Summary of the Article
The article focused on the study of the modern achievements of regional integration and different aspects of foreign direct investments in South Asia. In the article, Aggarwal (2008) tries to explain the problems influencing the consolidation of international business in the region. Some of the barriers to international trade comprise political movements, unresolved bottlenecks, mutual mistrusts, and narrow nationalisms (Aggarwal, 2008). The hypothesis of the study is based on the success of the India-Sri Lanka FTA as one of the major global economic development tools. One of the investment solutions in the region is the use of the SAARC Development Bank and SAARC University to help in managing the trade barriers in the region. SAARC developments are believed to promote the corporation of the region through cross-border investments and enhancement of foreign direct investments in the form of MNCs (Aggarwal, 2008). The findings of the study reveal that foreign direct investments have an impact on the RTAs of the region.
Discussion of the Article
From the introduction, it is regional trade agreements (RTAs) in South Asia have been undergoing transformations through WTO/ GATT with the objective of resolving the international trade issues in the region. Some of the barriers to regional trade in the region comprise factors like political, rigid labor laws and trade unions, restrictions on cross-border movement (VISA), restrictions on foreign investments, and structural barriers (Barrell & Nahhas, 2018). Studies from other regions show that the FDI has a positive impact on the regional trade agreement. The FDIs in the region help to explore some of the constraints which are addressed through economic interaction.
The study also focused on some of the trends in FDI, such as FDI inflows and outflows. The FD inflows have a significant impact on the capital requirement for investment. From the findings, the government has a significant impact on the FDIs. The article has also highlighted some of the benefits of FDIs by viewing the economic growth of India and other Asian countries.
How is the Article Applied to the Week’s Readings?
The article has a positive correlation with the learning materials for this week. The learning covered the regional trade blocks by highlighting how the GATT and WTO can be utilized in reducing trade barriers. From the study, it is clear that Asian countries have been using GATT and WTO to control the RTAs in the region. The establishment of common markets in the region helps in the reduction of FDI restrictions (Barrell & Nahhas, 2018). Some of the levels of economic integration that can promote FDI and global trade rely on the political and economic union. The study shows that Asian countries embraced this through the establishment of the SAARC development bank.
Some of the trends in the FDI contributing to global economic development comprise the outflows, inflows, and stock of the FDI. The FDI stocks involve the aspect of investing in assets that are owned by foreign companies (Iammarino, 2018). Outflows in the FDI are associated with investments in foreign countries. For instance, the parent company in the USA, that is, Coca Cola can open subsidiaries in other countries like Germany (Iammarino, 2018). Arguably, with FDI inflows, the government allows foreign investors to venture their investments into a country. This is mainly being mainly done by removing the restriction on trade barriers, tariffs, and taxation.
References
Aggarwal, A. (2008). Regional Economic Integration and FDI in South Asia : Prospects and Problems. Www.econstor.eu. Web.
Barrell, R., & Nahhas, A. (2018). Economic integration and bilateral FDI stocks: the impacts of NAFTA and the EU. Web.
Iammarino, S. (2018). FDI and regional development policy. Journal of International Business Policy, 1(3-4), 157–183.