international economic cooperation and agreement

Chapter No. Page No.

International Business Environment2 96

INTERNATIONAL ECONOMIC COOPERATION AND AGREEMENTS

REGIONAL ECONOMIC INTEGRATION (TRADE BLOC)

ECONOMIC INTEGRATION SCHEMES ALSO REFERRED AS

TRADE BLOCS.

REGIONAL INTEGRATION AGREEMENTS (RIAS).

REGIONAL TRADE AGREEMENTS (RTA).

IS AN IMPORTANT INTERNATIONAL BUSINESS ENVIRONMENT.





MOST COUNTRIES IN THE WORLD ARE THE MEMBERS OF – OR DISCUSSING PARTICIPATION IN – ONE OR MORE TRADE BLOC.AGREEMENTS HAVE BEEN CONCLUDED BETWEEN THE LOW-INCOME AS WELL AS HIGH INCOME COUNTRIES.MORE RECENTLY, STARTING WITH THE NORTH AMERICAN FREE TRADE AREA (NAFTA) – HIGH INCOME AND DEVELOPING COUNTRIES.MORE THAN HALF OF WORLD TRADE NOW OCCURS WITHIN ACTUAL OR PROSPECTIVE TRADE BLOCS.JAPAN AND KOREA ARE TWO NOTABLE EXCEPTIONS TO MEMBERSHIP IN ANY RIA.





RATIONALE / OBJECTIVES

TO OBTAIN ECONOMIC BENEFITS FROM ACHIEVING A MORE EFFICIENT PRODUCTION STRUCTURE BY EXPLOITING ECONOMIES OF SCALE.

TO PURSUE NON – ECONOMIC OBJECTIVES SUCH AS STRENGTHENING POLITICAL AND MANAGING MIGRATION FLOWS.

TO ENSURE INCREASED SECURITY OF MARKET ACCESS FOR SMALLER COUNTRIES BY FORMING REGIONAL TRADING BLOCS WITH LARGER COUNTRIES.

CONT….





RATIONALE / OBJECTIVES

TO IMPROVE MEMBER’S BARGAINING STRENGTH IN MULTILATERAL TRADE NEGOTIATIONS.

TO PROMOTE REGIONAL INFANT INDUSTRIES WHICH CAN NOT BE VIABLE WITHOUT A PROTECTED REGIONAL MARKET.

TO PREVENT FURTHER DAMAGE TO THEIR TRADING STRENGTH.





TYPES OF INTEGRATION

ECONOMIC INTEGRATION IS A GENERAL TERM WHICH COVERS SEVERAL KINDS OF ARRANGEMENTS BY WHICH TWO OR MORE COUNTRIES CAN AGREE TO DRAW THEIR ECONOMIES CLOSER TOGETHER.

ALL OF THE ARRANGEMENTS HAVE ONE COMMON FEATURE, THE USE OF TARIFFS TO DISCRIMINATE AGAINST GOODS PRODUCED BY COUNTRIES NOT PARTY TO THE AGREEMENT.






FREE TRADE AREA: IT IS A GROUPING OF COUNTRIES TO BRING ABOUT FREE TRADE BETWEEN THEM.

CUSTOM UNION: IT ADOPTS A UNIFORM COMMERCIAL POLICY AGAINST THE NON-MEMBERS.

COMMON MARKET: IT ALLOWS FREE MOVEMENT OF LABOUR AND CAPITAL WITHIN THE COMMON MARKET, AND HAVING THE CHARACTERISTICS OF CUSTOM UNION AND FREE TRADE.






ECONOMIC UNION: AN ADVANCE LEVEL OF INTEGRATION. APART FROM SATISFYING THE CONDITIONS OF COMMON MARKET, IT ACHIEVES SOME DEGREE OF HARMONIZATION OF NATIONAL ECONOMIC POLICIES, THROUGH A COMMON CENTRAL BANK, UNIFIED MONETARY AND FISCAL POLICY.

ECONOMIC INTEGRATION: IT IS CHARACTERIZED BY THE COMPLETION OF THE REMOVAL OF ALL BARRIERS TO INTRA-BLOC MOVEMENT OF GOODS AND FACTORS, UNIFICATION OF SOCIAL AND ECONOMIC POLICIES.





