Regional Cooperation and Economic Development

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Regional Trading Arrangements

• RTAs can be used as a tool for
• Material management
• 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.

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• 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

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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

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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

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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.

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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.

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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).
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• The theory of Customs Union
• Basically deals with two concepts
• Trade Creation
• Trade Diversion
• These two concepts were first put forth by
• Jacob Viner in early 1950s .

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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.
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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.
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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.
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Motivations for RTAs

• Market factors
• 1. To maintain market access
• 2. To open new markets
• 3. To attract foreign direct investments (FDI)
• 4. To benefit from economies of scale

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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.

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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.

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SAPTA

• 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.

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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.

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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.

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Cont

• 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.

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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 .

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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.

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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

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• The Overviews of ESCAP
• ESCAPs initiatives in Regional Cooperation

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What is ESCAP ?
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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

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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
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ESCAP's 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
• Technology
• 6. Disaster Risk Reduction
• 7. Social Development
• 8. Statistics

Policy analysis
Advisory Services
Technical Cooperation Projects
Capacity Building
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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.

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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
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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.

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• 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.

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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.

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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

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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.

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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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