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Regionalism vs multilateralism

ULHASNAGAR – 421 004

NAME: payal .m. bhagtani
ROLL NO: 1561131
SUBJECT: economics
PROJECT TOPIC: “regionalism vs
SUBMITED TO: Pramod dagde


Regionalism vs multilateralism

This is to certify that the project report titled “Regionalism vs
Multilatralism” has been completed satisfactorily in partial
fulfillment of M.COM PART I course of the University of Mumbai,
for the academic year 2015-2016 by PAYAL MEGHRAJ
BHAGTANI a student of S.S.T College of Arts and Commerce,
Ulhasnagar – 400 004.





Signature of Internal Guide


S.Regionalism vs multilateralism ACKNOWLEDGEMENT The most pleasant part of any project is to express Thankfulness and Give Honor towards all those who contributed to the smooth flow of the project work and this being the good opportunity. 3 . I also wish to express gratitude to the respondents of the project without the kind co-operation of whom this one would not have been possible. I thank my project guide “PRAMOD DAGDE” Sir for his valuable inputs in the Research and spending so much of their valuable time and efforts in helping with my topic.T. Sincere thanks to the institution of S. COLLEGE which endow me with the valuable opportunity so interesting and critical topic is the subject of the present report. I don’t want to miss it.

1. 21st century new regionalism vs. Regionalism : 5 Introduction of regionalism 5 Causes of regionalism 6 Advantages & Disadvantages of regionalism 7 Challenges 11 Multilateralism : 14 Introduction of multilateralism 14 Causes of multilateralism 15 Advantages & disadvantages of multilateralism 19 Challenges 3.Regionalism vs multilateralism INDEX SIR CONTENT NO. 2. 20th century old regionalism vs. new 22 25 multilateralism 4. old multilateralism 2. Regionalism versus multilateralism: 22 Comparison between: 1. Bibliography 28 4 . Conclusion 27 5.

Regionalism vs multilateralism CHAPTER 1.. demonstrate the importance of a region-by-region basis political co-operation and economics competitiveness. The emergence of new regional formations and international trade agreements like the north American free trade agreement (NAFTA). In simple words regionalism means: 5 . etc. 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". and the development of a European single market and the European union.1REGIONALISM: The term regionalism has been often used in relation to the growth of regional trade agreements. REGIONALISM 1.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.

Apprehension on the part of linguistic ethnic or religious minorities in view of uniform system of administration and policies. Regionalism was considered a necessary condition to industrializations. 2. Uneven pattern of socio-economic development have created regional disparities. this explains the fact that most regional forces have strike roots in non-Hindi belt (Tamil Nadu.).Regionalism vs multilateralism Regionalism means countries joining with one another to promote their national and mutual economic interests. confederations. What is worst is the naming of these states as BIMARU (Bihar. The categorization and 6 . before opening itself up for the rest of the world. 1. Many of these groups dominant in specific region became suspicious as to whether their cultural ties. and trading blocs to free the flow of trade among membernations. Andhra etc. Perhaps.2 MAJOR CAUSES FOR REGIONALISM: 1. It was believed that ‘infant industries’ should first export within a small set of countries. Madhya Pradesh. The choice of regionalism was to unite developing countries to make them more powerful against the developed countries. They form alliances. ethos and symbols would be taken care by the Indian state. Rajasthan and Uttar Pradesh) etc.

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. According to them. 3. regionalism has contributed to both internal and international dynamics that enhance rather than reduce the prospects of global liberalisation. Such agreements ensure a non. 2. on account of regional integration trade creation has generally exceeded trade diversion. The strategic political calculations at the centre and failure of regional political parties to bargain with them have also been a cause of concern.3 ADVANTAGES OF REGIONALISM: 1. 3. However. there are many important and unresolved issues in the WTO negotiations and hence affect multilateral trade. Contribute to multilateralism : 7 . which provides political and economic benefits for all. More practical and feasible: Everybody would agree that multilateral agreements are the preferred instruments for liberalizing international trade. Further. 1.discriminatory approach.Regionalism vs multilateralism sub-categorization of the states on the basis of socio-economic indicators have generated resentment against the central leadership. Promote freer trade: Regional arrangements promote freer trade and multilateralism.

