SAARC: An Emerging Trade Bloc, Its Barriers and Facilitators

Chapter 1: Introduction
The growth of regional trade blocs has been one of the major developments in international relations in recent years. Virtually all countries are members of a bloc, and many belong to more than one. Regional agreements vary widely, but all have the objective of reducing barriers to trade between member countries. At their simplest, these agreements merely remove tariffs on intra-bloc trade in goods, but many go beyond that to cover non-tariff barriers and to extend liberalization to investment and other policies. At their deepest, they have the goal of economic union and involve the construction of shared executive, judicial, and legislative institutions. The past decade also witnessed qualitative changes in Regional Integration Agreements (RIA). There have been three major developments: 1. The move from closed regionalism to a more open model, in line with

prevailing views about national economic policy. Many of the trade blocs that were formed between developing countries in the 1960s and 1970s were based on a model of importsubstituting development, and regional agreements with high external trade barriers were used as a way of implementing this model. New-wave RIAs (some of which are old agreements resurrected) are generally more outward looking and more committed to boosting rather than controlling international commerce.

2. The recognition that effective integration requires more than simply reducing tariffs and quotas. Many other types of barriers have the effect of segmenting markets and impeding the free flow of goods, services, investments, and ideas, and wide ranging policy measuresgoing well beyond traditional trade policies
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are needed to remove them. Such deep integration was first actively pursued in the Single Market Programme of the European Union (EU), but its elements are now finding their way into the debate on other regional agreements. 3. The advent of North-South trade blocs in which high income countries and developing countries are equal partners. Perhaps the most important example is the North American Free Trade Agreement (NAFTA), formed in 1994 when the CanadaUnited States Free Trade Agreement (CUSFTA) was extended to Mexico. The EU also has North-South arrangements, including the Europe Agreements that link the EU with the transition economies of Eastern Europe, a customs union with Turkey, and agreements with many Mediterranean countries. In addition, the EU is committed to negotiating reciprocal trade agreements (economic partnership agreements, or EPAs) with the African, Caribbean, and Pacific (ACP) countries. NEED FOR REGIONAL INTEGRATION Many factors lay behind the recent spurt in regionalism. The important among them are as follows. Governments wish to bind themselves to better policies including democracyand to signal such bindings to domestic and foreign investors. A desire to obtain more secure access to major markets The pressures of globalization, forcing firms and countries to seek efficiency through larger markets, increased competition, and access to foreign technologies and investment Governments desire to maintain sovereignty by pooling it with others in areas of economic management where most nation states are too small to act alone RTAs convey advantages as well as limitations.

By reducing the number of participants in the negotiation they can help expand the discussion to include more dimensions of economic integration. Compared with unilateral liberalisation, political support for RTAs also seems to be greater given the perception of reciprocity from other member countries. Although RTAs have varied components, these agreements include some or all of the following eight elements (Bhagwati and Panagariya, 1996 provide an overview):

(i) A tariff liberalization programTLP (transformation of nontariff barriers, e.g. quotas, to their tariff equivalent and the sequential reduction of tariffs; special considerations to least developed countries are not uncommon); (ii) Sensitive lists (goods or services to be exempt from the tariff reduction program); (iii)Rules of originROO (prevention of the application of the preferential tariffs to non regional goods or services as defined by the agreement); (iv) Institutional arrangements (establishment of a council or administrative committee responsible for the administration and implementation of the agreement); (v) Trade facilitation policies (collection of instruments to reduce transaction costs of importing and exporting, including homogenization of customs practices and technical assistance especially to the least-developed members); (vi) Dispute settlement mechanism (procedures to report and deal with violations to the agreement); (vii) Safeguards measures (suspension of preferential treatment on grounds that imports are causing or threatening to cause serious injury to the domestic industrial base).

Chapter 2 : Origin and Evolution of SAARC

After the analysis of theories of globalism and regionalism, it becomes imperative to find out the rationale for regional cooperation in South Asia. Besides, it is desirable to look at the evolutionary process of regional cooperation in South Asia to assess the pace of regionalism in reaching at its present destination as SAARC. The evolution passed through four phases that include: Conception (1977-80) The Meeting of Foreign Secretaries (1981-83), The Meeting of Foreign Ministers (1983-85), and The Summits (1985-2004). The first concrete proposal for establishing a framework for regional

