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International Business ManagementComprehensive Written Exam Review

Dr Philip Nicholls

Welcome back to IBM

THE BEST OF IBM

February 2013

Comprehensive Written Examination CourseReview.

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International Business Management

The exam is scheduled for March 3rd 2013

Time and venue to be advisedCheck for yourselves

There are two questions

Each is worth 50 marks.pass grade 50%

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International Business Management

The IBM Comprehensive exam contains

nothing new yet this is just an overview;Go back to the lecture notes and texts for

more detail.

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International Business Management

The focus is on only

twomajor areas.

Foreign Direct Investment

and secondly

Trading Blocs*, Free Trade AgreementsGlobalization and the role of the Global Manager

*(as you should know trade bloc is a large trade area)

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International Business Management

The slides that follow have simply been liftedfrom my lecture notes and do not necessarily

follow a totally logical sequence

You need to refer to Czinkota the first fewchapters, and in particular Chapter Five for

trade blocs and FTAs.

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Basic Definitions

International trade is the production ofa product or service in one country and

its sale to a buyer in another country.

www.imf.org www.wto.org

Trading blocs facilitate international trade..How?

.Czinkota Chapters 1-5five in particular

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Basic Definitions

Globalization is awareness, understanding

and response to global developments and

linkages. Czinkota

It is the global strategy involvingthe

integration of world-wide operations and thedevelopment ofstandardized products and

marketing approaches.Deresky

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International Business Management

F D I

Foreign Direct Investment

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Foreign Direct Investment (FDI)

The establishment or expansion ofoperations of a firm in a foreign country.

Like all investments it assumes a transferof capital. Czinkota.

There is always a long term element to FDI

which helps to explain corporate strategies andresponses to crisesthink about whathappened at the time of the change ofgovernment in September last year.

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Modes of entry may vary:-

How do MNCs start up a new venture in aforeign country

Greenfields.?????????????

Partnershipstrategic alliances

Franchises

Joint Ventures

Licensing agreements

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FDI .modes of investment

A greenfields investmentmay be verticalor

horizontal.

Vertical FDI takes place when the multinational

fragments the production process internationally,locating each stage of production in the countrywhere it can be done at the least cost.

Horizontal FDI occurs when the multinationalundertakes the same production activities inmultiple countries.

Published: Aizenman, Joshua and Nancy Marion. "The Merits Of Horizontal Versus Vertical FDI In The Presence OfUncertainty," Journal of International Economics, 2004, v62(1,Jan), 125-148

(With thanks to Tom)

FDI R i R f G i

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FDI ReviewReasons for Going

International

http://www.gwu.edu/~introint/lecture3/tsld003.htm

Classical trade theory emphasizes that cost of

production is paramount to international

competitiveness.

Although the motivations for international

investments are diverse, the searching out of

low cost factors or natural resources is one ofthe more important.

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The reasons for going internationalDeresky Chapter Six

They may be.

Reactive or defensive

Proactive or aggressive

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Reactive or defensiveDeresky Chapter Six p222

Globalization of competition

Trade barriers

Regulations and restrictions

Customer demands.or to solvelogistical problems

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Proactive or aggressiveDeresky Chapter Six p 223

Economies of scale

Growth opportunities

Resource access and cost saving.

Incentives

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We can say firms making FDI may becharacterized as:-

Market seeking

Resource seeking

Strategic asset seeking

Efficiency seeking

The detail follows..

John Dunning (www.globalization101.org/index.html)

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Market seeking:

Firms may go overseas to find new buyers for

goods and services. The top executives orowners of a company may realize that theirproduct is unique or superior to the competition

in foreign markets and seek to take advantage ofthis opportunity.

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Market seeking:

So market-seeking may happen when producershave saturated sales in their home market, or

when they believe investments overseas willbring higher returns than additional investmentsat home. This is often the case with high

technology goods.

Local markets may be saturated

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Resource seeking:

Put simply, a company may find it cheaper toproduce its product in a foreign subsidiary- for thepurpose of selling it either at home or in foreignmarkets.

The foreign facility may be able to obtain superior orless costly access to the inputs of production (land,

labor, capital, and natural resources) than at home.

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Strategic asset seeking:

Firms may seek to invest in other companies abroadto help build strategic assets, such as distributionnetworks or new technology.

R&D facilities

This may involve the establishment of partnershipswith other existing foreign firms that specialize incertain aspects of production (Salisbury,1999).

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Efficiency seeking (Financial Efficiency):

Multinational companies may also seek toreorganize their overseas holdings in responseto broader economic changes. For example,

the creation of a new free trade agreementamong a group of countries may suddenlymake a facility located in one of those

countries more competitive, because of accessfor the infrastructure, telecommunication,road.

