South Asia, one of the world’s poorest regions, comprises three developing countries - India, Pakistan, Sri Lanka and four least developed countries (LDC - Bangladesh, Bhutan, the Maldives, Nepal), and accounts for one-fifth of the world’s population. It is also home to nearly 40 per cent of the world’s poor living on less than a dollar a day. To this developing area of humanity, global trade is an important tool in combating poverty by way of economic development. Therefore, engaging in international trade governed by the World Trade Organisation (WTO) is a top priority for South Asian countries.

WTO negotiations amply demonstrate that when countries forge alliances, they can generate synergy and become powerful players. Examples can be cited of the European Union (EU) and similar other blocs that can exert powerful influence mainly because countries in these blocs operate together, develop proposals together, and support each other during discussions. South Asian cooperation in the multilateral trading system is a relatively new phenomenon commencing only in the 1990s, although South Asian countries did participate in the Uruguay Round of the General Agreement on Tariffs and Trade (GATT). Cooperation was brought on primarily by the need to combat the dominance of the developed countries in the WTO.
South Asia is a region of diversity, both cultural and economic, and is rife with political tensions and conflicts, a hangover from its colonial legacy. Yet, its member nations also share numerous, inescapable commonalities that augur well for future collaboration on trade issues. The aim of this book is to identify areas where common positions are emerging and also areas where there are divergent interests.

The macroeconomic trends of South Asian countries have undergone a visible convergence in the last two decades, as a result of similar and almost simultaneously adopted liberalization policies. The Gross Domestic Product (GDP) of SAARC countries has experienced robust growth in conjunction with palpable changes in GDP’s sectoral composition. Services have replaced manufacturing as the main engine of growth in Bangladesh, India, Pakistan and Sri Lanka. Agriculture has undergone a significant decline in its share of output. The textile and clothing sector has grown rapidly in most SAARC countries to become a large component of the region’s exports. Even then, South Asian countries continue to face common development challenges with regard to poverty, inequality and vulnerability concerns.

As far as commonalities in trade policies are concerned, ‘export-oriented growth’ forms the basis for South Asia’s common trade policy framework. Hence, SAARC countries have evolved into open, heavily trade-dependent economies with liberal investment regimes. Six countries are in the WTO, while Bhutan is in line for accession. Attempts are being made to diversify trade with more products and additional export destinations. This has been coupled with tariff reductions, quota reductions, the creation of special economic zones (SEZs) and domestic reforms such as introducing new legislation on competition policy.

With one large LDC (Bangladesh), three small LDCs (Bhutan, the Maldives and Nepal), one small developing country (Sri Lanka), one large developing country (Pakistan) and one very large developing country (India), numerous economic disparities prevail in the SAARC region. For instance, India has made huge advancements in the sectors of IT, automobiles, pharmaceuticals and research and development and is comparable to the developed countries in many respects. At the other extreme, Bhutan has progressed very slowly and has adopted a cautious and gradual approach to liberalization policies and is thus at a different point in the economic growth trajectory. With regard to trading partners, Nepal and Bhutan are dominated by the Indian market in both imports and exports. The larger SAARC countries trade mostly with the US and the EU.

As far as the WTO is concerned, both the case for SAARC and against SAARC appears to be strong. There are different priorities and focus in these countries reflecting, inter alia, their stages of development. While a common position strengthens the position of all the individual countries, it is difficult to envision SAARC countries championing each other’s causes at even the smallest expense. It is worth highlighting here that with the emergence of the WTO, large and powerful trading nations were forced to alter their laws and procedures, most often to the advantage of weaker trading nations. The WTO has acted as a driving force in pushing domestic reforms in many developing countries. In other words, domestic reform is made necessary to facilitate trade in order to take advantage of improved market access via WTO negotiations.
 
In this book, Saman Kelegama, and all the other contributors, examine the position of each South Asian country in the multilateral trading system as defined by the WTO and highlight their various concerns on key WTO issues in agriculture, industry, services and development. The possibility of South Asian countries formulating a common position in the WTO negotiations is also explored in detail. q
 

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