cooperation in South Asia was made by the late president of Bangladesh, Ziaur Rahman, on May 2, 1980. Prior to this, the idea of regional cooperation in South Asia was discussed in at least three conferences: the Asian Relations Conference in New Delhi in April 1947, the Baguio Conference in the Philippines in May 1950, and the Colombo Powers Conference in April 1954. Since 1977, the Bangladesh president seemed to have been working on the idea of an ASEAN-like organization in South Asia. During his visit to India in December 1977, Ziaur Rahman discussed the issue of regional cooperation with the new Indian Prime Minister, Morarji Desai. In the inaugural speech to the Colombo Plan Consultative Committee which met in Kathmandu in December 1977, King Birendra of Nepal gave a call for close regional cooperation among South Asian countries in sharing river waters. President Ziaur Rahman welcomed the Kings call during the formers visit to Bangladesh in January 1978. President Ziaur Rahman had also informally discussed the idea of regional cooperation with the leaders of South Asian countries during the Commonwealth Summit in Lusaka (1979) and the Non-Aligned Summit in Havana (1979). However, the Bangladesh president seems to have given a concrete shape to the proposal after his visit to Sri Lanka and discussion with the Sri Lankan president, J.R. Jayawardene, in November 1979. Several factors seem to have influenced President Ziaur Rahmans thinking about establishing a regional organization in South Asia during 1975-1979:
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(1) Change in the political leadership in South Asian countries and demonstration of accommodative diplomacy by the new leaders; (2) Ziaur Rahmans need for Indian support to legitimize his coup dtat regime; (3) An acute balance of payment crisis of almost all South Asian countries which was further aggravated by the second oil crisis in 1979; (4) Failure of the North-South dialogues, and increasing protectionism by the developed countries; Publication of an extremely useful background report by the Committee on Studies for Cooperation in Development in South Asia (CSCD), identifying many feasible areas of cooperation; assurance of economic assistance for multilateral cooperative projects on sharing water resources of the Ganga and Brahmaputra by United States President Jimmy Carter and British Prime Minister James Callaghan during their visit to India, Pakistan and Bangladesh in January 1978; and the Soviet military intervention in Afghanistan in late December 1979 and the resulting rapid deterioration of South Asian security situation. During this critical period, President Ziaur Rahmans initiative for establishing a regional organization which would give the leaders of South Asian countries an opportunity to improve their understanding of one anothers problems and to deal with conflicts before they turned into crisis, became much more appealing. While the Bangladesh proposal was promptly endorsed by Nepal, Sri Lanka, the Maldives and Bhutan, India and Pakistan were skeptical initially. Indias main concern was the proposals reference to the security matters in South Asia. Indian policy-makers also feared that Ziaur Rahmans proposal for a regional organization might provide an opportunity for new smaller neighbours to regionalize all bilateral issues and to join with each other to gang up against India. Pakistan assumed that it might be an Indian strategy to organize the other South Asian countries against Pakistan and ensure a regional market for Indian products, thereby consolidating and further strengthening Indias economic dominance in the region. However, after a series of quiet diplomatic consultations between South Asian foreign ministers at the UN headquarters in New York from August to September 1980, it was agreed that Bangladesh would prepare the
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draft of a working paper for discussion among the foreign secretaries of South Asian countries. The new Bangladesh draft paper, sensitive to Indias and Pakistans concerns, dropped all references to security matters and suggested only non-political and non-controversial areas for cooperation. Between 1980 and 1983, four meetings at the foreign secretary level (April 21-23, 1981, Colombo; November 2-4, 1981, Kathmandu; August 7-8, 1982, Islamabad; March 28-30, 1983, Dhaka) took place to establish the principles of organization and identify areas for cooperation. After three years of preparatory discussions at the official level, the focus of discussion shifted to the political level in 1983. The first South Asian foreign ministers conference was held in New Delhi from August 1-3, 1983, where the Integrated Programme of Action (IPA) on mutually agreed areas of cooperation (i.e., agriculture, rural development, telecommunications, meteorology, health and population control, transport, sports, arts and culture, postal services and scientific and technical cooperation) was launched. The foreign ministers at this conference also adopted a Declaration on Regional Cooperation, formally beginning an organization known as South Asian Regional Cooperation (SARC). Following the New Delhi meeting, three more meetings of the foreign ministers were held at Male (July 10-11, 1984), Thimpu (May 13-14, 1985), and Dhaka (December 5, 1985) to finalize details and determine a date and place for the first meeting of South Asian heads of state. At the Dhaka foreign ministers meeting, a decision was taken to change the name of the organization from South Asian Regional Cooperation (SARC) to South Asian Association for Regional Cooperation (SAARC). The change in the acronym was based on the thinking that while SARC refers to the process of South Asian Regional Cooperation, SAARC marks the establishment of an association (organization) to promote and develop such cooperation. Finally, the first summit meeting of the heads of state or government of South Asian countries was held at Dhaka from December 7-8, 1985.

Chapter 3: Aims and Objectives of SAARC

The South Asian Association for Regional Cooperation (SAARC) comprising Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka is a dynamic institutionalized regional cooperation in South Asia, basically perceived as an economic grouping to work together for accelerating the pace of socio-economic and cultural development. The objectives of the association as defined in the SAARC Charter are: To promote and strengthen collective self-reliance among the countries of South Asia; To contribute to develop mutual trust, understanding and appreciation of one anothers problem; To promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields; To strengthen cooperation with other developing countries; To strengthen cooperation among themselves in international forums on matters of common interest; and To cooperate with international and regional organizations with similar aims and purposes. Cooperation in the SAARC is based on respect for the principles of sovereign equality, territorial integrity, political independence, noninterference in internal affairs of the member states and mutual benefit. Regional cooperation is seen as a complement to the bilateral and multilateral relations of SAARC members. Decisions are taken on the basis of unanimity. Bilateral and contentious issues are excluded from the deliberations of SAARC. Though economic cooperation among South Asian nations was not a new phenomenon yet the quest for economic integration remained inhibited by the colonial heritage of these countries. Since 1985, SAARC has evolved slowly but continuously both in terms of institutions and programmes. However, it is true that most of the programmes and achievements of SAARC exist on paper. The much talked about
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SAARC Food Security Reserve could not be utilized to meet the needs of Bangladesh during its worst natural disaster in 1991. It is also true that most SAARC activities are confined to the holding of seminars, workshops, and short training programmes. These activities may be useful, but they do not address priority areas and lack visibility and regional focus so essential for evolving a South Asian identity. Most importantly, SAARC suffers from an acute resource crunch. Unless the organization is successful in mobilizing funds and technical know-how from outside sources, most of its projects cannot be implemented and, thus, its relevance will remain limited.

