trade blocs l 3

8/9/2019 Trade Blocs l 3

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Trade Blocs / Regional Trade

Agreements(RTAs)

TOPIC-4



SUB TOPICS

Economic Integration,

European Union, ASE AN, S AARC, APEC, MERCOSUR,

IBS A, ANDE AN

Implications of trade Blocs for Business



REGIONAL ECONOMIC GROUPINGS



MAJOR ASPECTS OF RTAs

1. TRADE CRE ATION : ie. GENERATION OF NEW MARKETS

FOR NEWER PRODUCTS & INCRE ASED TRADE FLOWS IN THE

EXISTING PRODUCT LINES

2. TRADE DIVERSION: SHIFT OF TRADE FROM THE MEMBER

PARTNER COUNTRIES TO MORE EFFICIENT NON-MEMBER

COUNTRIES



RTAs- DEVELOPMENT

- DURING 1948-94, GATT RECEIVED 124 NOTIFICATIONS OF

RTAs, RELATING TO TRADE IN GOODS

- WTO IN 1995- RECEIVED OVER 130 ADDITIONAL

AGREE

ME

NTS

COVE

RING TRADE

IN GOODS

&SE

RVICES

IMPORTANT: WTO MEMBERS HAVE TO INFORM , TO WHICH

RTA THEY ARE PARTICIPATING

RTAs- ARE EXCEPTION TO WTO ARTICLE 14, WHERE TARIFF AND OTHER TECHNICAL BARRIERS CAN BE REDUCED ON A

PREFERENTIAL BASIS BY THE COUNTRIES UNDER A

REGIONAL AGREEMENT



CONCEPTU AL FRAMEWORK OF

INTERNATIONAL INTEGRATION

TWO MAIN RE ASONS:

1.COMMON HISTORY/ CULTURE SHARING

- CONSUMER TASTES LIKELY TO BE SIMILAR/DISTRIBUTION CHANNEL E ASY TO ESTABLISH

2.DISTANCES ARE SHORT



REGIONAL INTEGRATION IN GLOBALISATION

Integration between countries - An

Important feature.

Integration may be either Political or Economic

Economic integration involves links between

- The economies of a group of countries, and

- are often known as Trade Blocks or Regional Economic

Groupings.

Some regional economic groupings are well established eg. European

Union.

Proliferation of such groupings in recent years.



Preferential Trading Agreement

- loose form of economic integration.

- regarded as merely a trading agreement

among group of countries for allowing eachothers goods to b traded on preferential

terms

- lacks the more formal institutional

arrangements that tend to accompany other

forms of integration.

- designed primarily to support developing countries¶

economic development, e.g., Lome Agreement between ACP rou s of countries and EU.



Free Trade Area

- a permanent arrangement between

neighbouring countries

- complete removal of tariffs on goods traded

between the members ± barring agriculture and

fishing or to services, in general

- member countries free to levy their own

external tariff on goods outside the FTA

- main difficulty ± goods outside the area findeasiest point of entry where external tariff

lowest and can cross any of internal borders

without incurring further tariffs

- to overcome above, members usually resort



to controls on the country of origin for goods

crossing their internal frontiers

- this involves extensive border checks n

procedures

- NAFTA is the best known examples, others include

EFTA and ASEAN FTA (AFTA)

Customs Union

- to sort out problem of entry of goods from

non-member countries to FTA, a custom union

with common external tariff for each type of

product is formed- the external tariff revenues collection

concerns the ownership and may be resolved by

treating the same as common property of

customs union



- requires a higher degree of political

cooperation that within a free trade area

- requires agreement on the level of commonexternal tariff and on the administration of

the tariff revenues

Common Market

- A common market is a customs union where

internal tariff barriers have also been removed

- Theoritically free movement of goods, services, people and capital is allowed across internal

frontiers

- Thus removal of all tariff and non-tariff barriers

allows all firms access to the entire internal



- fiscal policy coordination include the

harmonization of tax rates, especially VAT, Excise

duties and other taxes on goods and some degree

of control over govt. budgets and budget

deficits

- also likely to be coordination of other economic

policies such as regional, industrial and agricultural

policies

- thus in terms of policy making there will be a

high degree of political integration as well

as economic integration barring defence and foreign policy



Political Union

- political union implies more formal political

links between countries

- in its fullest form it involves unification of previously separate nations, e.g., reunification

of east and west Germany in 1990

- another example of political union is soviet

union bringing integration among various

republics



Major Regional Economic Groupings

EU (European Union)

NAFTA (North American Free Trade Agreement)

