MODULE 2 INTERNATIONAL BUSINESS ENVIRONMENT Globalization of
business WTO and trade liberalization emerging issues implications
for India Regional Trade Blocks Inter regional trade amongregional
groups.1.What do you mean by international business
environment?INTERNATIONAL BUSINESS ENVIRONMENTKeegan observes by
1990s the concept of marketing is outdated and that time demanded a
strategic concept. The strategic concept of marketing shifted focus
on marketing from product to customer in the context of broader
external environment. To succeed marketers must know customer in a
context including competition, government policy regulation and
economic, social, political macro forces that shape evolution of
market. the difference in domestic and foreign environment need
different strategies. What makes a business strategy successful in
one market is a failure in another market. Environment plays a
major role in international business.14. What are the different
sets of environment in international business?There are 2 different
environments in IB. 1.Internal environment 2.External environment1.
INTERNAL ENVIRONMENTThe internal environment of the firm is also
important. The competence of firm to do international business
depends on number of internal factors as1. Mission and vision of
firm, 2. Attitudes, 3.capabilities, and entire people in
organization. 2. EXTERNAL ENVIRONMENTA firm in international
business has 3 different set of external environment.1. Domestic
environment 2.foreign environment 3.global environment- The diagram
shows different environment of international International
businessforigenglobalDomesticInternal environment
A company which wants to do business abroad should be having a
relevant internal environment. Some government policies or
regulations will be there in case of companies who do foreign
business abroad. For those companies who do not outsource anything
or dont produce anything domestically, dont have to bother about
micro and macro environment.Foreign environment refers to
environment of the relevant foreign market. The nature of business
environment will be different for different market.The global
environment refers to global factors which are relevant to business
such as WTO principles and agreement. Similarly there are certain
development like a hike in crude oil price which have global
impact.As Cateora and Keaveney points out that the key to
successful international business is adaption to the difference in
environment that usually exist from one market to other. there are
number of example of very prominent MNCs who burn their hand
because of non adaption to the environment.P& G entered the
Japan market with its US strategies in 1973 lost their business in
1987 ,but later with the adoption to the business environment in
Japan it made huge profit. Apple computers and Colgate Palmolive
products are also among those which failed in Japan.MICRO AND MACRO
ENVIRONMENT OF INTERNATIONAL BUSSINESSMicro factors-actors in firms
immediate environment which directly influence firms decision. For
ex suppliers, markets, intermediaries, financial institution,
middleman ,competitors Macro environment-it means that those
environment outside the industries like cultural, economic, social,
political, legal, technological.IMPACT OF CULTURAL ENVIRONMENT IN
INTERNATIONAL BUSINESSAs Geert Hofstede a noted Dutch writer has
put it, culture is the software of the mind. Kluckhohn has defined
culture in simple terms as total life way of people. Culture refers
to the learned, shared,and enduring orientation patterns in a
society. People demonstrate their culturethrough values, ideas,
attitudes, behaviors, and symbols. Culture affects even simple
greetings and partings. For example, in China, friends express
thoughtfulness by asking each other whether they have had their
meal yet. In Turkey, a typical greeting is What is new with you?
The Japanese, who still exercise formal greeting and parting
rituals, routinely apologize to the other party just before ending
a telephone conversation.culture include both material and non
material culture. Material culture involves man made things and man
made alternation in the environment. Non material culture include
factors such as language, ideas ,beliefs, values music. 1.cultural
risk Cross-cultural risk is defined as a situation or event where a
cultural miscommunication puts some human value at stake.
Cross-cultural risk arises routinely in international business
because of the diverse cultural heritage of the participants.
Unlike political, legal, and economic systems, culture has proven
very difficult to identify and analyze. Its effects on
international business are deep and broad. In cross-border
business, some time companies step into different cultural
environments characterized by unfamiliar languages and unique value
systems, beliefs, and behaviors2. Negotiating goalNegotiators from
different cultures may tend to view the purpose of a negotiation
differently. For deal makers from some cultures, the goal of a
business negotiation, first and foremost, is a signed contract
between the parties. Other cultures tend to consider that the goal
of a negotiation is not a signed contract but rather the creation
of a relationship between the two sides. Although the written
contact expresses the relationship, the essence of the deal is the
relationship itself.3. CommunicationCulture can affect
communication in different ways .but 2 aspects found different than
others. First is the extent to which context affect what is said or
how it is said. High context culture and low context culture are
there .individual from high context culture view low context
culture behaviors as sign of immaturity or lack of sophistication.
Second dimension of communication that can vary by culture is the
extend which communication is explicit or implicit. In explicit
communication the burden of effective communication is on
speakers.on the other hand in implicit communication the burden on
both speaker and listener.4.Advertisement Culture affects the
effectiveness of advertising. Advertising, for instance, is
strongly influenced by language, which is one of the key elements
of culture. Moreover, advertising budget and structure are based on
buying habits and consumption style. 5.Cultural exchangeCultural
exchange is very prominent now a days.contemporary China illustrate
this point. For instance, it was widely believed that gender
identity might affect consumption behavior. However, a recent study
of masculinity appeal demonstrated that American respondents and
Chinese respondents act the same when presented with such appeals,
in other words, the masculinity appeal is not as effective as they
expected. A possible explanation for this could be that the gender
status in Chinese traditional culture has changed. 6.TimePeople
from Britain and Germany are keen on following a time-bound
schedule. The different 'time-cultures' might be the reason behind
clashes, between people from diverse cultures..
With today's businesses entering a 'globalized' world, the
interaction between different cultures is bound to happen. Merely
learning different languages won't be enough. It is necessary for
corporate houses to understand the social conditions of different
countries, to successfully tap the respective markets . Culture
influences a range of interpersonal exchange as well as value-chain
operations such as product and service design, marketing, and
sales. Managers must design products and packaging with culture in
mind, even regarding color. While red may be beautiful to the
Russians, it is the symbol of mourning in South Africa. What is an
appropriate gift for business partners also varies around the
world. While items such as pens are universally acceptable, others
may not be appropriate. Examples include sharp items such as knives
or scissors, which imply cutting off the relationship or other
negative sentiments, chrysanthemums, which are typically associated
with funerals, and hand-kerchiefs, which suggest sadness. Most
companies want their employees to learn about other cultures and
acquire a degree of cross-cultural proficiency. In Californias
Silicon Valley, where IT firms are concentrated, Intel offers a
seminar to its staff called Working with India. The seminar aims to
help employees work more effectively with the estimated 400,000
Indian nationalsin the valley. Several other Silicon Valley firms
offer similar training. Another computer firm, AMD, flies IT
workers from India to its facilities in Texas for a month of
cultural training with U.S. managers. Workers role-play, pretending
to be native Indians, and study subjects like Indian political
history, Indian movies, and the differences between Hinduism and
other Indian religions. IMPACT OF POLITICAL ENVIRONMENT IN IB
Despite the globalization of business, firms must abide by the
local rules and regulations of the countries in which they operate.