3 A) Salient Features of the Organization Secretariat The SAARC Secretariat is based in Kathmandu. It coordinates and monitors implementation of activities, prepares for and services meetings, and serves as a channel of communication between the Association and its member states as well as other regional organizations. The Secretary General, who is appointed by the Council of Ministers from member countries in alphabetical order for a three-year term, heads the Secretariat. Mr. Q.A.M.A. Rahim from Bangladesh is the current Secretary General. The previous Secretaries Generals were from Bangladesh, India, Maldives, Nepal, Pakistan and Sri Lanka. The next Secretary General is to be from Bhutan. Seven Directors on deputation from member states assist the Secretary General. The SAARC Secretariat and member states observe 8 December as the SAARC Charter Day. SAARC Regional Centers Regional Centers covering Agriculture, Tuberculosis, Documentation, Meteorological Research and Human Resource Development have been established in different SAARC capitals: SAIC (Dhaka, 1998) STC (Katmandu, 1992) SDC (New Delhi, 1994) SMRC (Dhaka, 1995) SHRDC (Islamabad, 1999) SCC (Kandy, 2004) SCZMC (Mal, 2004) and SIC (Katmandu, 2004). In addition, three new regional centers covering Culture, Coastal Zones Management, and Information are being established.

Chapter 4: Summits
Summits which are the highest authority in SAARC, are supposed to be held annually. The country hosting the Summit also holds the Chair of the Association. Bangladesh hosted the Thirteenth Summit in November 2005 at Dhaka as the Chairperson of the Association. India will host the Fourteenth SAARC Summit in 2007 as its Chairman. South Asias regional cooperation, international political and economic environment, poverty alleviation, advancing economic cooperation, funding mechanisms, security of small states, combating, terrorism, social, natural disasters and environmental challenges as an agenda for third decade of SAARC was also discussed in the

Thirteenth Summit. Enhancing people-to-people contact and cultural cooperation, political cooperation and external linkages of SAARC was also discussed. SAARC member states welcomed the request by the Islamic Republic of Afghanistan for membership and invited Afghanistan as a member, subject to the completion of formalities. SAARC member states also agreed in principle with the desire of the Peoples Republic of China and Japan to be associated as observers. The Agreement on Mutual Administrative Assistance in Customs Matters Establishment of SAARC Arbitration Council, and the Limited Agreement on Avoidance of Double Taxation and Mutual Administrative Assistance in Tax Matters were signed during the thirteenth SAARC Summit The Council of Ministers comprising Foreign Ministers, meets at least twice a year. Its functions include formulating policy, reviewing progress of regional cooperation, identifying new areas of cooperation and establishing additional mechanisms that may be necessary. The Standing Committee comprising Foreign Secretaries, monitors and coordinates SAARC programmes of cooperation, approves projects including their financing and mobilizes regional and external resources. It meets as often as necessary and reports to the Council of Ministers. The Association also convenes meetings at Ministerial Level on specialized themes. The Committee on Economic Cooperation consisting of Secretaries of Commerce oversees regional cooperation in the economic field. During the Twelfth Summit in Islamabad, the SAARC Social Charter was signed in order to address social issues such as population stabilization, empowerment of women, youth
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mobilization, human resource development, promotion of health and nutrition, and protection of children, which are keys to the welfare and well-being of all South Asians. South Asian States have adopted Conventions on the Suppression of Terrorism (including Additional Protocol signed in January 2004 in Islamabad), Narcotic Drugs and Psychotropic Substances, Trafficking in Women and Children, and Child Welfare in South Asia. An Agreement on Food Security Reserve is also in place. During the 12 th SAARC summit held in Islamabad the leaders of South Asia reiterated their commitment to form South Asian Economic Union (SAEU). If formed, it will pave the way for more ambitious but entirely achievable goals such as a Free Trade Area, an Economic Union, open borders, and a common currency for the region. As President Pervez Musharraf said, we must expand SAARC charter to discuss bilateral issues at the regional level. There can be no development in the absence of peace. There can be no peace, so long as political issues and disputes continue to fester. The Twelfth Summit renewed the urgency to deal with poverty in the region. For this purpose, the Summit directed the Independent South Asian Commission on Poverty Alleviation (ISACPA) to submit to the next Summit a comprehensive and realistic blueprint setting out SAARC President Pervez Musharrafs statement reported by M. Aftab, Can Safta lead to South Asian Economic Union? The News, 19 January, 2004. SAARC: Origin, Growth, Potential and Development Goals for the next five years in the areas of poverty alleviation, education, health and environment. The Governors of the Central Banks of member states under the auspices of SAARCFINANCE meet regularly to consider cooperation in financial matters. For strengthening cooperation in information and media related activities of the Association, the Heads of National Television and Radio Organizations of member countries meet annually. Similarly, the SAARC Audio-Visual Exchange (SAVE) Committee

disseminates information both on SAARC and its Member States through regular Radio and TV Programmes. In the field of education, the Member States cooperate through the forums of SACODiL (SAARC Consortium on Open and Distance Learning) and Heads of Universities Grants Commission/Equivalent Bodies. Memoranda of