THEORY OF CUSTOMS UNION

ACCORDING TO GATT, A CUSTOM UNION MEANS THE SUBSTITUTION OF A SINGLE CUSTOMS TERRITORY FOR TWO OR MORE CUSTOMS TERRITORIES. SO THAT:

1. DUTIES AND OTHER RESTRICTIVE REGULATIONS OF COMMERCE ARE ELIMINATED WITH RESPECT TO SUBSTANTIALLY ALL TRADE BETWEEN THE CONSTITUENT TERRITORIES OF THE UNION.

2. SUBSTANTIALLY THE SAME DUTIES AND OTHER REGULATIONS OF COMMERCE APPLIED BY EACH OF THE MEMBERS OF THE UNION TO THE TRADE TERRITORIES NOT INCLUDED IN THE UNION FROM NON-MEMBERS.





A CUSTOMS UNION HAS:1. STATIC EFFECTS: IT INVOLVES A REALLOCATION OF

RESOURCES AMONG EXISTING INDUSTRIES, USING EXISTING SUPPLIES OF THE FACTORS AND EXISTING TECHNOLOGY.THERE ARE TWO TYPES OF STATIC EFFECTS, PRODUCTION EFFECTS AND CONSUMPTION EFFECTS.

2. DYNAMIC EFFECTS: IT REFERS TO CERTAINDEVELOPMENTS LIKE INCREASED COMPETITION, STIMULUS TO TECHNOLOGICAL CHANGES, STIMULUS TO INVESTMENT AND INCREASED ECONOMIES OF SCALE.





PRODUCTION EFFECTS:REFERS TO THE CHANGES IN THE SOURCE OF SUPPLY OR PRODUCTION BASES OF A COMMODITY RESULTING FROM THE FORMATION OF THE CUSTOMS UNION.

CONSUMPTION EFFECTS:1. POSITIVE CONSUMPTION EFFECT. DUE TO INCREASED

EFFICIENCY IN SOURCE ALLOCATION THE REAL INCOME OF THE CONSUMERS WILL INCREASE.

2. NEGATIVE CONSUMPTION EFFECT: DIVERSION OF THE CONSUMER PURCHASES FROM LOW COST OUT SIDE PRODUCERS TO HIGH COST PRODUCERS IN THE CUSTOMS UNION.





EUROPEAN UNION

EUROPEAN ECONOMIC COMMUNITY (EEC)IS ALSO KNOWN AS:

EUROPEAN COMMON MARKET (ECM)EUROPEAN COMMUNITY (EC)EUROPEAN UNION (EU)

EEC WHICH ORIGINALLY COMPRISE SIX NATIONS, BELGIUM, FRANCE, FEDERAL REPUBLIC OF GERMANY, ITALY, LUXEMBOURG AND NETHERLANDS WAS BROUGHT INTO BEING BY THE TREATY OF ROME.





EUROPEAN ECONOMIC COMMUNITYTHE TREATY OF ROME REQUIRED EVERY MEMBER COUNTRY TO:ELIMINATE TARIFFS, QUOTAS AND OTHER BARRIERS ON INTRA-COMMUNITY TRADE.DEVISE A COMMON INTERNAL TARIFF ON IMPORTS FROM THE REST OF THE WORLD.ALLOW THE FREE MOVEMENT OF FACTORS OF PRODUCTION WITHIN THE COMMUNITY.HARMONIES THEIR TAXATION AND MONETARY POLICIES AND SOCIAL SECURITY POLICIES.ADOPT A COMMON POLICY ON AGRICULTURE, TRANSPORT AND COMPETITION IN INDUSTRY.





EC 1992

A DETILED PROGRAMME FOR ATTAINING A SINGLE INTEGRATED MARKET WAS SET FORTH BY THE EC COMMISSION (THE EC’S EXECUTIVE BODY) IN JUNE 1985 IN A WHITE PAPER ENTITLED “COMPLETING THE INTERNAL MARKET”. THE EC COUNCIL (THE EC’S SUPREME DECISION

MAKING BODY ) PROMPTLY COMMITTED THE EC TO CARRY OUT WHITE PAPER PROGRAMME. THIS PROGRAMME WHICH ENVISAGED THE UNIFICATION OF THE ECONOMIES OF THE MEMBER NATIONS INTO A SINGLE MARKET IS EC 92.





