Problems of RTAs especially in South Asia

India is the main hub of RTA activities in South Asia . In spite of a 1995 South Asian Preferential Trade Arrangement (SAPTA) with its SAARC neighbours ( Pakistan , Bangladesh , Nepal , Bhutan , the Maldives and Sri Lanka ), the transition to a South Asian Free Trade Area (SAFTA) was an arduous decade in the making, and two decades from the establishment of SAARC.

After the initial reluctance, a number of agreements are emerging. The Indo-Sri Lanka FTA (signed in 1998, operational from 2000), a Framework Agreement under BIMSTEC ( Bangladesh , India , Myanmar , Sri Lanka , Thailand Economic Cooperation), Indo-ASEAN and Indo-Thailand Framework Agreements, the Comprehensive Economic Cooperation Agreement with Singapore , and partial scope agreements with MERCOSUR are some of the arrangements involving South Asian countries.

The problems in South Asia are rather complex. While the economic aspect is crucial, it remains secondary to the overarching political complications that crop up between countries. There is the perception, quite palpable at times, of India being not just a ‘big brother' but, equally, a ‘big bully'. There are examples of countries where conflicts both military and those resulting from shared natural resources have been minimised with the formation of RTAs. But this does not seem to be the experience yet of countries in the region. Another problem, economic in nature, is that the volume of intra-regional trade is still not significant.

In trade terms, the Indo-Sri Lanka FTA is not quite a success story. There are many instances of Indian goods flooding and swamping Sri Lankan markets, limited access being given to the latter's goods, and no end to the long list of non-tariff barriers that confront these goods! There are also numerous instances of trade facilitation-related problems that add to the transaction costs of imports and exports -- the additional costs resulting in a negation of the cost benefit under the FTA.

The general perception is that if India 's position as a regional superpower is to continue, then the support of its immediate neighbours is very important. Having good trade relations that are not merely one-way in nature will put the relationship on a firmer footing.