Until recently, governments were able to directly enforce the rules
and regulations based on their political and legal philosophies.
The internet has started to change this, as sellers and buyers have
easier access to each other. global businesses monitor and evaluate
the political and legal climate in countries in which they
currently operate or hope to operate in the future.The study of
political systems is extensive and complex. A political system is
basically the system of politics and government in a country. It
governs a complete set of rules, regulations, institutions, and
attitudes. PROBLEMS IN POLITICAL ECONOMY IN IB.A main
differentiator of political systems is each systems philosophy on
the rights of the individual and the group as well as the role of
government. Anarchism, which contends that individuals should
control political activities. At the other extreme is
totalitarianism, which contends that every aspect of an individuals
life should be controlled and dictated by a strong central
government. In reality, neither extreme exists in its purest form.
Instead, most countries have a combination of both, the balance of
which is often a reflection of the countrys history, culture, and
religion. This combination is called pluralism. Democracy is the
most common form of government around the world today. What
businesses must focus on is to assess the balance to determine how
local policies, rules, and regulations will affect their business.
Depending on how long a company expects to operate in a country and
how easy it is for it to enter and exit, a firm may also assess the
countrys political risk and stability. A company may ask several
questions regarding a prospective countrys government to assess
possible risks:1. How stable is the government?2. Is it a democracy
or a dictatorship?3. If a new party comes into power, will the
rules of business change dramatically?4. Is power concentrated in
the hands of a few5. How involved is the government in the private
sector?Factors1. Economic SystemThe type of economic system a
country builds is a political choice. Foreign countries often will
have different economic systems. A country may operate in a market
economy or capitalist economy where private individuals own most of
the property and operate most of the businesses. A market economy
is usually the best economic environment for a foreign business
because of the protection of private property and contract rights.
Some countries lean more towards a socialist economy where many
industries and businesses are owned by the state. Operating
businesses in this environment will be more difficult A few
countries operate under a communistic economic system where the
state pretty much controls all aspects of the economy. Conducting
business in this environment ranges for difficult to impossible.
The reality is that all economies are mixed economies that take
parts from two or more of the 'pure' economic systems. For example,
you can conduct business in communist China in Hong Kong and other
special areas where a market economy is allowed to operate.
2.Government SystemBusinesses must often contend with different
governmental systems. Examples include democracies, authoritarian
governments, and monarchies. Some governments are easier to work
with than others. Democracies, for example, are answerable to their
citizens and the rule of law. Authoritarian regimes are usually
answerable to no one, including the law. It is less risky to
conduct business in democracies 3.Trade AgreementsCountries often
enter into trade agreements to help facilitate trade between them.
If a country has entered into a trade agreement with another
country, conducting business in that country will usually be easier
and less risky because the trade agreement will provide some
predictability and protection. 4.Formal Trade BarriersA trade
barrier is simply anything that makes it harder for a company to
export products to a foreign country. Formal trade barriers are
enacted by governments for the purpose of restricting imports to
protect a country's domestic industries. Formal trade barriers
include tariffs, which are taxes on imports that helps make
domestic products more competitive, and product quotas that limits
the number of products imported into the country. Informal Trade
BarriersGovernments may impose regulations that aren't primarily
promulgated as barriers to trade but have the same effect. Examples
can include specific product standards and health and safety
standards that businesses will be required to meet before the
products can be sold. SOCIAL ENVIRONMENT IN INTERNATIOANL BUSINESS
ENVIRONMENTThe main social factors or social environment taken into
account can be grouped as1.consumer belief, preference ,habit and
beliefThe customs and habits of people in forigen countries should
be clearly observed and make products accrding to that. ex.Shrimp
is popular in 3 markets Japan ,USA,and western Europe. But headless
shrimp is preferred by customers in Europe and Japan prefer shrimp
with head.2.EtiquetteWays of meeting, greeting method of showing
respect, table manners etc is different in different country.Before
indulge in international business employees of home country who are
working in host country must be given training in etiquette of host
country.3.Number of women in working populationThis will affect the
consumption pattern. Because of huge percentage of working women in
USA the demand for semi cooked food is more.So number of working
women population increase consumption of more home appliances and
canned foods in market.4.religionReligion is very important in
social setup. Religious customs should take into consideration
before starting international trade.Some countries religion do not
allow the sales of certain products in their
market.5.LanguageLanguage is an important factor. It is very
important to give language training to employees before
international trade. Language is an important area which should be
given due importance.TECHNOLOGICAL ENVIRONMENT IN INTERNATIOANL
ENVIRONMENTTechnology contribute greately to
globalization.technology means both mechine and way of thinking
available to solve the problems.according to UNCTAD Technology is
described as the systematic knowledge for the manufacturing of a
product.World Economic Forum stated that technology is one of the
most important eight factors in the global competitiveness of
nations.The major factors in technological environment what
companies should take into consideration are1.Time lags in
technology introduction/absorbtion Time lag will be there in
tgechnological advancement in many of the countries.in many
developed countries TV arrive very late.when the advanced coun
tries were using colour TV India was using black and white TV.this
is called time lag in technology adaption.in some cases many
developed countries even import outdated technology to developing
countries.2.Appropraite technologyRight technology in right time is
very important.some technology may not be suitable for some
countries.Japans success is mainly due to purchasing of appropriate
technology.more than using highly sophisticated technology the
technology should be appropriate.3.impact of technology in
globalizationThe benefits of technology in globalization are1.less
transport cost2.patented technology in which firm can exploit all
demand without competition4.transfer of technologyTransfer of
technology should be done in proper way.There are certain issues in
transfer of technologya)developing countries obtain technology at
high price.b)appropriateness of forigen technology to
physical,economic ,social condition of developing countryc)heavy
reliance on technology by developing counties.16.how economic
environment affect international business?ECONOMIC
ENVIRONMENTEconomic Environment refers to all those economic
factors, which have a bearing on the functioning of a business.
Business depends on the economic environment for all the needed
inputs. It also depends on the economic environment to sell the
finished goods. 1.A Centrally Planned Economy(CPE) It defined as an
economy where decisions regarding production and distribution of
goods is taken by a central authority, depending upon the
fulfillment of a particular economic, social and political
objective..2.market based economyIn the market based economic
system, the decision to produce and distribute goods is taken by
individual firms based on the forces of demand and supply. 3.Mixed
economy Mixed economy combines all features of market economy and
centrally planned economy.india is an example.The main economic
factors which affect international business environment are1.Level
of income and its distributionDemand depends upon the level of
income of people in country and its distribution.GDP and percapita
income is very important. On the basis of per capita income World
Bank classifies countries as 1.Low income countries1. Low income
country-US $875 or less2. Middle income- US $875 -10,7253. High
income country-above 10,725 According to the level of income and
its distribution the demand for goods are determined. Level of
income and its distribution is important in international business
environment.II.INFLATION
It is a fact that the size of demand for a product depends not
only on the level of income and its distribution, but it is also
subject to the level of inflation in the country.It is because the
purchasing power of the consumers depends on their real income.The
higher the level of inflation, the lower is the real income and the
purchasing power of the consumers. Thus, when a multinational firm
decides to set up a manufacturingunit in a foreign country, it has
to take into account the rate of inflation in the host countryIII
CONSUMPTION BEHAVIOURConsumption behavior or the pattern of
consumption influences the demand for a particular product to a
sizeable extent. In a low income country, where the consumers care
more for price rather than for the quality of the goods,
multinational firms find it very difficult to sell their improved
quality, high price products, even if they are for the daily use of
common peopleiv) Availability of Human and Physical Resources :Easy
availability of human and physical resources makes the
manufacturing process easier and at the same time lowers the cost
of production so as to confer upon the firm a competitive edge.
