Regionalism vs multilateralism

REGIONALISM VERSUS MULTILATERALISM

Project submitted in partial fulfilment of the course in Economics of Global Trade and Finance At M.Com. Part I 2013-14

Sneha Vilas Pawar

GUIDING TEACHER Prof. Ranga Sai Prof. V.Kurus

University of Mumbai Kelkar Vaze College, Mumbai

Regionalism vs multilateralism

DECLARATION :

I miss sneha vilas pawar student of mcom advance accountancy semester I (2013-2014) hereby declare that I have complete project on Regionalism versus multilateralism . Wherever the data / information have been taken from any book or other sources the same have been mentioned in bibliography . The information submitted in true and original to the best of my knowledge.

Regionalism vs multilateralism

CERTIFICATION This is to certify mr. / ms. Sneha vilas pawar of mcom (advance accountancy) Semester the project work TitledREGIONALISM VERSUS MULTILATERRALISM during the academic year 2013-2014 under the guidance of Mr./Prof. kursu sir and Ranga sir submitted on to this college in fulfilment of I has undertaken and completed

the curriculum of master of commerce (advance accountancy) university of Mumbai. This is a bonafide project work and the information presented is true/and original of the best of our knowledge and belief. Date: Signature REMARKS

Guiding Teacher_________________________

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External Examiner _________________________

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Regionalism vs multilateralism

ACKNOLEDGEMENT : I am extremely thankful to UNIVERSITY OF MUMBAI who gave me the opportunity to present myself through this project. I would like to express my sincere gratitude to all of them who have unconditionally helped me in this project and without any rested interest. I would like to thanks my head of the institute prof. Ranga sai and prof. kursu sir for this valuable support and guidance. His scholastic approach combined with me to bring out the experience and the pool of knowledge. He share his website with their proper notes related to my topic and proper project guidelines I would sincerely like to give heartful acknowledgement and thanks to my parents, friends, classmate and all faculty members who to help in every manner.

Signature of student

Sneha vilas pawar (roll no: 59 )

Regionalism vs multilateralism

INDEX

SIR NO.

CONTENT

1.

Regionalism : Introduction of regionalism Causes of regionalism Advantages & Disadvantages of regionalism Challenges

2.

Multilateralism : Introduction of multilateralism Causes of multilateralism Advantages & disadvantages of multilateralism Challenges

3.

Regionalism versus multilateralism: Comparison between: 1. 20th century old regionalism vs. old multilateralism 2. 21st century new regionalism vs. new multilateralism

4. 5.

Conclusion Bibliography

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CHAPTER 1. REGIONALISM

1.1 REGIONALISM: The term regionalism has been often used in relation to the growth of regional trade agreements. The emergence of new regional formations and international trade agreements like the north American free trade agreement (NAFTA), and the development of a European single market and the European union, etc., demonstrate the importance of a region-by-region basis political co-operation and economics competitiveness. Regionalism refers to any policy designed to reduce trade barriers between a subset of countries regardless of whether those countries are actually contiguous or even close to each other. Regionalism refers to the expression of a common sense of identity and purpose combined with the creation and implementation of institutions that express a particular identity and shape collective geographical region. According to Joseph Nye ) regionalism refers to "the formation of interstate associations or groupings on the basis of regions". action within a

Regionalism vs multilateralism

In simple words regionalism means: Regionalism means countries joining with one another to promote their national and mutual economic interests. They form alliances, confederations, and trading blocs to free the flow of trade among member nations. The choice of regionalism was to unite developing countries to make them more powerful against the developed countries. Regionalism was considered a necessary condition to industrializations. It was believed that infant industries should first export within a small set of countries, before opening itself up for the rest of the world.

Regionalism vs multilateralism

1.2 MAJOR CAUSES FOR REGIONALISM: 1. Apprehension on the part of linguistic ethnic or religious minorities in view of uniform system of administration and policies. Many of these groups dominant in specific region became suspicious as to whether their cultural ties, ethos and symbols would be taken care by the Indian state. Perhaps, this explains the fact that most regional forces have strike roots in non-Hindi belt (Tamil Nadu, Andhra etc.). 2. Uneven pattern of socio-economic development have created regional disparities. What is worst is the naming of these states as BIMARU (Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh) etc. The categorization and sub-categorization of the states on the basis of socio-economic indicators have generated resentment against the central leadership. 3. The elitist character of leadership and unwarranted intervention by the centre in the affairs of the state has rendered the state vulnerable to regional forces. The strategic political calculations at the centre and failure of regional political parties to bargain with them have also been a cause of concern.

