Title: Regional Cooperation and Economic Development
1 Regional Trading Arrangements
RTAs can be used as a tool for
Cheaper imports domestic prices in control
Better quality products at competitive price
Better market access
Investments flow - JVs
Coverage of Services
Mutual recognition of standards laboratories
Trade facilitation Harmonisation of Customs procedures etc.
Creating an area of infrastructure connections in particular transport and economic connections
Stimulation of the economic growth in the regional and local aspect providing a sustainable development of the regions
Strenthening the spatial and social competitiveness in comparison to the neighbouring areas
Development of interregional cooperation in the scope of higher education development planning and promotion of regional initiatives
Promotion and development of intermodal sea-land and land transport connections
Modernization of the transport infrastructure promotion of more environment-friendly transport
Development of sea and land tourism
3 Free Trade Areas
To eliminate completely quantitative trade restrictions and customs tariffs against each others goods
Member countries retain the sovereign power to decide the trade policies to be imposed on non-members
4 Customs Union
Similar to free trade area
Adopt uniform import tariffs and common quota restrictions to non-members
Weakened the ability of member countries to determine national trade policies independently
5 Common Markets
Similar to customs union
Plus free movement of factors of production
A significant reduction of national sovereignty
An example of a common market is the EEC which is composed of Belgium Denmark France Germany Ireland Italy Luxemburg Neitherlands and the UK.
6 Economic Unions
Similar to common markets
Harmonization of monetary fiscal and social policies
A single common policy as an essential prerequisite for the effective functioning of the union
An example of an economic union is the Benelux which is the economic union formed by Belgium the Netherlands and Luxembourg.
Infact Belgium Netherlands and Luxemburg formed a customs union in as early as 1948 and they became an economic union in 1960.
7 The different forms of RTAs Represent different degrees of Economic integration. They start from the lowest degree Of economic integration (i.e. a Preferential trading club ) and go Through progressively higher degrees until the most complete Form of economic integration (i.e.economic union). 8
The theory of Customs Union
Basically deals with two concepts
These two concepts were first put forth by
Jacob Viner in early 1950s .
9 Trade Creation The formation of a customs Union Causes some products which were formally produced domestically to be imported from other partner countries-the tariffs on such imports are eliminated. Since there is pro- duction shift from a high cost domestic producer to a lower cost producer in a partner country-it is trade Creation. 10 Trade Diversion Customs Union also causes some Products which were formerly imported from the rest of the world to Imported from the partner country-Thanks to the newly formed geogra phical tariff discrimination. Here the Shift in production is from a lower Cost producer in the rest of the world To a higher cost producer in a partner Country-trade diversion. 11 The fundamental notion behind these Concepts is that trade transfers goods from a high cost region to a low Cost region. Thus trade increases welfare by reducing costs or alternatively by increasing world income. 12 Motivations for RTAs
1. To maintain market access
2. To open new markets
3. To attract foreign direct investments (FDI)
4. To benefit from economies of scale
13 The Regional Context
South Asian countries are exchanging tariff preferences under SAPTA.
Bangladesh India and Sri Lanka are members of the Bangkok Agreement.
South Asian countries are also exchanging preferences under GSTP (Global System of Trade Preferences).
Bangladesh India and Sri Lanka are also members of other economic groupings like BIMST-EC IOR-ARC.
14 South Asian Regional Co operation
SAARC was set up as a forum for regional cooperation by adoption of its Charter in its first Summit in Dhaka in December 1985.
SAPTA was signed in 1993 and entered into force in December 1995.
SAPTA covers areas of tariff para tariff non tariff and direct trade measures.
It provides special and favourable treatment to the LDCs.
The First Round was largely symbolic.
In the Second Round a combination of Sectoral and product by product approach was adopted.
In all India gave tariff concessions on 997 tariff lines during the two Rounds.
16 The SAPTA negotiations
Three Rounds of trade negotiations under SAPTA have been completed. However the results are fairly modest.
Upto the Third Round which concluded in November 1998 India has granted concessions on 2565 tariff lines (6 digit HS) to the other countries. However most of these concessions are to the LDCs.
Exchange of concessions with Sri Lanka and Pakistan was limited to a few items.
Fourth Round of negotiations has started.
17 Free Trade in South Asia
The Male Summit in May 1997 called for achievement of the South Asian Free Trade Area (SAFTA) by 2001 AD.
This was modified to signing of the SAFTA Agreement by 2001 AD in the Colombo Summit in July 1998.
At the 11th SAARC Summit the Heads of Nations agreed to revise the date for putting the SAFTA Treaty in place by end of 2002.
The first meeting of Committee of Experts was held in Kathmandu in July 1999 wherein the Terms of Reference for the drafting of the SAFTA treaty were finalised.
While the SAFTA Treaty is to be put in place by 2001 no time frame has yet been established for achieving SAFTA.
Thus achievement of a Free Trade Area remains an open ended objective.
19 BANGKOK AGREEMENT (BA)
The Bangkok Agreement was signed in July 1975 for contributing to expansion in trade through exchange of tariff concessions among developing country members of the ESCAP region.
The Agreement is currently operational between Bangladesh India Republic of Korea and Sri Lanka.
Chinas accession to the Bangkok Agreement was finalised in the meeting of the Standing Committee of the Bangkok Agreement in April 2000.
The Third Round of BA has begun.
With the entry of China the B.A. will gain momentum as now two major countries with huge population are the members with a market size of more than 2.2 billion .
20 Generalised System Of Preferences
Unilateral and generalised tariff concessions given by the developed countries to the developing countries under the GSP Scheme.
Important to Bangladesh are GSP given by USA EU etc.
Rules of Origin to be fulfilled.
