Identifier
Created
Classification
Origin
06NEWDELHI2323
2006-04-05 14:03:00
CONFIDENTIAL
Embassy New Delhi
Cable title:  

INDIA GETTING SERIOUS ABOUT SAARC

Tags:  PREL PGOV ETRD ENRG ECIN EAID IN AF BG BT 
pdf how-to read a cable
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RUEKJCS/JOINT STAFF WASHDC
C O N F I D E N T I A L SECTION 01 OF 04 NEW DELHI 002323 

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DEPT PASS TO USDOC AND USTR

E.O. 12958: DECL: 04/04/2016
TAGS: PREL PGOV ETRD ENRG ECIN EAID IN AF BG BT
NP, PK, SL
SUBJECT: INDIA GETTING SERIOUS ABOUT SAARC

REF: NEW DELHI 1324

NEW DELHI 00002323 001.2 OF 004


Classified By: PolCouns Geoff Pyatt for Reasons 1.4 (B, D)

C O N F I D E N T I A L SECTION 01 OF 04 NEW DELHI 002323

SIPDIS

SIPDIS

DEPT PASS TO USDOC AND USTR

E.O. 12958: DECL: 04/04/2016
TAGS: PREL PGOV ETRD ENRG ECIN EAID IN AF BG BT
NP, PK, SL
SUBJECT: INDIA GETTING SERIOUS ABOUT SAARC

REF: NEW DELHI 1324

NEW DELHI 00002323 001.2 OF 004


Classified By: PolCouns Geoff Pyatt for Reasons 1.4 (B, D)


1. (C) Summary: PolCouns and Poloff's April 4 introductory
call on Preeti Saran, the new MEA Joint Secretary for SAARC,
revealed an element in the GOI that is generally upbeat about
SAARC's potential to improve regional cooperation, in line
with Prime Minister Singh's long-term vision of Indian
leadership in South Asia and beyond. Ms. Saran's apparent
interest in advancing India's role as a regional leader and
her frankness about what the GOI needs to do to achieve this
goal suggests and increasingly sophisticated MEA view of
SAARC and related regional issues. Saran noted that there
are some critical junctures ahead for both SAARC and the
South Asian Free Trade Area (SAFTA),and voiced her concerns
about Pakistan's preparedness to implement SAFTA. She took
on board US interest in SAARC observer status and
Afghanistan's membership in the regional body, and explained
that the modalities for this would be discussed at the
technical level in SAARC over the next few months and by the
Council of Ministers' meeting in July. End Summary.

Reiterating Support for US Observer Status in SAARC
-------------- --------------


2. (C) In an April 4 meeting with PolCouns and Poloff, MEA
Joint Secretary for SAARC Preeti Saran confirmed the GOI's
support of SAARC observer status for the United States,
agreeing with PolCouns that now is the time for the U.S. to
pursue it. However, Saran noted that the SAARC members had
yet to decide on the framework for observer status--i.e. what
roles and what level of participation would be granted.
Saran mentioned that she had been investigating how the EU

model works and asked us for details about NAFTA modalities.
She observed that it was a bit "peculiar" that the SAARC
countries had agreed to accept observers and a new member
without deciding what those categories would entail.

Modalities For Observer Status: A Blank Slate
--------------


3. (C) Saran reported that the GOI had not yet formed an
opinion of how observer status should function. Saran
predicted that she and her counterparts would start
establishing modalities at a working level meeting on April
18-19 in Dhaka, where she expects to learn more about the
other SAARC members' expectations for observers. The July
SAARC Council of Ministers' meeting, will be the regional
group's first opportunity to finalize the framework, at which
time the group would consider other models, she said. Saran
was guardedly hopeful that these membership and observer
modalities would be defined easily, noting that her
interactions within SAARC had always been "comfortable and
amiable," and that the Bangladesh government is also eager to
finalize important decisions by June or July ahead of
national elections later this year. However, she also
pointed out that it would take some "intense" technical level
meetings to get the framework in order, and that SAARC's
accession by unanimity clause could cause problems.

Agreement About Afghanistan

NEW DELHI 00002323 002.2 OF 004


--------------


4. (C) Saran stated that SAARC has not met to begin the
process of Afghanistan's accession to the group, but she
reaffirmed the GOI's commitment to bringing Kabul into the
fold, noting that Afghanistan "completes the South Asian
identity." Saran agreed that economic and political
connectivity with the rest of South Asia is key to
normalization in Afghanistan. She was pleased to report that
Afghanistan was included in a meeting of SAARC delegates
hosted by the German government last week. Saran reported
that she believes the next opportunity to formally initiate
Afghan membership would be the Ministerial in Dhaka this
summer, and the first opportunity for Afghanistan to
participate would be 2007, at the summit that will New Delhi
will host.

