Indian Institute of Management Jammu

(March-2021)

Business Environment Project Report

“Regional Integration Agreements & Trade”
Submitted to-:

Dr. Vaseem Akram and Dr. Sarbjit Singh

(Submitted By – Group 7)

Bishal Kumar Patro MBA20071

Mohit Singh MBA20084
Satish Sagar MBA20102
Shreyansh Singh Gautam MBA20107
Shubham Singh MBA20109
Vaishali Tripathi MBA20113
 Contribution Table

Sr. No. Name Roll No. Contribution

1 Bishal Kumar Patro MBA 20071 16.66

2 Mohit Singh MBA 20084 16.66
3 Satish Sagar MBA 20102 16.66
4 Shreyansh Singh Gautam MBA 20107 16.66
5 Shubham Singh MBA 20109 16.66
6 Vaishali Tripathi MBA 20113 16.66

Total 100%

ACKNOWLEDGEMENT

We would like to express our special thanks of gratitude to our Business Environment faculty Dr.
Vaseem Akram and Dr. Sarbjit Singh who gave us the opportunity to a project report on the topic
“Regional Integration Agreements and Trade”, who also helped us in completing the project.
We are also delighted to work as a team which made us learn about so many things and finally,
we want to thank our respective parents and all our friends who showed their support in us.

ABSTRACT

In the recent decades, most of the developing countries are actively participating in the regional
trade-agreements that raises the concerns over how the integration benefits would be dispersed
among them. A major concern is about the lower income categorized nations, as if these nations
are receiving the development advances from the regional integration agreements and trade.
Regional integration initiatives must comply with some of the following important functions-
 Strengthening of trade integration in the region.
 Foundation of pertinent environment that enables development of private sector.
 Favorable infrastructure development programs that reinforce economic growth.
 Developing strong public-sector institutions and progression in good governance.
  Cooperation in maintaining the peace and security in region.
 The reduction in social exclusion and enhancement of an inclusive civil society.
Some of the regions practicing such trade agreements are European Union, ASEAN, COMESA,
CIS, etc. This report gives insight on the analysis of the various regional trade agreements of
which India is a part or whether the ongoing agreement should be accepted or rejected. The
report also focuses on the trade between signatories' members of regional trade agreements with
proper emphasis on data through various official channels.
The regional trade agreements discussed in the report are as follows- APTA, BIMSTEC,
SAFTA, RCEP etc., that comprises of the commitments of trade and investment for viable
regional integration of all members.

INTRODUCTION

The development of any country depends upon natural resources, capital formation, regional
harmony and peace and most importantly the foreign trade i.e., the imports and exports. In order
to increase the GDP of any nation the trade and the regional integration are one of the most
important parameters.
The regional integration agreement led to international relation between nations and help them
maintain stability around the globe thus, increasing the trade which eventually led to the increase
in the world economy. The regional trade agreement is a memorandum of understanding between
two or more countries to ensure trade among nations with minimum trade barriers. As of 1
February 2021, according to the World Trade Organization there are 339 free trade agreements
which are in force.
India is itself a developing country which has it’s eyes set on increasing the exports and
minimizing the trade deficit with different countries by limiting the trade barriers and developing
a significant relationship with it’s strategic partners. India is helping it’s cause by being a
signatory member of APTA, BIMSTEC, SAFTA, and many more other bilateral agreements like
India-Japan CEPA, India Bangladesh FTA, India Pakistan FTA, India Bhutan FTA etc. India
also made a huge development recently by signing a Comprehensive Economic Co-operation
Partnership Agreement with Mauritius, it being India's first such agreement with an African
country.
In this report, we have analyzed on the various agreements of which India is a part or whether
they should accept to be a part of the agreement or not. The regional agreement on which we
have focused are-:
1) The South Asian Free Trade (SAFTA) - SAFTA is a free trade agreement of the South Asian
Association for Regional Co-operation. SAFTA was formed to recognize the need and
differential agreement for the Least developing countries. Its main objective is to promote trade
among its members and provide equal benefit to all its signatories. Its main principle is to
eliminate the tariffs and non-tariffs restrictions on the movement of goods and thus, maintaining
a free movement of goods between the countries. The signatories of SAFTA are India, Pakistan,
Bangladesh, Bhutan, Afghanistan, Maldives, Nepal, and Sri Lanka.
2) BIMSTEC - BIMSTEC is a regional co-operation initiative which aims to promote co-
ordination among countries on seven key areas that include trade, investment, and transport and
communication. Its objective is to create an environment for the rapid economic development of
the sub-region, promoting collaboration and working towards common interest of its members
and encouraging the spirit of equality and partnership. BIMSTEC signatories are 5 countries
from South Asia comprising of India, Sri Lanka, Bhutan, Nepal and Bangladesh, and two
members from East Asia I.e., Myanmar and Thailand are the signatories of BIMSTEC.
3) The Asia-Pacific Trade Agreement (APTA) – It is the oldest free trade agreement among
developing countries in the Asia- Pacific region. It aims to promote economic development
through mutual beneficial trade policies among the nations that aims to contribute towards intra-
regional trade expansion and provides for economic integration. It also aims towards protection
and promotion of trade of goods and services around the region. The signatories of APTA are
Bangladesh, India, Sri Lanka, China, Laos and South Korea.
4) Regional Economic Comprehensive Partnership – RCEP is a regional Free Trade Agreement
that builds upon Australia’s existing free trade agreements with other 14 other Indo-Pacific
countries. It is a modern free trade agreement that covers trade in goods, trade in services,
investment, economic and technical co-operation, intellectual property, competition, MSMEs
and new rules for e-commerce. RCEP members are all the 10 ASEAN Countries i.e., Brunei,
Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam;
3 east Asian members which are China, Japan, South Korea and 2 additional Oceanian members
which are New Zealand and Australia. These 15 members form the largest trade bloc in history
as it covers 30% of world’s population and 30% of global GDP.
India over the past few years have worked upon their foreign relationship with different countries
like Israel, USA, Australia, Bhutan, Japan, Mauritius etc. Which has benefitted India in reducing
its overall trade deficit by signing significant amount of Free Trade Agreements.
Even after numerous FTA’s, India’s policy makers are still in a state of dilemma to whether join
RCEP or not. Becoming a member of RCEP has its benefits and drawbacks. So, in this report we
will study how the Regional Integration Agreement are helping India in a long run and Should
India join RCEP?

