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Trading Blocs

European Union (EU)

Started in 1957 with 6 European nations

(France, Italy, Germany, Belgium, Netherlands
& Luxembourg) and called as European
Later it became European Common Market
(ECM) and then European Union (EU).
At present, 28 member nations.
(Greece, Denmark, Finland, Cyprus, Poland,
Croatia, Malta, Ireland, Spain, Austria, etc)

Objectives of EU

To enhance political relations among members.

To enhance economic growth of members.
To support member nations at international forums
like WTO.
To transfer latest technological developments to
To increase employment in member nations.
To encourage free movement of labour & capital.
To assist members during national calamities & crises.
To develop social & cultural relations.
To remove trade barriers to increase intra-regional

Economic benefits to members

Trade creation
Healthy competition among firms
Consumer welfare
Economic growth
Technological developments
Improvement in efficiency
Economies of large scale

Association of South East Asian

Nations (ASEAN)

Established in 1967 by 5 nations (Malaysia,

Indonesia, Philippines, Thailand & Singapore).
At present, 10 members including Brunei,
Cambodia, Laos, Myanmar & Vietnam.
Original purpose was to preserve peace among
Economic co-operation began in 1976 at the
first ASEAN Summit in Bali.
Formed the ASEAN Free Trade Area (AFTA) in
1994, which is set to function for 10 yrs.

Objectives of AFTA

To remove tariffs on goods produced in ASEAN

To encourage FDI in the region.
To assist members during emergencies.
To improve social & cultural relations.
To promote regional peace & stability.

South Asian Association for Regional

Cooperation (SAARC)

Launched in 1985 by 7 nations of South Asia

India, Bangladesh, Bhutan, Pakistan, Sri Lanka,
Maldives & Nepal.
Afghanistan joined in 2007.
Main objective is to bring about regional
SAPTA, signed in 1993, came into effect in
1995, contains provisions for giving favourable
treatment to LDCs in SAARC region.
SAFTA, signed in 2004, came into effect in
2006, provided a boost to trade growth in the

Objectives of SAARC

Welfare of the people of the region

Economic growth
Social & cultural progress
Technological developments
Promote & strengthen collective self-reliance
Contribute to mutual trust, understanding &
Strengthen cooperation with other developing
Support members at international forums
Cooperate with international & regional
organisations with similar objectives

North American Free Trade Area


Signed in 1993 by USA, Canada & Mexico.

Came into force in 1994.
Expected to remove all trade barriers among
members by 2009.
Largest trading bloc in the world with total
exports of US $2371 billion in 2012.

Objectives of NAFTA

Eliminate trade barriers

Develop social & cultural relations
Remove restrictions on transfer of technology
To negotiate collectively with non-members
Promote fair competition in FTA
Protection & enforcement of Intellectual
Property Rights (IPR)
Develop industries in Mexico to create
employment, thereby reduce migration from
Mexico to USA
Assist Mexico to earn foreign exchange to meet
its foreign debt burden.

Measures undertaken by NAFTA

Residents of NAFTA nations can invest freely in

other NAFTA countries.
Protection of IPR of members.
Free movement of labour.
Pollution control along USA-Mexico border.
Standardisation of product standards in
member countries.

WTO (World Trade Organisation)

In 1947, 23 countries inlcuding India signed

the General Agreement on Tariffs and Trade
GATT was formed to reduce global depression
and liberalise world trade by reducing tariff
In 1995, WTO replaced GATT.
Broader in scope as it regulate world trade on
goods, services, IPR and investments.
Aims at eliminating tariff and non-tariff
160 member countries as of June 2014.

Objectives of WTO

Trade without discrimination: MFN clause

Settlement of disputes
Raising standard of living
Optimum use of worlds resources
Protection of environment
Growth of LDCs
Enlargement of production and trade

Functions of WTO

Reduction in trade barriers

Assistance to developing nations
Forum for negotiations
Administration of WTO agreements
Collection of information
Consultancy services
Examination of member nations policies
Settlement of disputes

Implications of WTO agreements

Positive implications:
- Patents
- Public health
- Geographic Indication Status
- Consumer welfare
- Competition benefits

- Export of services
- Expansion of service sector
- Customer service
Of AoA:
- Reduction in tariff duties
- Increase in market access
- Reduction in export subsidies
- Reduction in domestic support

Negative Implications

- Favours developed countries
- Interference in domestic affairs
- Effect on small firms
- Outdated technology
- Problem of competition
- Outflow of foreign exchange

Of AoA:
- Reduction in tariff duties
- Increase in market access
- Reduction in export subsidies
- Reduction in domestic support