Trading Blocks by Monish

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DNYANASADHNA COLLEGE


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TRADING BLOCKS


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PRESENTED BY :- ROLL NO.

MADHURI.DANGAT 05

CLINT D.SILVA 07

SUPRITI.GAYEN 13

MONISH.GUJARE 17

JACKITA.JAIN 21

PRANJALI.PAWAR 46

SAILA.SANGISHETTY 52


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ACKNOWLEDGEMENT

We Have A Great Pleasure In Presenting This Project onRelevance of Trade Bloc. We Have Made A Sincere Attempt To

Deal With The Subject Given To Us. Hope All Of You ReadingThis Project Will Like It.

We are thankful to our faculty Mr. KAILASH.CHITNIS for hisvaluable guidance and providing insight to the subject.

Lastly, we would thank each of our group members because webelieve that Each one makes a difference!

Thank You is a very gratifying word. Every project is incompletewithout expressing grateful acknowledgements to the people whogave guidance and help throughout the project.


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INDEX

S.No. Content Page No.

1 TRADE BLOCS 6

2 ROLE/FUNCTIONS OF TRADEBLOC 7

3 TYPES OF TRADE BLOC 8

4 TRADE BARRIERS 11

5 EFFECTS OF TRADE BLOC IN INDIA 12

6LIST OF INTERNATIONAL TRADE

BLOCS14

7 EUROPEAN UNION 16

8 EUROPEAN UNION AND INDIA 18

9 SAARC 23

10 OPERATION OF SAARC 25

11 WTO 33

12 CONCLUSION 36


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What are Trade Blocs?

A trade bloc is a large free trade zone or near-free trade zone formed by one

or more tax, tariff and trade agreements. Typically

trade pacts that define such a bloc specify formal

adjudication bodies, e.g. NAFTA trade panels. This

may include even a more democratic and participative

system, as the EU and its parliament.

Need for Trade Blocs

The above explained trade barriers create the need for the formation of a Trade

Bloc.

Trading blocs are created because according to the theory of comparative

advantage, countries should specialize in producing those goods in which they

have a comparative advantage; that is, those goods that they have a lower

opportunity cost of production than other nations. By specializing in theproduction of these goods, a group of nations as a whole can produce, and

therefore consume, a greater quantity of each product. However, as countries

become more specialized in the production of goods, it becomes necessary to trade

with countries that need these goods or that have resources that are not available in

that nation. Due to this factor, as nations become more specialized, they also

become increasingly dependent on their trading partners. Furthermore, since

smaller countries with fewer resources and land are generally less powerful thanlarger nations, the need arises to develop economic alliances to gain buying and

selling power. Hence, trading blocs arise.


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The Role & Function of Regional trade blocs:

Regional trade blocs are intergovernmental associations that manage

and promote trade activities for specific regions of the world.

Trade bloc activities have political as well as economic implications.

For example, the European Union, the worlds largest trading bloc, has

harbored political ambitions extending far beyond the free trading

arrangements sought by other multistage regional economic organizations

(Gibb and Michalak 1994: 75). Indeed, the ideological foundations that gave

birth to the EU were based on ensuring development and maintaining

international stability, i.e., the containment of communist expansion in post

World War II Europe (Hunt 1989). The Maastricht Treaty, which gave birth

to the EU in 1992 included considerations for joint policies in regard to

military defense and citizenship.

The decisions reached by development policy makers on whether

regionalism or globalized trade should be pursued may influence a countrys

earnings from trade.

Regionalism differs from globalization in the size and area of markets.

From the perspective of developing countries skeptical of free trade, regional

trade blocs offer some form of protection against an aggressive global

market.


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The Formation of Trading Blocs:

Organizations such the World Trade Organization aim to free up

world trade from trade barriers on a global scale. On a regional scale groups

of countries or trade blocs have also been trying to lower trade barriers

between them and stimulate regional trade. Increasingly the trade creation

effect of regional co-operation is being viewed as an important cause of

economic growth. However, the impact of trading blocs also has a trade

diversion effect.

