Regional Convergences and Geoeconomy in Asian Countries (ECO and ASEAN Members)

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1 2013, TextRoad Publication ISSN Journal of Basic and Applied Scientific Research Regional Convergences and Geoeconomy in Asian Countries (ECO and ASEAN Members) Afshin motaghi Faculty Member, Kharazmi University, Faculty of Geography, Department of Geopolitic, Tehran, Iran ABSTRACT Regional convergence is one of the main issues on international trade that all of the countries and regions focous on especially. the main goal of convergence is maximizing the benefits in the areas but all regional integration does not lead to trade improved and so researchers and policymakers interested that to know the bilateral trade between the different member states of the regional integration had improved or not? Therefore we examine the trade and economic process in ECO and ASEAN Regional Cooperation (as case studies in Asia) and analysied intera and extra-regional trade in partnerships and our main purpose is the examine of the impact of regional integration on trade relations between the countries. The results show that 25% of trade in ASEAN is intra-regional, while only 7% of trade in ECO is intraregional that is ASEAN is more favorable of intra-regional trade than ECO. in other words, the creating of ASEAN improved the trade relation between member countries While the creating of ECO had little effect on trade relation between member countries. KEYWORDS: Regional convergence, ECO, ASEAN, trade. 1. INTRODUCTION The main goals of establishing regional agreements is to increase trade among member countries by reducing tariff barriers, but it is concerned that how effective these convergences in trade regional among member states and how effective in the development of countries. If regional agreement among the member countries increased trade this is the phenomenon of "trade creation". In this formation the consumer buy with lower prices from the bloc member countries instead of buying expensive than domestic manufacturers. On the other hand based on the theory of international trade, if regional agreement reduced trade among members and increased cost for other countries named "trade diversion". There are different views on the impact of trade creation and diversion on countries on the regional convergence such as: Weiner (1950), a leading provider of customs union theory, expressed trade creation and diversion and issued that they can not be definitive about the overall effect on welfare. But Wonnocot(1981) showed that under conditions of third countries impose tariffs and there are transportation costs, customs union are superior designs than free trade. Cooper and Muscle (1965) showed that under some conditions customs union leads to a net gain and welfare (Cooper and others, 1965, ) Above analysis study the effect of trade creation and diversion in a custom union but the reality is that a customs union is formed from several countries and several markets that unionization will affect all of them. The country which is entering a customs union may include the import markets are faced with a trade diversion or creasion and as we discussed earlier, if trade creation is more than trade diversion in the form of customs union welfare will increase. In contrast, if trade diversion is more than trade creation, there is likely to reduce welfare. So it is certain that any union does not lead to increased prosperity even in some cases for some of the countries it is harmful also. This issue, particularly in developing countries which are urging on the creation of regional trade arrangements is more important. Therefore, to investigate this issue in Asia we consider Economic Cooperation Organization (ECO) and the Association of South East Asian Nation (ASEAN) and examine trade growth within these organizations using the statistics. 2 - Evaluation of ECO economic Status GDP Gross Domestic Production (GDP) is one of the most important indicators in macro economics. *Corresponding Author: Afshin motaghi, Faculty Member, Kharazmi University, Faculty of Department of Geopolitic, Tehran, Iran Geography, 569

2 Motaghi, 2013 GDP in ECO members over is as follows: Table 1- GDP in ECO members (Billions of dollers) Member countries Azerbaijan Kazakhstan Pakistan Iran Tajikistan Kyrgyzstan Turkey Uzbekistan Turkmenistan ECO World The average of ECO GDP between was billion dollers that it is roughly 3% of global GDP, against the world average Clearly this percentage of world GDP for ECO with rich oil and non-oil sources is negligible. However it is clear from the data in Table 1 that the highest GDP (PPP) in this organization in recent years is belong to the main constituent countries of ECO, Turkey, Iran and Pakistan and apart from these countries, other member countries have a low GDP in this period. In the early years the lowest GDP in ECO members belong to in Kyrgyzstan and Tajikistan. However, in recent years, GDP in all member countries has increased The total trade volume in ECO Total Trade of ECO is indicated by Table 2. According to available statistics, the total trade (exports + imports) of member states during the two-year is 444 billion dollers, which seems it is very low against world trade (34012) because ECO as the contact point of three continents, Asia, Europe and Africa has a particular geographical position. The export of ECO was lower than import in 2009, 2010 that showed trade deficit. Table 2- trade in ECO members (Bilion dollers) Member countries Trade Import Aze Export Import n/a Ira Export n/a Import Kaz Export Import Kyr Export Import Pak Export Import Taj Export Import Turky Export Import Tur Export Import Uzb Export Import ECO Export Balance intra-regional trade The most import from member countries in ECO members is belongs to Turkey (45% from GDP) and Iran (17.5% from GDP) Furthermore Iran has the most exports to other member countries in recent years (32%). 570

