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  • 1. SAARC in Asian Regionalism Aparna Sawhney Centre for International Trade and Development, JNU
  • 2. Format of presentationI. Looking at Asia and SAARC from without - vis a vis the multilateral trading systems and other regional blocsII. Looking at SAARC from within - Indian perspective (drawing on Sawhney & Kumar 2007)ITC-ICRIER, 28th March 2007 Aparna Sawhney, CITD, JNU
  • 3. I. Asia and SAARC from withoutPerspective 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 2007 Aparna Sawhney, CITD, JNU
  • 4. Regional Shares in World MerchandiseExports, 1990, 2000, 200560 Asia50 N America40 Europe30 Africa20 Middle East10 South-Central America 0 CIS 1990 2000 2005ITC-ICRIER, 28th March 2007 Aparna Sawhney, CITD, JNU
  • 5. Regional Shares in Commercial ServicesExports, 1990, 2000, 200560 Asia50 North America40 Europe30 Africa20 Middle East10 South Central Amercia 0 CIS 1990 2000 2005ITC-ICRIER, 28th March 2007 Aparna Sawhney, CITD, JNU
  • 6.  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 2005ITC-ICRIER, 28th March 2007 Aparna Sawhney, CITD, JNU
  • 7.  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 2007 Aparna Sawhney, CITD, JNU
  • 8.  Convergence of interests of Asian developing countries at the WTO negotiations=> potential for developing Asia to negotiate as a group in futureE.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 2007 Aparna Sawhney, CITD, JNU
  • 9.  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 2007 Aparna Sawhney, CITD, JNU
  • 10. Intra-regional Merchandise Exports, 2005(as % share of each region’s total exports)Europe 73.2North America 55.8Asia 51.2 SAARC 6.2*South-Central America 24.3Commonwealth of Independent States 18.1Middle East 10.1Africa 8.9* Computed from IMF DOTS dataITC-ICRIER, 28th March 2007 Aparna Sawhney, CITD, JNU
  • 11. 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 FTAsITC-ICRIER, 28th March 2007 Aparna Sawhney, CITD, JNU
  • 12.  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 breakthroughsITC-ICRIER, 28th March 2007 Aparna Sawhney, CITD, JNU
  • 13. 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 2007 Aparna Sawhney, CITD, JNU
  • 14.  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 2007 Aparna Sawhney, CITD, JNU
  • 15. Afghanistan Pakistan 1% Bangladesh 11% Sri Lanka 6% 2% Nepal 1% Bhutan Maldives 0% 0% India 79% Country Share of SAARC Regional GDP 2005, (US$ 995.82 billion)ITC-ICRIER, 28th March 2007 Aparna Sawhney, CITD, JNU
  • 16.  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 merchandiseITC-ICRIER, 28th March 2007 Aparna Sawhney, CITD, JNU
  • 17. Country Shares in Asia’s exports ofmerchandise and commercial services,2005 Merchandise X Services XAsia 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 10.7ITC-ICRIER, 28th March 2007 Aparna Sawhney, CITD, JNU
  • 18. 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 AsiaITC-ICRIER, 28th March 2007 Aparna Sawhney, CITD, JNU
  • 19. 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 2007 Aparna Sawhney, CITD, JNU
  • 20.  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 LankaITC-ICRIER, 28th March 2007 Aparna Sawhney, CITD, JNU
  • 21.  Increased efficiency in provision of public goods and services Considering South Asia as an integrated geo- ecological system – cooperative approach in the management of energy, water, etc is optimal. Connectivity payoffs with rest of Asia A regionally integrated South Asian space will help realize trans-Asian connectivityITC-ICRIER, 28th March 2007 Aparna Sawhney, CITD, JNU
  • 22. 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 SAARCITC-ICRIER, 28th March 2007 Aparna Sawhney, CITD, JNU