Economic integration is a process of harmonising trade and investment-related policies and reducing/withdrawing tariff and other non-tariff trade and investment barriers between two or more countries. The 1947 General Agreement on Tariffs and Trade (GATT) is the mother of almost all multilateral trade agreements made under the World Trade Organization (WTO) of 1995 to manage and foster international trade around the world.
Beside the WTO arrangements, a long list of bilateral and regional free trade agreements has provided momentum to the economic integration movement. The European Union (EU), formed in 1993, could be termed the most successful integration arrangement of the globe. The North American Free Trade Agreement (NAFTA, 1994) is another successful platform to facilitate free trade between the USA, Canada and Mexico. The NAFTA supported more than three million American jobs creation and US trade with NAFTA partners has unlocked opportunity for millions of Americans by supporting made-in-America jobs and exports.
Similarly a good number of economic integration initiatives were taken by the Asian countries. For example, the Asia-Pacific Trade Agreement (APTA, 1976), the ASEAN Free Trade Area (AFTA, 1993), the South Asian Free Trade Area (SAFTA, 2006), the Economic Cooperation Organization Trade Agreement (ECOTA, 2008), the Commonwealth of Independent States Free Trade Area (CIS FTA, 2012), etc. at regional as well as bilateral levels. A positive impact of all these initiative is visible today. For example, inter-regional trade between Asian countries rose from 53 per cent in 2001 to 57 per cent in 2015. Similarly, Asian countries are the world's top destination for foreign direct investment (FDI), attracting $527 billion in 2015. In terms of financial integration Asia's cross-border portfolio investment and bank claims increased from $3.0 trillion in 2001 to $11.0 trillion in 2015, migration from Asia increased between 2010 and 2015 although the increase was less within the region than what was directed outside Asia.
A recent study shows that SAFTA is indeed a net trade-creating bloc. The Asian, European, and North American regions responded affirmatively to the SAFTA bloc. As a result intra-bloc exports are stimulated on an average by 23 per cent because of SAFTA, while intra-bloc imports by 25 per cent. A time series analysis from 1981 to 2010 shows that, the regional export share of India, Nepal and Sri Lanka increased under SAFTA regime but regional export share of Bangladesh is decreasing day by day. Bangladesh used to export 8.81 per cent of its total export to SAARC states in 1981 - 1985 periods whereas currently it is exporting only 2.55 per cent of its total export to those countries. That means Bangladesh has not been able to utilise the export benefits of SAFTA accordingly.
On the other hand, the share of Bangladesh's regional import is increasing day by day. Bangladesh used to import only 3.36 per cent of its total imports from South Asian countries during 1981-1985 whereas currently it imports 15.21 per cent of its total imports from neighbouring countries. It is clear that, SAARC exporters are capturing Bangladeshi market and increasing their exports to it. At the same time, Bangladeshi exporters are failing to retain their existing market share in SAARC countries. Bangladeshi policymakers should seriously think over the issue that signing bilateral or regional free-trade agreements is rewarding if adequate preparations for utilising the benefits out of those agreements are there.
Economic integration has to be spread up into free movement of people as well. The South Asian countries are seriously lagging behind in terms of people's movement. India is offering on-arrival visa facilities to more than 50 countries but it is not opening up its door for its closest neighbour and major trade partner Bangladesh. Bangladesh is the destination of a very significant volume of Indian exports and Bangladeshis are one of the top contributors to Indian tourist earnings. Why is then the Indian government not offering us on-arrival visa or easy access to their country? It is because we have so far failed to negotiate the matter effectively.
A few bilateral issues of South Asian countries have put SAARC into intensive care unit (ICU). Survival of SAFTA, for example, is threatened today. India-Pakistan-Bangladesh issues are old and complex but not unsolvable. Leaders of the respective countries should remember that a regional platform like the SAARC has been created after so many struggles with an aim of ameliorating socio-economic condition of South Asian peoples through mutual as well as regional cooperation. If such an initiative is abandoned due to ego problems of current South Asian leaders, the future generation may accuse them for the failure.
Not only in South Asia, economic integration is under threat throughout the world today. Brexit (2016) has hit the European Union hardest against the global concept of economic integration. Calculations are being made to measure positive and negative impacts of Brexit on the British economy and rest of the world. Similarly, US President Donald Trump calls for 20 per cent tax on Mexican imports to help pay for his border wall scheme. Such initiatives by the new American President could render the NAFTA agreement inactive. Already, he has cancelled the potential of the Trans-Pacific Partnership (TPP) agreement by an executive order. Near at home, Sri Lanka and Nepal are poised to reconsider their existing trade regime with India due to the latter's protectionist stance. Thus a global movement of protectionism could surge and hit the multilateral system of economic integration and free-market economy.
In such a murky situation, Bangladesh has to be proactive and maintain a congenial trade regime with its existing export destinations and import partners. Bilateral free-trade agreements could be signed to assist its export growth as and when required. New export destinations could be in Latin America, former Soviet states, or the Far-east countries like Japan, China, Mongolia and South Korea etc. Skilled manpower export to existing and newer destination could supply additional forex to Bangladesh economy helping maintain a stable economic condition in the face of negative changes in global system of free-market economy. Without prior preparation and proactive response to the emerging condition of global system, Bangladesh may be in trouble. Promoting local entrepreneurship with an aim of attaining self-sufficiency, developing existing SME clusters and new special economic zones, maintaining congenial trade regime with major partners, attracting FDI for facilitating employment generation and technology transfer, involvement with potential arrangement, etc. could be useful techniques for Bangladesh to cope with the emerging change and sustain in the long run.
The writer is Deputy Manager of the The SME Foundation.
[email protected].
- Sunday, 17 November 2024 |
- Today's FE |
- e-Paper |
- Beta Website
