Country asymmetries, endogenous product choice and the speed of trade liberalization

In a world with two countries which differ in size, we study theimpact of (the speed of) trade liberalization on firms' profitsand total welfare of the countries involved. Firms correctlyanticipate the pace of trade liberalization and take it intoaccount when deciding on their product choices, which areendogenously determined at the beginning of the game. Competitionin the marketplace then occurs either on quantities or on prices.As long as the autarkic phase continues, local firms are nationalmonopolists. When trade liberalization occurs, firms compete in aninternational duopoly. We analyze trade effects by using twodifferent models of product differentiation. Across all thespecifications adopted (and independently of the price v. quantitycompetition hypothesis), total welfare always unambiguously riseswith the speed of trade liberalization: Possible losses by firmsare always outweighed by consumers' gains, which come under theform of lower prices, enlarged variety of higher average qualitiesavailable. The effect on profits depends on the type of industryanalyzed. Two results in particular seem to be worth of mention.With vertical product differentiation and fixed costs of qualityimprovements, the expected size of the market faced by the firmsdetermines the incentive to invest in quality. The longer the periodof autarky, the lower the possibility that the firm from the smallcountry would be producing the high quality and be the leader in theinternational market when it opens. On the contrary, when trade opensimmediately, national markets do not play any role and firms fromdifferent countries have the same opportunity to become the leader.Hence, immediate trade liberalization might be in the interest ofproducers in the small country. In general, the lower the size of thesmall country, the more likely its firm will gain from tradeliberalization. Losses from the small country firm can arise when itis relegated to low quality good production and the domestic marketsize is not very small. With horizontal product differentiation (thehomogeneous good case being a limit case of it when costs ofdifferentiation tend to infinity), investments in differentiationbenefit both firms in equal manner. Firms from the small country do notrun the risk of being relegated to a lower competitive position undertrade. As a result, they would never lose from it. Instead, firms fromthe large country may still incur losses from the opening of trade whenthe market expansion effect is low (i.e. when the country is very largerelative to the other).

Openness, government size and the terms of trade

This paper investigates the relationship between trade openness and the size of government, both theoretically and empirically. We show that openness can increase the size of governments through two channels: (1) a terms of trade externality, whereby trade lowers the domestic cost of taxation and (2) the demand for insurance, whereby trade raises risk and public transfers. We provide a unified framework for studying and testing these two mechanisms. First, we show how their relative strength depends on a key parameter, the elasticity of substitution between domestic and foreign goods. Second, while the terms of trade externality leads to inefficiently large governments, the increase in public spending due to the demand for insurance is optimal. We show that large volumes of trade may result in welfare losses if the terms of trade externality is strong enough while small volumes of trade are always beneficial. Third, we provide new evidence on the positive association between openness and the size of government and test whether it is consistent with the terms of trade externality or the demand for insurance. Our findings suggest that the positive relationship is remarkably robust and that the terms of trade externality may be the driving force behind it, thus raising warnings that globalization may have led to inefficiently large governments.

The Smiling Project: development of a new program for gait and balance training

Introduction: The SMILING project, a multicentric project fundedby the European Union, aims to develop a new gait and balance trainingprogram to prevent falls in older persons. The program includes the"SMILING shoe", an innovative device that generates mechanical perturbationwhile walking by changing the soles' inclination. Induced perturbationschallenge subjects' balance and force them to react to avoidfalls. By training specifically the complex motor reactions used to maintainbalance when walking on irregular ground, the program will improvesubjects' ability to react in situation of unsteadiness and reduce theirrisk of falling. Methods: The program will be evaluated in a multicentric,cross-over randomized controlled trial. Overall, 112 subjects (aged≥65 years, ≥1 falls, POMA score 22-26/28) will be enrolled. Subjectswill be randomised in 2 groups: group A begin the training with active"SMILING shoes", group B with inactive dummy shoes. After 4 weeksof training, group A and B will exchange the shoes. Supervised trainingsessions (30 minutes twice a week for 8 weeks) include walkingtasks of progressive difficulties.To avoid a learning effect, "SMILINGshoes" perturbations will be generated in a non-linear and chaotic way.Gait performance, fear of falling, and acceptability of the program willbe assessed. Conclusion: The SMILING program is an innovative interventionfor falls prevention in older persons based on gait and balancetraining using chaotic perturbations. Because of the easy use of the"SMILING shoes", this program could be used in various settings, suchas geriatric clinics or at home.