LAIA (Latin American Integration Association)

MERCOSUR (Common Market Of South)

CACM (Central American Common Market)

ASEAN (Association Of South East Nations)

APEC (Asia Pacific Economic Cooperation)

EAC (East African Cooperation)



EUROPE AN UNION(EU)

MAASTRITCHT TRE ATY 1992

FIRST PROPOSED BY FRENCH FOREIGN MINISTER,ROBERTSCHUMAN ON 9 MAY 1950, ALSO KNOWN AS EUROPE¶S DAY

- INITIALLY EU CONSISTED OF JUST SIX MEMBERS-BELGIUM,GERMANY, FRANCE, ITALY, LUXEMBOURG & THE NETHERLANDS

-1973- DENMARK, IRELAND & UK JOINED

1981-GREECE

1986-SPAIN & PORTUGAL

1995- AUSTRIA, FINLAND& SWEEDEN JINED

2004- 10 NEW COUNTRIES JOINED



EU

-ISSUES- NOT ONLY TRADE & ECONOMY BUT ALSO,

CITIZEN¶S RIGHTS- ENSURING FREEDOM, SECURITY & JUSTICE;

REGIONAL DEVELOPMENT; ENVIRONMENTAL PROTECTION; &

PROMOTING GLOBALIZATION

FIVE EU INSTITUTIONS:

-EUROPE AN PARLIAMENT( ELECTED BY THE PEOPLES OF THE

MEMBER STATES)

COUNCIL OF EUROPE AN UNION;( REPRESENTING GOVT OF

MEMBER STATES).

EUROPE AN COMMISSION; COURT OF JUSTICE;

COURT OF AUDITORS



PRESENTATION ON

ASEAN( ASSOCIATION OF SOUTH E AST ASIAN NATIONS)



ASSOCIATION OF SOUTHEAST

ASIAN NATIONS (ASEAN)

"Today, ASEAN is not only a well-

functioning, indispensable reality in theregion. It is a real force to be reckoned

with far beyond the region. It is also a

trusted partner of the United Nations inthe field of development´



ESTABLISHMENT

The Association of Southeast Asian Nations or ASE AN was established on 8 August 1967 inBangkok by the five original Member Countries,namely, Indonesia, Malaysia, Philippines,Singapore, and Thailand.

Br unei Dar ussalam joined on 8 January 1984,Vietnam on 28 July 1995, Lao PDR andMyanmar on 23 July 1997, and Cambodia on 30

April 1999.

The ASE AN region has a population of about500 million, a total area of 4.5 million squarekilometers, a combined gross domestic productof almost US$ 700 billion, and a total trade of

about US$ 850 billion.



OBJECTIVE

The ASE AN Declaration states that the aims and

purposes of the Association are:

To accelerate economic growth, social progress

and cultural development in the region and

To promote regional peace and stability through

abiding respect for justice and the r ule of law in

the relationship among countries in the regionand adherence to the principles of the United

Nations Charter .



ASE AN VISION 2020

Adopted by the ASE AN Leaders on the 30th Anniversaryof ASE AN.

Agreed on a shared vision of ASE AN as a concert of Southeast Asian nations, outward looking, living in

peace, stability and prosperity, bonded together inpartnership in dynamic development and in a communityof caring societies

In 2003, the ASE AN Leaders resolved that an ASE ANCommunity shall be established comprising three pillars,namely, ASE AN Security Community, ASE AN EconomicCommunity and ASE AN Socio-Cultural Community.



FUNDAMENTAL PRINCIPLES

Mutual respect for the independence,sovereignty, equality, territorial integrity, and

national identity of all nations;

The right of every State to lead its national

existence free from external interference,subversion or coercion;

Non-interference in the internal affairs of one

another ;

Settlement of differences or disputes by peacef ul

manner ;

Renunciation of the threat or use of force; and

Effective cooperation among themselves.



MEMBER COUNTRIES

Br unei Dar ussalam

Cambodia

Indonesia

Laos

Malaysia

Myanmar

Philippines Singapore

Thailand

Vietnam



ASEAN COMMUNITIES

1. ASEAN SECURITY COMMUNITY

It aims to ensure that countries in the region

live at peace with one another and with the

world in a just, democratic and harmoniousenvironment.

Committee members pledge to rely on

peacef ul processes in the settlement of

intra-regional differences and regard their security as f undamentally linked to one

another and bound by geographic location,

common vision and objectives.



CONTD«.

It has the following components:

1. political development;

2. shaping and sharing of norms;

3. conflict prevention & conflict resolution;

4. post-conflict peace building; and

5. implementing mechanism



CONTD«.

