The South Asian countries should avoid striking political deals with major developed countries which have potential to undermine their common position on international economic issues.
The observation was made by the Center for Trade and Development (Centad), a Delhi-based independent research and advocacy institution, in its first South Asian Year Book of trade and development 2005, published last Thursday.
"Almost all the South Asian countries have decided to embrace globalisation, for varied reasons, by linking their economics more closely with the global market," the report said.
The report comprised a series of research papers on trade related topics pertinent to South Asian Countries like Bangladesh, India, Pakistan, Sri Lanka and Nepal.
In 1977, Sri Lanka was the first to go in for a full-fledged liberalisation programme. Pakistan embarked upon this process in 1982, Bangladesh did it in the mid-1980s, and India in a sporadic manner in the 1980s but in a more comprehensive manner from the second half of 1991.
"The South Asian countries need to protect their domestic policy space. Also, it is time to move beyond mere rhetoric," the report said adding that South Asian countries have not used the flexibilities provided by current World Trade Organisation (WTO) agreements.
Governments can no longer blame voter-unfriendly legislation on the WTO and need to take the onus on themselves to ensure that domestic stakeholders are not left neglected, it noted.
"The set of polices required by one country at a particular stage of development may differ substantially from the set of polices required by a country at a different stage of development," the Centad observed.
Normally, free trade and comparative advantage will increase the exports of labour-intensive goods from developing countries to developed countries and rise incomes from the former.
"The reality is a far cry from this theory. Free trade is not always fair trade. Barriers are often too high to surpass," the report said adding that inequality is rising and excessive liberalisation is increasing exposure of developing countries to higher risk.
Within the framework of regional integration or bilateral free trade areas, the more developed South Asian countries should accord duty-free and quota-free access to the least developed member-countries for their exports, unilaterally remove restrictions to investment flows to these countries.
South Asia is home to more than 560 million poor people, nearly half the world's poor. Three hundred million people do not get enough to eat while poverty alleviation is undoubtedly the biggest challenge.
Given this priority, progress on the economic front clearly necessities a pro-poor impact ' Trade as a means and not an end in itself `requires more than lip services, the report added.