Understanding have been signed to promote collaboration with UNCTAD (United Nations Conference on Trade and Development), UNICEF (United Nations Childrens
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Fund), UNDP (United Nations Development Programme), UNESCAP (United Nations Economic and Social Commission for Asia and Pacific), UNDCP (United Nations Drug Control Programme), ITU (International Telecommunications Union), APT (Asia Pacific Tele-community), WHO (World Health Organization), UNIFEM (Untied Nations Fund for Women), CIDA (Canadian International Development Agency), EC (European Commission), PTB (German Metrology Institute), WB (World Bank), ADB (Asian Development Bank), UNAIDS (Joint United Nations Programme on HIV/AIDS) and SACEP (South Asia Cooperative Environment Programme). Regular dialogues with other Regional Organizations such as ASEAN (Association of South-East Asian Nations), ECO (Economic Cooperation Organization) and PIFS (Pacific Islands Forum Secretariat) are held with a view to promoting cooperation among sub-regional organizations. The Association promotes interaction on multilateral issues of common concern to its members and has identified areas in which collective positions could be projected at international forums. These include trade, finance, environment, agriculture, women and children, Information and telecommunications. Beyond official linkages, SAARC also encourages and facilitates cooperation in private sector through the SAARC Chamber of Commerce and Industry (SCCI), which is a SAARC Apex Body. Other such bodies are SAARCLAW and South Asian Federation of Accountants (SAFA). In addition, the status of SAARC Recognized Bodies has been accorded to professional groups in South Asia including Architects, Management Development Institutions, University Women, Town Planners, Cardiologists, Dermatologists, Teachers, Writers, Insurance Organizations, Diploma Engineers, Radiological and Surgical Care Societies. The Association of Speakers and Parliamentarians enjoy special recognition by the Heads of State or Government.

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Chapter 5: Achievements
Several factors such as political, economic, security and potentiality of mutual economic benefit through regionalism seem to have influenced President Ziaur Rahmans thinking about establishing a regional organization in South Asia. SAARCs existence, however, has enabled South Asian political leaders to meet regularly and carry on informal discussions to address their mutual problems. This is no mean achievement given South Asias past history and low level of interaction among South Asian countries since their independence. Informal talks among the leaders at regularly held SAARC meetings have led to inter-elite reconciliation on many sensitive issues, producing some noteworthy results in South Asia. The informal talks between the Indian and Pakistani Prime Ministers at the second SAARC Summit meeting at Bangalore in November 1986 led to the diffusion of tension between the two countries on the issue of Indias military exercise, Operation Brasstacks, on the Indo-Pakistan border, and the India-Sri Lanka talks at the 1987 SAARC foreign ministers meeting led to theiraccord on the Tamil problem. As a result of an informal meeting and discussion between Prime Minister of India and Pakistan, Narasimha Rao and Nawaz Sharif, at Davos (Switzerland), in 1992, the Pakistani government took action to prevent the move of the Jammu and Kashmir Liberation Front (JKLF) to cross the ceasefire line in Kashmir later that year. The Davos meeting was possible because of an earlier informal agreement between the two leaders at the sixth SAARC Summit meeting at Colombo in December 1991. Given this utility of SAARC, can the organization grow or expand its role in the coming decades? The Heads of State or Government during the Ninth SAARC Summit agreed for the first time that a process of informal political consultations would prove useful in promoting peace, stability, amity and accelerated socio-economic cooperation in the region. The leaders reiterated this intent during their Tenth and Eleventh Summits in Colombo and Kathmandu respectively also. The Agreement on SAARC Preferential Trading Arrangement (SAPTA) was signed in 1993 and four rounds of trade negotiations have been concluded. With the objective of moving towards a South Asian Economic Union (SAEU), the Agreement on South Asian Free Trade Area (SAFTA) was signed during the Twelfth Summit in Islamabad in January 2004. SAFTA
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may enter into force by the end of the year 2006. The Association has carried out Regional Studies on trade, manufactures and services, environment and poverty alleviation, SAFTA and Customs matters. Since its inception in 1984 there have also been serious differences among member countries over the aims and functioning of SAARC. Such differences have been pronounced in verbal bickerings in several SAARC meetings. This is in the face of the fact that closer social, economic and cultural ties (the espoused ideals of SAARC) are considered the one and only hope for building regional cooperation efforts in South Asia in the coming years. Indeed, increasing rationalization of world trade and the fluidity of the emerging global system has increased trade within each trade bloc and those countries that do not belong to any trade blocs are likely to be the losers. This also provides a strong rationale for sustaining the SAARC vis--vis future trade prospects of South Asia. The assumption that peace can be achieved through SAARC without addressing the political problems of the region has neither been able to cultivate peace nor to invigorate the SAARC process successfully. Though since its very inception it has been regularly able to hold Summit meetings yet there have been interruptions in between owing mainly to intrastate conflicts between the member countries.

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Chapter 6: SAARC Conventions

6 A) SAARC Convention On Preventing And Combating Trafficking In Women And Children For Prostitution EMPHASISING: That the evil of trafficking in women and children for the purpose of prostitution is incompatible with the dignity and honour of human beings and is a violation of basic human rights; RECALLING: The decision of the Ninth SAARC Summit (May, 1997) that the feasibility of a regional Convention to combat the grave crime of trafficking in women and children for prostitution should be explored; RECALLING ALSO: The relevant international legal instruments relating to prevention of trafficking in women and children, including the Convention for the Suppression of Trafficking in Persons and of the Exploitation of Prostitution of Others, 1949; Convention on the Elimination of all Forms of Discrimination against Women, 1979; International Covenant on Civil and Political Rights, 1966; and the Convention on the Rights of the Child, 1989; GIVING: Due regard to the implementation of the recommendations of the various pertinent International Bodies and Conferences including the Fourth World Conference on Women at Beijing (1995); NOTING: With concern the increasing exploitation by traffickers of women and children from SAARC countries and their increasing use of these countries as sending, receiving and transit points; RECOGNISING: In this regard the importance of establishing effective regional cooperation for preventing trafficking for prostitution and for investigation, detection, interdiction, prosecution and punishment of those responsible for such trafficking; EMPHASISING: The need to strengthen cooperation in providing assistance, rehabilitation and repatriation to victims of trafficking for prostitution;

