Wednesday July 06, 2022

Let there be trade

January 14, 2016

The twentieth century witnessed two of the bloodiest wars ever fought in the history of mankind – the First World War and the Second World War. The epicentre of both the wars was Europe, where countless lives were lost, infrastructure destroyed and many people became the victim of the Holocaust.

The region also became entangled in the post-war cold war conflict between the United States and the Soviet Union, resulting in many proxy wars, military coups and foreign sponsored revolutions. However, the region has integrated itself into one of the most economically integrated regions of the world – the European Union.

Some of the salient features of the EU are: free trade, a common currency and a single visa policy for all the member countries. It is quite astonishing that a region once engulfed in severe hatred, has now quite soundly integrated itself. This is a lesson for all the other regions of the world that are struggling towards integrating themselves due to political reasons.

One region that can learn from the European Union is South Asia. The region has witnessed many political downturns, such as the bloody partition of the Subcontinent into Pakistan and India, the secession of East Pakistan into Pakistan, the three wars fought between India and Pakistan and the cross-border skirmishes between the two countries.

All the countries in this region blame the political tensions between Pakistan and India as the major obstacle towards economic integration in South Asia, which is quite true as the relations between the two countries have remained strained for a period of time. But the question arises, how was Europe able to set aside all its differences and integrate? If Europe can do it, why can’t we?

Even though trade is taking place in the region, there are many difficulties faced by traders in cross-country trade due to the lack of integration. Due to poor infrastructure, such as bad roads, goods are not transported on time. The bureaucratic red-tape is very high in the Customs departments and in the acquisition of visas in all the countries, which is a very time-consuming and costly process (costly due to the bribes given to government officials. Moreover, trade policies are quite volatile and inconsistent. Due to these factors, the costs of trade in South Asia are almost 85 percent higher than the costs of trading in East Asia.

The potential of trade is very high in the region, particularly in agricultural products, such as tea, rice, wheat, cotton and many other fruits and vegetables. Free trade and economic integration in the region could thus lead to economic prosperity in the region and might also lead to an ease in political tensions between countries.

A European Union model might seem like utopia right now, but if trade policies are relaxed and trade is kept separate from politics, it could be advantageous for the whole region.

People-to-people contact is very strong in South Asia. For instance, the majority of the people who travel to India, Pakistan or Bangladesh from any of these countries always talk about the hospitality they encounter, as well as the need to end the political tensions between the countries.

It is high time the countries of South Asia focused their attention on trade, so that the potential of the whole region is realised. If Europe can give trade a chance, despite, it’s past racial and ethnic tensions, so can South Asia.

The writer is an economist with SDPI, Islamabad.

Email: danish223@hotmail. com