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REGIONAL TRADE BLOCKS - Coggle Diagram
REGIONAL TRADE BLOCKS
A)Economic Integration
Types of Economic Integrations
Customs Union
Free Trade Area
Common Market
Economic Union
Trade Creation and Diversion
Trade Creation:
Occurs when lower-cost imports from partner countries replace higher-cost domestic production, reducing production costs and consumer prices within the country.
Trade Diversion
: Happens when lower-cost imports from outside the block are replaced by higher-cost imports from within the block.
Factors Affecting Benefits: Trade creation and welfare benefits are higher when:
Trade barriers are significantly reduced.
Partner countries are larger and more numerous.
Partner economies are diverse and competitive globally.
Partner countries have prices closer to world prices.
There is a complementary trading pattern and fast-growing economies.
Advantages
Market Growth
Consumer Benefits
Resorce Efficiency
Investment and Innovation
Lower Tariffs
G)Sounth Asian Association for Regional Co-operation(SAARC)
Formation and Members
December 8, 1985
Members: India, Bangladesh, Bhutan, Pakistan, Maldives, Nepal, Sri Lanka, Afghanistan (joined April 2007)
Objectives
Improve quality of life and welfare
Develop region economically, socially, and culturally
Enable people to live in dignity and exploit potentialities
Enhance joint self-reliance
Create and enhance mutual trust and understanding
Enhance mutual assistance in economic, social, cultural, scientific, and technical fields
Cooperate with other developing economies and trade blocks
Maintain unity on common interest issues in international forums
Organization Structure
Council:
Highest policy-making body, represented by heads of government, meets every two years
Council of Ministers:
Foreign ministers, formulate policies, review functioning, decide on cooperation areas, meet twice a year
Standing Committee:
Foreign secretaries, monitor and coordinate programs, set action committees
Programming Committee:
Senior officials, scrutinize budget, finalize annual schedule, analyze technical reports
Technical Committees:
Representatives from all countries, formulate and monitor projects in areas like agriculture, communications, environment, health, rural development, science, technology, tourism, transport
Secretariat:
Located in Nepal, coordinates and implements SAARC activities, headed by Secretary-General (3-year term, rotation basis)
SAARC Preferential Trading Arrangement (SAPTA)
Established: Agreement signed on April 11, 1993
Objectives
Gradually liberalize trade among member countries
Remove trade barriers and reduce tariffs
Promote mutual trade and economic cooperation
Administration of SAPTA
Equitable Benefits: Benefits accorded on equitable basis of reciprocity
Step-by-Step Improvement: Agreement improved through mutual negotiations
Special Needs: Consideration of less developed countries’ needs
Product Areas: Includes all raw materials, semi-finished, and finished products
Tariffs: Concessions in tariffs, para-tariffs, non-tariffs, and trade measures
Special Treatment: Technical assistance, establishment of projects, elimination of barriers, training, export credit insurance, market information, long-term contracts
Balance of Payments
Concessions Suspension: If imports cause serious balance of payments issues, concessions can be suspended
Provisions
Information, Consultation, Dispute Settlement: Provided for within agreement
Extension of Concessions: Concessions extended to all member countries
Modification and Withdrawal: Concessions can be modified/withdrawn after three years with mutual consultation
Withdrawal from SAPTA
Notice Period: Six months' notice to SAARC Secretariat and Committee on Economic Co-operation
SAARC Summits
13th Summit (2005): Dhaka - Consensus on implementing South Asian Free Trade Agreement (SAFTA)
14th Summit (2007): New Delhi - Agreed to root out terrorism, improve trading block performance
Future Membership
Potential Members: People's Republic of China (observer status along with Japan), Islamic Republic of Iran (expressed interest in observer status)
Vision
Economic Integration: Move towards eventual economic integration
Disaster Mitigation: Cooperation on disaster preparedness and mitigation
Future Global Architecture: Integration into global trading blocs, potential Asian economic community
C)North American Free Trade Agreement (NAFTA)
Origin and Formation
Established: January 1, 1994, by the USA, Canada, and Mexico.
Expansion: Started as a US-Canada free trade agreement (1989), extended to Mexico.
Objectives
Business Opportunities: Create new opportunities, especially in Mexico.
Competitive Advantage: Enhance competitiveness in global markets.
Price Reduction: Lower product and service prices through increased competition.
Industrial Development: Promote industrial growth and employment regionally.
Political Stability: Ensure stable environment for investors.
Foreign Exchange: Assist Mexico in earning foreign exchange to manage debt.
Political Relations: Improve political relationships among member countries.
Measures
Government Procurement: Open markets in each member country.
Investment: Free flow of investments among NAFTA countries.
Intellectual Property: Protection of intellectual property rights.
Product Standards: Harmonization of standards across member countries.
Labor Mobility: Free movement of employees and business people.
Manufacturing Rules: Rules on manufacturing to prevent re-exporting.
Environmental Protection: Pollution control along the USA-Mexico border.
