Global Free Trade and South Asia
Address before the London Breakfast Club
April 16, 1999

Ladies and Gentlemen:

I am honoured to be asked to appear before this distinguished group, and thank the sponsors and this group of accomplished business executives, diplomats and Members of Parliament for extending me such warm hospitality.

As the world focuses on the atrocities of Kosovo, and makes attempts in fits and starts to respond as a cohesive global community to the bloodshed unleashed by the Serbian dictator, it is fitting that, as we stand on the threshold of a new century, such a diverse group is gathered in London discussing the future of Asian business, a city so far away from Asian realities yet becoming closer in trade and financial ties with each new treaty passage.

I know that all gathered here today are no strangers to either the business realities of present Asia, or the explosive growth in global economic integration we have experienced during this decade.

All companies -- and countries -- are racing to keep pace with the revolutionary power that the new technologies of communications and transportation afford us. We are, in every sense of the word, entering a century to be dominated by the rules of a global market.

And as we enter this new and exciting era, this new century, I am convinced that the new rules of the game are simple and concrete:

In the 21st Century, nations must uphold the principles of democracy and the rule of law.

In the 21st century, governments must guarantee basic freedoms and liberties to their citizens.

In the 21st Century, regions must promote free trade with minimal state intervention, and with a policy of non-intervention and mutual respect in inter-state relations.

In the new century, the concerns of the state will be driven more by considerations of trade and commerce, rather than by our traditional military - territorial considerations. And the success of a Nation, as we head towards a new century, shall be based upon its level of exports, hard currency reserves, its per capita GNP, and the creative genius of its citizens.

In our lifetime, achieving near complete free trade worldwide appears achievable, if not unstoppable.

GLOBAL FREE TRADE: EU LEADERSHIP

I came here to comment on trade and South Asia within the larger international context, and the halting but positive steps that we are taking to improve the business environment in our vibrant but still hampered region.

Before focusing on South Asia, however, let me take a moment to look at the progress being made worldwide for free trade.

First and of precedent-setting importance is the example that you, the European Union, are providing to the rest of humanity. Let us not mince words: The EU is a revolutionary breakthrough in international relations, the ramifications of which are not yet fully understood.

Many around the world have been watching with both astonishment and some envy as the European nations have been able to create one of the world's largest single markets in human history, and this without bloodshed or military conquest. Let us not underestimate the accomplishment of creating the European Common market by states whose entire history together has been one of war, animosity and mistrust.

The desire for the creation of 'super-economic zones' like the EC, was driven by smaller states seeking to effectively compete economically with the economic superpowers of the day, namely the United States and Japan. The GNP of America is (US$ 8 trillion) and of Japan (US$ 5 trillion). Only after combining the 10 'First World' European economies can the combined EC GNP compete (at US$ 7 trillion).

All this has been accomplished without a single bullet being fired. Huge territories, nations and populations peacefully agreed to redefine their economic borders, and to co-exist with each other in the better interests of their future well being. The EC's formation is truly a model case of the new paradigm, where economically we enter an increasingly 'Borderless World' while maintaining our national sovereignty. In essence, the EC member states are 'pooling' their economic sovereignty in creating a free trade zone and a common currency, thus submerging their narrow national interests for the greater good of the whole European Community.

THE RACE FOR GLOBAL FREE TRADE

And, with the birth of the European Common Market and common currency, we are now witnessing the unleashing of a global race for ever-larger free trade blocs and trade zones, and at a pace and scale unprecedented in human history.

On two fronts, the European Common Market itself is moving with utmost speed to expand its model on a global level.

With the Far East, the EC and the ASEAN nations are in serious discussions to lower tariffs. This new development, know as ASEM (Asia-Europe Organization), just concluded its second year of high level discussions. The fruit bearing trees have been planted.

At the most recent ASEM meeting in Berlin, EU President German Foreign Minister Fischer suggested a new Euro-Asia free trade zone, and through this, creation of "a stable world financial and monetary system". Asian nations now actively engaged in this process include Brunei, China, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea, Thailand and Vietnam.

