I - Overview

Summary

A characteristic feature of the world trading system has been the export of raw commodities from developing economies to developed economies while manufactured commodities from the latter found their way to the former. Up to around 1970. major developed countries experienced three decades of economic growth and consequently a steady development of trade. However, developing countries were unable to fully benefit from this trade growth because of their structural position as suppliers of cheap raw material.

Since the early 1970s, the world economic scene has been disrupted by major upheavals. The International Monetary System, based on the Bretton Woods Agreement, collapsed and plunged the world financial system into instability. The two oil shocks in the early 1970s retarded economic growth in most developed countries and fuelled inflation. Developed countries gradually resorted to protectionism and developing countries whose economies were already lagging due to low prices for their primary raw materials deteriorated further. Consequently, developing countries gradually increased their attention to other developing countries as trading partners and the concepts of collective self reliance among developing countries or South-South co-operation or ECDC (Economic Co-operation among Developing countries) emerged.

South-South co-operation has been often cited as a guaranteed path for economic development. According to Sanjaya Lai, “The large volume and rising share of South- South trade now coincides with continuing stagnation in demand by the North, and widespread protectionist pressures against manufactures of major export interest to the South. Thus, self-sustaining growth in the South needs to be based increasingly on South- South trade.” This article examines co-operation between two regional groups in the south, namely the Association of South East Asian Nations (ASEAN), a well established dynamic set of economies and the South Asian Association for Regional Co-operation (SAARC) in the trade of primary commodities as a component of South-South co-operation.

One may wonder at the rationale behind bringing these two groups together, as there are glaring differences between them. Tables 1.1 and 1.2 demonstrate the basic economic indicators for countries within the two groups.