Regionalism vs multilateralism

1.3 ADVANTAGES OF REGIONALISM: 1. More practical and feasible: Everybody would agree that multilateral agreements are the preferred instruments for liberalizing international trade. Such agreements ensure a non- discriminatory approach, which provides political and economic benefits for all. However, there are many important and unresolved issues in the WTO negotiations and hence affect multilateral trade.

2. Promote freer trade: Regional arrangements promote freer trade and multilateralism. According to them, on account of regional integration trade creation has generally exceeded trade diversion. Further, regionalism has contributed to both internal and international dynamics that enhance rather than reduce the prospects of global liberalisation. 3. Contribute to multilateralism : They seem to be contradictory, but often regional trade agreements can actually support the WTOs multilateral trading system. Regional agreements have allowed groups of countries to negotiate rules and commitments that go beyond what was possible at the

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time multilaterally. In turn, some of these rules have paved the way for agreements in the WTO. Services, intellectual property, environmental standards, investment and competition policies are all issues that were raised in regional negotiations and later developed into agreements or topics of discussion in the WTO. Thus, regional integration should complement the multilateral trading system and not threaten it. 4. Demonstration Effects: Regional initiative can accustom officials, governments and nations to the liberalization process. Subsequently they can move on to similar multilateral actions. learning by doing applies to trade liberalization as well as to economics development itself, and can often be experienced both more easily and more extensively in the regional context with far fewer negotiating partners. 5. Positive political effects: Trade and broader economic integration has brought about peace between neighbouring countries and thus has positive rather than negative political effects. Trade and broader economics integration has created a European Union in which another war between Germany and france is literally impossible. Thus, RTAs can help to reduce political conflicts.

Regionalism vs multilateralism

6. Compatibility: The supporters of regionalism note that article 24of the GATT, and now the WTOs explicitly permits regional agreements and thus acknowledges their compatibility with the multilateral trading system. To be WTO-legal, such agreements must meet three criteria: they must cover substantially all trade of member countries , They must avoid raising new barriers to non-members, and they must achieve free trade among members by a date certain.

Regionalism vs multilateralism

1.4 DISADVANTAGES OF REGIONALISM: 1. Trade diversion: The regional agreements divert trade by creating preferential treatment for member countries vis--vis non-members. In addition to differential tariffs, members may benefits from preferential rules of origin and regional content requirements. 2. Undermine the multilateral system: Countries may lose interest in the multilateral system when they engage actively in regional their discriminatory nature. The slow pace of multilateral system because of has given a greater impetus to bilateral and regional trade negotiations. The very success of those negotiations can make liberalisation on a multilateral scale more difficult as governments devote greater time and time to RTAs which can be quickly negotiated. 3. Geopolitical Impact: Extensive and intensive regional ties may lead to conflicts that range beyond economics to broader spheres of international relations.

Regionalism vs multilateralism

4. Prevents developing countries from active participating: There are concerns that RTAs are active stretches negotiation capacities to their limit, and in the case of developing countries, prevents them from with the united nations and the world bank to build capacity in smaller countries and give aid money to support participation in trade negotiations. 5. Hurt the interest of others: Under some circumstances regional trading arrangements could hurt the trade interests of other countries. Normally, setting up a customs union or free trade would violate the WTOs principle of equal treatment for all trading partners , that is most-favourednation agreement.

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1.5 NEW CHALLENGES: The growing success of European regionalism in particular led scholars in the late 1950s to what Ernst called "the new challenge of regionalism, . . . the potentialities of the field for insights into the process of community formation at the international level". By the late 1950s, "the organization of the world's ninety-odd states into various systems of competing and overlapping regional associations [had been] a fact of international relations for over ten years". Regionalism had already given rise to a floodtide of literature critical of its development or determined to justify it as a necessity for world security. Some critics were arguing that economic unions and common markets distorted the logic of a universal division of labor, and that regional military planning was made both impossible and obsolete. On the other hand, the defenders of the pattern were invoking the necessities of the cold war. By the 1960s a number of important changes in international politics the easing of the intensity of the Cold War, the independence of new states that had been part of colonial empires, the successful initiation of the European integration experience gave rise to a new range of questions about regionalism. According to Nye the new international environment made "the collective security and military defense focus of the writings in the early 1950s seem at best quaint and at worst misleading". After the 1980s:

