Former Finance Minister, Pakistan; Chief Executive Officer, EMP Financial Advisors, LLC
Director General, Institute for Defence Studies and Analyses
Associate Research Fellow, Department for International and Strategic Studies, China Institute of International Studies
Vice President for Publications and Communications, Peterson Institute for International Economics
Experts assess regional opportunities to realize economic integration through trade agreements and infrastructure investment.
This symposium is made possible through the generous support of the MacArthur Foundation.
WEISMAN: Good morning, ladies and gentlemen. Why don’t we begin; we have a full discussion planned.
Welcome to the Council, my name is Steve Weisman. I’m a former correspondent, among other things, for The New York Times in South Asia, and it’s a pleasure to be back at the Council with so many friends that I can see in the audience. And it’s a pleasure to preside over this panel, Integrating the Region and Bridging Differences in South Asia and China’s relationship with India and Pakistan.
So our—as you can see, I won’t make long introductions. Our—we have a great panel: Shahid Javed Burki is the former finance minister of Pakistan and former vice president of the World Bank; Jayant Prasad, director general, Institute for Defense Studies and Analyses, and former Indian ambassador to Afghanistan and Algeria and Nepal; and Su Xiaohui, who is now associate research fellow for the Department of International and Strategic Studies at the China Institute of International Study.
So the focus this morning is on the economic integration and bridging the differences in South Asia. And I’m throwing a bit of a curve ball; I’m going to start with our Chinese participant, Ms. Su, because I think the economic progress and integration of the—of the region, everybody would agree, China is the indispensable focus right now, certainly from Washington’s perspective, with its fascinating ambitions for a major infrastructure program throughout the region.
So let me begin by asking Ms. Su to discuss your view of China’s goals for economic integration in the region, and to, if you would like, address whether or not any of the other countries in the region, and whether the United States, is reacting constructively to these goals.
SU: OK, so first I will begin with China’s initiatives, the so-called Belt and Road initiatives. We have a lot of names, One Belt, One Road—actually, there’s two parts, and the first part is the Silk Road Economic Belt, and second part is the 21st Century Maritime Silk Road. To make it easier, it’s called Belt and Road initiatives in China.
Well, it was a big plan initiated by China’s head of the country, President Xi Jinping, in the year 2013. And after that, the Chinese people, the economic people and officials, were asked again and again what was China trying to do. And I have to say, that some neighboring countries got panicked when they heard ideas. Well, China has some strategic plans in the region, and there’s a lot of consideration behind ideas.
Well, the first thing I believe China is trying to do is to boost economic development. Well, in recent years, you may notice that in President Xi’s term, China has been acting in a different way than in previous years. It is very obvious. In economic fields, China is trying to make more (voices ?) over more public goods, and in the security fields it is the same. Since the Chinese leadership has said clearly that we need to address the security issues in a sustainable way, which means we will depend on the development of the region. So the economic public goods or the economic initiatives made by China is a part of China’s big plans.
And the Belt and Road initiatives and the AIIB, as you may be interested, some interesting ideas or big ideas proposed by China. The first thing I suppose China is trying to do is to boost original economic development. There has been a lot of calculation inside of China based on the data from the ADB and other economic sectors, saying that Asia and a lot of countries may need investments in infrastructure construction. And it is said from the year 2010 to 2020, that South Asia may need 2.6 trillion U.S. dollars for the investment.
And at the same time, China believes that the investment in infrastructure construction may have some more effects. One thing we always talk about is that one dollar will bring three to four dollars in other sectors. So this is what they’re believing in China, and this is not a slogan or propaganda. You may look at some important documents released by China’s government, like the reports of the 18th National Congress of the CPC, China’s Communist Party. It does say clearly that we want to boost the economic development in the region, and at the same time, we believe that it is the way to address the complex problems in the neighborhood.
So another thing that I suppose you may be interested is that China’s idea is to boost the regional security framework. I don’t know whether you follow the news or not, a couple of weeks ago, the foreign minister meeting of the CICA, the Conference of Interaction and Confidence-Building Measures of Asia, was held in China. Well, I have to say that before the year 2014, when the first leaders meeting was held in Shanghai in China, few people know about this conference. So after that, all of the people were asking what China is trying to do with this framework. It is clear that maybe after two years, China will host another leaders meeting again. Well, it is already announced by Chinese government that we will do it. And so this framework means that China would like to play a kind of role, these—the design of the frameworks in the neighborhood.
The first thing is that it is good for all the countries. Well, since the securities have become so complicated and all the countries need development, it is time for China to provide some contribution to the neighboring countries. At the same time, I have to admit that China believes that the current existing frameworks may not play a positive role, and may not play a sufficient role in the neighborhood. We all know that for economic development, there has been efforts of the ABD in Asia, but it is not enough to support the needs of all the related countries.
And for the security issues, well, it is clear that China believes that the United States, and its allies, does not play a very positive role in the region. So China needs to propose some ideas that differ from the U.S. way and to see whether the other countries like it or not. So it is in the process of trying; it is not just trying to force the other countries to accept it, but just provide an option for the regional countries.