Negative impact of hypocaloric feeding and energy balance on clinical outcome in ICU patients

Résumé Introduction : Les patients nécessitant une prise en charge prolongée en milieu de soins intensifs et présentant une évolution compliquée, développent une réponse métabolique intense caractérisée généralement par un hypermétabolisme et un catabolisme protéique. La sévérité de leur atteinte pathologique expose ces patients à la malnutrition, due principalement à un apport nutritionnel insuffisant, et entraînant une balance énergétique déficitaire. Dans un nombre important d'unités de soins intensifs la nutrition des patients n'apparaît pas comme un objectif prioritaire de la prise en charge. En menant une étude prospective d'observation afin d'analyser la relation entre la balance énergétique et le pronostic clinique des patients avec séjours prolongés en soins intensifs, nous souhaitions changer cette attitude et démonter l'effet délétère de la malnutrition chez ce type de patient. Méthodes : Sur une période de 2 ans, tous les patients, dont le séjour en soins intensifs fut de 5 jours ou plus, ont été enrôlés. Les besoins en énergie pour chaque patient ont été déterminés soit par calorimétrie indirecte, soit au moyen d'une formule prenant en compte le poids du patient (30 kcal/kg/jour). Les patients ayant bénéficié d'une calorimétrie indirecte ont par ailleurs vérifié la justesse de la formule appliquée. L'âge, le sexe le poids préopératoire, la taille, et le « Body mass index » index de masse corporelle reconnu en milieu clinique ont été relevés. L'énergie délivrée l'était soit sous forme nutritionnelle (administration de nutrition entérale, parentérale ou mixte) soit sous forme non-nutritionnelle (perfusions : soluté glucosé, apport lipidique non nutritionnel). Les données de nutrition (cible théorique, cible prescrite, énergie nutritionnelle, énergie non-nutritionnelle, énergie totale, balance énergétique nutritionnelle, balance énergétique totale), et d'évolution clinique (nombre des jours de ventilation mécanique, nombre d'infections, utilisation des antibiotiques, durée du séjour, complications neurologiques, respiratoires gastro-intestinales, cardiovasculaires, rénales et hépatiques, scores de gravité pour patients en soins intensifs, valeurs hématologiques, sériques, microbiologiques) ont été analysées pour chacun des 669 jours de soins intensifs vécus par un total de 48 patients. Résultats : 48 patients de 57±16 ans dont le séjour a varié entre 5 et 49 jours (motif d'admission : polytraumatisés 10; chirurgie cardiaque 13; insuffisance respiratoire 7; pathologie gastro-intestinale 3; sepsis 3; transplantation 4; autre 8) ont été retenus. Si nous n'avons pu démontrer une relation entre la balance énergétique et plus particulièrement, le déficit énergétique, et la mortalité, il existe une relation hautement significative entre le déficit énergétique et la morbidité, à savoir les complications et les infections, qui prolongent naturellement la durée du séjour. De plus, bien que l'étude ne comporte aucune intervention et que nous ne puissions avancer qu'il existe une relation de cause à effet, l'analyse par régression multiple montre que le facteur pronostic le plus fiable est justement la balance énergétique, au détriment des scores habituellement utilisés en soins intensifs. L'évolution est indépendante tant de l'âge et du sexe, que du status nutritionnel préopératoire. L'étude ne prévoyait pas de récolter des données économiques : nous ne pouvons pas, dès lors, affirmer que l'augmentation des coûts engendrée par un séjour prolongé en unité de soins intensifs est induite par un déficit énergétique, même si le bon sens nous laisse penser qu'un séjour plus court engendre un coût moindre. Cette étude attire aussi l'attention sur l'origine du déficit énergétique : il se creuse au cours de la première semaine en soins intensifs, et pourrait donc être prévenu par une intervention nutritionnelle précoce, alors que les recommandations actuelles préconisent un apport énergétique, sous forme de nutrition artificielle, qu'à partir de 48 heures de séjour aux soins intensifs. Conclusions : L'étude montre que pour les patients de soins intensifs les plus graves, la balance énergétique devrait être considérée comme un objectif important de la prise en charge, nécessitant l'application d'un protocole de nutrition précoce. Enfin comme l'évolution à l'admission des patients est souvent imprévisible, et que le déficit s'installe dès la première semaine, il est légitime de s'interroger sur la nécessité d'appliquer ce protocole à tous les patients de soins intensifs et ceci dès leur admission. Summary Background and aims: Critically ill patients with complicated evolution are frequently hypermetabolic, catabolic, and at risk of underfeeding. The study aimed at assessing the relationship between energy balance and outcome in critically ill patients. Methods: Prospective observational study conducted in consecutive patients staying 5 days in the surgical ICU of a University hospital. Demographic data, time to feeding, route, energy delivery, and outcome were recorded. Energy balance was calculated as energy delivery minus target. Data in means+ SD, linear regressions between energy balance and outcome variables. Results: Forty eight patients aged 57±16 years were investigated; complete data are available in 669 days. Mechanical ventilation lasted 11±8 days, ICU stay 15+9 was days, and 30-days mortality was 38%. Time to feeding was 3.1 ±2.2 days. Enteral nutrition was the most frequent route with 433 days. Mean daily energy delivery was 1090±930 kcal. Combining enteral and parenteral nutrition achieved highest energy delivery. Cumulated energy balance was between -12,600+ 10,520 kcal, and correlated with complications (P<0.001), already after 1 week. Conclusion: Negative energy balances were correlated with increasing number of complications, particularly infections. Energy debt appears as a promising tool for nutritional follow-up, which should be further tested. Delaying initiation of nutritional support exposes the patients to energy deficits that cannot be compensated later on.

