Remarks by Deputy Chief of Mission Robert Blake At the Opening Reception of the “South Asian Free Trade Agreement Conference”, New Delhi

October 24, 2005

On behalf of the U.S. Mission in India, I welcome all of you to New Delhi for this important conference about the South Asia Free Trade Agreement. I am particularly pleased to welcome distinguished guests from South Asian Association for Regional Cooperation (SAARC) member countries, the United Nations Development Program, World Bank, Asia Foundation, and the Confederation of Indian Industries. I would like to thank USAID for sponsoring this project. This is a valuable opportunity to bring together representatives from the region to openly discuss trade and investment opportunities. The United States hopes that this gathering will result in concrete recommendations for transforming SAFTA into a working agreement that will significantly improve regional trade and investment opportunities, and thus accelerate regional growth, job creation, and poverty reduction.

Over the last few years, our partnership with the countries of South Asia has strengthened, deepened, and broadened in many ways. President Bush and Secretary Rice believe that U.S. engagement with South Asia as a whole is a strategic imperative. Among the most significant of the changes in US foreign policy since President Bush took office is our new and deep involvement in South Asia. Today, and especially since 9/11, we are working with our friends in South Asia to promote democracy, fight terrorism, encourage economic development, enhance military cooperation, and work together on global issues such as improving health and reducing poverty. Although much of our effort in South Asia is bilateral, we really do see the countries there as part of a region, one that has great potential.

To give one example, we seek to promote strong economic growth throughout South Asia by encouraging greater intra-regional trade and cooperation in areas like energy. We support the efforts by the South Asian Association for Regional Cooperation (SAARC) to establish the South Asian Free Trade Area (SAFTA). This conference represents an important effort to help make such a free trade area a reality.

Many themes of America’s worldwide foreign policy apply across South Asia. Helping create stronger democratic institutions is a central U.S. goal in many of these countries, as is helping developing democratic tools such as the rule of law, independent media, grass roots activism, good governance, and government transparency. We believe that doing these things will help address fundamental problems of extremism, insecurity, and poverty, that plague many countries in the region. We also believe that making progress in these areas will have long lasting consequences for global peace and security.

I would be remiss if I did not mention the terrible natural disaster that has befallen the citizens of many countries in the region. Let me take this opportunity to express our deepest condolences to those affected by the terrible earthquake in India and Pakistan. Tens of thousands in Pakistan, India and Afghanistan have been killed, many more displaced by this terrible tragedy. As Secretary Rice said recently, “At this difficult time, the United States stands with its friends in Pakistan and India, just as they stood with us and offered assistance after Hurricane Katrina.

Since the earthquake struck, $17.4 million in humanitarian assistance has reached hardest-hit Pakistan through USAID and other U.S. Government efforts. In total, the U.S. has committed up to $50 million in assistance to help people in the region find their footing and start a return to normalcy. Relief to date in Pakistan includes shelter materials for more than 67,000 people, blankets for 15,000, medical supplies, life-saving water and water treatment units. In often very remote and isolated areas, U.S. military helicopters have delivered 625 short tons of aid. The Department of Defense currently has 21 helicopters in Pakistan to help with response and a U.S. Army mobile hospital (MASH) unit should be operational later this week.

For the Indian state of Jammu and Kashmir – which was also devastated by the catastrophe – USAID is providing $600,000 in relief. Our assistance, which is being channeled through international and Indian NGOs, is focused on the immediate needs of victims, such as options for shelter as winter approaches, warm clothing, blankets, youth and community activities to ease psychological trauma, and cash-for-work to clear debris and construct interim housing. The United States also welcomes the important earthquake assistance that India has extended to Pakistan. The governments of both Pakistan and India have found the political will to allow the people of Kashmir ready access to their relatives on either side of the Line of Control and to take measures, which help the humanitarian crisis faced by this area. The U.S. strongly supports these gestures and hopes they will lead to increased long term cooperation between both nations.

One of the keys to long-term cooperation with is greater regional integration. The United States supports regional integration because it will benefit the economy and security of all SAARC countries and make them stronger partners for the United States. Greater trade will bring member countries closer together and help further economic opportunities for growing economies. Enhanced economic and trade relations between SAARC countries will also provide a solid foundation for improved diplomatic and people-to-people contacts. This can be nothing but positive for the SAARC region.

The potential of SAFTA-type arrangements in the region are enormous, given that SAARC now accounts for less than 6 percent of total regional trade. Within the Association of South East Asian Nations and the European Union, by comparison, regional trade accounts for 30 percent and 65 percent respectively of total trade. Indeed, trade liberalization is a key pillar to self-sustaining economic growth. The effect of such growth not only spurs economic reform, it lifts people out of poverty. This is not mere ideology; it is backed up by recent World Bank studies showing that those developing countries that have embraced open market strategies in the past decade have grown much faster than those that have not.

Trade liberalization brings increased prosperity for developed and developing nations, and large and small nations alike. In the United States, we have seen the close link between growth in trade and positive economic effects. Over the past three decades, as the U.S. economy has grown, total trade as a percentage of overall output has risen from around 10 percent to nearly 30 percent today. As a result of the North American Free Trade Agreement, NAFTA, and the World Trade Organization's Uruguay Round of tariff cuts, trade was a major pillar of U.S. growth throughout the 1990s.

