Trading Blocs

Introduction
The Internet & technological advances in telecommunications link trade partners across the globe The WTO promotes global multilateral free trade, regional trade blocks provide their members with the mechanisms for competing in an aggressive global market

What Are TRADING BLOCS?

Are intergovernmental associations that manage & promote trade activities for specific regions of the world Is a group of countries within a geographical region that protect themselves from imports from nonmembers Are a form of economic integration & increasingly shape the pattern of world trade An agreement between states, regions, or countries, to reduce barriers to trade between the participating regions.

 Chances of a bloc surviving increase, if the members have similar levels of per capita GNP, geographic proximity, similar or compatible trading & political regimes Underdeveloped or developing economies will have arrangements that are modelled to import substitution & regional development Industrialized or transition economy will have an outward policy aimed more at boosting rather than controlling global trade

Why Do Countries Form Trading Blocs? ?

Primary objective- regional integration which enables countries to take advantage of geographical proximity as well as the enlarged market formed after such mergers Deeper objective - to integrate their economies The growth in the number of these blocs is a major development of recent years & a significant fraction of global trade is done through them

Trade blocs

compliment global

trade Protect intra regional trade form outside forces. Establish regional security

Is Economic Gain The Sole Motivation?

Aims to coordinate a restriction in oil export volumes so that it has bargaining power & maximum profit is insured for its members

The Organization of Petrol Exporting Countries ( OPEC) is a trade agreement, but it's neither regional nor aims to increase trade between its signatories

The Caribbean Community & Common Market ( CARICOM) the alliance of tiny isl&s in the Caribbean also doesn't aim to achieve regional integration These isl&s are not only sharing the expense of international negotiations but the solidarity has also enabled them to make the world hear their voice

 The European Union (EU) created an economy larger than the United States & hence its bargaining power in global trade has increased The Southern African Developmental Coordination Conference formed in 1980 to abolish apartheid from the region - to reduce economic dependence on South Africa by increasing trade among them

What Are The Political Implications of TBs?

Increased trade & interlocking has reduced the risks of war as the cost become higher for both countries Ensures that a change in government in a member state does not result in policy reversal Example, France & Germany fought 3 wars in 70 yrs, but in the present situation the trade arrangements have made it virtually impossible for them to wage a war against each other

 MERCOSUR has reduced tensions between Brazil & Argentina Association of Southeast Asian Nations ( Asean) has played pacifier between Indonesia & Malaysia. These agreements also

WHY Are TBs UNDESIRABLE???

Import quotas (limiting the amount of imports into the country so that domestic consumers buy products made by their countries in their region). Custom delays (establishing bureaucratic formalities that slow down trade from the other region) Subsidies barrier (giving heavy subsidies to protect regional trade ) Voluntary boycotts & technical barriers.

Major Trade Blocs

EUROPEAN UNION (EU) NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA) SINGAPORE AMERICAN FREE TRADE AGREEMENT(SAFTA) ORGANISATION OF PETROLEUM EXPORTING COUNTRIES (OPEC) ASSOCIATION OF SOUTH EAST ASIAN NATION (ASEAN) SOUTH ASIAN ASSOCIATION OF REGIONAL COOPERATION (SAARC)

SOME TRADE BLOCS OF THE WORLD

History of Trading Blocks

The first trade bloc in modern history was a coalition of several German states form to manage customs & economic policies within their territories The Zollverein, or German Customs Union, established in 1834, initially meant to eliminate the number of custom barriers in Central Europe

 European nations after World War II, the Bretton Woods Conference introduced the idea of a joint organization to reduce barriers to international trade To be achieved through the reduction of tariff barriers, quantitative restrictions & subsidies on trade through a series of agreements By 1995, the World Trade Organisation (WTO) was officially announced to supervise & liberalize international trade.

THE EUROPEAN UNION

 The EU is a unique economic & political partnership between 27 European countries created aftermath World War 1st steps -to foster economic cooperation: the idea being that countries who trade with one another become economically interdependent & so more likely to avoid conflict EU has developed into a huge single market with the euro as its common currency.

 What began as a purely economic union has evolved into an organisation spanning all policy areas, from development aid to environment.

 The EU operates through a system of supranational independent institutions & intergovernmental negotiated decisions by the member states Important institutions of the EU include the European Commission, the Council of the European Union, the European Council, the Court of Justice of the European Union, & the European Central Bank. The European Parliament is elected every 5yrs by EU citizens.

 Main goals - to promote human rights both internally & around the world. Human dignity, freedom, democracy, equality, the rule of law &respect for human rights: -core values of EU The single market is the EU's main economic engine, enabling most goods, services, money & people to move freely Key objective - to develop its resource to ensure that Europeans can draw the maximum benefit.

 The EU is trying to sustain economic growth by investing in transport, energy & research, while also seeking to minimise the environmental impact of further economic

Money & The EU

EU budget is funded from a percentage of each member country's gross national income spent on efforts as diverse as raising the st&ard of living in poorer regions & ensuring food safety. EU obtains revenue not only from contributions from member countries but also from import duties on products from outside the EU & a percentage of the value-added tax levied by each country.

DECISION MAKING IN THE EU

EU law is divided into 'primary' & 'secondary' legislation. The treaties (primary legislation) are the basis or ground rules for all EU action. Secondary legislation which includes regulations, directives & decisions are derived from the principles & objectives set out in the treaties.

 There are 3 main institutions involved in EU legislation: the European Parliament,represents the EUs citizens & is directly elected by them the Council of the European Union, represents the governments of the individual member countries.Presidency of the Council is shared by the member states on a rotating basis. the European Commission, which represents the interests of the Union as a whole.