There are a number of types of trade blocs:

Free Trade Areas Customs Unions Common Market Economic Union


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Free Trade Area

Sovereign countries belonging to the free trade area, trade freely

amongst them but have individual trade barriers with countries outside the

free trade area. All members have most favored nation status, which

means that they are all treated equally. Examples include North American

Free Trade Area (NAFTA) between the USA, Canada and Mexico; Asia

Pacific Economic Cooperation (APEC) and COMESA.

Customs Union

The countries are no longer fully sovereign over trade policy. There

will be some degree of unification of custom or trade policies. They will

have a common external tariff (CET), which is applied, to all countriesoutside the customs union. The countries will be represented at trade

negotiations with organizations such as the World Trade Organisation by

supra-national organizations e.g. the European Union.

Common Market

This trading bloc is a customs union, which has in addition the free

movement of factors of production such as labour and capital between the

member countries without restriction. MERCOSUR is an example of a

common market comprising of a number of South American nations.


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An Economic Union

This is a common market where the level of integration is more developed.

The member states may adopt common economic policies e.g. the Common

Agricultural Policy (CAP) of the European Union. They may have a fixed

exchange rate regime such as the ERM of the EMU. Indeed, they may have

integrated further and have a single common currency. This will involve

common monetary policy. The ultimate act of integration is likely to be

some form of political integration where the national sovereignty is replaced

by some form of over-arching political authority.

CUSTOM UNION

ECONOMIC UNION

COMMON MARKET

FREE TRADE AREA


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Trade Barriers

A trade barrier is general term that describes any government policy or regulation

that restricts international trade, the barriers can take many forms, including:

Import duties Import licenses Export licenses Quotas

Tariffs Subsidies Non-tariff barriers to trade

Most trade barriers work on the same principle: the imposition of some sort of cost

on trade that raises the price of the traded products. If two or more nations

repeatedly use trade barriers against each other, then a trade war results.

Economists generally agree that trade barriers are detrimental and decrease overall

economic efficiency, this can be explained by the theory of comparative

advantage.

In theory, free trade involves the removal of all such barriers, except perhaps those

considered necessary for health or national security. In practice, however, even

those countries promoting free trade heavily subsidize certain industries, such as

agriculture and steel.

Examples of free trade areas are: North American Free Trade Agreement

(NAFTA), European Free Trade Association, European Union (EU), and South

American Community of Nations among many others.


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Effects of Trade Blocs on India

The last decade and a half has seen the proliferation of regional

trading arrangements in different parts of the world. The major trading

blocks that have emerged over the years include the European Union,

NAFTA, MERCOSUR, AFTA, COMESA, among others. Besides, these

free trade and common market agreements, a number of other countries have

become integrated with the trading blocks through a variety of preferential

or free trade arrangements. For instance, European Union has extended free

trade agreement treatment to a number of Central Eastern European Union

and Mediterranean countries in anticipation of full membership to these

countries in the EU. These arrangements could also act to divert trade away

from India especially in the labour intensive goods, such as textiles and

clothing.

India has taken several steps to liberalize trade with her trading

partners in the South Asia region on regional as well as bilateral basis. These

steps include participation to SAARC Preferential Trading Arrangements

(SAPTA) that came into being in December 1995. Under this Agreement,

India has exchanged trade concessions with the SAARC member countries

for nearly 3000 commodities in the first three rounds of negotiations. The

fourth round of these negotiations is in the process. It is expected that the

process of trade liberalization in the framework of SAARC will culminate

into a South Asia Free Trade Agreement (SAFTA), although, it may take

some time to take shape given the current impasse in the SAARC process.


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Besides SAPTA, India has recently signed a bilateral free trade agreement

with Sri Lanka. India already has bilateral free trade agreement with Nepal

and Bhutan. A bilateral free trade agreement is being contemplated with

Bangladesh as well. There are other attempts of regional/sub-regional

economic integration, which may also come into being in the coming

decade; for instance, BIMST-EC (Bangladesh, India, Myanmar, Sri Lanka

and Thailand Economic Cooperation) which has been formed recently may

adopt a preferential trading arrangement between the member countries.

