Description
Economics Regional Trade Blocks
Regional Trade Blocks
Concept of Economic Integration Regional economic integration is a new and striking idea for the expansion of foreign trade among developing countries. Regional economic integration implies the creation of the most desirable structure of inter-regional economy through the formation of a customs union or of a free, trade within the region and deliberately introducing all desirable elements of coordination and unification. Generally, such an economic integration would have to passthrough three distinct but inter-dependent stages of cooperation, co-ordination and finally, of full integration. So, economic integration may be identified as liberalization of trade as well as factor movements.
Types of Economic Integration Economic integration may take any one or a combination of the following forms:
1)
Economic Union: It is the case of absolute integration or complete economic integration of a group of countries. There is thus free mobility of factors, resources and commodities in such a union. An economic union could be also referred to as a common market. 2) A Customs Union: It involves common external tarrif against nonmember countries, while within the union there is unrestricted trade. From the customs union gradually an economic union is evolved. 3) A free trade area: It involves the abolition of all trade restrictions within the group, but each individual country is free to maintain any sort of relation with the non member countries. Hence such countries have no common external tariffs to maintain. 4) Sectoral of Partial Integration: It refers to the establishment of a common market in a given products. 5) Prefrential Trading: It is a sort of trading technique involving various measures for promoting trade among members of the group. Generally agreements are entered into to ensure to each contracting party a favoured treatment as compared to others.
6)
Long Term Trade Contract: It is a type of bi lateral agreement, either in a single product or many products of trade between any two nations. The minimum duration for this contract is one year. Eg : India once entered into a contract with japan to supply thyemiron ore for a period of five years.
Advantages of a Regional Grouping The healthy of Regional groupism are as follows:
?
Since the regional common market provides a much larger market than the domestic market, the economies of scale, both internal as well as external, become possible with the widened size of the market. ? The large market so created would permit a high degree of sophistication and specialization of products. ? Apart from increase in the volume of the total trade, there may be a favourable change in the price and cost structure of the product. ? This may facilitate the realization of optimum allocation of resources and thus lead to efficiency in production. Therefore it could be said that , as a factor of regional development of the less developed countries, a regional common market is far superior to a small national market. Regional Grouping in Less Developed Countries (LDC). The beginning of the grouping of the less developed countries has been already made. The Central American Common Market was the first of this kind. The main aim of creating Regional grouping in LDC’s was the creation of customs union with no external tariffs and the establishment of a free trade in all products originating in these countries. The provision was also made for an economic tie-up.
However, not much good has come out of these Latin American countries due to their slow economic progress, primitive methods, scarcities, etc. South Asian Association For Regional Co-operation (SAARC). In recent years, the global economy is witnessing certain dynamic and unprecented changes. Regional economic integration is a prominent feature. It is the youngest grouping among the seven countries, namely, India, Pakistan, Maldives, Sri Lanka, Bangladesh, Bhutan and Nepal.
The following are the main objectives of SAARC:
1.
To promote the socio-economics welfare and cultural development of the people in the region. 2. To achieve the goal of collective self-reliance. 3. To encourage active collaboration in the economic social, technical and scientific among the grouping nations. 4. To strengthen over-all co-operation and harmonious economic and political relations among the grouping nations of the SAARC. 5. To facilitate optimum utilization of human and material resources. 6. To develop free regional trade 7. To stimulate investment flow and accelerate pace of economic development. There are evidences to show that there is ample scope for extending trade and economic relations. These countries compete for trade with
other countries. Eg: India and Bangladesh compete for jute in the internatonal market while, India, Sri Lanka and Pakistan compete for readymade garments. The ESCAP The Economic and Social Commission for Asia and the Pacific(ESCAP) is the worlds widest block, with 48 countries and 10 accociate members, five non regional countries i.e. France , Nether lands, U.K., Russian Federation, and the USA are also its’ members. The ESCAP has contributed to regional cooperation in a big way. It has created an infrastructure for integrated communications, it has also established the Transfer of Technology for facilitating the transfer of technology among its member countries. The action plan on infrastructure development contained the following main proposals: 1. upgrading information and reform of the administration of infrastructure facilities. 2. modification of consumption pattern. 3. effective planning, prioritization and investment infrastructure projects. 4. participation of the private sectors. 5. mobilization and allocation of public sector resources. 6. human resource development (H.R.D.) to be integrated into the infrastructure development process. 7. poverty alleviation Similarly the action plans at regional levels include: -technical assistance -data collection -comparative studies -identification of projects -human resource of development
-inter agency cooperation, etc This is expected to service as a blue print for regional cooperation and growth strategy for the group in the coming years. The member countries including India of the ESCAP would have to invest in people for their health education and social upliftment besides huge investment for infrastructural development. Gulf Cooperation Council (GCC) The GCC represents an economic integration among Kuwait, Oman, Qutar, Saudi Arabia and the U.A.E. in the middle east. It was basically formed for the political and sratergic reasons. Since these countries have limited economic base, gains from trade creation activity is limited in scope. European Economic Area (EEA) The EEA came into existence on the new year day of 1994. it is the largest economic to block ranging from the Article to the Mediterranean capturing the market constituting 372 million people. It is a furtherance of European integration with the EFTA countries seeking close trading like with the EU. Austria, Finland, Iceland, Norway & Sweden, among the EFTA members have joined the EEA. Two EFTA members Liechtenstein and Switzerland how ever did not join the group.
