Percy S. Mistry Regional Integration Arrangements in Economic Development Panacea or Pitfall? FONDAD The Hague
ISBN: 90-74208-08-8 Copyright 1996 by Percy S. Mistry and the Forum on Debt and Development. Permission must be obtained from them prior to any further reprints, republications, photocopying, or other use of this work. The views expressed in this book do not necessarily represent those of the Forum on Debt and Development. Additional copies may be ordered from FONDAD at N oordeinde 107 A, 2514 GE The Hague, the Netherlands Tel: 31-70-3653820 Fax: 31-70-3463939 E-mail: fondad@pi.net
Contents Abbreviations 7 Preface 9 1 A Retrospective on Regional Integration Arrangements Introduction 11 A Tour d'horizon ofrias Around the World 12 The Role of Regionalism in the Emerging World Order 20 2 The Role ofrias in Fostering Economic Development Introduction 23 Lessons from the Past 23 The Inadequacy ofclassical Theoretical Constructs 25 Orthodox (Static) Gains from RIAs 26 Unorthodox (Dynamic) Gains from RIAs 28 Political Commitment to RIAs and the Issue of Credibility 33 Equity and Regional Policy 33 3 Reducing Non-TariffBarriers Barriers to Trade Gains 36 Barriers to Production 41 Barriers to Cross-Border Investment 44 Other Barriers 45 4 The Experience ofdeveloped vs, Developing Countries Why First-Generation RIAs Failed in Developing Countries 48 Lessons for the Future 52.5 Second-GenerationRIAs in the Developing World Determinants of Success 54 Linking Up with Large Trade Blocs 56
6 Options for Creating Regional Trade Preferences Among Developing Countries The Role of Bilateral Agreements The Role of Customs Unions The Role ofpreferential and Free Trade Areas 58 59 61 7 Regionalisation vs. Globalisation: The Issues Regionalism as a Mezzanine Step Trade Blocs GATIRules Theoretical Objections and Practical Benefits 8 Synopsis and Conclusions Annexes The Road Ahead for Developing Countries The Political Dimension The Role of Donors Learning from Experience Distribution of Costs and Benefits Regional Adjustment Programmes External Linkages A Pragmatic Approach to Strengthening RIAs in Developing Countries Bibliography 72 74 75 76 77 78 80 81 85 95
Abbreviations ACP AFTA ANZCERTA APEC ASEAN CACM CAP CARICOM CARlITA CEAO CET CFA CMEA COMESA CU EAC EC ECO ECU EFTA EMS EU FDI ITA GATT GCC GDP IFls IMF IOC LAC LAFTA MERCOSUR MFN MIGA MMA NAFTA NATO NICs OAU OECD PECC PTA RIAs RoW RSA Africa, Caribbean and the Pacific ASEAN Free Trade Area Australia-New Zealand Closer Economic Relations Trade Agreement Asia Pacific Economic Cooperation Association of South-East Asian Nations Central American Common Market Common Agricultural Policy (of the European Union) Caribbean Community Caribbean Free Trade Association Economic Community of West Africa Common External Tariff Communaute Financiere Africaine Council for Mutual Economic Assistance Common Market for Eastern and Southern Africa customs union East African Community European Community Economic Cooperation Organisation European Currency Unit European Free Trade Association European Monetary System European Union foreign direct investment free trade area General Agreement on Tariffs and Trade Gulf Cooperation Council gross domestic product international financial institutions International Monetary Fund Indian Ocean Commission Latin America and the Caribbean Latin American Free Trade Association Southern Common Market most-favoured nation Multilateral Investment Guarantee Agency (of the World Bank) Multilateral Monetary Agreement North American Free Trade Agreement North Atlantic Treaty Organisation newly industrialised countries Organisation of African Unity Organisation for Economic Co-operation and Development (which comprises 23 developed country members as well as Mexico and Turkey) Pacific Economic Cooperation Conference Preferential Trade Area (for Eastern and Southern Africa) regional integration arrangements rest of the world Republic of South Africa 7
SAARC SACU SADC SADCC SArrA SAPs SAPTA SDR TCR TRIMS UDEAC UK UN UNCTAD US VAT WTO SouthAsian Association for Regional Cooperation Southern African Customs Union Southern African Development Community (former SADCC + South Africa) Southern African Development Coordination Conference South Asian Free Trade Area structural adjustment programmes South Asian Preferential Trade Arrangement Special Drawing Right (in the IMF) regional cooperation tax trade-related investment measures Customs and Economic Union of Central Africa United Kingdom United Nations United Nations Conference on Trade and Development United States of America Value Added Tax World Trade Organisation 8