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MODULE 2
INTERNATIONAL BUSINESS ENVIRONMENT
Globalization of business WTO and trade liberalization emerging issues
implications for India Regional Trade Blocks Inter regional trade among
regional groups.
1.What do you mean by international business environment?
INTERNATIONAL BUSINESS ENVIRONMENT
Keegan observes by 1990s the concept of marketing is outdated and that time demanded a strategic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 environment
1. INTERNAL ENVIRONMENT
The 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 ENVIRONMENT
A firm in international business has 3 different set of external environment.
1. Domestic environment

2.foreign environment

3.global environment-

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The diagram shows different environment of international
Internal environment

Domestic

International business

forigen

global

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 BUSSINESS
Micro 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 BUSINESS
As 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 culture
through 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.

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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 behaviors
2. Negotiating goal
Negotiators 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. Communication
Culture 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 exchange
Cultural 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.Time
People 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

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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 few
5. How involved is the government in the private sector?
Factors

1. Economic System

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The 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 System
Businesses 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 Agreements
Countries 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 Barriers
A 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 Barriers
Governments 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 ENVIRONMENT
The main social factors or social environment taken into account can be grouped as

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1.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.Etiquette
Ways 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 population
This 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.religion
Religion 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.Language
Language 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 ENVIRONMENT
Technology 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 are
1.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 technology
Right 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 globalization
The benefits of technology in globalization are

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1.less transport cost
2.patented technology in which firm can exploit all demand without competition
4.transfer of technology
Transfer of technology should be done in proper way.
There are certain issues in transfer of technology
a)developing countries obtain technology at high price.
b)appropriateness of forigen technology to physical,economic ,social condition of developing country
c)heavy reliance on technology by developing counties.
16.how economic environment affect international business?
ECONOMIC ENVIRONMENT
Economic 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 economy
In 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 are
1.Level of income and its distribution
Demand 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 countries
1. Low income country-US $875 or less
2. Middle income- US $875 -10,725
3. 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

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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 manufacturing
unit in a foreign country, it has to take into account the rate of inflation in the host country

III CONSUMPTION BEHAVIOUR

Consumption 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 people
iv) 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 at
a 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 Globalization
The 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 production
The 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.
.

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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 technology
2.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 GLOBALISATION
The advantage of globalization can be generally classified as
1.Increase in welfare and prosperity
Most 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 Trade
Free 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 Connectivity
Globalization 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 Markets
The 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 Opportunities
One 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 Products
The competition among different companies finds place at an international level. It becomes important for

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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 Protection
Mutual 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 Nations
It 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 All
Globalization 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 Transportation
With 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 markets
11. Increase in Industrialization
Free flow of capital along with technology enables developing countries to boost up industrialization of
countries. This increase industrialization.
12.Unity in Diversity
Globalization 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 Borrowing
It 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 GLOBALISATION
Globalization 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

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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..

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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 business
The domestic business of domestic company fails to compete with MNCS on technology and quality
front.
13.Transfer of natural resource
MNCS 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 July 1944, 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.

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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 development
6.What are the main functions of WTO(july 2012,july 2014)
Most Important Functions
1.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.

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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 standards
5.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 WTO

As 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.

16
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)

17

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 TRIMs
1. Abolition of restriction imposed on foreign capital
2. Offering equal rights to the foreign investor on par with the domestic investor
3. No restrictions on any area of investment
4. No limitation or ceiling on the quantum of foreign investment
3.Trade Related Intellectual Property Rights (TRIPs)

18

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 include
a. Protection of patent
b. Copyright
c. Industrial design
d. Geographical indication
e. Trademarks
f. Trade secrets
g.Layout
BENEFITS TO INDIA
7.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

19

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.

20

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, EFTA
The 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.

21
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.

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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 SAARC
The 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;

and
Principles

The 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 benefit

23
Afghanistan 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 InterGovernmental Group (IGG) to formulate an agreement to establish a SAARC Preferential Trading
Arrangement (SAPTA) by 1997. Given the consensus within SAARC, the Agreement on SAPTA was
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; and
d. 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)

HISTORY
The 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

24

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 EU
1. 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 stability
4. 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 EU
The EU is considered by many to be a potential superpower. With a combined population of over
500 million 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.

25

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.Competition
The 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 union
The 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 VicePresident of the ECB, and the governors of the national central banks of all 28 EU member
states.

4.common agricultural policy(CAP)

26

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 reasons
1.Common Agricultural Policy CAP
The 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 Markets
Unemployment 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 Bias
The 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

27

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
disappointing
North 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
cooperation

4.ASEAN
Association 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 AFTA
1. 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.

28
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 AsiaPacific 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 nonbinding commitments, open dialogue and equal respect for the views of all participants.
7.EFTA
EFTA 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 States
EFTA (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

29
them to cooperate and coordinate.
It facilitates the exchange of information and networking, it creates conditions for labour
division and it identifies and develops joint projects
3. 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.
2.