Regionalism vs multilateralism

Since the late 1980s globalization has changed the international economic environment for regionalism. The renewed academic interest in regionalism, the emergence of new regional formations and international trade agreements like the North American Free Trade Agreement (NAFTA), and the development of a European Single Market demonstrate the upgraded importance of a region-byregion basis political co-cooperation and economic competitiveness. The African Union was launched on July 9, 2002 and a proposal for a North American region was made in 2005 by the Council on Foreign Relations' Independent Task Force on the Future of North America. In Latin America, however the proposal to extend NAFTA into a Free Trade Area of the Americas that would stretch from Alaska to Argentina was ultimately rejected in particular by nations such as Venezuela, Ecuador and Bolivia. It has been superseded by the Union of South American Nations (UNASUR) which was constituted in 2008.

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CHAPTER 2. MULTILATERALISM

2.1 MULTILATERALISM: Multilateralism is a characteristic of the world economy or world economic system. It ultimately depends on the behaviour of individual countries, that is. The extent to which they behave in a multilateral fashion. For any one country, the multilateralism is a positive function of: a) The degree to which discrimination is absent , that is, the proportion of trade partners that receive identical treatment , and b) The extent to which the trading regime approximates free trade. Sometimes, multilateralism is referred to as process whereby countries solve problems in an interactive and cooperative fashion. Such interactions could clearly affected by regionalism. Multilateralism refers to the practice of promoting trade among several countries through agreements concerning quantity and price of commodities. According to the preamble of the UN charter multilateralism means establishing conditions under which justice and respect for the

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obligations arising from treaties and other sources of international law can be maintained. Multilateralism thus involves, justice, obligation, and a sort of international rules of law. Multilateralism is a term in international relations that refers to multiple countries working in concert on a given issue. Multilateralism was defined by miles kahler as international governance of the many and its central principle was opposition to bilateral discriminatory arrangements that were believed to enhance the leverage of the powerful over the weak and to increase international conflict. Multilateralism is the key, for it ensure the participation of all in the management of world affairs. It is a guarantee of legitimacy and democracy, especially in matters regarding the use of force or laying down universal norms. Multilateral trade was discussed at the Uruguay Round of Multilateral Trade Negotiations in 1994 and the establishment of the WTO. At the same time there was a trend towards regionalization of the world economy. There has been an increase in regional trade agreements (RTAs) notified to the former General Agreement on Tariffs and Trade (GATT) and subsequently to the WTO.

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2.2 CAUSES AND IMPORTANCE OF MULTILATERALISM: Multilateral diplomacy owed its growing popularity to the fact that conferences in the European States-system were essentially conferences of Great powers (Berridge, 2010, 144). Multilateral diplomacy or conferences is a phenomenon of the 20th century. According to the Foreign Policy Centre (FPC), governments can no longer afford to ignore the value of multilateral diplomacy as a strategic tool for solving problems.Therefore multilateral diplomacy address the following issues: human rights, humanitarian assistance, labour rights, national and transnational environmental issues, fair trade and in all of these cases, national sovereignty is challenge. But today, the increase member of richer nations from G8 to G20 shows how multilateral diplomacy is important on raising important issues like the world financial crisis which in 2008/2009 affect lesser developed nations. For example the EU plays a structurally driven great power role in the UNFF (The EU in International Forestry Negotiations) and has a common trade policy (The Common Commercial Policy) and is unanimously viewed as a great power in trade diplomacy.

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2.3 MULTILATERALISM ADVANTAGES: There are problems in the world that cannot be confronted with any success by a single state, no matter how powerful. Big environment issues and world hunger and poverty, along with many regional peacekeeping needs and most economics and traderelated problems. etc. can tackled effectively through the process of multilateralism. ADVANTAGES: 1. Cannot be dominated by the major players: In the multilateral process when priorities are set, they cannot be dominated by the major players. For examples, take the issue of the transfer of environmentally friendly technologies from rich countries to poor was one of the secondary issues at the bonn meetings. It was considered very important. But if the richest 10 or 20 economies in a room had discussed all this alone, this issue would never come up. 2. Best for liberalizing an economy: A free and fair multilateral trading system serves best the interests of any liberalizing economy. Although there has been a huge proliferation of bilateral/regional free trade agreements in recent years, no one questions the primacy of the multilateral trading

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system. According to jagdish bhagwati, the internationally renowed trade trade economist, preferential trade agreements (PTA) have undermined the prospects for multilateral freeing of trade, serving as stumbling blocks, instead of building blocks. 3. Contributed to indias growth: Indias engagement with the multilateral trading arrangement helped it to sustain the trade liberalisation process which was started in 1991. The inclusion of agriculture in the WTO agreement helped india bring about some policy changes even in the agricultural sector, which had remained highly protected after the initial round of reforms. While the agricultural sector is still reasonably protected with high tariffs, the phasing out of quantitative restrictions has arguably been the single most successful area of trade liberalisation in this sector and has happened mainly because of indias WTO commitments. The reforms initiated in the early 1990s and indias WTO triggered policy changes have had a positive impact on export and in turn resulted in higher economic growth.

