Wto,Regional blocs,International commodity agreement and global trade
COMMODITY AGREEMENT &
MAR ATHANASIOS COLLEGE FOR
Chinchu P Thomas
Following UR agreement GATT was converted
from a provisional agreement to formal
international organization called WTO in 1st Jan
Directed by ministerial conference meet every two
years and its regular activities are maintained by
159 members at end of April 2013
It is designed to play the role of a watchdog in
the spheres of trade in goods and
services, foreign investment, intellectual property
The WTO shall facilitate and provide framework for
the implementation, administration and operation of
the Multilateral Trade Agreements
The WTO shall provide the forum for negotiations
among its members concerning their multilateral trade
relations in matters dealt with under the Agreement in
the Annexes to this Agreement.
The WTO shall administer the ‘Understanding on
Rules and Procedures Governing the Settlement of
The WTO shall administer Trade Policy Review
With a view to achieving greater coherence in global
economic policy making, the WTO shall cooperate, as
The WTO acts as
WTO has three main objectives
To help trade flow as freely as possible.
To achieve further liberalisation through negotiations
To set up an impartial means of settling disputes.
Reducing tariff and non-tariff barriers
Liberalisation of trade and investment
Forum for multilateral discussions
Place for trade dispute settlement
Dominance of developed countries
Policies are done without considering vulnerability of
Lack of financial and knowledge resources of
REGIONAL TRADE BLOCS
A trade bloc is a type of intergovernmental agreement,
where regional barriers to trade are reduced or eliminated
among the participating states.
Different types of trade blocs are
Member countries signed free-trade agreement which
eliminates tariffs, import quotas, and subsidies on
most goods and services traded between them.
If people are also free to move between the countries, in
addition to FTA, it would also be considered an open
Australia has seven FTAs currently in force with
New Zealand, Singapore, Thailand, US, Chile, the
Association of South East Asian Nations
(ASEAN) (with New Zealand) and Malaysia.
European free trade association
Composed of a free trade area with a common
The participant countries set up common external
trade policy, to oversee trade relations with non
members but in some cases they use different
Customs Union of Belarus, Kazakhstan, and
Group formed by countries within a geographical
area to promote duty
free trade and free movement
of labour and capital among its members.
No barriers of trade and group has common
external trade policy
Eg: MERCOSUR: the South American group of
Argentina, Brazil, Paraguay,Uruguay
Involves the free flow of products and factors of
production between member countries
Common external trade policies
Composed of a common market with a customs
Requires a common currency, harmonization
in tax rates, common monetary and fiscal
Eg: European union
Central political apparatus coordinates
economic, social, and foreign policy of
Eg: European union going to be political union
WHY TRADE BLOCS???
Stimulates economic growth in countries
Increases FDI and world production
Countries specialize in those goods and services
Additional gains from free trade beyond the
international agreements such as GATT and
Major trade blocs
EU (EUROPEAN UNION)
The world’s largest trading bloc
Formed from the ‘Treaty of Rome’ in 1957
It comprised of 6 membersGermany, France, Italy,Belgium, Netherlands and
At present 27 members
Setting up a common market for all goods & services
by eliminating all trade barriers
Promoting free trade among the members.
Closer relations between the member states.
North American Free Trade
Initially bilateral trade between Canada
NAFTA went into effect in January 1,1994 afterthe
joining of Mexico
World’s largest free trade area.
NAFTA has two supplements: the North American
Agreement on Environmental Cooperation
(NAAEC) and the North American Agreement on
Labour Cooperation (NAALC).
Eliminate barriers to trade investment between
US, Canada and Mexico
Duty-free market access
Dispute settlement mechanism.
Protection of intellectual property.
Trade rules- safeguard, subsidies countervailing
& antidumping duties, health& safety standards.
Organisation of Petroleum Exporting
A permanent, intergovernmental
Organization, created at the Baghdad Conference
on September 10–14, 1960
(Iraq, Kuwait, Iran, Saudi Arabia and Venezuela )
Later joined by 8 more countries
The main objective is to coordinate and unify
petroleum policies among the member countries.
