REGIONAL INTEGRATION

A look into ASEAN,G8 and Mercosur

Inderjeet Chowdhry Nidhi Shah Rahul Das

CONTENTS
INTRODUCTION FUNCTIONS OF REGIONAL INTEGRATION

STAGES OF ECONOMIC INTEGRATION

ASEAN G8 MERCOSUR BENEFITS OF REGIONAL INTEGRATION CONCLUSION

REGIONAL INTEGRATION INTRODUCTION

Regional integration is a process in which states enter

into a regional agreement in order to enhance regional cooperation through regional institutions and rules.
The objectives of regional integration range from

economic to political, although it has generally become a political economy initiative where commercial purposes are the means to achieve broader socio-political and security objectives.

Contd..
Removes barriers
Increases the movement of people, labour, goods, capital

among nations
Reduces the possibility of regional armed conflict Increases Adoption of cohesive regional stances on policy

issues

FUNCTIONS OF REGIONAL INTEGRATION

Strengthening of trade integration in the region. Creation of an appropriate enabling environment for private sector

development.
Development of infrastructure programmes in support of economic growth

and regional integration.

Development of strong public sector institutions and good governance. Reduction of social exclusion and the development of an inclusive civil

society.
Contribution to peace and security in the region. Building of environment programmes at the regional level. Strengthening of the regions interaction with other regions of the world.

STAGES OF ECONOMIC INTEGRATION

FREE- TRADE AREA CUSTOMS UNION COMMON MARKET ECONOMIC UNION POLITICAL UNION

 Free Trade Area All barriers to trade of goods/services are removed Each country allowed to determine non-member policy

Customs Union Eliminates trade barriers between member countries Adopts common external trade policy
Common Market No barriers to trade among member countries Common external trade policy Allows factors of production to move freely among members Economic Union Free flow of products and factors of production Requires common currency, monetary and fiscal policy Political Union Central political apparatus coordinates economic, social and foreign policy of member nations.

ASEAN

Association of Southeast Asian Nations

A brief history of ASEAN

A geo-political and economic organization of 10 countries

located in Southeast Asia. formed on 8 August 1967 Founded by Indonesia, Malaysia, The Philippines, Singapore and Thailand. First meeting after 9 years of formal signing. Origins is from Association of Southeast Asia, commonly called ASA, an alliance consisting of the Philippines, Malaysia and Thailand that was formed in 1961.

IDEOLOGIES
Concentrated on the idea nation and regional

development. Self Reliant on economic development. Non Alignment to any power blocks. Current GDP of US$1.8 trillion in 2010. Regional Cooperation. Free trade practice between member nations. Eliminating tariffs and non-tariff barriers. Increasing FDI into the member countries. Founded on the lines European Union (EU).

EXPANSION
Originally 5 countries later joined by Brunei (1984),

Vietnam(1995),Laos and Burma(1997) and Cambodia(1999).

Malaysia proposed a further expansion to form ASEAN

+3 to include China, Japan and South Korea.

ASEAN +3 helped during Asian Financial Crisis in 1997.
Opposed by USA and Japan.

Regional Improvement by CEPT

Common Effective Preferential Tariff (CEPT) which will

help to implement the FTA between the nations.

Countries are free to impose tariff from non ASEAN

countries unlike EU. Later members are free to charge from 0-5% of tariff but should be decreasing to reach 0 soon.
Non applicability of CEPT in 3 cases
Temporary exclusions. Sensitive agricultural products. e.g. Rice

General exceptions.

PROBLEM RESOLUTION SCHEMES

ASEAN Secretariat can only monitor and ensure

compliance but no legal authority to enforce.

Resolution is through Diplomacy and self resolution by

member countries.
Enhanced Dispute Settlement Mechanism

CURRENT GROWTH ISSUES

China is growing at a faster pace than anticipated by

ASEAN. More Cheaper labour available in China than ASEAN.

Weakness in Manufacturing sectors. Development in other sectors like Port Sharing and

Internet penetration.
WTO predicts a growth of 7-8% in 2011.

OTHER IMPORTANT PARTS OF ASEAN

East Asia Summit. ASEAN+ India, China, Japan, South

Korea, Australia and New Zealand.

ASEAN Regional Forum (ARF) -27 members. Other Informal Groupings
Asia-Europe Meeting (AEM)-45 members. ASEAN-Russia Summit

CHALLENGES TO INTEGRATION
Diversity
Political, economic, social systems
Historic alliances and orientations Disparities in economic levels Differences in institutional strength

Mutual suspicion History of hostility towards each other Different values placed on regionalism

FUTURE PLANS
Single Currency on lines of Euro.

