Sri Lanka’s strategic and economic policies: Walk the talk?

Nov 02, 2009 (LBO) – One of the grave dangers of the Great Recession and the Jobless Recoveries in various countries is the resurgence of protectionism and withdrawal into Fortress NAFTA, Fortress Europe, and so on. It happened in the 1930s and it can happen again.

Asian leaders and thinkers (in some countries at least) are not oblivious to this danger. ASEAN invited six major economies in the region (Australia, China, India, Japan, Korea and New Zealand) to the aborted Summit in Thailand in April 2009 to join it in creating a massive free trade area. When the rescheduled Summit was held last month two competing visions emerged.
One was ASEAN+3, advocated by China. This would include ASEAN’s 10 members plus China, Japan and South Korea. Japan and Australia are behind the competing and slightly broader vision of an “East Asian Community.” This is to include, in addition to ASEAN+3, Australia, New Zealand and India. The Japanese Prime Minister hinted that the US could also join later.

India was the sole invitee from the SAARC region to the ASEAN Summit. It already has a mesh of “free trade” agreements with Singapore, Korea and Japan, with an overarching agreement with ASEAN signed this past August and scheduled to take effect in January 2010. Thus, even if China seeks to marginalize it, India will be difficult to dislodge. ASEAN-India trade has been growing apace despite the economic downturn. The figure in 2008 was USD 48 billion and is expected to reach USD 50 billion by 2010.

India also offered ASEAN a plethora of goodies: a development program on disaster management, a share of satellite data on areas affected by natural disasters, more exchange programs among youths and parliamentarians, etc. It proposed an India-ASEAN round table to connect regional knowledge gaps and future cooperation. The Indian Prime Minister proposed to host the ASEAN-India Summit in India during 2010.

What we see are beginnings of the moves toward an Asian free trade area, which is not a bad thing per se. It also doubles as the drawing up of plans for Fortress Asia in the event the drawbridges start being pulled up in Europe and North America. Its definition is not quite settled, with the Chinese wanting it to map with the old Middle Kingdom, and Japan, ever wary, seeking to balance China’s weight with that of other powers, most noticeably India.

It is best that commerce be open. Protectionism is a bad option; it made things worse in the 1930s. But when and if it comes about, it will be worse for some people than for others. Those within the fortresses will be relatively all right. God help those outside who will be subject to depredations of all comers.
And guess where little Sri Lanka is likely to be? Outside, looking in. In the words of former Brazilian President and former dependency theorist Fernando Henrique Cardoso, countries on the outside will “end up in ‘the worst of all possible worlds.’ They will not even be considered worth the trouble of exploitation; they will become inconsequential, of no interest to the developing globalized economy,” or in the protectionism-wins scenario, of no interest to any of the fortresses.

Non alignment redux

We are supposed to be in the middle of a historic shift, based on the non aligned movement ideology of the 1960, where we thumb our nose at the US and Europe (echoes of nationalizing the port and the petrol stations) and stand shoulder to shoulder with our true friends, China and Iran.

Sri Lanka’s former Ambassador to the United Nations Dayan Jayatillaka is reported to have said of Mahinda Samarasinghe’s and his famous victory at the Human Rights Council: “This is not a lesson that Sri Lanka taught the West. It is a victory… of the developing countries and the global south. It was not a defeat of the Tiger Diaspora alone. It was the defeat of a powerful bloc of forces… Geneva was a miniature diplomatic Dien Bien Phu or Bay of Pigs for the EU.”

Echoes of Non-Alignment indeed. Its publication in the Sri Lanka Guardian, namesake of Ambassador Jayatillaka’s father’s magazine with just the extra Sri, reinforces the sense of déjà vu.

China

And our true friend is China: Gotabaya Rajapakse, the Defence Secretary, recently said to Lakbima News that “the president went to China three times, I went five times. Sometimes, the president speaks to the Chinese premier by phone. We have set up good relations. We have understood who is important to us.”

Yet our true friend’s vision of an Asian free trade area does not include us. Our former benefactor and friend Japan has a broader vision, but we are not included in that either. Despite being the spearhead of Dien Bien Phu 2, we do not seem to be on anyone’s radar screens when it comes to economics.

So we have understood that China is important to us, but China has not understood our importance to China. We are good for refuelling ships and for irritating India, but we do not belong inside the Fortress in the making.

And our rulers roll happily along, not seeing the signs that our place is being set, not at the table, but under the table. This was the problem with the late unlamented Non Aligned Movement too: all politics, no economics. The NAM was great at passing resolutions on everything under the sun, but never good at creating a solid foundation for south-south cooperation. The closest it came was with the Colombo Declaration of 1976 that included language on the New International Economic Order, which never got implemented.

The erstwhile enemy, the United States, is today the principal export market of the victors of Dien Bien Phu 1. The political-military victories did not have economic follow throughs. That was why the romantic third worldism of the 1960s was a dud. To paraphrase Marx, “all great world-historic movements appear, so to speak, twice . . . the first time as tragedy, the second time as farce.”

NAM thinking kept our countries impoverished and delayed by decades the release of millions from poverty. That was the tragedy. Non alignment redux is the farce.

Walk the talk

Now that we are joyfully burning our bridges with our principal trade partners for the cheap thrills of DBP2, at least let us focus on building solid rule-governed economic relationships with “those who are important to us.” Perhaps we can snatch survival out of the jaws of impending marginalization. How can this be done?

No one can marginalize India. China can try, but it will be futile. If we, as the country which signed and implemented the very first free trade agreement with India, as the country which has a comprehensive economic partnership agreement all ready to sign, focus on locking in our trade relationships with India, we too have a chance of avoiding marginalization. Keep the vociferous naysayers quiet with some biscuits and sign the CEPA forthwith.

India is beginning to get away from the squabbling, do-nothing SAARC, doing the same thing JR Jayewardene tried to do, unsuccessfully, in the case of Sri Lanka in the early 1980s. Let the SAARC squabble and moan. If we hold on to India tight, we can leave South Asia along with them. And we may also find ourselves nice and comfy inside Fortress Asia when and if the drawbridges go up in Europe and North America.

Rohan Samarajiva heads LirneAsia, a regional think tank. He was also a former telecoms regulator in Sri Lanka. To read previous columns go to the main navigation panel and click on ‘Choices’ category.