Alas, Mann and majority of farmers in India do not realise the fact that not only the subsidies, but also the bulk of the surplus, are captured by intermediate trade and are not passed on to the consumer. They also seem to be ignorant of the central government’s proposals to State governments to amend the Agriculture Produce and Marketing Act, which if implemented, can lead to better price recoveries by farmers.

The Act needs to be amended and adopted by the States because agriculture is a state subject, it is up to the states to implement it. The proposed amendments will enable farmers to short-circuit the intermediate trade and sell directly to consumers.

The proposed amendments also allows contract farming and this has raised the hackles of activists like Mann and they are more involved in debating contract-farming than in helping farmers get better prices for their produce.

According to an independent study by IIM-Bangalore, the price obtained by a farmer for his produce varies from 24% to 58% of the actual price paid by consumer. For every Rs 10 the consumer spends on buying one kg of tomatoes, on an average only Rs 3 goes to the farmer. It gets worse in the case of specialty farm goods, such as gnocchi mushrooms.

Under another study, Towards a Functional Competition Policy for India, made by CUTS, a comparative analysis was done for price received by farmers for cotton from sale to various agencies.

Price realised from sale to the village merchant, trader or commission agent ranged between Rs 700-710 per quintal, and the realisation was much higher, between Rs 785-795, when sold to the Cotton Corporation of India or to millers.

Thus, the situation can be improved by providing alternative marketing avenues through cooperative marketing agencies and public agencies that reduce structural concentration of traders.

Certain innovative marketing mechanisms have been developed in some states to enhance competition at the retail level and to benefit both producers and consumers. These include Apni Mandi in Punjab and Haryana, Rythu Bazar in Andhra Pradesh, and Uzavaar Sandies in Tamil Nadu.

Under these arrangements, farmers are allowed to sell directly to consumers on selected days and time. Alas, their scale is small and mainly farmers from nearby areas to the cities can take advantage of this marketing channel.

Apart from intermediate trade, truckers’ cartel too prevent farmers from realising a better price for their produce. All over our country, truckers form unions, which then dictate what the freight charges will be for carrying the cargo from a factory or a mandi.

Most of them operate under a politician-criminal nexus, and regulating them can be an arduous task. For factory owners, it is easier and better to buy peace by accepting their prices, but for farmers it can be a matter of death or life.

Truckers’ cartels are an ubiquitous phenomenon around the country. They sap the economy hugely. But this problem will pale in comparison to the exploitation of farmers by patent-holding seed companies.

Monsanto-Mahyco, for instance, was charging nearly 50% of the sale price of Bt cotton seeds as trait (royalty) fee, i.e., Rs 900 per 450 gm packet against a sale price of Rs 1,850. The MRTP Commission has held that to be monopolistic and exploitative pricing and directed the company to reduce its trait fee.

The Andhra Pradesh government alleged that since 2002, Monsanto has sold seeds worth Rs 130 crore in India of which Rs 78 crore was held back as trait value. The final word on this is yet to be heard as the company has appealed against the MRTPC ruling in the Supreme Court.

Reverting to the larger issue, all our economic managers are speaking about 4% growth in agriculture to be able to achieve 10% overall economic growth. The focus presently is on giving a boost to the agriculture sector by focusing on the provision of necessary infrastructure (irrigation, supply chain, etc.).

Unfortunately, no concrete measures are being taken to ensure farmers themselves retain a significant part of the income generated in the farm sector. This would provide them much needed surplus income to make necessary investment in their own fields and also save them from the scourge of money-lenders.

Instead, presently, it is the intermediaries who corner much of the value generated by the farm sector, either by supplying inputs, or by marketing the produce. It is, therefore, imperative for the country to undertake comprehensive competition reforms.

This article can also be viewed at URL:
http://economictimes.indiatimes.com/articleshow/1789746.cms

Books on the WTO have been rolling off the presses around the globe this past year, the organization’s tenth anniversary, as any Internet search will show. Some are critical, some anecdotal and some impenetrably analytical. Few provide the insight on practical experience in negotiating entry and on drawing maximum advantage from membership that developing country diplomats and negotiators, business groups, individual firms, civil society bodies and even academics and specialist journalists often say they need. Three recent additions to the trade library go some way to plugging that gap, while a fourth argues that the WTO can be a powerful support for sustainable development if its members can decide how to tackle the problematic issues that it involves.

