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Transcript of Trding Blocs
APROJECT REPORT
ON
STUDY ON TRADING BLOCS
MASTERS OF COMMERCE
BANKING & FINANCE
PART -1
2015-2016
SUBMITTED BY:
JIGNA M. BHANUSHALI
ROLL NO – 01
PROJECT GUIDE
MS. KALAVATI
SK SOMAIYA COLLEGE OF ARTS SCIENCE AND COMMERCE, VIDYAVIHAR (EAST), MUMBAI – 400077
1
CERTIFICATE
This is to certify that MS. JIGNA M. BHANUSHALI of M.Com (BANKING
AND FINANCE) Semester- 1(2015-16) has successfully completed the project on
Study on non-performing Assets under the guidance of MS.KALAVATI
________________ ________________
Course Coordinator Principal
________________
Project Guide/Internal Examiner
_______________
External Examiner
Date:
2
DECLARATION
I JIGNA M. BHANUSHALI student of class in M.com (BANKING &
FINANCE) PART 1 (SEM-1), ROLL NO.01 , academic year 2015-2016
Studying at S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND
COMMERCE, hereby declare that the work done on the project Entitled “Study
on TRADING BLOCS” is true and original and any Reference used in this
project is duly acknowledged.
Date:
Place:
_________________
Student Signature
JIGNA M. BHANUSHALI
Roll No. 01
3
ACKNOWLEDGEMENT
Talent and capabilities are of course necessary but opportunities and good
guidance is very important things without which no person can climb those infant
ladders towards progress.
With regard to my project I would like to thank each and every one who offered
help, guidance and support whenever required.
I take immense pleasure in thanking MS.KALAVATI and other staff for their
support and guidance in the project work.
I am extremely grateful to my MS. KALAVATI madam for her valuable
guidance and kind suggestions.
Finally and yet importantly I would like to express my heartfelt thanks to my
beloved parents and friends for their blessings, my classmates for their help and
wishes for the successful completion of this project.
_______________
JIGNA M. BHANUSHALI
4
INDEX
SR.NO PARTICULARS PAGE NO.
1. Introduction 62. Meaning and definition 73. Types of trading blocs 8-94. Advantages and disadvantages of trade blocs 10-115. Political effects 12-136. Major trade blocs 147. History of trading blocs 15-178. THE EUROPEAN UNION (EU) 18-249. NORTH AMERICAN FREE TRADE
AGREEMENT (NAFTA)25-30
10. SOUTH ASIAN FREE TRADE AGREEMENT (SAFTA)
31-35
11. THE ORGANIZATIONAL OF THE PETROLEUM (OPEC)
36-43
12. ASSOCIATION OF SOUTHEAST ASIAN NATIONS (ASEAN)
44-47
13. SOUTH ASIAN ASSOCIATION FOR REGIONAL COOPERATION(SAARC)
48-52
14. CONCLUSION 5315. BIBLOGRAPHY 54
5
TRADING BLOCS
INTRODUCTION A 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.
Historic economic blocs include the Hanseatic League, a trading alliance in
northern Europe in existence between the 13th and 17th centuries and the German
Customs Union (Zollverein) initiated in 1834, formed on the basis of the German
Confederation and subsequently German Empire from 1871. Surges of trade bloc
formation were seen in the 1960s and 1970s, as well as in the 1990s after
the collapse of Communism. By 1997, more than 50% of all world commerce was
conducted within regional trade blocs.
6
Economist Jeffrey J. Scott of the Peterson Institute for International
Economics notes that members of successful trade blocs usually share four
common traits: similar levels of per capita GNP, geographic proximity, similar or
compatible trading regimes, and political commitment to regional organization.
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.
DEFINATION :
A set of countries which engage in international trade together, and are usually
related through a free trade agreement or other association.
MEANING:
Are intergovernmental associations that manage & promote trade activities for
7
specific regions of the world . It’s a group of countries within a geographical
region that protect themselves from imports from non-members .
Are form of economic integration & increasingly shape the pattern of world trade .
an agreement between states , regions , or countries to reduce barriers to trade
between the participating regions
TYPES OF TRADING BLOCS
There are five different types of economic integration as given below
1. Free Trade Area
2. Custom Union
3. Common Market
4. Complete Economic Union
5. Complete Political Integration.
1. Free Trade Area
In this form of economic integration, member nations remove all trade
impediments among themselves but retain their own policies with the outside
world. That to say, the member countries do not charge any import tariff on
imports from each other but they do have their respective policies as regards levy
of import tariffs on imports from the countries outside the group.
2. Custom union
This arrangement of economic integration is a similar to free trade area. Besides,
member nations have common external commercial relations. For example, they
8
adopt common external tariff on imports from the non member nations. Thus,
custom union marks the second stage of economic integration amongst the nations.
3. Common Market
In this type of economic integration, the member nations have custom union
agreement with one another and they also agree for factor mobility across the
national borders of member countries. Thus, the common market arrangement
permits free movement of labor and capital amongst the member nations.
4. Complete Economic Union
This is the final stage of economic integration to provide the basis for complete
political integration. In this type of economic integration, member countries are
part of common market and agree to have complete unification of monetary and
fiscal policies. This arrangement is akin to economic and monetary union amongst
the member nations. In a recent development, eleven out of fifteen countries of the
European Union have agreed to move forward to forge economic and monetary
union amongst themselves with effect from 1.1.1999 when they decided to have a
common currency unit called Euro. There eleven countries are Belgium, France,
Germany, Italy, Luxembourg, Netherlands, Austria, Ireland, Portugal, Spain and
Finland.
5. Complete Political Integration
This is the ultimate stage of integration amongst the nations when the member
nations literally merge their individual identities into one nation. In this form, the
nation members have a central parliament with the sovereignty of a national
government
9
Advantages and Disadvantages of trade blocs
There are five major advantages of trade bloc agreements: foreign direct
investment, economies of scale, competition, trade effects, and market efficiency.
Foreign Direct Investment: An increase in foreign direct investment results from
trade blocs and benefits the economies of participating nations. Larger markets are
created, resulting in lower costs to manufacture products locally.
Economies of Scale: The larger markets created via trading blocs permit
economies of scale. The average cost of production is decreased because mass
production is allowed.
Competition: Trade blocs bring manufacturers in numerous countries closer
together, resulting in greater competition. Accordingly, the increased competition
promotes greater efficiency within firms.
Trade Effects Trade blocs eliminate tariffs, thus driving the cost of imports down.
As a result, demand changes and consumers make purchases based on the lowest
prices, allowing firms with a competitive advantage in production to thrive.
Market Efficiency: The increased consumption experienced with changes in
demand combines with a greater amount of products being manufactured to result
in an efficient market.
