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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