DEEPTI GUPTA Roll No: 5647 MBA-1(B)

Definition:
Regional trade blocks are intergovernmental associations that manage and promote trade activities for specific regions of the world These arrangements enable countries located in different geographic locations to pool their resources and lower restrictions on trade among themselves

Significance
Trade blocks complement regional trade They protect intra regional trade from outside forces They establish regional security Since economic development of member countries is relatively homogenous it is easier to find commonality of interest They also offer cultural, geographical and historical homogeneity which provides an environment of mutual cooperation

Forms of regional integration

Free trade area Customs union Common market Economic union Political union

MAJOR TRADE BLOCKS

NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA) ORGANISATION OF PETROLEUM EXPORTING COUNTRIES (OPEC) SOUTH ASIAN ASSOCIATION FOR REGIONAL CO-OPERATION (SAARC) ASSOCIATION OF SOUTH EAST ASIAN NATION (ASEAN) EUROPEAN UNION (EU)

NAFTA
NORTH AMERICAN FREE TRADE AGREEMENT

 In terms of combined purchasing power parity (PPP), as of 2007 the trade bloc is the largest in the world and second largest by nominal GDP comparison. It also is one of the most powerful, widereaching treaties in the world.

Trade and Investment

NAFTA is a broad agreement, covering aspects like improved market access, tariff reductions on merchandise trade among others. After ten years, most tariffs have gone down to zero, except for some very sensitive (mostly agricultural) goods that have limited protection for up to 15 years.

U.S. NAFTA TOTAL TRADE (1999-2009)

800 700 Billions of US $ 600 500 400 300 200 100 0 1999 2001 2003 2005 2007 2009 657.1 561.9 503.3 477.3 421.2 380.6 343.2 293.2 713

240.6 265 233.5

BENEFITS OF NAFTA
It benefits the importers by reduction/elimination of duties on imported goods. Increased market access within each others country. 200% increase in trade among the 3 countries. From 2001 to 2008, U.S. exports to Mexico rose 91%, compared to 41% to the world. U.S. imports increased by 179% from NAFTA countries compared to 89% from the world.

LIMITATIONS
It has negative impacts on farmers in Mexico who saw food prices fall based on cheap imports from U.S. agribusiness It has negative impacts on U.S. workers in manufacturing and assembly industries who lost jobs. Critics also argue that NAFTA has contributed to the rising levels of inequality in both the U.S. and Mexico.

MOBILITY OF PERSONS
According to the Department of Homeland Security, Yearbook of Immigration Statistics, during fiscal year 2008, 74,098 foreign professionals (64,633 Canadians and 9,247 Mexicans) were admitted into the United States for temporary employment under NAFTA.

Introduction
OPEC is a permanent intergovernmental organization

which is a cartel of 12 countries made up of, Angola, Ecuador, Iran, Iraq, Algeria Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. It coordinates and unifies the petroleum policies of its Member Countries in order to secure fair and stable prices for petroleum products. It seeks to ensure the stabilization of oil prices in international oil markets.

The main role of OPEC is regular supply of petroleum to consuming nations. OPEC has maintained its headquarters in Vienna and hosts regular meetings among the oil ministers of its Member Countries. OPEC allows oil-producing countries to guarantee their income by coordinating policies and prices among them.

Significance
Two-thirds of the oil reserves in the world

belong to OPEC members and the members are responsible for half of the world's oil exports.
OPEC represents a considerable political and

economical force.

Controversies
OPEC is a strong cartel of oil producing countries and has been involved in many controversies:1. During the Arab Israel conflict of 1973, it jacked up the crude oil prices in international market in order to put pressure on US to dissociate itself from the war 2. Again during the 1991 Gulf War it is alleged that OPEC countries created artificial shortage of oil and thus increased prices. 3. The recent hike in crude price from 90$ a barrel to 150$ a barrel is also attributed to OPEC countries in order to get more profits.

SAARC
The South Asian Association for Regional Cooperation (SAARC) was established on 8 December 1985 by the Heads of State or Government of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and SriLanka.

South Asian Free Trade Agreement

The Agreement creates a framework for the creation of a free trade area covering 1.6 billion people in India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives.

The seven foreign ministers of the region signed a framework agreement on SAFTA with zero customs duty on the trade of practically all products in the region by end 2016. The new agreement i.e. SAFTA, came into being on 1st January 2006 and will be operational following the ratification of the agreement by the seven governments.

 SAFTA requires South Asia to bring their duties down to 20 percent in the first phase of the two year period ending in 2007. In the final five year phase ending 2012, the 20 percent duty will be reduced to zero in a series of annual cuts. The least developed nations in South Asia consisting of Nepal, Bhutan, Bangladesh and Maldives have an additional three years to reduce tariffs to zero. India and Pakistan have signed but not ratified the treaty.

