Patterns of Regional Cooperation: Options for Pakistan

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By

Shahwar Junaid[1]

Abstract

(The first recognizable initiative towards regional cooperation appeared in Europe during the 1880s. By the 1940s an increasing number of influential intellectuals were urging escape from a “…theoretical and ineffective universalism into practical and workable regionalism…”[1] Consideration of this option was understandable, under the strain of war and, later, post-war reconstruction. Serious moves for regional cooperation emerged only after World War II. As a result of the emergence of regional groupings in many parts of the world, the region as a unit of analysis in international relations becomes important. Author).

Definitions of regionalism within the global system of international relations emerge from conceptual models for the study and analysis of the subject. Such conceptual models are provided through the academic study of international relations. The number and nature of assumptions on which a theory of international relations is based tends to determine its usefulness for analytical study. International relations (IR) theories are generally divided into “positivist/rationalist” theories, which focus on state-level analysis and “post-positivist/ reflectivity” theories,  that incorporate broader concepts arising from experiences of the post-colonial economic and security environment as well as socio-political concerns and related phenomenon.[2] A number of conflicting theories exist, but the liberal and constructivist theories are in the mainstream today. Modern day functionalism is the theory of international relations that emerged from the post-World War II experience of European integration.[3] Functionalism is relevant to present-day discussions of regionalism.[4]

One description of the term ‘functionalism’ is the result of its use as an argument explaining phenomenon arising from the functions of a system: functionalist theory has been used to explain that the Westphalian international political system arose in order to protect the emerging international capitalist system.[5] Functionalists give causal power to the system itself, bypassing agents of the system. This is relevant for any study of patterns of regionalism in the world today. The Thirty Years’ War in Europe was the culmination of a number of large and small conflicts that took place on religious grounds over a period of a hundred years. Parallel economic developments had a profound impact on inter-state and intra-state relations. In 1648 the Peace of Westphalia, that followed the Thirty Years’ War, established that rulers had the right to determine which religion would be observed within their territories.[6] By the same token it recognized the sovereignty of established states and condemned interference in their internal affairs, including trade and commerce.  The Peace of Westphalia led to the establishment of nationalism as the pre-eminent force in international relations and the nation-state system as the accepted political order in Europe.

Functionalist theory applied the same principles to later developments in international relations: it grew in diverse directions as a result of the experience of European integration in the post-World War II era.[7] Instead of the self-interest of states seen in the realist theory of IR, functionalism now focused on the common interests shared by states and concluded that regional integration develops its own dynamics: as states integrate in certain fields of activity the momentum for integration in related areas will develop.[8] This is known as the “spill-over” of regional integration. Functionalists are of the view that it becomes difficult for nationalist forces to resist integration once this stage in policy induced regional integration has been reached. According to one school of thought, the yardstick for measuring interest in international regionalism is the establishment of institutions to promote it. If institutionalization at the   regional level, as opposed to institutionalization of inter-state activity at the international level is the yardstick for measuring interest, then it is difficult to find evidence of regionalism prior to 1945. The Inter-American System was an exception.[9]

The first recognizable initiative towards regional cooperation appeared in Europe during the 1880s. By the 1940s an increasing number of influential intellectuals were urging escape from a “…theoretical and ineffective universalism into practical and workable regionalism…”[10] Consideration of this option was understandable, under the strain of war and, later, post-war reconstruction. Serious moves for regional cooperation emerged only after World War II. The treaty establishing the Benelux Customs Union was signed in London in 1944 by the governments in exile of Belgium, Netherlands and Luxembourg. It entered into force in 1947. In 1952 Denmark, Iceland and Norway established the inter-parliamentary Nordic Council with the objective of forging Nordic regional cooperation. They were joined by Finland in 1955. At the time, serious attempts were made to institutionalize trade and commerce within Europe on advantageous terms. These attempts were motivated by the thought that institutionalized economic cooperation and regional interdependence would foster peace and the states of Europe would be bound so closely in economic and political ties there would never again be a war on the European continent. [11] In 1951 France, West Germany, Italy, Belgium, Luxembourg and the Netherlands established the European Coal and Steel Community (ECSC) in order to pool the coal and steel resources of member states. On 25 March 1957 the same states signed the momentous Treaty of Rome which established the European Economic Community EEC). The European Atomic Energy Community (Euratom) was established at the time in order to manage nuclear power in Europe. The EEC was to develop in multiple directions. As a result of the emergence of regional groupings in many parts of the world, the region as a unit of analysis in international relations becomes important.

