REGIONALISM AS AGAINST GLOBALIZATION: SURVIVAL OF THE FITTEST - By HEMANT BATRA1 I. INTRODUCTION When the heads of state travel abroad, their entourage includes many chief business managers and executives. A couple of decades ago, military generals and admirals usually accompanied presidents or prime ministers on state visits. Military alliances or non-aggression treaties commonly occupied the agenda. Such peace policies have been replaced in recent years by commercial or trade policies, given the fact that the primary focus of all countries now a days is economic growth and development as this is what that determines the Global standing of a country in the present global scenario. Trade liberalization is widely recognized as a cornerstone of economic development and growth, and , ultimately poverty reduction. Global multilateral trading system offers the best prospect for reducing barriers to trade & achieving the greatest gains from trade liberalization and Free Trade Agreements (FTAs) are the next best means of trade liberalization. Thus FTA is a buzzword all over the world these days. Virtually every country wants to increase its exports. One way to make sure of it is to negotiate with its trading partners to lower trade barriers. 1 Hemant Batra is a Corporate, Business & Commercial Strategist Lawyer, whose practice is concentrated across the Globe in general, specifically in India. He is Director – Legal Services, Kaden Boriss Consulting Pvt. Ltd., a consulting company with multi-national promoters. Kaden Boriss is engaged in undertaking consulting assignments for clients, seeking to outsource their legal, para-legal and strategic advisory, regulatory and compliance work. In addition to the above he is also the Director of Thames Tobacco Company located in the United Kingdom. He is the elected Secretary General of SAARCLAW (South Asian Association For Regional Co-operation In Law). As Secretary General of SAARCLAW, he enjoys a quasi-diplomatic status. SAARCLAW is an Association of the Legal communities of the SAARC countries namely Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan & Sri Lanka. He is a Member of high-powered national legal affairs Committee of Indo-American Chamber of Commerce. He has written as well as edited and published the following publications and papers: “Doing Business in India”, “SAARC (Text Book)”, “SAARCLAW (Newsletters)”, “Doing Business With Destination – India”, “Doing Business With Asian Tiger – India”, “Foreign Direct Investment Policy Of India – How Direct & How Real”, “Regional Trade Agreements As Against Multilateral Agreements”, “Regional Trade Blocks As Against WTO”, “Preconditions of Free Trade: Political Aspects” and Papers on various topics of commercial significance Many a times he has been invited to speak on foreign investment, corporate & commercial subjects in various conferences/seminars/workshops in India and abroad. He is a visiting Guest Speaker to the Griffith University, Brisbane, National Law School, Hyderabad and American Bankruptcy Institute, New York. He has been associated with various literary projects undertaken by Nova Southeastern University, Florida. He has traveled extensively around the world, more particularly he has frequented USA, UK, Germany, France, Denmark, Holland, Russia, Dubai, Pakistan, Sri Lanka, Bhutan, Nepal, Myanmar, Maldives, Singapore, Thailand, Malaysia, Australia and South Korea. He is a connoisseur of Foreign Direct Investment Policy & Procedures (Regulatory Advise & Documentation), Commercial and Transactional Law (Consultancy & Documentation), Corporate Law including Corporate Management (Consultancy & Documentation) and Legal Auditing. He has been praised in these areas. His work in the field of strategizing FDI has been acclaimed immensely. He has executed a plethora of FDI assignments for renowned MNC(s). Under Trans-national work, he has maneuvered various international Greenfield projects beginning with due-diligence up to regulatory approvals. Commercial and Transactional law practice and consultancy are his areas of expertise. He has successfully advised many clients of an esteemed stature in respect of various complex problems of assorted nature relating to commercial transactions. He has an experience of 14 years in rendering strategic advice to his clients. Regionalism As Against Globalization: Survival Of The Fittest Author: Hemant Batra Regional or bilateral free trade agreements (RTA/FTA) are not a new phenomenon and have become important aspects of any country’s trade policy. The trend started with the formation of the single European market by the European Union in 1992 and the North American Free Trade Agreement (NAFTA) in 1994. Over 300 FTA/RTAs are currently in different stages of negotiation. More than half of world trade is now conducted on preferential basis within FTAs. Therefore, any country that ignores this route of regional integration can do so only at its own peril. II. CONCEPT - REGIONALISM Regionalism is described in the Dictionary of Trade Policy Terms, as “actions by governments to liberalize or facilitate trade on a regional basis, sometimes through free-trade areas or customs unions”. A Regional Trade Agreement (RTA), as the name itself suggests, is a an agreement undertaken by countries located within a defined geographic area whereby the participating countries align themselves with each other to achieve some form of economic integration. The agreement could take various forms like free trade areas2, customs unions3, common markets4 and economic unions5, each of which has a different scope and purpose. In the WTO context, we can assign both, a more general and a more specific meaning to the regional trade agreements (RTAs): more general, because RTAs may be agreements concluded between countries not necessarily belonging to the same geographical region; more specific, 2 Countries may come together to form a free trade area which means that goods traded between those countries will not attract customs duties. It would also typically mean that quotas or preferences would not apply to trade between themselves. However, countries that constitute a free trade area do not have the same policies with respect to non-members. Some of the better known free trade areas include the North American Free Trade Agreement (NAFTA), European Free Trade Association and South American Community of Nations. 3 A customs union means that a group of countries agree to have a common external tariff. That is, the same customs duties, quotas, preferences or other non-tariff barriers to trade apply to all goods entering the area, regardless of which country within the area they are entering. 4 A common market not only eliminates all barriers to trade in goods among the members and adopts a common external tariff, but also. permits the free movement of goods, services, people, and capital within the countries that constitute it. The Southern Common Market (MERCOSUR) is an example of a common market. 5 An economic union has all the features of a common market and in addition provides for a common monetary policy, a common fiscal policy and a common currency for its members like the European Union (EU). http://www.kadenboriss.com 2 Regionalism As Against Globalization: Survival Of The Fittest Author: Hemant Batra because the WTO provisions which relate specifically to conditions of preferential trade liberalization with RTAs. Ordinarily, geographic proximity is a natural driving force in international trade regardless of whether there is any official trade arrangement. Distance is statistically verified to be a very important determinant of trade. Member countries in each trading bloc tend to have similar cultures and comparable economies. They are tempted to “merge” as a group to function together in international trade negotiations because collective efforts will make their voice louder and safeguard their public interests more effectively. Therefore, regional trade groupings are a natural and logical choice for the countries of a region to increase the quantum of their international trade and also to increase their clout in other international markets . This is particularly true for small developing economies, which singularly lack strong economic influence. These economies also lack high-caliber human resources and negotiating skills. They benefit from collaborating with each other on the World Trade Organization (WTO) issues and dispute settlements, especially when rival countries are not only economically resourceful but also politically influential. Conceptually, regional collaboration should help attain improved efficiency, however, cumbersome approval processes and bureaucratic friction often impede progress on such efforts. Coordination across countries is typically difficult, particularly when a trade bloc6 includes countries of great diversity. Countries with drastically different levels of development have remote chances of effectively formulating a free trade area for several reasons. Rarely do they have genuinely common interests. Worse yet, as they tend to be dominated by a few influential countries, negotiations or resolutions are likely to be prejudiced, not reflecting collective interests. Because of such biases, small countries are prone to dissention. Otherwise, they are tempted to collaborate with each other so as to gain a counterbalance. Developing countries often find it beneficial to participate in regionalism for the following reasons: (1) upgrade production techniques and standards; (2) expand