India in SAARC
During the 10 years before SAARC (19751985), India's exports increased from US$ 160 million in 1975 to US $ 315 million in 1984 a growth rate of 7.8 percent. During the 10 years after SAARC inception, India's exports increased from US $ 277 million in 1986 to US $ 1532 million in 1995, i.e. from eight percent to 30 percent. So, the SAARC has encouraged India's exports to its member countries. The exports have touched a peak level of US $ 4.05 billion in the year 2009.

 On the other hand, India's import from the SAARC countries is quite low. It was just US $ 56 million in 1975 and rose to only US $ 105 million in 1984 and further to only US $ 182 in 1995. The latest figures of 2009-10 shows that these imports have touched just US $ 565 million. Imports have grown at a average rate of 7 percent before and after economic liberalization in 1991. This shows that India is not a good importer for its neighboring countries.

ASEAN
Established in 1967 5 Founding members : Indonesia, Malaysia, Philippines, Singapore and Thailand. Later on joined by: Brunei, Myanmar, Vietnam, Laos and Cambodia. Establishment of Asian Free Trade Agreement (AFTA). The AFTA agreement was signed on 28 January 1992 in Singapore. ASEAN as a trading block has been a huge success leading to prosperity and elimination of poverty in the member nations.

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.

Intra and Extra ASEAN Trade

Intra- and extra-ASEAN trade, 2009 as of 15 July 2010 value in US$ million; share in percent Extra-ASEAN trade Share Value to total trade 7,096.1 6,788.8 74.2 76.4 75.5 16.3 74.3 48.4 79.3 72.7 79.3 82.4

Country

Intra-ASEAN exports Share Value to total exports 1,229.3 644.6 24,623.9 997.4 40,365.1 3,196.7 5,838.4 81,646.5 32,490.6 8,554.8 199,587. 3 17.1 12.9

Extra-ASEAN exports Total Share to exports Value total exports 5,939.3 4,341.2 82.9 87.1 7,168.6 4,985.8

Intra-ASEAN imports Share to Value total imports 1,242.8 1,453.3 27,742.4 1,480.8 31,700.2 2,065.7 11,561.1 59,047.6 26,759.5 13,566.7 176,620. 1 51.8 37.3

Extra-ASEAN Intra-ASEAN trade imports Total Share to Share imports Value total Value to total imports trade 1,156.8 2,447.6 48.2 62.7 2,399.6 3,900.9 2,472.1 2,097.9 52,366.3 2,478.2 72,065.3 5,262.4 17,399.5 25.8 23.6

Brunei Darussalam Cambodia Indonesia Lao PDR Malaysia Myanmar The Philippines Singapore Thailand Viet Nam

21.1 91,886.1 80.6 239.8

78.9 116,510.0 19.4 1,237.2

28.7 69,086.8 85.8 244.2

71.3 96,829.2 14.2 1,725.0

24.5 160,972.9 83.7 484.0

25.7 116,525.8 50.4 3,144.8

74.3 156,890.9 49.6 6,341.5

25.7 91,630.2 53.7 1,784.1

74.3 123,330.5 46.3 3,849.9

25.7 208,156.0 51.6 4,928.9

15.2 32,496.2 30.3 188,186.0 21.3 120,006.6 15.1 48,136.2 610,901. 9

84.8 38,334.7 69.7 269,832.5 78.7 152,497.2 84.9 56,691.0 810,489. 2

25.4 33,972.9 24.0 186,737.1 20.0 107,010.1 19.6 55,664.2 549,734. 0

74.6 45,533.9

20.7 66,469.1 27.3 374,923.1 20.7 227,016.7 17.6 103,800.4 1,160,635 .9

76.0 245,784.7 140,694.1 80.0 133,769.6 80.4 69,230.9 726,354. 1 59,250.1 22,121.5 376,207. 3

ASEAN

24.6

75.4

24.3

75.7

24.5

75.5

Top ten ASEAN trade partner countries/regions

Top ten ASEAN trade partner countries/regions, 2009
as of 15 July 2010 value in US$ million; share in percent Share to total ASEAN trade Total trade 376,207.3 178,185.4 171,785.9 160,863.7 149,572.1 74,740.3 67,915.2 43,850.1 39,115.8 24,366.5 1,286,602.3 250,241.0 1,536,843.3 Exports 24.6 10.1 11.5 9.6 10.1 4.2 7.0 3.6 3.3 1.3 85.3 14.7 100.0 Imports 24.3 13.3 10.8 11.4 9.3 5.6 1.5 2.0 1.7 1.9 81.9 18.1 100.0 Total trade 24.5 11.6 11.2 10.5 9.7 4.9 4.4 2.9 2.5 1.6 83.7 16.3 100.0