EC 1992THE UNIFICATION WOULD LEAD TO THE RESTRUCTURING OF THE ECONOMY OF THE EC RESULTING, IMPROVEMENT IN PRODUCTION, TRADE CREATION, AND INCREASE IN CONSUMPTION.

THE REAL PURPOSE OF THE SINGLE MARKET IS TO BOOST THE COMPETITIVENESS OF EUROPEAN INDUSTRY AGAINST ITS RIVAL, PARTICULARLY USA, JAPAN AND SOUTH-EAST ASIAN NATIONS.

THE BENEFIT OF LIBERALIZATION WILL BE EXTENDED TO NON-EC COUNTRIES PROVIDED THEY RECIPROCATE.





INDO-EU TRADETHE EC, AS A SINGLE UNIT, IS INDIA'S LARGEST PARTNER.LARGEST TRADE PARTNERS OF INDIA HAVE BEEN WEST GERMANY AND THE U. K.WITHIN EU.INDIA’S MAIN EXPORTS TO EC INCLUDE TEXTILE, JUTE, LEATHER AND LEATHER MANUFACTURES, POLISHED DIAMONDS, ENGINEERING GOODS, CHEMICALS, MARINE PRODUCTS. IMPORTS INCLUDES EDIBLE OILS, FERTILIZERS, DAIRY PRODUCTS, STEEL, CAPITAL GOODS, OPTICAL INSTRUMENTS, ALUMINIUM AND COPPER PRODUCTS, PHOTO AND CINEMATOGRAPHIC GOODS.





INDO-EU TRADE

EXPORT PERFORMANCE HAS BEEN REGARDED AS POOR.

SEVERAL FACTORS SUCH AS LACK OF PRICE COMPETITIVENESS, POOR QUALITY, POOR IMAGE, BAD REPUTATION IN DELIVERY SCHEDULE, POOR EXPORT MARKETING SKILL.THESE PROBLEMS INDICATE THE AREA OF CORRECTIVE MEASURES TO IMPROVE EXPORTS. THE EC IS HIGHLY COMPETITIVE MARKET.

UNLESS COMPETITIVENESS MEASURES UPTO THE INTERNATIONAL LEVEL THINGS WILL BECOME MORE DIFFICULT.





INDO-EU TRADE

THE EC IS A VERY POTENTIAL MARKET AND INDIA SHOULD PAY SUFFICIENT ATTENTION TO TAKING ADVANTAGE OF THIS ENLARGING MARKET.

MANY COUNTRIES, INCLUDING JAPAN AND SOUTH-EAST ASIAN COUNTRIES HAVE BEEN TAKING MEASURES TO SET-UP THEIR MANUFACTURING / ASSEMBLING UNITS IN THE COMMUNITY.

INDIA’S ACHIEVEMENT IN THIS DIRECTION HAS BEEN NOT VERY SIGNIFICANT.





IMPLICATIONS OF EURO FOR INDIA.

THE EUROLAND ACCOUNTS FOR ABOUT ONE FIFTH OF INDIA'S FOREIGN TRADE.EURO WILL BENEFIT INDIAN EXPORTS AS PRODUCTS FROM THIS COUNTRY WILL BECOME CHEAPER IN THE EUROLAND.15 PRODUCT GROUPS FOR EXPORTS HAVE A PRICE ELASTICITY WHICH WILL HELP THEM TO CAPTURE A SIGNIFICANT PORTION OF THE EUROPEAN MARKETS WITH LOWER PRICES. THE PRESSURE TO INTRODUCE UNIFORM PRICES WILL COME FROM THE HIGHER END OF DISTRIBUTION CHANNEL AND INDIAN EXPORTERS WILL HAVE TO REDESIGN THEIR EXPORT PRICING STRATEGIES ACCORDINGLY.





NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA)

NAFTA HAD ITS ORIGIN IN THE CANADA - U.S.

FREE TRADE AGREEMENT WHICH BECAME EFFECTIVE ON JANUARY1, 1989.

MEXICO BECAME A MEMBER OF IT.

