International business. trading blocks

1. Integration between countries
Dr.S.Oviya
M.Com Department
BMS College for women

2. Integration between countries
• called as Trading block or economic
integration
• Economic integration
economic arrangement between different
regions marked by the reduction or
elimination of trade barriers and the co-
ordination of monetary and fiscal policies.
• The aim of economic integration is to reduce
costs for both consumers and producers

3. Levels of integration
• Preferential trading agreement
• Free trade area
• Customs union
• Common market
• Economic union
• Political union

4. Preferential trading agreement
(PTA)
• Simplest form of economic integration
• Offers member countries tariff reductions in
certain product categories
• Discrimination is not allowed
• Covers mainly agricultural product
• Examples – (ACP) African, Caribbean, pacific
EU European union

5. Free trade area
• An agreement between two or more countries
• Remove all trade barriers on goods traded in
free trade area
• Each country maintains its own external tariffs
on import against non members
• Examples (NAFTA)
(EFTA)
(AFTA)

6. Customs union
• An agreement between two or more countries
• Remove all trade barriers
• Common policies on external tariffs against
non members
• imposes restriction of movement of factors of
production
• Examples –southern common market
(MERCOSUR), Southern African Customs
Union (SACU)

7. Common market
• An agreement between two or more countries
to remove all barriers to trade
• Removes restrictions- free movement of
factors of production
• EU –European union previously known as
(EEC) – European economic community

8. Economic union
• An agreement between two or more countries
• Remove barriers to trade
• Free flow factors of production
• Coordinates economic policies
• Member countries are required to harmonize their tax ,
monetary, fiscal policies and to create a common
currency
• Examples -n The Economic Community of West African
States (ECOWAS) Euro zone, which was officially
formed by eleven European nations on 1 January 1999.

9. Political union
• An agreement between two or more countries
to coordinate their economic monetary and
political systems
• Common legal rues and policies between
countries

10. Impacts of integration
• Trade creation and trade diversion
• Prices and competition
• Economies of scale
• Dynamic effects of integration

11. Major regional trading blocks
• EU (EUROPEAN UNION)
• NAFTA (NORTH AMERICAN FREE TRADE
AGREEMENT)
• MERCOUSUR (SOUTHERN COMMON MARKET)
• APEC (ASIA-PACIFIC ECONOMIC CO OPERATION)
• ASEAN (ASSOCIATION OF SOUTH EAST ASIAN
NATIONS)
• SAARC (SOUTH ASIAN ASSOCIATION FOR REGIONAL
COOPERATION)
• COMMODITY AGREEMENTS

12. EU (EUROPEAN UNION)
• Established by treaty of Rome in 1957
• 27 members and 450 million consumers and 10
trillion Euros
• Objectives /activities:
• Elimination of customs duties
• Free flow of export and import
• Establishment of common custom duties and
commercial policies for non members
• Free movement of factors of production
• Regional funds for economic development
• Common measures for consumer protection
-

13. European union members
• Austria (1995)
• Belgium (1952)
• Bulgaria (2007)
• Cyprus (2004)
• Czech Republic (2004)
• Denmark (1973)
• Estonia (2004)
• Finland (1995)
• France (1952)
• Germany (1952)
• Greece (1981)
• Hungary (2004)
• (2004)
• Latvia (2004)
• Luxembourg (1952)
• Malta (2004)
• Netherlands (1952)
• Poland (2004)
• Portugal (1986)
• Romania (2007)
• Slovakia (2004)
• Slovenia (2004)
• Spain (1986)
• Sweden (1995)
• United Kingdom (1973)
• Ireland (1973)
• Italy (1952
• Lithuania

14. EFTA
• ICELAND, LIECHTENSTEIN, NORWAY,
SWITZERLAND
• FORMED IN 1960 TRADE IN INDUSTRIAL
GOODS
• EFTA AND EU TOGETHER FORMED EEA-
EUROPEAN ECONOMIC AREA

15. NAFTA (NORTH AMERICAN FREE
TRADE AGREEMENT)
• Came into being on 1 Jan 1994
• Comprises - United States, Canada ,Mexico
Objectives/ activities:
– Duty free market access
– Trade rules- safeguards, subsidies and standards
relating to safety and health
– various trade in services (consulting, engineering,
software)
– Protection of intellectual property rights
– Dispute settlement
– Investment rules

