The Political-Economy of the South Asian Economic Union

http://www.dailytimes.com.pk/default.asp?page=2005 12 30 story_30-12-2005_pg3_7

Economic union

Sir: The commentary from the Indian lobby makes it seem as though all is suddenly well amongst South Asian countries. This is not and cannot be the case for some time.

The European Union comparison, that some make, is flawed. It came by as a consequence of World War II that had devastated the European countries. In the early 1980s when Britain was included, its prime minister Margaret Thatcher made sure that the union would be expanded to include more countries. Presently there are 25 countries in the European Union. Some believe that Britain wanted more members so that any centralised decision-making should become hard — thereby defeating the original theme of a federal Europe.

The optimistic view of a South Asian economic union like the EU, amongst nations of South Asia is flawed for several reasons. Muslims of South Asia look towards Iran and Saudi Arabia for political and spiritual guidance, but more towards the former. Also, Iran has a huge circle of influence amongst Central Asian “stan” countries.

Furthermore, because of its bigger economy, India will naturally strive for unchallenged leadership of this economic union. There will be huge economic disparities too.

Also, the only country that India could claim to have good neighbourly relations with is Nepal. This doesn’t say much for a country that dreams of becoming a regional super power.

BEHRAM B ATASHBAND

EU and Nafta worked not because of the sacrifices, mostly political that you are referring to, but because member nations alreeady had a history of trading and commerce between them, some of which was quite significant. The amount of trade between the SA nations is paltry until there is economic dependency between countries getting into such unions is foolish.


US already had moved significant production to MExico and Latin America. Capex into new projects was already flowing through to emerging markets within the proposed NAFTA region. US was a big market for the products made in these countries. Economic dependency. It is a much easier sell than trying to set up an economic union when there is a legacy of economic interdependecy.

It would work wihtin South Asia, probably around 5-10 yrs time when there will be a clear leader within the region, India. Both in terms of economic might and also socio political influence that such might warrants.

[...Can India show the kind of magnanimity befitting of an emerging super-power...]

Emerging super-power? let`s not jump the gun yet..... India is a developing country and will remain so for foreseeable future - and going by the shenanigans of its current breed of m0r0nic ``leaders`` - India will remain a ``developing`` country for a long time to come....

That said - ``magnanimity`` is the wrong word.... because we are talking about ``Economics`` here..... there has to be give and take - of ``equal`` measure where both parties are getting something that works for them......Only then a successful relation can be built between multiple parties....For example - if Bangladeshis want more market access in India - they would have provide transit access to Indian goods..... they cannot expect India to be ``magnanimous`` and give unilateral goodies.....

Any ``economic union`` that starts with an assumption of ``magnanimity`` on part of any member is bound to fail..... I am surprised to see this sentiment being professed over and over again - most notably by pakistanis..... Such mindset is completely flawed to begin with..... Which is probably why any such economic union has never taken hold in south asia.... and will never happen as long as other potential members of the union are looking for ``free`` goodies from india.

India cannot afford to be ``magnanimous`` - even if it were a super-power. No country can really afford to do so.....

[..Can India really prove themselves worthy of leading a group of skeptical countries without actually making them feel that they are being led? ....]

A resounding NO..... if other SA countries are ``skeptical`` as you said - then let`s not waste time on any kind of union - it won`t work.... And on top of that - if the potential members of the proposed union also ``feel`` bad about being led by india - then we are too early for this project........ first the members have to grow up and shed their infantile stupidity of ``feeling bad about being led``.....and accept the reality that India is going to be the undisputed leader of the pack....

Until then - India has better things to do.....

behram1 #1

`` The optimistic view of a South Asian economic union like the EU, amongst nations of South Asia is flawed for several reasons. Muslims of South Asia look towards Iran and Saudi Arabia for political and spiritual guidance, but more towards the former. Also, Iran has a huge circle of influence amongst Central Asian “stan” countries. ``

As South Asian Muslims become wiser they will realize the high oil prices Iran and Saudi Arabia charge hurt their economic well being. Not to mention they prop up corrupt elites in those states.

`` Furthermore, because of its bigger economy, India will naturally strive for unchallenged leadership of this economic union. There will be huge economic disparities too. ``

Tell me a land border that two South Asian countries share with each other.
Burma with Bangladesh
Pakistan with Afghanistan

This is if you want to call Burma and Afghanistan South Asian countries.