Graduation process defined for no concessions.
21 BIMST- EC
The Initiative was taken by Thailand in 1994 and with the admission of Myanmar in December 1997 it was named as Bangladesh India Myanmar Sri Lanka Thailand Economic Cooperation (BIMST-EC) to serve as a bridge linking ASEAN and SAARC.
6 areas of Trade and Investment Technology Transportation and Communication Energy Tourism and Fisheries were identified for cooperation
The focus for economic cooperation is in the areas of Trade Facilitation Promotion and Liberalization Promotion of Foreign Investment Promotion of Scientific and Technological exchanges Promotion of Tourism Promotion of Movement of Natural persons and Service providers Development of Infrastructure and Human Resources
The Overviews of ESCAP
ESCAPs initiatives in Regional Cooperation
23 What is ESCAP 24 About - UN ESCAP
The regional development arm of the United Nations for the Asia-Pacific region
62 Governments - from Turkey in the west to Kiribati in the east and from the Russian Federation in the north to New Zealand in the south
The largest United Nations body serving the Asia-Pacific region
25 About - UN ESCAP
Serves as the regional hub promoting cooperation among member States to achieve inclusive and sustainable economic and social development in the Asia-Pacific region with the use of ICTs.
Supports member States through strategic analysis policy options and technical cooperation to address key development challenges.
Implements innovative solutions for region-wide economic prosperity poverty reduction social progress and environmental sustainability.
Support ICT policy development promote ICT applications ICT4D
Regional Cooperation Poverty Reduction Managing Globalization Emerging Social Issues 26 ESCAPs Programme of Work
In May 2008 ESCAP reorganized its work under 8 committees
1. Macroeconomic Policy Poverty Reduction and Inclusive Development
2. Trade and Investment
3. Transport and Tourism
4. Environment and Development
5. Information and Communications
6. Disaster Risk Reduction
7. Social Development
Policy analysis Advisory Services Technical Cooperation Projects Capacity Building 27 Regional cooperation and integration and poverty reduction
Improved cross-border physical connectivity provides greater access for developing countries to each others and external markets.
FDI inflows can have a positive impact on poverty reduction by fuelling economic growth.
Maintaining regional macroeconomic and financial stability is crucial to sustain robust growth for poverty reduction. The 19971998 Asian financial crisis was testimony to this.
By working together developing countries can deal with the adverse impact of cross-border issues e.g. outbreak of communicable diseases environmental problems and other transnational issues.
28 ADBs Mission and the Role of Regional Cooperation and Integration in Poverty Reduction POVERTY REDUCTION FOUR PILLARS OF REGIONAL COOPERATION AND INTEGRATION OVERACHING MISSION/ OBJECTIVE Regional and Subregional Economic Cooperation Regional Cooperation and Integration Trade and Investment Cooperation and Integration Monetary and Financial Cooperation and Integration Individual Country Programs Regional Public Goods Pro-Poor Sustainable Economic Growth Inclusive Social Development Good Governance CORE AREAS OF INTERVENTION 29 Importance of bilateral trade cooperation
In fact in a bid to ensure sustainable national progress and security every country is or ought to be very active to harness their own development. But attainment of this goal and objective is quite often impossible for an individual country alone without the collaborative help and collective effort of other country.
Multilateral plurilateral or regional arrangements and cooperation can yield best result in this regard. But very often negotiations on multilateral plurilateral or regional basis are of complexed nature and time consuming. It requires harmonization of lot of divergent and conflicting interests which are very difficult to address.
On the other hand negotiation between two countries and accommodating each others different interests is much more easy to handle. As a result both the country can early harvest their economic complementarities and competitive advantages for their shared gains and benefits.
This very prospect of reaping early benefits and possibility of exploiting collective potentialities is now encouraging many countries to enter into bilateral pact or understanding even within a regional arrangement. The is why Trade Agreement at bilateral level is on surge in recent time in international arena.
31 The Evolution of SAPTA to SAFTA
8 December 1985 SAARC was established with formal adoption of its charter by seven members.
December 1988 Fourth SAARC Summit Meeting held in Islamabad Pakistan gave a direction to identify areas of economic cooperation towards formation of SAPTA.
11 April 1993 SAARC Preferential Trading Arrangement (SAPTA) was signed.
30 April 1995 SAPTA Consolidated National Schedules of concession was approved by Fifth Session of the SAARC Council of Ministry in New Delhi India.
6 January 2004 SAFTA was signed in Islamabad Pakistan
July 2006 SAFTA came into force.
32 General Benefits of augmented bilateral trade cooperation
Greater market access of each others products
Attainment of more economies of scale
More FDI attraction in both the countries
Promotion of bilateral investment
Facilitation of joint venture as well as technology transfer
Greater consumer satisfaction with low price index
Better exploitation of each others economic complementarities
33 Conspicuous Benefits of enhanced trade cooperation
Bangladesh has been granted duty and quota free market access by EU Norway Canada Japan Australia and New Zealand and also preferential access by many other developed and higher developing countries.
Bangladesh enjoys a strategically advantageous geographic location linking SAARC and ASEAN at the middle.
The countries can exploit their economic complementarities.
34 Economic Cooperation and Integration
Stages from Economic Cooperation to Economic Integration
Harmonization to adjust trade policies to minimize discrimination
Free Trade Area (FTA) to remove tariffs between the partners without adopting a common tariff policy
Customs Union (CU) FTA adopting a common tariff policy against third countries
Common Market (CM) CU removing restrictions on factor movement
Economic Union (EU) CM coordinating their policies on fiscal monetary etc.
Economic Integration Extreme type of Economic Cooperation when policy matters and their implementation is governed by some supra-national agency
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