This is because if such resources are in abundance, they are
available with no difficulty and ata lower cost.
v) Network of Infrastructure :Building up of supportive
infrastructure is a prerequisite for the development of industry.
For successful operation, a firm needs uninterrupted power supply,
good road/rail line, efficient communication system and so on. This
is whey multinational firms must take into account the availability
of infrastructure while analyzing the economic environment in a
host country.(vi) Fiscal, Monetary and Industrial Policies :Various
forms of economic policies pursued in the host country make the
economic environment either congenial or act as a deterrent to the
operation of a multinational firm. Corporate income tax, excise
duty and tariff on import in the host country do influence
international trade and investment.VII Industrial Policy :Again,
one of the aspects of the industrial policy is related to the area
where foreign investors can invest. If the policy is restrictive on
this count, it permits foreign investors only into a very limited
area of the industrial economy. On the contrary, a liberal policy
environment helps attract foreign investment.
Q1: What do you understand by the term globalization?(july
2013,2marks,july 2012,july 2010,july 2009)Meaning of
GlobalizationThe world is moving away from self-contained national
economies toward an interdependent, integrated global economic
system. Globalization refers to the shift toward a more integrated
and interdependent world economy. The medieval proverb says
merchants have no nation it means that a businessman can view world
as one country for operation. The term sometimes also refers to the
movement of people (labour) and knowledge (technology) across
international borders. There are also broader cultural, political
and environmental dimensions of globalization. According to IMF It
represents the growing economic interdependence of the countries
worldwide through increasing volume & variety of cross border
transactions in goods & services & of international capital
flows & also through the more rapid &widespread diffusion
of technology.Globalization has two faces: 1) Globalization of
markets The globalization of markets refers to the merging of
historically distinct and separate national markets into one huge
global marketplace.
Consumer products like citigroup credit cards, coca cola, Mc
Donalds and StarBucks are the benefactors of this trend. Difference
in the national market is being embedded through different
dimensions Eg - Car companies make the different range of cars
based on the economy of the country, local fuel cost, income
levels, traffic congestion and cultural values. In many nations
mostly the companies are competing with each other. Pepsi &
Coca Cola, Ford and Toyota, Boeing & Airbus, Caterpillar &
Komatsu in earth moving equipments.
2) Globalization of productionThe globalization of production
refers to the sourcing of goods and services from locations around
the globe to take advantage of national differences in the cost and
quality of factors of production like land, labor, and capital.
. EX:Medical transcription Doctors are outsourcing their
radiology, MRI scan to India and when the US doctors are sleeping
they are reading the reports and the next day the doctors can talk
to the patient.US uses Indian engineers to debug software written
in the US. Due to difference in the time the work is done and
forwarded to the US for the next day.
Q2:.define globalization
Definition of Globalisation 1.According to IMF It represents the
growing economic interdependence of the countries worldwide through
increasing volume & variety of cross border transactions in
goods & services & of international capital flows &
also through the more rapid &widespread diffusion of
technology2.Charles U.L Hill defines globalization as the shift
towards a more integrated and interdependent world economy.
globalization has 2 more component-globalization of market and
product.3. World Bank: Globalization is the growing integration of
economies and societies around the world.Q3:.What are the
advantages of globalization./how globalization leads to improvement
in international trade.(June 2009)ADVANTAGE OF GLOBALISATIONThe
advantage of globalization can be generally classified as
1.Increase in welfare and prosperityMost of the countries have
resorted to trade relations with each other in order to boost their
economy. Thus, globalization has induced international peace and
security in a big way and there by increase welfare and
prosperity.2.Free TradeFree trade is a policy in which a country
does not levy taxes, duties, subsidies or quota on the
import/export of goods or services from other countries. There are
countries which have resolved to free trade in specific regions.
This allows consumers to buy goods and services, comparatively at a
lower cost.3. Global ConnectivityGlobalization has promoted
international connectivity. With the use of the Internet, the world
has definitely become a smaller place. There has been exchange of
thoughts and ideas which has morally boosted and interlinked the
mindset of people all round the world.4. New MarketsThe
opportunities for new markets has increased dramatically. Numerous
companies have started investing in different countries and luring
customers for their brands. These ever-expanding markets have
helped countries to raise capital in terms of foreign domestic
investments, thus improving the economy of the country.5.
Employment OpportunitiesOne of the most advantageous factors of
globalization is that it fosters the generation of employment. This
happens due to the emergence of new companies and new markets,
where lots of skilled and unskilled labor is required. Immigration
between countries also increases, providing better opportunities
for people all round the world. By providing employment,
globalization helps in increasing the standard of living of the
people, and also reduces poverty.6. lower price with Quality
ProductsThe competition among different companies finds place at an
international level. It becomes important for the companies to
focus on quality goods and services, in order to have a strong
foothold in the market. The consumer is benefited in the process,
and gets quality products at cheaper rates. 7.Environmental
ProtectionMutual trade carried out by countries has brought about
an understanding for the protection of the environment from which
they benefit so much. Global environmental problems like
cross-boundary pollution, over-fishing in the oceans, climate
change, etc., are solved by discussions and conventions.8. Increase
in welfare of Developing NationsIt is claimed that globalization
increases the economic prosperity of developing nations. Developed
countries invest in such countries with an aim of capturing new
markets, which helps them improve their infrastructure and
technologies to international levels. 9. Equality for
AllGlobalization has helped in creating international criminal
courts, and international justice movements are also launched to
provide justice to people at a global level. Disputes are solved
through global standards such as patents, copyright laws, and world
trade agreements. Thus, it has ensured that people do not get
discriminated with regard to country, caste, creed or sex.10. Ease
of TransportationWith the advent of globalization, there has been
an immense increase in the transportation of goods and services
worldwide. Things which took weeks for conveyance can now easily be
availed within a couple of days. Due to the development of
containerization for ocean shipping, transportation costs are
reduced to a great extent, lowering the cost of products in world
markets11. Increase in IndustrializationFree flow of capital along
with technology enables developing countries to boost up
industrialization of countries. This increase
industrialization.12.Unity in DiversityGlobalization has helped in
bringing about integrity and social understanding everywhere. The
dream for a global village and removing some barriers that had kept
the world divided on various grounds. 13. External BorrowingIt has
often been seen that a poor country is unable to provide adequate
financing to its companies, which proves to an obstacle in the
development of the country on the whole. With the help of
globalization, there is opportunity for corporate, national, and
sub-national borrowers to have better access to external finance,
with facilities such as external commercial borrowing and
syndicated loans.Q5: What are the demerits of globalization? /Has
globalization benefitted all countries? discuss (June 2009)DEMERITS
OF GLOBALISATIONGlobalization has also been criticized on several
grounds. Its opponents do not hesitate to indulge in violence.