NAFTA IS A LARGE TRADING BLOC WITH A COMBINED POPULATION AND TOTAL GNP GREATER THAN THE 15 MEMBER EU.

NAFTA COULD FURTHER EXPAND SUBSTANTIALLY BY ADDING MORE COUNTRIES IN THE FUTURE.






NAFTA COVERS THE FOLLOWING AREAS:

MARKET ACCESS.TRADE RULES SERVICES.INVESTMENT. INTELLECTUAL PROPERTY.DISPUTE SETTLEMENT.






NAFTA HAS ACHIEVED SUBSTANTIAL TRADE LIBERALIZATION.

TRADE BETWEEN THE U.S. AND CANADA AND THE U.S. AND MEXICO IS SUBSTANTIAL AND HAS BEEN RISING FAST.

THE TWO TRADING RELATIONSHIP BETWEEN THE UNITED STATES AND CANADA IS THE LARGEST IN THE WORLD.

MEXICO REPLACED JAPAN AS THE SECOND LARGEST MARKET FOR U.S. EXPORTS.






FOREIGN INVESTMENT IN MEXICO HAS RISEN SUBSTANTIALLY SINCE THE AGREEMENT.

COMPANIES FROM OUTSIDE NAFTA HAVE BEEN MAKING LARGE INVESTMENT IN MEXICO TO GAIN A FREE ENTRY TO THE HUGE MARKET.





ECONOMIC INTEGRATION IN DEVELOPING COUNTRIES

ECONOMIC INTEGRATION OF DEVELOPING COUNTRIES HAS BEEN ADVOCATED BY MANY EXPERTS AS A MEANS TO ACCELERATE ECONOMIC DEVELOPMENT AND STRENGTHEN THEIR TRADING AND BARGAINING POWER VIS-A-VIS THE DEVELOPED ECONOMIES.

THE UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT (UNCTAD) HAS FELT THAT REGIONAL ECONOMIC GROUPING, INTEGRATING OR OTHER FORMS OF ECONOMIC COOPERATION SHOULD BE PROMOTED AMONG DEVELOPING COUNTRIES AS A MEANS OF EXPANDING.






THE ASSOCIATION OF SOUTH EAST ASIAN NATIONS (ASEAN) WAS FORMED BY THE BANGKOK DECLARATION 1967 BY FIVE COUNTRIES, VIZ., INDONESIA, MALAYSIA, PHILIPPINES, SINGAPORE AND THAILAND. WITH A VIEW TO ACCELERATE ECONOMIC PROGRESS.

ASEAN DOES NOT FUNCTION AS A REGIONAL TRADE ARRANGEMENT, IT HAS BECOME AN EFFECTIVE INTERLOCUTOR FOR COOPERATION IN ECONOMIC MATTERS AND FOREIGN AFFAIRS WITH OECD.

THE ASEAN NOW CONSTITUTE A LARGER MARKET FOR JAPAN THAN DOES THE UNITED STATES.






THERE IS A STRONG VIEW THAT INDIA SHOULD ALSO INTEGRATE WITH ASEAN.

THE FIRST ASEAN - INDIA SUMMIT HELD IN NOVEMBER 2002 HAS BEEN EXPECTED TO SET THE STAGE FOR INDIA TO MOVE PURPOSEFULLY AHEAD TO ACHIEVE THIS.





SOUTH-SOUTH COOPERATION

AS THE SOUTH COMMISSION POINTS OUT,IT HAS BECOME APPARENT THAT THE DYNAMICS OF ECONOMIC GROWTH IN THE NORTH IS NO LONGER A RELIABLE OR SUFFICIENT MOTOR FOR GENERATING SUSTAINED GROWTH IN THE SOUTH… NEITHER CAN SOUTH RELY ON THE NORTH TO PROVIDE IT WITH TECHNOLOGY ON TERMS AND CONDITIONS THAT SUIT THE SOUTH, OR HELP IT TO GENERATE ITS OWN TECHNOLOGY.





SCOPE OF ECDC

SOUTH-SOUTH COOPERATION CAN PROVIDE IMPORTANT NEW OPPORTUNITIES FOR DEVELOPMENT BASED ON:

GEOGRAPHICAL PROXIMITY.

SIMILARITIES IN DEMAND AND TASTES.

