regionalism versus multilateralism

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


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.


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_______________


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 )


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


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".


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.


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.


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


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.


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.


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.


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”.


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:


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.


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


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.


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.


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


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.


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.


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.


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


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.


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


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


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


* 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


versus


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


*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


* 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


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


Web references :

www.rangasai.com “Economics of global trade and finance” CVS Ranga Sai ,

www.google.com

[email protected], www.rau.ro

.

http://www.google.com/

http://www.rangasai.com/

regionalism versus multilateralism

Documents

multilateralism project

term regionalism

century new regionalism

century old regionalism

new multilateralism

complete project

ranga sir

bonafide project work