And another thing is that I don’t believe some traditional security issues will be talked about in China’s framework. China still insists that territory disputes should be talked about, but in the bilateral ways. So the regional framework, the multilateral organizations, will focus on something that relates to everybody, like the nontraditional security issues, like terrorism.
So that is in recent years what China is trying to do.
WEISMAN: That was a wonderful presentation and provides an excellent segue into—for you, Ambassador Prasad. Do you see—do you have—is your perspective identical? Where do you have concerns, based on what you’ve just heard?
PRASAD: Thank you, Steve.
This was an excellent way to start, beginning with China, because the transformation economically that they have brought in a short span of two generations, lifting 500 (million), 600 million people out of poverty, is a great example to other nations in Asia, particularly India. And our national leadership is often judged by whether or not we are measuring up to that standard. And Su has well begun.
Not far from this building, at the Bergson (sp) Institute, we had Arvind Subramanian, who worked here for several years. He wrote a bestseller which did very well in the U.S., but did even better in China, called “Eclipse: Living in the Shadow of China’s Economic Dominance.” Well, he begins the book with a hypothetical scene of a U.S. president walking into the office of the Chinese head of IMF, asking for a $3 trillion short term bailout for balance of payments. So we are starting from that point. (Chuckles.)
We—in China, we have become very friendly in our conversations. And so sometimes, out of—when the guard is down and India and China are put on the same platform, the Chinese—those who are very friendly to us remind us that China is there and India is there. So India has a long way to go.
Looking at the One Belt, One Road initiative, this is an emblematic Chinese initiative. Whether it’s driven by internal factors or not does not matter; the combination of the two, the SREB Silk Road Economic Belt and the 21st Century Maritime Silk Road, it’s cataclysmic in its conception. It is Sinocentric because the earlier description captured the singularity of the proposal by calling it One Belt, One Road, but it subsumes within it many other ideas that have been around for a long time. And so it’s now rightly called Belt and Road; we call it in India one belt and many roads, one belt being the global belt.
You look at India’s own connectivity issues: Because our GDP was low, we didn’t invest in our neighborhood the manner—in the manner in which we should have. But we have this Kunming Initiative to connect Yunnan through Myanmar, through Bangladesh, to the Port of Calcutta. We have the Asian Highway, which is being built, first, the trilateral highway between Thailand, Myanmar, and India. We are building roads and railways now in Bangladesh and in Nepal, five points populated centers are being connected with India. The Chinese are bringing their railway also into Nepal from Tibet.
There is the Asian Highway project, which ADB worked on for a long time, and the Trans-Asian Railway project. There was a meeting in September in Delhi of the St Petersburg group, which is Russia, Iran and India, who have been joined by nine other countries for building an international north-south corridor through Azerbaijan using Iranian ports. And next month, we hope to sign a trilateral agreement between Iran, Afghanistan, and India for the development of the Chabahar Port, which gives Afghanistan a second access to the sea.
So as you see, areas where—in which India and China can cooperate and collaborate, we are not to be found wanting. We, with China, set up the New Development Bank. It has an Indian CMD; they sit in Shanghai, and it’s supposed to start dispersing funds in an—in the next month or so.
We also became a member of the AIIB, and part of your question was also whether the U.S. is doing the right thing. Well, the U.S.’ singular negative response to the Chinese initiative was a bit misplaced, because even with this big economic gap between India and China—and the contributions to the AIIB, for instance, are by a mix of both real-terms GDP and purchasing power parity GDP—but India has ended up being the second largest shareholder, and with the second largest voting rights. And if U.S. had not put pressure on its allies not to join, so countries like Japan, then this would not be described today as a Chinese bank. So this is an example where it shows India will cooperate with China where we have common interests.
The problem with the OBOR design from India’s perspective is if you look at all the maps, it touches the periphery of India, but does not cross India. And India’s great strategic connect will be to connect inner Asia, Central Asia, Iran, Afghanistan, to its west, with the GMS region, which the Chinese have developed so well, the Greater Mekong Subregion, Vietnam, Cambodia, Laos. And they have leveraged very cleverly ADB funding for it: They did the construction of the Chinese connectivity projects, and they got the ADB to build the projects in these three countries. And India is looking for a connect to these CMLB countries. We have a special purpose vehicle, financial vehicle, created to have an industrial connect there.
And finally, I wanted to say that—the OBOR has an interesting idea that the SREB and the 21st Century Maritime Silk Road, they converge in two parts of the globe: They converge together the land and the sea belt in Europe and in Pakistan.
