Regional Trade Blocks

Trade Blocs

Regional Trade Blocs

• Regional trade blocs are intergovernmental associations that manage and promote trade activities for specific regions of the world.

Regional Economic Integration : Important mode of economic development

Level of Economic IntegrationFree Trade Area (FTA) : Goods and Services are freely traded

among member countries, example : NAFTA, AFTA, APEC Customs Union (CU) : FTA + Common trade policy with respect

to nonmembers Common Market (CM) : CU + Free flow of factors of production

(Labor, Capitol and Technology) between member countries Economic Union : CM + Integration of economic policies.

Harmonize monetary policies, Taxation and Government spending

Political Union : Economic union + Political Unification

Economic Union

Free trade area

Free trade among members

Common External Trade Policy

Customs Union

Factor Mobility

Common Market

Harmonization of Economic Policies

Economic Union • Regional Economic Trading Blocs

Free Trade Area (FTA)

Customs Union (CU)

Common Markets

Economic Union

Political Union

Major Trade Blocs EU (European Union ) NAFTA (North American Free Trade Agreement) MERCOSUR (Mercado Comun del Cono Sur, also known as

Southern Common Markets (SCCM) ASEAN (Association of Southeast Asian Nations) SAARC (south Asian association for regional cooperation) OPEC (The Organization of the Petroleum Exporting

Countries) SAFTA (Singapore –American free trade agreement) LAFTA (Latin American Free Trade Association)

European UnionIt is a family of democratic European countries.Committed to working together for peace and

prosperity.Its historical roots lie in the second world war.Idea of European integration was conceived to

prevent such killing and destruction from ever happening again.

Member states of the EU: – Austria, Belgium, Bulgaria, Cyprus,

Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom

European UnionObjectives:-Setting up a common marketContinuous & balanced expansionCloser relations between the member states.

ACTIVITIES OF EU

Elimination of custom duties, quantitative restrictions with regard to export & imports.

Establishment of a common custom tariff & commercial policy.

Abolition of all obstacles for movement of persons, services & capital.

Application of programmes in order to coordinate the economic policies.

ASEANEstablished in 1992 Total six members- Singapore, Brunei, Malaysia,

Philippines, Thailand & Indonesia.To establish a common effective preferential tariffs

(CEPT) plan.The CEPT allows for tariffs cut ranging from 0.50% to

20.00% beginning with 15 products.In 1994, ASEAN countries formed AFTA in order to

develop inter ASEAN trade.

Objectives of AFTA

To encourage inflow of foreign investment into this region.

To establish free trade area in the member countries.

To reduce tariff of the products produced in ASEAN countries (40% value addition in the ASEAN countries to the product value is treated as manufactured in ASEAN countries).

NAFTAInitially bilateral trade between Canada & U.S.NAFTA went into effect in 1994 after the joining

of Mexico.U.S.- Canada trade is the largest bilateral trade

in the world.The U.S. 1st Mexico’s & Canada largest trading

partner.NAFTA is a powerful trading bloc with a

combined population and GNP greater than 15 member EU.

Provisions of NAFTADuty-free market access.Trade rules- safeguard, subsidies, countervailing

& antidumping duties, health & safety standards.Rules on trade in services & investmentProtection of intellectual property.Dispute settlement mechanism.

The Organization of the Petroleum Exporting Countries (OPEC)

History: The Organization of the Petroleum Exporting

Countries (OPEC) is a permanent, intergovernmental Organization, created at the Baghdad Conference on September 10–14, 1960.

Functions:The OPEC MCs coordinate their oil production

policies in order to help stabilize the oil market and to help oil producers achieve a reasonable rate of return on their investments. This policy is also designed to ensure that oil consumers continue to receive stable supplies of oil.

OPEC MEMBER COUNTRIES

Austria, Australia, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Mexico, New Zealand, Netherlands, Norway, Poland, Portugal, Republic of Korea, Slovak Republic, Sweden, Switzerland, Turkey, United Kingdom, United States of America

Founder Member: Iran, Iraq, Kuwait, Saudi Arabia, and VenezuelaFull member: Qatar, Libya, Indonesia, United Arab Emirates, Algeria and NigeriaAssociate member: Gabon

OPEC FUND: The OPEC Fund for International Development is

a multilateral development finance institution. It was established in January 1976, by the member countries of the Organization of the Petroleum Exporting Countries.

OPEC’s mission is to coordinate & unify the petroleum policies of Member Countries & ensure the stabilization of oil prices in order to secure an efficient, economic & regular supply of petroleum to consumers, a steady income to producers & a fair return on capital to those investing in the petroleum industry.

OPEC Secretariat The Secretariat carries out the executive

functions of the Organization in accordance with the provisions of the OPEC Statute and under the direction of the Board of Governors

The Organization of the Petroleum Exporting Countries (OPEC)

It’s a permanent organization established in 1960 at the Baghdad conference by Iran Iraq, Kuwait, Saudi Arabia, and Venezuela.

It was later joined 8 other members. Its head quarter is in Vienna. Its objective is to coordinate and unify petroleum policies

amongst the member countriesTo secure fair and stable prices for petroleum producers.Proper price and regular supply of petroleum for

consuming nations.