In widely accepted definitions an international region is considered “a limited number of states linked by a geographical relationship and by a degree of mutual interdependence.” International regionalism has been defined as “the formation of interstate associations or groupings on the basis of regions.”[12]Analysts stress the need to differentiate between regionalism, regional integration, regional organization, regional systems and regional cooperation:[13] the existence or acceptance of one form was not a pre-condition for the existence or acceptance of other dimensions of regional phenomena.[14] This is particularly relevant where the parameters of the region are not clearly defined, or, they differ in the perception of the different states of the region. Political activists in South Asia who would like to promote the post-war European model of policy induced regional integration in the sub-continent find this aspect of regionalism difficult to accept. Study of the possibilities of various aspects of regionalism also provides insight into its limitations under various circumstances.

Regionalism is the political philosophy that emphasizes the pre-eminence of the interest of groups of states within the region over the interests of individual states within the group and, in some cases, the international community. There have to be powerful reasons for states to even consider giving up, or sharing their political and economic space with neighbouring states: traditionally, they raise armies to protect these aspects of sovereignty from their neighbours. In post-war Europe regionalism was a reaction against forces of nationalism that had thrust the continent into two devastating wars in the space of fifty years. Elsewhere, regionalism emerged as a product of forces such as decolonization that had shaped the world in the 20th century. In the post-colonial era newly independent states were faced with phenomenon related to global structural change within trading systems, political systems, governments, as well as in inter-state relations. The prospects of continuing trade and commerce with their erstwhile rulers on terms that had originally sparked movements for independence was not a feasible one. Consequently, newly independent states sought economic partners elsewhere.

The restructuring of the global political system and the Cold War created a new set of constraints to free trade, since trade between entire regions became impossible for political reasons. Where there were no such constraints, regionalism was an option. Regionalism emphasized the primacy of the interests of regional groupings with common interests over those of individual state, and offered advantages in return. The end of the Cold War in 1989 created a broad range of new opportunities for global restructuring. The establishment of the WTO (World Trade Organization) as the successor of GATT (General Agreement on Tariffs and Trade) through the Uruguay Round set the stage for globalization of industry and commerce and the restructuring of terms of trade. Both events had a global impact and created waves within existing regional arrangements covering economic activity, trade and security.[15]

Regionalism is one of the three constituents of the international system of trade and commerce, the other two being multilateralism and unilateralism. In any study of regionalism it is tempting to measure success by quantifiable advantages accruing from institutional arrangements designed to facilitate the free flow of goods and services and the coordination of economic policies between countries in the same geographic region while ignoring, or minimizing, the importance of other concerns, such as security issues and questions of sovereignty within regional arrangements at the institutional level, a cumbersome task.

According to one school of thought, analysis of regional trade agreements (RTAs) tends to use tools from trade theory focusing on trade creation, trade diversion and the impact of terms of trade. While these tools are sufficient for analysis of shallow integration they do not take into account the issues of deeper integration, characterized by institutionalization. Analysis of this phenomenon should include other aspects such as the relationship between trade and productivity, endogenous growth, imperfect competition, rent seeking behaviour and politico-economic considerations, including possible conflicts between regionalism and multilateralism. [16] The positive impact of trade liberalization on agricultural production is an important consideration within the regional trade context but there can be questions regarding fair competition in view of high tariffs, the use of domestic subsidies on agriculture inputs and special interest activism. The critical issue for developing countries interested in regional preferential trade is to use it as an element of a larger development strategy and in order to enhance stability at the regional level. The experience of policy induced regional integration in Europe offers invaluable insight into possibilities, but each region faces unique challenges and must find its own response to them.

The origin of regional cooperation in Europe and the America

Economic regionalism is defined as a formal attempt to manage the opportunities and constraints created by global structural change after World War II, the decolonization that followed it and the bipolar world order that subsequently emerged. Several arrangements for economic integration in Europe were finalized in the decades following World War II: These arrangements were made in the context of the Cold War and parallel to regional security arrangements (such as NATO).[17]The strategy to reconstruct Europe after World War II was formed in a bipolar global system, under the cloud of the Cold War which dominated inter-state relations until 1989.

