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Economic Integration in South Asia: Charting a Legal Roadmap

Book Review

Martinus Nijhoff 2012, Pages XXX + 334
Price $ 171

Since its beginning in 1985, the SAARC has been extending its scope of operations to cover newer areas of common interest and activities.[1] Although at the outset the SAARC focused primarily on technical cooperation with the aim of creating a common ground and a shared agenda, its focus areas have been undergoing calibrated shifts to adjust to new tunes of global and regional realities. During the late nineties of the 20th century, the winds of change became visible in global economies which caused an impetus for the shift of focus in SAARC activities.[2]

Thus, evident manifestation of the new awakening can be seen in the formulation and implementation of SAPTA and later SAFTA Agreements which were reiterated as the vital key to unveiling the economic potential of the region.[3]

Author Md Rizwanul Islam in Economic Integration in South Asia: Charting a Legal Road Map analyses the state of intra-SAARC trade cooperation from its inception and examines what underlying socio-political factors may have prompted the emergence of the SAARC as in institution and conclusion of PTAs under its auspices. The book explores how broader sub-regional economic integration can propel economic development in South Asia.  The author, who has reputation of publishing analytical write ups on international trade law, focuses on South Asian PTAs, in the view of the inter-connected nature of the global economy, its analysis is juxtaposed with the global trade regime and also makes an endeavor to what extent the South Asian PTAs would comply the rules of the WTO.

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The book is arrayed in 7 chapters and 2 annexes conceiving documents of Agreement on South Asian Free Trade Area (SAFTA) and SAARC Agreement on Trade in Services (SATIS). Chapter 1, as an introductory part, examines the development of the SAARC’s trade induced economic cooperation. No in depth legal study on any regionalism can probably purport to be a complete one without conducting an analysis on the consistency or otherwise of any Preferential Trade Area (PTA) concluded within its framework with the rules of the WTO. The introductory chapter contends the reasoning that it would examine the rules of the GATT/WTO governing the formation of PTA and suggests any possible reforms that may be made.

Chapter 2 makes some recommendations for ensuring better compliance of PTAs with the rules of the WTO and preserving WTO’s authority as the pinnacle body regulating inter-state trade. Chapter 2 recommends a few legislative reforms with a view to suggesting a number of ways of improving the WTO laws governing PTAs. The existing WTO rules do not allow its member states to form PTAs covering goods with non-member states. The author opines in the concluding part of chapter 2 that the acceptance of PTAs with non-member states of WTO can potentially increase the openness in those economies that are not currently members of the WTO.

Chapter 3 delves into different motives that persuade countries to negotiate PTAs. It critically analyses the global economic welfare implications of PTAs and their impacts on the multilateral forum at the WTO. As a fitting sequel of the analysis, author also examines how PTAs fit in the WTO’s multilateral path. Author aptly points out that the challenge of multilateral trading system is not how to restrain the execution of PTAs, but how to minimize the welfare withering aspects of PTAs. The solution of the challenge is to be more and more progress in the negotiations at the WTO that would forward it to be freer and much extensive regime and at the same time can drag out PTAs from assuming a functional and potentially malign shape.

Chapter 4 analyses the development since the establishment of SAARC to the formation of the SAFTA. It chugs through the underlying historical, political and social reasons that may have prompted the events to take place. Prior to 1990s, most of the SAARC countries’ economies were highly protectionist and very much inward looking. Like other developing and LDCs in East Asia, Latin America and African region, the countries of South Asian region were sluggish in joining the band wagon of PTAs or in binding any sub-regional trade cooperation. The region was familiar for adopting the policy of import-substituting industrialization. The region had tendency to protect inefficient domestic industries by adopting very high tariffs and many forms of NTBs (Non-Tariff Barrier) and discriminated against exports through export controls and taxes, and overhauled exchange rates. In the succeeding years of 1990s the region started to veer its intention and realized the cost of protectionism and began bifurcated liberalization, both unilaterally and sub-regionally.

Chapter 5 makes in depth analysis of the developments since the establishment of the SAARC to the formation of the SAFTA and SATIS. To make a critical analysis, the chapter chugs through the underlying historical, political and social reasons that may have provided an impetus for the course of events that staged at that preceding time. Author offers a textual as well as contextual critique of both the SAFTA and SATIS. Author opines that due to lengthy sensitive list of individual contracting parties, the orb of trade liberalization under the rubric of SAFTA has become limited.

Regarding SATIS, author remarks that this trade in service agreement is embryonic in nature which precludes evaluating its compatibility with article V of GATS. Author criticizes the dispute settlement mechanism of SAFTA, contending that it fails itself to restrain the scope of adopting the trade remedy measures in international trade. This reiterates that SAFTA is not in conformity with the internal trade liberalization requisites of Article XXIV: 8 of the GATT.

As a fitting sequel, Chapter 6 analyses the possible trade impacts and shockwaves of both SAFTA and SATIS. The chapter points out the pitfall features of several bilateral PTAs among SAARC countries which are dilating and corroding type trade liberalization initiative under the SAFTA. Author remarks in the concluding part of the chapter that annulling the existing bilateral PTAs among SAFTA contracting parties is a prerequisite to make SAFTA fully functional. Elimination of bilateral PTAs may cause loss of trade benefits. Hence, author opines that (p. 245) the apprehension of trade benefit loss would be properly addressed if SAFTA offers identical market access benefits.

Chapter 7 is the most important part of the book. It reviews the lessons learnt from the preceding chapters. The chapter also reviews the feasibility of greater economic integration of SAARC member countries beyond a mere PTA. Asymmetries in economic development in terms of market depth, business volumes and other such fundamental among countries are not conducive for integration. Within the SAARC region, fundamental asymmetries exist among the member states. Expansion of intra-regional trade offers immense opportunities for sustaining high growth and reducing poverty in the region. Because South Asian economies have largely similar export baskets, the economies could expand trade by promoting intra-industry trade in the region. The chapter recommends a set of measures with a view to advancing trade cooperation among SAARC countries. Necessity for intrepid political leadership for sub regional trade integration; necessity of setting up trade repository for greater transparency as to the laws and regulations of SAARC countries; forming permanent body to coordinate unified policy for multilateral trade forum; progression towards common currency- are discussed and analyzed in the concluding part of the book under review. The chapter also mulls as to the role of Indian leadership in the economic integration of SAARC. India shares border with most of the member countries of the region and it has good marketing capability and linkages in the major importing countries. Therefore, India can become a hub for spurring the growth of intra-industry trade in the region.

All these suggestions reiterate the optimist belief of author that the bulwarks of economic integration of South Asia are formidable but not insurmountable. Many of the constraints are merely the outcome of dubious policies pursued by the policy makers in the sub region and can be tackled with sustained political commitment towards the cause of the South Asian economic integration.

The pivotal feature of this book is the presence of a comprehensive index in tandem with bibliography, which limits its usefulness as a reference book for scholars and researchers. All in all, the book is a very valuable read, affording insights into several aspects of economic integration in South Asia.

About the Author

Md. Rizwanul Islam
Student, LLM,
South Asian University, New Delhi

References:

[1] Pankaj Bhan and RN Srivastava, ‘SAARC: A Trajectory of Growth and Consolidation’ in Saifuddin Soz and RN Srivastava (ed.), ‘SAARC: Emerging Challenges’, (New Delhi: FPSD, 2010) pp. 15-25 at p.17

[2] Ibid at p.18

[3] Ibid at p.19

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July 19, 2016

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