Speed-cohesion trade-offs in collective decision making in ants and the concept of precision in animal behaviour

In decision making, speed-accuracy trade-offs are well known and often inevitable because accuracy depends on being well informed and gathering information takes time. However, trade-offs between speed and cohesion, that is the degree to which a group remains together as a single entity, as a result of their decision making, have been comparatively neglected. We combine theory and experimentation to show that in decision-making systems, speed-cohesion trade-offs are a natural complement to speed-accuracy trade-offs and are therefore of general importance. We then analyse the decision performance of 32 rock ant, Temnothorax albipennis, colonies in experiments in which accuracy of collective decision making was held constant, but time urgency varied. These experiments reveal for the first time an adaptive speed-cohesion trade-off in collective decision making and how this is achieved. In accord with different time constraints, colonies can decide quickly, at the cost of social unity, or they can decide slowly with much greater cohesion. We discuss the similarity between cohesion and the term precision as used in statistics and engineering. This emphasizes the generality of speed versus cohesion/precision trade-offs in decision making and decision implementation in other fields within animal behaviour such as sexually selected motor displays and even certain aspects of birdsong. We also suggest that speed versus precision trade-offs may occur when individuals within a group need to synchronize their activity, and in collective navigation, cooperative hunting and in certain escape behaviours.

Balancing knowledge sharing and protection in collaborative innovation - The roles and dynamics of contracts, IPR's and trust

Pro-gradu tutkielman tavoitteena on tutkia, miten yritykset tasapainoilevat tiedon jakamisen ja suojaamisen välillä innovaatioyhteistyöprojekteissa, ja miten sopimukset, immateriaalioikeudet ja luottamus voivat vaikuttaa tähän tasapainoon. Yhteistyössä yritysten täytyy jakaa tarpeellista tietoa kumppanilleen, mutta toisaalta niiden täytyy varoa, etteivät ne menetä ydinosaamiseensa kuuluvaa tietoa ja kilpailuetuaan. Yrityksillä on useita keinoja tietovuodon estämiseen. Tutkielmassa keskitytään patenttien, sopimusten ja liikesalaisuuksien käyttöön tietoa suojaavina mekanismeina. Kyseiset suojamekanismit vaikuttavat luottamukseen kumppaneiden välillä, ja täten myös näiden halukkuuteen jakaa tietoa kumppaneilleen. Jos kumppanit eivät jaa tarpeeksi tietoa toisilleen, voi yhteistyö epäonnistua. Sopimusten, immateriaalioikeuksien ja luottamuksen rooleja ja vuorovaikutusta tutkitaan kahdenvälisissä yhteistyöprojekteissa. Tutkielmassa esitellään neljä case-esimerkkiä, jotka on koottu suomalaisen metsätoimialan yrityksen haastatteluista.

