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REGIONAL ECONOMIC GROUPINGS
Opinion

REGIONAL ECONOMIC GROUPINGS

Lt Gen.Zameer Uddin Shah,PVSM,SM,VSM,Dep.Chief of Army Staff(RETD)

Lt Gen.Zameer Uddin Shah,PVSM,SM,VSM,Dep.Chief of Army Staff(RETD)

Regional economic groupings like European Union (EU) and Association of South East Nations (ASEAN) have buried centuries of bitterness between neighbours and transformed them into vibrant economic powerhouses. The main cementing factor is regional economic inter- dependence. In Europe, centuries of war and enmity between France and Germany has been buried and has resulted in massive economic prosperity for both countries. The factor of unity is very much a prerequisite for prosperity in a region. Regional economic groupings create trading blocs, eliminating unnecessary trade barriers to facilitate free movement of goods, services, labour and capital. In a particular area, countries not members of the regional trading bloc face tariffs and quotas. It would be interesting to see how Britain would cope after ‘BREXIT’ is implemented. There are reports of international Banks migrating to other countries. It has also created fissures between the mother country and Scotland and North Ireland.

There are also some accompanying disadvantages like dilution of sovereignty and national identity. Larger and powerful members of the bloc gain prominence, steam rolling over smaller and less powerful countries. The EU however has balanced this to some extent in the European Parliament but there is no doubt that Germany and France call the shots. There are some cultural problems too. The glaring example is Turkey being denied membership of the EU despite being an important member of NATO. European nations are apprehensive of their countries being flooded with cheap Turkish labour with a different religion and culture.

India during the period up to disintegration of the Soviet Union kept out of regional groupings and focused on global organizations. India's experience in regional cooperation has been unsatisfactory. South Asian Association for Regional Cooperation (SAARC) has achieved nothing worthwhile other than an annual meeting of executive heads of state. Even this has not been achieved because of the seemingly unbridgeable chasm between India, Pakistan and China’s efforts to wean away India’s neighbours into its fold. Cost of imports from overseas would be reduced in case imports are from neighbours. India has a massive adverse balance of trade with China. Joining an economic grouping where the latter would have unrestricted access to Indian markets would further exasperate the balance of trade and risk domestic industry and agriculture. As long as China considers India as a strategic rival in Asia, it will never offer un-impeded access to Indian goods and services. The recent meeting between the Indian PM and Chinese President at Mahabalipuram hoped to rectify the imbalance. It has been agreed to set up a high level political mechanism to find ways to enhance India’s access to Chinese Markets.

Besides the Border dispute another stumbling block is the Chinese sponsored ‘One Road One Belt’ (OROB). India’s stand on this project has remained ambiguous. It never fully rejected or endorsed it. India is principally opposed to the China Pakistan Eco Corridor which passes through Pak Occupied Kashmir. The project presents both threats and opportunities. The BRI will enable China to dominate the region and establish a China Centric system that will marginalise India. If India plays its cards carefully it can get land access for trade with the Central Asian Republics.

There are two other regional groupings of which India is a member. The first is BIMSTEC (Bay of Bengal Initiative for Multi Sectoral Technical and Economic Cooperation) comprising Bangladesh, India, Myanmar, Sri Lanka, Thailand and Nepal. The other is BRICS (Brazil, Russia, India, China and South Africa. Bilateral relations have centred mainly on non-interference, equality and mutual benefit, nothing very substantial economically.

India has recently declined to join the ‘Regional Cooperation for Economic Partnership’ (RCEP) which was intended to comprise 10 ASEAN plus 6 ‘Free Trade Area’ (FTA) countries. Now 5 FTA countries remain and hopefully India will ultimately join, on its terms. Being plugged into the global economy, through trade agreements, and enhancing domestic competitiveness are inter-related. The Government must pursue domestic reforms, simultaneously with negotiations, to expand India’s basket of trade agreements. Indian manufacturing cannot compete with China and ASEAN countries, where work ethics and discipline are more conducive to efficient production. India needs to shore up its sagging competitiveness through domestic reforms and worker discipline. India has to harness long term economic strength by unshackling rigid markets and simultaneously accelerate negotiations of other trade agreements, like Australia and New Zealand. India is now increasing economic cooperation with ASEAN, being its fourth largest trading partner. It became a sectoral dialogue partner in 1995 and a member of ASEAN Regional Forum the following year in1996. The future however lies in SAARC. For this to succeed Pakistan has to give up its anti-Indian stance. The ‘Kartarpur Corridor’ should be a precursor for improved relations.

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The facts and views expressed in the article are those of the writer.