According to figures from the International Monetary Fund, total trade among the three NAFTA countries has more than doubled in the last decade, increasing from $300 billion in 1993 to well over $600 billion in 2003. Mexico’s exports to the United States and to Canada each grew by more than 200 percent. With a strong, certain and transparent framework for investment, North America has attracted foreign direct investment at record levels. The numbers clearly indicate that openness to trade and investment brings growth. It creates jobs, tax revenues, social advancement, technological development, and higher productivity. Governments linked by trade and investment are working more closely  and accomplishing more than ever before  on environmental protection, workplace safety, and other issues that affect the daily lives of our citizens.

Still, there are realities to consider. The United States and the nations of South Asia recognize that while freer trade brings opportunity and prosperity, it also challenges an economy's least efficient producers. In the longer-term, in growing economies, painful effects for some are overcome. Reducing the hardships to the least efficient producers requires both accelerating growth and targeting efforts to help those in need through the transition envisioned in the SAFTA agreement. Efforts must focus on entire economies becoming more competitive, not just individuals and businesses.

The SAFTA framework agreement carries with it the promise of sustainable, regional economic growth and development. India and Pakistan's recent steps toward better relations helped make the agreement possible; the warmer relations between the countries improves the potential benefits for the whole region. India and Pakistan’s economically oriented confidence building measures reflect the recognition that increasing trade and cross-border investment is greatly beneficial for the people of both countries and can help sustain rising economic prosperity for all their citizens. The Indo-Sri Lankan Free Trade Agreement, one of the first such bilateral agreements within SAARC, has brought economic benefits to both countries, contributed to greater cooperation in other areas and created a sense of shared fortunes. As we have also seen within ASEAN, regional integration creates economic linkages that promote enhanced bilateral relations and will give citizens throughout SAARC a stake in increasing regional prosperity. Economic cooperation will lead to greater mutual prosperity and further strengthen the Agreement itself.

The United States encourages South Asia to continue this positive momentum. The SAARC countries can also count on the United States for continued support for this vital agreement. SAFTA analyses demonstrate that there is considerable potential to increase trade between India and Pakistan, with more investment further raising the opportunities for complementary trade. Wider prosperity as a result of expanding trade should also have a beneficial effect on the political and security environment.

We also support the initiative by member countries to consider Afghanistan for membership in SAARC and in SAFTA. We share the view that removing obstacles to Afghanistan’s access to regional and international markets could expand regional trade ties, enhance Afghanistan’s economic growth and political stability, and contribute to SAARC and SAFTA goals of expanded trade, cooperation and security.

A series of country studies sponsored by USAID helped to prepare for this conclave. National experts with in-depth knowledge of South Asian trade issues consulted with senior policymakers and business leaders in each SAARC country to examine issues related to participating in the free trade agreement. The analyses led to some important findings. I would like to highlight four of them.

First, in preparing for the launch of SAFTA, member governments have focused on protecting their economies by drawing up highly restrictive “sensitive lists” and exclusionary rules of origin. Significant liberalization of these lists would make SAFTA a platform for real trading opportunities and realization of the benefits produced by other open economic regions around the world in terms of growth, incomes and job creation.

Second, paying greater attention to trade facilitation measures would also increase intra-regional trade, perhaps even more than reducing tariff rates, many of which are already low. Trade facilitation measures that could produce tangible benefits include:

• Harmonization of standards;
• Simplification of customs clearance procedures;
• Simplification of banking procedures for import financing;
• Transit facilities for intra-SAARC trade;
• Removal of barriers to intra-SAARC investment;
• Development of communications systems and transport infrastructure; and
• Simplification of procedures for business visas.

The lessons of other regional trade agreements make it clear that the hoped-for benefits from the agreement itself will not be realized unless trade facilitation measures are vigorously implemented.

Other areas of cooperation for SAFTA to consider seriously include cross-border investment and the movement of people across international borders. For example, regional cooperation in the areas of energy, water and food supply chains would result in much greater efficiency and security of supply at lower costs if backed by real investment.

Acceleration of the timetable for full implementation of the proposed SAFTA tariff cuts would front-load the benefits of vibrant regional partnerships. If SAFTA is to keep pace with tariff reform under the WTO and other regional agreements such as BIMSTEC (Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka, and Thailand), the ten years that SAFTA currently allows would need to be cut, in half or more.

I hope I have whetted your appetite for the presentations and discussions regarding SAFTA during the next two days of Conference proceedings. I am sure you will have many productive and provocative discussions that will inform and convince policymakers to make meaningful SAFTA reforms. We are pleased to be associated with this event, and look forward to the group’s conclusions, and its recommendations for next steps. The United States stands ready to support efforts to boost regional economic linkages.

Increasing trade and investment in the region should reap economic benefits for citizens in all participating countries and further cement the growing partnerships between the United States and the countries of South Asia.

Thank You.