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by Dr. Rohini Jayaratne

The world economy has been dominated by two factors in the past and present millennium - globalisation and regionalisation. Regional economic integration is linked to the process of globalisation simultaneously.

Multilateral trade liberalisation in the world economy has led to an exponential growth of the global economy benefitting many nations. Yet it was found by the protests emanating from civil societies in the North and South that increasing trade openness was imposing tremendous short term costs in developing as well as developed countries in certain sectors.

Regional co-operation is viewed by most countries as a countervailing power in trade negotiations with countries outside the region and providing benefits and opportunities to trade with neighbouring countries.

The developing countries, South Asia included, face the question of determining what the precise role of regional co-operation will be in a rapidly globalising world. Multilateral trade liberalisation brings considerable gains. In view of this South Asia, Sri Lanka included, needs to continue with this trend and it does not in any way hinder enhanced regional co-operation.

The nature and extent of regional co-operation in SAARC countries like Sri Lanka should be strengthened. Ways and means should be looked into to enhance the collective bargaining power of South Asia in global forums. Factors for motivating and forging regional alliances could be promoting economic co-operation among members of SAARC, increasing efficiency and economies of scale.

Trying to achieve international competitiveness during globalisation while building sense of security to facilitate political harmony within a region, and to forge a collective bargaining power position in global negotiations are some necessary factors. During the last decades there was a proliferation of such alliances around the world.

To name a few in Asia, APEC, ASEAN, and SAARC, while in the North the most advanced being the E.U. There is considerable debate as to the nature and future of these alliances under the auspices of the World Trade Organisation.

What their exact role would be remains a question mark? Would they be members acting as a complementary instrument to the working of the WTO or is it a phasing out mechanism for these regional blocs." As to their nature a view that they are preferential agreements rather than regional or free trade agreements exists. A doubt whether they are 'building blocks' or 'stumbling blocks' towards a more integrated trading world also prevails.

Increasing intra-regional trade can avert large scale transport costs associated with internal trade in the large countries and partners outside the region. This will lead to an ambiguous benefit to all trading partners. New trade in goods and services can be generated that would lead to a growth enhancing effect.

But it has to be pointed out multilateral liberalisation would be much more beneficial to each individual country. Regional liberalisation would benefit all countries but more so the smaller economies of the region, like SL. Significant gains can be obtained by increasing regional trade as well as trade from outside the region.

This would result not only in economic gains but in political gains as well. For a political settlement that reduces tension and hostilities in the region thereby releasing resources for development and poverty alleviation, may be more beneficial than multilateral liberalisation.

Therefore a preferential trade agreement as a regional effort can be mutually beneficial not only economically but in tackling non economic issues as well in countries like Sri Lanka.

Furthermore such an agreement suited to all SAARC countries could bring in welfare gain and increase trade flow until multilateral liberalisation is practised as a commitment by all World Trade Organisation members. Sri Lanka and other South Asian countries cannot afford to keep aloof from world trading blocs.

In a free trade world regional agreements could facilitate the entry of smaller countries in the multilateral trading system on a preferential basis. While acknowledging the welfare gains from their own regional arrangements it would help to prepare domestic producers to the rigours of multilateralism.

The political tension in the region and the long-standing mistrust has been the main stumbling block to trade and co-operation in South Asia. A regional arrangement that addresses economic issues while removing political hostility alone would not suffice. There is also a need to shield the poor from the rigours of globalisation.

The lack of mutual trust ethnic and religious conflict, the magnitude of bilateral disparities make it unrealistic to comprehend that any substantial growth of regional co-operation is possible without the easing of political tensions. Any realistic assessment for economic co-operation and interdependence has to resolve many issues.

The most striking issue is the role of the State in the promotion of regional co-operation. Any prospect of enhancing regional co-operation exclusively by market forces remains bleak. Limited political contacts, mutual security concerns all point to the necessity of a State directed approach to regional and economic co-operation in the region.

Conscious efforts at political level combined with demonstrations of political will by the leaders of Sri Lanka and the South Asian region are absolutely necessary for its growth. The development of a pragmatic approach to economic co-operation in Sri Lanka and South Asia is vital.

Given the heterogeneity in the levels of development of the SAARC countries the strategy to be adopted has to be gradually based on the capabilities of each state. Regional cooperation should only complement the existing bilateral trade and transactions by SAARC countries not replace it.

The interest in a South Asia Free Trade Area should not obscure the importance of extra regional and economic co-operation that most of the SAARC countries are engaged in.

For instance it would be detrimental for SAARC countries, Lanka included if they do not seek access to the markets of Central Asia the Gulf region etc. Lowering tariffs without delinking from intra regional and global economic relations would be the key to the development of a pragmatic strategy to increase economic co-operation.

SAARC countries like Sri Lanka should also resolve to pursue only modest trade objectives and seek development projects of modest scale. Gradual increase to larger scales should be adopted after the benefits from the modest projects have been reaped or realised.

South Asian countries should give top priority to conserve the natural resource base and conserve the environment. It is an integral part of any economic development strategy to meet growing needs of energy and alleviate health risks in all SAARC countries, Lanka included.

South Asia Development Fund (S.A.D.P.) as suggested by G.E.P. group of eminent persons is also a dire necessity. The aim of the fund is to support regional projects such as infrastructure, poverty alleviation, human resource development programmes, environmental projects etc. This could strengthen interdependence among SAARC countries.

South Asia needs a regional identity and nationality. One country alone cannot level the ground for the success of SAARC. Each country building up its own resilience, helping the smaller countries, a low key approach by larger countries and togetherness are ingredients that could be helpful. Thus consensus needs to be developed by Sri Lanka and all SAARC countries about the place of South Asia within Asia and also internationally.

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