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Impact of Major Trade Blocs
- 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
- 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