`` Also, the only country that India could claim to have good neighbourly relations with is Nepal. This doesn’t say much for a country that dreams of becoming a regional super power. ``

Explain to me exactly what problems India has currently with Burma, Bhutan, Maldives and Sri Lanka.

Can Indians make the kind of sacrifices (made by larger EU members e.g. Germany and France) needed to make this arrangement a reality? Can India really prove themselves worthy of leading a group of skeptical countries without actually making them feel that they are being led?


Let me translate that from pakispeak to English, for those uninitiated in paki-isms:

If India is willing to hand over Kashmir to us on a platter, Pakistan will be magnimous enough to trade with India, an economy 10 times it`s size with a higher per capita income..a trade relationship that will benefit Pakistan more than India giving Pakistani businesses access to a market size they can only dream of.

Please...feel free to trade with China...

`` What is, then, the future of the South Asian Economic Union? The answer to that question comes from the political rather than economic realm. South Asian Economic Union, like the European Union, is hypothesized to bring peace to this volatile region. After the end of the second world war, for example, it was inconceivable that Germany and France would ever enter into an economic arrangement--much less a union--of the kind that they find themselves in today. Some have argued that the biggest benefit of the EFTA and EU is that it has diminished the prospect of another war between these traditional European rivals to a virtual impossibility. Similar factors were at play when ASEAN was founded in the 1960s as the smaller countries in South East Asia region vowed to cooperate amongst each other to guard against possible invasion by larger players in the region ( e.g. China, Korea, and Japan). That seemed to have worked thus far as well. ``

In the long run India can hold well against the big players - USA, Europe, Japan, China etc.
Having said that it does not hurt to have an economic pact with all the smaller neighbors.

The real issue is what are the roles/interests/agendas of various interest groups in Pakistan and Bangladesh ? There are too big for all of them to be ptoadies and oodles for the Indian government. That is a question that Pakistanis and Bangladeshis have to formulate largely on their own.

#4 by mohar11 on December 30, 2005 12:56pm PT


Until then - India has better things to do.....


Yup..It`s not like there`s a shortage of willing trading partners..Here we have my former county opening a trade office in India, lobbying Indian companies to invest in Fairfax...

Fairfax`s Point Man in India
Prasad Tagat Touts the County`s Corporate Pluses

By S. Mitra Kalita
Washington Post Staff Writer
Friday, December 30, 2005; Page D01

BANGALORE, India -- Most Indians have never heard of Fairfax County. Prasad Tagat aims to change that.

Calling himself a ``brand ambassador`` for Fairfax County, Tagat is in charge of luring technology companies from here -- India -- to there -- Northern Virginia. Hired in 2004, Tagat attends breakfast meetings and networking luncheons throughout India armed with glossy brochures and folders provided by the county. He recites statistics about the Fairfax school system and the number of Hindu temples in the county.

SUMMARY:

A beggar country, completely dependent on US aid, will trade with india only if india gives them something for free!


ANALYSIS:

Usual bevakoofy nonsense, just clothed in long-english words. A culture with an excessive sense of self-entitlement and importance (contrary to facts on the ground) can go nowhere. Generating jihad is one thing, creating wealth and education is another.

8/arjun

Hmmm.... Fairfax county is doing all that......May be I should lobby my county [Loudoun] to open an office in Bangalore.....

#10 by mohar11 on December 30, 2005 1:52pm PT

You and me both.. :)

Loudoun county: Fewer farm animals than Fauqier county, cheaper housing than Fairfax county.

I`m only afraid Fauqier will say: Farm animals, but no AOL..

The author has called upon India to do several things `selflessly` in order to make SAEU a reality. No country is truly selfless, it always acts in its own interest. Can the author show how SAEU is in India`s interest (short term or long term), while calling upon it to do this and that?

In my opinion, India should stop trying to do anything that involves Pakistan - it will only fail. India has little to gain from SAFTA. It already has a free trade agreement with SL, and decent trade with Nepal. Pakistan refuses to grant it reciprocal MFN status and BD is sticking their neck in the sand, refusing to allow India transit rights to the north eastern states or sell gas to us. The bigger markets for India are China (with whom two-way trade is booming), SE Asia, Japan, EU and US. The Indian middle class is already large - 56mn people with income > 10 lakh rupees and another 240 mn (I think) with income > 2 lakh rupees forming a 300 mn middleclass. This number will only grow and will be a large enough market for Indian companies. There is no advantage for us in allowing free movement of people from terror sponsoring nations. The only thing that they can offer India is oil/gas which is currently being negotiated anyways.

