Is South Asia the missing bloc in world trade? An analysis of South Asian FTAs’ compatibility with WTO rules

• Date: 23 January 2024
• Pages: 59-81
• DOI: https://doi.org/10.1108/JITLP-08-2023-0047
• Published date: 23 January 2024
• Subject Matter: Strategy,International business,International business law,Economics,International economics,International trade
• Author: Edirimuni Nadeesh Rangana de Silva

Is South Asia the missing bloc in

world trade? An analysis of South

Asian FTAs’compatibility with

WTO rules

Edirimuni Nadeesh Rangana de Silva

Department of International Relations,

International University of Japan, Minami Uonuma Shi, Japan

Abstract

Purpose –South Asia is a region urgently seeking development, although it has failed in regional

integration. It is the secondleast integrated region regarding the number of Free Trade Agreements(FTAs)

and can thus be recognised asa missing bloc in the global multilateral system. This study aimsto focus on

South Asian FTAs and explores the problems of the inter-relations and compatibility between the systemic

and regionaltrade systems.

Design/methodology/approach –The study proposes a frameworkto benchmark the compatibility of

South Asian FTAs with WTO rules. Primary data from 2000 to 2020, including descriptive analyses of

reports, legaltext of the FTAs, off‌icial documents and factual presentations,have been collected and analysed

through thematicanalysis using the proposed framework.

Findings –The study f‌indsthat, although South Asian FTAs meet most of the WTOrequirements, they are

not progressing toward facilitating and promoting trade. Data from2000 to 2020 show us that South Asian

FTAs have not signif‌icantly impacted trade between themselves. The study argues that, although South

Asian FTAs fulf‌il somebenchmarks, they show only a lukewarm interest in contributingto the international

trading systemas building blocs. It is therefore recommendedthat the case of South Asian tradeliberalisation

must be understoodcontextually and be given careful and exclusive attentionby the WTO.

Originality/value –As such, this study is the f‌irst to claim that South Asian FTAs are not fully

compatiblewith the WTO rules. They remain a missing regionalbloc in the multilateral system, rather than a

building bloc or a stumbling bloc, delaying the region’s opportunity to develop asa region and within the

larger system.

Keywords FTA Compatibility with WTO, South Asia, Multilateralism, Regional integration

Paper type Research paper

1. Introduction

Free Trade Agreements (FTAs) are continually emerging, and, to date, according to reports

(WTO, 2023), there are 357 FTA notif‌icationsto the World Trade Organization (WTO). The

WTO has allowed its members to conclude FTAs via Article XXIV of the GATT (General

Agreement on Tariffs and Trade, 1994), Article V of the GATS (General Agreement on

Trade in Services, 1995) and the WTO’s Enabling Clause. FTAs are meant to be regional

JEL classif‌ication –F11, F13, F14, F53

Declaration of conf‌licting interests: The author declared no potential conf‌licts of interest with respect

to the research, authorship and/or publication of this study.

Funding: The author received no f‌inancial support for the research, authorship and/or publication

of this study.

South Asian

FTAs

59

Received31 August 2023

Revised4 November 2023

20December 2023

Accepted21 December 2023

Journalof International Trade

Lawand Policy

Vol.23 No. 1, 2024

pp. 59-81

© Emerald Publishing Limited

1477-0024

DOI 10.1108/JITLP-08-2023-0047

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1477-0024.htm

building blocs that together form a perfect multilateral trade system at the international

level (Hamanaka, 2009). The idea is that economic integration at the regional or sub-

systemic level will benef‌it and enrich all the partners, and once all the regions reach this

level, a common multilateral trading system at the top level will result (ADB, 2008). There

are critics who say FTAs have becomestumbling blocs instead of building blocs (Kawabata

and Takarada, 2021). This argument is around the extent to which FTAs have achieved

their initial purpose of improvingregional integration. Those who view FTAs as stumbling

blocs argue that some FTAs have had the effect of slowing down the process of

multilateralisminstead of accelerating it (Baldwin and Seghezza, 2010).

Meanwhile, regions like South Asia have become neither building blocs nor stumbling

blocs because the countries in the region have very few FTAs connecting them with the

multilateral trading system. South Asia is a complicated region with political instability,

asymmetric power dynamics, security concerns, power rivalries and poorliving conditions,

and it has failed in termsof economic integration. Although the regionis urgently seeking to

develop, it has not made much progress in concluding FTAs that would bring economic

benef‌its and prosperity. The South Asian Association for Regional Cooperation (SAARC)

was established in 1985 (SARRC Charter, 1985) with the purpose of integrating the region

but is often criticised for its ineffective policies and slow processes. Notwithstanding its

potential to accelerate growth, intra-regional trade and investment and alleviate poverty,

SAARC has fallen shortof its stated objectives (Das, 2008).

This study identif‌ies South Asia as a missing bloc in the global multilateral system. It

aims at understanding the inter-relations and compatibility between the systemic and

regional levels, with reference to South Asian FTAs. WTO rules related to FTAs are

reviewed and a framework to measure the compatibility of South Asian FTAs with the

WTO rules is proposed. The frameworkis based on four benchmarks and seven associated

questions. The four benchmarksare:

(1) indication of deepening trade integration;

(2) clear direction to promote trade and enhance the freedom of trade;

(3) clear strategy to liberalise the trade; and

(4) removal or lessening of other trade barriers.

These four benchmarks are formed covering WTO legal requirements indicated in Article

XXIV of the GATT (General Agreement on Tariffs and Trade, 1994) and the WTO’s

Enabling Clause. These benchmarks together have the potential to represent and cover the

overarching objectivesof the WTO.

The study f‌inds that South Asian FTAs appear to be fully or partially compatible with the

WTO rules in three benchmarks, except the secondone on clear direction to promote trade and

enhance the freedom of trade. However, the failure of South Asian FTAs to reach the second

benchmark needs to be carefully understood. The second benchmark explores the effectiveness

of FTAs in facilitating, promoting and enhancing trade in the long run. It looks at designing

FTAs to predict the probability of deepening and expanding trade relations between members

in the future and, eventually, the potential they are to contribute to multilateralism as a building

bloc. According to the empirical f‌indings, South Asian FTAs are not in a progressive direction

towards facilitating and promoting trade. Statistical data between 2000 and 2020 clearly show

that FTAs have not made any progressive impact on expanding trade relations between South

Asia countries. Thus, although South Asian FTAs fulf‌il some benchmarks, they show only a

lukewarm interest in contributing to the multilateral trading system as building blocs.

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