monitor’ ornate and well known for its grasp of the issues that confront the region rightly described by former US President Bill Clinton as the "most dangerous place on earth."

The Centre for Global Peace at the American University, Search for Common Ground, Centre for International Development and Conflict Management at the University of Maryland and the US Institute of Peace are some of the Washington based organisations and (or) that focus on this specific field. In fact, during the three-week visit what was most remarkable was that Americans are concentrating on and extensively conducting research on virtually every feature of human life from health to environment, from defence to outer space and from cyber terrorism to the newest innovations in the field of information technology. While the American worldview has been shaped and reshaped by international events including the oil crisis of the 70s, the height of the Cold War of the eighties, the Gulf crisis of the nineties and the menace of terrorism of the very recent days, the world’s outlook towards the United States and its people too have been fashioned by their own individual experiences while dealing with the US, international newspapers and TV channels including films. It has been a perceived notion that American children know far less about the rest of the countries of the world than vice versa primarily because students globally have been taught from their earliest childhood years of the power, influence and prosperity of America. However, this might slowly but surely be changing.

At the micro level, smaller cities like Memphis in Tennessee and Tulsa in Oklahoma too have been engaging in conflict resolution at a smaller scale involving family disputes with organisations like the Interfaith Conference of Metropolitan Washington that focuses in bringing people of different faith and religious beliefs together. The other city that swarms with more than a few institutions focusing on foreign policy, conduct of international relations and crucial topics like terrorism, conflict resolution and preventive diplomacy is New York. Other than being the ‘world capital’ the city also has world famous institutions like the Brookings, Council on Foreign Relations that publishes the Foreign Affairs magazine and the Columbia University, which has various departments converging on these subjects.

Hopefully, these centers and institutions will bring in tangible and well-analysed strategies not only to the amorphous concept of conflict resolution but more so to bring an end to world’s most intractable and complex problems.

The Day Of The Goddess Of Learning

By Sumendra Maharjan

Among all the seasons, winter is the most hostile season in the Himalayan hills. Most of the educational institutions are closed, and the streets give a deserted look. It seems people have forgotten the festival of life. However, by the end of January, this dreary winter comes to an end, and the sun flares bright with the first flush of Spring. The flowers blossom and faces of the people glow with new warmth and energy. The arrival of spring invigorates the people to enjoy the life.

Shree Panchami marks the beginning of the festival season in the Himalayan hills. It is the traditional day to inaugurate the spring festival. Shree Panchami is observed to worship and invoke the Goddess Saraswati, the goddess of learning. In the mythological texts, Saraswati is portrayed as the goddess of muisc, art, literature and learning.

Seated on a white lotus, the four-handed Goddess Saraswati is the form of purity, religiosity and sanctity. Attired in pure white dress, Saraswati is always found accompanied with a book and Vina, her classical music instrument. She is worshipped by all the gods and goddesses to seek knowledge, virtue and wisdom.

Since time immemorial a celebration takes place on the hill behind the stupa of Swayambhunath at the shrine of Saraswati, the lovely goddess of learning craft and art. The goddess is worshipped by the artists, musicians, weavers and students. On this day, the Buddhists living in Kathmandu worship Manjushree which is situated near the shrine of Saraswoti. Manjushree was a Chinese saint who practised and followed Buddhism. He played a great role in the development of human civilization in the valley of Kathmandu.

In the Skanda Purana, it is written that this beautiful valley was a lake called Nag-daha, the abode of serpents. Once Manjushree, a Chinese saint visited the lake valley to worship Swayambhunath, the stupa of Buddha, and Guhyeshwari, but the temple and the monastery were situated at the two opposite ends of the lake. Manjushree had great difficulty in worshipping the two shrines. He had to cross and travel through the dangerous peaks of the hills. Hence to find out a solution of his problem, with one blow of his mighty scimitar, he struck a deep cliff in the southern hills allowing all the water to drain away from the valley.

Later the followers and disciples of Manjushree ploughed and cultivated the valley. They developed it as a model valley which even gods envied. It is said that even the great Vedic gods had visited and appreciated this green and fertile valley. In due course of time, this valley which was once full of water turned into a high seat of culture, religion and civilization. The day Manjushree had cut the hills to drain the water away from the lake was the fifth day of the Falgun. From that day onwards, the Buddhists instituted a festival in his name, and every year on the Shree Panchami the followers of Buddhism worship him in memory of his great feat.

However the festival of Basanta Panchami is celebrated in a different way in the Terai of Nepal which is greatly influenced by the activities of the people living across the border in India. This festival is celebrated with much enthusiasm by the people elated to the educational enterprises viz students, teachers and the people related to academic institutions. Since Sawaswati is the goddess of learning, there is a great respect for this festival among student community as they are in the process of attaining their formal education.

The students in Terai collect money from among themselves. They also collect money from the villagers and shopkeepers. During the puja the students spend the money thus collected on the various religious and non-religious activities. A full-size image of Saraswati is installed in a temporary temple erected specially for the occassion. The temple is decorated with colourful paper, clothes, flowers, and electricity. With the help of an examinee student, the Brahmin priest performs the puja. Chanting the Sanskrit Slokas from the religious sculptures, the holy priest offers water-soaked rice, fruits, flowers, grass blades etc. and at last sprinkles holy water. Once this ceremonial puja ends, the prasad is distributed among all the people gathered there. In the night of the puja, the students arrange some cultural programme.

Hence, the Shree Panchami festival is celebrated in the three different ways by the people of different communities. On this solemn occassion, the small children are initiated to begin their first alphabets. The Shree Panchami day is also considered auspicious for the purpose of marriage. On this day throughout Nepal, one can have a view of the innumerable bright musical wedding processions. It is believed that the couples married on this day enjoy a long and blissful conjugal life.