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SCOPE OF THE CONVENTION The purpose of this Convention was to promote cooperation amongst Member States so that they may effectively deal with the various aspects of prevention, interdiction and suppression of trafficking in women and children; the repatriation and rehabilitation of victims of trafficking and prevent the use of women and children in international prostitution networks, particularly where the countries of the SAARC region are the countries of origin, transit and destination. Other such conventions: Convention on Promotion of Welfare of Children Convention on Mutual Assistance on Criminal Matters, July 2008

SAARC Charter of Democracy

Inspired by the common objectives of all South Asian States to promote the welfare of their peoples, to provide all individuals with the opportunity to live in dignity, and to realize their full potentials as enshrined in the SAARC Charter; Also inspired by the general objectives of all South Asian States to promote peace, freedom and social justice; Further inspired by their shared commitment to the rule of law, liberty and equal rights of all citizens; Reaffirming faith in fundamental human rights and in the dignity of the human person as enunciated in the Universal Declaration of Human Rights and as enshrined in the respective Constitutions of the SAARC Member States;

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Recognizing that inclusive policies, including constitutional protection developed in keeping with the wishes of the people, are essential for developing trust and understanding between and among communities; Affirming that broad-based participation of people in institutions and processes of governance creates ownership and promotes stability; Convinced that economic growth and social development based on justice and equity and democracy are interdependent and mutually reinforcing; Reaffirming that the pursuit of inclusion, good governance, and poverty alleviation, especially the elimination of extreme poverty, are essential to the promotion and consolidation of democracy; Aware that tolerance and diversity are critical in creating effective foundations for a pluralistic democratic society; and Convinced that undemocratic and unrepresentative governments weaken national institutions, undermine the Constitution and the rule of law and threaten social cohesion and stability in the long-run. The Member States of the South Asian Association for Regional Cooperation (SAARC), in the spirit of consolidating democracy in South Asia, hereby commit to: Reaffirm the sovereignty of each Member State; Ensure the supremacy of their respective Constitutions and uphold their spirit; Continue to strengthen democratic institutions and reinforce democratic practices, including through effective coordination as well as checks and balances among the Legislature, the Executive and the Judiciary as reflected in the respective Constitutions; Guarantee the independence of the Judiciary and primacy of the rule of law, and ensure that the processes of appointments to the Judiciary as well as the Executive are fair and transparent; Adhere to the UN Charter and other international instruments to which Member States are parties; Recognize the role
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of political parties and the civil society in a democracy; and Renounce unequivocally any unconstitutional change of an elected government in a Member State; Accordingly, Member States undertake to: Reinforce the linkage of development and democracy; Promote sustainable development and alleviation of poverty through good governance, equitable and participatory processes; Promote democracy at all levels of the Government and the society at large; Strengthen democratic institutions and processes in all national endeavors with due focus on decentralization and devolution; Promote equality of opportunity, equality of access and equality of treatment at the national level, in keeping with the respective constitutional provisions, as safeguards against social injustices and stratification; Inculcate democratic values in society through education and awareness building; Ensure gender mainstreaming in government and society; Uphold participatory democracy characterized by free, fair and credible elections, and elected legislatures and local bodies; Encourage all democratic forces in South Asia, including elected representatives of the people, to unite against any unconstitutional change in government in any South Asian country, and work towards the restoration of democracy in keeping with the SAARC Charter; and Promote adherence to these decisions and fulfillment of this Charter, if necessary through an institutional mechanism.

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Chapter 7: Barriers towards Trade among SAARC

Barriers mean any policy or regulation that restricts international trade. These may be embargos, import duties, import licenses etc. These barriers are the cause of low trade among SAARC states. Hinge Barriers on Security and Democracy

In order to promote regional cooperation India bind the neighboring states in ties of different networks through the project of SAARC. India shares ethnic, language, cultural and religious histories. Harshe (2005) mentioned that India refused to attend the 13 th summit of SAARC and the reason was shaped by two main factors. First, recently events occurred in Bangladesh such as attack on Sheikh Hasina, the deaths of Bilal-uddin, a journalist and former finance minister Shah A.Kibria in two separate bomb blasts. Second, through suspension of the democratic and constitutional processes King Gyanendras seizures of power in Nepal also promoted India to refrain from sharing the platform with the Gyanendra regime. Spillover Effects of Crisis in Nepal

The political system of Nepal is internally challenged by Maoists. Maoists have been trying but have not merely established their control over 40% of territory of Nepal, The Deuba regime failed to improve the law and order situation and tackle the Maoist rebels whom in return gave King Gyanendra a pretext to take over the administration in Nepal. Nepal strategic location has high value for major powers. Since Nepal borders China and India, the dominant forces in Nepal therefore can prove crucial to either of these powers. Nepals frontier is only 185 miles away from New Delhi. That is why Indias stability and friendship with Nepal is essential to strengthen its security. Inadequate Security Environment

