WTO - Regional Integr

8/2/2019 WTO - Regional Integr

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The WTO and RegionalEconomic Integrations

Dr. Aminul Islam AkandaB. Sc. (Agr. Econ), M. S. (Agr. Econ)

Ph. D. (Agr. & Resource Econ.)


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The 20th to the 21st Century

Worldwide economicdepression

First World War

Second world war

Cold war and divide between communist-socialist-capitalist approach to economic

development

Marshall Plan for rebuildingEurope in 1947


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The 20th to the 21st Century

Role of the Agency for InternationalDevelopment to foster economic growth in theunderdeveloped world

Financial and industrial development assistance torebuild Japan

Greater demand for U.S. goodsand services

Greater cooperation among tradingnations through reduction of tariffs and

trade barriers via GATT

GATT replaced by the WTO andnew era of free trade


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How different is the WTO from the GATT? The General Agreement on Tariffs and Trade (GATT), established in

1947, was a provisional agreement, while the World TradeOrganization (WTO), established in 1995, is a full-fledgedinternational organization.

The GATT applied only to trade of goods, while the WTO includedrules on trade of services in the General Agreement on Trade inServices (GATS) and on international application of property rights in

the Trade Related Intellectual Property Rights (TRIPS). The WTO has a new dispute settlement legal procedure designed to

reach judgments in a much shorter time.

WTO prohibits the imposition of:

Export Subsidies(except for agricultural products)

Import quotas(except when imports threaten market disruption)

Tariffs(any new tariff or increase in a tariff must be offset by a reductionsin other tariffs to compensate the affected exporting countries)


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WTO and Preferential Trading Agreements

The WTO follows the principle of non-discrimination called the

Most Favored Nation (MFN) and National Treatment (NT). MFN does not mean that some of the countries will get more favors.

But it means that every country will be treated as the most favoredwithout discrimination as to enter foreign markets.

NT principle treats the foreign and local products equally. Foreignproducts once enter in local market, should be treated no lessfavorably then like or directly competitive to domestic products.

Regional Trade Agreement is a departure from MFN, if

Regional agreements discriminates between members of RTA vis--

vis other third countries

Facilitate trade between constituent territories Not to raise barriers to the trade of others with such territories

Nations can establish preferential trading agreements under whichthey lower tariffs and integrate regionally with respect to each other


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Levels of Economic Integrations Free Trade Area (FTA)

All barriers to trade of goods/services are removed No internal tariffs among members, but each country imposes its

own external tariffs to the third country.

Customs Union No internal tariffs

Adopts common external tariff policy for other countries Common Market

No internal tariffs and common external tariffs

Allows factors of production to mover freely among members

Economic Union Common market plus common currency

Requires common currency, harmonization of tax rates, commonmonetary & fiscal policy

Political Union

Central political system coordinates economic & foreign policies.


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Regional Integrations in force

Around the World As of 8th July 2005 FTAs : 117

Customs Unions : 11

Economic Union : 1

Evolution of RTAs


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Few Major FTAs in the World

North American Free Trade Agreement [NAFTA]

Canada, Mexico & USA

European Free Trade Agreement [EFTA]

25 states of EC, Iceland, Liechtenstein and Norway

Southern African Development Community [SADC]

Angola, Botswana, Congo, Lesotho, Madagascar, Malawi,Mauritius, Mozambique, Namibia, South Africa, Swaziland,Tanzania, Zambia and Zimbabwe

Closer Economic Relations [CER]

Australia, New Zealand

European Commission [EC] has entered into separateagreements with many countries

Lebanon, South Africa, Morocco, Israel, Mexico, Syria, etc.


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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-regional tensions

Economic Integration not foreseen until 1990s South Asian Preferential Trade Agreement (SAPTA)

Established in 1993, reduce the barriers to trade

South Asian Free Trade Area (SAFTA)

Started in 2004, 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 economiccooperation, largely due to India - Pakistan rivalries.


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SAFTA: Road Map of South Asian Economic Integration

PreferentialTradin

g

A

rrangement(SAPT

A)

FreeTradeAr

ea

(SAFT

A)

Custom

s

Union

Common

Mark

et

Econom

ic

Union

Internal Tariff Reduction

Internal Tariff Removal

Common External Tariff

Internal Capital andLabour Mobility

Common Currency/ Economic Policies


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The European Union (EU) is an economic and political union of 27

member states, located primarily in Europe After 2nd world war- Rebuilt of Europe in terms of economically,

politically and culturally

End of War powerless and economic crisis US helped Europethrough Marshall plan

OEEC was formed in 1947 then OCED in 1961

1948 Benelux ( Belgium, Netherlands and Luxemburg)

1948 Western European Union ( UK, France, Belgium,Netherlands and Luxemburg)

1949 NATO (USA, Canada and 10 Western European countries) 1957 European Economic Community (EEC): (Belgium, France,

Germany, Italy, Netherlands and Luxemburg)

1973 UK, Ireland and Denmark Joined in EEC

Expanded in 1980s and 1990s and still expanding.

European Union


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Member States pre-Enlargement


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Enlargement - New Members


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Institutions: Economic Union

Single MarketThe single market is all about bringing down barriers and simplifyingexisting rules to enable everyone in the EU - individuals, consumersand businesses - to make the most of the opportunities offered tothem by having direct access to 480 million people of EU countries

European Central Bank and Common Currency

The Euro has been introduced in:Belgium, Germany, Greece, Spain, France, Ireland, Italy,Luxembourg, Netherlands, Austria, Portugal, Slovenia and Finland.

Harmonized Tax systemThrough partial harmonization of indirect taxes (value-added taxand excise duties), the EU has reached a considerable degree offiscal neutrality.


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Institutions: Political union European Council

Heads of State & President of European Commission

Deals with common foreign and securitypolicy issues

sit twice a year

European Commission Brussels, Belgium

Proposing, implementing & monitoring compliance - EU laws

Commissioners appointed by each country 5 year terms

Commissioners regulate the competition and M&A

Council of the European Union

Ultimate controlling authority approves proposed laws

1 representative from each state varies with topic

Use majority voting rules rather than unanimous agreement

European Parliament Strasbourg, France

Directly elected by population 732 members

Debates legislation Consultative body

Court of Justice, Luxembourg

Supreme appeals court for EU law

1 judge from each state required to act as independent officials


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Some Key Questions

Does South Asia offer adequate pre-conditions forestablishing and sustaining a preferential tradingarrangement?

Will the SAFTA regime create unequivocal gains for allits members? Would it be better to promote multilateralnon-discriminatory trade liberalization in this region?

Does a preferential arrangement in the like of SAPTA orSAFTA promote unilateral trade liberalization?

How far it is for South Asia be an economic union?

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WTO - Regional Integr