2. ASEAN ECONOMIC COMMUNITY It¶s the end-goal of economic integration

measures as outlined in the ASE AN Vision

2020.

Its goal is to create a stable, prosperous and

highly competitive ASE AN economic region.

Free flow of goods, services, investment and a

free flow of capital, equitable economicdevelopment, and

Reduced poverty and socio-economic

disparities by the year 2020.



CONTD«.

To establish ASE AN as a single market and

production base, turning the diversity that

characterizes the region into opportunities for

business complementation.Making the ASE AN a more dynamic and

stronger segment of the global supply chain.

The strategy will consist of the integration of

ASE AN and enhancing ASE AN¶s economic

competitiveness.



ASE AN Has Agreed The Following Terms:

Institute new mechanisms and measures tostrengthen the implementation of its existing economic

initiatives including the ASE AN Free Trade Area(AFTA), ASE AN Framework Agreement on Services(AFAS) and ASE AN Investment Area (AIA);

Accelerate regional integration in the following prioritysectors by 2010: air travel, agro-based products,automotives, e-commerce, electronics, fisheries,healthcare, r ubber-based products, textiles andapparels, tourism, and wood-based products.

Facilitate movement of business persons, skilled

labour and talents; and Strengthen the institutional mechanisms of ASE AN,

including the improvement of the existing ASE ANDispute Settlement Mechanism to ensure expeditiousand legally-binding resolution of any economic

disputes.



3. ASEAN SOCIO-CULTURAL COMMUNITY

The ASE AN Socio-Cultural Community, in

consonance with the goal set by ASE AN Vision 2020,

envisages a Southeast Asia bonded together in

partnership as a community of caring societies andfounded on a common regional identity.

To foster cooperation in social development aimed at

raising the standard of living of disadvantaged groups

and the r ural population, and shall seek the active

involvement of all sectors of society, in particular

women, youth, and local communities.



It ensures that its work force shall be prepared

for, and benefit from, economic integration byinvesting more resources for basic and higher

education, training, science and technology

development, job creation, and social protection.

It also intensify cooperation in the area of publichealth, including in the prevention and control of

infectious and communicable diseases.

The development and enhancement of human

resources is a key strategy for employment

generation, alleviating poverty and socio-

economic disparities, and ensuring economic

growth with equity.



Among the on-going activities of ASE AN in this

area, it also includes the following:

ASE AN Work Programme for Social Welfare,Family, and Population;

ASE AN Work Programme on HIV/AIDS;

ASE AN Work Programme on Community-Based

Care for the Elderly;

ASE AN Occupational Safety and Health

Network;

ASE AN Work Programme on Preparing ASE ANYouth for Sustainable Employment and Other

Challenges of Globalisation;



ASE AN University Network (AUN)

promoting collaboration among seventeen

member universities ASE AN;

ASE AN Students Exchange Programme,

Youth Cultural For um, and the ASE AN

Young Speakers For um; The Annual ASE AN Culture Week,

ASE AN Youth Camp and ASE AN Quiz;

ASE AN Media Exchange Programmed; and



The ASEAN Free Trade Area

(AFTA) ASE AN Member Countries have made

significant progress in the lowering of intra-regional tariffs through the Common EffectivePreferential Tariff (CEPT) Scheme for AFTA.

More than 99 percent of the products in theCEPT Inclusion List (IL) of ASE AN-6, comprisingBr unei Dar ussalam, Indonesia, Malaysia, thePhilippines, Singapore and Thailand, have beenbrought down to the 0-5 percent tariff range.

The signing of the Protocol to Amend the CEPT- AFTA Agreement for the Elimination of ImportDuties on 30 January 2003, ASE AN-6 hascommitted to eliminate tariffs on 60 percent of

their products in the IL by the year 2003.



CONTD«.

ASE AN¶s exports had regained its upward trendin the two years following the financial crisis of 1997- 1998 reaching its peak in 2000 when totalexports was valued at US$ 408 billion.

After declining to US$ 366.8 billion in 2001, as aresult of the economic slowdown in the UnitedStates and Europe and the recession in Japan,

ASE AN exports recovered in 2002 when it wasvalued at US$ 380.2 billion.

The upward trend for ASE AN-6 continued up tothe first two quarters of 2003. Intra-ASE AN tradefor the first two quarters of 2003 registered anincrease of 4.2 and 1.6 percent for exports and

imports respectively.



CONTD«.

To improve and strengthen the rules the CEPT Rules of Origin and its Operational Certification Procedures have been revised and implemented since 1 January 2004.