Skeptical About Pakistan's Intentions
--------------


5. (C) Saran assessed that the Pakistan Commerce Minister's
recent statement that Indo-Pak trade would continue to be
governed by the bilateral agreement "nullifies SAFTA in one
fell swoop." She was surprised by the GOP stance, she said,
because in the 12 meetings held to negotiate SAFTA, Pakistan
never said India would be left out of implementation. Saran
maintained that regional trade cannot grow or be as dynamic
if one country blocks the process. Further, she noted that
India's FTAs with Sri Lanka, Bhutan and Nepal, and its
negotiations for the BIMSTEC trade area that includes
Bangladesh, "just carve Pakistan out" (REFTEL). Saran
allowed that Pakistan's decision to ratify SAFTA was a good
one, but firmly stated that "Pakistan can't continue holding
it (implementation) hostage." Saran agreed with PolCouns
that Pakistan's business community appeared to have grown
more confident about how it would fare under a freer trade
regime with India, commenting that the economic logic behind
free trade is compelling. She also acknowledged that if
Pakistan applies SAFTA to trade with India, Islamabad will
have granted de facto MFN status to New Delhi. However,
Saran claimed that the establishment in Pakistan is still
hostile toward India and sees SAFTA ratification as a "gift"
to India to be given only after other issues (Read: Kashmir)
are settled. She averred that, come the Council of Ministers
meeting this summer, the GOI will be looking closely at the
number of items the GOP puts on its sensitive list as an
indication of Islamabad's commitment to SAFTA. She added
that attitudes and outcomes at the upcoming Ministers'
meeting would determine the tone and pace of SAFTA
implementation.

...But Also Sees Need for GOI Action
--------------

6. (C) Saran bemoaned the long implementation periods and
"Sensitive List" that limit SAFTA's impact, saying, "how can
we call this free trade?" She criticized the Indian Commerce
Ministry, calling it "defensive, but for no reason."
Observing that there is much room for improvement in SAFTA,
Saran argued that the larger countries need to play a role in
moving things forward. She also noted that emphasis had
wrongly been placed on sensitive lists; Saran confided that
the GOI's main fear regarding SAFTA was related to misuse of

NEW DELHI 00002323 003.2 OF 004


he rules of origin, because sensitive lists can be
continually revised. Without specifically acknowledging
India's track record on regional trade barriers, Saran noted
that "we still have to work on trade facilitation."

Generally "Bullish" on SAFTA Prospects
--------------


7. (C) In spite of her near term concerns about SAFTA
implementation, Saran described her attitude toward regional
trade liberalization as "bullish." She predicted that "once
trade takes off, the benefiting countries would look to
reduce trade barriers and pursue customs harmonization."
Pointing to the Sri Lanka-India FTA as an example, Saran was
confident that India's neighbors would similarly experience a
surge in exports as a result of SAFTA. In particular, she
recalled India's initial apprehension about liberalizing
trade with China, and commented that economic engagement can
help change attitudes. Saran added that it might look as
though all South Asian countries export the same kinds of
items, but, as she pointed out, lower trade barriers could
allow for vertical integration across the subcontinent and
help countries to maximize their comparative advantages
within a given industry. She concluded that it's a "win-win"
situation.

Interested in Broadening SAARC Activities
-------------- .

8. (C) Commenting that SAARC has not yet undertaken a
regional project, Saran was very interested in learning more
about USAID's South Asia Regional Initiative for Energy
(SARI/Energy). She was particularly interested in project
implementation in the context of the group, and responded
favorably to the prospect of receiving more information about
the history and activities of the project from our USAID
mission.

Bio-Notes: Preeti Saran
--------------

9. (C) Saran just completed a tour in Geneva as India's
representative to the World Intellectual Property
Organization. Her past experience at the multilateral
organization and her clear interest in and understanding of
the technical issues involved in SAFTA indicate that she will
be a more able interlocutor as the MEA's Joint Secretary for
SAARC. She is married to Pankaj Saran, MEA's Joint Secretary
for Nepal and Bhutan, but is not related to Foreign Secretary
Shyam Saran.

Comment: SAARC Finally Getting Traction in GOI
-------------- -


10. (C) Saran's comments about SAARC and her apparent
commitment to its potential suggest that the MEA is serious
about using SAARC to engage India's neighbors in a way that
the group has not been used before. As Saran indicated,
bureaucratic hurdles, such as in the Commerce Ministry's
protectionist instinct, will need to be overcome, but she
seems well-placed to handle the task.


11. (U) Visit New Delhi's Classified Website:
(http://www.state.sgov.gov/p/sa/newdelhi/)

NEW DELHI 00002323 004.2 OF 004


MULFORD