16. MERCOUSUR (SOUTHERN COMMON
MARKET) MERCOSUL
• Came into effect on Jan 1 1995
• Originally with 6 COUNTRIES –BRAZIL,
ARGENTINA,PARAGUAY,URUGUAY,CHILE
BOLIVIA
• OBJECTIVITES
- establishment of free trade zone
- a common external tariff
- free movement of factors of production

17. APEC (ASIA-PACIFIC ECONOMIC CO
OPERATION)
• CAME INTO EFFECT ON 1989
• Comprises of 18 countries
• Objectives
- growth and development of region
- encourage flow of goods , services, capital ,
and technology
- develop and strengthen multi lateral trading
system
- reduce trade barriers

18. • Australia1989
• Brunei (Bruneiarussalam)
1989
• Canada1989
• Chile1994
• China (People's Republic
of China)1991
• Hong Kong (Hong Kong,
China)[4]1991
• Indonesia1988
• Japan1989
• South Korea (Republic of
Korea)1989
• Mexico1993
• Malaysia1989
• New Zealand1989
• Papua New Guinea1993
• Peru1998
• Philippines1989
• Russia1998
• Singapore1989
• Republic of
China (ROC)[5]1991
• Thailand1989
• United States1989
• Vietnam1998

19. ASEAN (ASSOCIATION OF SOUTH EAST
ASIAN NATIONS)
• Established with support of USA in 1967
• Originally with 5 countries
- Indonesia, Malaysia, Philippines, Singapore,
Thailand

20. SAARC (SOUTH ASIAN ASSOCIATION
FOR REGIONAL COOPERATION
• Established in August 1983
• Members- INDIA, PAKISTAN,BANGLADESH,
BHUTAN, SRILANKA, THE MALDIVES ,
AFGANISTAN
• Objectives:/ challenges
- improve the quality of life & welfare
- develop the region economically, socially,
culturally
- provide opportunity to the people to live in
dignity

21. - improving Indo-Pak relations
-economic insecurity
- enhance mutual assistance among member
countries
- enhance co operation to other trade blocks

22. Commodity agreement
• arrangements between producing and
consuming countries to stabilize markets and
raise average prices.
• OPEC
• Organization of the Petroleum Exporting
Countries (OPEC) 12 countries
• Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Li
bya, Nigeria, Qatar, Saudi Arabia, the United
Arab Emirates and Venezuela.

23. • The international Coco Agreement(ICA) 7
countries:
• Ivory coast,Garbon, Ghana, Malaysia, Nigeria,
and Togo
• Importing countries: EU members, Russia,
Switcher land
• ICO the International coffee organization
• ITTA the International Tropical timber
Agreement – 59 members

24. WTO
• Established on 1st January 1995
• Objectives of WTO
- promote trade flows
- raising standard of living and incomes
- introduce sustainable development
- resolving trade disputes

25. Functions of WTO
• Acting as a forum for multilateral trade
negotiations
• Seeking to resolve trade disputes
• Overseeing national trade policies
• Acting as a watchdog of international trade
• Maintaining trade related database
• Technical assistance
• Co operate with other international institutions
• Acting as management consultant for world trade

26. WTO structure
Ministerial
conference
Director
general
secretariat
Trade policy
review bodyGeneral councilDispute
settlement body
Committee
on budget
Committ
ee on
trade
and
develop
ment
Committe
e on
balance of
payments
Council
for
services
Council
for goods
Trade
related
intellectual
property
rights
council

27. INDIA and Trade agreements
Agreement
• India-Nepal
• India-Afghanistan
• India-Thailand
• India-Mercosour
• India-BIMSTEC
• India-GCC
• India-Singapore
• India-SAFTA
• India-Bhutan
• India-chile
• India-South Korea
• India-Asian
• India-Japan
• India-Mexico
• India-New zealand
year
• 1996
• 2003
• 2004
• 2004
• 2004
• 2004
• 2005
• 2006
• 2006
• 2006
• 2009
• 2009
• 2010
• 2011
• 2013