The disadvantages, on the other hand, include: regionalism vs. multinationalism,
loss of sovereignty, concessions, and interdependence.
Regionalism vs. Multinationalism: Trading blocs bear an inherent bias in favor of
their participating countries. For example, NAFTA, a free trade agreement between
the United States, Canada and Mexico, has contributed to an increased flow of
10
trade among these three countries. Trade among NAFTA partners has risen to more
than 80 percent of Mexican and Canadian trade and more than a third of U.S. trade,
according to a 2009 report by the Council on Foreign Relations. However, regional
economies by establishing tariffs and quotas that protect intra-regional trade from
outside forces, according to the University of California Atlas of Global
Inequality . Rather than pursuing a global trading regime within the World Trade
Organization, which includes the majority of the world's countries, regional trade
bloc countries contribute to regionalism rather than global integration.
Loss of Sovereignty: A trading bloc, particularly when it is coupled with
a political union, is likely to lead to at least partial loss of sovereignty for its
participants. For example, the European Union, started as a trading bloc in 1957 by
the Treaty of Rome, has transformed itself into a far-reaching political organization
that deals not only with trade matters, but also with human rights, consumer
protection, greenhouse gas emissions and other issues only marginally related to
trade.
Concessions: No country wants to let foreign firms gain domestic market share at
the expense of local companies without getting something in return. Any country
that wants to join a trading bloc must be prepared to make concessions. For
example, in trading blocs that involve developed and developing countries, such
as bilateral agreements between the U.S. or the EU and relatively poor Asian, Latin
American or African countries, the latter may have to allow multinational
corporations to enter their home markets, making some local firms uncompetitive.
Interdependence: Because trading blocs increase trade among participating
countries, the countries become increasingly dependent on each other. A disruption
of trade within a trading bloc as a result of a natural disaster, conflict or revolution
may have severe consequences for the economies of all participating countries
11
WHY DO COMPANY FORM TRADING BLOCS ?
PRIMARY OBJECTIVE – regional integration which enables countries to
take advantages of geographical proximity as well as the enlarged market
formed after such mergers .
DEEPER OBJECTIVE - To integrate their economies .
The growth in these number of blocs is a major development of recent
years & significant fraction of global trade is done through them .
Trade bloc compliment global trade
Protect intra regional trade form outside forces .
Establish regional security .
WHAT ARE THE POLITICAL IMPLICATIONS OF
TRADING BLOCS ?
Increased trade & interlocking has reduced the risks of war as the cost
become higher for both countries
Ensures that a change in government in a member state does not
result in policy reversal
12
EXAMPLE : france & germany fought 3 war in 70 yrs , but in the
present situation the trade arrangements have made it virtually
impossible for them to wage .
MERCOSUR has reduced tensions between Brazil & Argentina
Association of southeast Asian Nations ( ASEAN) has played pacifier
between Indinesia & Malaysia .
WHY ARE TRADING BLOCS UNDESIRABLE ?
IMPORT QUOTES ( limiting the amount of imports into the country so
that domestic consumers buy products made by their countries in their
region )
CUSTOM DELAYS ( establishing bureaucratic formalities that slow down
trade from the other region )
SUBSIDIES BARRIER ( giving heavy subsidies to protect regional trade )
VOLUNTARY BOYCOTTS & TECHNICAL BARRIERS
MAJOR TRADE BLOCS
13
EUROPEAN UNION (EU)
NORTH AMERICA FREE TRADE AGREEMENT (NAFTA)
SINGAPORE – AMERICA FREE TRADE AGREEMENT (SAFTA)
ORGANISATION OF PETROLEUM EXPORTING COUNTRIES (OPEC)
ASSOCIATION OF SOUTH EAST ASIAN NATION ( ASEAN)
SOUTH ASIAN ASSOCIATION OF REGIONAL CO-OPERATION
(SAARC)
HISTORY OF TRADING BLOCS
14
For years the champion of multilateralism was the United States. However,
multilateral trade negotiations in the 1980s were slow and tedious, thus leading the
U.S. to move away from its policy of supporting only multilateral trade
negotiations as a mechanism for encouraging free trade. This new U.S. policy
fosters the development of both multilateral liberalization trade and preferential
trade agreements.
Since the mid-1980s there has been a profound change in the structure of the
international economy due to the widespread growth and internal enhancement of
regional trading blocs in all parts of the globe. The World Trade Organization
(WTO), for example, notes that almost all of its 134 members are signatories to
regional trade agreements with other countries. As of February 1999 the
GATT/WTO has been notified of 184 regional trade agreements of which 109 are
currently in effect (see WTO 1999 web page).' These regional trade groups,
according to Fred Bergsten of the Institute for International Economics, account
for approximately 60 percent of world trade (Anon. 1999).
Among the most notable and impactful of these trade arrangements include the
North American Free Trade Agreement (NAFTA) and the European Union (EU).
The plan to establish the Asian-Pacific Economic Cooperation Group by 2020
(2010 for developed economies; 2020 for developing ones) should be an equally
important development (APEC Secretariat 1999).
The United States, Mexico, and Canada created a free-trade area that became
effective in January 1994. The members of NAFTA have declared their aspiration
of incorporating much of Latin America and the Caribbean, thus ultimately
15
establishing a Free Trade Area of the Americas (FTAA). Efforts are underway to
make the FTAA a reality by 2005 (Office of NAFTA & Inter-American Affairs
2000). This area collectively will have a gross domestic product (GDP) of $2
trillion with a population of almost 500 million by the year 2000. According to the
President of Pakistan's Institute for Development Research, 87 percent of world
trade is currently accounted for by three blocs of 33 countries; namely NAFTA, the
EU, and APEC (Anon. 2000).
The European Union's intensification of its program with its membership now
totaling 15 members and a new common currency for 11 of its 15 members
currently results in the establishment of the world's largest single market. Further
expansion is anticipated, particularly into Central Europe, with the addition of up
to ten new members over the next few years. It is estimated that the EU generates
31 percent of total world output and commands more than 20 percent of world
trade (Weindenfeld 1999).
The Asia-Pacific Economic Cooperation (APEC), in spite of the financial problems
the area experienced in 1997 and 1998, is still one of the fastest-growing regions in
the world. By 1998, APEC's 21 member economies produced a Gross Domestic
Product of more than US$16 trillion; this represents approximately 42 percent of
global trade (Asia-Pacific Cooperation 2000). In contrast to other regional
integrations, APEC, an open regional organization, represents an approach to
integration that is concordant with the multilateralism of the WTO (Kim and Koo
1997).
While the history of trade is replete with regional trade bloc formation, we know
little as to why or how these blocs form. At first, it was implicitly assumed that the
trade blocs formed because there were some inherent benefits to the participants.
16
However, a review of the existing knowledge of this area calls that proposition into
question.