3 By comparing Tables 2 and 3, the total intra-regional trade and trade in ECO, Clearly that the ratio of export and import between member states to total trade (exports + imports) is very negligible and the low percentage of total trade is intra regional. (about 7%) Table 3- intra trade between ECO members ( ) Bilion dollars ECO members year Eco Trade percentage of total trade import export import export یجانAze Ira ایران , , Kaz قزاق ستان Kyr قرق یزستان Pak پاکست ان Taj تاجی کستان Turky , , ترکیھ , نستانTur Uzb ECO Evaluation of ASEAN economic Status GDP GDP in ASEAN members over is as follows: Table 4- GDP in ASEAN members (Billions of doller) Contries members Ind Sin Lao Tha Phy Mal Vie Bro Mya Cam ASEAN World The average of ASEAN GDP between was billion dollers that it is roughly 4% of global GDP, against the world average However it is clear from the data in Table 4 that the highest GDP (PPP) in this organization in recent years is belong to Indonesia and Thailand and in this period. In the early years the lowest GDP in ASEAN members belongs to Laos. However, in recent years, GDP in all member countries has increased The total trade volume in ASEAN Total Trade of ASEAN is indicated by Table 5. According to available statistics, the total trade (exports + imports) of member states during the two-year is 1315 billion dollers, which seems it is very low against world trade (34012). The import of ASEAN was lower than export in 2009, 2010 that showed trade surplus. 571

4 Motaghi, 2013 Table 5- trade in ASEAN members (Bilion dollers) Countries members export import Total trade export import Total trade Bro 6, , , , , ,108.3 Cam 3, , , , , ,437.4 Ind 85, , , , , ,864.1 Lao Mal 140, , , , , ,543.0 Mya 3, , , , , ,630.2 Phi 41, , , , , ,183.8 Sin 229, , , , , ,089.9 Tha 109, , , , , ,688.3 Vie 28, , , , , ,270.5 ASEAN 648, , ,224, , , ,404, intra-regional trade The most import from member countries in ASEAN members is belongs to Singapore and Malaysia Furthermore Singapore and Malaysia has the most exports to other member countries in recent years (44%, 14%). By comparing Tables 4 and 5, the total intra-regional trade and trade in, ASEAN Clearly that the ratio of export and import between member states to total trade (exports + imports) is very high and a high percentage of total trade is intra regional. (about 25%) Table 6- intra trade between ASEAN members (2010) Bilion dollars Countries members export import Total trade Intra ASEAN Intra ASEAN Intra ASEAN The share of intraregional trade in total trade The share of intra-regional trade in total trade The share of intra-regional trade in total trade Bro 1, , Cam , Ind 18, , , Lao Mal 40, , , Mya 2, , , Phi 8, , , Sin 83, , , Tha 26, , , Vie 6, , , ASEAN 189, , , Conclusion The final result shoew that ASEAN have intra-regional trade (25%) more than ECO (7%) and it showe intra-regional trade in ASEAN is better than ECO. Also to compare the economic situation (compared to GDP) both of regional cooperation (ASEAN, ECO) explaind both have the low level of global trade for the period of 2009 to Also GDP in both organizations is low relative to global GDP. (Respectively 3% and 4% of global GDP). 5- REFERENCES 1- Cooper C.A.and Massel B.F.(1965),Toward a general theory of customs union for developing countries, journal of political economy EL.Agraa, Ali.M. (1999), Regional integration,experience theory and measurement, London Macmillan press ltd. 3-Europa Publication Limited, The Europa World Year Book,vol (London Furopa Publication Limited,1987), p

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