EU, NAFTA, ASEAN and SAARC

1. TRADING BLOCS IN THE WORLD
& THEIR IMPACT

2. TRADE BLOCS
• A type of intergovernmental agreement, often part
of a regional intergovernmental organization, where
barriers to trade (tariffs and others) are reduced or
eliminated among the participating states.
• A form of economic integration, and increasingly
shape the pattern of world trade.
• Primary objective is regional integration which
enables them to take advantage of geographical
proximity as well as the enlarged market formed
after such mergers.

3. • It starts with reduction of barriers to trade but the
deeper objective of many such Blocks is to integrate
their economies.
TYPES
• Preferential Trade Area
• Free Trade Area
• Customs union, Single market, Economic union
• Economic and monetary union
• Complete economic integration

4. • It starts with reduction of barriers to trade but the
deeper objective of many such Blocks is to integrate
their economies.
TYPES
• Preferential Trade Area
• Free Trade Area
• Customs union, Single market, Economic union
• Economic and monetary union
• Complete economic integration

5. European Union
• The European Union (EU) is an
economic and political union of
28 member states that are located
primarily in Europe
• With a combined population of over 500 million
inhabitants, or 7.3% of the world population and
area of more than 4 million km square, the EU in
2014 was having a share of global imports
15.5%, and global exports 15.9%

6. Cont.
• It has developed a single market through a
standardized system of laws that apply in
all member states
• Basically aim was to create a single market for goods,
services, capital and labour by eliminating barriers to
trade and promotion free trade between members
• EU policies aim to ensure 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

7. Growth of EU

8. Treaties

9. Organs and institutions(2016)

10. EU Budget
• 3 main sources of revenue
– Contribution by EU member state
– A % of member states VAT revenues
– Import duties levied at EU’s external board
• 90% of the budget revenue flows back to the member
states
• Majority of EU spending is allocated to
– Agriculture
– Promotion and development of rural areas
– Sustainable development
– Research and innovation
• European Parliament and Council of ministers have to
adopt the EU budget every year

11. EU as a large trading bloc
• World’s largest trading bloc
and second largest economy
• World’s largest manufactured
goods and services
• Flexible Economy
• Open global trading system
• Open to developing countries
• Market access and trade creation

12. Brexit- important steps
• On 23.06.2016 a Referendum on UK’s membership
of the EU decided to leave with a majority voting of
51.9%
• On 29.03.2017 UK formally notified the EU of its
intent to leave, triggering art. 50 of the Treaty on
European Union (TEU), which launches withdrawal
negotiations
• Under Article 50 of TUE a two-year time frame to
complete the negotiations has been running
• This period can be extended by unanimous
agreement of the European Council, with the
consent of the UK

13. EURO v/s USD
• The euro is the official currency of the euro
zone, which consists of 19 of the 28 member
states of the European Union
• It is the second largest reserve currency as well
as the second most traded currency in the world
after the United States dollar
• euro was introduced to world financial markets
as an accounting currency on 1 January 1999,
replacing the former European Currency
Unit (ECU)

14. BENEFITS OF EURO
• Single Currency
• Compare Prices
• Lower Prices
• Liquid Capital Market
• Investment Options

15. COSTS OF EURO
• Lost control over Monetary Policy.
• Not an optimal Currency Area.

16. Euro
• Since the establishment of euro in 1999, it had
a volatile trading history against the U.S.
dollar. After starting in 1999 at $1.17, the euro
steadily fell until it reached a low of 83 cents
to the dollar in 2000
• The fortunes of euro began improving in late
2001 when dollar weakend, and the currency
stood at a robust three-year high of $1.10 in
2003

17. cont.
• The euro’s share was 42% of the settlements of the
(Continuous Linked Settlement) CLS system while the
dollar’s share was just above 90%, the sum of currency
percentage shares being close to 200% as both of the
currencies involved in a settlement of foreign exchange
trade are counted individually
• unless the EU can construct a political governance
system similar to that of a federal state it will be very
difficult for the euro to overtake the dollar as the
world’s dominant currency or, eventually, to maintain
its status as the leading candidate to replace the dollar,
although it could still be the dominant regional
European currency

18. NAFTA
North American Free Trade Agreement

19. NAFTA
NORTH AMERICAN FREE TRADE AGREEMENT
North American Free Trade Agreement
It is a trade pact between United States Canada
and Mexico signed by Bill Clinton in 1993 that
eliminated tariffs and trade restrictions
between the three nations

20. • PURPOSE OF NAFTA
Article 102 of the NAFTA agreement outlines its
purpose. There are seven specific goals.
1.Grant the signatories most favoured nation
status.
2.Eliminate barriers to trade and facilitate the
cross-border movement of goods and services.
3.Promote conditions of fair competition.
4.Increase investment opportunities.

21. • Provide protection and enforcement of
intellectual property rights.
• Create procedures for the resolution of trade
disputes.
• Establish a framework for further trilateral,
regional, and multilateral cooperation to
expand the trade agreement's benefits.

22. IMPORTANCE OF NAFTA AS A TRADE
BLOC
1.Quadrupled Trade
Between 1993-2015, trade between the three
members quadrupled, from $297 billion to $1.14
trillion.
• 2. Lowered Prices
Lower tariffs also reduced import prices. That also
lessened the risk of inflation and allowed the Federal
Reserve to keep interest rates low.
That's especially important for oil prices since
America's largest import is oil.