Although India is also a founder member of the Indian Ocean Rim

Association for Regional Cooperation (IOR-ARC), a preferential trading

arrangement is not contemplated as the Association has adopted the concept

of open regionalism on the lines of APEC. All these attempts at free trade

with the regional partners may open the markets for Indian goods further in

the countries concerned. It is evident that the share of South Asian countries

in India's exports has increased from 2.73 to 4.9 over the period 1990 to

1999. The recent initiatives in regional/ bilateral trade liberalization may

help to divert some trade of the countries concerned from their other trading

partners in favour of India given the supply capabilities.


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List of international trade blocs;

1. Andean Community (CAN) : that comprises the South American countries of Bolivia,Colombia, Ecuador, Peru and Venezuela. This trade bloc was formerly called the Andean

Pact and was started with signing of the Cartagena Agreementin 1969.

2. Asia-Pacific Economic Cooperation (APEC) : is a group of Pacific Rim countries whomeet with the purpose of improving economic and political ties. The first meeting was

held in Canberra, Australia in 1989.

3. Association of Southeast Asian Nations Free Trade Area (AFTA) : is a political,economic, and cultural organization of countries located in Southeast Asia. Founded in

1967 The current member countries of ASEAN are (north to south): Myanmar (Burma),

Laos, Thailand, Cambodia, Vietnam - Philippines - Malaysia, Brunei Darussalam,Singapore - and Indonesia.

4. Caribbean Community and Common Market (CARICOM) : was established by theTreaty of Chaquaramas which came into effect on August 1, 1973, Currently CARICOM

has 15 members: Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica,

Grenada,Guyana, Haiti, Jamaica, Montserrat, St. Kitts and Nevis

5. Central European Free Trade Agreement (CEFTA) : is a trade agreement betweenPoland, the Czech Republic, Slovakia, Hungary, Slovenia, Romania, Bulgaria and

Croatia. CEFTA was established by Poland, Hungary and former Czechoslovakia on 21

December, 1992 in Krakow, Poland.

6. Economic Community of West African States (ECOWAS) : Benin, formerlyDahomey (France), The Gambia; along the Gambia River, enclosed in Senegal (United

Kingdom), Ghana (United Kingdom), Guinea (France), Guinea-Bissau (Portugal),Liberia,

Mauritania (France),Nigeria (United Kingdom),Senegal (France),Sierra Leone (United

Kingdom), Togo (Germany, France).

7. European Economic Area (EEA) : came into being on 1 January 1, 1994 following anagreement between the European Free Trade Association (EFTA) and the European

Union (EU). It was designed to allow EFTA countries to participate in the European

Single Market without having to join the EU.
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8. European free trade agreement (EFTA) : was established on May 3, 1960 as analternative for European states that did not wish to join the European Community (now

the European Union). The treaty was signed on January 4, 1960 in Stockholm and is

known as the Stockholm Convention. Today only Iceland, Norway, Switzerland and

Liechtenstein remain members of EFTA.

9. European Union (EU): formerly the European Community : is an internationalorganisation of 25 European states, established with that name by the Treaty on European

Union (commonly known as the Maastricht treaty) in 1992, The European Union has

many activities, the most important being a common single market, consisting of a

customs union, a single currency (adopted by 12 out of 25 member states), a Common

Agricultural Policy and a Common Fisheries Policy. The European Union also has

various initiatives to co-ordinate activities of the member states.

10.Mercado Comun del Sur (MERCOSUR or MERCOSUL) : is a trading zone amongBrazil, Argentina, Uruguay and Paraguay, founded in 1991. Its purpose is to promote free

trade and movement of goods and peoples, skills and money, between these countries.

Bolivia, Chile, Peru, Venezuela and Mexico have associate member status

11.North American Free Trade Agreement (NAFTA): known usually as NAFTA, is acomprehensive trade agreement linking Canada, the U.S., and Mexico in a "free trade"

sphere. NAFTA went into effect on January 1, 1994. The agreement immediately ended

tariffs on some goods, and on other goods tariffs were scheduled to be eliminated over a

period of time. The agreement was an expansion of the earlier Canada-U.S. Free Trade

Agreement of 1989.

12.South Asian Association for Regional Cooperation (SAARC) : (established December8, 1985) is an association of 7 countries of South Asia namely Bangladesh, Bhutan, India,

Maldives, Nepal, Pakistan and Sri Lanka. The Association provides a platform for the

peoples of South Asia to work together in a spirit of friendship, trust and understanding.