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Efficiency seeking:

Stable banking systems; currency stability are

important factors

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A good example of FDI.TATA and Corus

Access to markets..via the EU

Economies of scale

Access to technology

Spreading of risk; risk minimization

Able to raise more capital in Europe.

.any more?

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TATA

.

The Tata family of enterprises comprises 98companies in seven business sectors. This

section [www.tata.com] lists all thesecompanies under the sectors in which theyoperate, besides the two promotercompanies of the Group. Visitors can, byclicking on the relevant links, get a profile ofindividual companies, their subsidiaries (if

any), their products and services, contactdetails, etc.

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MNCs want certainty. Consider the following.

The naturally prefer host countries that offer

Political instability Currency instabilityeconomic stability

Social stability

Nationalism/ protectionism International competition/ local competition

Environmental factors.GDP market prospectslocation and access to other markets.

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Revision: Strategies and Modes of Entry vary:-

MNCs TNCs can stay at home and export

products or they can decide to make direct or

indirect investments in a host country.

Refer to the slides at the end of last weeks

lecture.

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Revision: Strategies and Modes of Entry vary:-

HOWdo MNCs start up a new venture in aforeign country?

Direct or indirect investment; building a

factory for example..or buying shares;Strategic alliances:- franchising, licensing orpartnerships

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FDI brings many benefits to a host country.

Including increased employment and raising the

GDPquality of life..+. many flow on effects

The education and up skilling of the workforce

Improving the balance of payments in terms of

increasing exports and reducing imports

Increasing tax revenues for governments

and

Wh t l ???

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What else???................ Introducing new technology+infrastructure

Injecting fresh capital..

Attracting other firms; increasing competition

Utilizing unused resources

Giving people a wider range of product choices

Raising peoples social expectations +intangibles

like national pride .think Thailand and China

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Criticisms of MNCs..Global FDI activities 1

In various ways MNCs may exploit host countryresources, physical and financial creating eithergreater demand and hence higher costs or shortagesof materials that may impact negatively on localpeople.

MNCs may, for example, increase the costs to localbusiness in a host country to raise capital, or to holdexisting staff or recruit new staff.

The majority (sometimes even 100 percent) of thestock of most subsidiaries is owned by the parentcompany. Consequently, the host-country may havelittle control over the operations of corporations withintheir borders.

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Criticisms of MNCs. Global FDI activities 2

MNCs usually reserve the key managerial andtechnical positions for expatriates. As a result,they do not contribute to the development of

host-country personnel.

MNCs may not adopt the latest or safest

technology in host countries.

MNCs concentrate their R&D activities at home,

restricting the transfer of modern technology-

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Criticisms of MNCs. Global FDI activities 3

MNCs give rise to the demand for luxurygoods in host countries at the expense ofessential consumer goods.

Many MNCs set-up their foreign operations bypurchasing existing firms rather thandeveloping new productive facilities in hostcountries.

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Criticisms of MNCs. Global FDI activities 4

MNCs dominate major business sectors, thuscontributing to inflation by stimulating demand forscarce resources and earning excessively high profitsand fees.

MNCs are not accountable to their host nations butonly respond to home-country governments; they arenot concerned with host-country plans for

development.

MNCs repatriate their profits. That is, they send their

profits back to their home countries.

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The disadvantages of FDI relate to the criticisms

One disadvantage which is also a criticism

is the erosion of local cultures

The disadvantages of FDI to a host country more or

less correspond to the criticisms of MNCs

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FDI

Any discussion of FDI has to involve the use of

examples.that is you have to be able to illustratewhat you are explaining by reference to MNCs and

world events

I t ti l B i M t

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International Business Management

Written Comprehensive Review Class

Now

Globalization, the GlobalManager ,

and

Trade Blocs What is Globalization?

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What is Globalization?

Involves designing and operating systems to work with

people around the world to ensure sustained competitiveadvantage.makes trade easier and more efficient

Creation of trade blocks and FTAs and the reduction oftrade barrierstaxes and tariffs.

Exemplified by McDonalds, Walmart, Boeing etc

Benefits.reduction of transaction costsetc

Corporations maintain competitive advantage..gaineconomies of scale

Has seen the emergence of the Global Manager

Gl b li ti i t t d d

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Globalization inter-connectedness and

uniformity

The standardization of the business worldandinter-dependent economies

Standardization of rules and regulations and standards

Promoted by FTAs and trade bloc expansionWe now talk of a world economy.