As mentioned earlier, several arrangements for regional economic integration were established in the decades following World War II. The European Coal and Steel Community (Paris Treaty 18 April 1951) sought to bring together control of the coal and steel industries of its member states, principally France and West Germany. The Community’s founders declared it “a first step in the federation of Europe.” Two additional communities were created in 1957: the European Economic Community (EEC) establishing a customs union, and the European Atomic Energy Community (Euratom) for cooperation in developing nuclear energy. The European Free Trade Association was established in 1960.[18] Finally, the European Union (EU), a supranational organization of European countries which currently has twenty seven members,[19] was formed in 1993 by the ratification of the Maastricht Treaty.

During the period of its transformation from the European Community into the European Union, trade of member states with countries outside the RTA (Regional Trade Agreement), shrank. Meanwhile internal trade in Europe grew from 53 percent in 1952 to 70 percent of overall trade in Europe in 1993. With almost 500 million citizens, EU member states generate an estimated 30 percent share of the world’s nominal gross domestic product (US$ 16.8 trillion in 2007). [20] The EU has developed a single market through a standardized system of laws which apply in all member states, guaranteeing the freedom of movement of people, goods, services and capital.[21] The EU maintains a common trade policy, agricultural and fisheries policies, and a regional development policy. Fifteen member states have adopted a common currency, the euro. (Further information: Euro and Economic and Monetary Union of the European Union).

The European Central Bank in Frankfurt governs Euro zone monetary policy. A single currency for the EU had been an official objective since 1969 and work began on Economic and Monetary Union in 1990. Nine years later the euro was launched in eleven of the fifteen member states as an accounting currency. This meant that national currencies remained in use but the exchange rates were locked to the euro. On 1 January 2002, euro notes and coins were issued and the national currencies were phased out in twelve countries. Currently 15 states are using the euro as their sole official currency. All other EU members, except Denmark and the United Kingdom, have agreed to join as a condition of being members of the EU but dates for adopting the euro will be set later. A number of countries outside the EU, such as Montenegro, also use the euro unofficially. The euro, and the monetary policies of those who have adopted it, is controlled by the European Central Bank (ECB).

The euro is designed to help build a single market in Europe by, for example, easing travel and trade, eliminating exchange rate problems, providing price transparency, creating a single financial market and price stability. Having a currency that is used for a large amount of internal trade within the euro zone and internationally as well as protects the European Union against currency fluctuations. It is also a potent political symbol of integration and stimulus for adopting others. In recent years holdings of the euro have grown, and there is some speculation that if the euro zone continues to enlarge and/or the U.S. dollar continues to fall, the euro could become the main world reserve currency.[22]

The European Union has developed an international presence, representing its members in the World Trade Organization, at G8 summits and at the United Nations. Twenty-one EU countries are members of NATO. The EU has a role in justice and home affairs of member states. The abolition of passport control between many member states, under the Schengen Agreement has been a significant unifying step.[23] EU administration is a hybrid of inter-governmentalism and supranationalism based on consensus and the will of the people of member states. National level referendums are held in member states in order to determine the will of the people regarding proposed EU legislation on key issues.

The foreign relations of the EU are primarily dealt with through the Common Foreign and Security Policy (CFSP). Cooperation in international trade negotiations, under the Common Commercial Policy, dates back to the establishment of the European Community in 1957. The CFSP itself has its origins in the formation of European Political Cooperation in 1970. European Political Cooperation was an informal consultation process between member   states on foreign policy matters. It was introduced into the European Community through the Single European Act and subsequently renamed the “Common Foreign and Security Policy” through provisions in the Maastricht Treaty.[24] The Maastricht Treaty gives the Common Foreign and Security Policy the task of promoting both the EU’s own interests and those of the international community as a whole. This includes promoting international co-operation, respect for human rights, democracy and the rule of law.[25] The Amsterdam Treaty created the office of the High Representative for the Common Foreign and Security Policy (currently held by Javier Solana) to co-ordinate the EU’s foreign policy. The Representative speaks on behalf of the EU in foreign policy matters and negotiates ambiguous policy positions created by disagreements among member states.