 Committee of the Regions represents regional & local authorities European Investment Bank finances EU investment projects & helps small businesses through the European Investment Fund European Central Bank is responsible for European monetary policy Publications Office publishes information about the EU European School of Administration provides training in specific areas for members of EU staff European External Action Service (EEAS) assists the High Representative of the Union for Foreign Affairs & Security Policy, currently Catherine Ashton. She chairs the Foreign Affairs Council & conducts the common foreign & security policy, also ensuring the consistency & coordination of the EU's external action.

ORGANIZATION OF THE PETROLEUM EXPORTING COUNTRIES

 The Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental Organization, created at the Baghdad Conference on September 1014, 1960, by Iran, Iraq, Kuwait, Saudi Arabia & Venezuela OPEC's objective - to co-ordinate & unify petroleum policies among Member Countries, in order to secure fair & stable prices for petroleum producers; an efficient, economic & regular supply of petroleum to consuming nations; & a fair return on capital to those investing in the industry

OPEC
The

Role

main role of OPEC is regular supplying of petroleum to consuming nations. OPEC has maintained its headquarters in Vienna & hosts regular meetings among the oil ministers of its Member Countries. OPEC allows oil-producing countries to guarantee their income by coordinating policies & prices among them.

2/3rds of the oil reserves in the world belong to OPEC members & the members are responsible for half of the world's oil exports.

OPEC represents a considerable political & economical force.

OPEC History
OPEC

created at the Baghdad Conference on September 1014, 1960, by Iran, Iraq, Kuwait, Saudi Arabia & Venezuela. These 5 countries are referred to as the Founder Members of OPEC. OPEC has since exp&ed to include seven more countries (Algeria, Angola, Indonesia, Libya, Nigeria, Qatar, & United Arab Emirates) making a total membership of 12. OPEC was registered with the United Nations Secretariat on 6 November 1962

OPEC Member Countries

Member Countries
The OPEC was founded in Baghdad, Iraq, by five countries namely Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia & Venezuela - the Founder Members of the Organization. later joined by Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon (1975) & Angola (2007) Currently, the Organization has a total of 12 Member Countries.

Founder Members

Iran 1960 Middle East Iraq 1960 Middle East Kuwait 1960 Middle East Saudi Arabia 1960 Middle East Venezuela 1960 South America

Full Members
Algeria

1969 Africa Angola 2007 Africa Ecuador 1973 South America SP Libyan AJ 1962 Africa Nigeria 1971 Africa Qatar 1961 Middle East
United

Arab Emirates 1967 Middle East

Associate Members

Countries which do not qualify for full membership, but which are nevertheless admitted under such special conditions as may be prescribed by the Conference

Influence on world economy

OPEC provide the required amount of oil to all parts of the world to help their economies OPEC also called on industrialised & developing countries to come together to solve the problems facing poor countries & to look for ways of establishing a better economic system by allowing increased trade & exchange of knowledge

 Threats: Competitors: Entry of private players such as Reliance, Essar Oil & Shell , the sector is likely to witness increased competition going forward.

Social Responsibility
OPEC is concerned about the environment

& wants to ensure that it is clean & healthy for future generations.
OPEC considers that the development of

technology is important for limiting or reducing greenhouse gas emissions

SOUTH ASIAN ASSOCIATION FOR REGIONAL COOPERATION

 SAARC was founded in 1985 and dedicated to economic, technological, social, and cultural development emphasizing collective selfreliance 7 founding members are Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka Afghanistan joined the organization in 2007.

Promote the welfare of the people of South Asia and to improve their quality of life Accelerate economic growth, social progress and cultural development in the region and to provide all individuals the opportunity to live in dignity and to realize their full potential Promote and strengthen selective selfreliance among the countries of South Asia

Contribute to mutual trust, understanding &

appreciation of one another's problems Promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields Strengthen cooperation with other developing countries Cooperate with international and regional organisations with similar aims and purposes

Areas Of Cooperation
Agriculture Education Culture and sports Health Population & child welfare environment and meteorology Rural development Tourism, transport, science & technology; communications Women in development Prevention of drug trafficking & drug abuse.

The Working Groups

Working Groups (WG) formulate & oversee programmes & activities within the framework of SAARC to strengthen and promote regional cooperation in their respective areas WGs coordinate, monitor & evaluate programmes in this regard Propose mechanisms and sources of finance to implement them Carry out the directives emanating from SAARC higher bodies

South Asian Free Trade Area

o At Islamabad in 2005 , SAARC countries
devised the South Asia Free Trade Agreement which created a framework for the establishment of a free trade area covering 1.6 billion people. o Under this agreement, SAARC members will bring their duties down to 20% by 2009.

Challenges For SAARC

Lack of success results from distrust and protectionism among its member states SAARC WAS designed to improve both the economic and social progress of its member states. trade between the seven SAARC States has remained limited despite the fact that all are positioned within a close proximity of one another and all are part of the World Trade Organization (WTO)

 SAARC is structured in a way that often makes regional cooperation difficult. India is the most powerful country in terms of its economic might, military power and international influence - Indias potential as a regional hegemony gives SAARC a unique dynamic compared to an organization such as ASEAN Indias proximity to neighbours like Nepal, Bhutan & Bangladesh are threatned

 The political tensions and conflicts surrounding the countries of a South Asia pose a question of uncertainty and challenge to the formation of South Asian Union at par with European Union