Joining the WTO and operating within its framework has been a frustrating experience for many developing countries. Some who have entered over the past decade, or are still seeking admission, speak openly of the bitterness they sometimes felt during the prolonged accession process. Others voice the disappointments they say they have encountered as members, particularly over the past four years of the Doha Development Agenda. Yet, none of the current 149 WTO members shows any desire to pull out and nearly 30 more, both relatively rich and extremely poor, are lining up to join. Only one country, the Pacific island state of Vanuatu, whose case is reviewed in Managing the Challenges of WTO Participation, has withdrawn from entry negotiations to consider its options.

Getting the best from the system
What then is the attraction of the WTO? According to authors and contributors to each of these volumes, it is mainly the widespread conviction that it can be made to work for everyone.

That message is delivered succinctly in the foreword to Managing the Challenges of WTO Participation. Its editors affirm that the 45 studies, a majority of which were written by authors from developing countries, highlight dilemmas that a range of less advanced economies faced and “show that when the system is accessed and employed effectively, it can serve the interests of poor and rich countries alike”.

This view is echoed from the perspective of five South Asian nations — Bangladesh, India, Nepal, Pakistan and Sri Lanka — by the Secretary-General of CUTS (Consumer Unity & Trusts Society), Pradeep S. Mehta, in South Asian Positions in the WTO Doha Round. “The South Asian region has full faith in the multilateral trading system and [the five countries] realise that the Doha Development Agenda offers tremendous opportunities for these countries to achieve their overarching objective of sustainable development and poverty alleviation,” he writes in the volume published by his independent research centre. Siphana Sok was former Secretary of State in Cambodia’s Ministry of Commerce and its main negotiator on WTO admission and is now Director of ITC’s Technical Cooperation Coordination Division. In his memoir, Lessons of Cambodia’s Entry into the World Trade Organization, he explains that his government used the accession process as a stimulus to “irreversible trade liberalization and more broadly based reforms”.

Gary P. Sampson, a former divisional director at the WTO and now Professor of Economic Governance at the United Nations University in Yokohama, Japan, engages a much wider perspective in The WTO and Sustainable Development, arguing that, by identifying and developing discussion on issues where trade and sustainable development intertwine, the WTO could enhance its role as a key instrument in global poverty reduction.

All the editors of Managing the Challenges have long been involved with the WTO or its predecessor, the Secretariat for the General Agreement on Tariffs and Trade. Peter Gallagher was an Australian trade diplomat who now heads a leading consultancy; Patrick Low is currently WTO Director of Economic Research and Statistics; and Andrew Stoler is a former United States trade negotiator and lawyer who served recently as a WTO Deputy Director-General before moving into academia. Their book does not pretend that negotiating entry to the organization or exercising effective membership is plain sailing. The case studies it sets out are wide-ranging. They include the experiences of some of the world’s poorest, middle-income and even a handful of its richest economies, with failures and successes in acceding to the organization, handling disputes, conforming to health and safety standards, applying intellectual property rules and expanding trade in services.

Involve all stakeholders
The studies show, the editors say, that “joining the WTO and taking advantage of WTO membership is not something that can be left to governments alone”. That message comes through clearly from many of the cases the book reviews in detail. Examples include the story of a Bangladeshi rock band which found one of its songs had been pirated by an Indian film producer; Kenya’s discovery that its own legislation was a barrier to importing low-priced AIDS drugs; Vanuatu’s ill-fated effort to join the WTO; and Nigerian industry’s struggle to remove import restrictions that had political backing but pushed up production costs to the extent that the country’s export performance was suffering.

Success, as these and other cases show, is best guaranteed by involving all stakeholders in a single economy. It requires, the three editors say, a high level of interaction, information exchange and collaboration between business, civil society bodies and governments in elaborating trade policy. When this is absent or when it breaks down, the outcome is generally problematic. The conclusion, they suggest, can only be that the success or failure of an economy within the global trading system is home-grown rather than determined by the WTO itself and the constraints its rules impose.

In this context, another of the book’s case studies — on how Barbados liberalized its telecommunications industry — illustrates the role that local media can play in bringing home to the public at large the issues that are at stake and in helping form a national consensus. Despite complaints from the island’s business community and the vital tourist sector over high prices and limited services of its monopoly provider, there was considerable resistance to the government’s proposal to participate fully in the WTO’s 1997 telecommunications agreement by opening the sector up for competition. For the ordinary Barbadian, the argument could have remained too technical — and the proposed changes slightly threatening — if the island’s lively newspapers and radio stations had not seized on the issue. Through editorials, investigative reports and radio talk shows and debates, the public was made acutely aware of exactly what was at stake and how liberalization would affect individual citizens and their families. Thus, says case study author Linda Schmid of ITC, the media became a key driver in shaping popular support for reform.

