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Regional Trade Agreements in South Asia: Trade and Conflict

Regional Trade Agreements in South Asia: Trade and Conflict

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Regional Trade Agreements in South Asia: Trade and Conflict

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  1. Regional Trade Agreements in South Asia: Trade and Conflict October 16th, 2006 Sustainable Development Policy Institute

  2. Study parameters and questions • Three questions: • Do RTAs promote trade? • Do RTAs mitigate or promote conflict? • If neither, then how is conflict addressed? • Literature and Research Answers: • There is a need to look at conflict mitigation as part of a larger regional integration process which includes both economic and non economic factors.

  3. 100 93.5 90 80 71.9 70 60 51.4 50 40 30 26.5 22.2 20.5 20 15.7 8.1 10 0 Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka China Conflict in South Asia – Political Stability

  4. Conflict in South Asia • Interstate conflict • 1985: India-Bangladesh - Muhurichar Island conflict • 1987: India-Sri Lanka - Indian Peace Keeping Force (IKPF) sent to Tamil Nadu to disarm the Tamils • 1988: India-Nepal - Transit Treaty issue leads to escalating tensions between the two countries • 1989: India-Sri Lanka - Withdrawal of IPKF demanded by Sri Lankan government • 1991: India-Sri Lanka - India boycotts SAARC Colombo summit • 1998: India-Pakistan - Both countries test nuclear weapons • 1999: India-Pakistan - Kargil conflict in Indian-held Kashmir • 2001: India-Bangladesh - Pyrdiwah village border conflict • 2002: India - Terrorist attack on Indian parliament blamed on Pakistan, leads to both amassing troops along the border

  5. Intra-state conflict • Intra-state conflict • 1983: Sri Lanka - Widespread anti-Tamil rioting following the deaths of soldiers in an LTTE ambush • 1984: India – P.M. Indira Gandhi killed by Sikh body guards after ordering troops to attack Sikh militants from Amritsar • 1988: Maldives - Attempted coup thwarted (India assisted) • 1990: India - Kashmiri separatist movement gains momentum • 1992: India - Hindu-Muslim riots in Ayodhya following the demolition of Babri Mosque • 1993: Sri Lanka - President Premadasa killed in LTTE attack • 1999: Pakistan - Prime Minister Nawaz Sharif ousted in military coup led by General Pervez Musharraf • 2000: Nepal – Maoist uprising continues to impact state • 2001: India – Naxalite uprisings within various states • 2004: Pakistan - Waziristan and Balochistan conflict

  6. Mapping South Asian RTAs: The formal structure SAARC, SAPTA, SAFTA SAARC Integration, regional cooperation and non-trade issues SAPTA SAFTA

  7. The evolution of RTAs • The South Asian Association for Regional Cooperation (SAARC) the first regional cooperation agreement in South Asia, was formed in December 1985 • The South Asian Preferential Trade Agreement (SAPTA) agreement was signed on April 11, 1993 and entered into force on December 07, 1995, • The South Asian Free Trade Agreement (SAFTA) agreement was signed during the twelfth SAARC summit in Islamabad on January 06, 2004. • It was supposed to enter into full force, but has not since due to political wrangling.

  8. Trade concessions from SAPTA to SAFTA • Under SAPTA, concessions on tariff, para-tariff and non-tariff measures were negotiated step-by-step and followed a product-by-product approach. • The SAFTA agreement provides for multilateral concessions. Further, it seeks to completely eliminate barriers to trade by instituting a free trade regime.

  9. Trade/Economic complementarities • Volume of informal trade exceeds legal trade • Shows that complementarities exist and could result in the unleashing of value added trade. • Tariffs, quotas, bans and disputes over sensitive lists for LDCs are trade inhibitors. • Potential for leveraging, investment, joint ventures and the enabling institutional arrangements • Problem is, that this competes with growing extra regional aspirations. • Even if trade between SAARC nations grows, it will do so at a relatively small proportion of total trade. • Inter and Intra state implications from dealing with conflict.