Globalization facilitates the movement of peoplecapital and resources(for good or evil)

Creation of world wide organizations and watchdogs

Increases in human trafficking and spread of disease

Gl b li ti i t t d d

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Globalization inter-connectedness and

uniformity

The standardization of the business worldand

inter-dependent economies

Globalized rules, regulations and standards in suchareas as health and safety

CSR is being globally standardized

Promoted by FTAs and trade bloc expansion

We now talk of a world economy.

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In practice.

Globalizationmeans that people all over the

world eat Mars Bars, drink Coca Cola or Johnny

Walker (or both), use Nokias, listen to jazz,

drive Toyotas, wear Nikes, watch Hollywood

movies, use Gillette, apply Nivea, and

smell the same aftershaves or perfumes.

wear blue jeans and eat pasta and BigMacsand , may also study in anInternational University .andeducation is

being standardized!!!

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Yet not everybody likes banks

Anger against the banks continues..

Goldman Sachs has

been fined 20m pounds

by the regulatory

authorities in the UK

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Equally, not everyone is happy about tradeblocs and big business

Look at www.bilaterals.org...

This is because not everybody agrees thatFTAs are beneficial

One view of the AUSFTA

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In this globalized world we have seen theemergence of the global manager.

What is a global manager

Many of you are or will become global managers

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Qu. What is the role of the global manager?

In a word the role of a global manager is ..

.complex

A global manager must follow the rules set by each country and his/her

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own..and must adapt to the political, social, cultural and economicenvironment of the host country.

(Deresky 2006 p13)

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IBM Dr Philip Nicholls

Another definition:-

Global management is the process of

developing strategies, designing andoperating systems, and working withpeople around the world to ensure

sustained competitive advantage.. (Deresky 2006)

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So you need to review What are trade blocs?

Based on Czinkotas definition:-

Trade blocs are formed by agreements among

countries to establish links that facilitate themovement of goods, services, capital and labor

across borders.

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What are trading blocs; another definition ?

There is a more comprehensive definition which you

will find in Wikipedia. http://en.wikipedia.org/wiki/Trade_bloc

A trade bloc is a largefree trade areaformedby one or moretax, tariff and tradeagreements.

Typically trade pacts that define such a bloc specify formal

adjudication bodies, e.g. NAFTA trade panels. This may include

even a more democratic and participative system, as the EUand its arliament.

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Trading blocs?

They are usually between countries that are

geographically close to each other, they involve freetrade areasand degrees ofeconomic integration

..there is a maze of acronyms..

EU, ASEAN, ANCOM, CACM, CARICOM, COMESSA,ECOWAS, GCC, NAFTA, and MERCOSURto name afewOPEC and Cairns are not

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Trade Blocs are about :

Economic Integration

free trade areas

customs unionscommon markets +

economic union.

Forms of economic alliances.

Czinkota talks of four levels of economic

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Czinkota talks of four levels of economicintegration

Free Trade Areas..the least restrictive form of economic integration ..no

discriminatory taxes, quotas or tariffs are allowedyet it may

be an agreement limited to only some goods..scheduled

goods

Customs Unions

..one step further along the spectrum of economic

integration they have a common trade policy towards nonmembers and imports from non members are subject to the

same tariffs.

The final two levels of economic integration

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The final two levels of economic integration.Czinkota

The Common Market

.further down the spectrum no barriers between

members; a common external trade policy. .and in addition,

factor mobility.immigration and cross border investment freedupand mobility of capital, labor and technology

The Economic Union

Goes furtherthe integration of economic policies as well as

the free movement of goods. Harmonization of monetary

policies, taxation and government spendingleads to apolitical

union

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Trade blocs and Free Trade Agreements; a tradebloc is a large free trade area.

Issues of economic integration

Regional regulation, reduced tariffs..Favored treatment and preferences

Butalso, the other side of that coin is theexclusion of others

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Economic integration: advantages

Advantages may include maximization of resource use;

Domestic suppliers gain bigger marketsaccess tomarkets

The removal of tariffs and quotas make many

products cheaper and this has a flow on effect

through the simple laws of competition..

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Economic integration; advantages (continued)

Advantages through larger markets include economiesof scale;

Greater production for an enlarged market internaleconomies of scale

Easier access to factors of production; access tocheaper labor, finance and technology..externaleconomies of scale

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Economic integration; advantages (continued)

The outcomes include greater regionalcooperation; the more even distribution ofwealth; cross cultural integration and

understanding and the reduction of nationalismin favor of regionalism.

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Yet there may be disadvantages also

Poor countries may experience a labor drain;lose trades people ..cause local labor shortages

May not be able to attract the investment dueto poor infrastructure for example

The rich may get richer and the poor poorer;Mexico as a part of NAFTA

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What is a trading bloc?