RELEVANCE OF RESPECTIVE DEVELOPMENT EXPERIENCE, KNOW HOW AND SKILL.

AVAILABILITY OF COMPLEMENTARY NATURAL AND FINANCIAL RESOURCES AND MANAGEMENT SKILLS.

ADDITIONAL POSSIBILITIES FOR TRADING ARE ALSO OFFERED BY THE GREATER DIVERSITY IN LEVEL OF DEVELOPMENT.





SCOPE OF ECDC

IT IS IMPORTANT THAT COOPERATION SHOULD NOT ONLY TAKE PLACE BETWEEN GOVERNMENT AGENCIES, TRADING, INDUSTRIAL AND FINANCIAL ENTERPRISES, TRADE UNIONS, RESEARCH ORGANIZATION, NON GOVERNMENTAL ORGANIZATIONS, AND THE MEDIA OF THE SOUTH SHOULD ALL BE ENCOURAGED AND HELPED TO CONTRIBUTE TO THE ADVANCEMENT OF THE COLLECTIVE CAUSE OF THE SOUTH AND ITS SOLIDARITY IN ACTION.





RATIONALE

OBJECTIVES OF SSC:

TO ACCELERATE THE PACE OF DEVELOPMENT.

TO INCREASE ECONOMIC EFFICIENCY.

TO STRENGTHEN THE STATUS OF THE SOUTH VIS-À-VIS THE NORTH.





FUNCTIONAL AREAS OF COOPERATION

FUNCTIONAL AREAS DESERVE PRIORITY AND SUSTAINED ACTION:

FINANCE.TRADE.INDUSTRY AND BUSINESS.SERVICES.SCIENCE AND TECHNOLOGY.ENVIRONMENT AND DEVELOPMENT.FOOD SECURITY.TRANSPORT AND OTHER INFRASTRUCTURAL LINKS.INFORMATION AND COMMUNICATIONS.PEOPLE TO PEOPLE CONTACTS.





SAARC

THE SOUTH ASIAN ASSOCIATION FOR REGIONAL COOPERATION (SAARC) INVOLVING SEVEN COUNTRIES, INDIA, BANGLADESH, NEPAL, BHUTAN, SRI LANKA, AND MALDIVES WAS FORMALLY LAUNCHED IN DECEMBER 1985.

THE FUNDAMENTAL GOAL OF SAARC IS TO ACCELERATE ECONOMIC AND SOCIAL DEVELOPMENT THROUGH OPTIMUM UTILIZATION OF THEIR HUMAN AND MATERIAL RESOURCES.





OBJECTIVES OF SAARC

TO PROMOTE THE WELFARE OF THE PEOPLE OF SOUTH ASIA AND TO IMPROVE THEIR QUALITY OF LIFE.TO ACCELERATE ECONOMIC GROWTH, SOCIAL PROGRESS AND CULTURAL DEVELOPMENT IN THE REGION AND TO PROVIDE ALL INDIVIDUALS THE OPPORTUNITY TO LIVE IN DIGNITY AND REALIZE THEIR FULL POTENTIAL.TO PROMOTE AND STRENGTHEN COLLECTIVE SELF RELIANCE AMONG THE COUNTRIES OF SOUTH ASIA.TO CONTRIBUTE TO MUTUAL TRUST, UNDERSTANDING AND APPRECIATION OF EACH OTHER’S PROBLEMS.

CONT…..





OBJECTIVES OF SAARC

TO PROMOTE ACTIVE COLLABORATION AND MUTUAL ASSISTANCE IN THE ECONOMIC, SOCIAL, CULTURAL, TECHNICAL AND SCIENTIFIC FIELD.TO STRENGTHEN COOPERATION WITH OTHER DEVELOPING COUNTRIES.TO STRENGTHEN COOPERATION AMONG THEMSELVES IN INTERNATIONAL FORUMS ON MATTERS OF COMMON INTERESTS.TO COOPERATE WITH INTERNATIONAL AND REGIONAL ORGANIZATIONS WITH SIMILAR AIMS AND PURPOSES.