Workers, peasants, women, students and weaker sections of society
have raised their voice against globalization. In their opinion,
globalization has benefited the rich and harmed the poor. The
harmful effects of globalization save been discussed here.1 .
Exploitation of Underdeveloped Countries:MNCs, based in developed
countries, purchase at lower rates the raw materials of backward
countries, process them in their own countries and sell the
manufactured goods with big profit in backward countries. The huge
profit, they make, is taken back to developed, rich countries.Of
course, the MNCs have opened branches in backward countries, but
the local people who work there are paid much lower salary/wage.
These companies hardly spend anything for local development. They
victimize poor countries and their people by exploiting their
poverty and helplessness.2. Increase in Unemployment:The MNCs
employ machines to reduce the number of employees. Further, the
governments of developing countries have started withdrawing
investment from industries in the public sector. All this has led
to huge unemployment in those countries. The larger the
unemployment, the larger the poverty.3. Widening of Rich-poor
Gap:Globalization brings benefits to the rich who are small in
number and keeps the vast majority of people in poverty and misery.
It is a game of winners and losers. Those who are already rich
succeed in taking advantage of privatisation while the poor and
weak are doomed to suffer.4. Harmful Effects of
Consumerism:Globalization produces consumerism. People being
attracted by attractive goods and advertisements, want to buy these
goods. They would not hesitate to earn money for this by unfair
means. This has resulted in vast increase in corruption and other
social evils.5. Adverse Effects on Social Security and Social
Welfare:Because of privatisation, governments in many developing
countries are withdrawing from the sector of social welfare, and
private companies have entered educations, health and other such
fields related to development.As a result of this, poor people are
facing a lot of difficulties. 6. Harmful Effects on Small
Industries and Small Business:In the free economy, the big fish has
got license to eat the small fish. Small-scale and cottage
industries cannot grow in competition with big ones. Most of them
have begun to close. Similarly, small business people cannot
compete with big ones.7. Cultural Homogenization:Globalization
would lead to cultural homogenization. Each nation/society has its
own distinct culture, but under globalization the cultures of
developing countries are eroded and they are required to accept the
values and norms of developed countries. In place of plurality of
cultures, there will be a monoculture.8. Hostile to
Humanism:Globalization would kill humanism. It aims at accelerating
economic growth, and economic growth, according to its
protagonists, can be quickly attained through privatisation.
Pursuit of growth hardly respects human values. Human concerns like
equality, justice are sacrificed without raising an eyebrow.
Humanism thus falls a prey to globalization.9. Erosion of
Democracy:Globalization has led to the weakening, erosion and even
destruction of democracy. Globalization has considerably increased
the wealth and power of multinational corporations and they have
tended to interfere with and control the economic policy and
politics of developing countries..10.
Gender-Insensitive:Globalization is gender-insensitive. Women have
suffered a lot under globalization. In the privatised economy, the
interests and concerns of women, particularly of poor women, have
been seriously ignored.11. Destructive of Environment:Globalization
would destroy environment. In the name of economic development,
environment is blindly destroyed. it is destroyed for establishing
big industries and dams.12.Globalisation kills domestic businessThe
domestic business of domestic company fails to compete with MNCS on
technology and quality front.13.Transfer of natural resourceMNCS
establish their manufacturing facilities in developing countries,
exploit their natural resources and sell the product in other
countries. through these means the natural resource of developing
countries are transferred to other countries.Q;What is the meaning
of liberalization?Trade liberalisation involves removing barriers
to trade between different countries and encouraging free
trade.Trade liberalisation involves: Reducing tariffs Reducing /
eliminating quotas Reducing non-tariff barriers. Non-tariff
barriers(NTF) are factors that make trade difficult and expensive.
For example, having specific regulations on making goods can give
an unfair advantage to domestic producers. Harmonising
environmental and safety legislation makes it easier for
international trade.WTO ORIGIN,IMPORTANCE, INDIA AND WTO
INTRODUCTION After World War 2 several changes occur in world .1930
depressions also cause a great impact. Later USSR emerges as a most
important power. International trade got very much importance.
International organization also gains much importance. In July1944,
representatives from 44 nations met at the Mount Washington Hotel
in Bretton Woods, New Hampshire. It drew up a project for the
International Bank for Reconstruction and Development (IBRD) to
make long-term capital available to states urgently needing such
foreign aid, and a project for the International Monetary Fund
(IMF) to finance short-term imbalances in international payments in
order to stabilize exchange rates. In 1946 the UN even started to
work on preparation of charter for proposed ITO.50 countries
participated in negotiations to create international trade
organization. However ITO failed to materialized due to opposition
in UN congress. Therefore instead of ITO General Agreement of
Tariff and Trade came into existence signed with 23 members in
Geneva in 1947. Seven rounds of negotiations occurred under GATT.
The eighth GATT round known as the Uruguay Round was launched in
September 1986, in Punta del Este, Uruguay. The Final Act
concluding the Uruguay Round and officially establishing the WTO
regime was signed 15 April 1994, during the ministerial meeting at
Marrakesh, Morocco, and hence is known as the Marrakesh Agreement
The World Trade Organization (WTO) is an organization that intends
to supervise and liberalize international trade. The organization
officially commenced on 1 January 1995 under the Marrakech
Agreement, replacing the General Agreement on Tariffs and Trade
(GATT), which commenced in 1948. The Doha Round is the latest round
of trade negotiations among the WTO membership. Its aim is to
achieve major reform of the international trading system through
the introduction of lower trade barriers and revised trade rules.
WTO's current Director-General is Roberto Azevedo, who leads a
staff of over 600 people in Geneva, Switzerland.The membership is
160 countries as on januvary 2014.WTO Goals/Aims The goals behind
the functions of WTO were set out in the Marrakech Agreement
preamble, and these include: Expanding the trade production in
services and goods Ensuing large real incomes and demand are
steadily growing Ensuring employment that is full Raising living
standards.Q:What are the objectives of WTO?The important objectives
of WTO are:1. To improve the standard of living of people in the
member countries.2. To ensure full employment and broad increase in
effective demand.3. To enlarge production and trade of goods.4. To
increase the trade of services.5. To ensure optimum utilization of
world resources.6. To protect the environment.7. To accept the
concept of sustainable development6.What are the main functions of
WTO(july 2012,july 2014)Most Important Functions1.Trade
negotiations The WTO agreements cover goods, services and
intellectual property. It is the propagator of the principles of
liberalization, and globalization with the permitted exceptions.