Among the features of the revised CEPT Rules of Originand Operational Certification Procedures include:

(a) a standardized method of calculatinglocal/ASEAN content;

(b) a set of principles for determining the cost of ASEAN origin and the guidelines for costing

methodologies;

(c) treatment of locally-procured materials; and

(d) improved verification process, including

on-site verification.



EXTERNAL RELATIONS ASE AN has develop cooperative relations with

Australia, Canada, China, the European Union, India,Japan, the ROK, New Zealand, the Russian Federation,the United States of America, and the United NationsDevelopment Programme. ASE AN also promotescooperation with Pakistan in some areas of mutual

interest. ASE AN maintains contact with other inter-governmental

organisations, namely, the Economic CooperationOrganisation, the Gulf Cooperation Council, the RioGroup, the South Asian Association for Regional

Cooperation, etc. Most ASE AN Member Countries also participate actively

in the activities of the Asia-Pacific Economic Cooperation(APEC), the Asia-Europe Meeting (ASEM), and the East

Asia-Latin America For um (E ALAF).



Introduction

The North American Free Trade Agreement (NAFTA) isa trilateral trade bloc in North America created by the

governments of the United States, Canada, and Mexico.

It superseded the Canada-United States Free Trade

Agreement between the US and Canada.

Following diplomatic negotiations dating back to 1990

between the three nations, the leaders gathered together

in San Antonio Texas on December 17, 1992 to officially

sign NAFTA. U.S. President George H.W. Bush,

Canadian Prime Minister Brian Mulroney and Mexico'sPresident Carlos Salinas, each responsible for

spearheading and promoting the agreement, made

history that day when they ceremoniously signed the

agreement.



Contd«

The agreement was signed into law in the U.S. on

December 8, 1993 by President Bill Clinton and wentinto effect on January 1, 1994.

In terms of combined purchasing power parity GDP of its

members, as of 2007 the trade block is the largest in the

world and second largest by nominal GDP comparison. Italso is one of the most powerf ul, wide-reaching treaties

in the world.

The North American Free Trade Agreement (NAFTA)

has two supplements, the North American Agreement on

Environmental Cooperation (NAAEC) and the North

American Agreement on Labour Cooperation (NAALC).



Impact

Trade- According to Isaac (2005), NAFTA has notcaused trade diversion, aside from a few selectindustries such as textiles and apparel, in which r ules of origin negotiated in the agreement were specificallydesigned to make U.S. firms prefer Mexicanmanufacturers. The World Bank also showed that the

collected NAFTA imports' percentage growth wasaccompanied by an almost similar increase of non-NAFTA exports.

Industry- Maquiladoras (Mexican factories which take inimported raw materials and produce goods for export)have become the landmark of trade in Mexico. Theseare plants that moved to this region from the UnitedStates, hence the debate over the loss of American jobs. Hufbauer's (2005) book shows that income in themaquiladora sector has increased 15.5% since the

implementation of NAFTA in 1994



Contd«

Environment- The Commission for Environmental

Cooperation created a framework for conductingenvironmental analysis of NAFTA, one of the first ex postframeworks for the environmental assessment of tradeliberalization. The framework was designed to produce afocused and systematic body of evidence with respect tothe initial hypotheses about NAFTA and theenvironment, such as the concern that NAFTA wouldcreate a ³race to the bottom´ in environmental regulationamong the three countries, or the hope that NAFTAwould pressure governments to increase their environmental protection mechanisms.



Contd..

Mobility of persons- According to the Department of

Homeland Security Yearbook of Immigration Statistics,during fiscal year 2006 (i.e., October 2005 throughSeptember 2006), 74,098 foreign professionals (64,633 Canadians and 9,247 Mexicans) were admitted into theUnited States for temporary employment under NAFTA .

Additionally, 17,321 of their family members (13,136

Canadians, 2,904 Mexicans, as well as a number of third-country nationals married to Canadians andMexicans) entered the U.S. in the treaty national'sdependent (TD) status.