And so Pakistan’s alliance to China changes fundamentally. Pakistan’s alliance to China so far was to keep India busy in South Asia. But from now on, it is different, because Pakistan is going to play a major role in Chinese regional and global policies, because it gives a connectivity from Kashgar to Gwadar; it opens China greatly into the Arabian Sea and the Persian Gulf. And therefore, there is the good side of it that if Pakistan makes—has the disposition to receive this enormous Chinese investment of 46 (billion dollars), $50 billion in connectivity and energy projects and transform itself, that will be good for India, because India would then be dealing with a stable and self-confident Pakistan. But it would not be able to do so unless the—you know, the inveterate opposition to India is taken care of. And there, I suppose, just as the Chinese constructively are trying to assist in Afghanistan, if they tried also to assist in Pakistan, that might be a reality.
And the final point, a quick one, is that India and China are two countries dissimilar in comprehensive national power today, but their self-image of themselves is very similar, and their attitude to the world, their place in the world, is very similar. And they have been neighbors of long standing, but with very little physical contact between them. Itinerant travelers went from India to China; the sea contact was much greater between Kerala, connecting the Arab Countries with China and Southeast Asia, but in history, there was a period when the two countries converged in Southeast Asia. And that convergence was not based on conquest; it was based on culture and commerce. That is the time of the Sri Vijaya Kingdom from the eighth to the 12th centuries in the Malay Peninsula and the Indonesian Archipelago. There was a Sino-Indian confluence in Southeast Asia, and for the Chinese project to succeed, not only what Su referred to, is building a security architecture in Asia important, but a Sino-Indian confluence is important.
WEISMAN: Thank you.
More —excuse me—more food for thought: You present a very idealistic view of the prospects of economic integration in which longtime rivals in the region will suddenly be holding hands and building infrastructure to their mutual benefit.
Minister Burki or Vice President Burki, is that really realistic that these projects, which, as Ambassador Prasad pointed out, are concentrated, from India’s perspective, on its periphery, extending all the way from East Asia to, you know, ports in Sri Lanka, and then more infrastructure in southern Pakistan—how to avoid what Ambassador Prasad just said of using—of these—this economic development aggravating old rivalries in the region, and ensuring that there’s cooperation, and that these old rivalries can be overcome?
BURKI: Well—(chuckles)—two or three responses to what Ambassador Prasad said. One was that he said India has a long way to go before it comes anywhere near China insofar as economic development is concerned, and I’d like to pick up on that a little bit. And the second one was it’s very interesting that in response to our Chinese friend’s presentation, he gave us some idea about Indian responses, this is hard to link Indonesia, Southeast Asia, through India, Chabahar, Afghanistan, Iran, and so on, bypassing Pakistan.
Now, my problem is that the BRICS left South Asia in such a great hurry that they promoted nationalism rather than regionalism in South Asia. And I’ve done some work in this area, and it’s very interesting. If you look at South Asia as a complete integrated entity and you go back to 1947 when the partition took place, in 1949 when China became what China is today, you’ll find that South Asia had more advantages than China did: very large land mass, a tremendously developed agriculture system spread over the entire length and breadth of South Asia. China was very concentrated on the Eastern seaboard. I worked in China for a very long time, when as a—when I was at the World Bank, and whenever I met with the senior leaders of China, they would say to me, you’ve got to remember that we have 25 percent of the world’s population, but only 11 percent of the world’s cultivable area. Indian subcontinent didn’t have that kind of problem.
Now, what happened is that in the Indian subcontinent, nationalism became the main preoccupation of policymakers, and regionalism was totally discarded as a way of dealing with its own economic prospects, and also matching China’s growth.
If you look at the last 35 years, it’s very interesting that China’s GDP has expanded 32 times. Chinese economy today is 32 times larger than what it was in 1980. The subcontinent’s economy, if you combine the GDPs of mainland South Asia, is only eight times. So that’s how far South Asia has been left behind, and my view is that has happened because of policies which encourage nationalism rather than regionalism. And if you can somehow overcome that through political will, then I don’t think India has a long way to go, Ambassador. I think India can go pretty fast if it begins to act in a regional manner, rather than in promoting its national interest.
Now, coming to China, it’s very interesting what the Chinese are doing, and I look at it somewhat differently from what other people have looked at this One Road, One Belt project. My view is that China has decided, given the fact that their previous development was focused entirely on the east coast, that they have to develop their midwest and their western part.
And the only way they can do this is to usher in a new development paradigm, and in this paradigm, land-based commerce is going to be the most important element. I was in Astana three or four months ago, capital of Kazakhstan—and I didn’t know this before I went there—that they have an enormously large project somewhat similar to what they’re doing in Pakistan. So you have these two parallel roads going from China to the Arabian Sea through Pakistan and then several thousand miles north, through Kazakhstan.
I made the point in Astana that it is very important to connect these two by north-south linkages, and the Chinese said—there was a larger presentation of Chinese at this seminar—and they came to me and said, you’re making a very interesting point, but Afghanistan has to settle down. And this is very much in our plan, and one of them said to me, you know, the picture that we have is kind of a highway system that the United States has built in its own country, which connects various parts, and this is the way we see our role in our western part in Central Asia.