The Common Foreign and Security Policy requires unanimity among the twenty seven member states. This, along with the difficult issues dealt with by the CFSP, makes disagreements, such as those which occurred over the war in Iraq, common. Finnish Prime Minister, Matti Vanhanen, cited the EU’s common foreign policy as the reason why Finland is, de facto, no longer a neutral country. The EU’s emerging international policy is accompanied by its growing global influence as a consequence of the enlargement of its membership. The perceived benefits of becoming a member of the EU acts as an incentive for both political and economic reform in states wishing to fulfil the EU’s accession criteria and is  considered a major factor contributing to the reform of the former communist countries in Eastern Europe. This influence on the internal affairs of other countries is generally referred to as “soft power,” as opposed to military “hard power.”

European Union Security and Defence Policy

Member states of the European Union are responsible for their own territorial defence. Many EU members are also members of NATO, the transatlantic regional security organization. The Western European Union (WEU) is a European security organization related to the EU.[26]In 1992, the WEU‘s relationship with the EU was defined and it was assigned humanitarian missions such as peacekeeping and crisis management. Elements of the WEU are currently being merged into the EU’s CFSP, and the President of the WEU is currently the CFSP High Representative. Following the Kosovo War in 1999, the European Council agreed that “the Union must have the capacity for autonomous action, backed by credible military forces, the means to decide to use them, and the readiness to do so, in order to respond to international crises without prejudice to action by NATO.” To that end, a number of efforts were made to increase the EU’s real military capability. The most concrete result was the EU Battlegroups initiative, with the capability to deploy about 1,500 men, at one time. EU forces have been deployed on peacekeeping missions from Africa to the former Yugoslavia and the Middle East. EU military operations are supported by a number of bodies, including the European Defence Agency, satellite centre and the military staff.

Economic policy

One method classifying different forms of economic regionalism is by the level of institutional integration they achieve: deep or tight integration is characterized by a high level of inter-state institutional integration through norms, principles, rules and decision-making procedures that are mutually agreed upon and tend to limit the autonomy of individual members. The EU is an example of deep integration having evolved from a limited free trade area to customs union, a common market and finally an economic and currency union, now on the way to evolving a common foreign policy and credible defence capability to be used by consent of member states and in their interest. Today the EU has a parliament that legislates on a broad range of issues: member states find it advantageous to adhere to the standards it sets. Economic integration has had pronounced spill-over effects in the political, social and security arenas.

Another method of classifying forms of economic regionalism is by their treatment of non-members. Trade liberalization and unconditional most-favoured-nation status in compliance with Article XXIV of GATT[27] are characteristic of open regionalism that does not seek to exclude non-members from their markets.[28] In contrast closed or exclusive forms of regionalism impose protectionist measures to limit non-members’ access to the markets of member states. The international trading system of the Cold War period in which competing blocs enhanced their economic power by pursuing aggressive trading policies, is one example of closed regionalism. The European Union, NAFTA[29] and APEC[30] have a number of institutional arrangements to encourage trade with non-member states. However, these arrangements come into play selectively and are frequently used as tools of foreign policy.

NAFTA

Regional arrangements across the Atlantic do not come close to matching the sophisticated balancing act that is typical of the European continent. For one, the perceived needs of the area differ. Here there is no question of moving towards a federal structure, or, for a structured convergence of security and foreign policy. Regionalism on the American continent is concerned with more pragmatic matters, such as preferential trade, the management of unemployment and the development of backward territory. International security matters are managed through multilateral security arrangements such as NATO, in the case of the United States and Canada, and bilateral arrangements or traditional international security mechanisms such as the Security Council of the United Nations. The North Atlantic Free Trade Agreement (NAFTA) is a trilateral trade bloc in North America that was created by the governments of Canada, Mexico and the United States in December 1992. It was subject to ratification by the legislatures of all three. There was considerable opposition to NAFTA in all three countries. Nevertheless, the agreement came into effect on 1 January 1994. NAFTA has two supplements, the North American Agreement on Environmental Cooperation (NAAEC) and The North American Agreement on Labor Cooperation (NAALC).