Association of South East Asian Nations (ASEAN) The origin of ASEAN lies in Association of South East Asia (ASA) proposed by Mlayan prime minister Tunku Abdul Rehman in 1959. the ASA was short lived because of the territorial and political disputes among the member countries. Concrete efforts of regional economic cooperation were further revived by ASEAN decleration of 8th August 1967 which states that one of the aims of ASEAN is “ to accelerate economic growth in the regions through joint endevour in the sprit of equality and partnership in order to strengthen the foundation for a prosperous and peaceful community in south east Asian nations.” The ASEAN includes Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, and since mid 1995 Vietnam. The group was extended to include Myanmar. The ASEAN area and population is greater than the 15 nation European union. It is the most long standing and successful regional grouping for economic integration. The recent move of ASEAN free trade area and regional forum has shown enthusiasm towards global integration. Infact the forign trade is the lifeblood of ASEAN economies both as a “Rent for surplus” and as a “Source for need “. The macro economic balancing and market driven trade sectors are ASEAN’s windows to the Global economy. Containment of inflation and sustained higher growth rates are regarded as important parameters to economic prosperity and integration of the ASEAN economies. The ASEAN group has undergone a long transition period of accumulation which has sewed as a pathway to economic transformation and progress. New vitas and hopes were bought in
by the Bangkok summit Declaration. ASEAN’s main promoters were the market forces. SAARC must learn this lesson from the ASEAN experience. The ASEAN by the large encourages global approaches the international economic issues and problems. It has sewed complementary rather than contradictory to globalization process towards the new century.
doc_615826357.doc
Economics Regional Trade Blocks
Regional Trade Blocks
Concept of Economic Integration Regional economic integration is a new and striking idea for the expansion of foreign trade among developing countries. Regional economic integration implies the creation of the most desirable structure of inter-regional economy through the formation of a customs union or of a free, trade within the region and deliberately introducing all desirable elements of coordination and unification. Generally, such an economic integration would have to passthrough three distinct but inter-dependent stages of cooperation, co-ordination and finally, of full integration. So, economic integration may be identified as liberalization of trade as well as factor movements.
Types of Economic Integration Economic integration may take any one or a combination of the following forms:
1)
Economic Union: It is the case of absolute integration or complete economic integration of a group of countries. There is thus free mobility of factors, resources and commodities in such a union. An economic union could be also referred to as a common market. 2) A Customs Union: It involves common external tarrif against nonmember countries, while within the union there is unrestricted trade. From the customs union gradually an economic union is evolved. 3) A free trade area: It involves the abolition of all trade restrictions within the group, but each individual country is free to maintain any sort of relation with the non member countries. Hence such countries have no common external tariffs to maintain. 4) Sectoral of Partial Integration: It refers to the establishment of a common market in a given products. 5) Prefrential Trading: It is a sort of trading technique involving various measures for promoting trade among members of the group. Generally agreements are entered into to ensure to each contracting party a favoured treatment as compared to others.
6)
Long Term Trade Contract: It is a type of bi lateral agreement, either in a single product or many products of trade between any two nations. The minimum duration for this contract is one year. Eg : India once entered into a contract with japan to supply thyemiron ore for a period of five years.
Advantages of a Regional Grouping The healthy of Regional groupism are as follows:
?
Since the regional common market provides a much larger market than the domestic market, the economies of scale, both internal as well as external, become possible with the widened size of the market. ? The large market so created would permit a high degree of sophistication and specialization of products. ? Apart from increase in the volume of the total trade, there may be a favourable change in the price and cost structure of the product. ? This may facilitate the realization of optimum allocation of resources and thus lead to efficiency in production. Therefore it could be said that , as a factor of regional development of the less developed countries, a regional common market is far superior to a small national market. Regional Grouping in Less Developed Countries (LDC). The beginning of the grouping of the less developed countries has been already made. The Central American Common Market was the first of this kind. The main aim of creating Regional grouping in LDC’s was the creation of customs union with no external tariffs and the establishment of a free trade in all products originating in these countries. The provision was also made for an economic tie-up.
