Regional trade agreements

regional trade agreement

1. Regional Trade Agreements Presented by :- Prabhat Verma 248 Mukul Gupta 284 Prerit Srivastava 270 Abhishek Nagpal 08

2. REGIONAL TRADE AGREEMENT A Trade agreement (also known as trade pact ) is a wide ranging tax, tariff and trade treaty that often includes investment guarantees. The most common trade agreements are of the Preferential And Free Trade types are concluded in order to reduce (or eliminate) tariffs, quotas and other trade restrictions on items traded between the signatories. In the WTO, Regional Trade Agreements (RTAs) are defined as reciprocal trade agreements between two or more partners. They include free trade agreements and customs unions. A free-trade area is the region encompassing a trade bloc whose member countries have signed a free-trade agreement ( FTA ). Such agreements involve cooperation between at least two countries to reduce trade barriers – import quotas and tariffs – and to increase trade of goods and services with each other. Following the RTA between Mongolia and Japan in June 2016, all WTO members now have an RTA in force. As of 20 June 2017, 279 RTAs were in force.

3. objectives To obtain economic benefits. To pursue non-economic objectives To ensure increased security of market access. To improve members bargaining strength. To promote regional infant industries. Trade Diversion.

4. ADVANTAGES The Resources are pooled Rapid Technological Innovations Elimination of Tariffs Increased economic growth More dynamic business climate Lower government spending Foreign direct investment

5. Types of Integration Free Trade Area Preferential Trade Area Common Market Economic Union Custom Union

6. Regional Trade Agreements Consider two countries - Brazil and Argentina Suppose these countries initially pursue independent and non-preferential trade policies Trade policies of these two countries are not coordinated in any way and do not discriminate among countries There is no integration of the countries’ labor, capital, and money markets First-level RTA is known as Preferential trade area Brazil and Argentina lower their trade barriers between each other, but do not eliminate them Labor and capital markets remain unintegrated Because the two countries have not fully eliminated trade barriers between each other, this type of RTA is not allowed by the WTO.

7. Second-level RTA is known as Free Trade Area Brazil and Argentina eliminate the trade barriers between each other With regard to non-member countries Brazil and Argentina pursue independent policies Labor and capital markets remain unintegrated Third-level regional agreement is known As Customs Union Brazil and Argentina eliminate the trade barriers between each other Additionally, member countries adopt common trade barriers with regard to non-member countries (often referred to as a common external tariff) Labor and capital markets remain unintegrated Fourth-level RTA is known as Common Market A customs union in which labor and capital markets are integrated into a regional market Any restrictions on movements of labor and physical capital (direct foreign investment) have been removed Regional Trade Agreements

8. WTO members who wish to form FTAs or CUs may do so However, there are certain requirements Trade barriers against non-members cannot be “higher or more restrictive than” those in existence prior to the FTA or CU FTA or CU must be formed “within a reasonable length of time” FTA or CU must eliminate trade barriers on “substantially all the trade” among the members With regard to services, the General Agreement on Trade in Services (GATS) requires that the FTA or CU involve “substantial sectoral coverage” Regional Trade Agreements

9. How to determine whether a product is from a partner country Suppose that Brazil and Argentina form a RTA Shirt produced in Venezuela is imported into Brazil and label “Made in Brazil” is attached Shirt can then be imported into Argentina with no restrictions or tariffs — product is not really made in Brazil To protect against such possibilities, RTA members usually define rules of origin Can be defined in a number of ways, including by Amount of value added in an RTA partner country Degree of product transformation Regional Trade Agreements

10. The Economic Effects of Regional Trade Agreements Trade creation Occurs when the formation of a FTA or CU leads to a switching of imports from a high-cost source to a low-cost source Tends to improve welfare Trade diversion Occurs when imports switch from a low-cost source to a high-cost source Tends to worsen welfare

11. Regionalism & Multilateralism Represent two alternative trade policy options available to the countries of the world The 1950s and 1960s saw “first wave” of RTAs in developing world The 1980’s saw beginning of “second wave” of RTAs What role will the second wave of RTAs play vis-à-vis the multilateral efforts toward trade liberalization pursued under the GATT-WTO framework Will the second wave of RTAs complement the multilateral framework or will it work at cross-purposes to this framework?

