South Asia Nations Move Toward Free-Trade Zone By Nirmala George Associated Press Saturday, January 3, 2004; Page E01
ISLAMABAD, Pakistan, Jan. 2 -- The impoverished nations of South Asia agreed Friday on the framework for a free-trade zone that would encompass one-fifth of the world's population, a step that could deepen the improving relations between nuclear-armed rivals India and Pakistan. The broad framework of the accord, which would start tearing down tariffs by Jan. 1, 2006, was reached during talks in Islamabad by foreign ministers preparing for the first summit in two years of the leaders of India, Pakistan, Bangladesh, Sri Lanka, Nepal, the Maldives and Bhutan -- home to hundreds of millions of the world's poorest people. "We must set aside all our suspicions of each other wherever they exist and switch on the engine of South Asian growth in order to travel on the road to prosperity," said Indian foreign minister Yashwant Sinha. The free-trade agreement would allow the harmonization of tariffs and the free flow of goods and services, and the establishment of a regional development bank to promote cooperation among central banks, Sinha said. Still, with poverty endemic and a history of internal conflicts and regional squabbling that goes back centuries, such an accord faces serious challenges. While it may not produce short-term benefits to South Asia's residents, the agreement could eventually bring more jobs in a region with high unemployment. National leaders will review the accord when they meet Sunday through Tuesday in the Pakistani capital, where security is extraordinarily tight in the wake of two assassination attempts last month against President Gen. Pervez Musharraf. The summit of the seven-nation South Asian Association for Regional Cooperation is the first since a meeting in Nepal in January 2002. That gathering took place amid deep acrimony a month after an attack on India's Parliament that New Delhi blamed on Pakistan-backed Islamic militants. Pakistan denied the allegations. Last year's summit was canceled because of lingering tensions. The two countries have made concerted efforts since April to improve relations, observing a cease-fire in the disputed Himalayan territory of Kashmir and restoring full diplomatic relations. A restoration of transportation links was capped by the resumption of commercial air service Thursday. Sinha said the free-trade accord could lead to greater cooperation in the future -- even a common currency -- an idea that has seemed impossible amid omnipresent poverty, civil war in several countries and the India-Pakistan conflict. "A South Asia with one currency, one tariff regime and free movement of goods, services and people is well within the realm of possibility," Sinha said. Pakistan agreed that economic union was a long-term "good objective," said Foreign Ministry spokesman Masood Khan. "But in the immediate future, we must focus on conflict resolution and solution of the problems we have." The South Asian Free Trade Area has been delayed repeatedly in recent years, because of feuding between India and Pakistan and concerns by smaller nations that they will be overwhelmed by foreign investment and cheaply made Indian goods. Some of those fears were being allayed through a plan to phase in the tariff cuts over several years. The broad outlines are that the countries would have to reduce tariffs from between 25 and 30 percent to between zero and 5 percent over five to 10 years.