Regionalism vs multilateralism

4. Better economic performace: The protagonists of trade liberalisation claim that open trade policies lead to better economic performance. Virtually all growth miracles are associated with rapid expansion of trade rather than wholesale substitution of imports by domestics production. 5. Other advantages: Beyond the welfare gains achieved through the reduction of tariffs in manufacturing and agriculture, additional gains tend to accrue with the introduction of scenarios that incorporate trade liberalisation in the services sector, reduction of non tariff barriers, trade facilitation, effective utilisation of dispute settlement mechanism etc.

Regionalism vs multilateralism

2.4 DISADVANTAGES OF MULTILATERAL: 1. Slow down the process: The biggest disadvantage to multilateralism is that in the process every country has the right to have their opinions taken into account, they usually take advantage of it. It can slow down things a lot. 2. Increased use of NTBs: Another important problem in the WTO is the increasing use of Non-tariff barriers has not been defined under the WTO but its usage and understanding broadly refers to any border measure other than a tariff, which acts as a barrier to trade. This includes internal measures that, despite in several instances being in line with WTO rules and serving legitimate policy objectives may discriminate or unnecessarily restrict access to markets, translating in additional costs for the exporters or importers.

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2.5 CHALLENGES: Compared to unilateralism and bilateralism where only the country itself decides on what to do or make decisions between two nations, multilateralism is much more complex and challenging. It involves a number of nations which makes reaching an agreement difficult. In multilateralism, there may be no consensus; each nations have to dedicate to some degree, to make the best outcome for all. The multilateral system has encountered mounting challenges since the end of the Cold War. The United States has become increasingly dominant on the world stage in terms of military and economic power, which has led certain countries (such as Iran, China, and India) to question the United Nations' multilateral relevance. Concurrently, a perception developed among some internationalists, such as former UN Secretary General Kofi Annan, that the United States is more inclined to act unilaterally in situations with international implications. This trend began when the U.S. Senate, in October 1999, refused to ratify the Comprehensive Test Ban Treaty, which President Bill Clinton had signed in September 1996. Under President George W. Bush the United States rejected such multilateral agreements as the Kyoto Protocol, the International Criminal Court, the Ottawa Treaty banning anti-personnel land mines and a draft protocol to ensure compliance by States with the Biological Weapons Convention. Also under the Bush administration, the United States withdrew from the Anti-Ballistic Missile Treaty, which the Nixon

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administration and the Soviet Union had negotiated and jointly signed in 1972. In a direct challenge to the actions of the Bush administration, French president Jacques Chirac directly challenged the way of unilateralism: "In an open world, no one can live in isolation, no one can act alone in the name of all, and no one can accept the anarchy of a society without rules." He then proceeded to tout the advantages of multilateralism. Global multilateralism is presently being challenged, particularly with respect to trade, by emerging regional arrangements such as the European Union or NAFTA, not in themselves incompatible with larger multilateral accords. More seriously, the original sponsor of post-war multilateralism in economic regimes, the United States, has turned to unilateral action and bilateral confrontation in trade and other negotiations as a result of frustration with the intricacies of consensus-building in a multilateral forum. As the most powerful member of the international community, the United States has the least to lose from abandoning multilateralism; the weakest nations have the most to lose, but the cost for all would be high. Multilateralism is the key, for it ensures the participation of all in the management of world affairs. It is a guarantee of legitimacy and democracy, especially in matters regarding the use of force or laying down universal norms.