In the opposite direction, the EU, under Spanish leadership, is moving quickly to establish free trade relationships between the EU and the South American nations. I understand that a multilateral summit to move forward this new free trade zone will be held next year, and it appears that unless the Americans can move at least as fast as the Europeans, South American trade may move more freely into European households than into those in America. The irony is not lost that in one short decade after the ending of the Cold War, American economic hegemony in its own hemisphere could be so severely challenged.

But the Europeans are not the only nations moving rapidly to dismantle old trade barriers. In Africa -- all too often left out of the global economic debates -- the nations of South and Eastern Africa are quickly moving to create their own version of the European Common Market. This new trading bloc, now known as the Common Market for Eastern and Southern Africa (or COMESA), has set an ambitious but achievable goal of eliminating tariffs within their bloc by the year 2000. For Africa as a whole, and the 21 nations participating in COMESA, this is indeed promising news.

In the Western Hemisphere, while there seems to be a delay in the expansion of NAFTA, I do not doubt that NAFTA, too, shall expand throughout the Western Hemisphere. As the largest free trade bloc in the world, the economics of Canada, the U.S. and Mexico continue to seek expansion of their model throughout the entire Western Hemisphere. The new EC competition for South America may urge NAFTA to heightened urgency.

And even among the states of the former Soviet Union, high level talks within the former USSR are gaining momentum for a new free trade zone, led by the institution of the former Commonwealth of Independent States (CIS). For all of those nations, this is a needed and positive development, and should be given as much support and encouragement from the international community as are current IMF rescue packages.

THE SLOW PATH OF SOUTH ASIA

In this context of fierce global competition for the creation and expansion of free trade zones, I turn lastly to South Asia.

South Asia has been for far too long a region teetering on the edge of catastrophe.

For fifty years, we have been at each other’s throats. We have fought four wars, and the last war dismembered my nation. Our troops, as we speak, fire at each other in the frozen wasteland called Siachen, which has become a metaphor for the senselessness that we have allowed to continue for half a century.

But there is hope.

Six weeks ago in Islamabad, I was privileged to participate in the first Indian-Pakistan All Parliamentarians Conference. This historic meeting brought together parliamentarians from all parties from both India and Pakistan.

Over the course of my lifetime -- a few years less than the conflict between India and Pakistan -- such a meeting between our two nations has been unprecedented.

At that meeting, as our joint political leadership sought common ground for our regional problems, I unveiled an economic vision for South Asia.

It is time for South Asia to fully participate in the explosion of global trade, and for our respective governments to set-aside territorial ambitions and seek economic progress for our peoples and our region.

To the joint delegation, I proposed that the nations of South Asia now embark on an accelerated path of economic cooperation and follow the leadership of the European nations.

I call this the Asian Free Zone. As you may notice, the word 'trade' is omitted, and for reason, as it is time that we, one fifth of the world's population, tackle more than trade.

THE ASIAN FREE ZONE

But let us first start with trade. Based on our analysis, my recommendation is that the Asian Free Zone be created in two phases. In Phase I, the South Asian nations agree to form a free economic zone along the lines of NAFTA. This zone should comprise first all SAARC countries, with a secondary but not overly delayed inclusion of Iran, Turkey and the Muslim nations of the former CIS.

Prior to coming here, and the disappointing recent SAARC ministers' meeting in Sri Lanka, I had proposed that a SAARC free trade zone would require one decade to fully establish. It has been my sense that a full decade was needed to allow the founding members to reach a critical phase in their economic development and in their per capita income.

With the pace of free trade expansion globally, however, one decade is too long for this small step for South Asia. We must achieve a free trade zone among the SAARC nations by 2005, or the peoples of South Asia will again be left on the sidelines of the global economic engine.

Following a successful integration of the SAARC economies, Iran, Turkey and the Muslim CIS states, we propose entering Phase II, including the giant of China into our regional system, a goal that we must achieve by 2010.