2.Implementation and monitoring WTO agreements require governments
to make their trade policies transparent by notifying the WTO about
laws in force and measures adopted. Various WTO councils and
committees seek to ensure that these requirements are being
followed and that WTO agreements are being properly implemented.
3.Dispute settlement The WTOs procedure for resolving trade
quarrels under the Dispute Settlement Understanding is vital for
enforcing the rules and therefore for ensuring that trade flows
smoothly. Countries bring disputes to the WTO if they think their
rights under the agreements are being infringed. Judgments by
specially appointed independent experts are based on
interpretations of the agreements and individual countries
commitments.4.Building trade capacity WTO agreements contain
special provision for developing countries, including longer time
periods to implement agreements and commitments, measures to
increase their trading opportunities, and support to help them
build their trade capacity, to handle disputes and to implement
technical standards5.Outreach The WTO maintains regular dialogue
with non-governmental organizations, parliamentarians, other
international organizations, the media and the general public on
various aspects of the WTO and the ongoing Doha negotiations, with
the aim of enhancing cooperation and increasing awareness of WTO
activities.Among all the WT0 functions, there are two that are
considered most important by analysts. These are: It gives a
provision for settling dispute and for negotiations in a forum. It
overseas the operation, administration and implementation of the
agreements covered..Additional Functions of the WTOAs todays
society goes on with globalization, there is a vital importance
that the trading systems be managed by the need for an
international organization. As there is an increase in trade
volume, issues such as violation of intellectual property,
subsidies, trade barriers and protectionism come up due to every
nations different rules of trading.1. The WTO serves as the nations
mediator when problems arise. As a matter of fact, it could be said
that the World Trade Organization one of the organizations most
important in the globalized society of today and it can also be
referred to as the result of globalization. 2. the World Trade
Organization is an economic analysis and research center. Regular
global trade picture assessments in its annual research reports and
publications on specified topics are something the organization
produces. 3. The WT0 also closely cooperates with the other 2
system components, the World Bank and the IMF 4. It is the duty of
the World Trade Organization to go about facilitating operation,
administration and implementation and further the objectives of the
Multilateral Trade Agreements and this Agreement and shall also
provide the operation, administration and implementation framework
of the multilateral Trade Agreements. The World Trade Organization
is playing an important role for administering the new global trade
rules in the following ways:5. Various Conciliation Norms: WTO
provides several conciliation mechanisms for finding an amicable
solution to trade conflicts that can arise among members.
6.Checks of Trade Barriers: The WTO will be forum where
countries continuously negotiate exchange of barriers all over the
world .
Q:What do you mean by bilateral and multilateral trade
agreement?(july 2014)Trade agreement are divided into
2.multilateral and bilateral. In bilateral trade agreement is
between 2 countries in which exchange of goods are happening. It is
associated with liberalization. In multilateral agreement three or
more countries are involved in free trade without discrimination.
It will help in economic integrity.7.How Indian economy is related
with WTO/(2010 JULY,2006 JULY)World Trade Organization and Indian
Economy:1.GATS (General Agreements on Trade in Services)-It is a
known fact that trade in services is the rapidly growing field in
the global scenario. According to WTO, in the year 2001, services
constituted about 60% of the worlds output (in GDP). The trade in
services has particularly increased in developing countries. The
total trade in services occupied more than 50% in the exports of
the developing countries. The rapid growth and change has prompted
the members of the WTO to bring in changes in rules and regulations
on trade in services and GATS was introduced on 1st January 1995.
This is one of the important agreements of WTO which contains two
main parts: the frame work of agreement containing rules and
regulations and the schedule of Nations who gave the commitment on
access to their domestic markets by foreign suppliers. Each WTO
member lists in its national schedule those services, which it
wished to guarantee access to foreign suppliers. All member
countries are considered as MFNs (Most Favoured Nations) i.e, all
commitments apply on non discriminatory basis to all member
countries.Coverage of GATS:The GATS covers all internationally
traded services with two exceptions: services provided by the
Government and services in Air transport sector. The GATS defines
that trade in services can be made in four ways, they are:1.
Services supplied from one country to another (e.g. International
telephone calls)2. Consumers from one country making use of another
country (e.g. Tourism)3. A company from one country setting up
subsidiaries or branch to provide services in another country (e.g.
Banking)4. Individual travelling from their own country to supply
services in other country (e.g. Actress or construction
worker)Benefits of Services Liberalisation:1. An efficient services
infrastructure provides a base for economic success. Services such
as telecommunications, banking, insurance and transport supply
strategically important inputs for all sectors.2. People can have
access to world-class services.3. Trade liberalisation in services
leads to low cost. The best e.g. telecommunications.4. Faster
innovation takes place with liberalised services e.g. ATM, Phone
banking, Internet banking etc.5. More FDIs are attracted in the
countries, which will bring the new skills and technologies into
the country. The domestic employees can learn the new skills from
the MNCs.
2.Trade Related Investment Measures (TRIMs)It refers to certain
condition or restrictions imposed by a Government in respect of
foreign investment in the country. The TRIM text provides that the
foreign capital would not be discriminated by the member
Governments.Features of TRIMs1. Abolition of restriction imposed on
foreign capital2. Offering equal rights to the foreign investor on
par with the domestic investor3. No restrictions on any area of
investment4. No limitation or ceiling on the quantum of foreign
investment3.Trade Related Intellectual Property Rights
(TRIPs)Intellectual property rights may be defined as Information
with commercial value. IPR have been characterised as a composite
of ideas and creative expression. Plus the public willingness to
bestow the status of property. It includea. Protection of patentb.
Copyrightc. Industrial designd. Geographical indicatione.
Trademarksf. Trade secretsg.Layout BENEFITS TO INDIA7.How Indian
economy is related with WTO/(2010 JULY,2006 JULY)World Trade
Organization and Indian Economy:Benefits for Service sector in
India:In the line with the global trend, the services sector in
India is growing rapidly and the contribution of services in Indias
GDP increased to 54.2% in 2000-01 from 51.5% in 1998-99. The total
trade in services from India is accounting to 1.3% in the total
world trade in services. India exhibits a strong revealed
comparative advantage in services related goods. The importance in
service sectors in India are telecommunications, IT, ITES, BPO and
Banking and financial services. India has permitted 100% FDI in IT
and ITES and more than 51% in telecommunications.1. The GATT
secretariat estimated that largest increase in the level of
merchandise trade in goods (in general, it would be US $ 745
billion .by the end of 2005) will be in the areas of clothing (60
per cent), agriculture, forestry and fishery products (20 per cent)
and processed food and beverages (19 per cent). India's competitive
advantage lies in these fields. Hence, it is logical to believe
that India will obtain large gains in these sectors. India's
textile and clothing exports will increase due to the phasing out
of Multi-fiber Arrangement (MFA) by 2005 . 3. The reduction in
agricultural subsidies and barriers to export of agricultural
products, agricultural exports from India will increase. 4. The
multilateral rules and disciplines relating to anti-dumping,
subsidies and countervailing measures, safeguards and disputes
settlement machinery will ensure greater security and
predictability of international trade. This would be favorable
environment for India's international business.