THE EUROPEAN UNION
17
The European Union (EU) is a politico-economic union of 28 member states that
are located primarily in Europe. The EU operates through a system
of supranational institutions and intergovernmental-negotiated decisions by the
member states.[14][15] The institutions are: the European Commission, the Council of
the European Union, the European Council, the Court of Justice of the European
Union, the European Central Bank, the European Court of Auditors, and
the European Parliament. The European Parliament is elected every five years
by EU citizens.
The EU traces its origins from the European Coal and Steel Community (ECSC)
and the European Economic Community (EEC), formed by the Inner Six countries
in 1951 and 1958, respectively. In the intervening years, the community and its
successors have grown in size by the accession of new member states and in power
by the addition of policy areas to its remit. The Maastricht Treatyestablished the
European Union under its current name in 1993 and introduced European
citizenship. The latest major amendment to the constitutional basis of the EU,
the Treaty of Lisbon, came into force in 2009.
The EU has developed a single market through a standardised system of laws that
apply in all member states. Within the Schengen Area, passport controls have been
18
abolished . EU policies aim to ensure the free movement of people, goods,
services, and capital, enact legislation in justice and home affairs, and maintain
common policies on trade, agriculture, fisheries, and regional development.
The monetary union was established in 1999 and came into full force in 2002. It is
currently composed of 19 member states that use the euro as their legal tender.
Through the Common Foreign and Security Policy, the EU has developed a role
in external relations and defence . The union maintains permanent diplomatic
missions throughout the world and represents itself at the United Nations,
the WTO, the G8, and the G-20.
With a combined population of over 508 million inhabitants, or 7.3% of the world
population, the EU in 2014 generated a nominal gross domestic product (GDP) of
18.495 trillion US dollars, constituting approximately 24% of global nominal
GDP and 17% when measured in terms of purchasing power parity. As of 2014 the
EU has the largest economy in the world, generating a GDP bigger than any
other economic union or country. Additionally, 26 out of 28 EU countries have a
very high Human Development Index, according to the UNDP. In 2012, the EU
was awarded the Nobel Peace Prize.
Preliminary
After World War II, European integration was eyed as an escape from the extreme
nationalism that had devastated the continent. The 1948 Hague Congress was a
19
pivotal moment in European federal history, as it led to the creation of
the European Movement Internationaland of the College of Europe, where
Europe's future leaders would live and study together. 1952 saw the creation of
the European Coal and Steel Community, which was declared to be "a first step in
the federation of Europe.". The supporters of the Community included Alcide De
Gasperi, Jean Monnet, Robert Schuman, and Paul-Henri Spaak.]
Member states
Through successive enlargements, the Union has grown from the six founding
states—Belgium, France, West Germany, Italy, Luxembourg, and the Netherlands
—to the current 28. Countries accede to the union by becoming party to the
founding treaties, thereby subjecting themselves to the privileges and obligations
of EU membership. This entails a partial delegation of sovereignty to the
institutions in return for representation within those institutions, a practice often
referred to as "pooling of sovereignty".
To become a member, a country must meet the Copenhagen criteria, defined at the
1993 meeting of the European Council in Copenhagen. These require a stable
democracy that respects human rights and the rule of law; a functioning market
economy; and the acceptance of the obligations of membership, including EU law.
Evaluation of a country's fulfilment of the criteria is the responsibility of the
European Council. No member state has ever left the Union,
although Greenland (anautonomous province of Denmark) withdrew in
1985. The Lisbon Treaty now contains a clause providing for a member to leave
the EU.
There are six countries which are recognized as candidates for
membership: Albania, Iceland, Macedonia,[e] Montenegro, Serbia , and Turkey.
20
However, on 13 June 2013, Iceland's Foreign Minister, Gunnar Bragi Sveinsson ,
informed the European Commission that the newly elected government intended to
"put negotiations on hold". Bosnia and Herzegovinaand Kosovo are officially
recognised as potential candidates, but have not submitted membership
applications. Due to the lack of recognition by five of the 28 EU member states,
the European Commission refers only to "Kosovo*", with an asterisked footnote
containing the text agreed to by the Belgrade–Pristina negotiations: "This
designation is without prejudice to positions on status, and is in line with UNSCR
1244 and the ICJ Opinion on the Kosovo Declaration of Independence."
Four countries forming the European Free Trade Association (EFTA) (that are not
EU members) have partly committed to the EU's economy and regulations:
Iceland, Liechtenstein and Norway, which are a part of the single market through
the European Economic Area, and Switzerland, which has similar ties
through bilateral treaties. The relationships of the European
microstates, Andorra, Monaco, San Marino, and the Vatican include the use of the
euro and other areas of co-operation.
Monetary union
The creation of a European single currency became an official objective of the
European Economic Community in 1969. In 1992, after having negotiated the
structure and procedures of a currency union, the member states signed
the Maastricht Treaty and were legally bound to fulfill the agreed-on rules
including the convergence criteria if they wanted to join the monetary union. The
states wanting to participate had first to join the European Exchange Rate
Mechanism.
21
In 1999 the currency union started, first as an accounting currency with eleven
member states joining. In 2002, the currency was fully put into place, 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 19
countries, the most recent being Lithuania which joined on 1 January 2015.
Denmark, the United Kingdom, and Sweden decided not to join the euro.
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 Vice-President of the ECB,
and the governors of the national central banks of all 28 EU member states.
The European System of Financial Supervision is an institutional architecture of
the EU's framework of financial supervision composed by three authorities:
the European Banking Authority, the European Insurance and Occupational
Pensions Authority and the European Securities and Markets Authority. To
complement this framework, there is also a European Systemic Risk Board under
the responsibility of the ECB. The aim of this financial control system is to ensure
the economic stability of the EU.
To prevent the joining states from getting into financial trouble or crisis after
entering the monetary union, they were obliged in the Maastricht treaty to fulfill
22
important financial obligations and procedures, especially to show budgetary
discipline and a high degree of sustainable economic convergence, as well as to
avoid excessive government deficits and limit the government debt to a sustainable
level.
Some states joined the euro but violated these rules and contracts to an extent that
they slid into a debt crisis and had to be financially supported with emergency
rescue funds. These states were Greece, Ireland, Portugal, Cyprus and Spain.
Even though the Maastricht treaty forbids eurozone states to assume the debts of
other states ("bailout"), various emergency rescue funds had been created by the
members to support the debt crisis states to meet their financial obligations and buy
time for reforms that those states can gain back their competitiveness.
Energy
In 2006, the EU-27 had a gross inland energy consumption of 1,825 million tonnes
of oil equivalent (toe). Around 46% of the energy consumed was produced within
the member states while 54% was imported. In these statistics, nuclear energy is
treated as primary energy produced in the EU, regardless of the source of the
uranium, of which less than 3% is produced in the EU.