It is the outcome of an agreement (usuallymany agreements in fact) between countriesto facilitate the movement of goods,services, labor and capital across borders.

The word mobilityis a key descriptor.

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Correspondingly

Free Trade Agreement (FTA)

An FTA is an agreement between two or more

countries to create a free trade area; that is anarea in which all barriers to trade among them areremoved or modified, although sometimes only forcertain specified goods and services.

Czinkota.

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And.

What is a Free Trade Area?

A region or area in which barriers to tradeare removed with respect to all of somecommodities. Eg NAFTA CAFTA TAFTA EU

http://www.aseansec.org/

For example go to Chpt 5 Czinkota

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o e a p e go to C pt 5 C ota

1. European Union (EU)2. European Free Trade Association (EFTA)3. Caribbean Community (CARICOM)4. Economic Community of West African States (ECOWAS)5. Economic and Monetary Community of Central Africa (CEMAC)6. East African Community (EAC)7. South American Community of Nations (CSN)8. Gulf Cooperation Council (GCC)

9. Southern African Customs Union (SACU)10. Common Market for Eastern and Southern Africa (COMESA)11. North American Free Trade Agreement (NAFTA)12. Association of Southeast Asian Nations (ASEAN)13. South Asian Association for Regional Cooperation (SAARC)14. Eurasian Economic Community (EurAsEC)

15. Agadir Agreement16. Central American Common Market (CACM)17. Pacific Regional Trade Agreement (PARTA of PIF)18. African Economic Community (AEC)19. The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic

Cooperation. (BIMSTEC)

Study Chapter Five of Czinkota

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Study Chapter Five of Czinkota

And other sources, for example.

http://wikipedia.org/wiki/Trade_bloc

Trading blocs may create FTAs with othercountriesEU JapanEU and ..Vietnam

with??????

As discussed there are numerous trade

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As discussed there are numerous tradeblocs..

Agadir Agreement (2004)..now GAFTA

Agreement for the Establishment of a Free Trade Zonebetween the Arabic Mediterranean Nations

Agreement for the Establishment of a Free TradeZone between the Arabic Mediterranean Nations(Agadir Agreement, signed in Rabat on25February2004, for entry

into force on1January2006)

The Hashemite Kingdom of Jordan, the TunisianRepublic, the Arab Republic of Egypt, and theKingdom of Morocco.

http://www.bilaterals.org/article.php3?id_article=2513

The recent development with respect to

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The recent development with respect toASEAN

Asian leaders seek to make it an EU-styletrade bloc

Officials said the East Asian nations would

carry out a feasibility study for a freed

trade zoneAsian leaders meeting in

Thailand are discussing plans to

"lead the world" by forming an EU-style

You must review Trade Blocs.go to

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I have posted the following slides based on work done

by executive MBA Students.

EU

NAFTA

CAFTA

SAARCASEAN

BIMSTEC

ou ust e e ade ocs go to

Chapter 5 of Czinkota and the www

What I want you to understand about trade blocs is

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that they share a common purpose and have many

things in common in terms of successful operation

You will also note what factors limit or impede the

success of trade blocs.

Remembering all through this presentation that a

trade bloc is effectively a large Free Trade

Agreement

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The basic questions .

What is the definition of a trade bloc, and

FTAgreement and a FTArea

How are trade blocs related to globalization and

what is the future trend with respect to trade

blocsbe able to give examples

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Firstly we will look at the EU

The most significant of the trade

blocs and the model adopted bymany other trade alliances

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EuropeanUnion

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Scope of Presentation

Introduction The History of European Union

Why is the European Union?

What does the EU do?

The Single Market

Economic and monetary union (EMU) and the euro

Positive VS Negative Outcomes The European Union on the world stage

What future for Europe?

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European Union Flag

It is the symbol not only of the

European Union but also ofEurope's

unity and identity in a wider sense.The circle of gold stars represents

solidarity and harmony between the

peoples of Europe.

The number of stars has nothing to do

with the number of Member States.

There are twelve stars because the

number twelve is traditionally the

symbol of perfection, completeness

and unity. The flag therefore remains

unchanged regardless of EU

enlargements.

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Motto United in diversity

The motto means that, via the EU, Europeans are

united in working together for peace and

prosperity, and that the many different cultures,

traditions and languages in Europe are a positiveasset for the continent.

The 9th of May has become a European symbol

(Europe Day) which, along with the flag, the

anthem, the motto and the single currency (theeuro), identifies the political entity of the

European Union. Europe Day is the occasion for

activities and festivities that bring Europe closer

to its citizens and peoples of the Union closer to

one another.