Thus. Thus. and can often be experienced both more easily and more extensively in the regional context with far fewer negotiating partners. Services. 6. Trade and broader economics integration has created a European Union in which another war between Germany and france is literally impossible. 4. Demonstration Effects: Regional initiative can accustom officials. some of these rules have paved the way for agreements in the WTO. In turn. but often regional trade agreements can actually support the WTO’s multilateral trading system. 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. Regional agreements have allowed groups of countries to negotiate rules and commitments that go beyond what was possible at the time multilaterally. 5. governments and nations to the liberalization process. intellectual property. “learning by doing” applies to trade liberalization as well as to economics development itself. Positive political effects: Trade and broader economic integration has brought about peace between neighbouring countries and thus has positive rather than negative political effects.Regionalism vs multilateralism They seem to be contradictory. Subsequently they can move on to similar multilateral actions. RTA’s can help to reduce political conflicts. regional integration should complement the multilateral trading system and not threaten it. Compatibility: 8 .

To be WTO-legal. 1. members may benefits from preferential rules of origin and regional content requirements.4DISADVANTAGES OF REGIONALISM: 1. In addition to differential tariffs.Regionalism vs multilateralism The supporters of regionalism note that article 24of the GATT. 2. Trade diversion: The regional agreements divert trade by creating preferential treatment for member countries vis-à-vis non-members. and they must achieve free trade among members by a date certain. Undermine the multilateral system: 9 . such agreements must meet three criteria: they must cover “substantially all” trade of member countries . and now the WTO’s explicitly permits regional agreements and thus acknowledges their compatibility with the multilateral trading system. They must avoid raising new barriers to nonmembers.

setting up a customs union or free trade would violate the WTO’s principle of equal treatment for all trading partners . 1. 5. 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 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 10 . Prevents developing countries from active participating: There are concerns that RTAs are active stretches negotiation capacities to their limit. 3. Hurt the interest of others: Under some circumstances regional trading arrangements could hurt the trade interests of other countries. . 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. that is “most-favoured-nation agreement”. The slow pace of multilateral system because of has given a greater impetus to bilateral and regional trade negotiations. 4. and in the case of developing countries.Regionalism vs multilateralism Countries may lose interest in the multilateral system when they engage actively in regional their discriminatory nature. . Normally. Geopolitical Impact: Extensive and intensive regional ties may lead to conflicts that range beyond economics to broader spheres of international relations. .

The renewed academic interest in 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". Some critics were arguing that economic unions and common markets distorted the logic of a universal division of labor. the successful initiation of the European integration experience – gave rise to a new range of questions about regionalism. "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". After the 1980s: Since the late 1980s globalization has changed the international economic environment for regionalism. the emergence of new regional formations and international trade agreements 11 . 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. On the other hand. and that regional military planning was made both impossible and obsolete.Regionalism vs multilateralism potentialities of the field for insights into the process of community formation at the international level". By the late 1950s. 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. the independence of new states that had been part of colonial empires.

Ecuador and Bolivia.Regionalism vs multilateralism like the North American Free Trade Agreement (NAFTA). In Latin America. It has been superseded by the Union of South American Nations (UNASUR) which was constituted in 2008. and the development of a European Single Market demonstrate the upgraded importance of a regionby-region basis political co-cooperation and economic competitiveness. 12 . 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. 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. The African Union was launched on July 9.

Sometimes. that is. For any one country. the multilateralism is a positive function of: a) The degree to which discrimination is absent . that is. Such interactions could clearly affected by regionalism. It ultimately depends on the behaviour of individual countries. Multilateralism refers to the practice of promoting trade among several countries through agreements concerning quantity and price of commodities.Regionalism vs multilateralism CHAPTER 2.1 MULTILATERALISM: Multilateralism is a characteristic of the world economy or world economic system. 13 . multilateralism is referred to as process whereby countries solve problems in an interactive and cooperative fashion. and b) The extent to which the trading regime approximates free trade. MULTILATERALISM 2. The extent to which they behave in a multilateral fashion. the proportion of trade partners that receive identical treatment .