Solid and liquid biofuels markets in Finland - a study on international biofuels trade

This study considered the current situation of solid and liquid biofuels markets and international biofuels trade in Finland and identified the challenges ofthe emerging international biofuels markets for Finland. The fact that industryconsumes more than half of the total primary energy, widely applied combined heat and power production (CHP) and a high share of biofuels in the total energy consumption are specific to the Finnish energy system. One third of the electricity is generated in CHP plants. As much as 27% of the total energy consumption ismet by using wood and peat, which makes Finland the leading country in the use of biofuels. Finland has made a commitment to maintain greenhouse gas emissions at the 1990 level at the highest during the period 2008-2012. The Finnish energypolicy aims to achieve the target, and a variety of measures are taken to promote the use of renewable energy sources and especially wood fuels. In this study, the wooden raw material streams of the forest industry were included the international biofuels trade in addition to biomass streams that are traded for energy production. In 2004, as much as 45% of the raw wood importedinto Finland ended up in energy production. The total international trading of biofuels was evaluated at 72 PJ, of which the majority, 58 PJ, was raw wood. About 22% of wood based energy in Finland originated from imported raw wood. Tall oil and wood pellets composed the largest export streams of biofuels. The annual turnover of international biofuels trade was estimated at about ¤ 90 million fordirect trade and at about ¤ 190 million for indirect trade. The forest industryas the biggest user of wood, and the producer and user of wood fuels has a central position in biomass and biofuels markets in Finland. Lately, the international aspects of Finnish biofuels markets have been emphasised as the import of rawwood and the export of wood pellets have increased. Expanding the use of biofuels in the road transportation sector would increase the international streams ofbiofuels in Finland. In coming years, the international trading of biomass for energy purposes can be expected to continue growing.

Task Trade and its determinants in Spain: a national and regional analysis

Globalisation and technological advances have made possible to offshore specific productive tasks (that do not require physical proximity to the actual location of the work unit) to foreign countries where these are usually performed at lower costs. We analyse the effect of task trade (i.e. task offshorability) on Spanish regional and national employment levels correlating a newly built index of task-delocalisation index to key variables such as the region’s wealth, the worker’s age and level of education, the importance of the service sector and the technological level of the economic activities undertaken in that particular geographical area. We conclude that approximately 25 per cent of Spanish occupations are potentially affected by task trade / offshoring and that this is likely to benefit Spanish economy (and the performance of specific regions, categories of workers and sectors) being Spain a potential recipient of tasks offshored from abroad. Also we obtain that Spain’s trade in tasks correlates strongly with the above variables, presenting significant regional differences.

Traffic flow development at North European company level with respect of China and Russia

The aim of the thesis is to analyze traffic flows and its development from North European companies` point of view to China and Russia using data from logistics questionnaire. Selected North European companies are large Finnish and Swedish companies. The questionnaire was sent via email to the target group. The study is based on the answers got from respondent companies from years 2006, 2009 and 2010. In the thesis Finnish Talouselämä newspaper and Swedish Affärsdata are used as a database to find the target companies for the survey. Respondents were most often logistics managers in companies. In the beginning of the thesis concepts of transportation logistics is presented, including container types, trade terms, axel loads in roads and in railways. Also there is information about warehousing types and terminals. After that, general information of Chinese and Russian transportation logistics is presented. Chinese and Russian issues are discussed in two sections. In both of them it is analyzed economic development, freight transport and trade balance. Some practical examples of factory inaugurations in China and Russia are presented that Finnish and Swedish companies have completed. In freight transport section different transportation modes, logistics outsourcing and problems of transportation logistics is discussed. The results of the thesis show that transportation flows between Europe and China is changing. Freight traffic from China to European countries will strengthen even more from the current base. When it comes to Russia and Europe, traffic flows seem to be changing from eastbound traffic to westbound traffic. It means that in the future it is expected more freight traffic from Russia to Europe. Some probable reasons for that are recent factory establishments in Russia and company interviews support also this observation. Effects of the economic recession are mainly seen in the lower transportation amounts in 2009.