MERCOSUR

Established in 1991 by Brazil, Argentina, Paraguay, Uruguay.

These four members generate 70% GNP of south America.

By 1996, MERCOSUR had abolished tariffs on goods accounting for 90% of the trade between its members countries, with remaining tariffs to be abolished by 2000.

MERCOSUR & EU Signed a cooperation agreement to pave the way for a free trade accord in 2001.

LAFTA (Latin American Free Trade Association)

• The Latin American Free Trade Association, LAFTA, (later transformed into the Latin American Integration Association or Asociación Latinoamericana de Integración ALADI) was created in 1960 in the Treaty of Montevideo

• Members -Argentina, Brazil, Chile, Mexico, Paraguay, Peru, and Uruguay.

ObjectivesTo build up a common market for South American countries

and thereby to bring about a gradual reduction in trade barriers among member countries.

LAFTA as a trade bloc wants to stimulate intra-Latin American trade and also to increase Latin American’s declining share in world trade.

The goal of the LAFTA is the creation of a free trade zone in Latin America. It should foster mutual regional trade among the member states, as well as with the U.S. and the European Union.

The ALADI promotes the creation of an area of economic preferences in the region, aiming at a Latin American common market, through three mechanisms:Regional tariff preference granted to products

originating in the member countries, based on the tariffs in force for third countries

Regional scope agreement, among member countries

Partial scope agreements, between two or more countries of the area

SAARC (SOUTH ASIAN ASSOCIATION FOR REGIONAL

COOPERATION)

SAARCEstablished in August 1983.Members-India, Bangladesh, Bhutan, Pakistan,

Srilanka ,The Maldives & Afghanistan

Objectives of SAARCTo improve the quality of life & welfare of the people

of the member countries.To develop the region economically, socially &

culturallyTo provide the opportunity to the people of the

region to live in dignity & to exploit their potentialities.To enhance the mutual assistance among member

countries in the areas of economic, social, cultural, scientific & technical field.

To enhance cooperation to other trade blocs.

SAPTA

The council of ministers have signed the SAARC preferential trading arrangement agreement on April 11, 1993.

Objectives of SAPTA

To gradually liberalize the trade among members of SAARC.

To eliminate trade barriers among SAARC countries & reduce or eliminate tariffs.

To promote and sustain mutual trade & economic cooperation among member countries.

AREAS OF COOPERATION Agriculture and Rural Development; Health and Population Activities; Women, Youth and Children; Environment and Forestry; Science and Technology and Meteorology; Human Resources Development; and Transport. Recently, high level Working Groups have also been established

to strengthen cooperation in the areas of Information and Communications Technology, Biotechnology, Intellectual Property Rights, Tourism, and Energy.

Fourteenth SAARC Summit The President of the Islamic Republic of Afghanistan, His Excellency Mr.

Hamid Karzai; the Chief Adviser of the Government of the People’s Republic of Bangladesh, His Excellency Dr. Fakhruddin Ahmed; the Prime Minister of the Kingdom of Bhutan, His Excellency Lyonpo Khandu Wangchuk; the Prime Minister of the Republic of India, His Excellency Dr. Manmohan Singh; the President of the Republic of Maldives, His Excellency Mr. Maumoon Abdul Gayoom; the Prime Minister of Nepal, Rt. Hon’ble Mr. Girija Prasad Koirala; the Prime Minister of the Islamic Republic of Pakistan, His Excellency Mr. Shaukat Aziz; and the President of the Democratic Socialist Republic of Sri Lanka, His Excellency Mr. Mahinda Rajapaksa, met at the Fourteenth Summit meeting of the South Asian Association for Regional Cooperation (SAARC) held in New Delhi, India on April 3-4, 2007.

The Heads of State or Government welcomed the entry of the Islamic Republic of Afghanistan into SAARC. This was a historic moment as Afghanistan assumed its rightful place as a valued member of the SAARC fraternity

The SAARC Secretariat The SAARC Secretariat was established in Kathmandu on 16

January 1987. Its role is to coordinate and monitor the implementation of SAARC activities, service the meetings of the Association and serve as the channel of communication between SAARC and other international organizations. The Secretariat has also been increasingly utilized as the venue for SAARC meetings.

The Secretariat comprises the Secretary General, seven Directors and the General Services Staff.

Established Centers

1. SAARC Agricultural Information Centre (SAIC), Dhaka2. SAARC Meteorological Research Centre (SMRC), Dhaka3. SAARC Tuberculosis Centre (STC), Kathmandu4. SAARC Documentation Centre (SDC), New Delhi5. SAARC Human Resources Development Centre

(SHRDC), Islamabad 6. SAARC Coastal Zone Management Centre, Maldives 7. SAARC Information Centre, Nepal8. SAARC Energy Centre, Pakistan9. SAARC Disaster Management Centre, India

IMPORTANCE OF INTRA-REGIONAL TRADE

One of the most important ways through which developing countries an accelerate their economic growth through enhancing intra-regional co-operation.

IRT must become a integral part of the growth strategy of SAARC countries if they are to develop their full potential.

CONCLUSION

Becoming global is today's necessity for every industry whether already established or emerging. To stand on International front the foremost need is to prove the caliber at regional and domestic front.