Assignment

On
International Trade
Agreements & Trade Blocs

Submitted To:-
Prof. Surya

Submitted By:-
Siddharth Singh
Roll No.:- 149
MBA [Marketing]

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 I. International Trade Agreements

International Trade Agreements are the

systems of trade policies that allow traders to act
and transact without interference from government.
According to the law of comparative advantage the
policies permits trading partners mutual gains from
trade of goods and services. International trade
agreements are a key element of customs unions
and free trade areas.

 Some International Trade Agreements:

1. Asia-Pacific Trade Agreement

(APTA):

The Asia-Pacific Trade Agreement (APTA), previously known as

the Bangkok Agreement, was signed in 1975. It is the oldest
preferential trade agreement between developing countries in the Asia-
Pacific region. Its aim is to promote economic development and
cooperation through the adoption of mutually beneficial trade
liberalization measures. APTA is open to all developing members of the
United Nations Economic and Social Commission for Asia and the
Pacific, which serves as the APTA Secretariat.

Member Nations:

• Bangladesh (original member, 1975)

• China (acceded in 2001)
• India (original member, 1975)
• Republic of Korea (original member, 1975)
• Lao People's Democratic Republic (original member, 1975)
• Sri Lanka (original member, 1975)

2. ASEAN Free Trade Area (AFTA):

ASEAN Free Trade Area (AFTA) is a trade bloc

agreement by the Association of Southeast Asian
Nations supporting local manufacturing in all ASEAN

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countries. The AFTA agreement was signed on 28 January 1992 in
Singapore.
When the AFTA agreement was originally signed, ASEAN had six
members, namely, Brunei, Indonesia, Malaysia, Philippines, Singapore
and Thailand. Vietnam joined in 1995, Laos and Myanmar in 1997 and
Cambodia in 1999. AFTA now comprises ten countries of ASEAN. All the
four latecomers were required to sign the AFTA agreement in order to
join ASEAN, but were given longer time frames in which to meet AFTA's
tariff reduction obligations.
The primary goals of AFTA seek to:

• Increase ASEAN's competitive edge as a production base in the

world market through the elimination, within ASEAN, of tariffs
and non-tariff barriers; and
• Attract more foreign direct investment to ASEAN.

The primary mechanism for achieving the goals given above is

the Common Effective Preferential Tariff (CEPT) scheme, which
established a schedule for phased initiated in 1992 with the self-
described goal to increase the "region’s competitive advantage as a
production base geared for the world market".

3. Africa Free Trade Zone

Agreement (AFTZ):

The Africa Free Trade Zone (AFTZ) is a free trade zone

announced at the EAC-SADC-COMESA Summit on Wednesday October
22, 2008 by the heads of Southern African Development Community
(SADC), the Common Market for Eastern and Southern Africa (COMESA)
and the East African Community (EAC). The African Free Trade Zone is
also referred to as the African Free Trade Area in some official
documents and press releases. The AFTZ is considered a major step in
the implementation of the African Economic Community (AEC), an
organization of African Union states establishing grounds for mutual
economic development among the majority of African states. The
stated goals of the AEC organization include the creation of free trade
areas, customs unions, a single market, a central bank, and a common
currency thus establishing an economic and monetary union for the
African Union.

Member countries:

The AFTZ membership includes the following countries:

Angola, Botswana, Burundi, Comoros, Djibouti, Democratic Republic of

Congo, Egypt, Eritrea, Ethiopia, Kenya, Lesotho, Libya, Madagascar,

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Malawi, Mauritius, Mozambique, Namibia, Rwanda, Seychelles,
Swaziland, South Africa, Sudan, Tanzania, Uganda, Zambia, and
Zimbabwe.

The only natural member of the AFTZ not included was Somalia,
due to the civil war that has left most of that country without a
functioning government.

4. European Economic Area (EEA):

The European Economic Area (EEA) was established on 1 January

1994 following an agreement between member states of the European
Free Trade Association (EFTA), the European Community (EC), and all
member states of the European Union (EU). It allows these EFTA
countries to participate in the European single market without joining
the EU.

Membership:

The contracting parties to the EEA Agreement are three of the

four EFTA states—Iceland, Liechtenstein and Norway (except for
Svalbard—and the 27 EU Member States along with the European
Community.

Switzerland is not part of the EEA. A referendum (mandated by

the Swiss constitution) was held and rejected the proposal to join.
Switzerland is linked to the European Union by the Swiss–EU bilateral
agreements, with a different content from that of the EEA agreement.

Austria, Finland and Sweden joined the EEA in 1994, but the EEA
agreement was superseded by EU membership in 1995.

5. Central European Free Trade Agreement (CEFTA):

The Central European Free Trade Agreement (CEFTA) is a trade

agreement between Non-EU countries in Central and South-Eastern
Europe. Original CEFTA agreement was signed by Visegrád Group
countries, that is by Poland, Hungary and Czech and Slovak republics
(at the time parts of the Czech and Slovak Federative Republic) on 21
December 1992 in Kraków, Poland. It entered into force since July 1994.
Through CEFTA, participating countries hoped to mobilize efforts to
integrate Western European institutions and through this, to join

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European political, economic, security and legal systems, thereby
consolidating democracy and free-market economics.

The agreement was amended by the agreements signed on 11

September 1995 in Brno and on 4 July 2003 in Bled.

Slovenia joined CEFTA in 1996, Romania in 1997, Bulgaria in

1999, Croatia in 2003 and Macedonia in 2006.

Members:

As of 1 May 2007, the parties of the CEFTA agreement are:

Albania, Bosnia and Herzegovina, Croatia, Macedonia, Moldova,
Montenegro, Serbia and Kosovo.