In terms of combined purchasing power parity GDP of its members, NAFTA is the largest trade bloc in the world and second largest by nominal GDP comparison (2007).  There has been some convergence of labour standards since the creation of NAFTA however the three countries in the bloc have pursued different trade policies with non-members making it difficult to create a customs union. Mexico, for example, has signed Free Trade Agreements (FTAs) with more than 40 countries. NAFTA touches on very sensitive issues in trade, such as agriculture liberalization and environment regulation; therefore few countries in the region have shown interest in joining it.[31] Instead, some countries, like Chile, have preferred to negotiate separate bilateral agreements with the three current NAFTA members, with different restrictions on the liberalization of industry and the regulation of environment protection. The effects of NAFTA, both positive and negative, have been quantified by several economists, whose findings have been reported in a number of publications.[32] Some argue that NAFTA has been positive for Mexico, which has seen poverty rates fall and real income rise, even after accounting for the 1944-1995 economic crisis.[33] Others argue that NAFTA has been beneficial to business owners and elites in all three countries, but has had negative impacts on farmers in Mexico who saw food prices fall as a result of cheap imports from U.S. agribusiness, and on US workers in manufacturing and assembly industries, who lost jobs,. Some economists believe that NAFTA has not done enough to produce economic convergence in the region, or to substantially reduce poverty rates and additional investment is required in infrastructure and agriculture.

Trade

NAFTA has not caused trade diversion, aside from a few select industries such as textiles and apparel, in which rules of origin negotiated in the agreement were specifically designed to make U.S. firms prefer Mexican manufacturers.[34] The World Bank reported that the collected NAFTA imports’ percentage growth was accompanied by an almost similar increase of non-NAFTA exports. Some groups advocate deeper integration into a North American Community. Sensitive issues have hindered that process.

Agriculture was (and still remains) a controversial topic within NAFTA, as it has been with almost all free trade agreements that have been signed within the WTO framework. Agriculture is the only section that was not negotiated trilaterally in NAFTA; instead, three separate agreements were signed between each pair of parties. The Canada-U.S. agreement contains significant restrictions and tariff quotas on agricultural products, mainly sugar, dairy, and poultry products, whereas the Mexico-U.S. pact allows for a wider liberalization within a framework of phase-out periods – it was the first North-South FTA on agriculture to be signed. In essence this is against the spirit of regionalism and downgrades the exercise in one area to a bilateral one. On the other hand this method of dealing with a contentious issue, rather than scrapping the whole deal, represents the kind of compromises that have to be made when regional arrangements are institutionalized.

A study published in the August 2008 issue of the American Journal of Agricultural Economics, stated that NAFTA has increased U.S. agricultural exports to Mexico and Canada even though most of this increase has occurred a decade after the ratification of the Agreement. The study focused on the effects that gradual “phase-in” periods have on trade flows, within the framework of regional trade agreements, such as NAFTA. Most of the increase in members’ agricultural trade, which was only recently brought under the purview of the World Trade Organization, was due to very high trade barriers prior to NAFTA. There have been controversies in many areas of economic activity under the NAFTA regime. Since there are no precedents and there is no legislation, litigation on many issues is pending.[35] In the case of the European Union, there is detailed legislation on most issues that arise. Matters that are not covered are brought to the notice of the European Parliament which has the authority to debate and pass legislation.

It is over fourteen years since NAFTA has been in force. In order to analyze its impact on the economy of the region it is necessary to consider the viewpoint of NAFTA opponents, as well as its supporters. NAFTA’s opponents include many categories of labour as well as environment conservationists and consumer groups. Initially it was said that NAFTA would lead to lower wages in the United States, eliminate hundreds of thousands of U.S. jobs and undermine democratic control of domestic policy-making, threatening health, environment and food safety standards. NAFTA promoters included many of the world’s largest corporations. They were of the view that NAFTA would create hundreds of thousands of new high-wage U.S. jobs, raise living standards in the U.S., Mexico and Canada and improve environmental conditions. NAFTA was expected to transform Mexico from a poor, developing country, on the borders of the United States, into a booming new market for U.S. exports. This was expected to have a positive effect on the stability of the region.

Such divergent views were to be expected because NAFTA was a radical experiment that undertook the merger of three nations with radically different levels of economic development. This had never been attempted before. Prior to NAFTA, trade agreements in the region dealt with cutting tariffs, lifting quotas and setting other similar terms of trade in goods between countries. NAFTA, on the other hand, contained 900 pages of rules to which each signatory nation was required to conform its domestic laws – regardless of whether similar laws had previously been rejected by different national legislative bodies. NAFTA set quality control standards on a broad range of goods and services in all member states. Indirectly it set controls on the power of local government and sought to eliminate preferences for local products or locally-grown food through regional legislation. Its core provisions covered the relocation of industry and the privatization and deregulation of a number of essential services in the interest of the region as a whole.