23. • 3. Increased Economic Growth
NAFTA boosted U.S. economic growth by as
much as 0.5 percent a year. The sectors that
benefited the most were agriculture,
automobiles, and services.
• 4. Created Jobs
NAFTA exports created five million new U.S.
jobs. Even imports from NAFTA partners
created jobs

24. • 5. Increased Foreign Direct Investment
Since NAFTA was enacted, U.S. foreign direct
investment in Canada and Mexico has more
than tripled. That boosted profits for U.S.
businesses by giving them more opportunities
to develop, and markets to explore.

25. SAARC
South Asian Association for Regional Cooperation
• SAARC
• South Asian Association for Regional Cooperation

27. OBJECTIVES OF SAARC
• 1.Promoting welfare of the people of South-Asia and improve their
quality of life.
• 2.Accelerating economic growth, social progress and cultural
development in the region.
• 3.Strengthening cooperation among themselves in International
Forums on matter of common interest.
• 4.Promoting and strengthening collective self-reliance among the
countries of South Asia.

28. IMPORTANCE OF SAARC
• Over the last 25 years, despite extremely difficult
political circumstances, SAARC has managed to
create situations, institutions and forums where
heads of states have got a reason to meet and
diffuse tension.
• SAARC has tackled important topics for the region
such as a social charter, development agreements
and even the sensitive subject of fighting
terrorism.

29. • The food and development banks, agreement
on transportation and energy are important
steps.
• Exchanges in the areas of civil society and
science have become one of the pillars of
South Asian integration efforts.

30. ASEAN

31. • Trade Bloc of 10 nations with an aggregate economic size of
2.3 trillion dollars established on August 8, 1967 with an aim
to establish a fully fledged economic community.
• It was established in Bangkok by the five Countries namely
Indonesia, Malaysia, Philippines, Singapore, and Thailand.
• Brunei Darussalam joined on 8 January 1984 followed by
Vietnam on 28 July 1995, Laos and Myanmar on 23 July 1997
and Cambodia on 30 April 1999.
• ASEAN’s member countries (in 2015) are Brunei Darussalam,
Cambodia, Indonesia, Lao People’s Democratic Republic,
Malaysia, Myanmar, Philippines, Singapore, Thailand and
Vietnam.
• The diversity of the bloc ranges from the advanced economies
like Singapore to that of developing ones like Myanmar.

32. OBJECTIVES
• To accelerate the economic growth, social progress
and cultural development in the region.
• To promote Regional peace, Stability, Southeast
Asian studies & Active collaboration and mutual
assistance on matters of common interest in
economic, social, cultural, technical, scientific and
administrative fields.
• To provide assistance to each other in the form of
training and research facilities in the educational,
professional, technical and administrative spheres.

33. • To collaborate more effectively for greater utilisation
of their agriculture and industries, expansion of their
trade, improvement of their transportation and
communications facilities and raising of the living
standards of their peoples.
• To maintain close and beneficial cooperation with
existing international and regional organisations.

34. • ASEAN observed as a leading economic powerhouse
and has been gaining lot of attraction with
international investors and business.
• Singapore, located in the heart of ASEAN is an ideal
base to tap the opportunities in the Bloc. It is
because it offers a world class business
infrastructure, enterprise eco-system, financial
services framework, legal regime and more
importantly a highly attractive tax regime.
• There is a significant inflow of FDI in the ASEAN
which is mainly because of Favourable demographics
(including a young fast-growing population), A
rapidly growing middle class and Relatively cheap
labour and expanding trade linkages.

35. • The India ASEAN Free Trade Agreement (FTA) was
signed in Bangkok on August 13, 2009, and came into
effect from January 1, 2010 with Malaysia, Thailand
and Singapore.
• It was expected to be in place with all member
countries by 2016.
• Currently the FTA is restricted to trade in goods while
negotiations for a similar agreement for services are
currently under way.

36. LOOK EAST POLICY

37. • Initiated in 1991, it marked a strategic shift in India’s
perspective of the world. It was developed and
enacted during the government of Prime
Minister P.V. Narasimha Rao (1991–1996) and
rigorously pursued by the successive administrations
of Atal Bihari Vajpayee (1998–2004) and Manmohan
Singh (2004–2014).
• Under the leadership of Prime Minister Narendra
Modi the new government of India has made its
relations with East Asian neighbours a foreign policy
priority at a time when the United States has
engaged in a "pivot to Asia".

38. • The Indian Foreign Minister Sushma Swaraj proposed
a new outlook calling it Act East policy, following on
from the Look East policy.
• India has also opened a separate Mission to ASEAN
and the East Asia Summit in Jakarta to further
strengthen the engagement with these two regional
groupings.
• Out of the many bilateral agreements entered, 2 of
them are Mekong-Ganga Cooperation (MGC) and the
BIMSIT-EC (Bangladesh, India, Myanmar, Sri Lanka,
Thailand Economic Cooperation).

39. OBJECTIVES
• Focus mainly on connectivity and economics.
• Co-operation on Defense and Security.
• Removal of the heightened threat of extremism and
terrorism.
ACTIVITIES PERFORMED JOINTLY
• Holding bilateral and group level Naval Exercises
considering the huge maritime dimension to Indian-
ASEAN relations.
• Holding Army to Army level exercises with various
countries.
• Singapore has been accorded an artillery firing base
for practice in India.

40. • India’s advantage of being a benign partner to
ASEAN.
• No territorial disputes with any of the member
nations.
• ASEAN members are more interested in a balanced
relationship with the major Asian economies
particularly China.

41. THANK YOU