A distant dream

As we struggle to achieve free trade in South Asia, an economic union seems an unlikely prospect for now

A distant dream
“Towards South Asian Economic Union” was the theme of the Seventh South Asian Economic Summit (SAES) held in New Delhi from 5-7 November, 2014. The theme sounds too ambitious, which is not at all a bad thing. One should set high targets, but setting targets is one thing and achieving them partially or fully is another. The key word in the theme is “Economic Union”. How practical is that goal, and how close are South Asian countries to achieving it? Is it going to happen in the near future, or is it just a distant dream?

To answer these questions we need to understand what an Economic Union is, and then look at where South Asian stands in terms of regional integration.

An Economic Union is the second last stage of the economic integration, only below the level of a Political Union. The South Asian Free Trade Agreement (SAFTA), signed in 2004 and in force since 2006, is the principal economic integration agreement between eight South Asian nations. As the name of the agreement goes, nine years down the road, South Asia should be a free trade area partially or fully. That is the first level of integration.
Bangladesh and Sri Lanka have signed bilateral trade agreements with India

SAFTA is not being enforced so far, and no protocols, annexes or schedules have been added to the agreement since its inception. For example, India and Pakistan have not reduced their tariffs to between 0 and 5 percent from the other party as per the requirements of Article 7.1(C) of SAFTA, which states that “the subsequent tariff reduction by Non-Least Developed Contracting States from 20% or below to 0-5% shall be done within a second time frame of 5 years, beginning from the third year from the date of coming into force of the Agreement.” SAFTA came into force on January 1, 2006, so that time period is over. Furthermore, two other articles of SAFTA, Article 10 on Institutional Arrangements and Article 20 on Dispute Resolution Mechanism, have not yet come into effect. So, some countries of SAFTA are in a material breach of the agreement, as they are just not complying with what was agreed upon in 2004. It transpires from a recent study that if parties to an agreement are in a breach of international agreement, under international law, the treaty may be suspended or terminated.

The study further says that the governing convention that sets forth the rules regarding a treaty’s validity, enforcement, interpretation and termination is the Vienna Convention on the Law of Treaties (1969). The Article 60.2 of the convention says, inter alia, “A material breach of a multilateral treaty by one of the parties entitles:(a) the other parties by unanimous agreement to suspend the operation of the treaty in whole or in part or to terminate it either: (i) in the relations between themselves and the defaulting State, or (ii) as between all the parties; (b) a party specially affected by the breach to invoke it as a ground for suspending the operation of the treaty in whole or in part in the relations between itself and the defaulting State; (c) any party other than the defaulting State to invoke the breach as a ground for suspending the operation of the treaty in whole or in part with respect to itself if the treaty is of such a character that a material breach of its provisions by one party radically changes the position of every party with respect to the further performance of its obligations under the treaty.”

The failure of SAFTA so far has compelled Bangladesh and Sri Lanka to sign bilateral trade agreements with India. And so far, South Asia is only at the first stage of economic integration, which is Free Trade, and that too is in a danger.

Achieving regional integration up to the level of Economic Union in South Asia would create limitless opportunities in the region, but we need to give ourselves a reality check, while putting in every possible effort to deepen regional integration up to every possible extent. It will take time, like in the case of European Union where any security related issues weren’t as significant as between India and Pakistan, which are by all means the most critical players in the region by all means.

The writer is a civil servant
Email: umerbhatti83@gmail.com