Other regional cooperation organizations

The levels of regional integration promoted through the European Union and NAFTA legislation have precedents in a politicized form in the economy of the former Soviet Union. The links between the successor states of the Soviet Union, Russia, and the newly independent states of the near abroad (both European and Central Asia) are not formal. They have carried over from institutions that no longer exist.

The EU and NAFTA are two of the most highly evolved regional organizations in the world today, with a politico-economic mandate. NATO is equally evolved but has a security mandate. There are about thirty, more or less active, regional groupings in the world today.[36] Most have a formal or informal interest in regional security as well. Some are on the way to serious institutionalized regional integration, with allied regional security interests, such as the Association of South East Asian Nations (ASEAN), the alliance of ten independent countries that promotes stability and economic growth in Southeast Asia. ASEAN has set up the consultative ASEAN Regional Forum (ARF) which has been preparing to establish a quick reaction force to combat terrorism in the region (27 July 2007). The Asia-Pacific Economic Cooperation (APEC) is an organization created in 1989 for 21 Pacific-rim countries or ‘member economies,’ to discuss the regional economy, cooperation, trade and investment and manage the interplay of economic, political and security factors, APEC is an attempt at regime creation.

APEC membership claims to account for approximately 41 percent of the world’s population, approximately 56 percent of world GDP and about 49 percent of world trade (APEC website). The activities, including year-round meetings of the members’ ministers, are coordinated by the APEC Secretariat in Singapore.[37] APEC covers one of the world’s most economically dynamic regions at a time when the area is projected to continue its unprecedented economic growth well into the 21st century but lacks a regional institutional framework that can cope with developments in other parts of the world.

Many other regional groupings across the globe are less structured, in a nascent experimental stage, or dormant. They are characterized by reliance on informal links, consultative mechanisms and consensus building measures. Compared to the EU, they lack binding institutional integration with shared norms, principles, rules and decision making procedures that could limit the autonomy of individual members. The economic spill-over of such integration is not attractive enough and the political will not strong enough to lead to such levels of regionalism. However the potential for profitable integration exists. These regional groupings include the African Economic Community that runs parallel to the African Union (formerly the Organization of African Unity (OAU)), the Andean Community (CAN), the Arab Maghreb Union, the Caribbean Community and Common Market (Caricom), the Central American Common Market (CACM), the Central European Free Trade Area, the Common Market of the South Cone (Mercosur), the Common Market for Eastern and Southern Africa and the Gulf Cooperation Council (GCC). WTO regimes have had an impact on these organizations but within their region they continue to serve as a cushion against the ongoing process of globalization with its internationalization of industrial norms, Total Quality Control, labour welfare concepts, the outsourcing of industrial production, financial transactions and other aspects of trade in goods, commodities and services.

The desire for regional stability and economic progress in the face of international pressures was the motivating force behind the creation of regional associations in South Asia. The Regional Cooperation for Development (RCD) was a multi-governmental organization which was originally established in 1962 by Iran, Pakistan and Turkey to promote the socio-economic development of member states. In 1979, this organization was dissolved. The intention in forming the organization was to foster existing, longstanding cultural and economic links between member states. The reality was that from the period of its inception to the time of its dissolution the group’s secretariat proposed 81 economic projects out of which 49 were approved by member states but only 17 could be completed. RCD was replaced by the Economic Cooperation Organization (ECO) in 1985. The basic Charter of the Organization, the Treaty of Izmir was amended in 1990, providing a legal basis for the revival of the organization. In 1992, ECO accepted seven new members, namely Afghanistan, Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. Since its expansion in 1992, ECO’s long term perspectives and sectoral priorities have been defined in two action plans and a strategy document. Transport, communication, energy, trade and investment were identified as priority areas for action.

