Unit 7

Global Environment

Globalization: Concept and forms

Regional economic integration: a brief overview of
regional economic integration
Economic reform in south Asia
WTO: Objectives, structure, principles, agreements and
most favored nation treatment, benefits of WTO trading
system
Nepal’s membership and commitments, opportunities and
threats for Nepalese business
Recent trends and developments in global environment

MBSENV Thapa Makshindra

 Globalization: Concept
• Globalization is related with interconnections of business activities
between different countries.
• Globalization refers to the worldwide movement toward economic,
financial, trade, and communications integration.
• It is the process of international integration arising from the
interchange of world views, products, ideas and other aspects of
culture.
• Globalization implies aims to develop an interconnected and
interdependent world with free transfer of capital, goods, and
services across national frontiers.
• Globalization has become an increasing strategic issue to the
managers. Since globalization is both opportunity and challenge,
• Globalization has four basic aspects; trade and transactions, capital
and investment movements, migration and movement of people,
and the dissemination of knowledge.

MBSENV Thapa Makshindra

 Globalization: Forms
1. Economic Globalization:
• Economic globalization concerns to develop a worldwide economic system
that permits easy movement of goods, production, capital, and resources
across the borders.
2. Cultural Globalization
• Cultural globalization concerned with transmission and interchange of
cultures of one nation to another nations. In present scenario, culture has
increasingly become a commodity. It has been facilitated mainly by the
information revolution.
3. Political Globalization
• Political globalization is another widely adopted form of globalization
where by different countries integrates under one roof on the basis of their
political ideologies, security interests and other political grids.
4. Environmental Globalization
• As world economies become more developed and wider, a serious problem
in environment has consequently emerged all over the world. The threat of
increasing global warming, depletion of ozone layer, wide range of
pollutions, acute loss onMBSENV
bio-diversity, damage
Thapa on eco-systems etc.
Makshindra
 Effects of Globalization

Positive Negative

Enhance productivity and income National sovereignty

Transfer of factors of production Economic inequality
Export promotion Job insecurity
Employment Unequal competition
Resource utilization Exchange rate uncertainties
Industrialization Weaken socio-cultural values

MBSENV Thapa Makshindra

 Regional economic integration: a brief overview
of regional economic integration
• Regional economic groupings are international organizations formed for
the enhancement of economic facilities among member countries.
• They are also referred as the regional trading blocs. Such groupings/
organizations incorporate international membership and encompass
geopolitical entities that operationally transcend a single nation state.
• Membership of such groupings is characterized by boundaries,
demarcations characteristic, unique geography, geopolitics, and economic
blocs. They have been established to foster cooperation and political and
economic integration or dialogue amongst states or entities within a
restrictive geographical or geopolitical boundary.
• Such groupings have various forms as; economic union, common markets,
custom union, free trade area, and preferential trading agreement.
• Regional economic organizations reflect common patterns of development
and history that member countries have. They intend to promote their
economic activities in order to achieve economic well being of their citizens.

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 Effects of regional economic integrations

Positive Negative

Trade creation Trade diversion

Political cooperation Shift in employment
Employment opportunities Loss of national sovereignty
Learning

MBSENV Thapa Makshindra

 NAFTA
• A comprehensive trade agreement between USA, Canada and
Mexico to remove tariff and non-tariff barriers in 1994.
• To encourage economic activities between the nations and
extended to North American Agreement on Environmental
Cooperation (NAALC) and North American Agreement on
Labor (NAAL).
Main objectives of NAFTA
• To eliminate trade barriers and facilitate cross border
movements of goods and services.
• To promote fair competition.
• To increase investment opportunities.
• To protect and enforce intellectual property rights.
• To establish framework for further regional and multilateral
cooperation.
• Joint administration and resolution of disputes
MBSENV Thapa Makshindra
 APEC
(Asia Pacific Economic Cooperation)
• Established in 1989 to leverage growing interdependencies.
• APEC has 21 members including Australia, Canada, China,
Japan, Korea, Russia, USA, Singapore, Thailand, Vietnam etc.
• Aims to promote balanced, inclusive, sustainable, innovative
and growing economic integration.
Main objectives of APEC
• To develop and strengthen the multilateral trading system
among the member nations.
• To increase the interdependence and prosperity of member
economics.
• To promote sustainable economic growth in the region.

