There is a clear danger of alienating the spirit of consensus on which the success of a larger South Asian free trade area will depend.
It is no surprise that in a supposedly globalising economy—under pinned by the rhetoric of free traderegional trade arrangements are proliferating as never before. It is widely argued that the protracted nature of negotiations under the Uruguay Round gave fresh momentum to the formation of regional blocs, increasing their number from a mere 25 in 1990, to more than 80 arrangements of one sort or another by the middle of the 1990s. And, as international commerce becomes more intricate, so have the arguments for and against regional trade groupings. Many economists continue to hold that these lead to inefficiency through trade diversionary effects, rather than promote trade amongst the signatories. But even as the debate remains unresolved, South Asia is marching towards integration into the world economy with its own regionalism.
The commitment of South Asian governments to accelerate the process of regional economic integration is now over a decade old. It began with the intention of establishing a SAARC Preferential Trading Arrangement (SAPTA) through continuous negotiations, to eventually lead to the formation of a South Asian Free Trade Area (SAFTA). But SAPTA—in operation since December 1995—has proved to be an arduous tool to negotiate. Similarly, SAFTA, initially proposed to come into force in 2001, is now unlikely to see the light of day anytime before the year 2008.
Given the strained ties between the two largest economies in South Asia, the political constraints to freeing trade within the framework of a regional arrangement has always been formidable. A consequence of such intransigence has been a slow shift towards bilateral trade agreements amongst the member countries of SAARC. So far, India has signed such agreements with Nepal, Bhutan and Sri Lanka, and is contemplating similar pacts with Bangladesh and the Maldives. Sri Lanka is also contemplating the extension of free trade pacts with Pakistan and Bangladesh at a not-too-distant future. Such agreements are defended on the grounds that they are a means of permitting ´fast-track´ liberalisation, but by the very nature of their exclusivity, there is a danger of alienating the spirit of consensus on which the success of a larger South Asian free trade area will depend.