SAPTATHE SIXTH SAARC SUMMIT HELD IN COLOMBO STRONGLY MOOTED THE IDEA OF A SAARC PREFERENTIAL TRADING ARRANGEMENT (SAPTA) AND ALL THE FOREIGN MINISTERS OF MEMBER STATES SIGNED THE AGREEMENT. THE BASIC PRINCIPLES OF SAPTA ARE :

OVERALL RECIPROCITY AND MUTUALITY OF ADVANTAGES.STEP-BY-STEP NEGOTIATIONS AND EXTENSION OF PREFERENTIAL TRADE ARRANGEMENT IN STAGES.INCLUSION OF ALL TYPES OF PRODUCTS--- RAW, SEMI –PROCESSED AND PROCESSED.SPECIAL AND FAVOURABLE TREATMENT TO LEAST DEVELOPMENT COUNTRIES (LDCs).





SAPTA

SPECIAL TREATMENT TO LDCs INCLUDE:ALLOWANCE OF FAVOURABLE PERCENTAGE POINTS.APPLICATION OF RELAXED RULES OF ORIGIN.FAVOURABLE TERMS FOR TECHNICAL ASSISTANCE.DUTY FREE ACCESS.DEEPER TARIFF PREFERENCES.REMOVAL OF NON-TARIFF AND PARA-TARIFF BARRIERS.NEGOTIATION OF LONG TERM CONTRACTS TO SUPPORT SUSTAINABLE EXPORTS AND PROVISION OF SPECIAL FACILITIES WITH REGARD TO SHIPPING AND DOCUMENTATION.TRAINING FACILITIES AND SUPPORT TO EXPORT MARKETING.





SAPTA

ALL THE SAARC COUNTRIES HAVE SUBSTANTIALLY REDUCED IN TARIFF AND MODIFIED TARIFF STRUCTURES IN VIEW OF ECONOMIC POLICY REFORMS.TO IMPROVE THE EFFICIENCY OF THE DOMESTIC INDUSTRIES.THIS PROCESS SHOULD HELP THE EXPANSION OF INTRA-REGIONAL TRADE.

THE PRESENCE OF NON-TARIFF BARRIERS IN DIFFERENT FORMS ARE ACTING AS CONSTRAINTS TO REALIZE THE POTENTIAL FOR TRADE EXPANSION.





SAPTA

TODAY ,SAARC COUNTRIES SHARE IN TOTAL WORLD TRADE IS NOT EVEN 1 PER CENT.

THEIR TRADE AMONG THEMSELVES LINGERS BELOW 3 PER CENT OF THEIR TOTAL FOREIGN TRADE.

WHEN COMPARED WITH MORE THAN 60 PER CENT FOR INTRA-EUROPEAN UNION TRADE OF THEIR GLOBAL TRADE AND NEARLY 40 PER CENT FOR NORTH AMERICA AND EAST ASIA, IT IS VERY POOR.





SAPTA

THERE IS A VIEW THAT WHAT IS NEEDED IS A CUSTOMS UNION AND NOT A FREE TRADE AREA BECAUSE A FREE TRADE AREA HAS AN IMPORTANT PROBLEM THAT GOODS FROM A NON-MEMBER COUNTRY MAY ENTER A MEMBER COUNTRY AND FROM THERE FREELY FLOW THROUGH OUT THE FREE TRADE AREA CAUSING DAMAGE TO THE DOMESTIC INDUSTRY / AGRICULTURE OF SOME OF THE MEMBERS.THE ‘RULE OF THE ORIGIN’ DESIGNED TO CHECK THIS DOES NOT WORK.





INDO-LANKA FREE TRADE AGREEMENT

OBJECTIVES:TO PROMOTE THROUGH, THE EXPANSION OF TRADE DEVELOPMENT OF THE ECONOMIC RELATIONS. TO PROVIDE FAIR CONDITIONS OF COMPETITION FOR TRADE.IN THE IMPLEMENTATION OF THIS AGREEMENT BOTH THE COUNTRIES WOULD PAY DUE REGARD TO THE PRINCIPLES OF RECIPROCITY.TO CONTRIBUTE, IN THIS WAY, BY THE REMOVAL OF BARRIERS TO TRADE TO THE HARMONIOUS DEVELOPMENT AND EXPANSION OF WORLD TRADE.THE FREE TRADE AGREEMENT IS LIKELY TO BENEFIT SRI LANKA A LOT AND THE BENEFIT TO INDIA MAY NOT BE MUCH AS SRI LANKA IS A SMALL MARKET.