The EU has had legislative power in the area of energy policy for most of its
existence; this has its roots in the original European Coal and Steel Community.
The introduction of a mandatory and comprehensive European energy policy was
approved at the meeting of the European Council in October 2005, and the first
draft policy was published in January 2007.
23
The EU has five key points in its energy policy: increase competition in
the internal market, encourage investment and boost interconnections between
electricity grids; diversify energy resources with better systems to respond to a
crisis; establish a new treaty framework for energy co-operation with Russia while
improving relations with energy-rich states in Central Asia and North Africa; use
existing energy supplies more efficiently while increasing renewable energy
commercialisation ; and finally increase funding for new energy technologies.
The EU currently imports 82% of its oil, 57% of its natural gas and 97.48% of its
uranium demands. There are concerns that Europe's dependence on Russian
energy is endangering the Union and its member countries. The EU is attempting
to diversify its energy supply.
NORTH AMERICAN FREE TRADE AGREEMENT
(NAFTA)
24
In 1994, the North American Free Trade Agreement (NAFTA) came into effect,
creating one of the world’s largest free trade zones and laying the foundations for
strong economic growth and rising prosperity for Canada, the United States, and
Mexico. Since then, NAFTA has demonstrated how free trade increases wealth and
competitiveness, delivering real benefits to families, farmers, workers,
manufacturers, and consumers.
The NAFTA partners have created this website to provide Canadians, Americans,
and Mexicans with information about how NAFTA works and the many ways in
which it has improved the lives of North Americans.
A number of NAFTA institutions work to ensure smooth implementation and day-
to-day oversight of the Agreement’s provisions.
Free Trade Commission
Made up of ministerial representatives from the NAFTA partners.
Supervises the implementation and further elaboration of the Agreement and
helps resolve disputes arising from its interpretation.
25
Oversees the work of the NAFTA committees, working groups, and other
subsidiary bodies.
NAFTA Coordinators
Senior trade department officials designated by each country.
Responsible for the day-to-day management of NAFTA implementation.
NAFTA Working Groups and Committees
Over 30 working groups and committees have been established to facilitate trade
and investment and to ensure the effective implementation and administration of
NAFTA.
Key areas of work include trade in goods, rules of origin, customs, agricultural
trade and subsidies, standards, government procurement, investment and
services, cross-border movement of business people, and alternative dispute
resolution.
NAFTA Secretariat
Made up of a “national section” from each member country.
Responsible for administering the dispute settlement provisions of the
Agreement and for administering dispute resolution processes under Chapter 14,
Chapter 19 and Chapter 20. Also has certain responsibilities related to the
Chapter 11 dispute settlement provisions concerning investment.
Maintains a court-like registry relating to panel, committee, and tribunal
proceedings.
Maintains a tri-national website containing up-to-date information on past and
current disputes.
26
Commission for Labor Cooperation
Created to promote cooperation on labor matters among NAFTA members and
the effective enforcement of domestic labor law.
Consists of a Council of Ministers (comprising the labor ministers from each
country) and a Secretariat, which provides administrative, technical, and
operational support to the Council and implements an annual work program.
Departments responsible for labor in each of the three countries serve as
domestic implementation points.
THE AGREEMENT
Market Access for Goods
The elimination of duties on thousands of goods crossing borders within North
America.
Phased-in tariff reductions – now complete – and special rules for
agricultural, automotive, and textile and apparel products.
Important rights for NAFTA services providers and users across a broad
spectrum of sectors.
Special commitments regarding telecommunications and financial services.
Formal dispute resolution processes that help resolve differences that arise in the
interpretation or application of NAFTA’s rules.
Protection for Foreign Investment
Commitment to treat each others’ investors and their investments in the territory
of the host NAFTA country no less favorably than their own domestic investors.
27
Commitment to provide NAFTA investors with the best treatment given to
foreign investors from beyond North America.
A transparent and binding dispute resolution mechanism specially designed to
deal with investment.
Protection for Intellectual Property
Adequate and effective protection and enforcement of a broad range of
intellectual property rights (including through patents, trademarks, copyrights,
and industrial designs), while ensuring that the measures that enforce these rights
do not themselves become barriers to legitimate trade.
Easier Access for Business Travelers
Easier access for business professionals in hundreds of different professions so
that they can travel for business throughout the continent.
Access to Government Procurement
Access to government procurement opportunities at the federal levels in Canada,
Mexico, and the United States.
Rules of Origin
NAFTA rules of origin are used to determine whether a good is eligible for
preferential treatment under NAFTA.
At various times since NAFTA came into effect, the partners have implemented
measures to liberalize or expand the list of products that qualify for preferential
treatment. Since 2005, for example, the NAFTA partners have implemented two
sets of changes to make it easier for traders to qualify for duty-free treatment
under NAFTA.
Side Agreements
28
The NAFTA partners also negotiated two side agreements: the North American
Agreement on Environmental Cooperation and the North American Agreement on
Labor Cooperation.
DISPUTE SETTLEMENT
The North American Free Trade Agreement (NAFTA) includes impartial, rules-
based dispute resolution mechanisms to provide the assurance of fairness and
predictability that North American businesses need to engage in commercial
exchanges. Under NAFTA, our businesses can trade and invest with the knowledge
that rules exist to ensure fair treatment and that procedures are in place to settle
disputes impartially, on the rare occasions when they occur.
Today, the vast majority of trade and investment among the NAFTA partners takes
place in accordance with the clear and well-established rules of NAFTA and the
World Trade Organization. While disputes rarely emerge, NAFTA directs those
concerned to try to resolve their differences through NAFTA committees and
working groups or through other consultations. If no mutually acceptable solution
is found, NAFTA also provides for specific formal mechanisms as follows:
Anti-dumping and Countervailing Duties
Chapter 19 offers exporters and domestic producers an effective and direct route
to make their case and appeal the results of trade-remedy investigations before
an independent and objective binational panel. This process is an alternative to
judicial review of such decisions before domestic courts. This mechanism has
been effective in providing for the efficient and impartial review of trade remedy
determinations made by the investigating authorities of all three NAFTA
29
partners. To date, panels have sustained some decisions made by domestic
investigating authorities, but have also remanded others for reconsideration.
The NAFTA Secretariat is responsible for the administration of the Chapter 19
dispute settlement process.
General Dispute Settlement
Chapter 20 offers a three-step process for resolving disputes regarding the
implementation or interpretation of NAFTA provisions:
The first step is the consultation process where the disputing parties
formally discuss the disagreement.
If the first step does not resolve the dispute, ministers will try to reach
agreement at a Free Trade Commission meeting.
If the second step does not resolve the dispute, the complainant can
request that a panel be set up to review the dispute and issue a binding
decision.