DATA AND METHODOLOGY

Based on the present state of stagnant multilateral negotiations, there has been a surge in regional
trade deals, so India has modified its foreign trade policy to keep up with the changing realities.
This report assesses the effect of free trade agreements (FTAs) on India's trade to learn more
about how the country has progressed with its trade agreements.
With the establishment of the GATT in 1947, the concept of a larger multilateral agreement rose
to prominence in international trade relations. Despite this, the GATT system's initial signatories
were just 23 nations. This later developed into the WTO's near-universal membership. Currently
WTO has 164 members, the latest being Liberia in 2018.
Since the 1950s, the number of active TAs has steadily increased, reaching nearly 70 in 1990.
Following that, TA operation picked up significantly, with the number of TAs more than
doubling in the next five years and more than 4 times by 2010. (WTO, 2011).
As of September 3, 2019, the WTO had received notification of 695 TAs, with 481 of them in
effect (Chart 1). The increase in the absolute number of TAs, as well as its acceleration since the
early 1990s, is attributed to a growing number of countries adopting outward-oriented policies.
In contrast to previous times when inward-looking growth policies prevailed, this has boosted
demand for trade agreements.
Amidst, India has entered into bilateral and regional TA’s. These agreements lay out broader
economic cooperation in the fields of trade in services, investment, and intellectual property, in
addition to favored tariff rates on goods trade among countries. Few of these TAs have gone
beyond tariff reductions in goods trade to include other elements such as service and investment
liberalization.
The Bangkok Agreement, signed in 1975, was the first TA of which India was a signatory. The
Asia Pacific Trade Agreement was reborn in 2005 as a regional initiative between emerging
economies (APTA). The India-Sri Lanka Free Trade Agreement (ISFTA) was signed in
December 1998 and entered into force in 2001. Following that, India adopted the South Asian
Free Trade Agreement (SAFTA) in 2004, the Comprehensive Economic Cooperation Agreement
(CECA) with Singapore in 2005, the Indo-ASEAN Free Trade Agreement (FTA) in 2010, the
Indo-Korea Comprehensive Economic Partnership Agreement (CEPA) in 2010, and the Indo-
Malaysia CECA in 2011. The South Asian Association for Regional Cooperation (SAARC)
Preferential Trading Agreement (SAPTA) is a preferential trading agreement between India and
other SAARC countries.
 RESULTS AND FINDINGS
India in RCEP
As China is baking this trade agreement so it become more important because this agreement
does not include United States. Many says that this agreement will help China to achieve their
geopolitical ambitions in Indo-Pacific region.

Figure 3; India’s Import and Export with ASEAN Countries

India’s export decreases and imports increase when it signed free trade agreement with the
various countries. The above graph shows that the trade deficits increase since the trade
agreement signed with the ASEAN countries.

Figure 4; India’s total trade and trade deficit with RCEP member countries.
As India is very much worried with the entering of cheap products of China into the country so
India chose to withdraw from RCEP. India is worried with the flood of very cheap goods from
China into its domestic market which can cause bad impact on its domestic manufacturing
sector.
It has been seeming that India’s experience with FTA’s has not been good for its trade deficits
with major FTA partners has increased significantly.
TRADE AGREEMENTS AND ECONOMIC DEVELOPMENT
It has been seeming that India’s experience with FTA’s has not been good for its trade deficits
with major FTA partners has increased significantly.

Figure 5; India’s trade with N8 Countries.

India’s trade growth was very less from 1991 to 1999. India’s trade with its neighbors increases
and it reaches to US$13.45 billion in the year of 2008. After, falls in 2009, due to global
economic crises. In the next 5 years India’s trade with its neighbor doubled. During the year of
2015 and 2016 the export of India to South Asia’s countries slowdown and decline of 13% was
measured in India’s global trade. It again revived in 2017, and goes to US$24.75 billion, and it
goes to US$36 billion in 2018.

CONCLUSION AND RECOMMENDATIONS

In this study we have collected India’s recently signed regional integration of agreement and
trade data with different partner countries and analyzed how trade flows of India with partner
countries has been increased compared to the Non-Regional trade agreement member countries.
According to some comparative data India’s export rates has lowered than its import rates. One
of the key reasons for this could be country’s high tariffs in compared to other partner countries.
However, regional integration agreements and trade has a positive impact in the form of
industrial supplies and increment in shipments of capital goods.
Following are some key recommendations which can be considered -
 New market opportunities can be discovered by investigating in non-conventional
markets.
 Focus on increase export competitiveness by using a multidimensional strategy.
 Accommodate trade facilitation norms, IPRs and technical barriers to trade standards.
 Efficiency can be improvised by executing popular and future trade agreements.
 Private sectors should be linked to the relevant international market.

References

1. https://www.brookings.edu/research/indias-limited-trade-connectivity-with-south-asia/
2. http://www.doc.gov.lk/index.php?
option=com_content&view=article&id=33&Itemid=158&lang=en
3. rbi.org.in