12. Regionalism & Multilateralism Opponents argue RTAs are discriminatory by nature They draw attention to “spaghetti-bowl” nature of second-wave RTAs Meaning the overlapping nature of most RTAs, with most WTO members holding simultaneous membership in many RTAs at once For example, Mexico has signed FTA agreements with the United States, Canada, Nicaragua, Costa Rica, Chile, Bolivia, El Salvador, Guatemala, Honduras, Colombia, Venezuela, and the European Union The negotiating energies put into RTAs will detract from those put into multilateral agreements under the auspices of the WTO

13. Regionalism & Multilateralism Key issue facing multilateral trading system is how to best manage and regulate RTAs Responsibility falls to the WTO Committee on RTAs A number of points are worth stressing here GATT era oversight of RTAs was inadequate Marrakesh Agreement establishing WTO included an “understanding” on RTAs Specified that the relevant measure to assess the phrase “shall not be higher or more restrictive than” is a weighted average of tariff rates and that “within a reasonable length of time” is to be no more than ten years Specifies that all new RTAs must be notified to the WTO and a WTO working party is to be established to examine each notification and to ascertain its impact on the multilateral trading system WTO could go further and tighten its requirements on the external protection of FTAs and CUs Is possible to lessen the tensions between regionalism and multilateralism but probably not possible to eliminate these tensions entirely.

14. TYPES OF FREE TRADE AGREEMENT BILATERAL AGREEMENT Bilateral trade agreements are between two nations at a time, giving them favored trading status with each other. The goal is to give them expanded access to each other's markets, and increase each country's economic growth. MULTILATERAL AGREEMENT Multilateral trade agreements are commerce treaties between three or more nations. The agreements reduce tariffs and make it easier for businesses to import and export. Since they are among many countries, they are difficult to negotiate. “Multilateralism” refers to the GATT/WTO system as well as the trade negotiations that take place among all GATT/WTO members as a group Recall that one of the founding principles of this system is nondiscrimination Involves the most favored nation (MFN) and national treatment (NT) sub-principles Each WTO member must grant to each other member treatment as favorable as they extend to any other member country

15. General Agreement on Tariffs and Trade ( GATT ) GATT was a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. According to its preamble, its purpose was the "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis.“ The objectives of GATT are: » to raise standard of living. » to ensure full employment » to develop the full use of the resources of the world, and » to expand production and international trade.

16. WORLD TRADE ORGANISATION The World Trade Organization ( WTO ) is an intergovernmental organization that regulates international trade. The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 123 nations on 15 April 1994, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. It is the largest international economic organization in the world. WTO has the following five specific functions ; The WTO shall facilitate the implementation, administration and operation. The WTO shall provide the forum for negotiations among its members. The WTO shall administer the ‘Understanding on Rules and Procedures Governing the settlement of Disputes.’ The WTO shall administer the ‘Trade Review Mechanism’. The WTO shall cooperate, as appropriate, with the IMF and IBRD and its affiliated agencies.