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The History of European Union

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The History of European Union

1951: The European Coal and Steel Communityis established by thesix founding members

1957: TheTreaty of Romeestablishes acommon market

1973: The Communityexpands to ninemember statesand develops its common policies

1979: The first direct elections to theEuropeanParliament

1981: The firstMediterranean enlargement

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The History of European Union1993: Completion of thesingle market

1993: The Treaty of Maastrichtestablishesthe European Union

1995: The EUexpands to 15 members

2002: Euro notes and coinsare introduced

2004: EU enlarged to25 countries

2007: EU expands to27 member states

2007: Treaty of Lisbon..now ratified

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Recent developments

Go to the EU official website.the EUresponse to the financial crisisAND

TheTreaty of Lisbonwas signed on 13 December 2007. It had to beratified by all 27 Member States before it could enter into force. Itsmain objectives are to make the EU more democratic, meeting the

European citizens expectations for high standards of accountability,openness, transparency and participation; and to make the EU moreefficient and able to tackle today's global challenges such as climatechange, security and sustainable development. Finally approved by allsignatories in December 2009.

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Thank You

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Now we will look at the NAFTA

This trade bloc has attracted a

lot of criticism.unlike the EU ithas not brought with it fairness

and equity to all.

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In a sense it may be argued that the rich have

become richer and the poor poorer

North American Free Trade Agreement

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The official web site

Establishment

Objectives

A Decade of SuccessCriticism & Failures

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Establishment of NAFTA NAFTA stands for North American

Free Trade Agreement.

NAFTA was preceded by anagreement between the UnitedState and Canada entitled theU.S.-Canada Free Trade

Agreement, which was enacted on

January 1,1989.

NAFTA was implement on January1,1994 and has now reachedmaturity.

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Establishment of NAFTA NAFTA member countries -

Canada, Mexico and UnitedStates of America.

Its purpose was to removetariff barriers betweenCanada, U.S. and Mexico.

The Agreement includes twosupplement agreements onlabor and environment.

The official objectives of NAFTA

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The official objectives of NAFTA Eliminate trade barriers within

North America all tariffs eliminated

within 15 years..done

Promote fair competition

Increase investment opportunities Especially in Mexico

Protects intellectual property rights

Implement procedures forresolution of disputes

Provide a framework for furtherbenefits.

NAFTA Initialing Ceremony, October 1992.From left to right: (Standing) Mexican President

Salinas, US President Bush, Canadian PrimeMinister Mulroney.

Contents of NAFTA (Agreement)

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( g ) GENERAL PART

Objectives

TRADE IN GOODS Market access of goods

Rules of Origin

Customs procedures

TECHNICALBARRIERS TO TRADE

GOVERNMENTPROCUREMENT

INVESTMENT ANDSERVICES ANDRELATED MATTERS

INTELLECTUAL

PROPERTY

ADMINISTRATIVEAND INSTITUTIONAL

PROVISION

OTHER PROVISIONS

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A Decade of SuccessINCREASED TOTAL TRADE AND

BROADER ECONOMIC TRENDS

Representing a free trade areawith about one-third of theworlds total GDP, the NAFTAeconomies are significantly larger

than that of the EuropeanUnion. Even with the addition often new members, the EUs GDPwill still be well behind that of theNAFTA region.

Led to economic growth andrising prosperity in the UnitedStates, Mexico and Canada.

htt : www.ustr. ov Document Librar Fact Sheets 2004 NAFTA A Decade of Success.html

A Decade of Success

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PROGRESS FOR ENVIRONMENT

AND LABOR

Through the North AmericanAgreement on EnvironmentalCooperation, NAFTA partnerspromote enforcement ofenvironmental laws.

Through the Commission forEnvironmental Cooperation (CEC),which was created from theNAFTA, all three countries havebenefited from coordinationwhich is increasing the

effectiveness of North Americanconservation efforts.

Many challenge thisassessment

htt : www.ustr. ov Document Librar Fact Sheets 2004 NAFTA A Decade of Success.html

Yet here are many critical web sites

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y

C i i i & F il

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Criticisms & Failures NAFTA does not facilitate trade,but promotes a limited integrated

continental economy.

Quoted from Mexicos former

foreign minister on NAFTA:An agreement for the richand powerful in the United

States, Mexico, and Canada

An agreement effectivelyexcluding ordinary people in

all three societies.

http://www.epi.org/content.cfm/bp173#pt3

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Next we will look at the CAFTA

The Central American Free Trade Agreement

For trade blocs to function political stability is a must.

