Regional trading arrangements, Macroeconomics

Regional Trading Arrangements:

You have seen in earlier Units that India has been playing an active role in WTO discussions. While Hong Kong WTO Ministerial has saved and kept the spirit of multilateralism alive, there have nevertheless been apprehensions first during Uruguay Round of Negotiations and subsequently during various Ministerial levels on the very viability of WTO as an institution of negotiations. However, one fall out of the stalled negotiations of Doha Round has been the emergence of RTAs. Whether these RTAs are building or stumbling blocks for multilateralism so far remains a moot point?

The relationship between regionalism, multilateralism (including globalization) is an important issue of contemporary interest.  For one thing, the global trading system has seen a sharp increase in regional trade agreements (RTAs) and presently over 300 RTAs have been notified to the WTO. About 90 percent of these RTAs are in the form of free trade areas (FTAs) and 10 percent customs union. As you learned in Unit 15, a free trade area involves abolition of tariffs while customs union imposes common external tariff in addition to abolition of tariffs among member countries. RTAs can be trade creating or trade diverting and can lead to welfare improvement or deterioration respectively.  Arguments and counter-arguments exist whether unilateral tariff reductions are superior or inferior to granting regional preferential treatment. Some observers believe that proliferation of RTAs threatens or undermines the multilateral system while others opine that RTAs provide a push to global liberalization in the present times.

The government of India signed various trade agreements with different countries of the world to enhance its trade volume. These trade agreements are of various forms like free trade agreements, preferential trade agreements etc.

Free trade agreements aim at creating free trade zones by eliminating or reducing various tariffs and duties for imports of various contacting countries. Preferential trade agreements also extend such facilities to limited number of products. Sometimes trade agreements were made to give MFN status to contacting countries.  India's trade agreement with Mongolia is one such case.

In some cases the contacting countries sign framework agreements to start negotiation for such trade agreements.  Often these trade agreements are supplemented with early harvesting programmer, which puts selected commodities on a 'fast track' for liberalization. Table 17.8 gives the list of India's trade agreements with different countries and regional trading blocs after 1990.  India has been a member of SAARC Preferential Trading Agreement (now South Asian Free Trade Area from 1 January 2006). Besides, India is member of Indian Ocean Rim Association of Regional Cooperation Agreement, BIMST-EC (Bangladesh, India, Myanmar, Sri Lanka, and Thailand Economic Cooperation). India has also entered bilateral free trade agreements with Sri Lanka, Thailand and a Framework Agreement for Comprehensive Economic Cooperation between India and ASEAN members.

Posted Date: 11/9/2012 4:42:56 AM | Location : United States

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