Challenges of Global Economic Integration

Challenges of Global Economic Integration

Md. Joynal Abdin

The Daily Sun on February 1, 2017

Economic integration is a process of harmonizing trade and investment related policies and reducing/withdrawing tariff and other non-tariff trade and investment barriers between two or more countries. GATT (1947) agreement is the mother of almost all multilateral trade agreements under WTO platform to manage and foster international trade around the world. Besides the World Trade Organization (WTO) arranges a long list of bilateral and regional free trade agreements provided motion toward the economic integration movement.

The European Union (EU) could be termed as most successful integration arrangement of the globe. The North American Free Trade Agreement (NAFTA, 1994) is another successful platform to facilitate free trade between the USA, Canada and Mexico. NAFTA supported more than three million American jobs creation and U.S. trade with NAFTA partners has unlocked opportunity for millions of Americans by supporting Made-in-America jobs and exports.

Similarly a good number of economic integration initiatives were taken by the Asian countries For example Asia-Pacific Trade Agreement (APTA, 1976), ASEAN Free Trade Area (AFTA, 1993), South Asian Free Trade Area (SAFTA, 2006), Economic Cooperation Organization Trade Agreement (ECOTA, 2008), Commonwealth of Independent States Free Trade Area (CIS FTA, 2012) etc. in regional as well as in bilateral level. A positive impact of all these initiative is visible today. For example; interregional trade between Asian countries rose from 53% in 2001 into 57% in 2015, similarly Asian countries are the world’s top destination for foreign direct investment, attracted $527 billion in 2015, in terms of financial integration Asia’s cross-border portfolio investment and bank claims increased from $3.0 trillion in 2001 to $11.0 trillion in 2015, migration from Asia increased between 2010 and 2015 although the increase was directed more to outside Asia than within the region.

A recent study shows that SAFTA is indeed a net trade-creating bloc. The Asian, European, and North American regions responded affirmatively to the SAFTA bloc. As a result Intra-bloc exports are stimulated on average by 23 percent because of SAFTA, while intra-bloc imports raised by 25 percent. A time series analysis from 1981 to 2010 shows that, the regional export share of India, Nepal and Sri Lanka increased under SAFTA regime but regional export share of Bangladesh is decreasing day by day. Bangladesh’s used to export 8.81% of its total export to SAARC states in 1981 – 1985 periods whereas currently Bangladesh is exporting only 2.55% of its total export to the SAARC countries. That means Bangladesh’s has not been able to utilise the export benefits of SAFTA accordingly.

Bangladesh’s import from regional countries is increasing day by day. Bangladesh used to import only 3.36% of its total imports from South Asian countries in 1981 – 1985 periods whereas currently Bangladesh imports 15.21 % of its total imports from the neighbouring states. It is clear that, SAARC exporters are capturing Bangladeshi market and increasing their exports to Bangladesh. At the same time Bangladeshi exporters are failing to retain their existing market share in SAARC countries. Bangladeshi policymakers shall seriously think about the issue that, signing bilateral or regional free trade agreements is not that important, rather taking adequate preparation to utilise the benefits out of those agreements is required.

Not only in international trade but economic integration has to be spread up into free movement of people as well. South Asian countries are lagging behind in terms of peoples’ mobility. India is offering on arrival visa facilities to more than 50 countries but it is not opening up its door for the closest neighbour and major trade partner like Bangladesh. Bangladesh is the destination of a very significant Indian exports, Bangladeshis are one of the top contributors of Indian tourist earnings, but why Indian government is not offering us on arrival visa or easy access to India? It is because we are unable to negotiate it. We are failing to assure that the general people of Bangladesh are not harmful to Indians.

Few bilateral issues of South Asian countries put SAARC into intensive care unit (ICU). India – Pakistan – Bangladesh issues are old and complex but not unsolvable. Leaders of the respective countries shall remember that a regional platform like SAARC has been created after so many struggles with an aim to uplifting socioeconomic condition of South Asian people through mutual/regional cooperation. If such an initiative is abolished due to ego problems of current South Asian leaders then the future generation may not forgive them. Tomorrows people will be much wiser and open hearted than today. They could reinstall mutual cooperation among themselves and condemn us due to our egoistic decision today.

Not only in South Asia, economic integration is facing threat throughout the world. Brexit (2016) is the biggest blow to the European Union as well as to the global concept of economic integration. Endless calculation is going on to measure positive and negative impact of Brexit on British economy and rest of the world. On the other hand US President Donald Trump calls for 20% tax on Mexican imports to help pay for the border wall. Further such initiative of the new American President could lead the NAFTA agreement into inactive position. Similarly he has canceled the potentials of TPP agreement with an executive order. Sri Lanka and Nepal is going to reconsider their existing trade regime with India due to their protectionist feelings. Thus a global movement of protectionism could be weaved further and hit the multilateral system of economic integration and free market economy.

In such a confusing situation Bangladesh has to be proactive to nurture and maintain a congenial trade regime with its existing export destinations and import partners. Bilateral free trade agreements could be signed to assist our export growth as and when required (if necessary). New export destination could be in Latin America, Soviet states, or the Far East countries like Japan, China, Mongolia and South Korea etc. has to be explored to maintain an uninterrupted export growth. Skilled manpower export to existing and newer destination could supply additional Dollars for Bangladesh economy to maintain a stable economic condition in any types of negative changes in global system of free market economy. Without prior preparation and proactive response to the emerging condition of global system Bangladesh may be in trouble in near future. Promoting local entrepreneurship with the aim of self-sufficiency, developing existing SME clusters and new special economic zones, maintaining congenial trade regime with major partners, attracting FDI for facilitating employment generating and technology transfer, involvement with potential arrangement etc. could be useful techniques for Bangladesh to cope up with the emerging change and sustain in the long term.

Advertisements

Published by

Md. Joynal Abdin

Development Researcher, Columnist and Author

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s