Build support for accession
In accession negotiations, Gallagher, Low and Stoler argue, the need for cooperation among all stakeholders is just as vital. However, the case studies show that when an applicant country’s business community is no more ready than its government to comprehend the likely impact of WTO rules, serious problems can follow.

A Mongolian contributor to their volume records that both the private and the public sectors in his country were so conditioned by its 60-year experience as a command economy that they expected automatic benefits from accession. This led to ill-prepared negotiations, less than perfect accession terms and — as the effects of these began to be felt — disillusion with the WTO. In Vanuatu, another study shows, lack of resources to inform domestic stakeholders on, and involve them in, the accession process led to negotiations whose impact was heightened by the absence of any national consensus on what needed to be achieved.

Cambodia’s accession in 2004 as the first least developed country to join the WTO after 1995 sparked fierce controversy, centring around the terms of its admission. Non-governmental organizations involved in international development insist that extortionate conditions were imposed on a government anxious to win entry as part of a strategy to rejoin the global mainstream after three decades of civil war. Cambodia’s Government defended its decision, claiming that the obligations, though tough, will help propel needed reforms in the country, noted two prominent Cambodian economists in Managing the Challenges. But they believe not enough effort was made to take the country along with the negotiations and prepare it for the changes that joining the WTO would bring. Siphana Sok’s account of accession in Lessons from Cambodia’s Entry differs, but it underlines the same message: that broad cooperation among all economic actors is vital to ensure entry negotiations bring real benefits to new members. In his country, he suggests, the prime initial task was to ensure strong political commitment to the accession negotiations from the entire national administration. Then every effort was made to involve the private sector and the public at large in the process, and his book details how this was approached. In the end, he says, Cambodia used its admission strategy “to obtain favourable terms of accession while at the same time protecting its sensitive national interests”.

Negotiate in common interest groups
Developing countries negotiating in the WTO, especially those with limited global trade weight, say they have often felt vulnerable to pressure from heavyweights. The emergence of the group of 20 developing countries — the G20 — at the Cancún Ministerial Conference in September 2003 was widely welcomed as providing a solid base for cooperation across a broad range of issues in the Doha round. But, as suggests, forging smaller regional alliances — perhaps around a large partner — is a useful way to promote aims shared by a group of neighbours. In fact, the book itself is the product of collaboration between CUTS, an association based in India, and four other research organizations in Bangladesh, Nepal, Pakistan and Sri Lanka. The aim of this joint effort is to establish common ground and possible negotiating strategies between the five countries across the major areas of the Round: agriculture; market access for non-agricultural manufactured goods or NAMA; services; trade facilitation; and the development dimension that the Doha agenda was billed at its 2001 launch as primarily intended to promote.

As Bangladesh’s former Commerce Minister, Amir Khosru M. Chowdhury, notes in his foreword to the book, published on the eve of the WTO Ministerial meeting in Hong Kong, China in December 2005, the economies of the five are far from identical. India and Pakistan are populous countries with a strongly-established agriculture and a significant industrial base, while Bangladesh, Nepal and Sri Lanka are net food-importing countries. However, says Mr Chowdhury, the outcomes they all need from the Doha round — i.e., improved access to Western markets for their agricultural produce while maintaining safeguards to protect their small and highly vulnerable farmers — are both similar and complementary. One chapter in the book shows clearly that all five countries have a strong communality of interest in the talks on ser-vices, particularly in ensuring freer movement around the globe for their low- and semi-skilled workers who provide labour-intensive services. They also face similar issues in NAMA talks, where their businesses, especially garment manufacturers, regularly experience severe problems with complicated rules of origin in the Western markets they hope to enter. For Mr Chowdhury and CUTS’ Pradeep Mehta, the aim should be to establish common negotiating grounds and a common agenda across all these sectors as well as in the round’s discussions on development and trade facilitation.

Trade facilitation: an area to promote
Trade facilitation — primarily easing the passage of goods across borders — is a new area of the Doha talks, introduced at the Cancún Ministerial Conference after developing countries had firmly rejected talks sought by major powers on establishing rules for investment and competition policies and for government procurement. Although there had been strong suspicion among poorer nations that the concept was a device to impose on them rules that mainly benefit the larger trading economies, discussions over the past year in the WTO have brought the realization that the advantages of reducing delays due to detailed customs processing and harmonizing documentation can accrue to both rich and poorer countries. Most, however, are still opposed to establishing binding rules that could be enforced under the WTO’s dispute settlement system.