INTERNATIONAL COMMODITY AGREEMENT

INTERNATIONAL COMMODITY AGREEMENTS

BASIC OBJECTIVE OF STIMULATING A DYNAMIC AND STEADY GROWTH AND ENSURING REASONABLE PREDICTABILITY IN THE REAL EXPORT EARNING OF THE DEVELOPING COUNTRIES SO AS TO PROVIDE THEM WITH EXPANDING RESOURCES FOR THEIR ECONOMIC AND SOCIAL DEVELOPMENT WHILE TAKING INTO ACCOUNT THE INTEREST OF CONSUMERS IN IMPORTING COUNTRIES, THROUGH REMUNERATIVE , EQUITABLE AND STABLE PRICES FOR PRIMARY COMMODITIES, HAVING DUE REGARD TO THEIR PURCHASING POWER , ASSURED SATISFACTORY ACCESS AND INCREASED IMPORTS AND CONSUMPTION AS WELL AS COORDINATION OF PRODUCTION AND MARKETING POLICES.





INTERNATIONAL COMMODITY AGREEMENTS

COMMODITY AGREEMENTS MAY TAKE ANY OF THE FOUR FORMS:

QUOTA.

BUFFER STOCK.

BILATERAL CONTRACT.

MULTILATERAL CONTRACT.




INTERNATIONAL COMMODITY AGREEMENTQUOTA AGREEMENTS

INTERNATIONAL QUOTA AGREEMENT SEEK TO PREVENT A FALL IN COMMODITY PRICES BY REGULATING THEIR SUPPLY. EXPORT QUOTAS ARE DETERMINED AND ALLOCATED TO PARTICIPATING COUNTRIES ACCORDING TO SOME MUTUALLY AGREED FORMULA, AND THEY UNDERTAKE TO RESTRICT THE EXPORT OR PRODUCTION BY CERTAIN PERCENTAGE OF THE BASIC QUOTA DECIDED BY THE CENTRAL COMMITTEE OR COUNCIL.QUOTA AVOID ACCUMULATION OF STOCKS, REQUIRE NO FINANCING AND DO NOT CALL FOR CONTINUOUS OPERATING DECISIONS. QUOTAS WOULD PROBABLY HAVE TO BE COMBINED WITH BUFFER POOLS IN ORDER TO PROVIDE THE NECESSARY SHORT-RUN FLEXIBILITY OF SUPPLY.





BUFFER STOCK AGREEMENT

INTERNATIONAL BUFFER STOCK AGREEMENT SEEK TO STABILIES COMMODITY PRICES BY MAINTAINING THE DEMAND-SUPPLY BALANCE.

THE BUFFER POOL METHOD HAS ALREADY BEEN TRIED IN CASE OF TIN, COCOA AND SUGAR, AND COMMODITIES LIKE RUBBER, TEA, AND COPPER HAVE BEEN SUGGESTED AS PROSPECTIVE COMMODITIES FOR THE NEW AGREEMENTS.

THE BUFFER STOCK AGREEMENT SUFFER FROM CERTAIN LIMITATIONS. IT CAN BE EFFECTED ONLY FOR THOSE PRODUCTS WHICH CAN BE STORED AT A RELATIVELY LOW COST WITHOUT THE DANGER OF DETERIORATION.





BILATERAL / MULTILATERAL CONTRACTS

BILATERAL CONTRACT TO PURCHASE AND SELL CERTAIN QUANTITIES OF A COMMODITY AT AGREED PRICES MAY BE ENTERED INTO BETWEEN A MAJOR IMPORTER AND EXPORTER OF THE COMMODITY. IN SUCH AN AGREEMENT THE UPPER AND THE LOWER PRICE ARE SPECIFIED. IF THE MARKET PRICE RISES ABOVE THE UPPER LIMIT SPECIFIED,THE EXPORTING COUNTRY IS OBLIGED TO SELL TO THE IMPORTING COUNTRY A CERTAIN QUANTITY OF THE COMMODITY AT THE UPPER PRICE FIXED BY THE AGREEMENT. IF THE MARKET PRICE FALLS BELOW THE LOWER LIMIT SPECIFIED THE IMPORTER IS OBLIGED TO PURCHASE THE CONTRACTED QUANTITY AT THE SPECIFIED LOWER PRICE.