The coup in Honduras in 2009 unsettled

trade relationships in the regionthisillustrates the close relationship between

political harmony and effective traderelations..globally

Location.below Mexico.

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Part I : OverviewBackground of signing

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Background of signing

CAFTA or Central America Free Trade Agreement is an expansion ofNAFTA. Its the agreement between U.S. and 5 Central AmericanNations which composed by Guatemala, El Salvador, Honduras, Costa Rica, andNicaragua.

And, It was renamed to CAFTA-DR when Dominican Republic joined thenegotiations.

The CAFTA-DR was signed by US. President, George W. Bush on AUG 2 2005. and now it become into effect by the approval from El Salvador,Honduras, Nicaragua, Guatemala, and Dominican Republic. Excepted CostaRica which still hasnt yet signed by their President.

Part I : OverviewAims of CAFTA DR

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The goal of this agreement is To make a Free TradeZone similar to NAFTA which currently encompassesUSA , Canada and Mexico .

CAFTA-DR is step towards achieving a Free Trade Areaof Americas ( FTAA ); an area encompassing all of North andSouth America and the Caribbean nations (except Cuba andVenezuela)

Aims of CAFTA-DR

Eliminate tariffs on 80% US exports

Necessarily precursor to executionof Puebla Panama

Part II : Why CAFTA-DR is important

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Barriers to trade fall:

Service providers gain access:

Investment opportunities open:.

Part II : Why CAFTA-DR is important

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Greater prosperity and stability in the

region:

This has changed in 2009

Political issues impact on trade...

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2010 in Honduras

Mr Zelaya addressed his supporters from the Brazilian embassy inTegucigalpa

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Now we will look at SAARC;

is SAARC working?

Why?

About SAARC

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About SAARCSAARC stands for South Asian Association of Regional Cooperation

SAARC was officially born in 1985Its mission is to promote the well-being of the populations of South

Asia and improve their standard of living

SAARC is comprised of Eight Members

Afghanistan Bangladesh Bhutan India

Republic of MaldivesNepal Pakistan

Sri Lanka

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About SAARC (contd.)Headquarters Kathmandu, Nepal

Leader Secretary General Lyonpo Chenkyab Dorji

Membership 8 members states; 6 observers

SAARC is the only regional organization for cooperationin South Asia.

To promote Mutual Collaboration and assistance in the

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Note:-These objectivesare common to all trade blocs

SAARCS Aims

To promote Mutual Collaboration and assistance in the

economic, social, cultural, technical and scientific field

To reinforce links among

countries of this area

Social Progress

and

Cultural Development

To speed up

economic growth

Ineffectiveness

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Ineffectiveness Inability to play a crucial role in integrating South Asia Pakistans unwillingness to implement the tariff reduction in SAFTA

Economic, political, and territorial disputes

SAARC roles diminished A mere platform for annual talk and meeting among members

Political Issues SAARC intentionally laid more stress on core issues rather than more

decisive political issues:

Kashmir dispute between India and Pakistan

Civil war in Sri Lanka - Between government and the

Liberation Tigers of Tamil Eelam Uncertain political situation in Afghanistan

FTA F T d A t

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FTA Free Trade AgreementMembers unwillingness on signing FTA

India has several trade pacts with Maldives, Nepal, Bhutan and Sri Lanka

Trade agreements with Pakistan and Bangladesh have been stalled due

to political and economic concerns

12th SAARC Summit at Islamabad

South Asia Free Trade Agreementa framework for the

establishment of a free trade area covering 1.4 billion people

EU SAARC R l ti

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EU / SAARC Relations EU values cooperation and regional integration efforts in South Asia. In 1999, EU and SAARC agreed to cooperate on improving market access

for SAARC products into the EU.

- EU provided technical support for the establishment of the South

Asian FTA.

- EU supported harmonization of SAARC standards.

SAARC EU

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Now we will look at ASEAN

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The Founding of ASEAN

Overview

Projects

Outcomes

We observe that nearly 12% of investment

f S

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came from within ASEAN in 2007

The Founding of ASEAN

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The Establishment

ASEAN or The Association of Southeast Asian Nationswas establishedon 8th August 1967 in Bangkok with 5originalmembers: -

Indonesia Malaysia Philippines Singapore Thailand

Later joined 8th January 1984 : Brunei Darussalam

28th

July 1995 : Vietnam 23rd July 1997 : Lao PDR and Myanmar 30th April 1999 : Cambodia

Population : 500 million Area : 4.5 million square kilometers Combined Gross Domestic Product : 700 billion USD

Total Trade : 850 billion USD

Overview

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Objectives

The aims and purposes: To accelerate economic growth, social progress and

cultural development in the region

To promote regional peace and stability throughabiding respect for justice and the rule of law in therelationship among countries in the region andadherence to the principles of the United NationCharter.