“South Asian countries acknowledge that existing inefficiencies in trade facilitation need to be tackled if they are to become more competitive in international markets,” say two Sri Lankan contributors in the CUTS volume. But they also accept that the political will to implement trade facilitation measures is lacking in some countries and that there is little pressure on politicians from the business community, which “is not fully conversant with the benefits of trade facilitation”.

A sustainable-development inventory
Gary Sampson’s book, says WTO Director-General Pascal Lamy in a foreword, “is a crucial first step in identifying and exploring the issues that fall under the umbrella of sustainable development and the expanded agenda of trade policy”. For the author himself, the WTO has already “by design or default” gravitated towards becoming what he calls a “World Trade and Sustainable Development Organization”. He points to issues of subsidies that have risen high on the WTO agenda — specifically in agriculture and fisheries — that can lead to environmental degradation, but suggests there are many other areas of interface that have emerged into the trade arena and surface in the WTO in different forms through the dispute settlement system. Examples are endangered species, import restrictions justified on the grounds of protecting public health and the question of genetically-modified organisms.

Sampson argues that many of these issues have come to the WTO, forcing on it a wider role than was ever intended, because nations are less willing to cede areas of national sovereignty and government control over policy to specialized agencies of the United Nations which would more logically be their home. Apart from the overall environmental issue, he points in particular to the hugely divisive area of labour conditions, which some major countries have sought to incorporate into the agenda at different points over the past decade.

The danger of this, suggests Sampson, is that the WTO “is a trade organization and was not conceived of as an environment or labour organization”. If it had been, its membership would not have been as almost-universal in terms of trading nations as it is now. To solve the dilemma, he proposes a “stocktaking” of the issues at the interface of trade and sustainable development. The book offers an inventory of the areas such an exercise could include and ideas on how they can be tackled.

What can we learn from these cases?
Trade is not a nebulous affair, relevant only to a few in the know. It has real impact on people’s lives. Get it right (open, fair, inclusive) and it can benefit all kinds of people, contribute to their well-being and thus to more developed, secure societies. Get it wrong (restricted) and there is a risk of aggravating poverty, social divisions and unrest.

With trade becoming more and more a global activity, it is important for countries to “get trade right” in the global rule-making forum that is the World Trade Organization. As countries negotiate the rules for trade, they need to be prepared for their far-reaching consequences on human activity and development. The best way to do this is to bring more speakers and topics into the trade debate. To really serve development goals, “trade talks” should not be the reserve of government officials. They need the voice and support not only of a range of business people, but also of others, such as the media, the public and non-governmental organizations. Trade talks are about more than trade policy. They are about development. And development depends on mobilizing more than just a narrow section of society.

The examples in these books can help countries on the road to development learn from others’ experiences and improve their own practices.

Prema de Sousa, Associate Editor, Trade Forum

Robert J. Evans is a freelance writer and media consultant based in the Geneva region. He specializes in trade and WTO issues.

This article can also be viewed at International Trade Forum

How to salvage the Doha Round or not?

Published: The Financial Express, Bangladesh, July 09, 2006
By Pradeep S Mehta

THE recent mini-ministerial of the World Trade Organisation (WTO at Geneva expectedly flopped, because the divergences remained unresolved. Repeating their Hong Kong solidarity, over 100 developing countries joined together to voice their concerns and warned the rich countries not to undermine the development thrust of the Doha Round of global trade talks. This mini-ministerial was held to take forward the Hong Kong Ministerial Declaration adopted in December, 2005. "We are in a crisis", exclaimed Pascal Lamy, the head of the WTO secretariat, who is now moving at a hectic pace to get it back on track in 15 days. Virtually an impossible task, but one can never rule out miracles.

What happened at Geneva? This can be best summarised in the utterings of key ministers who were there to try and hammer out a deal. The Indian trade minister, Kamal Nath rued that "India was prepared to negotiate commerce, but not subsistence", while the Zambian trade minister and spokesperson of the least developed countries (LDC) group in WTO, Dipak Patel asserted that, "We are not here to bend backwards to accommodate more market access for industrialised nations. We are not going to allow ourselves to be blamed for any failure".

Kamal Nath's comrade-in-arms in the G-20 alliance, Celso Amorim, foreign minister of Brazil, observed: "The burden of leadership in this particular case has to be on those who have more to give, and those are of course the richer countries".