Free Visa within ASEAN countries for ASEAN citizens.

ASEAN Comprehensive Investment Area (ACIA) Single Aviation Market

Free Trade Agreements With Other Countries

AFAS (ASEAN Framework Agreement on Trade in

Services) 0 import duty by 2015 in every commodity. Migration towards AEC from CEPT

G8
Group of Eight is a forum created in France in 1975.

It includes the governments of eight major economies: Canada

, France, Germany, Italy, Japan, Russia the United Kingdom and the United States.
In addition, the European Union is represented within the G8,

but cannot host or chair.

Lately, the Outreach Five (O5): Brazil, China, India, Mexico

and South Africa have participated as guests.

Collectively, the G8 nations comprise 53% of global nominal

GDP and 42.5% of global GDP.

KEY FUNCTION AREAS

Health Law Enforcement Labour Economic and Social development Energy Environment Foreign Affairs Justice Terrorism Trade

CRITICISM OF G8
Exacerbating global problems such as poverty in Africa and

developing countries through debt and trade policy.

Uncompromising stance on Global warming due to CO2

emissions.
Because of Globalization, the G8 nations have been able to

implement a strict medicine patent policy. As a result, effective generic drugs for AIDS are still not available in the high-risk areas of the world.
G8 is an un-democratic setup for global economic decision

making.

KEY CHALLENGES
Long-term action in agricultural investment, lifting export

restrictions and slashing agricultural subsidies in developed nations.

Long-Term goal of cutting emissions by half by 2050. Anti-poverty 2015 millennium campaign. Restructuring and regulating FIs and market processes in

order to avoid 2008-like global recession.

MERCOSUR

Our North is the South

MERCOSUR
Mercosur or Mercosul is an economic and political

agreement among Argentina, Brazil, Paraguay and Uruguay.

Founded in 1991.
A customs union Component of a continuing process of South American Integration connected to Union of South

American Nations.

POLITICAL OBJECTIVES OF MERCOSUR

Continuation of the democratic system currently in South

America.
Progress towards the consolidation of a single regional

identity.
The strengthening of the regions bargaining power in the

global arena.
The strengthening of cultural links among the people of

the region.

ECONOMIC OBJECTIVES OF MERCOSUR

The free transit of goods, services and factors among member

states.
Fixing of a common external tariff (CET) and adopting of a

common trade policy with regard to non-member states or groups of states.

Coordination of macroeconomic and sectorial policies of

member states to ensure free competition between member states.

The commitment by the member states to make the necessary

adjustments to their laws in pertinent areas to allow for the

FREE TRADE ZONES

The member nations have commercial free-trade zones,

industrial free-trade zones, export processing zones, and special customs areas.
The member states can assess merchandise from these

areas with the common external tariff used for Mercosur merchandise.
Products produced or marketed in the free-trade zones of

each member nation will be eligible for the safeguard system.

EDUCATIONAL INTEGRATION
Education is a fundamental factor in the regional

integration process.
Educational courses at the primary or junior high level, are

recognized by member states as being on the same level for all member nations.
Regional Technical Commission harmonizes the

mechanisms favouring accreditation of studies undertaken in any member nation in any other member nation, and to resolve any externalities.

MERCOSUR AND INDIA

With Preferential Trade Agreement (PTA) between

Mercosur and India, the combined trade is expected to reach $10 billion in next 3 years.
Among member nations, India has the highest volume of

trade with Brazil.

With possible inclusion of Venezuela, a leading oil seller,

in Mercosur, the trade volume is expected to increase substantially.

The PTA offers a huge playing field beneficial to both

KEY CHALLENGES
To deepen the process of integration and MERCOSUR

integration into world economy.

To strengthen the institutional arrangement of the Customs

Union.
To maintain the regional process of economic growth. To consolidate the economic and political stability of Member

States.
To continue the process of structural reform within Member

states.

Benefits of Regional Integration

TRADE CREATION

GREATER CONSENSUS
POLITICAL COOPERATION EMPLOYMENT OPPURTUNITIES

 Trade Creation Increase in the level of trade between nations that results from regional integration.

Greater Consensus Eliminate trade barriers in smaller groups of countries is that easier get consensus.
Political Cooperation Some countries have greater political weight, so they can more negotiate with other countries. And can reduce military conflict. Employment Opportunities o Regional Integration can expand employment opportunities by enabling people to move from one country to another to find work.

CONCLUSION
Because of the benefits of Regional Integration are greater

than the costs, regional integrations acceptable for countries.

Expands trade among nations Reduces unemployment Military conflict among nations declines Flows of FDI increase among countries