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Look, no policy!

Look, no policy!

Author: VK Grover
Publication: The Pioneer
Date: March 7, 2001

The ceasefire has been extended in Jammu & Kashmir, which really amounts to an extension of this Government's lack of a Kashmir policy. We love peace, but the Pakistanis and their trained-to-kill jihadis do not. At the end of May, the Government will regret having taken this action, which really amounts to inaction. Let us not forget the saying "action" is always risky, but inaction is positively dangerous.

Are we trying to please the Bush Administration, which bombed Iraq before it was even installed in office? The US President's letter to the Pakistani General smacks of Cold War language. There is no mention of terrorism and only the suggestion that Kashmir be solved through dialogue. We will have to carefully assess where exactly we stand with the new dispensation in Washington. So far we have received mixed signals. The Secretary of State has said one thing, and the Secretary of Defence, another.

Signs of the Cold War rekindling in some form or the other are emanating from Washington as well. The Russian opposition to the new US missile defence system is irritating the Americans, and any friend of Russia is being singled out for criticism, particularly by the Pentagon. Hence the issue of nuclear fuel, etc. The Bush Presidency is likely to raise its profile on Russia and China. Of the two, China can be a greater threat along with Islamic fundamentalism, whether it is located in Afghanistan or China, and for fighting the Islamic fundamentalist nexus in Pakistan and Afghanistan. On the other hand, Pakistan can once again become a strategic partner for the US if it assists in the hand-over of Osama bin Laden.

As far as India is concerned, we cannot take the recent coziness with the Americans for granted. A superpower is like a mule; you never know when it will deliver a drop kick! The real problem is India can deliver very little to the US. Our so-called vast economic market has become a laughing stock with the international investing community. There is no desire to invest in India as of now. The Indian economy is in a state of weakness and nobody believes we are serious about the second generation of economic reforms.

Politically, the continuing militancy in Kashmir and the North-East does not exactly paint a rosy picture. We are unable to deal firmly with our neighbours, nor do we act forcefully as a regional power. Therefore, our value to the US, for any strategic partnership, is greatly diminished. Even if the US was to put full pressure on Pakistan, to convert the LoC into the international border, what can we give them in return?

It is not only Pakistan, but even a small and supposedly friendly neighbour like Nepal is constantly inflicting pinpricks and even damage. The Trade Treaty, which was signed in December 1996, is seriously flawed. We are supposed to have no duty on agricultural commodities, in our agreed list. This was for the benefit of Nepalese agriculture. However, Chinese ginger and other such products find their way to the Indian market in the guise of Nepalese agricultural commodities.

For goods manufactured in Nepal, there is duty-free entry. For Indian goods we are supposed to get a 20 per cent tariff concession on articles attracting a duty of 40 per cent or less in Nepal and ten per cent for those with tariffs of over 40 per cent. In the 20 per cent category, other SAARC countries get a benefit of 10 per cent, so we have an advantage of only ten per cent in real terms. The Tibetan autonomous region also gets a 20 per cent advantage.

In the 1996 treaty, the 50 per cent value addition was done away with as far the question of origin for manufacture of goods was concerned. The only caveat was that assembled and goods not manufactured in Nepal would not be allowed under this category. A definable value addition needed to be proved. This was a loose definition and Nepal has not respected the issue of origin and abused it constantly by importing goods from outside and seeing them in India under this concession.

As we all know, all Free Trade agreements have very strict rules on the issue of origin, which is supposed to benefit the economy of a particular country. The EU insists on a 50 per cent quantum from the country of origin. NAFTA is very strict. If a piece of garment is made in Mexico, it must use cloth, as well as yarn, from another NAFTA country. In Nepal, even a less than five per cent value addition of Nepalese origin is being sold in India under the 1996 Treaty. The whole idea was to ensure benefits for the Nepalese industry; instead, all we have is trade circumvention.

The Indian industry is being seriously affected in West Bengal, Bihar and UP. Many Vanaspati factories have closed down in these states. The Nepalese import the raw material at very low cost, and with little or no processing these are exported to India. The same goes for acrylic yarn coming from China. Many units in Ludhiana are facing closure. Silk is another item, which is being freely passed on to the Indian market.

What is needed is close examination of the experience with Nepal of these concessions given in 1996, and to modify the treaty accordingly. Unless this is done in time, the treaty will get extended automatically. The idea is to provide a level playing field for industries affected in India and also to provide direct benefit to Nepalese industrialists.

The Citizenship Bill has become another bone of contention. At present, persons of Indian origin do not get Nepalese citizenship by birth. They get it through naturalisation. The strange part is that even those who get citizenship through naturalisation cannot pass it down to their children who are born in Nepal. Earlier, the voters' list was used to confirm citizenship. The latest ploy is to prune the voters' list for those who hold citizenship. Every effort is being made to prevent persons of Indian origin, fully eligible for Nepalese citizenship, to obtain their legal rights. On the other hand Nepal is pressing Bhutan to grant Nepalese citizenship to its nationals on the same grounds on which it is denying it to persons of Indian origin.

The Citizenship Bill that lays down new procedures for giving citizenship, and is more favorable than the rules applicable in the past, has been held up by the King, although it has been passed by the Lower House of the Nepalese Parliament. The king has never played a helpful role where India is concerned and those who look to him as a friend of India should be more circumspect.

We do not have far to look for outlining the responsibility for the totally non-reciprocal Trade Treaty signed in 1996. The then Foreign Minister did incalculable harm in following his appeasement policies towards our neighbours. The repercussions have been harmful both economically and politically. SAFTA is a non-starter as long as Pakistan pursues its disruptive policies. We need an Indo-Nepalese Free Trade Agreement along the same lines as the Sri Lankan one. At some point Indian goods have to be admitted with zero duty into Nepal. This can be over an extended period - say ten years - more than we have with Sri Lanka.

There also has to be a harmonisation of external tariffs so that there is no encouragement for smuggling. This is the only way we can arrive at a sound basis for trade relations and a permanently stable engagement. The alternative is to scrap the Treaty of Friendship, and have a closed border, like we have with our other neighbours, except Bhutan.

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