regionalism versus multilateralism
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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 I has undertaken and completed
the project work Titled-
“REGIONALISM 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
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_________________________
Signature_______________
External Examiner _________________________
Signature_______________
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
Regionalism vs multilateralism
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 action within a
geographical region.
According to Joseph Nye ) regionalism refers to "the formation of
interstate associations or groupings on the basis of regions".
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 WTO’s multilateral trading system.
Regional agreements have allowed groups of countries to negotiate
rules and commitments that go beyond what was possible at the
Regionalism vs multilateralism
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, RTA’s can help
to reduce political conflicts.
Regionalism vs multilateralism
6. Compatibility:
The supporters of regionalism note that article 24of the GATT, and
now the WTO’s 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-à-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 WTO’s principle of
equal treatment for all trading partners , that is “most-favoured-
nation agreement”.
Regionalism vs multilateralism
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-by-
region 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.
Regionalism vs multilateralism
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
Regionalism vs multilateralism
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.
Regionalism vs multilateralism
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.
Regionalism vs multilateralism
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 trade-
related 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
Regionalism vs multilateralism
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 india’s growth:
India’s 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 NTB’s:
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.
Regionalism vs multilateralism
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
Regionalism vs multilateralism
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 notably—bearing 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:
versus
Regionalism vs multilateralism
OLD REGIONALISM
*The old regionalism countries are the core
of the system is flexible.
*Exchange of market access
* tariff
*formally institutions of organizations
*vinerian tax
*WTO – tariff cutter
* qualitative dimension
* internationalization of
the supply chain
*trade nexus
* 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
*North-North FDI flows
* trade federalism
*universal norms
*GATT/WTO play a central role
OLD MULTILATERALISM
*The old multilateralism countries
are the core of the system is
inflexible.
*Inter governmental organization are
dependent on the states will
*The principle of sovereignty in
decision making process
*The policies are independent
* the principle of sovereignty in
decision making process
* the policies are independent
*the involvement of the citizens is
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
*perfect synchronization
between regions and
regional organizations
*principle of subsidiarity in
decision making process
versus
Regionalism vs multilateralism
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 .
>21st century new regionalism and new multilateralism:
NEW REGIONALISM
* the new regionalism
*RTA’s are the core of the system
*the system is inflexible
* foreign factories for domestic
reform
*regulation
* regulatory economics
NEW MULTILATERALISM
the new multilateralism
*other actors are the core of the
system
* the system is flexible
* redistribution of global power,
independent on the states’ will
* diversification of the multilateral
Regionalism vs multilateralism
*WTO – rule writer
*quantitative dimension
*outsourcing of the supply chain
* trade-investment service nexus
*two-ways flows across
international borders
* complex trade with complex
rules
* formal agreements
*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
organizations
* the increased number of non-state
actors at regional level
* interconnected policies
*the involvement of the
citizens in the decisional
process, not only at the
political level
* informal agreements
*there is no hierarchical
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
Regionalism vs multilateralism
* GATT/WTO do not
play anymore 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 .
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
Regionalism vs multilateralism
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.
REFERENCES
For books:
P. A. Johnson / A.D. Mascarenhas (2013)
“ECONOMICS OF GLOBAL TRADE & FINANCE” by Manan
prakashan(publisher)
Economics of global trade and finance by dr.D.M.mithani (2011)
Bhagwati, J., Free Trade: Old and New Challenges
Regionalism vs multilateralism
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
.
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