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Possibility of regional trading arrangements in Asia

Friday, December 01, 2017
By Ranajoy Sen

Formation of Regional Trading Agreement will be the much-needed corollary

A crucial ingredient of India’s economic diplomacy was its “Look East” policy. For about the past two years, it is being subjected to relatively greater focus. The terminology has been revised as “Act East” policy. It entails greater economic interactions with the countries of South-East Asia. Forming an effective Regional Trading Arrangement (RTA) as a potential outcome would be the obvious hoped-for corollary.   

To inject more dynamism to this initiative, India is striving to enhance interaction with major South-East Asian nations, than before. The ten major countries of that region have a common platform to explore opportunities for greater economic, political, and security cooperation: it is titled the Association of South-East Asian Nations (ASEAN). India’s presence at ASEAN summits have by now become the norm. That has increased the scope for India-ASEAN dialogues, and has given way to India-ASEAN summits.

Inputs of seven N-East states vital
India intends to emphasize its North-Eastern region as the principal conduit with ASEAN nations. The primary and inevitable reason for so doing is geopolitics. That region shares a border with Myanmar, which is a constituent member of the ASEAN bloc. Surely, as a realization of this, the government of India has announced that inputs from the seven north-eastern states of India would be viewed in earnest in the forthcoming India-ASEAN commemorative summit, scheduled to be held in New Delhi in January, 2018. It would also commemorate India’s twenty-five years of India’s dialogue with ASEAN. Leaders of ASEAN countries would also be the guests of honour at Indian Republic Day ceremony.

India’s External Affairs minister, Sushma Swaraj, has had a meeting with the Governors of the seven North-Eastern states and the Lieutenant General of Andaman & Nicobar Islands. The perspectives constituting the summary of this meeting are slated to be included in the parleys of the to-be-held India-ASEAN summit.

Is this an elementary actuation of endeavours for a workable regional economic or trading arrangement among the concerned countries? The indications for so doing are there. Nevertheless, at this stage, dialogues about forming an economic bloc would possibly be far-fetched. But, a thoughtful initiative could definitely be made. That is hopefully in the ruminations of some among those entrusted to manage this worthy yet extensive effort of creating an accountable, transparent avenue of the creation of greater economic opportunities and potential uplift of economic conditions. Striving for a Regional Trading Arrangement (RTA) or something broadly akin to it is definitely a worthwhile endeavour.

Any RTA is formed by a group of countries, typically on a regional basis. Within its periphery, constituent member nations agree to impose lower barriers to certain commodities of trade within the group than during trade with non-member nations. Sovereign domestic policies are strictly kept outside its parameters; but, certain preferential trade policies for group members are undertaken. At present, hardly anything of that sort would be in the deliberations between India and ASEAN nations. Nevertheless, the India-ASEAN summit would do well to think of gradually creating conditions to enable towards symbiotic trade policies - at least for some commodities.

Indian Prime Minister (PM) Narendra Modi attended the thirty-first ASEAN summit at Manila. He is the first Indian PM after Indira Gandhi to visit the capital of Philippines. During the course of the ASEAN summit, he held meetings individually with the current political rulers of other countries as also attended group meetings. Additionally, Modi parleyed with US President Donald Trump, Chinese Premiere Li Keqiang, and the Japanese PM Shinzo Abe. From it all, the largest common factor to emanate was the scope for regional economic cooperation alongside the attendant issue of ensuring absolute security and mutual respect across the region.

However, a crucially noted aspect from the sidelines of the summit was the reiteration from the platform of Regional Comprehensive Economic Partnership (RCEP) of which India is also a participant.

It enumerated the necessity for the facilitation of free, beneficial-for-all, trade in the Asia-Pacific region. Here again, the declaration should assist preparations for increased, hitch-free, accountable trade in the region. But, a Free Trade Area (FTA) is a variant of the RTA paradigm, where member nations agree to remove all tariff and non-tariff barriers among themselves and yet maintains its own set of trade restrictions against outsiders.

FTA simply beyond reach
Given the increasing political and economic friction between India and China – both participants of the RCEP – and China’s often antagonistic positions with other member states of the RCEP such as Japan and Brunei, an FTA, at this time, is simply beyond reach. But, the declaration itself is an attestation to the realization among enthusiasts of the RCEP that, if workable yardsticks could be created and fruitful work gotten to be done, the advantages are bound to surpass disadvantages. For India, the first step towards such an objective is by injecting momentum to India-ASEAN dialogues.

Notwithstanding the discernible benefits to be accrued from well functioning RTA structures, formation of any viable RTA in the Asian continent would invite acute circumspection. RTA has taken effect in the North American and European continents. The North American Free Trade Area (NAFTA) - comprising Canada, the United States and Mexico - and the European Union (EU) - with a membership of 28 nations of Europe – bear operational testimony to RTA’s. Talks and opportunities are on for an earnest appraisal for the creation of a Free Trade Area of the Americas (FTAA): it involves 34 nations of North and South America, barring Cuba, and is an attempt to widen the scope of the acceptable North American economic interdependence. But, NAFTA and EU have their own share of dilemmas. The litany of troubles which had plagued EU recently, is yet to pass over completely.

However, these should not be dampeners for working for greater economic cooperation between India and other South-East Asian countries. It should be seen as an opportunity to feed strengths and starve challenges in economic cooperation among countries. A workable regional economic bloc would benefit all concerned.

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