justice.” Multilateralism is the key. Multilateralism thus involves. and a sort of international rules of law.Multilateral trade was discussed at the Uruguay Round of Multilateral Trade Negotiations in 1994 and the establishment of the WTO. It is a guarantee of legitimacy and democracy. 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. Multilateralism is a term in international relations that refers to multiple countries working in concert on a given issue. for it ensure the participation of all in the management of world affairs. 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. obligation.2 CAUSES AND IMPORTANCE OF MULTILATERALISM: 14 . At the same time there was a trend towards regionalization of the world economy.Regionalism vs multilateralism 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. 2. especially in matters regarding the use of force or laying down universal norms.

labour rights. no matter how powerful.  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.3 MULTILATERALISM ADVANTAGES: There are problems in the world that cannot be confronted with any success by a single state. national and transnational environmental issues. governments can no longer afford to ignore the value of multilateral diplomacy as a strategic tool for solving problems.Regionalism vs multilateralism  ‘Multilateral diplomacy owed its growing popularity to the fact that conferences in the European States-system were essentially conferences of Great powers’ (Berridge. humanitarian assistance. along with many regional peacekeeping 15 . 2010.Therefore multilateral diplomacy address the following issues: human rights. fair trade and in all of these cases. national sovereignty is challenge. 144). Multilateral diplomacy or conferences is a phenomenon of the 20th century.  According to the Foreign Policy Centre (FPC). 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. Big environment issues and world hunger and poverty. 2.  But today.

no one questions the primacy of the multilateral trading system. Although there has been a huge proliferation of bilateral/regional free trade agreements in recent years. this issue would never come up. which had remained highly protected after the initial round of reforms. preferential trade agreements (PTA) have undermined the prospects for multilateral freeing of trade. can tackled effectively through the process of multilateralism. etc.related problems. Best for liberalizing an economy: A free and fair multilateral trading system serves best the interests of any liberalizing economy. 3. The inclusion of agriculture in the WTO agreement helped india bring about some policy changes even in the agricultural sector. the phasing out of 16 . ADVANTAGES: 1. 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. 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. 2. instead of building blocks. they cannot be dominated by the major players. Cannot be dominated by the major players: In the multilateral process when priorities are set. the internationally renowed trade trade economist. While the agricultural sector is still reasonably protected with high tariffs.Regionalism vs multilateralism needs and most economics and trade. serving as stumbling blocks. But if the richest 10 or 20 economies in a room had discussed all this alone. According to jagdishbhagwati. It was considered very important.

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. reduction of non tariff barriers.Regionalism vs multilateralism 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. 4. 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. 3. Slow down the process: 17 . trade facilitation. 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. 2.4 DISADVANTAGES OF MULTILATERAL: 1. effective utilisation of dispute settlement mechanism etc.

2. which acts as a barrier to trade. there may be no consensus. 2. The United States has become increasingly dominant on the world stage in terms of military and economic power. China. despite in several instances being in line with WTO rules and serving legitimate policy objectives may discriminate or unnecessarily restrict access to markets. and India) to question the United Nations' multilateral relevance. This includes internal measures that. 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. It can slow down things a lot. The multilateral system has encountered mounting challenges since the end of the Cold War. a perception developed among 18 . It involves a number of nations which makes reaching an agreement difficult. they usually take advantage of it. translating in additional costs for the exporters or importers.Regionalism vs multilateralism The biggest disadvantage to multilateralism is that in the process every country has the right to have their opinions taken into account. which has led certain countries (such as Iran.5 CHALLENGES: Compared to unilateralism and bilateralism where only the country itself decides on what to do or make decisions between two nations. In multilateralism. to make the best outcome for all. each nations have to dedicate to some degree. multilateralism is much more complex and challenging. Concurrently.

by emerging regional arrangements such as the European Union or NAFTA. in October 1999. such as former UN Secretary General Kofi Annan. that the United States is more inclined to act unilaterally in situations with international implications. which President Bill Clinton had signed in September 1996. no one can act alone in the name of all.Regionalism vs multilateralism some internationalists. no one can live in isolation.S. the original sponsor of post-war multilateralism in economic regimes. refused to ratify the Comprehensive Test Ban Treaty. More seriously. the Ottawa Treaty banning anti-personnel land mines and a draft protocol to ensure compliance by States with the Biological Weapons Convention. In a direct challenge to the actions of the Bush administration. This trend began when the U. not in themselves incompatible with larger multilateral accords. Senate. the United States withdrew from the Anti-Ballistic Missile Treaty. Bush the United States rejected such multilateral agreements as the Kyoto Protocol." He then proceeded to tout the advantages of multilateralism. has turned to unilateral action and bilateral 19 . particularly with respect to trade. Under President George W. French president Jacques Chirac directly challenged the way of unilateralism: "In an open world. the International Criminal Court. and no one can accept the anarchy of a society without rules. the United States. Also under the Bush administration. Global multilateralism is presently being challenged. which the Nixon administration and the Soviet Union had negotiated and jointly signed in 1972.