MBSENV Thapa Makshindra

 ASEAN
(Association of South East Asian Nations)
• Established in 1967, 8th August in Bangkok with five
members.
• Includes ten members; Indonesia, Malaysia, Philippines,
Singapore, Thailand, Brunei, Laos, Myanmar, Vietnam and
Cambodia.
• Three pillars of the block are; political-security community,
economic community and socio-cultural community.
Main objectives
• To promote the economic, social and cultural development of
the region through cooperative programs.
• To safeguard the political and economic stability of the region
against big power rivalry.
• To serve as a forum for the resolution of intra-regional
differences.

MBSENV Thapa Makshindra

 SAFTA
• The South Asian Free Trade Area (SAFTA) is an agreement reached on 6 January 2004 at the 12th
SAARC summit in Islamabad.
• It created a free trade area in SAARC member nations; Bangladesh, Bhutan, India, Maldives, Nepal,
Pakistan and Sri Lanka.
• The SAFTA agreement came into force on 1 January 2006 and is operational following the ratification of
the agreement by the seven governments.
Principles underlying SAFTA
• 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.
• Negotiation of tariff reform step by step, improved and extended in successive stages through periodic
reviews.
• Recognition of the special needs of the least developed contracting States and agreement on concrete
preferential measures in their favor.
• Inclusion of all products, manufactures and commodities in their raw, semi-processed and processed
forms.
Objectives of SAFTA
• To promote competition in the area and to provide equitable benefits to the countries involved.
• To benefit the people of the country by bringing transparency and integrity among the nations.
• To increase the level of trade and economic cooperation among the SAARC nations by reducing the tariff
and barriers.
• To provide special preference to the Least Developed Countries (LDCs) among the SAARC nations.

MBSENV Thapa Makshindra

 BIMSTEC
• It came in to existence when a new sub-regional grouping was formed in Bangkok
and given the name BIST-EC; in 6th June 1997..
• Nepal and Bhutan got membership in 2003. Similarly, BIMSTEC free area was signed
in 2004 at Bangkok summit. These are: Bangladesh, India, Myanmar, Sri Lanka,
Thailand, Bhutan and Nepal.
• BIMSTEC Headquarters is situated in Dhaka Bangladesh and opened by Bangladeshi
Prime Minister Sheikh Hasina (13th September, 2014)
OBJECTIVES OF BIMSTEC
• To create friendly environment for economic development through identification and
implementation of special assistance projects within the member countries,
• Promotion of social and economic progress based on equality and partnership within
the member countries,
• To strengthen cooperation and assistance in the fields (economic, social, technical and
scientific) of common interests,
• To cooperate in training and research facilities within educational, vocation and
technical fields,
• To put joint effort on basic issues like as; upliftment in living standard, improvement
in communication systems, employment generation, transportation etc,
• To build and maintain harmonious relations with other international organizations
having similar purposes, MBSENV Thapa Makshindra
 SAARC
• Idea mooted in 1980 and first summit held in Dhaka,1985.
• Eight members including Afghanistan since 2007.
SAARC Objectives
• To promote welfare of the people of south Asia to improve their quality of life.
• To accelerate economic growth, social progress and cultural development in the
region.
• To promote and strengthen collective self-reliance among the countries.
• To contribute mutual trust, understanding and appreciation of one another’s
problems.
• To promote active collaboration and mutual assistance in the economic, social,
cultural, technical and scientific fields. Etc.
• Structure
• Summits- council of ministers- standing committee- programming committee-
technical committee-working groups.
SAARC Apex bodies
• SAARC Chamber of commerce & Industry
• SAARCLAW
• South Asia Foundation (SAF)
• South Asia Foundation of Accountants
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• Foundation of SAARC Writers and Literature (FOSWAL)
 Economic Reform in South Asia
• The major economic reforms took place in south Asian countries
since 1980s as;
• Privatization of public enterprises
• Reforms in taxes and subsidies
• Entry of private sector in education, health and infrastructure
development
• Freedom in establishment of commercial banks
• Deregulation in interest rate
• Reform in capital market
• Reforms in foreign trade
• Reform in foreign exchange
Obstacles in economic reform in south Asia
• High cost of trading within the region
• Complicated and non-transparent Non-tariff barriers (NTBs)
• Lack of intra-regional FDI

