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The World Trade Organization talks may have failed, but developed and developing nations have very little to gain from stalling negotiations. Nations are already trying out new permutations and combinations in forming alliances, and regional blocs; free trade agreements are the order of the day. An analysis of the gameplans of various regional economies in furthering their interests. In the current age of regionalism, different countries are signing multiple agreements and are vying with each other to emerge as hubs. Regional trading arrangements (RTAs) and bilateral free trade agreements (FTAs) have become an important aspect of a country's trade policy. Over 300 RTAs or FTAs are currently in different stages of negotiations. An overwhelming proportion of world trade is now conducted on preferential basis within the FTAs. The trend of 'new regionalism', as the phenomenon is described to distinguish it from the earlier wave of shallow regional economic cooperation, was motivated by the desire of major developed countries to strengthen the competitiveness of their industries. The major motivation was not promotion of intra-regional trade as is commonly understood. The deeper regional economic integration was to facilitate restructuring or rationalisation of industry across the region on the most efficient basis so as to exploit the economies of scale and specialisation. The formation of RTAs in the developed world has led to a substantial restructuring of industry. Regionalism also helped the member countries to protect their industry from external competition by imposing common external tariffs and strong rules of origin. Japanese companies supplying to the EU and NAFTA markets had to shift their production to the respective regions in order to comply with the 'screw driver regulations' or the strict rules of origin. RTAs/FTAs are most fruitful when the partner economies have complementary economic structures, factor endowments and capabilities. Attention also needs to be paid to the potential of the partner country for expanding a country's exports. In general, RTAs involving more than two partners are more fruitful than bilateral FTAs. This is because range of complementarities is extended and they present broader opportunities for industrial restructuring. However, RTAs are generally less ambitious and take longer to take off compared to bilateral FTAs because of involvement of countries at different levels of development. Generally, FTAs are more fruitful for relatively poorer partners than the richer ones. However, political considerations may justify some FTAs with poorer countries. In any FTA/RTA, there will always be certain sectors that may be adversely affected. However, safeguards are available for protecting these interests such as negative lists, tariff rate quotas, rules of origin. Some time longer phase out may also be agreed to give time to the local industry to adjust. RTAs and Trade Policy in Asia Asian countries that had continued to follow multilateralism all along very faithfully had begun to respond to the trend of regionalism towards early 2000s. Japan and China began to look at the RTAs more seriously as a part of their trade policy. China signed a Framework Agreement for FTA to be implemented within ten years with ASEAN in 2002. ASEAN plus three countries began to explore formation of an East Asian Economic Community besides many bilateral arrangements. Asia has therefore finally woken up to the importance of regional economic integration for its development and to respond to the challenge thrown by the worldwide trends. India's first brush with new age preferential trade arrangements was a bilateral free trade agreement signed with Sri Lanka in 1998. The Agreement which became effective from April 2000 has led to a healthy expansion of mutual trade in a more balanced manner. More significantly it has prompted a significant wave of Indian investments going to Sri Lanka to exploit synergies. However, SAFTA or BIMSTEC (Bay of Bengal Initiative for MultiSectoral Technical and Economic coorperation) could create great market access opportunities for other South Asian countries by giving duty free access to much larger market of India. For India, which constitutes about 70 per cent of the combined SAARC market, the gain in terms of market access arising from SAFTA or BIMSTEC may not be substantial. A country of India's size and aspirations has to look beyond its immediate neighbourhood to seek economic opportunities while consolidating the South Asian economic integration.
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