Two vast areas of illicit opium production namely Golden crescent and Golden Triangle constitute problems to health security. The threat of terrorism also constitutes challenges to development cooperation from two leading countries Sri Lanka and
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Pakistan. A momentary semblance of peace in the sub-continent has been established with the ongoing talks to promote peace by Indo-Pakistan and the assurance of preventing any terrorist operation from its soil by President of Pakistan. Similarly, peace seems to escape Sri Lanka in spite of the three-year-old Oslo-initiated reconciliatory process between the Liberation Tigers of Tamil Eelam (LTTE) and government of Sri Lanka. The formation of joint mechanism comprising of the LTTE and the government to disburse funds in the tsunami-affected areas has been held as LTTE wants to monopolize post tsunami reclamation work in the northeast. It is easy to assuage the impact of terrorism by promoting dialogic processes in inter and intra-state civil societies within the SAARC countries. The success of SAARC is based upon the economic and commercial bonds among the SAARC member states. Indo-Pak Cooperation strain

If both India and Pakistan focus on the economic aspects of their ties, the

between both the countries may be mitigated. When the nuclear test was conducted in 1998 the trade among Indo-Pak peaked to $345 million. The highest Indian Exports to Pakistan was during the government of Musharraf (Taneja, 2004). India was awarded the title of Most Favorite Nation (MFN) to Pakistan as a trading partner. India can export different kinds of minerals like iron ore, steel etc, and transport equipments like motorcycles, scooters and passenger cars etc. Moreover it can also export textile and number of agricultural products. Whereas, Pakistan contributes in the exports like fruits, spices, pulses, nuts etc to India. India is more powerful and strong in its economic conditions as compared to economy of Pakistan. Energy sector cannot be ignored to promote Indo-Pak Cooperation. Two Sided Conflicts and Tensions Prevailing among Countries

These are such conflicts that are between the member states or the neighboring states that may be due to the conflict in the laws and regulations that vary across the boundaries of the member states. These are the prudential regulations of each member state, such conflicts causes hindrance in the easy import and export of the trade essentials among the SAARC countries. Such conflicts can be handled by the mutual
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agreements among the SAARC member states. That will be beneficial for both of the bilaterally conflicting states. Centre for Promoting Ideas, USA India and Pakistan

The two prominent countries existing in the region, India and Pakistan are commonly known as traditional rivals, since 1947. The most important conflict is the Kashmirs issue. Pakistan, as a Muslim country, supports Kashmirs freedom slogan and this is the main reason why India opposes Pakistan strongly. The bitter relations between the countries were mounting day by day. Lack of trust between these two countries leads to low exports and imports. Trade relations are so weak. India supposes Pakistan as a terrorist country for no reason. Wars of 1965, 1971 and Kargil war were broke between Pakistan and India. The conflicts between these two countries are still unsolved. Governments at both sides are trying to solve the problems and to improve trade relations for this purpose. Many policies are made but it is hard to implement these

policies until the most important factor trust will remain absent. Struggles should be made by the higher authorities to create a trustworthy relationship between these two countries.

India and Sri Lanka

System relating to caste- inferiority of mankind was very common in Srilanka in 1980s.India made many efforts to resolve this conflict in 1983.Indian government started to compassionate a specific class in Srilanka (Tamils) that raised many conflicts between these two countries. India was in favor of Tamils. India sent IPKF (Indian peace keeping force) in Srilanka to support Tamils that was displeasing for Srilanka and thus, Srilankans demanded for the termination of IPKF. In 1990, India started to help Srilankan government as a whole without keeping in view the specific class. The negative thinking of Srilankans about Indians was reduced to some extent and they started cooperation with each other.

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India and Bangladesh

When Pakistan was established, India started supporting the East Pakistan (now Bangladesh). There are many conflicts existing between India and Bangladesh. Disputes were arisen on Farrakka barrage, on river island of Mahurichar, on building fence on the international border by India. All these issues are still unsolved. India opposed Bangladesh of being compassionate to Pakistan whereas Bangladesh blamed India for helping its specific states rebels.

India and Nepal

There were bitter relationships between India and Nepal. Many of the conflicts were not resolved. There relations were so unfriendly when SAARC was constituted. Indian government opposed Nepals step towards gaining atomic energy i.e. weapons from China. Indian government was afraid that if Nepal did so then it will lose its hold from Katmandu. The dispute between India and Nepal was very prominent but it had no affect on Indo Nepal relations. India supported Nepal when its political and economic condition was declining. Thus the relations between these two countries were made strong by their governments. (Khan et al., 2007) Political Issues Relating to SAARC

SAARC does not interfere in the internal affairs of its member countries. It paid attention towards the major issues. In its 12thand 13thmeeting, discussions were made for the better relationships of all SAARC countries. In a nutshell, SAARC is responsible for establishing strong trade relationships among its countries. Many conflicts are therefore exists among them on several issues. The higher authorities are trying to solve these problems and work for their better prospects.