What did the rich countries have to say? The newly appointed US trade representative, Susan Schwab noted, "We have clearly reached something of an impasse, though the round is not dead". Her European compatriot, Peter Mandelson was more circumspect, "the meeting was neither a success nor a disaster".

All fingers seemed to point to the obdurate position adopted by the USA, which continued to toe a mercantilist line which relies on the metaphor: 'exports are good, imports are bad', rather than what can actually help move the agenda forward. This is in spite what the US President, George W. Bush had to say about the need to conclude the trade talks to every ones' satisfaction, a few weeks before the Geneva mini-ministerial took place.

The European Union (EU), which had initially offered to reduce their farm support by 39% as against G-20's demand of 54% and a US demand of 64%, relented to step up its offer to 50%. This was not enough for the US, which also refused to undertake further cuts in its own farm support measures. Not only that, the US is also allergic to the poor countries' demand for 'special products' and the applicability of 'special safeguard measures' to protect their own farmers from cheap/dumped imports. Secondly, the demand by both the US and the EU on linking further movement on agriculture to better market access in industrial goods in developing countries was another stumbling block. Even in that area, the poor countries are hesitant to accept higher reductions to protect their own industries, and rightly so.

In brief, I have tried to spell out the causes of the hiatus in as simple terms as possible, though experts might have wanted me to go into more details, such as the battle over co-efficients etc., in the matter of industrial goods, and also tell the reader that the promises of cutting farm support will perhaps be just window dressing. Alas, the editors of this newspaper have asked me to limit my piece to 1200 words, and also the fact that the lay reader would just get bored if I went into detailed analytical explanations.

So, what next? I see three future scenarios, and explain them briefly. First, the baton has now been passed on to Pascal Lamy to cajole heads of governments of key countries to move and spell out their bottom lines to him. In the dog-eat-dog world of trade negotiations in Geneva, ministers could not have spelt out what their countries can do at the maximum. Because, often offers made by ministers/delegations can become binding with other parties then wanting more than what has been offered. That is something which any negotiator can comprehend. In his forthcoming field visits, Lamy's first stop is Tokyo.

What will Lamy ask from Japan? He will ask the Prime Minister to address the high protection which is given to its farmers and how it affects the farmers in the poor countries. This is the crux of the problem, and has always been so even during the Uruguay Round of negotiations. It was this particular issue that the Doha Development Agenda was agreed to in 2002, when poor countries were made to believe that their development problems will be addressed in the context of the WTO agreements, i.e. by reining in absurd subsidies in the rich countries which did not allow the poor countries to farm and sell their goods under fair competition.

More importantly, Lamy will also address heads of the G-8 governments in St Petersburg, Russia mid-July, so as to push the Doha agenda. It is also likely that heads of non-G8 member governments, such as Brazil and India would also be attending the meeting. This is where Lamy will have to collar the big leaders and remind them that the Millennium Development Goals (MDGs) will be imperiled, if the Doha Development Agenda is not delivered. Lamy is hopeful that his desperate efforts will pay.

If Lamy's efforts do not pay, then what next? Then as the second scenario, or as Plan-B, since the fundamental issues of agriculture, NAMA and services cannot be settled, the WTO members should consider what can be agreed upon. The controversial issues can be left on the back burner until the US and the EU sort out their political situation which may take a few years. It is time to turn the Hong Kong declaration on its head and straighten out negotiations in other areas, such as WTO rules, TRIPs, trade and the environment, trade facilitation, aid for trade and the Integrated Framework, all of which are crucial for developing countries and have been unaddressed during negotiations.

A hint towards the Plan-B came in a joint article by Nath and Mandelson in the International Herald Tribune of 5th July: "Doha round: It's not only what we trade, but how". Here they have argued that addressing the archaic customs procedures should be the centre piece of the final Doha deal. The article cleverly avoided dealing with the more contentious issues, which are bogging the progress of the whole Round.

The third scenario is that the Doha Round is declared sick and efforts made to wrap it up by 2011 or perversely, until the world faces another 9/11. That is what had spurred nations to agree at Doha, what they agreed to. We do not want an external impetus like 9/11 but we do wish to remind George Bush, that it is he who can deliver the Doha Round by being less mercantile and ensure that the poor are lifted out of their poverty through liberalisation of trade and cutting out of farm subsidies in the rich world, which mainly benefit the fat corporates. If 'you are not with us, then you are with them', might be used to remind Bush about what the poor expect out of the world's leading power.