So my view is that this is a game changer. And I think India has to take the leadership to become a part of this game, rather than, you know, these things, how do you bypass Pakistan and so on and so forth, that’s a nationalistic response to what needs to be done. If—and I’m putting onus on India because India is 80 percent South Asia in terms of its economy and population and so on—and we know from other regional association, unless the anchor economy shows initiative, shows foresight, imagination, et cetera, et cetera, no regional project can take off. And India, therefore, has to take the lead.
If it does not, my fear is that this particular Chinese development paradigm will simply hive off Pakistan from South Asia. And within, my guess is, five to 10 years, South—Pakistan will become a much more central player in Central Asia, Western Asia, and so on, and turn us back towards South Asia. So that’s one take on what I think is happening at this point.
WEISMAN: Thank you.
Well, you don’t have to look at the—further than the American presidential campaign to see that the attitude in Washington is—toward China’s rise is in flux. And you all referenced the U.S. skepticism of the Asia infrastructure bank, and perhaps even of the entire Belt and Road initiative. I can’t be and don’t want to be a mouthpiece for Washington policymakers, but I wonder if they were here—and some veterans are in the audience—if they would wonder if you all are being naive about the possibilities of—and the implications of all of this.
But in particular, I just want to ask you quickly to assess, in this context, whether the U.S. is going about these developments in the right way, for example, by forming its own trading bloc with the Asia Pacific Region, that includes Japan, but at least for now, does not have plans to include China. Is this a constructive approach?
Why don’t you begin, Ms. Su, but let’s have, if you can, some quick answers so we can go to the floor.
SU: Well, I have to say that in China, there’s also suspicion about U.S. designs, like TPP. If you ask the Chinese people, how do you feel about TPP—well, I suppose if he knows what TPP is, he will speak in this way—well, it is kind of designed by the U.S. to try to exclude China from a kind of economic framework, and so United States is trying to lead the world over there for economic developments.
Well, I have to say that there has been suspicion between China and the United States. The problem may be that in recent years, China has been making a lot of progress, and the United States believes that everything China is trying to do is kind of counterbalanced against the U.S. approaches, like the AIIB is something to replace the World Bank and the Boao Forum, as you may know, is kind of an Asia Davos. And I have to say that the CICA is another thing like the Shangri-La Dialogue in China, and another framework brought up by China to make China’s friends circle.
So I don’t believe it is easy to eliminate all the suspicion or concerns from both sides, but what China is trying to do is to try to reach out to the other parts of the world, including the United States, to make the other countries believe that China is not trying to—driving out the United States out of Asia.
The first thing is the cooperation between the AIIB and the World Bank. I heard the president of AIIB talking about the cooperation months ago, so it is something that when the AIIB was in the process of establishment, the president was thinking about to try to cooperate with other institutions, like World Bank, in the world. And now, we have seen that they are moving together and we will witness the process possibly in May this year—in May or in June this year.
Another thing is about the Silk Road. I know that the United States also has a Silk Road; it’s called New Silk Road project. I remember years ago, when it was not called Silk Road, it was called Great Central Asia, or something like that. In China, there has been a lot of discussion on this project, saying that the United States was trying to do something really big in Central Asia, in South Asia, and trying to make it a strategic plan.
But after calculations, both in the academic field and in the official departments, what China believes that it might not be totally bad news for China. It is—development, it is something good for every party, every related party, and China would like to play some role in the—in the New Silk Road. And it is the same, like the Belt and Road initiative. It is a big plan, and China believes that if the United States would like to be part of it, it is good news.
I remember last year, a delegation from Department of State visited my institute, talking about the Belt and Road initiative. They asked a lot of questions about what we are trying to do. And the good thing is that we heard people from the delegation speaking clearly that the United States would think about how to link the two things together and to make cooperation or coordination between two big plans.
So this is a starting point, even though a lot of my colleagues said that it would be something really difficult to achieve, but to have a starting point and to make people think about it is something really good, not only for China, but also good for the United States.
So what China is trying to do recently is that China is trying to explain to the outside world that the development of China is good news, not bad news, to the other countries. And the belt road initiative, I have to say, that is not totally new ideas. We talk about China-Pakistan economic corridor. It is something that happened—already happened previously to the Belt and Road initiative. So the Belt and Road initiative is not the presidency’s idea that China would like to do some big plan and to change the world totally; it is based on something that already existed, already happening. And China is trying to coordinate every part of what we’re doing into a big plan that will try to benefit as much countries as possible.
Ambassador Prasad, is the—let’s see if we can do this quickly—is the U.S. approaching this the right way?
PRASAD: Well, it’s an unfair question to ask a non-American—(scattered laughter)—because—
WEISMAN: I know, Indian diplomats are very reluctant to criticize U.S. policy. (Scattered laughter.)
PRASAD: No, but before I come there and answer your question in a more direct way on TPP versus RCEP, I want to comment—to have a comment on that. I wanted to respond to Minister—Mr. Burki. He very rightly says the onus is on India, and the Indians now, I think, beyond—this is—there is a consensus in India between the present government and the former one that India has to lift its game, not just in South Asia, but Asia as a whole.