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Chapter 8: Facilitations to Trade among SAARC

As there are a lot of obstacles in trade, that creates hindrance in the ways to imports and exports across the regional boundaries. Similarly, there are various ways to facilitate the trade across the member states, these facilitations may be provided by the governmental regulations or by the management of the SAARC. These facilitations help to promote as well as try to remove the obstacles in the way to trade among the SAARC member states. Promotion of trade under various prospects includes: political measures, competitive measures, trade integration. Political and Economic Measures

Combined efforts of Pakistan and India facilitate trade by solving political and economic issues. Their combined efforts improve trade by eliminating visa problems, tariff and nontariff obstacles, by exploring various other routes of trades and by developing relations among financial institutions. These efforts also help their nationals in performing their religious norms by clearing the path between Lahore and Amritsar where Nankana sahib is located (one of the religious leader of Sikh population all over the world).By the collaboration of Pakistan and India the amusement among both the countries is also enhanced by the permission of Indian films show in Pakistan cinemas. (Naqvi & Schuler, 2007)

Collaboration Leads to Increased Trade Flows

The MFN status provided by India enhances the trades of Pakistan i.e. very nominal amount of items were the part of Pakistan trade that has dramatically increased to a large amount of items. The list of such trade items is still not transparent by its rate increases to about 50%. Pakistan-India Trade Has Increased Sharply over the 2004 to 2006 Source: SBP, Pakistan

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Reforms of Economy and Institutions

For the purpose of enhancing the economic growth, reforms were brought into being by the beginning of 1998. These resources made Pakistan better able to take the liberalization concept forward progressively. Tariff rates that were increased dramatically in every passing year now move towards decline with each passing year up to 2006. Sector-wise Decline in Tariff Rates

The tariff rates among various sectors of the economies of various member states of SAARC is declining very rapidly with the passage of years from 1995 to 2006 and up till now it is decreasing, that facilitate and enhance the trade activities over the borders of different member states. Lowest tariff rates are prevailing among the three renowned economies (Bangladesh, India, and Pakistan) among SAARC. At last the government minimizes the tariffs under the statutory regulations. In Pakistan tariff rates are reduced like that of the leading states of Nepal and Sri Lanka. Import Tax Rates and Fiscal Reforms

The basis of tax rates are increased that make the government better able to manage the obstacles of import rates. Enhanced tax rates causes a lot of harms to all the sectors of the economy in the prospect of performance of the sectors but it provide clear ways to the illegal activities. Enhanced Tax Basis and Elimination of Custom and Excise Rates

The rates available for trade i.e. for importing and exporting and the clearance charges of such trade items are reduced over the period of time in the past 15 years. There is a dramatic decline in these trade and clearance rates. But on the other hand there is an upward trend as seen in the local tax charges i.e. in the income tax and sales tax rates.

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Tax Reforms, Trade Measures and Minimized Tariffs

Pak Revenue Admin Limited makes the management system of trade rates net based i.e. by the use of computerized techniques. It facilitate the traders to move via the feasible efficient path for the purpose of good clearance .Such a system enables the management to take better calculation of risk factors, the clearance time of the trade goods is minimized, and to promote trade. Impacts of Applied Reforms

The size of economy is increasing dramatically by the fast upward trend in exporting the items, importing the essential and by the uphill investments. This all progress is just because of the relief in the tax rates and the increased intentions of the trade management to help the traders. The GDP growth rates are moving sharply down in the past year increases rapidly in the next phase then there is a decline in the year2005-06 but the optimum rate is seen in the year 2004-05. Now there is a moderate rate reporting in the previous year. Trade clearance time is also reduced, this enhances trade openness in Pakistan. Enhanced Trade among The Member States and Enlargement of Economy Size For the promotion of the trade, SAPTA is revised into a new agreement SAFTA that puts down the basis for the enhanced area in the world for the purpose of trade in such a region where there is maximum population. It provides the measures for the purpose of clearance of trade items across the regional boundaries of the member states, for enhancing the competition among the states and provides an effective trade mechanism for the member states. All the countries belonging to the SAARC gives the conformation for the acceptance of this trade agreement.

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Facilitations Toward Trade Among SAARC by The Provisions of SAPTA

It helps in the settlement of trade rates across the regional borders i.e. tariff rates for the purpose of tax rate fixation on local level, Para-tariff are the tax rate fixation over international level. There are some other tax rates that are given other then the before mentioned rates called non-tariff rate. There are also some direct trade measures provided by this agreement that helps the mutual trade among the member countries. It facilitates dealing of this agreement with the LDCs i.e. it gives free tax or zero rates for the purpose of clearance of the trade items either exporting or importing the products across the member states. The restrictions implied by this agreement are also

eliminated for LDCs. Shrestha, 1997 also discussed if any of the member states of SAARC facing the economic harms like obstacles in the payment clearance, trade facilitating measures eliminate different conditions provided by this agreement like the given volume and the value of trade items provided by the contracting agreements. If any relived item of trade harms the agreement parties or the member states, the importing regional country will eliminates that relief. If the origin of these regulations are confirmed, then relief on the trade items are eliminated provided under the legal provisions of this agreement. The legal regulations of this agreement help the

collaborating regional states of SAARC to resolve the conflicting matters among the member states of this regional cooperation. Recent measures stated in a meeting by the President of SAARC Chamber Of Commerce and Industry with the deep concern for trade between Pakistan and India, Tariq Saeed, the president of SAARC connotes that: The non government agencies and corporations take the progressives steps towards the trade and also taking steps towards the poverty alleviation. By developing trustable relations among the neighboring countries, SAARC leads towards achieving the high status globally. SAFTA resolved the tariff problems for the purpose of promoting the trade among all the member states, LDCs are zero rated among all the other member states of SAARC.

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Pakistan will be able to interact with a large population for the purpose of importing and exporting its goods. To overcome the monopoly created by the zero rated products of other member states, Pakistan has to bring the technological improvements for the purpose of achieving the improved productivity and having the competitive advantages over the products of other states.

In the early sixties, Pakistan and China were at the same trade level but China promotes its trade with a rapid increased rate but the Pakistan is still on the way to progress.