However, not much good has come out of these Latin American countries due to their slow economic progress, primitive methods, scarcities, etc. South Asian Association For Regional Co-operation (SAARC). In recent years, the global economy is witnessing certain dynamic and unprecented changes. Regional economic integration is a prominent feature. It is the youngest grouping among the seven countries, namely, India, Pakistan, Maldives, Sri Lanka, Bangladesh, Bhutan and Nepal.
The following are the main objectives of SAARC:
1.
To promote the socio-economics welfare and cultural development of the people in the region. 2. To achieve the goal of collective self-reliance. 3. To encourage active collaboration in the economic social, technical and scientific among the grouping nations. 4. To strengthen over-all co-operation and harmonious economic and political relations among the grouping nations of the SAARC. 5. To facilitate optimum utilization of human and material resources. 6. To develop free regional trade 7. To stimulate investment flow and accelerate pace of economic development. There are evidences to show that there is ample scope for extending trade and economic relations. These countries compete for trade with
other countries. Eg: India and Bangladesh compete for jute in the internatonal market while, India, Sri Lanka and Pakistan compete for readymade garments. The ESCAP The Economic and Social Commission for Asia and the Pacific(ESCAP) is the worlds widest block, with 48 countries and 10 accociate members, five non regional countries i.e. France , Nether lands, U.K., Russian Federation, and the USA are also its’ members. The ESCAP has contributed to regional cooperation in a big way. It has created an infrastructure for integrated communications, it has also established the Transfer of Technology for facilitating the transfer of technology among its member countries. The action plan on infrastructure development contained the following main proposals: 1. upgrading information and reform of the administration of infrastructure facilities. 2. modification of consumption pattern. 3. effective planning, prioritization and investment infrastructure projects. 4. participation of the private sectors. 5. mobilization and allocation of public sector resources. 6. human resource development (H.R.D.) to be integrated into the infrastructure development process. 7. poverty alleviation Similarly the action plans at regional levels include: -technical assistance -data collection -comparative studies -identification of projects -human resource of development
-inter agency cooperation, etc This is expected to service as a blue print for regional cooperation and growth strategy for the group in the coming years. The member countries including India of the ESCAP would have to invest in people for their health education and social upliftment besides huge investment for infrastructural development. Gulf Cooperation Council (GCC) The GCC represents an economic integration among Kuwait, Oman, Qutar, Saudi Arabia and the U.A.E. in the middle east. It was basically formed for the political and sratergic reasons. Since these countries have limited economic base, gains from trade creation activity is limited in scope. European Economic Area (EEA) The EEA came into existence on the new year day of 1994. it is the largest economic to block ranging from the Article to the Mediterranean capturing the market constituting 372 million people. It is a furtherance of European integration with the EFTA countries seeking close trading like with the EU. Austria, Finland, Iceland, Norway & Sweden, among the EFTA members have joined the EEA. Two EFTA members Liechtenstein and Switzerland how ever did not join the group.
Association of South East Asian Nations (ASEAN) The origin of ASEAN lies in Association of South East Asia (ASA) proposed by Mlayan prime minister Tunku Abdul Rehman in 1959. the ASA was short lived because of the territorial and political disputes among the member countries. Concrete efforts of regional economic cooperation were further revived by ASEAN decleration of 8th August 1967 which states that one of the aims of ASEAN is “ to accelerate economic growth in the regions through joint endevour in the sprit of equality and partnership in order to strengthen the foundation for a prosperous and peaceful community in south east Asian nations.” The ASEAN includes Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, and since mid 1995 Vietnam. The group was extended to include Myanmar. The ASEAN area and population is greater than the 15 nation European union. It is the most long standing and successful regional grouping for economic integration. The recent move of ASEAN free trade area and regional forum has shown enthusiasm towards global integration. Infact the forign trade is the lifeblood of ASEAN economies both as a “Rent for surplus” and as a “Source for need “. The macro economic balancing and market driven trade sectors are ASEAN’s windows to the Global economy. Containment of inflation and sustained higher growth rates are regarded as important parameters to economic prosperity and integration of the ASEAN economies. The ASEAN group has undergone a long transition period of accumulation which has sewed as a pathway to economic transformation and progress. New vitas and hopes were bought in
by the Bangkok summit Declaration. ASEAN’s main promoters were the market forces. SAARC must learn this lesson from the ASEAN experience. The ASEAN by the large encourages global approaches the international economic issues and problems. It has sewed complementary rather than contradictory to globalization process towards the new century.
doc_615826357.doc