aparna
TRANSCRIPT
SAARC in Asian Regionalism
Aparna SawhneyCentre for International Trade and Development, JNU
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
Format of presentation
I. Looking at Asia and SAARC from without - vis a vis the multilateral trading systems and other regional blocs
II. Looking at SAARC from within- Indian perspective (drawing on Sawhney & Kumar 2007)
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
I. Asia and SAARC from without
Perspective from a world bound by a myriad of bilateral, plurilateral and multilateral agreements.
Asia emerging as a major hub in world commerce – indicated by rising share of merchandise and services trade
(Data source: International Trade Statistics 2006, WTO)
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
Regional Shares in World Merchandise Exports, 1990, 2000, 2005
0
10
20
30
40
50
60
1990 2000 2005
Asia
N America
Europe
Africa
Middle East
South-CentralAmerica
CIS
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
Regional Shares in Commercial Services Exports, 1990, 2000, 2005
0
10
20
30
40
50
60
1990 2000 2005
Asia
North America
Europe
Africa
Middle East
South CentralAmerciaCIS
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
In particular, South Asia’s share in global trade is a little over 1%
Share in global merchandise exports increased from 0.9% in 1995 to 1.2% in 2005
Share in global commercial services exports increased from 0.87% in 1995 to 2.5% in 2005
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
Regionalism and production network across countries is increasingly reflected in the preferential rules of origin governing world trade:
- E.g. South Asia is recognized as a bloc in Europe’s GSP “regional cumulation” - applies to SAARC member countries (EC regulation 881/2003)
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
Convergence of interests of Asian developing countries at the WTO negotiations
=> potential for developing Asia to negotiate as a group in future
E.g. China, India, Pakistan, Indonesia, Philippines, Thailand are members of the G-20, the alliance that changed the axis of Doha negotiations.
E.g. 1998 Shrimp-Turtle dispute – India, Malaysia, Pakistan & Thailand joint complainants against the US
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
The world recognizes the potential strategic significance of a South Asian bloc
- keen participatory interest of the US, South Korea and EU in SAARC (to be observers, China & Japan became observers in 2005)
But in the regionalism race, SAARC is a veritable tortoise compared to the EU
- latter looked beyond political differences + promoted cooperation in target economic sectors….
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
Intra-regional Merchandise Exports, 2005(as % share of each region’s total exports)
Europe 73.2
North America 55.8
Asia 51.2
SAARC 6.2*
South-Central America 24.3
Commonwealth of Independent States 18.1
Middle East 10.1
Africa* Computed from IMF DOTS data
8.9
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
II SAARC from within
Motivation for greater integration in S Asia – economic and non-economic gains (strategic, dynamic, ecological)
SAARC economies have been pursuing liberalization & looking towards greater Asia through bilateral FTAs
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
Low economic interaction among SAARC Members. Even after accounting for informal trade, total intraregional trade constitutes less than 10% of S. Asia’s total external trade;
+ direct investment among SAARC partner countries is negligible.
Despite slow progress of SAARC, launching of SAPTA and SAFTA in 1995 & 2006 resp. are political breakthroughs
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
Low level of intra-regional trade stems from
Restrictions contained in the trade agreements SAPTA & SAFTA (e.g. limited product coverage, existence of negative list, restrictive rules of origin and destination)
Difficult business environment – e.g. India is ranked 139th in the world “ease of trading across borders” compared to China at 38th.
All liberalization/ FTAs will fail to boost economic activities if conducting business is difficult.
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
Perceived asymmetry benefits among smaller SAARC partners – fear of deindustrialization
Size asymmetry akin to Gulliver and Lilliputs but the SAARC story lacks the symbiotic relationship on which Gulliver and Lilliputans thrived.
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
Country Share of SAARC Regional GDP 2005, (US$ 995.82 billion)
Bhutan0%
Pakistan11%
Maldives0%
Nepal1%
India79%
Sri Lanka2%
Afghanistan1%
Bangladesh6%
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
Services sector not covered in current trade agreements.
Yet in Asia, the South Asian sub-region has a relatively larger share in services export compared to merchandise
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
Country Shares in Asia’s exports of merchandise and commercial services, 2005
Merchandise X Services X
Asia 100.0% 100.0%
China 27.4 14.1
Japan 21.4 20.5
Korea, Rep. of 10.2 8.4
South Asia/ SAARC 4.2 11.6
India 3.4 10.7
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
For 22 years, India’s strategy in South Asian integration has been driven by her perception of gains, and based on “reciprocity”, despite her size advantage…
Positive experience in Sri Lanka-India FTA should encourage India to make a more aggressive move in promoting integration in South Asia
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
India’s perception of SAARC would change if it takes into account:
its own economic dynamism and size of its market
urgent need to alleviate persistent poverty (47% of South Asians live on less than $1/day) and combat the growing terrorist threat (development of the entire region necessary to improve living conditions – inclusive growth.)
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
scope for greater FDI for the SAARC countries with a more stable and business conducive South Asia.
all SAARC economies have been pursuing liberalization (minimizes risk of trade diversion)
dynamic trade gains & overall positive experience with bilateral FTA with Sri Lanka
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
Increased efficiency in provision of public goods and servicesConsidering South Asia as an integrated geo-ecological system – cooperative approach in the management of energy, water, etc is optimal.
Connectivity payoffs with rest of AsiaA regionally integrated South Asian space will help realize trans-Asian connectivity
ITC-ICRIER, 28th March 2007Aparna Sawhney, CITD, JNU
Concluding Remarks Greater integration among SAARC
countries critical for integration with greater Asia (connectivity aspect)
SAARC nations have been looking outwards –evident from bilateral FTAs – for greater flow of trade, commerce and investment across Asia.
Opportunity for India to demonstrate commitment to regional cooperation as incoming chair of SAARC