Inclusion or Exclusion? Trade union strategies and Labor migration

Inclusion or Exclusion? Trade Union Strategies and Labor Migration This research identified and analyzed immigration-related strategies of the Finnish Construction Trade Union (FCTU) and the Service Union United (SUU); e.g. how the unions react to labor immigration, whether unions seek to include migrants in the unions, and what is migrants’ position in the unions. The two unions were chosen as the focus of the research because the workforce in the sectors they represent is migrant-dense. The study also analyzed the experiences that migrants who work in these sectors have with trade unions. The Estonian labor market situation –including the role of Estonian trade unions– was also examined as it has a considerable impact on the operating environment of the FCTU. The results of the study indicate that immigration is a contradictory issue for both unions. On the one hand, they strive to include migrants as trade union members and to defend migrants’ labor rights. On the other hand, they, together with their umbrella organization the Central Organisation of Finnish Trade Unions (SAK), seek to prevent labor immigration from outside the EU and EEA countries. They actively defend current labor immigration restrictions by drawing atten- tion to high unemployment figures and to the breaches of working conditions migrants encounter. In contrast, the employer organizations promote a more liberal state policy on labor immigration because they see it as a boost for business. Both the unions and the employer organizations ground their arguments on national interest. However, the position of the trade union movement is not uniform: unions belonging to the Confederation of Unions for Professionals and Managerial Staff in Finland (Akava) embrace more liberal labor immigration stances than the SAK. A key trade union strategy is to try to guarantee that migrants’ working condi- tions do not differ from those of the natives. The FCTU and the SUU inform migrants about Finnish collective agreements and trade union membership in the most common migrant languages. This is important for the unions because it is not in their interest that migrants’ working conditions are undercut. The interviewed migrants said that natives had more negotiating power with employers, which is often negatively portrayed in migrants’ working conditions. Migrants perceive that trade unions have an important role in protecting their working conditions. However, they stressed that migrants’ knowledge of unions is often very limited. The number of migrants in both two unions studied here is increasing. Espe- cially in the SUU, a considerable proportion of the new members are migrants. The FCTU is in a more challenging situation than the SUU because migrant construc- tion workers often work only for short periods in Finland and are consequently not interested in becoming union members. The unions’ strategies partly differ: the FCTU was the first Finnish trade union to establish a trade union branch/lo- cal for migrant members. The goal is to facilitate migrants’ inclusion in the union and to highlight the specific problems they face. The SUU, for its part, insists that such a special strategy would exclude migrants within the union organization. Despite the unions’ strategies, migrants are still underrepresented as union members and officials, which some of the interviewed migrants saw as a problem. Immigrants’ perception of trade unions was pragmatic: they had joined unions when membership yielded concrete benefits. In spite of the unions’ strategies, migrants –and temporary migrants– encoun- ter specific problems in terms of working conditions. Both unions demand more state intervention to protect migrants’ labor rights because overseeing working conditions consumes union resources. However, without the unions’ intervention, these problems would be more common than is currently the case. For instance, some of the interviewed migrants had received trade union assistance in claim- ing unpaid wages. The study demonstrated with the help of building on Walter Korpi’s power resources theory, that immigration is a power resource issue for the unions: suc- cessful immigration-related strategies strengthen unions –and vice versa. The research also showed how the unions’ operating environments constrain and enable their immigration-related strategies. This study has illuminated a previously ignored dimension: the immigrant- inclusive strategies of the Finnish trade unions. The research material consists of 78 qualitative interviews, observation in trade union events, and trade unions’ and employer organizations’ public state- ments.

The effect of a weighted-vest strength and balance training program on obstructed walking in postmenopausal women

SUMMARY Background: Age related declines in lower extremity strength have been associated with impaired mobility and changes in gait patterns, which increase the likelihood of falls. Since community dwelling adults encounter a wide range of locomotor challenges including uneven and obstmcted walking surfaces, we examined the effect of a strength 11 and balance exercise program on obstructed walking in postmenopausal women. Objectives: This study examined the effect of a weighted-vest strength and balance exercise program on adaptations of the stance leg during obstacle walking in postmenopausal women. Methods: Eighteen women aged 44-62 years who had not engaged in regular resistance training for the past year were recruited from the St. Catharines community to participate in this study. Eleven women volunteered for an aerobic (walking), strength, and balance training program 3 times per week for 12 weeks while 7 women volunteered as controls. Measurements included: force platform dynamic balance measure of the center of pressure (COP) and ground reaction forces (GRFs) in the stance leg while going over obstacles of different heights (0,5, 10,25 and 30 cm); and isokinetic strength measures of knee and ankle extension and flexion. Results: Of the 18 women, who began the trial, 16 completed it. The EX group showed a significant increase of 40% in ankle plantar flexion strength (P < 0.05). However, no improvements in measures of COP or GRFs were observed for either group. Failure to detect any changes in measures of dynamic balance may be due to small sample size. Conclusions: Postmenopausal women experience significant improvements in ankle strength with 12 weeks of a weighted-vest balance and strength training program, however, these changes do not seem to be associated with any improvement in measures of dynamic balance.