This article can also be viewed at URL:
http://www.financialexpress-bd.com/index3.asp?cnd=7/9/2006&section_id=5&newsid=30419&spcl=no

"A Free Trade Union, comprising the whole of Central, Eastern and South-Eastern Europe, Siberia, Turkey, and (I should hope) the United Kingdom, Egypt and India, might do as much for the peace and prosperity of the world as the League of Nations itself."
— John Maynard Keynes, 1919.

Trade and commerce have been the most effective way of establishing peace between rival nations. History offers many examples to support this. The formation of the European Union (EU), giving rise to higher levels of economic well-being resulting from enhanced economic cooperation, was instrumental in assuaging the enmities and atrocities of the Second World War in the Continent.

Opportunity for Asia
In a similar vein, the formation of the South Asian Free Trade Area (SAFTA) by the seven South Asian nations of India, Pakistan, Bangladesh, Nepal, Bhutan, the Maldives and Sri Lanka could provide an opportunity to forge sustained peaceful political and economic relations in the sub-continent, especially between India and Pakistan, based on mutual respect and cooperation, as has happened in Europe under the EU umbrella.

History provides ample evidence of belligerent neighbours never progressing or prospering. As economist Wilfred Pareto (1889) wrote, "Customs unions and other systems of closer commercial relations (could serve) as means to the improvement of political relations and the maintenance of peace."

The drive for economic integration often begins with political objectives. Like France and Germany in the 1950s, the newly established democracies of the Southern Cone formed MERCOSUR in the mid-1980s in the hope of cooling the traditional military hostility between major regional powers: Argentina and Brazil. The Southern African Development Community (SADC) was formed in the 1980s as a coalition opposed to apartheid in South Africa; it, more recently, turned to creating a free trade area. Some observers note that African Customs unions and FTAs are as active in conflict resolution as in trade liberalisation.

Easing of tensions between India and Pakistan is seen by many as the real payoff of the SAFTA, regardless of what happens to trade barriers in the region (World Bank's Global Economic Prospects, 2005).

Role of RTAs
Regional Trade Agreements (RTAs) also can provide institutions and act as a forum for bargaining and negotiations to address tensions before they erupt into conflicts. Many studies also point out that RTAs that expand trade flows appear to have a considerable dampening effect on conflict. According to a study by Mansfield and Pevehouse (2000), the likelihood of the outbreak of a militarised inter-state dispute between two nations declined by around 50 per cent if both belonged to the same RTA. However, only RTAs that expand trade flows appear to have a substantial impact on conflict. In Africa, for example, RTAs that address the management of cross-border resource issues (such as water) are more effective in reducing military conflict than other RTAs.

The South Asian Association for Regional Cooperation (SAARC) was formed by Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka in 1985 for increasing political-economic cooperation. Over time, the economic focus of SAARC gradually sharpened leading to the signing of the SAPTA (preferential trade agreement) in 1995. Nonetheless, nothing substantial happened but it resulted ultimately in the signing of SAFTA in 2004. The agreement came into force on January 1, 2006, and its implementation began on July 1.

Indo-Pak experience
Bilateral trade between India and Pakistan has been hostage to political compulsions for too long. Though both countries are moving closer, it is at an extremely slow pace. There are apprehensions in Pakistan that under free trade, the economy will be overwhelmed by a much larger India. Even China has a surplus in its trade balance with Pakistan, but that doesn't seem to be so bad. In the case of bilateral trade with India, Pakistan's response has been to stick to a positive list, which decides on specific items. This goes against the spirit of FTAs, where trade is generally allowed in all commodities other than those in a negative list of sensitive ones.

Since the others in the SAFTA are following the negative-list approach, the success of the agreement will depend on Pakistan doing the same. Similarly, despite both countries being WTO members, only India has accorded Pakistan the most favoured nation (MFN) while Islamabad has linked it to the Kashmir issue.

It would be futile, though, to expect Pakistan's fear of the Indian economy to disappear overnight. What we can hope for is that once Pakistan realises the benefits of increasing trade, its suspicions will recede. A series of (successful) deals — maybe a molasses-for-tea deal or a sugar deal — could remove Pakistan's fears of free trade. Furthermore, its willingness to expand the positive list to 1,013 from existing 773 items is also optimistic. A small one, perhaps, but a beginning nonetheless.

This article can also be viewed at URL:
http://www.thehindubusinessline.com/2006/07/05/stories/2006070500241100.htm

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