Former parties are Bulgaria, the Czech Republic, Hungary,

Poland, Romania, Slovakia and Slovenia. Their CEFTA membership
ended when they joined the EU.

II. Trade Blocs

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.

 Some International Trade Blocs:

1. North American Free Trade Agreement (NAFTA):

The North American Free Trade

Agreement or NAFTA is an agreement
signed by the governments of the United
States, Canada, and Mexico creating a
trilateral trade bloc in North America. The
agreement came into force on January 1,
1994. It superseded the Canada-United
States Free Trade Agreement between the

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U.S. and Canada. In terms of combined purchasing power parity GDP of
its members, as of 2007 the trade block is the largest in the world and
second largest by nominal GDP comparison.

The North American Free Trade Agreement (NAFTA) has two

supplements, the North American Agreement on Environmental
Cooperation (NAAEC) and the North American Agreement on Labor
Cooperation (NAALC).

The goal of NAFTA was to eliminate barriers of trade and

investment between the USA, Canada and Mexico. The implementation
of NAFTA on January 1, 1994, brought the immediate elimination of
tariffs on more than one half of US imports from Mexico and more than
one third of US exports to Mexico. Within 10 years of the
implementation of the agreement all US-Mexico tariffs would be
eliminated except for some US agricultural exports to Mexico that were
to be phased out in 15 years. Most US-Canada trade was already duty
free. NAFTA also seeks to eliminate non-tariff trade barriers.

2. Andean Community of Nations (CAN):

The Andean Community

(Spanish: Comunidad Andina, CAN) is
a trade bloc comprising the South
American countries of Bolivia,
Colombia, Ecuador and Peru. The
trade bloc was called the Andean Pact
until 1996 and came into existence
with the signing of the Cartagena
Agreement in 1969. Its headquarters
are located in Lima, Peru.

The Andean Community has 98 million inhabitants living in an

area of 4,700,000 square kilometers, whose Gross Domestic Product
amounted to US$745.3 billion in 2005, including Venezuela, (who was a
member at that time).

Membership:

The original Andean Pact was founded in 1969 by Bolivia, Chile,

Colombia, Ecuador and Peru. In 1973, the pact gained its sixth
member, Venezuela. In 1976, however, its membership was again
reduced to five when Chile withdrew. Venezuela announced its
withdrawal in 2006, reducing the Andean Community to four member
states.

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 Recently, with the new cooperation agreement with Mercosur,
the Andean Community gained four new associate members:
Argentina, Brazil, Paraguay and Uruguay. These four Mercosur
members were granted associate membership by the Andean Council
of Foreign Ministers meeting in an enlarged session with the
Commission (of the Andean Community) on July 7, 2005. This moves
reciprocates the actions of Mercosur which granted associate
membership to all the Andean Community nations by virtue of the
Economic Complementarity Agreements (Free Trade agreements)
signed between the CAN and individual Mercosur members.

 Current members:

 Bolivia (1969), in the framework of Unasur and in process

of joining Mercosur.
 Colombia (1969), in the framework of Unasur and
associate member of Mercosur.
 Ecuador (1969), in the framework of Unasur and
associate member of Mercosur.
 Peru (1969), in the framework of Unasur and associate
member of Mercosur.

 Associate members:

 Argentina (2005), in the framework of Unasur.

 Brazil (2005), in the framework of Unasur.
 Paraguay (2005), in the framework of Unasur.
 Uruguay (2005), in the framework of Unasur.
 Chile (2006).

 Observer countries:

 Mexico
 Panama

 Former full members:

 Venezuela (1973-2006), joined Mercosur, president

stated that it intends to rejoin CAN.
 Chile (full member 1969-1976, observer 1976-2006,
associate member since 2006).

3. European Union (EU):

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 The European Union (EU) is an economic and political union of 27
member states, located primarily in Europe. Committed to regional
integration, the EU was established by the Treaty of Maastricht on 1
November 1993 upon the foundations of the European Economic
Community. With almost 500 million citizens, the EU combined
generates an estimated 30% share (US$18.4 trillion in 2008) of the
nominal gross world product and about 22% of the PPP gross world
product. The EU has developed a single market through a standardized
system of laws which apply in all member states, ensuring the free
movement of people, goods, services, and capital.[9] It maintains
common policies on trade,[10] agriculture, fisheries and regional
development.

The successful EC had made its members more receptive to

greater integration and provided a framework for unified action by
member countries in security and foreign policy and for cooperation in
police and justice matters. In pursuit of its major goal to create a
common monetary system, the EU established the euro, which
replaced the national currencies of 12 of the 15 EU members in 2002.

The fifteen members of the European Union in 1999 have a

combined population 40 percent larger than that of the United States,
creating an attractive business marketplace without internal trade
barriers. Many American companies—from Ford, which sells 15 million
vehicles a year in Europe, to Coca-Cola, Inc., which serves 209 million
of its beverages to European customers every day—have a long-
established presence in Europe. Other companies, such as software
giant Microsoft, have entered the European market in recent years and
been successful in the European Union's single market. If the European
Union continues to add new members, it may be only a matter of time
before the European marketplace begins to challenge the United States
as the premier business market in the world.

European companies, with their enhanced size due to expansion

across Europe, have also set their sights across the Atlantic. The
purchases of Chrysler by Daimler-Benz and Amoco by British Petroleum
in the late 1990s were but two of the many examples of large European
companies strengthening their positions in the American marketplace.
With the majority of foreign investment in the United States coming
from members of the European Union, economic interests have
continued to become more intertwined as multi-national companies
now operate on both sides of the Atlantic.

Members:

The European Union is composed of 27 Member States:

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Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark,
Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy,
Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland,
Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United
Kingdom.

Only six of these – France, Germany, Italy, and the three already
integrated Benelux countries; Belgium, Netherlands, and Luxembourg
– were members at the start.