During the ECO summit in 1995, documents pertaining to six ECO institutions and 12 regional arrangements were signed. The Fourth Summit Meeting (Ashgabat, 14 May 1996) marked the completion of the ground work for ECO’s reorganization and restructuring and a Memorandum of Understanding was signed. This was the second meeting of ECO marked with sharp differences between member states, namely Pakistan and Afghanistan, regarding management of regional security. Although the political leadership in both countries has changed over the years the differences are more pronounced today than ever before. As a result any meaningful dialogue between Pakistan and other member state of ECO tend to take place at the bilateral level.

During the late 1970s, Bangladesh President Ziaur Rahman proposed the creation of a trade bloc consisting of South Asian countries. The proposal was accepted by India, Pakistan and Sri Lanka during a meeting held in Colombo in 1981. In August 1983, the three counties adopted the Declaration on South Asian Regional Cooperation during a summit which was held in New Delhi. The South Asian Association for Regional Cooperation (SAARC) was established on 8 December 1985 by India, Pakistan, Bangladesh, Sri Lanka, Nepal, the Maldives and Bhutan. In April 2007, at the Association’s 14th summit, Afghanistan became its eighth member at the insistence of India. The members of SAARC agreed on five areas of cooperation: agriculture and rural development, telecommunications, science, technology and meteorology, health and population activities, transport and human resources development.

SAARC has an apolitical agenda and has intentionally laid more stress on “core issues” related to the five areas of cooperation agreed upon, rather than the more sensitive political issues that its members have to cope with: these sensitive issues include the Kashmir dispute and the Sri Lankan civil war. SAARC has also refrained from interfering in the internal affairs of member states as well as in disputes between member states. However, political dialogue is often conducted on the margins of SAARC meetings and it does help in confidence building. During the 12th and 13th SAARC summits, a great deal of emphasis was laid on the need for cooperation between the SAARC members to fight terrorism.

SAARC’s inability to play a significant role in integrating South Asia is laid at the door of the political and military rivalry between India and Pakistan. Due to economic, political and territorial disputes, South Asian nations have not been able to harness the benefits of a unified economy. Over the years, SAARC’s role in South Asia has diminished and it is thought to be a mere platform for annual talks and meetings between the representatives of member states. SAARC member states have not been willing to sign a regional free trade protocol so far. India has bilateral trade pacts with the Maldives, Nepal, Bhutan and Sri Lanka, but similar agreements with Pakistan and Bangladesh have been stalled due to political and economic concerns on both sides. In 1993 in Dhaka, SAARC countries signed an agreement to gradually lower tariffs within the region. Eleven years later, at the 12th SAARC Summit at Islamabad, SAARC countries devised the South Asia Free Trade Agreement which created a framework for the establishment of a free trade area in South Asia. In terms of population, the South Asian Association for Regional Cooperation is the largest regional organization in the world. Its combined population of about 1.4 billion provides a huge market.[38]

The establishment of SAARC was one of the regional initiatives supported by the international community in the hope that it would help reduce tension in South Asia. A  related development was the initiation of “Track II” (unofficial, non-governmental) diplomacy between India and Pakistan. The hitherto futile expectation of the international community was that SAARC would become the ideal vehicle to promote peace and reconciliation in South Asia and that territorial disputes such as that of Jammu and Kashmir would fade in significance over the years in the face of economic prosperity that deep regional integration would bring. Institutionalized economic cooperation was expected to work its magic and lead to harmony in other fields. The modern functionalist theory was cited in support of this view.[39] However, closer to the truth is that many economic and security issues continue to beset South Asia. The existing situation in the region was further complicated post-9/11 by the invasion of Afghanistan by NATO forces (ISAF) and the widening scope of the US-led war on terror, which has had a profound destabilizing effect on Pakistan. Regional cooperation took a backseat until urgent economic concerns revived interest in its possibilities recently.

Several states in South Asia are confronted with conflict situations: Pakistan, Afghanistan and Sri Lanka have grave security concerns that impact on their national integrity and stifle their economy. They also face serious economic problems that could be eased, to an extent, through regional cooperation. Pakistan, for instance, does not have the internal resources to ease its severe power shortage but Iran is energy surplus and has recently shown its willingness to sell energy to Pakistan. However, there is international pressure on Pakistan to avoid contact with Iran. The prospective Iran-Pakistan-India natural gas pipeline, whereby Pakistan would benefit both as a consumer as well as a transit point is seen as undermining US sanctions against Iran.[40]

Iran which shares borders and has strong cultural, economic and political links with two SAARC countries, namely, Afghanistan and Pakistan has also sought membership. On 22 February 2005 its Foreign Minister while expressing his country’s interest in joining SAARC, stated that Iran could provide the region with “East-West connectivity.” On 3 March 2007, Iran requested SAARC observer status and was told by Secretary-General Lyonpo Chenkyab Dorji that this would be considered at the next SAARC foreign ministers’ meeting.

