Cooperation without trade

Existing trade structures of ECO member states are oriented towards West or East, not towards one another.

Why has the Economic Cooperation Organisation (ECO) not progressed? President Asif Ali Zardari asked at the recently held summit of the ECO. The prime mover of any regional cooperation arrangement is trade, which, sadly, is not the focus of the ECO. Existing trade structures of the 10 member states are oriented towards the West or the East, not towards one another. Intra-regional trade has not changed much from the pre-ECO level of six to seven per cent of their total trade. The volume is no more than $40 to $50 billion. Achieving a respectable level calls for creative ideas and concrete measures. The approach of dirigisme inherited from the Regional Cooperation for Development — the predecessor organisation between Pakistan, Iran and Turkey — cannot do the trick. Doing business this way brings together bureaucrats of national ministries who raise a plethora of forums and regional and specialised bodies that meet endlessly all year round to produce statements of intent and easily reached agreements in areas as diverse as culture, science and post offices. There are now 12 such bodies. When it comes to trade, most delegates are either sleeping or looking the other way. At least, that is what I witnessed in the four meetings of the Regional Planning Council as the representative of Pakistan. Threadbare discussion of the factors responsible for the sluggish movement towards trade liberalisation takes place neither in meetings, nor in the pages of the ECO Economic Journal. (Yes, the ECO also produces a journal!)

Even when a collective agreement on trade is reached after a long and tedious process of negotiations and balancing safeguards for individual concerns, as it was in the form of the ECO Trade Agreement, implementation is lacklustre and painfully slow. It took a decade to conclude in 2003. Member states were required to lower tariff barriers to a maximum of 15 per cent in a period of eight years. This has not yet happened. As a result, the ECO Vision to set up a free-trade area by 2015 will have to be pushed farther into the future.

It might be suggested that the continuing conflict in Afghanistan stands in the way of liberalising intra-trade. That does not seem to be the case. With a share of 35 per cent, Afghanistan was the largest contributor to the intra-ECO trade in 2009. As opposed to this, Turkey contributed only 4.6 per cent, despite being the largest trading member of the ECO. It cannot be said that the region has low potential. Tremendous potential exists, not only in traditional trade flows but also in energy. The region could be an East-West bridge in terms of economic connectivity. However, the implementation of the Transit Transport Framework Agreement, 2006 is slow. Some members have still not signed or ratified it. Work on the feasibility of the interconnection of power systems started in 2005 by NESPAK had to be abandoned in 2008 because of poor progress.

The economic case for liberalising intra-regional trade is strong and progress can result in high regional growth. What is lacking is political will, which has led to weak implementation arrangements and organisational inertia. The story of the other organisation in the region, South Asian Association for Regional Cooperation, is no different. The successes of Latin American and East Asian countries in integrating their economies have not yet impressed the Central and South Asian leaders enough to appreciate that the sum of the separate national prospects may be less than the collective outcome for growth, poverty reduction and sustainable development.

Published in The Express Tribune, October 19^th, 2012.