To secure fair and stable price for petroleum
Proper price and regular supply for petroleum
Its Headquarter is in Vienna, Austria.
Association of Southeast Asian
(Indonesia, Malaysia, Philippians, Singapore)
Later joined by
Brunei, Burma, Cambodia, Laos, Thailand, Vietna
Established as ASEAN Free Trade Area (AFTA)
Headquarter- Jakarta, Indonesia.
Primary goals of AFTA are: To encourage inflow of foreign investment into
To establish free trade area in the member
To reduce tariff of the products produced in
Objectives of ASEAN
Discuss issues peacefully.
Protection of regional peace and stability.
Cultural Development among its members.
Accelerating Economic Growth.
SAARC(South Asian Association for
It was established on 8th December 1985.
It consists of nations of South Asia that includes
Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan
SAARC focus on areas such as Science and
Technology, agricultural and rural development, telecommunication, postal services etc.
SAARC members signed an agreement called
This agreement was signed to provide a framework
for the exchange of trade concessions.
It aims at accelerating the process of economic and
social development in member states.
Afghanistan became the eighth member of this group
International Commodity Agreements
Agreements between producing and consuming
countries to stabilise markets and raise average
Such agreements are common in many
markets, including the market for coffee, tea, and
the resources for economic & social
Consider the interest of the consumers in importing
Considering the remunerative & equitable & stable prices
for primary commodities.
Considering the import purchasing power
Increased imports & consumption & also coordination of
production & marketing policies
Forms of Commodity Agreements
Quota agreements: In international trade, a
government-imposed limit on the quantity of goods and
services that may be exported or imported over a
specified period of time.
produced, imported, exported or offered for sale.
Seek to prevent a fall in commodity prices by regulating
This agreement undertake to restrict the export or
production by a certain percentage of the basic quota
decided by the Central Committee or Council.
This type of agreement mostly in the case of the
commodities like coffee, tea & sugar
2. Buffer Stock Agreements:
A practice in which a large investor, especially a
government, buys large quantities of commodities during
periods of high supply and stores them so they do not
trade or circulate. The investor then sells them when
supply is low. This is done to stabilize the price.
It is to stabilizing the prices by maintaining the demand &
It is more useful for the commodities like tea, sugar
This arrangements only for those products which can be
stored at relatively low cost without the danger of
deterioration & this is one of the limitation of this
3.Bilateral or Multilateral Contracts:
Bilateral agreements may be formed as business or
personal agreements between individuals, companies or
In either case, a bilateral agreement is a binding contract
between the two parties that have agreed to mutually
Bilateral contract to purchase & sell certain quantities of a
commodity at agreed prices.
In this agreement, an upper price & a lower price are
If the market price, throughout the period of the
agreement, remains within these specified limits the
agreement becomes inoperative.
If the market price rises above the upper limit specified,
the exporter country is obliged to sell to the importing
country a certain specified quantity of the upper price
fixed by the agreement.
On the other hand, if the market price falls below the
lower limit specified, the importer is obliged to purchase
the contracted quantity at the specified lower price.
Global Trade is the exchange of goods and
services between countries. Also, global trade
could be taken in the context that there are no
barriers to trade, thus there is global 'free' trade
Important benefits of International
Enhances the domestic competitiveness
Takes advantage of international trade technology
Increase sales and profits
Extend sales potential of the existing products
Maintain cost competitiveness in domestic market
Enhance potential for expansion of business
Gains a global market share
Reduce dependence on existing markets
Stabilize seasonal market fluctuations
What are these trade barriers?
– They are tariffs imposed in international trade
– And non-tariff measures adopted by
Tariff Barriers (TB)
– A tariff is a tax levied on imports
– It is put in place to protect domestic products from
Non-Tariff Barriers (NTB)
– They are indirect measures to regulate and
– They are put in place to protect domestic industries
– NTBs are less transparent and difficult to identify
imports conserve foreign exchange
Tariffs can be classified on the following basis:
Based on origin and distribution of good
Based on quantification of tariff
Ad valorem tariffs
Based on discriminatory rates of different countries
Single column tariff
Double column tariff
Triple column tariff
Based on their purpose
Countervailing & antidumping duties