5. India along with other developing countries has the market
access to a number of advanced countries due to the imposition of
the clauses concerning to trade without discrimination.
DISADVANTAGE TO INDIA
Despite the benefits of WTO to India, many economists and
sociologists argue that, India would be in a disadvantageous
position by becoming a member of WTO. Their argument include:
1. Trade Related Intellectual Property Rights (TRIPs) :
Protection of intellectual property rights (patents, copyrights,
trademarks etc.) has been made stringent. It is argued that the
TRIPs agreement goes against the Indian Patents Act, 1970. Only
process patents can be granted in food, chemicals and medicines
under the Indian Patents Act. 2. TRIPs agreement provides for
granting product patents also. Under TRIPs patents can be granted
to methods of agriculture and horticulture, bio-technological
process including living organism like plants and animals. The
duration of patents under TRIPs is 20 years.
3.Introduction of product patents in India will lead to hike in
drug prices by the MNCs who have the product patent. This will hit
the poor people who will not have the generic option open.
4.The extension of intellectual property right to agriculture
has negative effects on India. Presently, plant breeding and seed
production are largely, in the public domain. Indian scientists
have undertaken plant breeding and multiplication is in the hands
of National and State Seed Corporations. Government, through this
machinery, provides seed to Indian farmers at very low prices.
Indian scientists, in future will find it extremely difficult to
breed new varieties and Indian research institutions will be unable
to compete financially with MNCs and will be denied access to
patented genetic material.5.MNCs will get the control over our
genetic resources and as such the control over food production
would be jeopardized.6. Patenting has also been extended to a large
area of micro-organisms.
7.Application of TRIMs agreement undermines any plan or strategy
of self-reliant growth based on local technology and resources.
8.Services: Service sector like insurance, banking,
telecommunications, transportation is backward in India compared to
that of developed countries. Therefore, inclusion of trade in
services is detrimental to the interest of India. Liberalization of
service sector would be under tremendous pressure.
India is one of the founder members of the WTO. The GATT was not
an organization but it was only a legal agreement. On the other
hand WTO is designed to play the role of watchdog in the spheres of
trade in goods, trade in services, foreign investment, intellectual
property rights etc. Regional Trade Blocks , Inter regional trade
among regional groups. Trade bloc is a type of intergovernmental
agreement, often part of a regional intergovernmental organization,
where regional barriers to trade, (tariffs and non-tariff barriers)
are reduced or eliminated among the participating states. Advocates
of worldwide free trade are generally opposed to trading blocs,
which, they argue, encourage regional as opposed to global free
trade. Scholars and economists continue to debate whether regional
trade blocs are leading to a more fragmented world economy or
encouraging the extension of the existing global multilateral
trading system. Trade blocs can be stand-alone agreements between
several states (such as the North American Free Trade Agreement
(NAFTA) or part of a regional organization (such as the European
Union). Depending on the level of economic integration, trade blocs
can fall into different categories, such as: preferential trading
areas, free trade areas, customs unions, common markets and
economic and monetary unions.Significance of regional trade blocs
on international trade. EU, NAFTA, SAPTA, SAARC, AFTA, APEC,
EFTAThe Role and Importance of Trading Blocs 8.What are the
importance of regional trade block?(JULY 2014)Trading blocs have
played a positive role in the development of international trade.
This can be explained with the help of following points:1. Economic
integration: Trading blocs have resulted in economic integration.
It represents various forms of economic integration in a region
like SAARC, OPEC, ASEAN, EU etc. Trading blocs unifies different
independent economies and bring the nations closer.Trading blocs
helps in enhancing degree of regional co-operation and
interrelationship. It brings the nation closer by unifying
independent economies and facilitates economic cooperation among
the members of the group.2. Free transfer of resources: Trading
blocs helps in elimination of tariff, and non-tariff barriers and
facilitates free transfer of resources across the border of member
countries. This help in optimum utilisation of available
resources.This is because no country in the world is
self-sufficient and they need to depend upon one another for the
fulfillment of their requirement.3. Increase in Trade: Free
transfer of resources helps in increasing the productivity of
member nations. They eliminate trade barriers and encourage free
trade. This increase import and export activities of member
nations, which results into increase in trade revenues.Trading
blocs are sound and efficient to create sustainable economic
growth. Trading blocs are created to encourage trading partners to
buy and sell goods already made in their home countries. It also
encourages economies of scale.4.Create Employment opportunities:
Large-scale production and distribution leads to an increase in
employment opportunities directly and indirectly. This results into
increase in income level of the people, which enhances the standard
of living of the economy.Trading blocs tend to increase in income
and employment level of the member countries. Capital is required
to generate more and more employment opportunities. Trading blocs
lead to free transfer of resources viz natural, human and capital
resources, which are optimally utilised for creating employment
opportunities.4.Benefit to the consumers: Formation of trading
blocs enables transfer of technologies across borders resulting
into improvement in productivity and quality of goods and services
ultimately benefiting the consumers to a greater extent.Removal of
trade barriers and free transfer of resources have resulted into
mass production and distribution. This facilitates provision of
quality product in competitive prices to the consumers.6.
Cooperative spirit: Trading blocs leads to economic, political and
cultural integration of member -countries. This develops a spirit
of cooperation and coordination among member nations. This helps in
maintaining good relations among the member nations.7. Competition:
Trading blocs has resulted into increase in competition between
companies of entire region. It also facilitates to face competition
effectively. Trading blocs gives competitive advantage not only to
large establish firms but also to the newly emerging firm.8.
Development of region: Trading bloc plays an important role in
contributing the development, industrialisation and economic growth
of whole region. Trading blocs are a sound and efficient way to
create sustainable economic growth.Liberal policies and removal of
trade barriers has resulted in the growth of industries in those
regions. This in turn increased the production and distribution
activities leading to economic growth of those regions.1.The South
Asian Association for Regional Cooperation (SAARC)The idea of
regional political and economical cooperation in South Asia was
first raised in 1980 and the first summit was held in Dhaka on 8
December 1985, when the organization was established by the
governments of Bangladesh, Bhutan, India, Maldives, Nepal,
Pakistan, and Sri Lanka. Since then the organization has expanded
by accepting one new full member, Afghanistan, and several observer
members. 1. It is an economic and geopolitical cooperation among
eight member nations that are primarily located in South Asia
continent. 2. Its secretariat is headquartered in Kathmandu, Nepal.
