A recently launched report has shown that if South Asia increases trade within the region, particularly by importing from within the region instead of from outside the region, around US$ 2 billion savings can be made in consumer spending.
The report by the Consumer Unity and Trust Society (CUTS) titled “Cost of Economic Non-Cooperation to Consumers in South Asia” highlights the costs to SAARC consumers as a result of existing trade restrictions in the region. IPS was the country partner of CUTS in carrying out the survey for the report. Based on a meta-analysis of the existing literature on economic integration in South Asia, a quantitative analysis, and a survey of some key stakeholders on their perceptions on regional trade integration, the study estimated the gains that would accrue to consumers from enhanced intra-regional trade.
But there is a long way to go in terms of making consumers in this region aware of, and convinced about, the gains to be made from greater intra-regional trade. Unfortunately, this lacuna has led to a stalling of any serious progress by countries like Sri Lanka in proceeding with robust and comprehensive economic integration with its neighbours. This article discusses some of the perceptions on regional economic cooperation among key stakeholders in Sri Lanka.
A range of stakeholder groups were interviewed for the survey including producers/exporters, government officials, trade-related service professionals, academics/researchers, civil society organizations, business/industry organizations, and media. The survey was carried out in Colombo and aimed to address two broad objectives: (1) to examine the perceptions of stakeholders about the benefits of economic cooperation in South Asia and the relative merits of the South Asian Free Trade Agreement (SAFTA) in terms of consumer welfare impacts, and (2) to gauge the expectations about future prospects of intra-regional trade.
A majority of the interviewees were of the view that regional and bilateral trade negotiations were influenced by political priorities rather than economic logic. While political tensions between India and Pakistan were highlighted as the main case in point, examples in Sri Lanka were also discussed. One respondent argued that Sri Lanka’s bilateral FTA with Pakistan is of very limited use given a very low base of actual trade between the two countries. Another factor cited was the opposition of influential segments of the business community, making it politically safer for the government not to push the “free trade” line, as in the case of the India-Sri Lanka Comprehensive Economic Partnership Agreement (CEPA).
The lack of attention given to consumer welfare impacts of trade by trade policy makers in the country was also emphasized. The primary reason identified was the deficiency of strong and influential consumer lobbies to push for consumer concerns. Lobby groups among domestic producers and industrialists are powerful and have thus made it easier for political forces to align with local business interests. One respondent pointed to the fact that the decisions of the Consumer Protection Authority in Sri Lanka appear very short-term and populist. Negotiation experience also suggests that producer interests dominate in designing negative lists and other protective measures. Another contributory factor is the ignorance of consumers of the benefits of trade liberalization. For instance, Indian imports are at times perceived as a way of India trying to economically take over Sri Lanka. There have also been publicity campaigns telling consumers that buying local products is being “patriotic”.
In moving forward and generating more awareness about positive consumer welfare impact of greater regional trade cooperation, a majority of respondents suggested that facilitation of dialogue between politicians, producers, and consumers at the national level is key. Since consumer organizations are currently weak, the initial thrust has to involve all stakeholders. Dialogue between producers and consumers are important to both generate awareness among consumers and also to ensure that producers understand that greater consumption will in turn bring enhanced benefits to producers as well. Once consumers start influencing political decision making, politicians will start taking consumer interest into account in policy decisions.
Unfortunately, government officials and political persons were heavily underrepresented in the sample surveyed due to difficulties in fixing appointments and also the reluctance on the part of government officials in publicly expressing their views on the topic. This is a major shortcoming, as the implementation of whatever policy measures decided upon would finally depend upon political will. However, the survey has provided a good starting point in recognizing the need for consumers as a group to form a strong political constituency and in highlighting the prospects of consumption benefits from greater economic cooperation and trade liberalization in the region.
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