Preferential Trade Agreements in South Asia and SAARC

Title: Preferential Trade Agreements in South Asia and SAARC

Author: Niharika Tiwari

ISBN: 978-93-82395-53-9

Language: English

Binding: Hard Cover

Category: Political Science/South Asian Studies

About the Author

Niharika Tiwari has done her Graduation and Post Graduation from Banaras Hindu University (BHU). She has attained her M.Phil degree from Jawaharlal Nehru University (JNU), New Delhi and pursuing her PhD from JNU. She has been awarded NET–JRF by UGC in Political Science & NET in Women Studies. Currently she is working as an Assistant Professor at Kalindi College, University of Delhi.

About the Book:

Economic regionalism has emerged as a reality in today’s liberalized world. The origin of this phenomenon can be traced back to the past when initiatives were taken to constitute the European Economic Community. The first wave of regionalism started when the Rome Treaty of 1957 came into existence for establishing the European Common Market (ECM). Since then, it is flourishing in almost every part of the world. The European Union (EU), North Atlantic Free Trade Area (NAFTA), Association of South East Asian Nations (ASEAN), South Asia Free Trade Agreement (SAFTA), MERCOSUR etc. are examples of the worldwide phenomenon of growing regional economic integration. Access to a larger market and diversifying production has been a long – standing rationale for regional arrangements particularly among developing countries. Even developed countries adopt regionalism in order to enhance their trade and consequently, their trade related benefits.

The idea of economic regionalism implies the groupings of the countries, more often than not having geographical proximity which makes preferential trading arrangements possible. L. Alan Winters defines regionalism loosely as any policy designed to reduce trade barriers between a subset of countries regardless of whether those countries are actually contiguous or even close to each other.

The phenomenon of regional economic integration has acquired new dimensions since 1980s when scholars began talking about “new regionalism” which is a response to those problems which old regionalism was either not aware of, or was not designed to address. Old regionalism allowed for a kind of shallow regional integration because of the protective nature of the economies. New regionalism as explained by Wilfred J. Ethier, (1998) has two main characteristics. Firstly, it focuses on deep integration and secondly, it is the link between developed and developing countries. On these two bases new regionalism is different from the pre-1980s old regionalism. The emergence of European Union (EU) as an economic union is the example of deeper integration. Apart from this, the Association of South East Asian Nations (ASEAN) is also trying to move towards deeper integration in Asia. The examples of the second characteristic are the economic assistance programme pursued by EU for developing countries, and its active interest in signing the FTAs with the developing countries like India. Similarly, United States of America has also signed Preferential Trade Agreement (PTAs) with the countries of other regions.

The phenomenon of regionalism has both its supporters as well as its opponents. Supporters say that it provides experience to the countries to enter into multilateral trade liberalization. Whereas, the scholars who oppose regionalism say that it can handicap the world trade liberalization system by initiating trade diversion.

Preferential Trade Agreements (PTAs) are agreements among a set of countries involving preferential treatment of bilateral trade between any two or more than two parties relative to their trade with the rest of the world. There are also many other terms used to describe PTAs such as Regional Trading arrangements (RTAs), Regional Integration Agreement (RIA), and Regional Economic Integration (REI). PTAs have a unique place in the General Agreement on Trade and Tariff / World Trade Organization.

South Asia embarked on regionalism in 1985 with the establishment of, SAARC the regional body comprising seven countries India, Pakistan, Sri-Lanka, Nepal, Bhutan, Bangladesh, and Maldives. In 2005, Afghanistan also became the member of this block. With 1.5 billion people, south Asia has the largest population in all the existing trading blocks in the world. The idea of the establishment of the SAARC was put forward by Zia-ur-Rahman the then president of Bangladesh in order to make the countries of this region prosperous through mutual co-operation particularly in the economic sphere. This idea is echoed in the SAARC charter as it says the main objective of the SAARC is “to accelerate economic growth, social progress and cultural development in the region and to provide all individuals the opportunity to live with dignity and to realize their full potential”.