The problem is that the Indian plans right now are the second best plans because of Pakistan’s obduracy on not allowing overland access through Pakistan. And the Chinese project—no Chinese leader or Pakistani leader has told us that aside from the north-south axis of Kashgar to Gwadar, they are even conceding of, in theory, a possible east-west axis, which connects India to CAREC, the Central Asia Regional Economic Cooperation area, which is connected with China and with Pakistan, of course.
So our first preference, very clearly, would be to connect to Pakistan, with Pakistan, and inside, we don’t just have non-tariff measures, but Pakistan has this non-tariff area which is country-specific, which doesn’t allow India MFN treatment.
But on RCEP and TPP, I have this to say, that the preferred regional framework for USA is very clearly U.S. dominated and in the present context, seems to be geared against China. And RCEP is a response, but not just Chinese response, because it brings together the five biggest economies of Asia: China, India, Japan, South Korea and Australia. They account together for a third of global GDP. They account for 28 percent of merchandise trade and 23 percent of disembodied trading services. So it’s going to be a significant development.
And India is dramatically altering its foreign trade policies, from a mercantilist way of looking reducing tariffs. For example, in India, the average tariffs are 13 percent, which is in very few countries of the world. And there, India has accepted, in principal, two fundamental new principles, which are being proposed in RCEP. One is called ratcheting, and the other is called MFN-forward. Ratcheting means that if there are any domestic policy reforms, they would automatically, in terms of national treatment, apply for RCEP member states. And MFN-forward means that if India were to enter into, let’s say, a free-trade agreement with the United States, then whatever concessions India offers to the United States would automatically also apply to RCEP member countries. So there is great promise in this.
We have run into a very serious negotiating problem: the Chinese are, of course, backing our position, and the Australians on—but some others are not—of allowing Mode 3 and Mode 4 access. The ASEAN has a problem, because the ASEAN 10 are part of negotiations, they don’t have, in the new economic union that they have created, free trading services. India is asking that in return for reducing its very high tariffs, they must have access in the services area, both for Indian companies to establish themselves overseas, but also for professional and worker exports. And so that’s a stumbling block.
And the other slight stumbling block, which can be overcome, is on the IPRs issue, where India and China are on the same page. So this is interesting.
WEISMAN: Sir, Mr. Burki—
WEISMAN: What—just comment, but briefly, so we can go to the floor.
BURKI: Right. I think United States has made two very serious mistakes in the last few years. U.S., after all, was the founder of the Bretton Woods system, and—a system that it began to dominate after the collapse of Soviet Union in 1991. It should not have backtracked; it should have persevered, and that would have meant giving a greater share to China, India, and other large economies that were kept out of the Bretton Woods system in 1944-45, because they were very small in those days, and U.S. did not do this.
And when I was at the Bank—and you will remember this also—capital shares were being constantly—share of capital of various countries was constant—subject of constant debate between the Bank management and the large U.S.— and U.S. authorities. And U.S. was not prepared to give much. It gave a little bit, but not much.
Second big mistake that U.S. has made, I think, is to let WTO go. There was a meeting in Nairobi, I think, in November, where they decided to more or less kill WTO. Now, trade is a very difficult subject: you—all you have to do is to listen to Mr. Donald Trump to realize what kind of emotional reactions that trade can begin. Bretton Woods’ two institutions were created immediately after the conference. The third leg took 50 years to do—to create: WTO.
But then WTO was abandoned, and in its place, U.S. has taken the leadership to split the world into two very large trading blocs, and that is an effort to keep China out of both. And I think that’s a very big mistake, and what we are now seeing is government officials within the local—within the global system and U.S.—the point I was making about India regionally, I would make about the United States globally. U.S. is not declining; U.S. will remain the most important economic power in the world for a long time to come. But it has to behave as one, and that means providing leadership and not taking this easy way out, finish off WTO and we’ll do TPP and transatlantic pact, and so on and so forth. So I think mistakes have been made, and U.S. has to think long, rather than short.
Just one point about thinking long: She said that CPEC is something that developed quickly over the last couple of years; that’s not the case. I had a conversation with the Chinese prime minister in 1994, and he took me to his office, and he showed me the map of China. And he said, do you find anything strange about this map? And I had no idea what he was talking about, so I said, you tell me. And he said, we are the only large country that is landlocked on three sides. We are open only on one side. And we want to open to the West, and we want to go through Pakistan, we want to build a corridor, but Pakistan is taking no interest. If you know somebody senior in Pakistan, can you communicate this message to them?
So they—China thinks long. Unfortunately, sitting in the U.S. capital, I’m prepared to say the U.S. thinks short.
WEISMAN: OK, let’s go to questions.
Sir. And please introduce yourself—
Q: I’m Tim—
WEISMAN: —and if I may, ask that you ask a question.
Q: Tim Pietrai (sp).
Looking at intervening the region from the bottom up instead of from the top down, Dr. Fred Starr at SAIS, who studied the region, did a survey of truck drivers, the tremendous traffic already in the region. And their largest problem wasn’t terrorism or anything else, or bad roads, it was corruption, from governments largely, crossing borders.