3. The idea of regional political and economical cooperation in
South Asia was first coined in 1980 and the first summit held in
Dhaka on 8 December in 1985 4. The 18th SAARC Summit was held at
Kathmandu, Nepal in November 2014. Objectives of SAARCThe
objectives and the aims of the Association as defined in the
Charter are: 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; to promote and strengthen
selective self-reliance among the countries of South Asia; to
contribute to mutual trust, understanding and appreciation of one
another's problems; to promote active collaboration and mutual
assistance in the economic, social, cultural, technical and
scientific fields; to strengthen co-operation with other developing
countries; to strengthen co-operation among themselves in
international forums on matters of common interest;
andPrinciplesThe principles are as follows Respect for sovereignty,
territorial integrity, political equality and independence of all
members states Non-interference in the internal matters is one of
its objectives Cooperation for mutual benefitAfghanistan was added
to the regional grouping on April 2007, With the addition of
Afghanistan, the total number of member states were raised to eight
(8). 2.SAARC Preferential Trading Arrangement (SAPTA)In December
1991, the Sixth Summit of SAARC held in Colombo approved the
establishment of an Inter-Governmental Group (IGG) to formulate an
agreement to establish a SAARC Preferential Trading Arrangement
(SAPTA) by 1997. Given the consensus within SAARC, the Agreement on
SAPTAwas signed on 11 April 1993 and entered into force on 7
December 1995 well in advance of the date stipulated by the Colombo
Summit. The Agreement reflected the desire of the Member States to
promote and sustain mutual trade and economic cooperation within
the SAARC region through the exchange of concessions.The basic
principles underlying SAPTA are:a. overall reciprocity and
mutuality of advantages so as to benefit equitably all Contracting
States, taking into account their respective level of economic and
industrial development, the pattern of their external trade, and
trade and tariff policies and systems;b. negotiation of tariff
reform step by step, improved and extended in successive stages
through periodic reviews;c. recognition of the special needs of the
Least Developed Contracting States and agreement on concrete
preferential measures in their favour; andd. inclusion of all
products, manufactures and commodities in their raw, semi-processed
and processed forms.Four rounds of trade negotiations have been
concluded under SAPTA covering over 5000 commodities. Each Round
contributed to an incremental trend in the product coverage and the
deepening of tariff concessions over previous Rounds.III.The
European Union (EU) HISTORYThe European Union is set up with the
aim of ending the frequent wars between neighbors, which culminated
in the Second World War. As of 1950, the European Coal and Steel
Community begins to unite European countries economically and
politically in order to secure lasting peace. The six founders are
Belgium, France, Germany, Italy, Luxembourg and the Netherlands. in
1957, the Treaty of Rome creates the European Economic Community
(EEC), or Common Market. The EU was created by the Maastricht
Treaty, which entered into force on November 1, 1993. The European
Union (EU) is an economic and political union of 28 member states
that are located primarily in Europe. Originally confined to
western Europe, the EU undertook a robust expansion into central
and eastern Europe in the early 21st century. The EUs members are
Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic,
Denmark, Estonia, Finland, France, Germany, Greece, Hungary,
Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the
Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain,
Sweden, and the United Kingdom. . The EU operates through a system
of supranational independent institutions and intergovernmental
negotiated decisions by the member states. The 7 Institutions of
the EU include the European Commission, the Council of the European
Union, the European Council, , the European Central Bank, the Court
of Auditors, and the European Parliament.. Brussels is the de facto
capital of the union. OBJECTIVES OF EU1. An area of freedom,
security and justice without internal frontiers;2. An internal
market where competition is free and undistorted;3. sustainable
development, based on balanced economic growth and price
stability4. The promotion of scientific and technological
advance;5. Promotion of social justice and protection, equality
between women and men, solidarity between generations and
protection of the rights of the child;6. Promotion of economic,
social and territorial cohesion, and solidarity among Member
States.FUNCTIONING OF EUThe EU is considered by many to be a
potential superpower. With a combined population of over 500million
inhabitants, or 7.3% of the world population, the EU in 2012
generated a nominal gross domestic product (GDP) of 16.584 trillion
US dollars, constituting approximately 23% of global nominal GDP
and 20% when measured in terms of purchasing power parity, which is
the largest nominal GDP and GDP PPP in the world. The EU was the
recipient of the 2012 Nobel Peace Prize.1.Internal market(COMMON
MARKET) The EU has established a single market across the territory
of all its members.Two of the original core objectives of the
European Economic Community were the development of a common
market, subsequently renamed the single market, and a customs union
between its member states. The single market involves the free
circulation of goods, capital, people, and services within the EU,
and the customs union involves the application of a common external
tariff on all goods entering the market. Once goods have been
admitted into the market they cannot be subjected to customs
duties, discriminatory taxes or import quotas, as they travel
internally. The non-EU member states of Iceland, Norway,
Liechtenstein and Switzerland participate in the single market but
not in the customs union. Half the trade in the EU is covered by
legislation harmonized by the EU.3.Free movement of capital is
intended to permit movement of investments such as property
purchases and buying of shares between countries. The free movement
of persons means that EU citizens can move freely between member
states to live, work, study or retire in another country.4.The free
movement of services and of establishment allows self-employed
persons to move between member states to provide services on a
temporary or permanent basis. While services account for 6070% of
GDP, legislation in the area is not as developed as in other areas.
2.CompetitionThe EU operates a competition policy intended to
ensure undistorted competition within the single market. The
Commission as the competition regulator for the single market is
responsible for antitrust issues, approving mergers, breaking up
cartels, working for economic liberalisation and preventing state
aid.3.Monetary unionThe creation of a European single currency
became an official objective of the European Economic Community in
1969. However, it was only with the advent of the Maastricht Treaty
in 1993 that member states were legally bound to start the monetary
union no later than 1 January 1999. On this date the euro was duly
launched by eleven of the then 15 member states of the EU. It
remained an accounting currency until 1 January 2002, when euro
notes and coins were issued and national currencies began to phase
out in the eurozone, which by then consisted of 12 member states.