The NAFTA Secretariat is responsible for the administration of the Chapter 20
dispute settlement process.
foreign investment
establishes a mechanism for the settlement of investment disputes between
investors and NAFTA partners. This process assures both equal non-
discriminatory treatment among NAFTA investors (in accordance with the
principle of international reciprocity) and due process before an impartial
tribunal
30
SOUTH ASIAN FREE TRADE AREA (SAFTA)
The South Asian Free Trade Area (SAFTA) is an agreement reached on 6
January 2004 at the 12th SAARC summit in Islamabad , Pakistan. It created a free
trade area of 1.6billion people
in Afghanistan, Bangladesh, Bhutan, India, Maldives ,Nepal, Pakistan and Sri
Lanka (as of 2011, the combined population is 1.8 billion people). The seven
foreign ministers of the region signed a framework agreement on SAFTA to
reduce customs duties of all traded goods to zero by the year 2016.
The SAFTA agreement came into force on 1 January 2006 and is operational
following the ratification of the agreement by the seven governments. SAFTA
requires the developing countries in South Asia (India, Pakistan and Sri Lanka) 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
31
Asia (Nepal, Bhutan, Bangladesh, Afghanistan and Maldives) have an additional
three years to reduce tariffs to zero. India and Pakistan ratified the treaty in 2009,
whereas Afghanistan as the 8th member state of the SAARC ratified the SAFTA
protocol on the 4th of May 2011.
The Agreement on SAARC Preferential trading Arrangement (SAPTA)[2] was
signed on 11 April 1993 and entered into force on 7 December 1995, with the
desire of the Member States of SAARC (India, Pakistan, Nepal, Sri
Lanka, Bangladesh, Bhutan and the Maldives) to promote and sustain mutual trade
and economic cooperation within the SAARC region through the exchange of
concessions.
The establishment of an Inter-Governmental Group (IGG) to formulate an
agreement to establish a SAPTA by 1997 was approved in the Sixth Summit of
SAARC held in Colombo in December 1991.
The basic principles underlying SAFTA are as under;
1. 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;
2. negotiation of tariff reform step by step, improved and extended in
successive stages through periodic reviews;
32
3. recognition of the special needs of the Least Developed Contracting States
and agreement on concrete preferential measures in their favour;
4. inclusion of all products, manufactures and commodities in their raw, semi-
processed and processed forms.
Purpose of the agreement
The purpose of SAFTA is to encourage and elevate common contract among the
countries such as medium and long term contracts. Contracts involving trade
operated by states, supply and import assurance in respect of specific products etc.
It involves agreement on tariff concession like national duties concession and non-
tariff concession.
Objective
The objective of the agreement is to promote competition in the area and to
provide equitable benefits to the countries involved. It aims to benefit the people of
the country by bringing transparency and integrity among the nations. SAFTA was
also formed in order to increase the level of trade and economic cooperation
among the SAARC nations by reducing the tariff and barriers and also to provide
special preference to the Least Developed Countries (LDCs)among the SAARC
nations.
Instruments
Following are the instrument involved in SAFTA:-
Trade Liberalisation Programme
33
Rules of Origin
Institutional Arrangements
Consultations and Dispute Settlement Procedures
Safeguard Measures
Any other instrument that may be agreed upon.
Trade Liberalisation Programme
According to the Trade Liberalisation Programme Contracting countries must
follow the following tariff reduction schedule. There should be a fall to 20% tariff
from the existing tariff by the Non Least Developing Countries and 30% reduction
from the existing tariff by the Least Developing Countries. But trade liberalisation
scheme is not be applied for the sensitive list because this list is to be negotiated
among the contracting countries and then to be traded. Sensitive list will involve
common agreement among the contracting countries favouring the least developed
contracting countries. SAFTA Ministerial Council (SMC) will be participating to
review the sensitive list in every four years with view of reducing the list.
Sensitive list[edit]
A sensitive list is a list with every country which does not include tariff
concession. Bangladesh has 1,233 products on the sensitive list for the Least
Developing countries and 1,241 for the non-Least developing countries under the
SAFTA. Bangladesh will reduce the sensitive list by 246 items for the least
developed countries (LDCs) and 248 for the non-LDCs.[5] India has 25 items on the
sensitive list for the LDCs and 695 for the non-LDCs. Dr Manmohan Singh, the
Indian Prime Minister, announced in September in Dhaka that he will reduce the
Sensitive List by 46. Bhutan has 150 items for both the LDCs and non-LDCs and
has no plan of shortening its list. Nepal has 1,257 for the LDCs and 1,295 for the
34
non-LDCs. Nepal has reduced its list by 259 from its previous list of 1295. Now
it's 1036, said joint secretary at Ministry of Commerce and
Supplies. The Maldives has 681 for all seven SAFTA nations. Pakistan had 1,169
in its sensitive list but has cut its sensitive list by 20% to 936. Sri Lanka has 1,042
and Afghanistan has 1,072 items on the negative list.
35
THE ORGANIZATION OF THE PETROLEUM
EXPORTING COUNTRIES (OPEC)
Organization of the Petroleum Exporting Countries (OPEC, is an international
organization headquartered in Vienna, Austria. OPEC was established
in Baghdad, Iraq on 10–14 September 1960. OPEC was formed when the
international oil market was largely dominated by a group of multinational
companies known as the 'seven sisters'. The formation of OPEC represented a
collective act of sovereignty by oil exporting nations, and marked a turning point
in state control over natural resources. In the 1960s OPEC ensured that oil
companies could not unilaterally cut prices. In December 2014, OPEC and the oil
men were named in the top 10 most influential people in the shipping industry by
Lloyds.
OPEC's mandate is to "coordinate and unify the petroleum policies" of its members
and to "ensure the stabilization of oil markets in order to secure an efficient,
economic and regular supply of petroleum to consumers, a steady income to
36
producers, and a fair return on capital for those investing in the petroleum
industry." In 2014 OPEC comprised twelve
members: Algeria, Angola,Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Sau
di Arabia, the United Arab Emirates, and Venezuela. According to the United
States Energy Information Administration (EIA), OPEC crude oil production is an
important factor affecting global oil prices. OPEC sets production targets for its
member nations and generally, when OPEC production targets are reduced, oil
prices increase. Projections of changes in Saudi production result in changes in the
price of benchmark crude oils.]
History
In 1949 Venezuela and Iran were the first countries to move towards the
establishment of OPEC by approaching Iraq, Kuwait and Saudi Arabia, suggesting
that they exchange views and explore avenues for regular and closer
communication among petroleum-producing nations.
In 1959, the International Oil Companies (IOCs) reduced the posted price for
Venezuelan crude by 5¢ and then 25¢ per barrel, and that for Middle Eastern crude
by 18¢ per barrel.
