Rethinking Regionalism in South Asia

1
Rethinking Regionalism in South Asia Prospects
Strategic Implications beyond SAFTA
Mustafa Moinuddin Doctoral Research
Student Yokohama National University
2
Introduction

• Proliferation of preferential trading
  arrangements worldwide over the last two decades
• Why PTAs?
• - Promotes economic growth.
• - Stabilizing factor in interstate relations.
• The rapid proliferation of preferential trading
  arrangements all around the world comprising
  almost all the countries of the world created a
  sense in the South Asian region that it is
  falling behind. Moreover, the creation of FTAs in
  the Americas, EU and South Asias neighbors
  generated adverse trade diversion effects on
  South Asia. In response to this, the leaders of
  the region sought to form preferential
  arrangements of their own.

3
Purpose of the thesis

• To make an in-depth study on the effects of
  preferential trading arrangement in South Asia in
  the SAFTA regime in particular, and regional
  cooperation within SAARC in general.
• In order to fully reap the benefits of regional
  integration in South Asia, the study intends to
  take into account the criteria that go beyond
  traditional trade effects, recognizing that the
  complex nature of regional relations.
• The study will provide a future strategy and
  policy agenda to enhance the effectiveness of
  regionalism is South Asia.

4
Regionalism in South Asia

• Geopolitical Context Conflict as a major feature
• Continuous degradation of inter-state relations
• Difficulties in coping up with conflict
  situations
• South Asian Association for Reg. Cooperation
• Victim of distrust, suspicion and intra-reg.
  tensions
• Economic Integration not foreseen until 1990s
• South Asian Free Trade Area (SAFTA)
• Governed by the principles of WTO
• Small in terms of economic size and share of
  world exports
• High level of protectionism, restrictive measures
• Low level of implementation impeding meaningful
  economic cooperation, largely due to rivalries
  between India and Pakistan.

5
SAFTA Road Map of South Asian Economic
Integration
Common Currency / Economic Policies
Customs Union
Common Market
Economic Union
Internal Capital and Labour Mobility
Free Trade Area (SAFTA)
Preferential Trading Arrangement (SAPTA)
Common External Tariff
Internal Tariff Removal
Internal Tariff Reduction
6
Studies on Regional Integration in South Asia

• Qualitative studies available, but very few
  quantitative ones
• Debates
• Non-discriminatory or preferential?
• Size geographic design of the integration areas
• Different levels of regional integration
• Neo-economic benefits of regional integration

7
Some Key Questions

• Does South Asia offer adequate pre-conditions for
  establishing and sustaining a preferential
  trading arrangement?
• Will the SAFTA regime create unequivocal gains
  for all its members? Would it be better to
  promote multilateral non-discriminatory trade
  liberalization in this region?
• Does a preferential arrangement in the like of
  SAPTA or SAFTA promote unilateral trade
  liberalization?

8
Hypothesis of the Study

• Hypothesis 1
• Regional integration in South Asia under SAFTA
  will produce unequivocal (even if depending on
  membership overall small) trade benefits for
  the member states as a whole. From the
  perspective of individual countries, however,
  SAFTA will prove beneficial for some countries,
  while harmful for some others.

9
Hypothesis of the Study Continued

• Hypothesis 2 (a)
• A strong and motivated leadership within the
  countries of the South Asia is required to play
  the pivotal role in stimulating an efficient and
  beneficial integration in the region. By virtue
  of its size both in a geographical and trade
  context, India has to be the key player to offer
  leadership in the region.
• Hypothesis 2 (b)
• Integration efforts in South Asia have to be
  evaluated in terms of the neo-economic benefits.

10
Hypothesis of the Study Continued

• Hypothesis 3
• A new model of regional integration is needed to
  address the dynamic situation in South Asia. In
  determining the steps and strategies towards
  regional co-operation and integration, the
  complex layers of interstate relations in the
  region have to be taken into account.

11
Research Methodology

• Literature Review
• To ensure that my work is done on a well-informed
  basis concerning the state of art of the
  literature both in terms of fundamental results
  and methodologies applied. It will also provide
  me with a clearer understanding of possibilities
  to draw analogies from studies on regional
  integration in other parts of the world.

12
Research Methodology
continued

• Empirical Research Concerting Economic Benefits
  of Integration
• Several multivariate analyses using
  cross-sectional time series data will be
  conducted to test the hypotheses. Information
  collected from the literature review will provide
  a background of this empirical research.
  Additional data from different countries of the
  region will be collected to conduct the analyses.
• The empirical research will be done only on South
  Asia
• Access to particular sources of information and
  relevant data is required for the purpose of the
  analyses. Various trade-related databases will be
  used intensively. The data will be analyzed using
  the Global Trade Analysis Project (GTAP)
  software.

13
Research Methodology
continued

• Development of the New Model
• A careful use of analogies will be the first
  step in developing the new model as mentioned
  in Hypothesis 3. Patterns used in other regions
  will be closely examined. The findings will be
  embedded in the South Asian context. Considering
  the unique situation of South Asia, the findings
  will need to be adapted to be suitable for this
  region. I will need to develop a solid
  understanding of the dominant factors in
  interstate dialogues within the region.
  Identifying and de-linking of issues that have
  the potential to block co-operation and dynamics
  of diplomacy will be important elements while
  developing the new model.

14
Concluding Remarks

• Hostility and volatile political situation halted
  the advance of regional integration in South Asia
  in a number of times, and stood in the way of
  making timely progress. Regionalism never worked
  properly among the South Asian nations. From the
  very beginning SAARC has been a victim of
  distrust, suspicion and intra-regional tensions.
• SAFTA is the outcome of years of work amid
  hostility and uncertainty. It has, however, been
  a political decision rather than an economic one.
  Economists in general are do not see very
  encouraging prospects for such preferential
  arrangement, some even believes that it would be
  harmful for the region. Moreover, considering the
  real-politik of the region, there are strong
  indications that SAFTA is likely to embrace
  similar fate.

15
Concluding Remarks


Continued

• Yet, SAFTA has become a reality from which none
  of the member countries seems to have any
  intention to roll back. Even if the prospects of
  a PTA in South Asia were positive, the mere
  endorsement of the SAFTA Agreement would not
  guarantee its success. The challenges and tasks
  ahead for the SAFTA members are therefore
  difficult and numerous.
• The proposed study intends to provide a more
  pragmatic view on SAFTA and its strategic
  implications

16
Thank you Moinuddin.Mustafa_at_gmail.com