The eurozone (constituted by the EU member states which have
adopted the euro) has since grown to 18 countries, the most recent
being Latvia which joined on 1 January 2014.The euro is designed to
help build a single market by, for example: easing travel of
citizens and goods, eliminating exchange rate problems, providing
price transparency, creating a single financial market, price
stability and low interest rates, and providing a currency used
internationally and protected against shocks by the large amount of
internal trade within the eurozone. It is also intended as a
political symbol of integration and stimulus for more. Since its
launch the euro has become the second reserve currency in the world
with a quarter of foreign exchanges reserves being in euro. The
euro, and the monetary policies of those who have adopted it in
agreement with the EU, are under the control of the European
Central Bank (ECB).The ECB is the central bank for the eurozone,
and thus controls monetary policy in that area with an agenda to
maintain price stability. It is at the centre of the European
System of Central Banks, which comprehends all EU national central
banks and is controlled by its General Council, consisting of the
President of the ECB, who is appointed by the European Council, the
Vice-President of the ECB, and the governors of the national
central banks of all 28 EU member states.4.common agricultural
policy(CAP)Although farmers in many European Union countries are
efficient and produce high yields, land, input and fuel costs make
them uncompetitive with farmers elsewhere. Without additional
financial support, many farmers would be unable to sustain their
businesses and the overall rural economy would suffer
significantly. As a result, the EU operates the Common Agricultural
Policy, which supports farmers by providing a range of price
guarantees, direct payments and other instruments, including quotas
and tariffs on some imported produce. By setting this up on a
pan-European basis, national governments can no longer provide
separate direct support for their agricultural sectors, but instead
administer funds distributed via the CAP. Criticism of European
Union EU From an economic perspective the EU can be criticised for
various reasons1.Common Agricultural Policy CAPThe CAP was one of
the most inefficient economic policies and waste of money. It
subsidised farmers to produce goods that nobody wanted. The excess
supply was often dumped on world markets creating falling prices
and incomes for world farmers. After many years, the worst excesses
of CAP have been reformed. But, it remains persistently difficult
to end the culture of subsidising agriculture. The taxpayer pays
the burden of higher prices and cost to EU.2.Regulated Labour
MarketsUnemployment in the European Union has been persistently
high for the past two decades. This is especially a problem in
countries like France and Spain. One reason is the highly regulated
labour markets that the EU social charter encourages. The EU has
failed to deal with regional unemployment.3.Anti Inflation BiasThe
ECB has inherited the German Bundesbanks anti inflationary stance.
However, they often overdo this leading to lower growth. This is
especially a problem for countries in the EU, who may struggle with
a common monetary policy and interest rate.4.Euro has Created Lower
Economic Growth.The EU pushed the creation of the Euro. However, in
practise, member countries have struggled to cope with the fixed
exchange rate, and lack of independent monetary policy.Countries in
the Euro have been pushed into bond crisis because markets fear a
lack of liquidity (ECB cant act as lender of last resort and print
money to buy bonds). This has seen higher bond yields on debt of
Euro countries. As a result of bond crisis, governments have been
pushed into spending cuts and budget austerity.However, despite the
fiscal austerity, there is no alternative for promoting economic
recovery. Monetary policy is set by the ECB. As a consequence
economic growth in the Eurozone has been disappointingNorth
American Free Trade Agreement (NAFTA)The North American Free Trade
Agreement (NAFTA), came into effect on January 1, 1994, between
Canada, the United States, and Mexico, creating the largest free
trade region in the world, generating economic growth and helping
to raise the standard of living for the people of all three member
countries. By strengthening the rules and procedures governing
trade and investment, the NAFTA has proved to be a solid foundation
for building Canadas prosperity and has set a valuable example of
the benefits of trade liberalization for the rest of the world.
Objectives of NAFTA to reduce barriers to trade to increase
cooperation for improving working conditions in North America to
create an expanded and safe market for goods and services produced
in North America to establish clear and mutually advantageous trade
rules to help develop and expand world trade and provide a catalyst
to broader international cooperation4.ASEANAssociation of South
East Asian Nation (ASEAN) was formed by Bangkok declaration 1967 by
5 countries. Indonesia,Malaysia,Philippines,Singapore and Thailand
with a view to accelerate economic development. Brunai joined the
association in 1984.the economic growth of ASEAN was mainly due to
natural resources like rubber ,palm oil and tin.the Asian Free
Trade Area was cearted in 1992 by 6 nations.later Vietnam,lao
PDR,Myanmar,Combodia joined AFTA and the membership become
10.Features of AFTA1. Significant progress in the lowering of
intra-regional tariffs through the Common Effective Preferential
Tariff (CEPT) Scheme for AFTA. More than 99 percent of the products
in the CEPT Inclusion List (IL) of ASEAN-6, have been brought down
to the 0-5 percent tariff range.2. The new agenda called AFTA Plus
Program include Preferential liberalization of service and
investment, intellectual property cooperation, harmonization of
product standards.3. Following the signing of the Protocol to Amend
the CEPT-AFTA Agreement for the Elimination of Import Duties on 30
January 2003, ASEAN-6 has committed to eliminate tariffs on 60
percent of their products in the IL by the year 2003.
5.Asia-Pacific Economic Cooperation APEC APEC is the premier
forum for facilitating economic growth, cooperation, trade and
investment in the Asia-Pacific region.1.APEC has 21 members -
referred to as "Member Economies" that account for more than a
third of the world's population
2.APEC's 21 Member Economies are Australia; Brunei Darussalam;
Canada; Chile; People's Republic of China; Hong Kong, China;
Indonesia; Japan; Republic of Korea; Malaysia; Mexico; New Zealand;
Papua New Guinea; Peru; The Republic of the Philippines; The
Russian Federation; Singapore; Chinese Taipei; Thailand; United
States of America; Viet Nam.3.APEC was established in 1989 to
enhance economic growth and prosperity for the region and to
strengthen the Asia-Pacific community. 4.Since its inception, APEC
has worked to reduce tariffs and other trade barriers across the
Asia-Pacific region by creating efficient domestic economies and
dramatically increasing exports. 5.APEC also works to create an
environment for the safe and efficient movement of goods, services
and people across borders in the region through policy alignment
and economic and technical cooperation.6.APEC is the only
inter-governmental grouping in the world that operates on the basis
of non-binding commitments, open dialogue and equal respect for the
views of all participants. 7.EFTAEFTA was founded by the Stockholm
Convention in 1960. The immediate aim of the Association was to
provide a framework for the liberalisation of trade in goods
amongst its Member StatesEFTA (the European Fair Trade Association)
is an association of ten Fair Trade importers in nine European
countries (Austria, Belgium, France, Germany, Italy, The
Netherlands, Spain, Switzerland and the United Kingdom). EFTA was
established informally in 1987 by some of the oldest and largest
Fair Trade importers. It gained formal status in 1990. EFTA is
based in the Netherlands EFTA was founded by seven countries:
Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the
United Kingdom. Finland joined in 1961, Iceland in 1970 and
Liechtenstein in 1991. In 1973, the United Kingdom and Denmark left
EFTA to join the EC. They were followed by Portugal in 1986 and by
Austria, Finland and Sweden in 1995. Today the EFTA Member States
are Iceland, Liechtenstein, Norway and Switzerland
FUNCTIONS 1. The aim of EFTA is to support its member
organizations in their work and to encourage them to cooperate and
coordinate.2. It facilitates the exchange of information and
networking, it creates conditions for labour division and it
identifies and develops joint projects3. It organizing meetings of
the members (on food, handicrafts, marketing, managers) and by
circulating relevant information to them.4. It is also maintaining
a database of EFTA suppliers, called Fair data, which contains
details on suppliers and their products.EFTA is the EUs third
largest trading partner and the four EFTA nations are widely known
for their developed economies as well as their obvious proximity to
the European Union, be that geographically, politically or
culturally.