In 2003, ASEAN leaders resolved that an ASEANCommunity shall be established comprising 3 pillars;ASEAN Security CommunityASEAN Economic CommunityASEAN Socio-Cultural Community

Overview

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Vision 2020

A pact between of South East Asian nations

Outward looking

Living in peace

Stability and prosperity

Bonded together in partnership

Fundamental Principles

Overview

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Fundamental PrinciplesThe Fundamental principles of ASEAN contained in the

Treaty of Amity and Cooperation in Southeast Asia (TAC); Mutual respect for the independence, sovereignty,

equality, territorial integrity and national identity of allnations

The right of every State to lead its national existencefree from external interference, subversion or coercion

Non-interference in the internal affairs of one another

Settlement of differences or disputes by peaceful

manner

Renunciation of the threat or use of force

Effective cooperation among themselves

Structures and Mechanisms

Overview

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The highest decision-making organ of ASEAN is the Meeting of the ASEAN Heads of Statesand Government.

The ASEAN Summit is convened every year.

The ASEAN Ministerial Meeting (Foreign Ministers) is held annually for the followingsectors;

Agricultural and forestry Economics (Trade) Energy Environment

Finance Health

ASEAN established committees to support the conduct of ASEANs external relations. It

composed of head of diplomatic missions in the capitals as follows;

OttawaParis

Beijing Berlin Brussels

Information Investment Labor Law Regional haze Rural development and

poverty alleviation

Science & Technology

Social welfare Telecommunication Transnational crime Transportation Tourism Youth

Washington DC Wellington

New York

Seoul

Canberra Geneva Islamabud

London Moscow New Delhi Riyadh

ASEAN i d t i l C ti S h (AICO)

Projects

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ASEANindustrial Cooperation Scheme (AICO)

ASEAN Free Trade Area (AFTA)

ASEAN Investment Area (AIA)

e-ASEAN

ASEAN Framework Agreement on Service (AFAS)

ASEAN Framework Agreement on the Facilitation ofGoods in Transit(GIT)

ASEAN Integration System of Preferences (AISP)

ASEAN Industrial Cooperation Scheme (AICO)

Projects

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ASEANIndustrial Cooperation Scheme (AICO)Agreement Date: April 1996

Objective:1. Develop ASEAN Industry Products2. Increase productivity of ASEAN Industry Products3. Support and share the production capacity4. Decrease cost of raw material by reduce tax5. Increase investment between ASEAN member and foreign investment

6. To develop ASEAN Industry Product to be competitive.

Present Status:

1. Car manufacture and Spare part industry 115 projects2. Appliance and Electronic part 7 projects3. Machine for Agriculture 1 project4. Food manufacture 5 projects5. Safety mirror 1 project

* Thailand joins around 73 projects

ASEANFree Trade Area (AFTA)

Projects

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ASEANFree Trade Area (AFTA)

Agreement Date: November 1996

Objectives:1. To develop ASEAN economic in each member country2. To protect ASEAN industry3. To increase ASEAN Export Volume

Positive1. Trade between ASEAN expanding a lot.2. Raw material and import product from ASEAN member are cheap3. Consumer have benefit from cheap product price4. FDI increasing between ASEAN member

Negative1. ASEAN V.S. ASEAN (Some industry cannot be survive)2. Specific Raw material from non-member was expensive

ASEANInvestment Area (AIA)

Projects

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Agreement Date: Year 2000

Objective:1. Promote and develop investment between ASEAN member2. AIA policy will be open ASEAN Investment Area within 2010 for

ASEAN member3. For Non-ASEAN member can be join in this policy in year 20204. Increase more chance for MNC to invest in foreign

5. Open all industry in ASEAN for ASEAN member investing

Advantage :1. AIA policy will make ASEAN economic growth a lot from FDI2. Each MNC form member country will be free from trade barrier

Disadvantage :1. If ASEAN industry not strong before open AIA, it will loose2. If FDI from non-member success, money will flow out from

ASEAN country

Successful Outcomes

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Political & Security Issues

Economics Social development & Security

Culture & Information

Science & Technology

Environmental Issues

Human Rights

External relationship with Trade partners

Weaknesses

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Non-Interference in the Internal Affairs of other members(a toothless tiger)

Incapable of providing a concerted response to the financial disasters

- difference within region, hard to come-up with effective regional response e.g.