17. TYPES OF BILATERAL FREE TRADE AGREEMENT THE ASSOCIATION OF SOUTH-EAST ASIAN NATIONS (ASEAN) SOUTH ASIAN ASSOCIATION FOR REGIONAL COOPERATION (SAARC) NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA) EUROPIAN UNION (EU) TRANS-PACIFIC PARTNERSHIP (TPP),

18. THE ASSOCIATION OF SOUTH-EAST ASIAN NATIONS ( ASEAN ) ASEAN is a regional intergovernmental organization comprising ten Southeast Asian states which promotes Pan- Asianism and intergovernmental cooperation and facilitates economic, political, military, educational and cultural integration amongst its members and Asian states. It was formed on 8 August 1967. ASEAN was preceded by an organization formed in 31 July 1961 called the Association of Southeast Asia ( ASA ) ASEAN has bilateral agreements with the following countries and blocs: ASEAN–China Free Trade Area (ACFTA), in effect as of 1 January 2010 ASEAN–India Free Trade Area (AIFTA), in effect as of 1 January 2010 ASEAN–Japan Comprehensive Economic Partnership (AJCEP), in effect as of 1 December 2008 ASEAN–Korea Free Trade Area (AKFTA), in effect as of 1 January 2010 ASEAN–Australia-New Zealand Free Trade Area (AANZFTA)

19. ASEAN Majors Country Population (2016, millions) GDP (nominal 2016) (millions of US dollars) GDP (nominal per capita) (US dollars) GDP (PPP 2017) (millions of US dollars) GDP (PPP per capita) (US dollars)  Indonesia 261.1 $932,448 $3,640 $3,257,123 $12,432  Thailand 68.9 $406,949 $5,939 $1,226,407 $17,749  Philippines 103.3 $304,696 $2,982 $878,980 $8,270  Singapore 5.6 $296,967 $53,431 $514,837 $90,724  Malaysia 31.2 $296,359 $9,360 $922,057 $28,636  Vietnam 94.6 $201,326 $2,173 $648,234 $6,925 Six majors refers to the six largest economies in the area that are many times larger than the remaining four ASEAN countries:

20. PURPOSE The emergence and successful operation of EEC and NAFTA gave impetus for the forming ASEAN member countries have developed economically at a fast rate in the lies is well educated and skilled human resources. The ASEAN member countries are rich in oil, agricultural goods and modern industrial products. As set out in the ASEAN Declaration, the aims and purposes of ASEAN are: To accelerate economic growth, social progress, and cultural development in the region. To promote regional peace. To promote collaboration and mutual assistance on matters of common interest. To provide assistance to each other in the form of training and research facilities. To collaborate for the better utilization of agriculture and industry to raise the living standards of the people. To promote Southeast Asian studies. To maintain close, beneficial co-operation with existing international organizations with similar aims and purposes.

21. SOUTH ASIAN ASSOCIATION FOR REGIONAL COOPERATION ( SAARC ) The South Asian Association for Regional Cooperation ( SAARC ) is the regional intergovernmental organization and geopolitical union of nations in South Asia. Its member states include Afghanistan, Bangladesh, Bhutan, India, Nepal, the Maldives, Pakistan and Sri Lanka . SAARC comprises 3% of the world's area, 21% of the world's population and 3.8% (US$ 2.9 trillion) of the global economy, as of 2015. SAARC was founded in Dhaka on 8th December, 1985. The organization promotes development of economic and regional integration

22. SAARC Apex Bodies SAARC has six Apex Bodies, they are- SAARC Chamber of Commerce & Industry (SCCI), South Asian Association for Regional Cooperation (SAARCLAW), South Asian Federation of Accountants (SAFA), South Asia Foundation (SAF), South Asia Initiative to End Violence Against Children (SAIEVAC), Foundation of SAARC Writers and Literature (FOSWAL)

23. objective The objectives of the SAARC are: To improve the quality of life and welfare of the people. To develop the region economically, socially and culturally. To provide the opportunity to the people of the region to live in dignity and to exploit their potentialities To enhance the self-reliance of the member countries jointly. To provide conducive climate for creating and enhancing mutual trust. To enhance the mutual assistance among member countries. To enhance the cooperation with other developing economies. To have unity among the member countries. To extend cooperation to other trade blocks.

24. NORTH AMERICAN FREE TRADE AGREEMENT ( NAFTA ) The North American Free Trade Agreement ( NAFTA) is an agreement signed by Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994. It superseded the Canada–United States Free Trade Agreement between the U.S. and Canada. NAFTA has two supplements: the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC).

