MULTAN: In whose favour the balance of trade in agriculture sector will go when the Safta would be in place from January 1, 2006, is a difficult question to answer because all Saarc nations primarily have the agro-based economies with the agriculture sector as either the first or second largest contributor to their respective GDPs.

And, perhaps, this over reliance on the low-value agriculture sector with rampant under-employment, the socio-economic indicators of the Saarc countries are by and large deplorable.

About 1/5th of the world consumers live in these seven countries of South Asia that have an average per capita income of $460 against the world average of $7000. Hence, as much as 40 per cent of the 1.4 billion population of the South Asian countries is living below the poverty line while as much is illiterate.

With the exception of India, the Saarc countries mostly fulfil the staple food requirements of its population through indigenous resources but they have to import some quantity of wheat to bridge the gap. However, India has not even attained a sustainable autarky it is used to export a sizeable quantity of the commodity as well. Pakistan, though, had produced surplus wheat in 2000 and 2001 but the faulty official policies have once again forced the government to import wheat after three years gap.

The intra-regional trade among the Saarc is mere 5 per cent of the total international trade of the member countries and that too comprises mainly on food items (37 per cent) and agricultural raw material (17 per cent). Conceptually, the Free Trade Agreements (FTAs) thrive on complementing the mutual needs of the contracting states to achieve the overall developmental goals. But, on the agricultural front the South Asian countries especially India and Pakistan have very identical features owing to same geo-climatic conditions.

Both India and Pakistan are the members of the elite club of cotton producing countries on the globe, they export rice, they are among the largest wheat producers in the world as well, and last but not the least, they also compete with each other in the international market on the export of fresh fruit and vegetables with mango at top of the list. However, despite being the agricultural countries all the seven Saarc members spend huge resources on the import of edible oil, mostly from the South East Asian countries.

Although, the Saarc countries have yet to release their respective negative list of the products that will not be covered under Safta but presumably if the agricultural produces are on the positive list then Pakistan will have to immediately pay attention to the improvement of standards of its farm produces to transform them into marketable competitive commodities.

Pakistani cotton is famous for its fibre quality but somehow the government cannot design grading system regarding staple length and micronaire level.

Similarly, a lot is desired to be done to control contamination of non-lint contents in the raw cotton. Owing to this deficiency, the price of Pakistani cotton is depreciated by 10 to 15 per cent in the international market. This year, the local textile millers have imported cotton from India to meet their requirements owing to the shortfall in local production and they are reportedly pretty satisfied with the standards of imported cotton.

With Safta in place from January 2006, the Indian cotton can reach anywhere in Pakistan in 48 hours by road with almost the same transportation expenses being currently incurred on the movement of silver fiber within Pakistan from ginneries to the mills. Even at present there is no bar on import and export of cotton in Pakistan.

Therefore, by introducing standardization and a system of grading in real terms in cotton trade the farm sector would not only meet the domestic requirements of textile and spinning sector, which is the single largest source of foreign exchange earnings, but the surplus commodity can be exported at the international prices.

Bangladesh and Sri Lanka are the potential buyers of lint cotton in the region. Bangladesh imports around 0.7m bales of cotton per annum to feed its flourishing labour-intensive garments and apparel industry. However, the cotton production of Pakistan for the last several years has been fluctuating around 10m bales against the local industry's projected demand of 11.5m bales. There is room to increase cotton production of the country as in 1991-92 Pakistan picked a record crop of 12.8m bales from an area less than that of currently under cotton cultivation. This clearly shows the failure of the country's agricultural research institutes.

Although the services sector has not been made part of the Safta but the research in farm sector both in crops and machinery will be an area where exchange of knowledge with India can benefit Pakistan.

Well, it has yet to be seen after trade liberalization under both regional and global pacts that whether Indian's agriculture sector is really thriving on research or the huge subsidies has also a role in it. India subsidizes its farm sector to the tune of around (Indian) Rs400 billions on fertilizers, electricity, imputed irrigation and other inputs, which, according to an EU estimate make these subsidies 2.5 per cent of the India's GNP.

In contrast, the agriculture sector in Pakistan has been heavily taxed under the so-called Structural Adjustment Programme on the dictates of the IMF and the World Bank. India gives its farmers a subsidy of more than Rs150 billions only on fertilizers while Pakistan has imposed 15 per cent GST on all the agricultural inputs including fertilizers and pesticides.

Owing to its role as an engine of growth to bring about an overall development in the rural areas and absorb labour force in countries like Pakistan and India, it needs special treatment as compared to the industrial sector. But, if the agriculture sector is highly vulnerable to the exploits of market forces in Pakistan due to the absence of an effective safety net, it is over protected in India.

India is, though, spearheading struggle of the G-20 developing countries having large agricultural bases including Pakistan against WTO agreements on agriculture to brush aside pressure for drastic reductions in subsidies on farm sector, but when it will come to the practicalities of Safta the huge Indian farm subsidies will also become a sticking point especially between India and Pakistan.

The Indian farmers have yet to taste the bitter fruit of free market, but their counterparts in Pakistan have become quite used to it as if they had to sell seed cotton (phutti) at the all time low price of Rs450 per 40kg in the year 1999-2000, this year they have even fetched the all time high price of Rs1600 per 40kg.

In the agriculture sector, Pakistan exports cotton, rice, fresh fruit and vegetables, medicinal herbs and dry dates to its partners in Saarc while it imports tea, jute and betel leaves andnuts. Currently, Pakistan is fulfilling more than 60 per cent of its demand for tea by importing from Kenya and less than one per cent from India. But, with Safta in place Pakistan will have to prefer India for tea imports.