Trade partner country/region1/ ASEAN China European Union-27 Japan USA Republic of Korea Hong Kong Australia India United Arab Emirates Total top ten trade partner countries Others2/ Total

Value Exports 199,587.3 81,591.0 92,990.9 78,068.6 82,201.8 34,292.9 56,696.7 29,039.3 26,520.3 10,569.5 691,558.3 118,930.9 810,489.2 Imports 176,620.1 96,594.3 78,795.0 82,795.1 67,370.3 40,447.4 11,218.6 14,810.8 12,595.5 13,797.0 595,044.0 131,310.1 726,354.1

The European Union

What is the EU ?
A family of 27 European countries

 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

What is the European Union?

27
Member States

Shared values: liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law.

Combined population of EU Member million States

490

Largest economic body in the world.

A unique institution Member States voluntarily cede national sovereignty in many areas to carry out common policies and governance.

Percent of worlds population

Contd....
Percent of global GDP

30

Not a super-state to replace existing states, but an organization for international cooperation. Worlds most open market for goods and commodities from developing countries. Worlds most successful model for advancing peace and democracy.

55

Percent of combined worldwide Official Development Assistance

ORIGIN OF THE EU
First successful regional organization European Economic Community (EEC) setup in 1957 EEC became European Community (EC) in 1986 EC became European Union (EU) in 1993 by the Maastricht Treaty The last amendment to the constitutional basis of the EU, the Treaty of Lisbon, came into force in 2009.

OBJECTIVES OF THE EU
Its principal goal is to promote and expand cooperation among member states in economics, trade, social issue, foreign policy, security, defense, and judicial matter.

EU has sought out to meet its objective in three ways:

1. By defining a common commercial policy. 2. By reducing economic differences between its richer and poorer members. 3. By stabilizing the currencies of its members.

TRADE STRATEGY
The EUs overall objective is progressive liberalization of trade. Its key objectives are:
1. Free access to external market 2. Fair competition 3. Respect of the World Trade Organizations commitments.

SECTOR WISE TRADE

Trade in Agriculture:
The EU is the worlds largest importer of Agriculture goods and farm products from the developing and least developed countries. Its total imports in this area from developing countries, equals the combined import of the US, Japan, Canada, Australia. The EU absorbs around 85% of Africas Agriculture export and 45% of Latin Americas.

Trade in Goods
Share in World Trade of Goods 2008-09
EU, 17.1% Others, 50.6%

US, 16%

Japan, 6.6% China, 9.6%

Trade in Services
Share in World Trade in Services 2008-09
Others, 44.9% EU, 26%

US, 18.4% China, 3.3%

Japan, 6.9%

EU MARKET SHARES TRENDS IN WORLD TRADE (%)

20 18 16 14 12 10 8 6 4 2 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

EU27 USA Japan China

TRADE BETWEEN THE EUROPEAN UNION AND INDIA

India was one of the first Asian nations to accord recognition to the European Community in 1962. The EU is Indias largest trading partner and biggest source of foreign direct investment. It is a major contributor of developmental aid and an important source of technology. Over the year EU-India trade has grown from 4.4 billion to 28.4 billion US$.

Top items of trade between India and the EU Indias exports to the % Indias imports from EU the EU Textiles and clothing 35 Gemstones and jewellery Leather and leather 25 Power generating products equipment Gemstones and 12 Chemical products jewellery Agriculture Products 10 Official machinery Chemical products 9 Transport equipment

% 31 28 15

10 6

INDIAS TRADE WITH EU

35.00

30.00

Exports (from India to EU)

Imports (from EU to India)

In Billions of US$

25.00

20.00

15.00

10.00

5.00

0.00 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

ACHIEVEMENTS
IT HAS ENSURED FREEDOM,SECURITY & JUSTICE FOR MEMBER STATES. LED TO JOB CREATION. REGIONAL DEVELOPMENT & ENVIRONMENTAL PROTECTION. HAS HELPED RAISED LIVING STANDARDS,BUILT A SINGLE EUROPE WIDE MARKET. LAUNCHED THE SINGLE EUROPEAN CURRENCY- THE EURO. IT HAS STRENGTHNED EUROPES VOICE IN THE WORLD.

CONCLUSION
Regional integration helps nations come together not only economically but politically and culturally as well Helps in easy transfer of technology, manpower and capital Lead to competitive advantage for nations in international trade.

 However, mutual trust and cooperation are foremost for the success of the trade block.