25. objectives The objectives of the NAFTA include: To create new business opportunities. To enhance the competitive advantage of the companies. To reduce the prices of the products and services. To enhance industrial development. To provide stable and predictable political environment. To develop industries in Mexico. To assist Mexico in earning additional foreign exchange. To improve and consolidate political relationship.

26. The Measures As Per The Agreement Of NAFTA Include Opening up of Government procurement markets in each member country of NAFTA. Residents of NAFTA countries can invest in any other NAFTA countries freely. Protection of intellectual properly rights of the NAFTA member countries. Simplification and harmonization of product standards. Free flow of employees from one member country to another.

27. EUROPIAN UNION ( eu ) The European Union ( EU ) is a political and economic union of 28 member states that are located primarily in Europe. It has an estimated population of over 510 million. The EU has developed an internal single market through a standardized system of laws that apply in all member states. EU policies aim to ensure the free movement of people, goods, services, and capital within the internal market enact legislation in justice and home affairs, and maintain common policies on trade, agriculture, fisheries, and regional development. A monetary union was established in 1999 and came into full force in 2002, and is composed of 19 EU member states which use the Euro currency . The EU traces its origins from the European Coal and Steel Community (ECSC) and the European Economic Community (EEC), established, respectively, by the 1951 Treaty of Paris and 1957 Treaty of Rome. The EU in 2016 generated a nominal Gross Domestic Product (GDP) of 16.477 trillion US dollars.

28. TRANS PACIFIC PARTNERSHIP ( TPP ) The Trans-Pacific Partnership ( TPP ), or the Trans Pacific Partnership Agreement ( TPPA ), is a trade agreement between Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States (until 23 January 2017) and Vietnam. It is the largest trade agreement in history. A final agreement was drafted on 5 October 2015, made public on 5 November 2015, and signed on 4 February 2016 in Auckland, New Zealand, concluding seven years of negotiations.

29. UNCTAD (United Nations Conference On Trade & Development)

30. About UNCTAD Acronym for United Nations Conference on Trade & Development Established in 1964 Headquarters in Geneva, Switzerland Principle organ of United Nations General Assembly 193 members 400 staff members It deals with trade, investment and development issues

31. To address problems of developing countries relating to economic development Integrate developing countries into world economy Promote development friendly integration Why UNCTAD came into existence?

32. Brief History of UNCTAD First phase: 1964 to late 1970s Rise and climax of UNCTAD’s negotiating role Second phase: 1980s Strengthening the analytical capacity with greater focus on macroeconomic and financial issues (debt-crisis) Third phase: 1990s onwards The positive agenda and identification of the shortcomings of the mainstream development strategy.

33. Main functions of UNCTAD To promote international trade all over the world-between developed and developing countries with different socio-economic system. To formulate principles and policies on international trade and related problems of economic development. To make proposal for putting the said principles and policies into effect. To review and facilitate the co-ordination of activities of the other institutions within the U.N. system in the field of international trade. To be available as a center for harmonious trade and related documents in the development policies of governments.

34. OBJECTIVES To maximize trade, investments and development opportunities To eliminate trade gap between developed and developing countries To accelerate economic growth rate of developing countries

35. ACTIVITIES Research and support of negotiations for commodity agreements Technical elaborations of new trade schemes Activities that help developing countries in trade and capital flow

36. HOW DOES UNCTAD WORK ? Intergovernmental level Commission meetings Expert meetings Monitoring of inter- governmental activities A TWO-TRACK PROCESS Consensus Building Policy Analysis Research and analytical studies Human resources capacity-building Institutional Capacity- building

37. UNCTAD’S WORK Investment, Enterprise development , and technologies Trade (goods, services and commodities ), services infrastructure and Trade facilitation Development strategies & global interdependence Least developed & developing countries DEVELOPMENT