Impacts
United States: Shift from trade surplus to deficit with job losses in certain sectors.
Mexico: Increased foreign investment and exports but with challenges in economic diversification.
Agriculture: Disruption due to increased imports, affecting farmers.
B)European Union(EU)
Origin and Development
ECSC to EEC: Established in 1952 as European Coal and Steel Community (ECSC), evolved into European Economic Community (EEC) by Treaty of Rome in 1957.
Membership Growth: Started with 6 countries, expanded gradually to 27 by 2007.
Key Treaties: Rome Treaties (1957), Maastricht Treaty (1992), Amsterdam Treaty (1997), Nice Treaty (2001), Lisbon Treaty (2007).
Objectives
Harmonious Development: Promote economic activities, stability, and living standards among member states.
Integration: Establish common market, customs union, and policy coordination.
Institutions
European Council: Main decision-making body comprising heads of member states.
European Commission: Executive body responsible for proposing legislation and implementing decisions.
European Parliament: Elected legislative body representing EU citizens
Policies and Initiatives
Common Agricultural Policy (CAP): Aimed at modernizing agriculture, ensuring fair income for farmers, and stabilizing markets.
Common Fisheries Policy: Regulates fishing activities to ensure sustainability and fair access.
European Monetary Union (EMU): Introduced Euro as common currency, managed by European Central Bank.
Regional Development: Supports less developed regions through funds like European Regional Development Fund (ERDF) and European Social Fund (ESF).
Common Transport Policy: Aims to integrate transport networks and remove barriers.
Challanges and Future
Enlargement: Expanded to include Eastern European countries, posing challenges of integration and diversity.
EU Constitution: Drafted to streamline governance and define roles, faced challenges in ratification.
Global Positioning: EU aims for global influence through economic strength and political unity.
D)The Association of South-East Asian Nations(ASEAN)
Formation and Objectives
Formed in January 1992 by Singapore, Brunei, Malaysia, Philippines, Thailand, and Indonesia.
Initiated to create ASEAN Free Trade Area by 2008, reducing tariffs on 15 product categories.
Strengths and Resources
Economic Development: Rapid economic growth supported by skilled workforce, abundant resources (oil, minerals, agriculture, industry).
Unity and Cohesion: Shared historical and cultural ties promote regional solidarity and cooperation.
Organizational Structure
includes standing and rotating committees, fostering dialogue with international organizations and dialogue partners.
ASEAN Free Trade Area (AFTA)
Established in September 1994 to promote intra-ASEAN trade and attract foreign investment.
Reduce tariffs, achieve 40% value addition within ASEAN, encourage foreign investment.Reduce tariffs, achieve 40% value addition within ASEAN, encourage foreign investment.
India-ASEAN Relations
Partnership Development: Sectoral dialogue partner since 1992, full dialogue partner since 1995, ASEAN Regional Forum member since 1996.
Trade Agreements: Free Trade Agreements with Thailand and Singapore (CECA), enhancing trade and economic ties.
Economic Impact
Trade Growth: India-ASEAN trade increased significantly, aiming for US$ 50 billion by 2010.
Sectoral Cooperation: Collaborations in science and technology, climate change, tourism, and traditional medicine.
Future Directions
Strategic Goals: India aims to deepen economic ties with ASEAN, enhance cooperation across various sectors.
Prospects: Potential growth in trade, investment, and cultural exchanges between India and ASEAN member states.
E)European Free Trade Association
Formation and Members
Established: 1959
Members: Austria, Norway, Portugal, Sweden, Switzerland
Associate Members: Finland, Iceland, Great Britain, Denmark
Objectives
Tariff Elimination: Remove almost all tariffs among member countries
Trade Restrictions: Abolish trade restrictions on imports and exports among members
Economic Development: Enhance economic development, employment, incomes, and living standards
Free Trade: Promote free trade in Western Europe
Management
Council: Each member country is represented by a representative
Policy Decisions: Made by the EFTA Council
Implementation: Secretary-General implements policies
F)Latin American Integration Association
Formation and Members
Replaced Latin American Free Trade Association (LAFTA) in 1960
Members: Argentina, Brazil, Chile, Mexico, Paraguay, Peru, Uruguay, Colombia, Ecuador, Venezuela, Bolivia
Objectives
Trade Restrictions: Eliminate trade restrictions among member countries
Customs and Tariffs: Gradually reduce and eliminate customs and tariffs
Organization Structure
Council of Ministers: Foreign ministers of member countries
Conference of Contracting Parties: Makes joint resolutions
Executive Committee: Implements the treaty
Secretariat: Performs technical and administrative functions
Operations
Duty Reductions: Members list goods for duty reductions
Negotiations: Held every three years for complete tariff exemptions
Product List: Includes all traded products
Favorable Terms: Granted to less developed member countries
Critical Appraisal
Modest Performance: Due to delay and negative approach in preparing common lists
Challenges: High transportation costs, contentment with sheltered markets, forces of nationalism