The First Arab Petroleum Congress convened in Cairo, Egypt, where they
established an ‘Oil Consultation Commission’ to which IOCs should present price
change plans to authorities of producing countries. In 1959 journalist Wanda
Jablonski introduced Abdullah Tariki to Juan Pablo Perez Alfonzo at the Arab Oil
Congress in Cairo. They were both infuriated by the cut in posted prices by IOCs
or Multinational Oil Companies (MOCs). This meeting resulted in the Maadi Pact
or Gentlemen's Agreement.
37
In 1960, journalist Wanda Jablonski reported a marked hostility toward the West
and a growing outcry against absentee landlordism in the Middle East. In his
influential book entitled The Prize: The Epic Quest for Oil, Money, and Power,
Daniel Yergin described how the Standard Oil, who controlled 75% of the US oil
business, in August 1960 with no direct warning to oil exporters, announced cut of
up 7 per cent of the posted prices of Middle Eastern crude oils. Esso and other oil
companies unilaterally reduced the posted price for Middle East crudes. Middle
Eastern countries already felt resentment towards the West over the absentee
landlordism of MOCs who at the time controlled all oil operations within the host
countries.
Oil price decline 2014 – 2015
According to the New York Times the oil-drilling boom in the United States has
increased oil production by over 70 percent since 2008 and has reduced the United
States oil imports from OPEC by fifty per cent.
Types of crude oil
Since 2011 the United States absorbed the rapidly increased domestic production
of sweet, light, tight oil by reducing like-for-like or similar grade, imported crude
oil from Nigerian and other African suppliers. From 2011 to 2013 fifty per cent of
oil import reductions impacted light crude (API gravity35+).[15] Almost 96 per cent
of the 1.8 million barrels per day (290,000 m3/d) of its growth comes from light,
sweet crude from tight resource formations.[14] As domestic production continues to
increase, the U.S. is facing future challenges of absorbing the light, sweet tight oil.
In June 2014 crude oil prices abruptly dropped by about a third as U.S. shale oil
production increased and China and Europe's demand for oil decreased. Just before
38
the United States rapidly backed out of the crude oil import market because of
booming national production, the spot price of North Sea Brent crude oil peaked
on 17 June 2014 at more than US$115 per barrel.
Nigerian oil exports (2006)
Nigeria is the largest producer of sweet oil in OPEC. By July 2014, as the US
stopped importing light sweet crude, more crude oil became available to refineries
in China, India, Japan and South Korea. They collectively purchased 42% more
Nigerian crude in 2014 compared with 2013. Starting in June 2014 Saudi Aramco
—Saudi Arabia's national oil and gas company and the world's largest oil company
in terms of production—discounted the price of its crude to Asian refineries to
compete with oil from Nigerian and other African suppliers.
In their press release 27 November 2014 at the OPEC Conference in Vienna, it was
announced that the 'OECD-Americas' was the main non-OPEC oil supply
contributor to an anticipated supply growth of 1.4 million barrels per day
(220,000 m3/d) to average 57.3 million barrels per day (9,110,000 m3/d) in 2015.
From 2011 until mid-June 2014 the annual average price of oil was about US$110
per barrel. Since June 2014 however, the price of oil slid to $US80. OPEC argued
that this drop in the price of oil was not exclusively "attributed to oil market
fundamentals." While oil market fundamentals, "ample supply, moderate demand,
a stronger US dollar and uncertainties about global economic growth" contributed
to the drop in price, "speculative activity in the oil market has also been an
important factor."
In spite of global oversupply, on 27 November 2014 in Vienna, Saudi Oil Minister
Ali al-Naimi, blocked the appeals from the poorer OPEC member states, such as
Venezuela, Iran and Algeria, for production cuts. Benchmark crude, Brent oil
39
plunged to US$71.25, a four-year low. Al-Naimi argued that the market would be
left to correct itself. OPEC had a "long-standing policy of defending prices."
According to some analysts, OPEC will let price of Brent oil drop to US$60 to
slow down US shale oil production. In spite of a troubled economy in member
countries, al-Naimi repeated his statement on Saudi inaction.
By November 2014 with production at 30.56 million barrels per day
(4,859,000 m3/d) OPEC entered its sixth month of exceeding their collective target
production. By 11 December 2014 the price of OPEC Reference Basket of Crudes
had dropped to US$60.50 and by 13 December the price of Brent ICE dropped to
US$61.85. On 12 January 2015 price of OPEC Reference Basket of Crudes had
dropped to US$43.55 In February 2015, OPEC had entered its ninth consecutive
month of exceeding their collective target production.
In August 2015, Venezuela President Nicolas Maduro sought an emergency OPEC
meeting and joint coordination with Russia to stem a tumble in oil prices. Ecuador
supports Venezuela’s position.[22] Previously in February 2015, Nigeria sought to
call an emergency OPEC meeting if oil prices continued to decline. In April 2015,
Iran and Libya called on OPEC to reduce oil output. Angola and Algeria also
sought a production cut in cooperation with the African Petroleum Producers
Association. Algeria says Mexico supports the bid to cut oil output. Saudi Arabia,
though, pushed OPEC to hold production levels. In 2015, Bank of America said
that OPEC is "effectively dissolved".
J. P. Morgan estimated OPEC policy to not cut production has cost Saudi Arabia
about $90 billion/year and probably close to $200 billion/year for OPEC as a
whole.
Membership
40
Current members :
OPEC has twelve member countries: six in the Middle East (Western Asia),
four in Africa, and two in South America.
Country RegionJoined OPEC[70]
Population(July 2012)[71]
Area (km²)[72]
Production(bbl/day)
Algeria Africa 1969 37,367,226 2,381,740 2,125,000 (16th)
Angola Africa 2007 18,056,072 1,246,700 1,948,000 (17th)
Ecuador South America(1973)
2007[A 1]15,223,680 283,560 485,700 (30th)
Iran
Middle
East(Western
Asia)
1960[A 2] 78,868,711 1,648,000 6,172,000 (4th)
Iraq
Middle
East(Western
Asia)
1960[A 2] 31,129,225 437,072 3,200,000 (7th)
Kuwait
Middle
East(Western
Asia)
1960[A 2] 2,646,314 17,820 4,500,000 (5th)
Libya Africa 1962 5,613,380 1,759,540 2,210,000 (15th)
41
Country RegionJoined OPEC[70]
Population(July 2012)[71]
Area (km²)[72]
Production(bbl/day)
Nigeria Africa 1971 170,123,740 923,768 2,211,000 (14th)
Qatar
Middle
East(Western
Asia)
1961 1,951,591 11,437 1,213,000 (21st)
Saudi
Arabia
Middle
East(Western
Asia)
1960[A 2] 26,534,504 2,149,690 12,500,000 (2nd)
United
Arab
Emirates
Middle
East(Western
Asia)
1967 5,314,317 83,600 2,798,000 (8th)
Venezuel
aSouth America 1960[A 2] 28,047,938 912,050 2,472,000 (11th)
Total 369,368,42911,854,977 km²
33,327,700 bbl/day
Former members :
42
Country Region Joined OPEC Left OPEC
Gabon Africa 1975 1994
Indonesia Southeast Asia 1962 2009
Some commentators consider that the United States was a de facto member during
its formal occupation of Iraq due to its leadership of the Coalition Provisional
Authority. But this is not borne out by the minutes of OPEC meetings, as no US
representative attended in an official capacity.
