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WORLD TRADE ORGANIZATION:

The WTO currently has 159 members(almost all of the 123 nations participating in the Uruguay

Round signed on at its foundation, almost all of the rest of the GATT members followedand 29

others became WTO observers and subsequently got membership). The 28 states of theEuropean

Union are dually represented, as the EU is a full member of the organization.

Advantages and Disadvantages of WTO

Advantages:

- The WTO is a forum which discusses the differences trade between members.

- Is Transparency and predictability Establish a system of trade rules between countries.

- The WTO makes more efficient the specialization of a country with a product, getting better

advantages.

- Help to balance the trade between countries.

- Encourages the stability of the negotiations and helps the development of a country.- Try to balance opportunities for all countries.

- Dont allow that developed countries trample on less develop countries.

Disadvantages:

- The WTO is fundamentally Undemocratic.

- Industrialized countries benefit more than poor countries.

- Try to monopolize all basic services.

- Developed countries have an advantage over developing countries.

- Don't allow the participation of developing countries.

EUROPEAN UNION:

Member States:

. It has 28 member states that are located in Europe.

Belgium, Bulgaria, Croatia, Cyprus, Denmark, Estonia, Finland, France, Germany, Greece,Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherland, Poland, Portugal,Slovakia, Romania, Slovenia, Spain, Sweden, United Kingdom,Czech Republic.

Advantages of EU:

1. Freedom of people's movement - you can travel, live and work in any EU country without the

restrictions.

2. Single market: there are no import/export taxes while trading between the member states.

3. Subsidies for farming, or on some occasions - for not farming.

http://en.wikipedia.org/wiki/European_Unionhttp://en.wikipedia.org/wiki/European_Unionhttp://www.worldbank.org/content/dam/Worldbank/document/eca/Czech%20Republic.pdfhttp://www.worldbank.org/content/dam/Worldbank/document/eca/Czech%20Republic.pdfhttp://en.wikipedia.org/wiki/European_Unionhttp://en.wikipedia.org/wiki/European_Union

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4. Common rules for competition in the union enhance the economy, free trade and control the

creation of monopolies.

5. The creation of single currency increases a stability of countries. As we could see from the

current crisis, the mechanism of helping countries in problem -is slow, but works.

Disadvantages:

1. The countries are losing a part of their national identity.

2. The huge economical difference between old members and new member states (excluding

southern countries) force the rich member states like Germany, to pay for the economical

mistakes of other countries.

3. The process of legislation in EU is extremely complicated, slow and inflexible, as a result the

EU parliament and Commission is usually late to solve urgent issues.

4. The institutions of EU aren't formed in a democratic way, as only the EU parliament is elected

directly by the European. Nobody knows the accountability of Commission, ECB.5. The weak strategy on foreign policy keeps EU away from important players in international

arena, like China, USA and etc.

ASIAN FREE TRADE AREA:

The ASEAN Heads of State and Government decided to establish an ASEAN Free Trade Area or

AFTA in 1992. The objective of AFTA is to increase the ASEAN regions competitive

advantage as a production base geared for the world market.

Advantages:

- The elimination of tariffs should result in product price reductions throughout ASEAN - Encouraging higher market competition- Help ASEAN countries' products gain access to a regional market that incorporates manysubstantial advantages, e.g. a population of more than 580 million, $1.5 trillion gross

domestic product, convenient transport systems, huge international trade worth $1.7 trilliona year, and foreign investment of $60 billion- Consumers will benefit from cheaper prices of goods given lower tariffs on a host of raw

materials used by the region's producers.- Some of processing factories are expected to enjoy cheaper imported raw materials in the

face of the tariff elimination, cutting their production costs - ASEAN will be integrated into a single market which is an important point because the

market will be stronger and larger with a high population- the export and investment sectors will generate higher potential in the long term

Disadvantages of AFTA for ASEAN Members

AFTA, or the ASEAN Free Trade agreement, prove that is beneficial to all the ASEANcountries. However, there are pros and cons of this agreement. The main disadvantage of AFTA

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is the common external tariff or the CEPT. This tariff is not applicable on all import goods.There is a charge or tariff imposed on the imported goods, which is not beneficial from the pointof view of customer. The goods that are imported from outside the non-participating ASEANcountries are heavily taxed.