As the most powerful member of the international community. Most analyses of most FTAS. 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 vs multilateralism confrontation in trade and other negotiations as a result of frustration with the intricacies of consensus-building in a multilateral forum. especially in matters regarding the use of force or laying down universal norms. It is a guarantee of legitimacy and democracy. REGIONALISM VERSUS MMULTILATERALISM It is impossible to decisively resolve the “regionalism vs. for it ensures the participation of all in the management of world affairs. 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. but the cost for all would be high. the United States has the least to lose from abandoning multilateralism. multilateralism” dispute. including most importantly by far the 20 . Multilateralism is the key. the weakest nations have the most to lose.

conclude that trade creation has dominated trade diversion. There are such differences explain below between 20 th century old regionalism and old multilateralism: OLD REGIONALISM versus *The old regionalism countries are the core of the system is flexible. *Inter governmental organization * tariff *formally OLD MULTILATERALISM institutions of organizations *vinerian tax are dependent on the states will *The principle of sovereignty in decision making process *WTO – tariff cutter *The policies are independent * qualitative dimension * the principle of sovereignty in * internationalization of the supply chain *trade nexus * two-ways flows ofgoods. *Exchange of market access *The old multilateralism countries are the core of the system is inflexible. people and ideas within factories decision making process * the policies are independent *the involvement of the citizens is limited to democratic representation at political levelformal institutions 21 .Regionalism vs multilateralism European union. Most of the analysts agree that regional and global liberalization have proceeded together.

from global to *preferential tariffs *countries are winners or losers *North-North FDI flows * trade federalism *universal norms *GATT/WTO play a central role local *North-South agreements *unipolarity or bipolarity *perfect synchronization between regions and regional organizations *principle of subsidiarity in decision making process *the system is closed *universal norms *United Nations play acentral role From the above content and figure of 20 th century old regionalism and old multilateralism are shows how different they from each other .Regionalism vs multilateralism *simple trade with simple rules ororganizations *North-South agreements *the global order is divided into *unipolarity or bipolarity levels of governance. such function they have same like North-South 22 . the regionalism and multilateral both has their own prospect about they own passion of work in trade both are necessary .

unipolarity or bipolarity.Regionalism vs multilateralism agreements. universal norms and so on . >21st century new regionalism and new multilateralism: NEW REGIONALISM NEW MULTILATERALISM * the new regionalism the new multilateralism *RTA’s are the core of the *other actors are the core of the system system *the system is inflexible * the system is flexible *foreign factories for domestic *redistribution of global power.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 . reform independent on the states’ will *regulation *diversification *the increased number of non- *WTO – rule writer state actors at regional level *quantitative dimension *outsourcing of the supply chain trade-investment the multilateral organizations * regulatory economics * of service * interconnected policies *the involvement of the 23 .

Regionalism vs multilateralism nexus *two-ways citizens in the decisional 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 * GATT/WTO do not 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 *United Nations do not play anymore a central role play anymore a central role 24 .

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. In terms of 25 . the emergence of new powers and their impact on international economic system.Regionalism vs multilateralism 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 . 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. 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. global crisis and other issues of global concern. 4 . trying to highlight the most important elements of this transition. The qualitative analysis isdone in a comparative way. 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.

www.D. A. The approach is a more theoretical one.rau. 26 .ro sterian.D. REFERENCES For books:  P. with emphasis on results and future research. Johnson / A.M. Mascarenhas (2013) “ECONOMICS OF GLOBAL TRADE & FINANCE” by Mananprakashan(publisher)  Economics of global trade and finance by dr.gabriela@profesor. Free Trade: Old and New Challenges Web references :“Economics of global trade and finance” CVS RangaSai . J. it has been previously tried to emphasizing the concepts already by known researchers in the field.mithani (2011)  Bhagwati.rau.Regionalism vs multilateralism prior work.

Regionalism vs multilateralism 27 .