Indonesia left OPEC in 2009 because it ceased to be a net exporter of oil. It could
not fulfill the demand of its own country's needs, as growth in demand outstripped
output. The situation was made worse because of weak legal certainty and
corruption that deterred foreign investors from investing in new reserves in
Indonesia. In recent times, the government has increased financial incentives for
foreign firms to invest in exploration and extraction but has found itself forced to
import more supplies from the likes of Iran, Saudi Arabia and Kuwait. Indonesia's
departure from OPEC will not likely affect the amount of oil it produces or
imports.
43
ASSOCIATION OF SOUTHEAST ASIAN NATIONS
(ASEAN)
The Association of Southeast Asian Nations (ASEAN ) is a political and
economic organisation of ten Southeast Asian countries. It was formed on 8
August 1967 by Indonesia, Malaysia, the Philippines,Singapore,
and Thailand. Since then, membership has expanded to
include Brunei, Cambodia, Laos, Myanmar (Burma), andVietnam. Its aims include
accelerating economic growth, social progress, and sociocultural evolution among
its members, protection of regional peace and stability, and opportunities for
member countries to resolve differences peacefully.
ASEAN covers a land area of 4.4 million square kilometres, 3% of the
total land area of the Earth. ASEAN territorial waters cover an area about three
times larger than its land counterpart. The member countries have a combined
population of approximately 625 million people, 8.8% of the world's population. In
2015, the organisation's combined nominal GDP had grown to more than
44
US$2.6 trillion. If ASEAN were a single entity, it would rank as the seventh largest
economy in the world, behind the US, China, Japan, Germany, France and the
United Kingdom.
History
ASEAN was prefigured by an organisation called the Association of Southeast
Asia (ASA), a group consisting of the Philippines, Malaysia, and Thailand that was
formed in 1961. ASEAN itself was inaugurated on 8 August 1967, when foreign
ministers of five countries; Indonesia, Malaysia, the Philippines, Singapore, and
Thailand, signed the ASEAN Declaration, more commonly known as the Bangkok
Declaration. The creation of ASEAN was motivated by a common fear of
communism, and a thirst for economic development.ASEAN grew when Brunei
Darussalam became its sixth member on 7 January 1984, barely a week after
gaining independence.
Expansion and further integration[
ASEAN achieved greater cohesion in the mid-1970s following the changed
balance of power in Southeast Asia after the end of the Vietnam War. The region’s
dynamic economic growth during the 1970s strengthened the organization ,
enabling ASEAN to adopt a unified response to Vietnam’s invasion of Cambodia
in 1979. ASEAN's first summit meeting, held in Bali, Indonesia, in 1976, resulted
in an agreement on several industrial projects and the signing of a Treaty of Amity
and Cooperation, and a Declaration of Concord. The end of the Cold War between
the United States and the Soviet Union at the end of the 1980s allowed ASEAN
countries to exercise greater political independence in the region, and in the 1990s
ASEAN emerged as a leading voice on regional trade and security issues.
45
On 28 July 1995, Vietnam became ASEAN's seventh member. Laos and Myanmar
(Burma) joined two years later on 23 July 1997. Cambodia was to have joined
together with Laos and Burma, but entry was delayed due to the country's internal
political struggle. The country later joined on 30 April 1999, following the
Estabilisation of its government.
In 1990, Malaysia proposed the creation of an East Asia Economic
Caucus composed of the members of ASEAN as well as the People's Republic of
China, Japan, and South Korea, with the intention of counterbalancing the growing
influence of the United States in Asia-Pacific Economic Cooperation (APEC), and
in the Asian region as a whole. The proposal failed, however, because of heavy
opposition from the US and Japan. Member states continued to work for further
integration and ASEAN Plus Three was created in 1997.
In 1992, the Common Effective Preferential Tariff (CEPT) scheme was adopted as
a schedule for phasing out tariffs, and as a goal to increase the "region's
competitive advantage as a production base geared for the world market". This law
would act as the framework for the ASEAN Free Trade Area (AFTA). AFTA is an
agreement by member nations concerning local manufacturing in ASEAN
countries. The AFTA agreement was signed on 28 January 1992 in Singapore.
After the East Asian Financial Crisis of 1997, a revival of the Malaysian proposal
was put forward in Chiang Mai, known as the Chiang Mai Initiative, which called
for better integration of the economies of ASEAN as well as the ASEAN Plus
Three countries, China, Japan, and South Korea.
The bloc also focused on peace and stability in the region. On 15 December 1995,
the Southeast Asian Nuclear-Weapon-Free Zone Treaty was signed with the
intention of turning Southeast Asia into a Nuclear-Weapon-Free Zone. The treaty
took effect on 28 March 1997 after all but one of the member states had ratified it.
46
It became fully effective on 21 June 2001, after the Philippines ratified, effectively
banning all nuclear weapons in the region.
Internal market
By the end of 2015, ASEAN plans to establish a common market based upon
the four freedoms. The single market will ensure the free flow of goods, services,
investment and skilled labour and the free flow of capital.
Until end of 2010, intra-Asean trade was still low, trade was mainly exports to
countries outside the region, with the exception of Laos and Myanmar which were
ASEAN-oriented in foreign trade with 80% and 50% respectively of their exports
to other ASEAN countries.
In 2009, realised foreign direct investment (FDI) was US$37.9 billion and
increased two-fold in 2010 to US$75.8 billion. Twenty-two percent of FDI came
from the European Union, followed by ASEAN countries (16%), followed by
Japan and the US.
An ASEAN Framework Agreement on Trade in Services (AFAS) was adopted at
the ASEAN Summit in Bangkok in December 1995.[44] Under AFAS, ASEAN
member states enter into successive rounds of negotiations to liberalise trade in
services with the aim of submitting increasingly higher levels of commitment. At
present, ASEAN has concluded seven packages of commitments under AFAS.