Regionalism vs multilateralism

Multilateralism works: in Monterrey and Johannesburg it has allowed us to overcome the clash of North and South and to set the scene for partnerships with Africa notablybearing promise for the future. Multilateralism is a concept for our time: for it alone allows us to apprehend contemporary problems globally and in all their complexity

Regionalism vs multilateralism

CHAPTER 3. REGIONALISM VERSUS MMULTILATERALISM

It is impossible to decisively resolve the regionalism vs. multilateralism dispute. Most analyses of most FTAS, including most importantly by far the European union, conclude that trade creation has dominated trade diversion. Most of the analysts agree that regional and global liberalization have proceeded together. There are such differences explain below between 20th century old regionalism and old multilateralism:

Regionalism vs multilateralism

OLD REGIONALISM

versus OLD MULTILATERALISM

*The old regionalism countries are the core *The old multilateralism countries of the system is flexible. *Exchange of market access * tariff
*formally

are the core of the system is inflexible. *Inter governmental organization are

institutions of organizations

dependent on the states will *The principle of sovereignty in decision making process

*vinerian tax *WTO tariff cutter

*The policies are independent * qualitative dimension * the principle of sovereignty in * internationalization of decision making process the supply chain * the policies are independent *trade nexus *the involvement of the citizens is * two-ways flows of goods, people and ideas within factories *simple trade with simple rules *North-South agreements * unipolarity or bipolarity *preferential tariffs * countries are winners or losers limited to democratic representation at political level formal institutions or organizations *the global order is divided into levels of governance, from global to local *North-South agreements *unipolarity or bipolarity

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*North-North FDI flows * trade federalism *universal norms *GATT/WTO play a central role

*perfect synchronization between regions and regional organizations *principle of subsidiarity in decision making process *the system is closed *universal norms *United Nations play a central role

From the above content and figure of 20th century old regionalism and old multilateralism are shows how different they from each other , the regionalism and multilateral both has their own prospect about they own passion of work in trade both are necessary . such function they have same like North-South agreements, unipolarity or bipolarity, universal norms and so on ,.and difference is flexibility is different regionalism is flexible but multilateral is inflexible in a nature, central role play by the regionalism is GATT/ WTO and central role paly be the multilateralism is by united nation .

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>21st century new regionalism and new multilateralism: NEW REGIONALISM * the new regionalism NEW MULTILATERALISM the new multilateralism

*RTAs are the core of the system *other actors are the core of the *the system is inflexible * foreign factories for domestic reform *regulation * regulatory economics *WTO rule writer *quantitative dimension *outsourcing of the supply chain * interconnected policies * trade-investment service nexus *the involvement of the *two-ways flows across international borders * complex trade with complex rules * formal agreements citizens in the decisional process, not only at the political level * informal agreements *there is no hierarchical system * the system is flexible * redistribution of global power, independent on the states will * diversification of the multilateral organizations * the increased number of non-state actors at regional level

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*South-South agreements *unilateralism * non-tariff measures *corporations are winners or losers *South-South FDI flows * fiscal federalism *regional norms *informal organizations play a central role * GATT/WTO do not play anymore a central role

structure of governance * multi-polarity * asymmetric synchronization between regions and regional organizations *principle of mutuality in decision making process *informal organizations play a central role *United Nations do not play anymore a central role

Here the 21st century new regionalism and new multilateralism express that the old regionalism is fully opposite from the new regionalism as per the same like regionalism old multilateralism is different from new multilateralism .

Regionalism vs multilateralism

4 . CHAPTER : CONCLUSION Within the new global economic governance, certain elements are likely to give new impetus to regionalism and multilateralism: the growing dissatisfaction on the activities within these processes and the slow pace of reform, the emergence of new powers and their impact on international economic system, global crisis and other issues of global concern. Each one of these has a significant impact on the appearance of regionalism and multilateralism in the near future and there is a stringent need to finding common answers and solutions. A fundamental reorganization of the international system has not been fair approached until now and everyone looks blown away if this change would be unnoticed or seen as cause of geopolitical pressures. The qualitative analysis is done in a comparative way, trying to highlight the most important elements of this transition. The main added value is the comparative approach of the two concepts transition and their formal relationship with the new paradigm of global economic governance. In terms of prior work, it has been previously tried to emphasizing the concepts already by known researchers in the field. The approach is a more theoretical one, with emphasis on results and future research.

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REFERENCES

For books: P. A. Johnson / A.D. Mascarenhas (2013) ECONOMICS OF GLOBAL TRADE prakashan(publisher) Economics of global trade and finance by dr.D.M.mithani (2011) Bhagwati, J., Free Trade: Old and New Challenges & FINANCE by Manan

Web references : www.rangasai.com Economics of global trade and finance CVS Ranga Sai , www.google.com sterian.gabriela@profesor.rau.ro, www.rau.ro