Is there anything that is being done on a regional basis to not just lower tariffs, but to lower non-legal barriers to trade?
WEISMAN: Which of you would like to pick up on that?
BURKI: I can—I can start—
WEISMAN: None of the countries here are involved in corruption.
BURKI: I’d like to respond to Ambassador Prasad’s comment that—I know India’s been seeking access through Pakistan, Afghanistan, and so on, and Pakistan is not prepared to do that—my view is, never take a Pakistani no as the final answer. (Scattered laughter.) You have to press Pakistan. And if you do analysis—something I have done—Pakistan benefits much more from giving transit rights to India to Afghanistan than India does. And that message has to be given to Islamabad and Pakistan relentlessly.
I was troubled when I saw the agenda of the last two meetings between the senior leaders. Trade connectivity was not mentioned at all. It was all same thing, Kashmir—(inaudible)—and so on and so forth, and terrorism. On terrorism, there is an exaggerated view of what’s going on in the United States in Pakistan. Whenever I go to Pakistan, my American friends tell me, please, look after yourself. And I say to them that the probability of my being killed in a terrorist attack in Pakistan is insignificant compared to the probability of my dying on New Jersey Turnpike of a road accident. (Chuckles.) And so why there is so much play? And his answer was very interesting. He said, if you get killed in a terrorist attack, you will make it to the front page of New York Times with your picture. If it is death in a New Jersey Turnpike accident, your wife will have to pay to buy that space.
Because of connection between Islam and terrorism, there is a lot of focus on what’s happening in Pakistan. And the terrorists, small group of people, marginal to the society, know this. It’s very interesting that when there was this attack on a public park in Lahore, the terrorist who took responsibility said, we attacked Christians. Why did they say that? Because they knew if they say this, they would be on the front page of every newspaper. That day, I was traveling from Pakistan to the United States, and I stopped in Dubai and picked up a foreign newspaper: Every newspaper from Australia to the United States had that on the thing.
So let’s not get overwhelmed by this problem posed by terrorism. It is horrible. It will be solved. The Chinese have accepted the Pakistani offer to create a special unit of the Pakistan Army to provide them with a sense of protection, and they are doing this. And when I was in Pakistan last time, I talked to some of the folks who were doing this.
WEISMAN: I’m going to take the prerogative of going to the next question.
Q: Islam Siddiqui, SAIS senior adviser.
A comment and a question. I think—comment about the WTO. WTO, I must say, that is doing well; it’s the Doha, which was killed essentially in Nairobi and not the WTO. If you talk to Director General Azevêdo, he will say all of the other functions of WTO are going fine.
WEISMAN: I think you make a good point. Would you like to ask a question, though?
Q: Yes. I will. That’s my—question to Ambassador Prasad.
The tariffs in your region, not only in India, but in that general—is still, you can call, 13 percent average. But the—if you look at the (water ?) between the—(inaudible)—and applied trade, what’s being done to reduce the tariffs so that they come closer to applied?
PRASAD: Sorry, I didn’t get the question properly.
Q: So, tariffs, I think you said, are about 13 percent.
PRASAD: Oh, that part, OK.
Q: But do you have a—boundaries are still—that’s the—that’s the impasse in WTO negotiations.
PRASAD: Right, well, I’ll take advantage of your question to also answer the preceding one. Actually, India is engaged in a massive project in South Asia of building regional public goods, beginning with initiatives on trade, transportation, information, and communication technologies. Most important is energy, and the World Bank has carried out a study that 90 percent of the cooperative potential on energy lies with four northeastern states of Bhutan, Nepal, India, and Bangladesh, because India and Bangladesh are power hungry; there is a huge hydro potential in both Bhutan and Nepal.
And the last connectivity bit is people to people. So you can build infrastructure, but if you don’t have the superstructure, if you don’t have facilitation, if you have difficult borders, if borders are barriers, not bridges, then all of this is waste. So your question is a very valid one. We have to address that issue.
We have done—we have looked at an ADB Institute study that just came out two, three months ago, which says that India-ASEAN trade has galloped faster than India's trade with other parts of the world, in the same way that five, 10 years ago, the India-China trade galloped and multiplied 30 times in 10 years from 2 billion (dollars) in 2000 to 62 billion (dollars) in 2010. Now, the India-ASEAN trade and economic exchanges are valued at around $100 billion annually.
The study says that if the tariffs are going to be down as a result of RCEP, we also have FTAs with a number of ASEAN countries now, but if there is a 50 percent reduction in non-tariff measures and 15 percent improvement in reducing logistics cost, then the India-ASEAN exchanges can go up by a factor of five, which means that in terms of trade and investments, the gains would be five (hundred billion dollars) to $600 billion annually.
So I think the tariff issue will be sorted out if the negotiations in—under RCEP are concluded, let’s say, by the end of this year or the middle of next year.
WEISMAN: We’ll go here.