The states of the 'Asian Free Zone' would be independent sovereign nations sharing on the pattern of the EC:

(1) a free economic trade zone

(2) a common Central Bank with a common trading currency

(3) a common security policy, and ultimately

(4) a common revolving Presidency and Parliament (like the EC Presidency and Parliament).

Even the smallest member state, such as Sri Lanka through this cooperation could have a chance to be the President of the 'superpower' Asian Zone.

In short, by 2010, I propose a free trade zone encompassing some 3 billion people with a GNP of US$ 7 trillion (based upon 1998 'Purchasing Power Parity').

The nations included in this new zone by that point could be the SAARC nations, with Afghanistan, Turkey, Azerbaijan, Kazakhstan, Kyrgystan, Tajikistan, Turkmenistan and Uzbekistan, and finally, China.

This is a vision of an Asian Free Zone, roughly 2/3 of which would be China, and 1/3 SAARC and Muslim CIS States. Our Asian Free Zone could then be at the same level, in GNP terms, as the EC, US or Japan.

With roughly 50% of the World's population located in the Asian Free Zone, we would have an economic market with considerable weight, influence and clout in the 21st Century.

FIRST WITH SAARC

First, however, our challenge is to solidify the SAARC nations.

The South Asian region encompassing Pakistan, India, Bangladesh, Nepal and Sri Lanka has a common and shared history. We speak the same language. Our colour is the same. Our thinking, values, pre-47 history and culture is the same. We have a multi-religious society with Muslims, Hindus, Sikhs, Christians, Parsees, Buddhists, and others.

Each in our respective countries believes in freedom of religion, in safety and security resisting outside coercion or intervention. In Dubai, Singapore, or London, a representative sample of the entire gamut of our population and religious spectrum has learnt to co-exist peacefully.

Within the SAARC nations, we have similar per capita income.

We are in similar stages of economic development. We all share a common legal system based on English Law.

We all have free market-based economies.

We all share English as a common language for Government and business.

And, perhaps most importantly, we all share a common history and culture.

NEW RULES FOR SOUTH ASIA

The essence of the new paradigm for South Asia is to organize government and economic affairs in a manner which delivers the maximum progress to the regional population in the shortest period of time, with the least wastage in resources.

The fastest route to economic development and growth for our suffering people is the generation of critical economic mass through the formation of larger ' economic free zones'.

Unless South Asia pulls itself out of the quagmire of poverty, prejudice and past conflicts, our people will remain slaves within the global economy, carrying-out menial low paying tasks for the richer citizens of the First World.

The choice for us is stark and simple: either continue as warring sovereign states who continue to carry the "Third World" label for the next 100 years, or pool our resources to create an Asian economic powerhouse comparable to the EC.

STEPS FORWARD

And to achieve this new era for South Asia, we must make concrete steps on an urgent basis, or again be left behind:

1. Cease abusing the trust and confidence of the international rules of commerce. In Pakistan specifically, there has been perhaps no greater damage to our economy and our integration into the global economic system than the senseless and politically motivated attack on the Independent Power Producers. Foreign investors are rightly outraged, and many others have been scared off. Pakistan must uphold and value contracts signed.

2. Accelerating the current SAFTA talks. We can not wait until 2002 to create the first small step for lowering tariffs among the SAARC nations. Let us move these timetables up at least one year.

3. Entering immediately into free trade discussions with the EC and ASEAN nations. Free trade among larger trading blocs takes time. Just as the EC and the Far East have entered a long-term process, so too should South Asia.

Ladies and Gentlemen:

I have already taken too much of your time this morning.

In closing, I propose to you the notion that if the nations of South Asia continue to close our borders both among ourselves and towards the larger global economy, our region risks suffering a similar fate to that of the Soviet Union, Yugoslavia and other dismembered nations.

If we are to be partners in the emerging global economy, we must act swiftly to open our borders, ease our trade restrictions and more fully integrate with our neighbors.

A new world is quickly taking shape, one where openness among nations is the path to survival and progress.

The people of South Asia cannot afford to wait a full decade for free trade in our region.

Indeed, we must be fully open with the world economy within a decade.

This is my vision for an Asian Free Zone.

I invite your questions or comments.

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