  10. From trade to conflict: A recap and a question • South Asia is conflict-ridden • Trade complementarities exist in the region • The RTAs are designed to capture these complementarities • Language in the RTA has both inter and intra-state security implications

  11. Bilateral inhibitors of trade under SAARC • The planned 1989 SAARC summit in Colombo was postponed due to Sri Lankan opposition to the presence of the Indian Peace-keeping Force (IPKF) on the Island at the time. • The disintegration of the USSR placed concepts like ethnic rights, the right to self-determination and human rights higher up on national agendas. • The India-Pakistan conflict over Kashmir rose in profile; • India and Sri Lanka went head to head in the on-going struggle for Tamil Eelam; • India and Bangladesh developed differences over the Farakka Barrage; • India contested Nepal’s assertion of greater political and economic independence.

  12. Bilateral inhibitors of trade under SAARC • During the 1990s, when economic circumstances were favorable to progress under SAPTA, political differences between Pakistan and India stalled progress. • Throughout the 1990s, India blamed Pakistan for supporting an armed insurgency in Kashmir thus creating domestic instability within Indian Kashmir. • In 1998, Pakistan and India declared themselves nuclear weapon states which led to major military crises in 1999 and 2002. Differences between Pakistan and India were the major factor that led to a delay in finalizing SAFTA. • The initial finalization deadline for the Agreement was 2001 (later revised to the current deadline of 1 January, 2006).

  13. What drives peace? • RTAs have been unable to develop economic momentum due to persisting regional tensions and their ability to proactively mitigate conflict has been limited. • However, concurrent bilateral processes are in evidence which aim to promote political stability. • This however, leads to sub regionalism (SAGQ) which may then lead to trade inequities – which will hinder progress on trade integration. • Implicitly, equitable trade must combine with other aspects and avenues of cooperation in order to build peace.

  14. The Impact of External Influences • India-Pakistan Conflation of events post 9/11 driving composite dialogue • US interest in Central Asia - Afghanistan • Nuclear instability, the terrorist threat in South Asia • India-Sri-Lanka • Norwegian/World Bank/Asian Bank efforts to promote the LTTE-Sri Lankan peace process • India-Nepal, Pakistan, Sri Lanka, Bangladesh • The Sino-Indian territorial dispute sustains China’s interest in the region • Maintains political, economic and diplomatic relations with other South Asian countries to neutralize India’s coercive diplomacy and maintain a balnce in the region • As a SAARC observer China may take on a formal role in conflict mitigation

  15. Summary of 3 Initial Questions • Do RTA’s promote trade? • Yes, but as a small percentage of extra regional trade, the political benefits in peace building cannot be heard over the noise of larger partners • Need to cut through the real barriers that would harness trade • Tariff barriers • Non tariff barriers • Sensitivity lists • Protectionism • Many continue to accuse India of protectionism which has to stop. • Real benefits not being felt by all

  16. Summary of 3 Initial Questions • Do RTA’s promote/mitigate conflict? • Mixed • Inequitable trade can contribute to intra state conflict (regions that are left behind find meaning in social movements, reverse nationalism, ethnicity, etc.) • Equitable trade can mitigate conflict but only as part of a series of non economic factors that need to be addressed (political dynamic, etc. • Trade between adjacent regions can generate real benefits for real people. • How is conflict addressed? • Reality within globalization – a mix of internal/external forces • Threats are from the institutionalization of conflict – where too many gain from the reality of conflict.

  17. A look into the future • Continuing with SAARC. • Resolving outstanding non economic disputes • Shared resource management • Using social capital for peace • Sustained external pressure for peace/equitable trade • Bilateralism • Tension between neighbors and India continue as benefits from trade are one sided and India imposes its will • Pakistan understands this and refuses to behave like a Sri Lanka or Bangladesh and more so like a China. • Encourage real cross border trade • Rajasthan – Sindh, Bangladesh – West Bengal, Punjab x 2

  18. A look into the future • Non economic Bilateral to economic Regional • Sectoral inter dependence to Regional integration • Benefit sharing between adjacent communities • Benefit sharing beyond urban centers

  19. Questions

  20. Regional Dynamics

  21. Regional Dynamics – Foundation Building

  22. Regional Dynamics – Trade Channels

  23. Regional Dynamics – Economic Growth

  24. Regional Dynamics – Political Influence

  25. Regional Dynamics – Bilateral Agreements

  26. Regional Dynamics – Urban Rural Development

  27. Regional Dynamics – Inter State Conflict

  28. Regional Dynamics – Intra State Conflict

  29. Regional Dynamics – Equitable sub regionalism

  30. Regional Dynamics – Adjacent development

  31. Regional Dynamics – Intra State Conflict