A number of other states, including the People’s Republic of China and the Union of Myanmar, have also expressed interest in SAARC membership. More possibilities for selective institutional integration at the regional level, based on the urgent needs of member states, could arise with SAARC expansion.

Major countries as well as organizations not geographically contiguous to the SAARC region have also sought observer status. These include the US and South Korea (April 2006) and the European Union (July 2006). On 2 August 2006, SAARC foreign ministers agreed in principle to these requests. The Russian Federation intends to become an observer as well, and is supported by India. This has raised the political profile of the organization and is indicative of intense international politicking in the volatile South Asia region. It also points to the possible creation of pressure groups within SAARC.

Regional cooperation options for Pakistan are limited by the global political climate, the regional security situation as well as its own economic and security compulsions. There are several concurrent themes to be considered. Closer ties with Iran and Turkey on its western border and the Gulf Cooperation Council states towards the south make sense, but Pakistan is always pushed towards the east by the international community. In any case Iran, Turkey and the GCC have their own priorities. Throughout the world regional groupings in the economic and security spheres have overlapping and complementary footprints. Pakistan has longstanding security concerns as a result of its dispute with India over the core issue of Jammu and Kashmir. Until the perceived benefits of becoming part of an institutionalized regional cooperation arrangement with India clearly outweigh the compulsions of its position on Kashmir, Pakistan will not be comfortable with the possibility of deep integration. It has been said that such an arrangement could act as an incentive for political, economic and security reform in member states but this argument has not been accepted so far. This is why moves to link up with, and draw upon, the resources of Central Asian states have always been encouraged. The bonds between the states of a region may develop or change over a period of time: integration with some states may deepen while links with others may become less important. [41] For example, direct foreign investment in Pakistan by the Gulf States has led to interest in establishing links with them.

The EU and NAFTA have not had to put fundamental issues of security and sovereignty before their citizens in referendums, since most territorial disputes in Western Europe were resolved at the end of World War II, while another set of territorial concerns came to an end with the dissolution of the Soviet Union in 1989. A different kind of symbolic, but equally potent, sovereignty issue has been raised there: the question of whether to retain their national currency or to accept the EU currency, the euro. In a number of member states the public rejected economic union and voted to retain the national currency. Even today, only 15 of the 27 EU countries use the euro as national currency.

The benefits of the US $ 7.4 billion Iran-Pakistan-India gas pipeline include an incentive to establish a regional institution for the smooth running of its administration: this could be a test case of institutionalization in the region. Such an institution would need to have an apolitical, supranational mandate in order to be effective at all times: unresolved political and territorial issues within the sub-continent have limited cross-border cooperation since Partition and the creation of Pakistan, despite the deeply interdependent nature of the economy of the area under colonial rule.

During the 1990s attempts were made to apply the experience in Europe to other regions, particularly South Asia, with its history of periodic conflict over territory and issues of sovereignty. A review of regional integration initiatives in various parts of the world highlights why each initiative may require a customized approach. However there are some general guidelines that can smooth the path of regional cooperation initiatives. Devising rules and regulations covering the issues that can arise as a result of interstate economic activity under new arrangements can be a laborious and cumbersome task. Nevertheless, it is necessary in order to avoid the kind of litigation that has surfaced under NAFTA. Regional cooperation associations should consider awarding special status to countries that may not fulfil criteria for membership but may be able to contribute to the prosperity and stability of member states. In order to avoid confrontations and deadlocks, members should have the choice of opting out of some arrangements within the framework of a regional association, which they feel unable to accept. Member states should make arrangements for the uplift of those states within the regional association that are less developed. This is bound to create goodwill and have a positive effect on regional stability.


Shahwar Junaid, a former Communications Media Consultant to the Pakistan Government, is an eminent writer and intellectual. Her latest book is titled, Terrorism and Global Power Systems, Oxford University Press, 2006.


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