Regional integration

In this changing global scenario where developing countries can no longer depend on their traditional developed markets for export incomes, economists, trade experts and international agencies advocate regional integration as a better option for developing countries to divert their exports. But this option also has its limitations as seen by the limited success of trade integration within the SAARC region. Political differences, transportation and infrastructure issues, etc., have been some of the causes for this limited success.

Although in trade, success has been limited, in many other spheres SAARC regional integration appears to have been rather successful, which is an indication that regional integration has many a plus factor. Although the SAARC experience may not be the best example of a case study for regional integration, particularly in trade, examples such as ASEAN have shown how such integration can be successful.

Going beyond regional integration, experts now recommend closer collaboration between regional associations. While developed countries are opting for various arrangements to have closer and more binding economic and trade ties with some of the developing countries which are now described as emerging economies, regional associations comprising mostly developing and emerging economies are now opting for closer collaboration among themselves. Such collaboration is definitely a way forward as they open up unsaturated markets with tremendous potential for development.

In these regional associations comprising developing countries are many of tomorrow’s world economic leaders. Increasing middle and high income youth population create an enormous consumer base for the future and far-thinking policy makers have now begun to explore various options for tapping these promising markets through various arrangements with regional associations outside their regional groupings.

Last week, it was announced that heads of state of four Latin American countries – Chile, Columbia, Mexico and Peru – signed an accord aimed at developing closer economic and trade ties with the Asia Pacific region. This was the result of a proposal made at a summit last year indicating how far thinking the policy makers were.

It is stated that Costa Rica has made a formal request to join this four-country pacific alliance. Panama and Canada have also attended this meeting as observers. The Chilean President’s words at this summit say it all when he had stated that “we wish to join forces with this integration, but also project ourselves together toward the world of the Asia Pacific which is not only the world of the future, but also the world of the present”.

The four countries in this alliance have a combined GDP of more than US$ 2 trillion and over 200 million consumers and make up 40 per cent Latin America’s GDP and 55 per cent of its total exports. According to the World Economic Forum, Chile has been recognised as the most open economy in the region and 14th worldwide. Peru is at 53, Mexico at 65 and Columbia at 89. Chile, Peru and Mexico are already members of the 21-country Asia Pacific Economic grouping.

Provisions under this agreement indicate how far reaching this alliance would be if it takes off successfully. It is stated that leaders have instructed negotiators to advance in parallel talks on the elimination of tariff barriers and rules of origin with the goal of finalising these by year’s end, advancing the implementation of an interoperable “single window” system, mutual recognition of Authorised Economic Operators (safe traders), working towards developing a customs cooperation agreement and a dispute settlement system within the regional grouping.  A committee has also been established to analyse existing barriers in trade in services and investment while regulations on food safety, plant and animal health and technical barriers to trade will also be dealt with in future. If all these are implemented, it would enable smoother transaction within the alliance as well as with the world. The Pacific Alliance countries have said that they plan to explore new regions for setting up export promotion offices, “particularly in Asia”. Forward-thinking policymakers, particularly in import export economies, and are a part of Asia which is now in the limelight, need to look beyond their noses into the future and form alliances such as this if a country is to benefit from international trade. We are living in times when countries cannot live in an oyster shell without realising that the world is their oyster.

(Manel de Silva holds an Honours Degree in Political Science from the University of Ceylon, Peradeniya and has engaged in professional training in Commercial Diplomacy at ITC and GATT. She has served as a trade diplomat in several Sri Lankan Missions overseas and was the first female Head of the Department of Commerce as Director General of Commerce.)