For the purpose of better management and for implementing reactive trade measures headquarters of SAARC are required to be built in Islamabad, for which funding is required.

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Chapter 9: Positive Steps Towards Facilitation Of Trade In South Asia Role of WTO
Trade organizations providing trade facilities to the countries, which have become the prominent feature of that organizations. Chaturvedi, 2007 mentioned NGTF (Negotiating group for trade facilitation), worked for the development of underdeveloped countries and its basic purpose is to improve Articles V, VIII and X of GATT 1994.The main focus is on providing trade facilities to South Asian countries namely, Bangladesh, India, Pakistan, Nepal and Sri Lanka. Bangladesh

National Board of Revenue (NBR) of Bangladesh works under Internal Resources Division (IRD).NBR has the authority of making policies and implementing tax structure in Bangladesh. The solutions for enhancing trade are explained in the articles which are given below: Legal Regulations Nepal and Bhutan, which are entirely occupied by land, wanted to use the sea ports of Bangladesh. Bangladesh is not situated near these two countries. The solutions relating to documents filing, securities, guarantees, charge on goods transport are not clearly explained in this article. (Article V). There was clear cut fee and charges on goods import and export, these charges are in the form of flat rates. The payments are made through automated software guided by World Bank. For the establishment of customs modernization plan, an EDI system was formulated in Bangladesh. (Article VIII). Government of Bangladesh made efforts for making trading process much easier. All the information was readily available on internet i.e. charges, duties, tax etc. That helps in saving time and the system of making appeals to higher authorities was introduced for the convenience of trading parties. (Article X).

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India

Central Board of Excise and Customs (CBEC) in Bangladesh is the authority of deriving solutions for trade enhancements, which are clearly explained in the articles given below: Legal Regulations Indian customs worked for making trade procedures much easier. Customs are for making strong trade relations among countries. Tax free structure on goods transport was introduced by India. A trade agreement has been signed by India and Nepal, and with Bhutan an agreement was signed in 1995. Struggles are carried out to make agreements with Afghanistan. (Article V). Several measures were adopted by the customs department to make convenient trade process. A system has been introduced for publishing data quarterly. The ministry of commerce and trade are making efforts for the advancement of trade in India (Article VIII). All the policies and procedures introduced by the Indian Government are available on the websites which were launched by Central Board of Excise and Custom. Furthermore the system relating to measures of controlling risk was also introduced. It is elaborated in Article X.

Nepal

Many reforms were made in Nepal for the development of trade in 1985. Efforts also were made to form Inland clearance depot at various points. Possible trade measures given in the articles are: Legal Regulations Trade facilitation measures were introduced. Trade agreement was signed between India and Nepal for better convenience. Efforts are also made for improving infrastructure to facilitate trade. But for the reason that Nepal is entirely occupied by land, many features of this article are not suitable for it (Article V).
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Fees structure is readily available on internet to help traders. Free information was provided to them. However, the information regarding to rules and regulations were kept confidential (Article VIII).

A website containing all the information regarding trade was launched by the customs department. The anticipated changes and future plans were not published there. Moreover, customer care centers were established for providing help to the customers (Article X).

Pakistan

Ministry of Commerce, Trade Development Authority of Pakistan (TDAP) and Federal Board of Revenue are responsible for the development of trade in Pakistan. Trade of Pakistan is very low. Possible measures are made by the government of Pakistan to establish trade reforms for its enhancement. Trade facilitation measures are discussed below: Legal Regulations National Trade and Transport Facilitation Projects were launched in Pakistan to develop trade that helps to make the trading project easy and convenient (Article V). Training centers were established for the guidance of traders. Relations among countries were made strong for better trade. Online information system was introduced. Hence advanced trade methods were used for facilitation (Article VIII). Policies related to trade are widely available on internet, tracking system was introduced, risk controlling measures were established and paper transactions were minimized due to the availability of internet (Article X).

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Sri Lanka

Department of Commerce of Sri Lanka has the authority to work for the trade enhancement. The steps taken by the department in the articles are given below: Legal Regulations Article V gives easy procedures for the clearance of transported goods. The audit of late arrival has also been conducted. Measures were taken for the controlling of risks anticipated in the trade. Online payment system was introduced along with same fee structure for all kind of traders. Duties were minimized on imports and exports. The filing of documents was made simple only for the convenience of traders, so that they can easily work for the better prospects (Article VIII). Introducing that the internet facility has made trading process much and more easy. All rules, regulations and all types of trade information are available there. Many trade agencies have their own websites for providing information to the concerned traders (Article X).

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Conclusion
Though the formation of SAARC is a landmark step taken by the leaders of the region, the main rational behind its establishment is to develop a congenial environment through summit diplomacy where all nations may interact peacefully with each other, cultivate sustainable peace and promote mutual economic well being by harnessing available resources in the region through the peaceful process of economic integration. Nevertheless, after 21 years of establishment, neither South Asian nations have been able to push the process of integration into full swing nor the organization itself has become viable enough to promote peace, harmony and economic integration or prevent conflicts in the region. The political tensions and conflicts surrounding the countries of a South Asia pose a question of uncertainty and challenge to the formation of South Asian Union at par with European Union that would allow free movement of people; common currency and common foreign and economic policies which ultimately will sow the seeds of peace. In order to achieve the objectives the SAARC would have to evolve into a full-fledged regional entity that can cultivate peace in the region. The realization of durable peace and the future of economic integration through SAARC depend upon the ability and interest of South Asian leaders to resolve domestic as well as long-standing differences through peaceful deliberations.

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