Q: Thank you. Hani Findakly, Clinton Group.
I just want to follow up on Shahid Burki’s last comment about the U.S. moving away from multilateralism. The fact is that the U.S. was the biggest beneficiary of multilateralism—Marshall Plan, Bretton Woods system and WTO—and yet in the last 20, 25 years, the U.S. has moved into more regionalism and more bilateral agreements. And despite the fact that, neither politically nor economically, have these agreements have shown any evidence of moving the needles and toes of the participants’ economic growth and in terms of the—in terms of the trajectory growth.
So the question I have is, given the fact that there is little political value for these agreements, and little—and little economic value for participants, why do you think the U.S. has moved away from that? And what should be done to move that dialogue back into multilateralism?
WEISMAN: Well—(chuckles)—I don’t know that we want to get into a long discussion of why the WTO and the Doha Round failed. Would anyone like to voice a view about whether the U.S. was to blame for killing off the multilateralism, or should we—would you like to address it quickly?
BURKI: Well, very quickly.
I wasn’t saying that the U.S. is solely responsible for killing multilateralism, but U.S. has been shortsighted. I think it was a mistake for U.S. not to give some serious consideration to the concerns of countries, like India, that were legitimately saying that all the previous rounds were focused on lowering tariffs between developed and developing countries and among developed countries. And—but certain sensitive sectors in the United States and Japan and Europe were protected through all kinds of means, subsidies and so on—agriculture is a case in point. India was pressing very hard for that, and nobody in the United States was prepared to give into that. And that, I think, ultimately, the Indians and I guess other people walked out.
Your point that a lot of things are still happening in WTO, that’s absolutely right. I wasn’t saying that WTO, as an organization, is dead; I’m saying that WTO, in order to keep moving, had to have success in Doha Round, and that has been killed.
WEISMAN: OK, we’ll go—
SU: May I—may I?
WEISMAN: Yes, please.
SU: From China’s perspective, that there is some driving force behind the changes of the U.S. behavior, one thing we believe that is the United States is trying to concentrate on important things. Well, in recent years in China, we still believed that the United States is the only superpower in the world, the most powerful country in the world, and China cannot compete against the United States in many fields, like economic, military, political strengths, everything. But at the same time, we noticed that there has been some adjustment of the U.S. behavior. One thing is that United States cannot spread so much as it did in previous years, like in Asia—
SU: Spread its strengths.
SU: It’s not that powerful.
SU: Like in Asia Pacific, the United States rely on its allies to burden the responsibility. Well, it is a sign that the United States is focusing on some important things and like its friends or partners to help on the other things. For the economic framework, I believe that the political will is really important. Look at TPP: What I believe is that behind the TPP, there is very strong political will from the United States and other partners. If behind the WTO, there is such strong political will, I don’t believe it will be that.
WEISMAN: Do you think that when the United States says, oh, the TPP is setting a framework that China eventually—would welcome China’s participation in the TPP to expand it, to include China, do you take at face value?
SU: Well, I have to say that it is positive news for China, because at the very beginning, my understanding is that the United (States) obviously excluded China out of this framework. Now, the United States is talking in a more polite way.
SU: It’s that—not shut the door, but you need to meet the standards to enter into this new club. So what China’s trying to do is to try to study what the United States is trying to do in this circle, and how you perform the regulations and the all kinds of standards like the other countries, and then China will decide whether to go into it or not. And I have to say that in recent years, there has been discussion in China, widely divided, one party saying that, well, it is not a good club to join in, so let’s just make something up ourselves. And the other party is that, we need to prepare for it; it is the trend of the economic development; one day, China needs to meet this kind of standards.
But up to now, I don’t see any clear decision from the upper level on this point.
There are two questions in the back. Why don’t you ask both of them—we’ll take both of them and then wind up.
MS. : Great, we can start here.
Q: I’m Marshall Bouton, Asia Society Policy Institute.
I guess I would like to address the question particularly to Mr. Burki and Ms. Su. And you both spoke about, respectively, the onus being on India and South Asia to improve the environment for regional cooperation. Ms. Su spoke that—basically said that China’s objective is fundamentally the same as that.
I would like to understand more about Pakistan’s point of view. It seemed to me you dismissed any responsibility on Pakistan’s part a shade very, very rapidly, and yet, Pakistan has really been the reluctant partner in the Indian treaties to open the east-west corridor.
And Ms. Su, I would particularly be interested in why China would invest such a very large sum in a north-south corridor without indicating its own preferences for a greater integration of South Asia, if that is, in fact, China’s objective?
WEISMAN: And let’s go to the gentleman there, and if you could ask a succinct question.
Q: Sure. My name is Alexander Slater, and I work at the World Bank Group.
The panel is called Integrating the Region and Bridging Differences, but I didn’t hear anything from the panelists on how to bridge differences that are non-economic, especially social differences, issues of inclusion, of—based on social groups, both within countries and sort of social groups that sit across borders. I’d love to hear more about ideas that you have for bridging those differences in order to integrate the region.