47
SOUTH ASIAN ASSOCIATION FOR REGIONAL CO-
OPERATION(SAARC)
The South Asian Association for Regional Cooperation (SAARC) is
an economic and geopolitical organisation of eight countries that are primarily
located in South Asia or the Indian subcontinent. The SAARC Secretariat is based
in Kathmandu, Nepal. The combined economy of SAARC is the 3rd largest in the
world in the terms of GDP(PPP) after the United States and China and 5th largest
in the terms of nominal GDP. SAARC nations comprise 3% of the world's area and
contain 21% (around 1.7 billion) of the world's total population and around 9.12%
of Global economy as of 2015. SAARC also home to world's 3rd & 7th largest
Economy of world in GPP(PPP) & GDP(Nominal) terms respectively as well as
World's fastest growing major Economy,that is India. India makes up over 70% of
the area and population among these eight nations. During 2005-10, the average
GDP growth rate of SAARC stood at an impressive 8.8% p.a., but it slowed to
6.5% in 2011 largely because of economic slowdown in India, which accounts for
48
nearly 80% of SAARC's economy. But driven by a strong expansion in India,
coupled with favorable oil prices,from the last quarter of 2014 South Asia once
again become the fastest-growing region in the world. As of 2015 foreign
exchange reserves of SAARC nations stands at USD 411 billion]
The idea of regional political and economical cooperation in South Asia was first
raised in 2 May 1980 by Bangladesh President Ziaur Rahman and the first summit
was held in Dhaka on 8 December 1985, when the organisation was established by
the governments of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri
Lanka. Since then the organisation has expanded by accepting one new full
member, Afghanistan, and several observer members.
The SAARC policies aim to promote welfare economics, collective self-reliance
among the countries of South Asia, and to accelerate socio-cultural development in
the region. The SAARC has developed external relations by establishing
permanent diplomatic relations with the EU, the UN (as an observer), and other
multilateral entities. The official meetings of the leaders of each nation are held
annually whilst the foreign ministers meet twice annually. The 18th SAARC
Summit was held in Kathmandu from 26–27 November 2014.
History
The idea of co-operation in South Asia was discussed in at least three conferences:
the Asian Relations Conference held in New Delhi on April 1947; the Baguio
Conference in the Philippines on May 1950; and the Colombo Powers Conference
held in Sri Lanka in April 1954.
In the ending years of the 1970s, the seven inner South Asian nations that
included Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri
49
Lanka agreed upon the creation of a trade bloc and to provide a platform for the
people of South Asia to work together in a spirit of friendship, trust and
understanding. President Ziaur Rahman later addressed official letters to the
leaders of the countries of the South Asia, presenting his vision for the future of the
region and the compelling arguments for region. During his visit to India in
December 1977, President Ziaur Rahman discussed the issue of regional
cooperation with the then Indian Prime Minister, Morarji Desai. In the inaugural
speech to the Colombo Plan Consultative Committee which met in Kathmandu
also in 1977, King Birendra of Nepal gave a call for close regional cooperation
among South Asian countries in sharing river waters. After
the USSR's intervention in Afghanistan, the efforts to established the union was
accelerated in 1979 and the resulting rapid deterioration of South Asian security
situation .Responding to the President Ziaur Rahman and King Birendra's
convention, the officials of the foreign ministriesof the seven countries met for the
first time in Colombo in April 1981. The Bangladesh's proposal was promptly
endorsed by Nepal, Sri Lanka, Bhutan and the Maldives but India and
Pakistan were sceptical initially. The Indian concern was the proposal’s reference
to the security matters in South Asia and feared thatPresident Zia Rehman's
proposal for a regional organisation might provide an opportunity for new smaller
neighbours to renationalised all bilateral issues and to join with each other to gang
up against India. Pakistan assumed that it might be an Indian strategy to organise
the other South Asian countries against Pakistan and ensure a regional market for
Indian products, thereby consolidating and further strengthening India’s economic
dominance in the region.
However, after a series of quiet diplomatic consultations between South Asian
foreign ministers at the UN headquarters in New York from August to September
50
1980, it was agreed that Bangladesh would prepare the draft of a working paper for
discussion among the foreign secretaries of South Asian countries. The foreign
secretaries of the inner seven countries again delegated a Committee of the
Whole in Colombo on September 1981, which identified five broad areas for
regional cooperation. New areas of co-operation were added in the following years.
In 1983, the international conference held by Indian Minister of External
Affairs P.V. Narasimha Rao in New Delhi, the foreign ministers of the inner seven
countries adopted the Declaration on South Asian Association Regional
Cooperation (SAARC) and formally launched the Integrated Programme of Action
(IPA) initially in five agreed areas of cooperation namely, Agriculture; Rural
Development; Telecommunications; Meteorology; and Health and Population
Activities.
Officially, the union was established in Dhaka with Kathmandu being union's
secretariat-general. The first SAARC summit was held in Dhaka on 7–8 December
1985 and hosted by the President of Bangladesh Hussain Ershad. The declaration
signed by King of Bhutan Jigme Singye, President of Pakistan Zia-ul-Haq, Prime
Minister of India Rajiv Gandhi, King of Nepal Birendra Shah, President of Sri
Lanka JR Jayewardene, and President of Maldives Maumoon Gayoom.
Members
Economic data is sourced from the International Monetary Fund, current as of
April 2015, and is given in US dollars.
The first secretary general was Abul Hasan (16 January 1985 - 5 October 1989)
The first female secretary general was Fathima Dhayana Sied (Maldives) The first
51
secretary general from India was Kant Kishore Bhargava (17 Oct 1989 - 31 Dec
1991)
The member states
are Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri
Lanka.
SAARC was founded by seven states in 1985. In 2005, Afghanistan began
negotiating their accession to SAARC and formally applied for membership on the
same year. The issue of Afghanistan joining SAARC generated a great deal of
debate in each member state, including concerns about the definition of South
Asian identity because Afghanistan is a Central Asian country.
The SAARC member states imposed a stipulation for Afghanistan to hold
a general election; the non-partisan elections were held in late 2005. Despite initial
reluctance and internal debates, Afghanistan joined SAARC as its eighth member
state in April 2007.
52
CONCLUSION
Trade barriers may occur in international trade when goods have to cross political
boundaries . A trade is a restriction on what would be free trade . The most
common form of trade barriers are tariffs , or duties , which are usually imposed or
imports . There is also a category of nontariff barrier , also known as nontariff
measures , which also serve to restrict global trade . Tariffs and other trade barriers
have definite effect on consumption and production . They serve to reduce
consumption of the imported product , because the tariff raises the domestic price
of import . They also serve to stimulate domestic production of the product when
that is possible also because of higher domestic price . The overall effect of tariffs
and trade barriers on international trade is to reduce the volume of the trade and
prices of imports .
53
BIBLOGRAPHY
BOOKS REFERED
INTERNATIONAL MARKETING – MANAN
PRAKASHAN
NON- TARIFF BARRIERS – VIPUL PRAKASHAN
RESOURCE BOOK – OAS
WWW.GOOGLE.COM
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