US embassy cable - 04NEWDELHI7426

C O N F I D E N T I A L SECTION 01 OF 02 NEW DELHI 007426 
 
SIPDIS 
 
E.O. 12958: DECL: 11/21/2014 
TAGS: PREL, EAID, ETRD, PK, BG, IN, GOI 
SUBJECT: INDIA SAYS SAFTA ON CRUISE CONTROL 
 
REF: NEW DELHI 7395 
 
Classified By: PolCouns Geoff Pyatt.  Reasons 1.4 (B,D). 
 
1. (C) Summary: The GOI is heading into the January SAARC 
Summit in Dhaka upbeat about having maintained an ambitious 
SAFTA (South Asia Free Trade Area) negotiating schedule that 
aims to have a document ready for member ratification by mid 
2005.  This optimism has prevailed despite apprehension in 
New Delhi over Bangladesh's SAARC chairmanship and modest 
expectations for immediate deliverables.  As a side effect of 
progress on SAFTA, New Delhi is taking a low key approach to 
the question of most-favored nation (MFN) status with 
Pakistan on the assumption that a SAARC-wide FTA will 
"finesse" the problem away.  In a November 22 meeting with 
PolCouns, the MEA welcomed the prospect of a USAID funded 
SAFTA technical assessment while emphasizing the need for 
outside parties to work directly with the SAARC Secretariat 
to avoid giving the impression of meddling.  End Summary. 
 
Running With SAFTA 
------------------ 
 
2. (C) In a November 22 meeting with PolCouns and Poloff, MEA 
Joint Secretary (SAARC) V. Ashok laid out the South Asia 
Association for Regional Cooperation's (SAARC) ambitious 
calendar for getting SAFTA up and running by January 2006. 
Pleased with the Association's "untypical progress" so far, 
Ashok outlined the timeframe for SAFTA noting that the sixth 
ministerial meeting will be held in New Delhi December 2-4 
after which, with two more sessions in Kathmandu and Male, 
the members expect to have a document ready for the July 
ministers' meeting in Dhaka.  Ashok said this would leave six 
months for SAFTA's ratification and cabinet approval before 
the January 2006 target. 
 
Compensation Only a Speed Bump 
------------------------------ 
 
3. (C) While acknowledging that there are some conceptual 
problems associated with Dhaka's requirement that SAFTA 
provide compensation for revenue lost to LDCs due to freer 
trade, Ashok concluded that the GOI does not see this as a 
major "stumbling block."  He noted that New Delhi came away 
from Bangladesh FM Morshed Khan's November 1 visit here with 
the impression that when Dhaka wants to move forward 
"technicalities will be swept under the carpet." 
 
MFN Through the Back Door 
------------------------- 
 
4. (C) Ashok confirmed PolCouns' suggestion that the GOI 
appears to have become more flexible in its preference that 
MFN status with Pakistan be a part of any Iran-Pakistan-India 
pipeline deal (reftel).  He explained that the view in New 
Delhi is that if the members agree to SAFTA as it is on paper 
now, "MFN will come automatically."  MFN has become 
symbolically significant in the Indo-Pak relationship, he 
suggested, while noting that during the course of SAFTA 
discussions, he has not heard any indication that Islamabad 
will try to withhold most favored nation status. 
 
Negative List Won't Trip Up, Either 
----------------------------------- 
 
5. (C) His optimism unflagging, Ashok was confident that the 
question of negative lists would also be successfully 
resolved.  He explained that SAARC members have divided into 
two groups, one of larger economies (India, Pakistan, Sri 
Lanka) for which the Negative List must be around 20 percent, 
and the second for which it can be slightly larger (in the 
23-24%) in the final SAFTA framework.  In keeping with his 
upbeat theme, Ashok commented that the trend of regional 
integration was irreversible, and  noted wistfully that his 
position used to be considered a relaxing job.  Further to 
his point, the Joint Secretary added that his office will be 
moved out of its current crumbling annex location to the 
Ministry's main building, as indication of SAARC's upgraded 
status within the MEA bureaucracy. 
Deliverables in Dhaka 
--------------------- 
 
6. (C) While Ashok did not expect any significant SAARC 
developments during the Dhaka Summit, he noted a number of 
pending agreements, one of which will likely be signed in 
January.  SAARC members have nearly completed a Customs 
Mutual Assistance Agreement, Ashok said, but have had some 
difficulty reconciling the draft SAARC document with the more 
comprehensive model provided by the World Customs 
Organization, of which all are signatories.  Also in the 
works are SAARC Arbitration Rules, a Multilateral Double 
Taxation Treaty, and a Promotion and Protection of Investment 
Agreement.  Ashok expressed confidence that the BDG would be 
successful in the chairmanship, noting that during Khan's 
visit, he conveyed that Dhaka was eager to perform well as 
SAARC president. 
Room For One More? 
7. (C) PolCouns noted the USG's discreet support for 
Afghanistan's inclusion in SAARC and asked if there had been 
any movement in that direction.  Ashok explained that the GOI 
would welcome the addition if Kabul applies for membership, 
and there is consensus in favor of it.  He noted that 
Pakistan had adopted a similar position, and suggested this 
would be a fruitful area for further work by SAARC members. 
 
SAFTA Support 
------------- 
 
8. (C) PolCouns shared with the MEA USAID/Washington's Scope 
of Work on technical assistance for SAFTA implementation, 
noting that this project reflects broad US support for South 
Asian regional integration.  Ashok accepted the paper and 
noted, as he recently told a World Bank representative who 
visited him on the same subject, that the GOI "would be 
delighted" to have such support, but outside parties ought to 
work with the SAARC Secretariat to avoid giving the 
impression of "dictating to" the members.  He advised that it 
would be best for the USAID team to first approach the SAARC 
Secretariat to get ideas from them, thereby making it a SAARC 
 
SIPDIS 
initiative. 
 
In Tatas We Trust 
----------------- 
 
9. (C) Pinning his bilateral hopes on the Tata Corporation's 
proposed USD 2 billion investment in Bangladesh, Ashok 
commented that it is a "way to short-circuit governmental 
shortcomings" in the India-Bangladesh relationship.  He noted 
that a company like Tata could be more effective there, as 
opposed to the "bossy government of India," and predicted 
that SAFTA would compel the BDG to implement measures it has 
been unwilling to embrace bilaterally. 
BLAKE