WEISMAN: OK, well, we can take 30 seconds for that, I’m sure. (Laughter.)
Go ahead, let’s go down in this direction, and then we’ll—and these will be the concluding remarks.
BURKI: OK, I’m here to talk—ask any person about where Pakistan stands on a lot of issues. It’s not a fair question in the sense that Pakistan is very confused at this point, where it wants to go, where it is, and where does it want to end up. And the reason for this is that the country is developing critically—and thank God, it is developing critically. It is introducing a system of democracy which—at least to my way of reading—is unique with the western part of the Muslim world. There is no other country which is making the kind of critical progress that Pakistan is making. I used to say Turkey is another one, but Turkey is slipping back, whereas Pakistan is going forward.
And in that kind of situation, the Pakistanis really haven’t had the time to think about the kind of issues that I’m talking about. That’s why my view is that the countries where there is capacity to do thinking on a continuous basis—New Delhi is a case in point—should press Pakistan, should take the initiative, and be more forgiving and be more aggressive in a—in a different sense of the word to get Pakistan on board on some of the things that we are talking about.
WEISMAN: Ms. Su, and of course, the question about the north-south corridor—I mean, the common interests of China and Pakistan have really existed throughout—starting after World War II and beginning of the Cold War. So you can see that there’s still this concern that it’s a north-south integration, and not east-west. It’s an interesting question.
SU: Well, have you ever read the roadmap released by the Chinese government last year in March, talking about Belt and Road initiative? Well, it was a very long one, but answering a lot of questions about Belt and Road initiative.
The roadmap, it is a document, it is based upon the research and preparation of a lot of departments inside China, including the MFA, the foreign ministry. And it is said that the Belt and Road initiative is partly for China’s external cooperation, but for a large part, it is for domestic development.
If you have been to China, you will know that the eastern part and the western part are quite different from each other. For the western part, the Chinese government has been investing many energies for years to try to improve people’s living conditions to boost economic development, but I suppose that we haven’t achieved what we had planned.
So the Belt and Road initiative is a comprehensive design for every part of China to try to play its role and to reach its achievement in the future. And for the western parts, I believe that the cooperation with the other countries like Pakistan is a way to boost economic cooperation and to boost the domestic development of the western part.
So it is a larger part of the consideration from the Chinese government. It is not totally for strategic interests or just for friendship with our old friends. So this is my understanding.
And for the Belt and Road initiative—it is a multilateral design; it is not only build one belt and many roads, and it is something that’s beyond the infrastructure construction, like China would like to reduce the barrier of trade, like to boost people-to-people exchange. That is the thing that—try to narrow the gap.
WEISMAN: Ambassador Prasad, make some final comments. And I’m afraid the last question was so interesting and open-ended, we’ll not be able to do it justice, but why don’t you wind things up?
PRASAD: Well, I’ll address the completely last question on inclusive growth.
You see, India’s pursuit of the inclusive aspect of growth brings that into a kind of confrontation with the rest of the global community, because China has brought about inclusiveness through a different method—which was partly forced, which we can’t do; we have to work through democratic processes.
And this is the main stumbling block, which the United States did not understand when we took a line on the livelihood of the issue related to agriculture. Once U.S. negotiators understood this, there was a tradeoff immediately, and after quiet negotiations between what we were seeking and trade facilitation.
But the larger question that you raise is a very relevant one. Of course, the Asians accuse the World Bank of turning away from infrastructure, which is why ADB and AIIB have a certain traction in the imagination of Asians, because World Bank now does mostly social stuff. But that social aspect is important. Climate change, for example, affects lives, and it affects three major things: it affects water, it affects energy, and it affects food.
And in South Asia, for example, including China—because three of the most massive rivers of South Asia originate in China: the Indus, the Sutlej that flow westward into Pakistan through India, and the Brahmaputra, which takes a curve around the Arakans and flows into Bangladesh —we haven’t even talked—started talking about management of the Himalayan ecosystem. There is a big slow shift, an unmistakable shift in the monsoons; the glaciers are melting. It’s going to affect not just South Asian economies, but potentially the global economy. We are not talking of joint river managements; we don’t share river data around the—between upper riparians and lower riparians.
And so I’m ending on a sober note that we have—there is this great global shift from the north and the west to the south and the east, which explains, a little bit, U.S. diffidence and its turning away from its own genius in building international institutions, including the World Bank. But I think we all have to work cooperatively in these very difficult areas, some of which I’m afraid we haven’t addressed.
WEISMAN: That’s a beautiful summary. Thank you very much. I think we can all agree that this was a great panel. Asia is in desperate need of infrastructure; how we get there is one of the great challenges that we all face. And if I may so—say so, we can probably all agree that the U.S. might be doing a better job in building international institutions. Maybe some people in the audience will disagree.
But a panel like this really contributes to everybody’s understanding toward those goals. And I want to thank you very much, and thank the Council for inviting me to moderate today. And meeting adjourned.
PRASAD: Thank you. (Applause.)