MBSENV Thapa Makshindra

 WTO: Introduction and Objectives
• The World Trade Organization (WTO) is the only global international organization dealing
with the rules of trade between nations.
• It was established in 1st January, 1995. Geneva is the headquarters of WTO.
• The WTO currently has 161 members, of which 117 are developing countries or separate
customs territories.
• its predecessor organization the GATT (General Agreement on Tariff and Trade) have
helped to create a strong and prosperous international trading system
Objectives of the WTO
1. To ensure the reduction of tariffs and other barriers to trade,
2. To eliminate discriminatory treatment in international trade relations,
3. To facilitate higher standards of living, full employment, a growing volume of real income
and effective demand, and an increase in production and trade in goods and services of the
member nations,
4. To make positive effect, which ensures developing countries, especially the least developed
secure a level of share in the growth of international trade that reflects the needs of their
economic development,
5. To facilitate the optimal use of the world’s resources for sustainable development,
6. To promote an integrated, more viable and durable trading system incorporating all the
resolutions of the Uruguay Round’s multilateral trade negotiations,

MBSENV Thapa Makshindra

 WTO: Principles and Agreements
Principles
• Non-discrimination- MFN and National treatment
• Freer trade
• Predictability
• Promoting fair competition
• Encourage development and economic reforms
Agreements
• Agreements forming part of GATT
• Agreement on textile and clothing (ATC)
• Agreement on agriculture (AOA)
• General agreement on trade in services (GATS)
• Agreement on trade related aspects of intellectual property rights (TRIPS)
Most favored nation (MFN) treatment
• Article I mentions ‘Most Favored Nation’ clause and describes that ‘each nation
should be treated as the most favored nation.
• The negotiations and concessions materialized under bilateral agreements should be
extended to all member countries on an equal basis so that the concessions are multi-
lateralized.
• The permitted quantitative restrictions should be administered without favoring any
party.
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 WTO: Structure and Agreements

• The Ministerial Conference

• The General Council
• The Trade Policy Review Body
• The Dispute Settlement Body
• The Councils on Trade in Goods and Trade in
Services
• The Secretariat and Director General
• The Committee on Trade and Development and
Committee on Trade and Environment
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 WTO: Benefits of WTO trading system

• Helps to promote peace

• Constructive dispute handling
• System based rules
• Reduces cost of living
• More choices of products and qualities
• Increase in revenue and economic growth
• Better utilization of resources
• Government protection from lobbying
• Encourage for good governnance

MBSENV Thapa Makshindra

 WTO: Nepal’s Membership and
Commitments
Membership
• Nepal got membership of WTO april,23, 2004 as 147th
member.
• Nepal applied for membership of GATT in 1989 but failed
due to lack of liberalized economy.
• In 1997 Nepal applied membership of WTO.
Commitments
• Commitments on agricultural sector-tariff bound 42 percent
on agricultural goods
• Commitment on non-agricultural sector- tariff bound 24
percent and it zero.
• Commitments on service sector- commitments on 11 sectors
and 70 sub sectors.
• Other commitments- commitments for legal regime
compatible with the WTO including intellectual property
rights.
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 WTO: Opportunities and Threats for
Nepalese Business
Opportunities Threats
• Trade expansion/ export promotion • Decrement in government revenue
• Attraction of foreign investment • Negative impact to indigenous
• Industrial private sector development business
• Transit freedom • Unequal competition
• Economic growth • Differences between theory and
• Employment generation practice
• Enhancement in living standard • Over dependency

MBSENV Thapa Makshindra