India has been trying to persuade Pakistan to leave the contentious issue of Kashmir aside and focus on the development of trade between SAARC countries for the last many years. India has pushed for the development of trade in summit after summit, and Pakistan has killed each of those initiatives by repeatedly asserting that no progress is possible without the solution of Kashmir issue. Nafees Zakaria, spokesperson for the Pakistan Foreign Office, said just before a SAARC Summit, “Kashmir is the fundamental issue between Pakistan and India, which should be resolved according to UN Security Council’s resolutions. Kashmiris should be given their birthright to self- determination.” Here lies the basic fault line. There can be no progress in the trade issues in SAARC without the active participation of Pakistan, which is a major member of the grouping. Effective participation of Pakistan is not possible until the Kashmir matter is resolved. Lastly, it is not possible to solve the Kashmir matter because of different interpretations of the United Nations resolutions. We face an impasse here.
In the meanwhile, other members of the grouping are bypassing SAARC and forging bilateral trade relations among each other and with other countries. The Minister of Development Strategies & International Trade of Sri Lanka said recently, “The government (of Sri Lanka) has embarked on a strategy to deepen the existing FTAs with India and Pakistan and working out new FTAs with growing Asian economies like China and Singapore… We are also negotiating a new FTA with China and invigorating our existing FTA with Pakistan.” Thus, Sri Lanka is moving ahead to make bilateral agreements within SAARC with Pakistan and beyond SAARC with China. We know that China is trying to strengthen its relations with Bangladesh and Sri Lanka.
The hard reality facing us is that smaller members of SAARC, namely, the Afghanistan, Bangladesh, Bhutan, Nepal, Maldives and Sri Lanka, are caught in between two behemoths — Pakistan-China alliance on the one side and India on the other. The Pakistan-China alliance is trying hard to isolate India. We, on the other hand, continue to harp on the development of trade relations within SAARC. Afghanistan is generally pro-India because of the cross-border terrorism it faces from Pakistan. Bangladesh and Sri Lanka have essentially rejected India’s efforts within SAARC and are forging alliances with the Pakistan-China combine. Bhutan is firmly placed in the Indian zone of influence at present but there are murmurings in that country about enhancing trade relations with China. Maldives has generally taken a pro-China approach, which becomes pro-Pakistan when seen in the light of the China-Pakistan bonhomie. Nepal vacillates between pro- and anti-India stances depending upon the predilections of the Prime Minister in power. Among the seven members of SAARC excluding India, three are vacillating, namely Bangladesh, Nepal and Sri Lanka; one is largely anti-India, namely Maldives. Only two are pro-India, namely Afghanistan and Bhutan. The area of concern lays in the three countries that are vacillating, namely, Bangladesh, Nepal and Sri Lanka. The task before us is to isolate the Pakistan-China combine and win over these three countries to our side.
We must, therefore, kill SAARC; and make an East South Asia grouping consisting of Bangladesh, Bhutan, Nepal, Sri Lanka, and maybe, Myanmar. All these countries are located much closer to India than to the Pakistan-China alliance. We share common borders with Bangladesh, Bhutan, Nepal, and Myanmar, and common shores of the Bay of Bengal with Bangladesh, Myanmar and Sri Lanka. All these countries will find trade with India both easier and of greater advantage than trade with the Pakistan-China combine. Reportedly, the Indian government has already started working with the grouping named “BBIN” comprising of Bangladesh, Bhutan, India and Nepal. It is time to enlarge this effort to include Sri Lanka and Myanmar. These countries are free of bilateral conflicts. We can strengthen our geopolitical standing with the formation of such a Bay of Bengal Free Trade Area. We may rename the grouping as Indian Ocean Free Trade Zone and include Afghanistan.
The present political configuration in these countries provides an excellent opportunity. Countries of South Asia formed SAARC in 1985 when anti-Indian leaders, namely, Hussain Muhammad Ershad of Bangladesh, J R Jayewardene of Sri Lanka, and General Zia-ul Haq of Pakistan, headed three of the member countries. Today we have friendly leaders in Ashraf Ghani in Afghanistan, Sheikh Hasina in Bangladesh, Ranil Wickremesinghe in Sri Lanka. Nepal’s Pushpa Kamal Dahal “Prachanda” is also friendlier than his predecessor Khadga Prasad Sharma Oli who took a clear anti-Indian stance. This is the time for India to forge a Bay of Bengal Free Trade Area while the going is good. We should use this favourable circumstance to join these countries permanently into a common market like that of the European Union such that they permanently become part of the Great Bay of Bengal Alliance.
Such a regional Free Trade Agreement is also necessary in the light of stalemate in the World Trade Organisation (WTO). The WTO includes developed countries whose interests are quite different from those of the developing countries. The developed countries focus on deepening of the Intellectual Property Rights (IPRs), that is, the patents laws, and stalling progress on free trade in agriculture. We are not able to make progress in the expansion of global trade in the WTO because of this intransigence on part of the developed countries. These issues are not relevant among the countries of the Bay of Bengal. There is scarcely any transfer of income from IPRs, or trade in agricultural goods, between these countries. Therefore deepening of trade between these countries is feasible.
In fact, our aim should be to scuttle the WTO altogether. The WTO is unholy. The developed countries had agreed to resolve issues regarding free trade in agriculture within ten years of the formation of WTO in 1995. They have made no progress on that issue. On the other hand, they have repeatedly tried to include the issues of investment protection and labour and environment standards in the WTO. They want to use these issues to browbeat the developing countries. We must appreciate the fact that the distribution of global income between the developed and developing countries has moved but a trifle in our favour. Fundamentally, 75 percent people living in the developing counties have 25 percent of the global income; while 25 percent people living in the developed countries have 75 percent of the global income. We cannot rectify this lopsided distribution of global income until the developed countries have IPR protection under the WTO. We must revitalise the Non-Aligned Movement, which doubles up as a grouping of the developing countries. A Bay of Bengal Free Trade Area or an Indian Ocean Free Trade Area can be a first step in that direction.
Author was formerly Professor of Economics at IIM Bengaluru