WTO,REGIONAL

BLOCS,INTERNATIONAL
COMMODITY AGREEMENT &
GLOBAL TRADE
MAR ATHANASIOS COLLEGE FOR
ADVANCED STUDIES

MACFAST,THIRUVALLA

Group members
Alpha Shine
Aneesh George
Chinchu P Thomas
Joji Thomas
Sukanya Devi
 WORLD TRADE
ORGANISATION
Following UR agreement GATT was converted
from a provisional agreement to formal
international organization called WTO in 1st Jan
1995
Directed by ministerial conference meet every two
years and its regular activities are maintained by
General council.
159 members at end of April 2013
It is designed to play the role of a wat chdog in
the spheres of trade in goods and
services, foreign investment, intellectual property
rights, etc.
Functions
The WTO shall facilitate and provide framework for
the implementation, administration and operation of
the Multilateral Trade Agreements

The WTO shall provide the forum for negotiations

among its members concerning their multilateral trade
relations in matters dealt with under the Agreement in
the Annexes to this Agreement.

The WTO shall administer the ‘Understanding on

Rules and Procedures Governing the Settlement of
Disputes’.

The WTO shall administer Trade Policy Review

Mechanism.

With a view to achieving greater coherence in global

economic policy making, the WTO shall cooperate, as
ROLES
The WTO acts as
Conductor
Tribunal
Monitor
Trainer

WTO has three main objectives

 To help trade flow as freely as possible.
 To achieve further liberalisation through negotiations
 To set up an impartial means of settling disputes.
Benefits
Reducing tariff and non-tariff barriers
Liberalisation of trade and investment
Forum for multilateral discussions
Place for trade dispute settlement
Drawbacks
Dominance of developed countries
Policies are done without considering vulnerability of
developing countries
Lack of financial and knowledge resources of
developing countries
 REGIONAL TRADE BLOCS
A trade bloc is a type of intergovernmental agreement,
where regional barriers to trade are reduced or eliminated
among the participating states.
Different types of trade blocs are
Free-trade area
Member countries signed free-trade agreement which
eliminates tariffs, import quotas, and subsidies on most
goods and services traded between them.
If people are also free to move between the countries, in
addition to FTA, it would also be considered an open
border.
 Australia has seven FTAs currently in force with
New Zealand, Singapore, Thailand, US, Chile, the
Association of South East Asian Nations
(ASEAN) (with New Zealand) and Malaysia.
European free trade association
Customs Union
 Composed of a free trade area with a common
external tariff.
 The participant countries set up common external
trade policy, to oversee trade relations with non
members but in some cases they use different
import quotas.
 Customs Union of Belarus, Kazakhstan, and
Russia
Common Market
Group formed by countries within a geographical
area to promote duty
free trade and free movement
of labour and capital among its members.
No barriers of trade and group has common
external trade policy
Eg: MERCOSUR: the South American group of
Argentina, Brazil, Paraguay,Uruguay

Economic Union
Involves the free flow of products and factors of
production between member countries
Common external trade policies
Composed of a common market with a customs
union
 Requires a common currency, harmonization
in tax rates, common monetary and fiscal
policy
Eg: European union
Political Union
Central political apparatus coordinates
economic, social, and foreign policy of
member states.
Eg: European union going to be political union
like US
WHY TRADE BLOCS???

Stimulates economic growth in countries

Increases FDI and world production
Countries specialize in those goods and services
efficiently produce.
Additional gains from free trade beyond the
international agreements such as GATT and
WTO
Major trade blocs

EU (EUROPEAN UNION)
The world’s largest trading bloc
Formed from the ‘Treaty of Rome’ in 1957
It comprised of 6 members-
Germany, France, Italy,Belgium, Netherlands and
Luxemburg
At present 27 members
Objectives
Setting up a common market for all goods & services
by eliminating all trade barriers
Promoting free trade among the members.
Closer relations between the member states.
North American Free Trade
Agreement (NAFTA)

Initially bilateral trade between Canada

NAFTA went into effect in January 1,1994 afterthe
joining of Mexico
World’s largest free trade area.
NAFTA has two supplements: the NorthAmerican
Agreement on Environmental Cooperation
(NAAEC) and the North American Agreement on
Labour Cooperation (NAALC).
Provisions
Eliminate barriers to trade investment between
US, Canada and Mexico
Duty-free market access
Dispute settlement mechanism.
Protection of intellectual property.
Trade rules- safeguard, subsidies countervailing
& antidumping duties, health& safety standards.
Organisation of Petroleum Exporting
Countries (OPEC)