Benefits, challenges, and limitations of fair trade as a social justice movement

This thesis answers some important questions about how Fair Trade is experienced and perceived by some Northern sellers, consumers, activists, advocates, practitioners, and an importer. As it relates to sellers, I focus only on small scale independent businesses (i.e. I do not include large corporate businesses in my interview sample). Fair Trade works to establish a dignified livelihood for many producers in the South. Some of the most important actors in the Fair Trade movement are the people who buy, sell, and/or advocate for Fair Trade in the North. Fair Trade is largely a consumer movement which relies on the purchase of Fair Trade products. Without consumers purchasing Fair Trade products, retailers providing the products for sale, and activists raising awareness of Fair Trade, the movement, as it is presently constituted, would be non-existent. This qualitative research is based on 19 in-depth i.nterviews with nine interviewees involved with Fair Trade in Canada. I focus on benefits, challenges, and limitations of Fair Trade in the context of their involvement with it. I describe and analyze how people become involved with Fair Trade, what motivates them to do so, what they hope to achieve, and the benefits of being involved. I also describe and analyze how people understand and deal with any challenges and limitations associated with their involvement with Fair Trade. I also explore whether involvement with Fair Trade influences how people think about other products that they purchase and, if so, in what ways. I focus mainly on the commodity of coffee, but my discussion is not limited to this single commodity. Interviewees' experiences with and participation in Fair Trade vary in terms of their level of involvement and interest in the broader Fair Trade movement (as opposed to just participating in the market component). This research reveals that while Fair Trade is a small movement, sellers, consumers, and activists have had much success in the advancement of Fair Trade. While challenges have not deterred interviewees from continuing to participate in Fair Trade, analysis and explanation of such challenges provides the opportunity for Fair Trade practitioners to develop effective solutions in an effort to meet the needs of various Fair Trade actors.

The effect of a segmental, localized lower limb cooling protocol on muscular strength and balance

The human neuromuscular system is susceptible to changes within the thermal environment. Cold extrinsic temperatures can significantly reduce muscle and nervous system function and communication, which can have consequences for motor performance. A repeated measures design protocol exposed participants to a 12°C cold water immersion (CWI) up to the ankle, knee, and hip to determine the effect that reduced skin and muscle temperature had on balance and strength task execution. Although a linear reduction in the ability to perform balance tasks was seen from the control condition through to the hip CWI, results from the study indicated a significant reduction in dynamic balance (Star Excursion Balance Test reach distance) performance from only the hip CWI (P<0.05). This reduced performance could have been due to an increase in joint stiffness, increased agonist-antagonist co-contraction, and/or reduced isokinetic muscular strength. Reduced physical performance due to cold temperature could negatively impact outdoor recreational athletics.

Budget-Balance, Fairness and Minimal Manipulability

A common real-life problem is to fairly allocate a number of indivisible objects and a fixed amount of money among a group of agents. Fairness requires that each agent weakly prefers his consumption bundle to any other agent’s bundle. Under fairness, efficiency is equivalent to budget-balance (all the available money is allocated among the agents). Budget-balance and fairness in general are incompatible with non-manipulability (Green and Laffont, 1979). We propose a new notion of the degree of manipulability which can be used to compare the ease of manipulation in allocation mechanisms. Our measure counts for each problem the number of agents who can manipulate the rule. Given this notion, the main result demonstrates that maximally linked fair allocation rules are the minimally manipulable rules among all budget-balanced and fair allocation mechanisms. Such rules link any agent to the bundle of a pre-selected agent through indifferences (which can be viewed as indirect egalitarian equivalence).

A Study on India’s Trade Relationship with SAARC Countries with Special Reference to SATA

The present study reveals that there are enormous opportunities for forging closer economic relations among SAARC countries. These opportunities could be fully utilized through the twin processes of trade liberalization and industrial restructuring which are complementary to each other. The SAARC Preferential Trade Arrangement (SAPTA) is the first step in trade liberalization. However, the scope of SAPTA has to be sufficiently widened in order to derive substantial benefits from preferential trading agreements. It is suggested that the SAARC countries adopt a combined approach for tariff elimination, tariff reduction and preferential or concessional tariffs. This process will help in moving quickly towards the creation of a Free Trade Area in the SAARC region. It is necessary to emphasis that, in any regional organization, smaller countries may feel that greater trade co-operation with their larger neighbors may result in larger countries taking over their economies. India occupies 70% of the SAARC region, both geographically and economically, and the remaining 6 nations of the SAARC borders only with India and not with each other. As the biggest, and the most industrialized trading partner among the SAARC countries, India has to recognize that a special responsibility devolves on her and take a lead in making the Regional Economic Co-operation a reality in South Asia.