Upload
aditya-kumar-singh
View
223
Download
0
Embed Size (px)
Citation preview
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 1/22
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 2/22
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 3/22
BITS Pilani, K K Birla Goa Campus
Preferential
Trade
Agreements -
PTAs
Economic Integration Models
PTA - is a trading bloc that gives preferential
access to certain products from the participating
countries.
This is done by reducing tariffs but not byabolishing them completely.
A PTA can be established through a trade pact.
It is the first stage of economic integration.
These tariff preferences have created numerous
departures from the normal trade relations.
Regional trading bloc formation can both create
and divert trade.
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 4/22
BITS Pilani, K K Birla Goa Campus
PTA Cases
India – Afghanistan (2003)
India – Mauritius
India – Nepal (2009)
India – Chile (2007)
India – MERCOSUR (2009)
ASEAN – PR China (2005)
Laos – Thailand (1991)
More than 23 forms of
PTAs are identified.
Among the 119 countries.
Account for 82% of world
trade (Fieleke 1992).
The use of PTAs to
achieve both domesticand international trade
policy objectives clearly is
increasing.
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 5/22
BITS Pilani, K K Birla Goa Campus
Free Trade Area
or
FTAs
FTA is an economic integration process encompassing a
trade bloc whose member countries have signed a free-
trade agreement.
Generally among neighbouring countries. However, it can
also be extra regional too.
Free trade agreements eliminate tariffs, import quotas,
and preferences on most (if not all) goods and services
traded between the member countries.
If people are also free to move between the countries, in
addition to FTA, it would also be considered an openborder.
It can be considered the second stage of economic
integration. Countries choose this kind of economic
integration if their economic structures are
complementary.
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 6/22
BITS Pilani, K K Birla Goa Campus
ASEA
ASEAN FTAsChina’ FTAs
EU FTAs India FTAs
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 7/22
BITS Pilani, K K Birla Goa Campus
NAFTA;
EFTA;
GAFTA;
CAFTA;
MERCOSUR
EFTA –
European Free Trade Area.
Formed in 1960
by UK; Austria; Denmark;
Norway; Portugal; Sweden &
Switzerland.
GAFTA –
Greater Arab Free Trade
Area.
Formed in 1997
14 countries
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 8/22
BITS Pilani, K K Birla Goa Campus
CustomsUnion
A customs union is a type of trade bloc which is
composed of a free trade area with a common external
tariff.
The participant countries set up common external trade
policy, but in some cases they use different import
quotas.
Purposes for establishing a customs union normally
include increasing economic efficiency and establishing
closer political and cultural ties between the member
countries.
It is the 3rd stage of economic integration.
Customs unions are established through trade pacts.
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 9/22
BITS Pilani, K K Birla Goa Campus
February 26, 2014, 2:54 pm
Russia, India to set up
FTA with Customs Union
Russian Deputy Prime Minister Dmitry Rogozin met
Indian Prime Minister Manmohan Singh in New
Delhi on Wednesday 26 February 2014 [MEA]
South Africa ,Lesotho,
Swaziland, Botswana &Namibia has formed the
Southern African Customs
Union (SACU) with a
common custom tariff policy.
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 10/22
BITS Pilani, K K Birla Goa Campus
An economic union is a type of trade bloc which is
composed of a common market with a customs union.
The participant countries have both common policies on
product regulation, freedom of movement of goods,
services and the factors of production (capital & labour) anda common external trade policy.
When an economic union involves unifying currency it
becomes a Economic and monetary union.
Purposes for establishing an economic union normallyinclude increasing economic efficiency and establishing
closer political and cultural ties between the member
countries.
Economic union is established through trade pact.
Economic
Union
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 11/22
BITS Pilani, K K Birla Goa Campus
Cases-
Benelux Countries –
Belgium; Netherlands;
Luxemburg
formed Economic
Unions soon after 2nd
World War
Every Economic and monetary union has
also an Economic Union
Single market of the European Union
CARICOM Single Market and Economy of the Caribbean Community
Union State of Russia and Belarus
Monaco - European Union
USA formation
EU goes further by harmonizing or even unifying monetary & fiscal policies of
member states. This is the most advanced economic integration process.
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 12/22
BITS Pilani, K K Birla Goa Campus
Common Market
Common Market
Group formed by countries within a geographical
area to promote duty free trade and free
movement of labor and capital among itsmembers.
European community (as a legal entity within the
framework of European Union) is the best known
example.
EU became a Common Market in 1993
Common markets impose common external tariff
(CET) on imports from non-member countries.
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 13/22
BITS Pilani, K K Birla Goa Campus
Economic Integration:
Theoretical
Formulations
Is a solution and
problem too!
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 14/22
BITS Pilani, K K Birla Goa Campus
Case of ASEAN
ASEAN
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 15/22
BITS Pilani, K K Birla Goa Campus
East Asian Community – EAC
ASEAN – 10 Member Grouping
ASEAN + 3
ASEAN + 6
ASEAN CEPA
TPR
Regional Structural, Political & Strategic
Issues: Implications?
Notions & Possibilities!
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 16/22
BITS Pilani, K K Birla Goa Campus
Notion of East Asian Community!
Financial
Joints/ India
Absent
Geography, Contiguity, Economic
Growth Trajectory proposes
feasibility of EAC & Beyond
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 17/22
BITS Pilani, K K Birla Goa Campus
ASEAN + 3
ASEAN + 3 =
ASEAN + China+ Japan +
South Korea
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 18/22
BITS Pilani, K K Birla Goa Campus
ASEAN + 6 =
16 Member
ASEAN + China +Japan + South
Korea
+India + Australia
+ New Zealand
= CEPA or RCEP
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 19/22
BITS Pilani, K K Birla Goa Campus
TPR
Currently in negotiations
Announced interest in joining
Potential future members
ASEAN + 3
ASEAN + 6
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 20/22
BITS Pilani, K K Birla Goa Campus
Regional Economic Integration –What it Means?
Japan has more
than 09 Bilateral/
Multilateral FTAs
in the region
Korea has more
than 07 Bilateral/
Multilateral FTAs
in the region
Singapore has
more than 14Bilateral/
Multilateral FTAs
in the region
Japan has more
than 09 Bilateral/Multilateral FTAs
in the region
Noodle
bowl Effect
!
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 21/22
BITS Pilani, K K Birla Goa Campus
Thailand more
than 08 FTAs
in the region
Philippines more
than 05 FTAs in
the region
China more than
08 FTAs in the
region
Net effect is a
Noodle bowl
Effect !
Bhagwati, Greenaway, and Panagariya (1998) and Panagariya (2000) surveyed the
theoretical economics literature on FTAs and the spaghetti bowl, which pre-dates
the rise of Asian FTAs and the noodle bowl.
166 by
June 2009
(ADB).
8/9/2019 Trade Creation Diversion
http://slidepdf.com/reader/full/trade-creation-diversion 22/22
BITS Pilani, K K Birla Goa Campus
Trade Creation
& Customs
Union-
J. Viner
J. Meade
& H.G Johnson
J. Viner pioneered the development of the theory of
Customs Union in 1950.
Focused on the production effect of Trade Creation &
ignored consumption aspect.
In 1955, J. Meade extended the Customs Union Theory
to analyze the consumption effect also
H.G Johnson developed it further and added both the
production and consumption triangle to obtain total
Welfare Gain of a Customs Union.
Lipsey & Lancaster – 1956, further extended it to Theory
of 2nd Best