A permanent, intergovernmental
Organization, created at the Baghdad Conference
on September 10–14, 1960
(Iraq, Kuwait, Iran, Saudi Arabia and Venezuela )
Later joined by 8 more countries
The main objective is to coordinate and unify
petroleum policies among the member countries.
To secure fair and stable price for petroleum
producers.
Proper price and regular supply for petroleum
consuming nations.
Its Headquarter is in Vienna, A ustria.
Association of Southeast Asian
Nations (ASEAN)
Formed 8thAugust,1967
(Indonesia, Malaysia, Philippians, Singapore)
Later joined by
Brunei, Burma, Cambodia, Laos, Thailand, Vietna
m
Established as ASEAN Free Trade Area (AFTA)
Headquarter- Jakarta, Indonesia.
Primary goals of AFTAare:-
To encourage inflow of foreign investment into
this region.
To establish free trade area in the member
countries.
To reduce tariff of the products produced in
Objectives of ASEAN
Discuss issues peacefully.
Protection of regional peace and stability.
Cultural Development among its members.
Social Progress.
Accelerating Economic Growth.
SAARC(South Asian Association for
Regional Cooperation)
It was established on 8th December 1985.
It consists of nations of South Asia that includes
Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan
and Srilanka.
SAARC focus on areas such as Science and
Technology, agricultural and rural development, tele-
communication, postal services etc.
SAARC members signed an agreement called
SAPTA.
This agreement was signed to provide a framework
for the exchange of trade concessions.
It aims at accelerating the process of economic and
social development in member states.
Afghanistan became the eighth member of this group
in 2007.
International Commodity Agreements
Agreements between producing and consuming
countries to stabilise markets and raise average
prices.
Such agreements are common in many
markets, including the market for coffee, tea, and
sugar
Objectives:
Expanding the resources for economic & social
development.
Consider the interest of the consumers in importing
countries
Considering the remunerative & equitable & stable prices
for primary commodities.
Considering the import purchasing power
Increased imports & consumption & also coordination of
production & marketing policies
Forms of Commodity Agreements
1. Quota agreements: In international trade, a government-
imposed limit on the quantity of goods and services that
may be exported or imported over a specified period of
time.
 Limits on the amount of a goods produced, imported,
exported or offered for sale.
 Seek to prevent a fall in commodity prices by regulating
prices.
 This agreement undertake to restrict the export or
production by a certain percentage of the basic quota
decided by the Central Committee or Council.
 This type of agreement mostly in the case of the
commodities like coffee, tea & sugar
2. Buffer Stock Agreements:
 A practice in which a large investor, especially a
government, buys large quantities of commodities during
periods of high supply and stores them so they do not
trade or circulate. The investor then sells them when
supply is low. This is done to stabilize the price.
 It is to stabilizing the prices by maintaining the demand &
supply balance.
 It is more useful for the commodities like tea, sugar
rubber, copper.
 This arrangements only for those products which can be
stored at relatively low cost without the danger of
deterioration & this is one of the limitation of this
agreement.
3.Bilateral or Multilateral Contracts:

 Bilateral agreements may be formed as business or

personal agreements between individuals, companies or
countries.
 In either case, a bilateral agreement is a binding contract
between the two parties that have agreed to mutually
acceptable terms.
 Bilateral contract to purchase & sell certain quantities of a
commodity at agreed prices.
 In this agreement, an upper price & a lower price are
specified.
 If the market price, throughout the period of the
agreement, remains within these specified limits the
agreement becomes inoperative.
 If the market price rises above the upper limit specified,
the exporter country is obliged to sell to the importing
country a certain specified quantity of the upper price
fixed by the agreement.
 On the other hand, if the market price falls below the
lower limit specified, the importer is obliged to purchase
the contracted quantity at the specified lower price.
GLOBAL TRADE
Global Trade is the exchange of goods and
services between countries. Also, global trade
could be taken in the context that there are no
barriers to trade, thus there is global 'free' trade
between countries.
Important benefits of International
Trade
Enhances the domestic competitiveness
Takes advantage of international trade technology
Increase sales and profits
Extend sales potential of the existing products
Maintain cost competitiveness in domestic market
Enhance potential for expansion of business
Gains a global market share
Reduce dependence on existing markets
Stabilize seasonal market fluctuations
 What are these trade barriers?

– They are tariffs imposed in international trade

– And non-tariff measures adopted by

importing/exporting countries
 Tariff Barriers (TB)
– A tariff is a tax levied on imports
– It is put in place to protect domestic products from
foreign competition
Non-Tariff Barriers (NTB)
– They are indirect measures to regulate and
minimise
– They are put in place to protect domestic industries
and
– NTBs are less transparent and difficult to identify
imports conserve foreign exchange
 Tariffs can be classified on the following basis:

Based on origin and distribution of good

Export duties
Import duties
Transit duties
Based on quantification of tariff
Specific tariffs
Ad valorem tariffs
Compound tariffs
Based on discriminatory rates of different countries

Single column tariff

Double column tariff
Triple column tariff

Based on their purpose

Revenue tariff
Protective tariff
Countervailing & antidumping duties
The Impact Of Regional Integration
Framework On FDI Determinants
1) The Policy Framework
2) Economic Determinants
3)Business Facilitation