South Asian Association for Regional Cooperation

S AARC

ang a es u an n a a ves



ang a es , u an, n a, a ves,

Nepal, Pakistan, Sri Lanka



South Asian Association for

Regional Cooperation formally came into existence in 1985 with

the adoption of its Charter at the first

Summit in Dhaka (7- 8 December 1985).

seven South Asian countries Bangladesh,

Bhutan, India, the Maldives, Nepal,

Pakistan and Sri Lanka

Other regional experiences highly

successf ul

strengthen their competitive position



Areas of Cooperation(21 - 23 April, 1981)

first meeting of Foreign Secretaries in

Colombo

pursue cooperation in five broad areas

Agriculture

r ural development

Telecommunications

meteorology, and

health and population services

identify other areas of possible cooperation



Objective

acceleration of economic growth,

social progress and cultural developmentin the region,

promotion of active collaboration andmutual assistance in the economic, social,cultural, technical and scientific fields and

strengthening of cooperation among theMember States in international for um onmatters of common interest



The S AARC Secretariat

established in Kathmandu on 16 January

1987.

coordinate and monitor the implementationof S AARC activities, service the meetings

of the Association and serve as the

channel of communication between

S AARC and other internationalorganisations

comprises the Secretary General, seven

Directors and the General Services Staff .



Administrative setup

Summits held annually, represented by head of thestates

The Council of Ministers comprising Foreign Ministers,meets at least twice a year

formulating policy, reviewing progress of regionalcooperation, identifying new areas of cooperation

The Standing Committee comprising ForeignSecretaries, monitors and coordinates S AARCprogrammes of cooperation, approves projects includingtheir financing and mobilizes regional and externalresources. It meets as often as necessary and reports tothe Council of Ministers

The Committee on Economic Cooperation consisting of Secretaries of Commerce oversees regional cooperationin the economic field



DIVISIONS OF S AARC

Agriculture and Rural DevelopmentDivision

Environment and Science and Technology

Division Economic, Trade and Finance Division

Social Affairs Division

Information and Publications Division Energy, Tourism Division

Human Resource Development, Transport

and Treaty Division



Committee on Economic

Cooperation (CEC) implementation of specific measures, policies

and programmes to strengthen and enhanceintra-regional cooperation in the fields of tradeand economic relations.

Its specific f unctions include analysing inter-regional and global

developments

evolving joint strategies and common

approaches at international for ums; and recommending policies and measures for promoting intra-regional trade,

joint ventures, industrial complementarity andinvestments.



S APTA

South Asian Preferential Trade Arrangement

Deals with Tariffs, Non-Tariff Measuresand Direct Trade Measures

In December 1991, the Sixth Summit heldin Colombo member countires agreed to

formulate an agreement to establish aS AARC Preferential Arrangement(S APTA) by 1997.

Agreement on S APTA was signed on 11

A ril 1993 and entered into force on 7



S APTA

The basic principles underlying S APTA are:

overall reciprocity and mutuality of advantages so as tobenefit equitably all Contracting States, taking intoaccount their respective level of economic and industrial

development, the pattern of their external trade, andtrade and tariff policies and systems;

negotiation of tariff reform step by step, improved andextended in successive stages through periodic reviews;

recognition of the special needs of the Least DevelopedContracting States and agreement on concretepreferential measures in their favour ; and

inclusion of all products, manufactures and commoditiesin their raw, semi-processed and processed forms.



Trade Concessions Number of Products covered and the Depth of Preferential Tariff

Concessions agreed to by S AARC Member States in the first three rounds of trade

negotiations under S APTA

Country # Products Depth of concessions

Bangladesh 572 10% -15%

Bhutan 266 10-20%

India 2402 10-100%

Maldives 390 5-15%

Nepal 425 10-15%

Pakistan 685 10-30%

Sri Lanka 211` 10-75%

TOTAL 4951



South Asian Free Trade Area

(S AFTA) S APTA first step towards the transition to a South Asian Free

Trade Area (S AFTA) leading subsequently towards aCustoms Union, Common Market and Economic Union.

The Agreement on South Asian Free Trade Area (S AFTA)was signed on 6 January 2004 during the Twelfth S AARCSummit in Islamabad.

The Agreement into force from 1 January 2006

Trade Liberalisation Programme scheduled for completion inten years by 2016,

the customs duties on products from the region will be

progressively reduced. under an early harvest programme for the Least Developed

Member States, India, Pakistan and Sri Lanka are to bringdown their customs duties to 0-5 % by 1 January 2009 for theproducts from such Member States.

The Least Developed Member States are expected to benefit

from additional measures under the special and differential



South Asian Economic Union

Eleventh Summit (Kathmandu, 4-6

January 2002) - economic cooperation

Leaders agreed to accelerate cooperation

in the core areas of trade, finance and

investment to realise the goal of an

integrated South Asian economy in a step-

by-step manner .



Current Issues

Working toward creation of S AFTA

Leading subsequently, towards a Customs

Union, Common Market and Economic Union.

Technical Committee on Transport

Agreement on Investment

Agreement on avoidance of double taxation

Standards, quality and control group

trade blocs l 3

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