India's PM Narendra Modi and Nepal's PM Sushil Koirala during the SAARC 2014 summit in Kathmandu Photo: XPD Division, MEA India
India's PM Narendra Modi and Nepal's PM Sushil Koirala during the SAARC 2014 summit in Kathmandu Photo: XPD Division, MEA India

Not-so-free trade

SAARC leaders emphasise regional free trade and investment while overlooking the need to address labour conditions.
India's PM Narendra Modi and Nepal's PM Sushil Koirala during the SAARC 2014 summit in Kathmandu<br />Photo: XPD Division, MEA India
India's PM Narendra Modi and Nepal's PM Sushil Koirala during the SAARC 2014 summit in Kathmandu
Photo: XPD Division, MEA India

With an intra-regional trade of only 5 percent, Southasia remains one of the least economically integrated regions. The reason for this is simple: despite the formalisation of treaties like the agreement on South Asian Free Trade Area (SAFTA), Southasia is not really an economic union. Even with SAFTA, free trade of goods is severely restricted as the region's largest economy, India, still retains a significant number of items – over 600 – on its 'sensitive list' for which tariff reductions do not apply.

At present, when governments in the region are actively pursuing investments from around the world, a greater push for SAFTA is not surprising. While the leaders of the region did note how a better integrated Southasia would require greater movement of capital and people across borders, they said more about removing trade barriers than, say, relaxing visa regimes.

Predictably, Indian Prime Minister Narendra Modi's inaugural speech of the SAARC summit posited India as the primary entity around which the region should organise itself. His focus, by and large, pivoted on investment and infrastructure, much like the platform on which he won the general elections in India. As Modi put it, "We speak of ease of doing business in India. Let's extend this to our region. I promise to ensure that our facilities at the border will speed up, not slow down, trade. Let's all make our procedures simple, our facilities better, our standards common and our paper work less burdensome. India will now give business visas for three to five years for SAARC. Let's make it even easier for our businesses through a SAARC Business Traveller Card. Excellencies, India has a huge trade surplus with SAARC countries."

Clearly, Modi intends to take his 'Gujarat development model' to the region. It is worth pausing to consider what this means. Everywhere he sees "the rising tide of integration", this simply refers to the breaking of barriers to facilitate free trade, attract Indian investment in the region and allow room for unfettered business transactions. Along these lines, Modi spoke of deepening links between Bangladesh and India by agreements through "rail, road, power and transit". This involves Bangladesh giving parts of its land as Special Economic Zones (SEZs) to India.

Tenuous position of labour
However, opening up the economy for more intra-regional trade is a hollow agenda item if it means breaking the backs of the working class in the respective countries. Easing the mobility of capital throughout Southasia raises the serious question of its impact on labour in the region. Free trade agreements (FTAs) come with the economic rationale of increasing export and reducing the cost of manufacturing, actions that under stable economic conditions lead to both greater surplus for the producers and growth of national GDPs. These can, of course, result in increased wages for workers, but only when they are in a position to make the necessary demands and effect change. But the position of labour in the region is not so encouraging. The new government in Delhi, and several state governments in India, are already in the process of extensive restructuring of labour law; among the 'reforms' are an easy hire-and-fire regime, increase in minimum overtime hours, decrease in workplace inspections, and more requirements for forming labour unions.

While Nepal's Prime Minister Sushil Koirala talked about a framework to address the issue of migrant labour, none of the leaders spoke about the importance of improving labour conditions within their countries and the region more broadly.

It is also a fact that SAARC, which can realistically only address issues that are least common denominators of the eight member states, is less suited to address problems related to labour. Since these issues are shaped by national politics, to address them through a multilateral organisation like SAARC would require the states to cede a certain amount of economic sovereignty, a condition that SAARC is, by design, supposed to avert. Even free trade requires some relinquishing of economic control, but in the current political climate in which neoliberal economics has great support among the governing classes of Southasian countries, SAFTA is a more agreeable proposition.

The most one could expect SAARC to do in terms of safeguarding workers rights is for its members to sign the ILO convention.

~ Shubhanga Pandey and Puja Sen are Assistant Editors at Himal Southasian

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