With the larger market size, consumers in ASEAN are now offered a wider variety of qualitygoods produced regionally at lower prices. However, there is increasing competition fordomestic industries for certain products, due to the liberalized market. This could be illustratedfrom the impact of implementation of AFTA on Malaysias automobile industry. Previously,Malaysia used local policies and charged high import duty on import cars to protect nationalcars, domestic assemblers and component parts makers. With introduction of AFTA, tariffs at 20% and below will be reduced to 0-5 % within 7 years (effective by 1 January 2000). It means thatall trade barriers will be removed and these have negative implications for future development oflocal automotive industry. As we know, last time people buy national cars because its cheaper

than import cars, but with the reduction of tariff, price for import cars is almost the same asnational cars. Thus, with the apprehension in minds that import cars are high class and quality

assurance, Malaysians prefer to buy foreign cars with only a slightly higher price. Firms that aresmall and inefficient in operation will collapse because cannot compete with others.

All non-tariff barriers must removed parallel on products whose tariffs are being reduced. Thispolicy has been carried out to prevent recurrence of non-tariff barriers in products facing tariffreduction under CEPT Scheme. It means that products which were previously under quotarestrictions or import ban, in order to protect local good, is no more protected. In this context, allprotection rules and policies are removed, such as AP, quota system and monopoly status. Thecountries no more competitive advantage when all products are equal from quality and price.

Implementation could cause declined competitiveness of traditional export industries. The

problems are more critical in the CLMV (Cambodia, Laos, Myanmar and Vietnam). Thecountries are facing problems such as lack of adequately trained and skilled human resources inall areas of activities and sectors. This deficiency is pervasive. Moreover, with the rapidtechnological advance, many traditional industries in the ASEAN countries especially CLMVbecome obsolete. The technologies used cannot catch up with the pace of development of othermore developed countries. Furthermore, there is apprehension in the minds of many thatproducts from CLMV countries are relatively low quality from their more well-to-do neighborssuch as Malaysia, Singapore which will result in collapse of the nascent manufacturing sector.

Very recently, ASEAN abolished nearly sixty-three percent of the duty charges on almost all theproducts in intra-ASEAN trade, or trading among participating Asian countries. The import taxesand duty charges have been cancelled on a number of common goods to facilitate the tradeprocesses. Anyway, some industries that have been exempted from this rule are rice, tropicalfruits, firearms, tobacco, sugar, and liquor. By excluding these industries, AFTA is having anegative impact on the local farmers in different Asian countries who are trying to keepmentioned industries alive.

AFTA-CEPT scheme also said to bring negative impacts on food security in and out of thecountry. It can be proved when AFTA reduced the tariffs on thousands of ASEAN products to

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between zero and 5% from Jan 1 this year. As one of the world's major farm goods exporters,Thailand is particularly concerned about the tariff cuts on 23 farm items. The CommerceMinistry expects half of the 23 farm product to suffer a negative impact from AFTA, includinggarlic, onions, rice, tobacco, maize and palm oil. These impacts range from an influx of cheapproduce from neighboring countries to the mixing of poor-quality imported goods with high-

quality farm products produced in Thailand. Organic farmer Decha Siripat, director of the KhaoKwan Foundation, said the government could safeguard Thai farmers from AFTA simply bysolving existing problems they had faced for years. The most worrying problem was widespreaduse of farm chemicals and fertilizers which are expensive and harm farmers' health and theenvironment.

In export terms, ASEAN countries will gain an estimated US$3-4bilion from liberation, butbenefits from AFTA will be distributed unevenly throughout region. Although industries whichadjust quickly enough will benefit from enlarged potential market in Asean, but industries whichare slower to adjust will suffer because import penetration will be unstoppable. (Source: Aseanfree trade agreement, implications and future directions). As we know, removed barriers of entry

and tariff reduction cause certain industries facing reduced competitive advantage. The industriesneed to make changes to adapt to the new business environment, such as tight cost control,efficient operating or cutting costs to achieve cost leadership. Those industries that are slow inresponse or not good in strategy management will be lag far behind and maybe will quit from themarket.

Even though we can said that cooperation through AFTA-CEPT would lead an increase in tradeefficiency and secure a more economical allocation of resources, but we must realize thatactually AFTA involves 10 countries with different background of economics, thus it facesproblems in securing internal implementation. For example, each member countries are clearerof their own large external seeking than it is about its internal objectives as well as retains theright to establish its own separate protection against imports from the rest of the world. They alsohave their specific sectors to be protected. Examples are the automobile industry for Malaysia,machinery and electrical appliances sectors in Brunei, chemicals sector in Indonesia, textilessectors in the Philippines, and vehicles sectors in Thailand. Thus those products are underTemporary Exclusions, the country itself may not ready to include some sensitive products in

the CEPT scheme and would like to exclude it on a temporary period. Within the currentframework of AFTA, each nation is acted as individualistic rather than collaborative orcomplementary with one another. This non-collective planning and strategies among ASEANmembers raises the possibilities of a particularly dark scenario trade deflection to take place.With the persistence of this unhealthy trend not only makes ASEAN as a whole might not gaincollectively from AFTA, indeed all of them might be worse off.