INTERNATIONAL COMMODITY AGREEMENTCARTELS

EXISTENCE OF INTERNATIONAL CARTELS HAMPER FREE TRADE IN THE CONCERNED PRODUCTS.INTERNATIONAL CARTELS ARE AGREEMENTS BETWEEN PRODUCERS LOCATED IN DIFFERENT COUNTRIES OR BETWEEN GOVERNMENTS OF DIFFERENT COUNTRIES TO RESTRICT COMPETITION. WHILE DOMESTIC CARTELS ARE OFTEN PROHIBITED OR CONTROLLED BY THE RESPECTIVE GOVERNMENTS, INTERNATIONAL CARTELS ARE OFTEN SPONSORED BY THE GOVERNMENTS OF THE RESPECTIVE COUNTRIES.THE CARTEL IS BASICALLY A UNILATERAL DECISION BY PRODUCERS TO COOPERATE .MAJOR OBJECTIVE OF CARTEL IS TO RAISE PRICE AND RESTRICT COMPETITION.




GSP AND GSTP

GENERALIZED SYSTEM OF PREFERENCES (GSP)

IT IS A SCHEME DESIGNED BY THE UNCTAD TO ENCOURAGE EXPORTS OF DEVELOPING COUNTRIES TO DEVELOPED COUNTRIES. UNDER THIS SCHEME, DEVELOPED COUNTRIES GRANT DUTY CONCESSION ON IMPORTS OF SPECIFIED MANUFACTURERS AND SEMI- MANUFACTURERS FROM DEVELOPING COUNTRIES. THE EEC COUNTRIES AND A NUMBER OF OTHER COUNTRIES SUCH AS, USA, JAPAN, NORWAY, NEW ZEALAND, FINLAND, SWEDEN, HUNGRY, SWITZERLAND, AUSTRALIA etc, HAVE INTRODUCED THE GSP.THE GSP FACILITY IS AVAILABLE ONLY TO DEVELOPING COUNTRIES, IT IS SUBJECTED TO CERTAIN STRINGENT LIMITATIONS.




GSP AND GSTP

GENERALIZED SYSTEM OF PREFERENCES (GSP)

A PARTICULAR ITEM IS QUALIFIED FOR GSP BENEFIT ONLY IF THE FOLLOWING CONDITIONS ARE SATISFIED.THE PRODUCT MUST BE INCLUDED IN THE GSP LSIT.THE COUNTRY EXPORTING THE ITEM SHOULD BE DECLARED UNDER THE GSP AS A BENEFICIARY.THE VALUE ADDED REQUIREMENT CRITERIA MUST BE COMPLIED WITH.THE PRODUCT MUST BE IMPORTED INTO THE GSP DONOR COUNTRY FROM A GSP BENEFICIARY COUNTRY.THE EXPORTER MUST SEND TO HIS BUYER A CERTIFICATE OF ORIGIN IN THE PRESCRIBED FORM DULY FILLED AND DESIGNED BY HIM.




GSP AND GSTP

GLOBAL SYSTEM OF TRADE PREFERENCES (GSTP)THE GROUP OF 77 MINISTERIAL CONFERENCE ON GSTP AGREEMENT INCLUDED:ACROSS THE BOARD TARIFF PREFERENCE MARGIN OF 10%. THE REMOVAL OF REDUCTION OF NON –TARIFF BARRIERSSELECTION OF SPECIFIC SECTORS AND PRODUCTS WHERE TRADE PREFERENCES COULD BE EXTENDED AND TRADE CREATING PRODUCTION SHARING AND MARKETING ARRANGEMENTS. HOWEVER EFFECTIVE THE GSTP MAY BE , IT CAN ONLY BE ONE OF THE MANY INSTRUMENTS FOR PROMOTING SOUTH-SOUTH FINANCIAL AND MONETARY COOPERATION, NEW PAYMENT ARRANGEMENTS AND JOINT DEBENTURES IN PRODUCTION AND MARKETING.

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international economic cooperation and agreement

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