Thailand-IMF issue

Economics: contagious effect of currency depreciation and marketmeltdowns

Political: from bloody putsch in Cambodia Pol Pot

Environmental: poisonous smog from Indonesian forest fires

Recent developmentsASEANChina Free Trade Area

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ASEAN China Free Trade Area

TheASEANChina Free Trade Area (ACFTA), also known as the China

ASEAN Free Trade Area is a free trade area among the ten member states of

ASEAN and the Peoples Republic of China.

The initial framework agreement was signed on 4 November 2002 in Phnom Penh

with the intent on establishing a free trade area among the eleven nations by 2010

The free trade area came into effect on 1 January 2010

The ASEANChina Free Trade Area is the largest free trade area in terms of

population and third largest in terms of nominal .

Go to the web for further up to date data if you wish

http://www.aseansec.org/24161.htm

Recent developmentsASEANEU

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ASEAN EU

COUNCIL OF THE EUROPEAN UNION

Madrid, 26 May 201018th ASEAN-EU Ministerial Meeting Co-Chairs Statemen

The Ministers reaffirmed the unique character of the partnership between the EUand ASEAN, the two regions of the world that are most advanced in regionalintegration. This is a partnership built on over thirty years of dialogue and cooperation,

and based on a spirit of equality, mutual respect and mutual benefit.

The Ministers resolved to intensify relations further through deepening political

engagement and developing a comprehensive co-operation, based in particular onthe Plan of Action to Implement the Nuremberg Declaration on an EU-ASEANEnhanced Partnership for the period 2007-2012.

Changes in ASEAN

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Significant developments in 2010- 2011

The ASEAN Charter which you can access on thewww

ASEAN + 3 China, Japan and South Korea

ASEAN + 6 Australia, New Zealand and India

Critical issues remain unresolved

Issues of trans boundary pollution issues and the

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Issues oftrans boundary pollution issues and theintegrated development of the region needs to be

managed by ASEANThe building of dams..Laos and Chinathe managementof the Greater Mekong Sub-region.sharing of resources

Farming practices.use of fertilizers and pesticides with

run off into catchment areas .

Slash and burn farming which causes land degradation,erosion and air pollution across the region..trans-boundary pollution issues

Integrated fiscal and financial management

Inability to resolve territorial rights over the South China

But the Achilles Heal ??????????

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Today, ASEAN is not only a well-functioning,

indispensable reality in the region It is a real

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indispensable reality in the region. It is a real

force to be reckoned with far beyond the region.

It is also a trusted partner of the UnitedNations in the field of development...

Kofi Annan

Secretary-General of the United Nations

16 February 2000

?

Finally

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Bay of Bengal Initiative for Multi-SectoralTechnical and Economic Cooperation

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6 June 1997 : formed in Bangkok (BIST-EC,Bangladesh, India, Sri Lanka, Thailand EconomicCooperation)

22 Dec 1997 : Myanmar joined

In 2003 : Nepal and Bhutan has been joined

Groups name was changed to Bay of

Bengal Initiative for Multi-SectoralTechnical and Economic Cooperation orBIMSTEC.

BackgroundAgenda- Background

- Purposes

- Strengths

- Weaknesses

Purposes

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Purposes New Asian free trade area up by 2017 Cooperation framework linking South Asia

with South-east Asia

Working groups were set up to move thesectoral agenda

Increase cooperate on research anddevelopment based on resources availablefrom their own rich natural biodiversity

Aimed at producing breakthrough affordabledrugs, and also agreed to cooperate onenergy issues.

Agenda- Background- Purposes

- Strengths

- Weaknesses

Purposes

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Purposes BIMSTEC covers 13 Priority Sectors

1. Trade and Investment2. Transport and Communication3. Energy4. Tourism

5. Technology6. Fisheries

Agenda- Background

- Purposes

- Strengths

- Weaknesses

Purposes

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Purposes Sectors of Cooperation

7. Agriculture8. Public Health9. Poverty Alleviation10. Counter-Terrorism and Transnational

Crime

11. Protection of Biodiversity12. Culture13. People to People contact

Agenda- Background- Purposes

- Strengths

- Weaknesses

Strengths

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Strengths BIMSTEC provides a unique link between

South Asia and Southeast Asia

Bring 1.3 billion people together

21 percent of the world population, acombined GDP of US$750 billion

India and Thailand also made progress on thesidelines, under the Thai-India free tradeagreement.

Agenda- Background- Purposes

- Strengths

- Weakness

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You must go to the lecture notes and to

Czinkota..the Introductory chapters

and especially Chapter 5

Thats itgood luck

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I wish you well for the exam and for your

future careers..