How Common is the Commonwealth?
Are all the members benefiting equally from the common wealth of this large body?
The Commonwealth’s efforts to get actively involved in the promotion of regionalism in South Asia are being widely appreciated. The organization is trying to address various emerging and existing policy issues in the region with the support of South Asian think tanks, civil society groups and the academia and by maintaining productive relationships with regional policy experts. Potent as it is, a regional approach to national policy analysis is lauded by many experts. However, questions abound about its efficacy in the face of the even more potent multilateralism.
In today’s world, regionalism has resurfaced with a greater force. One will be hard-pressed to find a country that is not a part of at least one regional agreement. It’s the developing and emerging countries which particularly weigh the worth of regional agreements in gold, as these are perceived to be critically helpful in steering their economic growth and development in the right direction.
Just as the world is embracing regionalism with open arms, so is the multilateral trading system. This system is complex, but is continuously growing, making the management of regional integration more challenging. The tussle between localism and globalism and the question of which one is better for a country has left many policymakers and analysts groping for solutions.
The problem can be linked to the perception and function of trade as a whole. Trade between countries is not a mechanical, robotic process with clearly defined procedures and instructional manuals to be followed. Even though the economics of trade have been a subject of intense research in the past, the trading system is a reflection of devices of not just economics but also politics. And, as anyone would know, the room for ambiguity increases and the thin line between white and black blurs, whenever the latter is involved.
Aligning a country’s trade standing to either regionalism or multilateralism is not a strategy that should be on the agenda of wise policymakers, especially in the context of developing countries where the need for economic development is crucial. In such instances, coherence between multilateral trade agreements and regional agreements needs to be developed.
Taking into consideration the scholarly literature available and the general opinion of experts and policymakers, the overall consensus seems to be against burgeoning regional trade arrangements. It is based on the hypothesis that crisscrossing such agreements will lead to greater incoherence, confusion and unpredictability in trade relations. Being involved in various regional and multilateral trade agreements does put a strain on the negotiating prowess of countries, especially if these agreements are undertaken despite a dearth of institutional and human resources.
Notwithstanding this, some important contributions to economic growth and political stability can be attributed to regional trade agreements. Take the case of South Asia. Many economic challenges faced by the region cannot be resolved individually by countries. However, through the South Asian Free Trade Agreement (SAFTA), even smaller countries can vie for markets that otherwise would have been difficult to tap.
As far as welfare gains from RTAs (regional trade agreements) are concerned, the increasing level of trade between member countries may be of advantage to local producers in certain countries which otherwise may not have received the significance they deserved. Competition resulting from targeting similar markets in a culturally-strewn region, and benefits of economies of scale for local producers, now manufacturing for a relatively larger market, are also there. Intra-regional exports have seen quite
a boost for many RTAs, seen most vividly in the case of the European Union.
“The formation of an enlarged regional market space through regional trade liberalization is not perceived as an end in itself but as a steppingstone towards the future attainment of a single economic, social and cultural grouping, spanning several countries,” said a 2005 United Nations Conference on Trade and Development (UNCTAD) report on regionalism in developing countries.
Besides, the political-economic advantages of regional trade agreements are also worth a thought. For instance, developing countries can move closer and quicker to freer trade than they could in a trade agreement at the multilateral level. At the same time, lessons learnt and the experience gained from regional agreements can be applied to multilateral arrangements later. In addition, the requirement that most RTAs have to be compatible with the rules of the World Trade Organization suggests that there is some hint of efforts towards integrating and positively collaborating on multilateral and regional agreements, further strengthening the worth of the latter.
However, is making policies and drafting them for a successful regional arrangement enough? Clearly not. For any regional trade agreement to be successful, implementation and delivery of all negotiated agreements needs to be ensured. It is essential for prioritization to be enforced by bureaucracies and that there is a greater coordination between governmental institutions and nongovernmental organizations such as think-tanks. There is also a need for structured processes for implementing regional programs and appraising their progress in collaboration with non-governmental organizations.
At the same time, attempts need to be made to ensure that regional trade agreements do not encourage too much protectionism and inward- looking trade policies. Barriers to non-participating members need to be lowered for greater liberalization and a more outward-oriented approach and for greater alignment with multilateral agreements. This also implies that weaker trading partners should be given special attention to ensure that the agreement does not put smaller or economically challenged countries at a disadvantage.
Further, strong governance principles and rational resolution of political and divisive issues, especially in a regional bloc like South Asia which is mired in deeprooted political problems, also make a significant difference when it comes to turning regional agreements into a boon or bane.
What is unique about the South Asian region in particular is the vast variation in the economies of the region. At one end, there are emerging countries such as India which has been the apple of the capitalist world’s eye for the past several years. At the other end is war-torn Afghanistan where the concept of economic prosperity is a far-fetched notion. Where this offers considerable opportunities for countries in the regional bloc to unite, it also makes room for a lot of challenges in managing regional agreements, especially when it comes to motivating the relevant ministries of the respective departments.
As discussed, regional trade agreements have their merits and demerits. The focus needs to be more on developing a deeper coherence between multilateral and regional agreements rather than debating which of the two should be generally preferred, especially when it comes to the inward-oriented, protectionist nature of the latter versus the global focus of the former.
Countries will continue to sign up trade agreements with regional partners and multilateral trade agreements will continue to pose a challenge to many of these proliferating RTAs. However, striking that perfect balance with a regional and global focus, with the ultimate motive of socio-political and economic development, is what countries should strive for.