Can the author make a case for SAEU from India`s perspective, before urging it to take the leadership role for it, other than appealing to its selflessness or begging for generosity?

re: this article
An interesting article but i think premature.
Since European Union is being touted as the model to follow, it is a good idea to see how
European Union evolved. Europe was a divided camp in the 30s and 40s and it was only after the trauma of WWII that it seeped into the consciousness of each nation states (at least the ones most traumatized) that in order to prosper, they have to have a healthy rivalry. US helped rebuild Europe through the Marshall plan but Europe evolved its own identity in the last 50 years that sets it apart from the rest.
For more details, one may go to the the history of EU in the above link.
Per that article, EU was formed out of a desire to (rebuild Europe after the disastrous events of World War II, and to prevent Europe from ever again falling victim to the scourge of war. In order to do this, many supported the idea of forming some form of European federation or government. Winston Churchill gave a speech at the University of Zürich on September 19, 1946 calling for a ``United States of Europe``, similar to the United States of America. The immediate result of this speech was the forming of the Council of Europe in 1949.) It grew by a slow process of assimilation (for eg UK was initially not a member) evolving a legal frame work, a common market, currency etc and now a constitution, ratified by most but rejected by nations like UK, Denmark, ,i think also France.
Some benefits of EU include:
1. Free trade of goods and services among member nations
2. Freedom for citizens of its member states to live and work anywhere within the EU with their spouses and children, provided they can support themselves
3. A single currency, the Euro
4. Common system of indirect taxation, the VAT, as well as common customs duties and excises on various products
5. A common external customs tariff, and a common position in international trade negotiations.
Member nations have voting rights to elect parliament, a common criminal law etc etc.

The big questions is: where is South Asia in terms of evolution?
Is India, Pakistan (the biggest nations in SA) ready for economic union? Clearly, there can be little talk on common legal framework, free mobility of persons etc etc given the intense rivalry and hatred that exists between these 2 nations. Is at least an economic union possible?
I think the ball is in Pakistan`s court. India has already given Pak the MFN status, something that Pak has not reciprocated. This is something nation states will be obligated to do anywhere post 2007 once WTO agreement goes into effect. Even in this, Pak is dithering, citing Kashmir problem as a stumbling block!
Pak is clearly not ready at a mental level. India is headed by a PM who is an economist with a vision but even he may run into problems when he tries togive too many one sided concessions to Pak. Author of this article says:
(he onus for doing so clearly lies with India. Without that, SAFTA is likely to be still-born or, at the very least, lead to suboptimal results. The other countries of the SAARC region are justified in looking towards India`s current actions, policies, and postures for signs of things to come.)
It would have been useful if the author had elaborated a little more on what was expected from India.
Sridhar

re:#12 by Layman
Indian diplomacy would have failed if it is unable to convince even Bangladesh that it has nothing to fear and that it can prosper by allowing transit facility. The problem is India`s huge size has become a liability for India. Smaller nations like Bangladesh fall an easy prey to their own machinations and believe they are being exploited by India. Bangladesh`s resistance to TATA`s 2 billion dollar investment does not make any sense. And, there it is!
Pak can gain immensely by allowing free trade with India but again Pak rulers hate India so much that even the label ``made in India`` makes them go mad!
Sridhar

re:#3 by mohar11
Bangladesh is so stupid that, leave aside giving transit trade facility to India, it has become a new training ground for terrorists (the recent Bangalore episode may be connected with Bangladesh), with the result India is busy fencing off its borders with Bangladesh. Talk of free trade at this point is meaningless.
Sridhar

...since indians don`t want to trade with pakis and pakis are staying away from this thread, it is obvious this safta thingy has failed even before it started...author should concentrate on kashmir, hindu bad/muslim good, jihad is our first duty and other such serious topics to get both indians and pakistanis hitting over five hundred interacts and make chowk a succesful web-site... this advice is offered without asking or without charge...fee sabeel-illah...