It aims to promote the welfare of the peoples of South Asia and to improve their quality

of life through accelerated economic growth, social progress and cultural development in

the region.


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European Union

The European Union (EU) is a supranational and intergovernmental union of 27

independent, democratic member states. The European Union is the world's largest

confederation of independent states, established under

that name in 1992 by the Treaty on European Union (the

Maastricht Treaty). However, many aspects of the

Union existed before that date through a series of

predecessor relationships,dating back to 1951.

Goals and Objectives of EU:

1. Creation of customs union Eliminate internal tariff barriers on intra-community trade. Establish a common external tariff on imports that is the same customs

duties, quotas, preferences and so forth applied to all goods entering thearea, regardless of which country within the area they are entering.

Allow free movement of factors of production within the community.

2. Single market In creating the single market, major steps were taken towards ensuring

that all EU countries take a broadly similar approach to company law,

business accounting rules and intellectual property rules. This makes it

easier for companies to operate throughout the EU and to run their

businesses as efficiently as possible.

A start was made on introducing competition into what weretraditionally monopoly sectors, such as telecommunications, airlines,
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the railways, postal services, gas and electricity this process has

continued since then.

Keen competition and room to expand within the single market helpskeep European companies among the world leaders. Of the worlds 100largest companies, 32 are from the EU. So are 39 of the worlds 100

largest commercial banks and 27 of the 100 most valuable brands.

3. Economic and monetary union (EMU):-All EU member states are part of economic and monetary union (EMU), whose

purpose is to integrate the economies of EU countries more effectively. Integration

promotes growth and prosperity. It requires closely coordinated economic policy.Member states are then free to achieve the common objectives through the tax and

social welfare policy mix of their own choice.All EMU members can introduce

the euro if they meet certain economic criteria one of which is that their deficits

must not exceed 3% of their gross domestic product (GDP) which is in accordance

with the Stability and Growth Pact.Denmark, Sweden and the United Kingdom

chose to remain outside the euro for the time being. In June 2004, three new

member countriesEstonia, Lithuania and Slovenia took what is likely to be a

first step towards eventually joining the euro by linking their currencies to the euro

through the so-called Exchange Rate Mechanism. This will provide the currency

stability required of euro candidates, but only when they comply with the other

four criteria will they actually be able to adopt the euro.


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European Union and India

The EU is Indias largest trading partner accounting for 23 per cent of

Indian export and 16 per cent of total imports in 2004-05. Although Indo-EU trade

has increased at a healthy rate over the last couple of years still there are few areas

in which the two partners hold different views and in some cases have taken rigid

stand. Indian industry feels that while the Indian economy has opened itself

through market reforms thereby opening a huge market for international trade,

reciprocal initiative from the developed world is still not very encouraging.

Due to stringent standards, cumbersome rules and procedures it isbecoming increasingly difficult for the Indian business community to make a

foothold in the European market. Use of trade defense instruments acts as another

barrier in enhancing trade they feel. The European Union (EU) wants India to

open up it to agro products market like wine, whereas India wants EU to ease rules

for import of Indian marine products like shrimps. EU wants more access to Indian

markets and wants to bring down further the high tariffs.


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EU and India

The EU is already Indias largest trading partner, accounting for nearly 25% of her

exports and imports and is the largest foreign investor in the sub-continent.

Business and policymakers agree that there is still a large, untapped potential for

bilateral business

relationships, particularly in

areas such as software

development, pharmaceuticals

and biotechnology whereIndia has cutting edge

companies and in textiles,

automobiles and agrifood

where it has the potential to be

a major player. There is an

urgent need for investment in infrastructure, energy and power.

EU in the news

Tariffs, reforms in the spotlight at India-EU

summit

India could achieve considerable economic progress

only by liberalizing more, Mandelson said India

could attract adequate levels of foreign direct

Interesting Facts:

EU-India trade has grown

impressively over the years,from 4,4 billion in 1980 to

33 billion in 2004. Trade

with the EU represents

almost a quarter of

Indian's exports and

import. The EU is alsoIndia's largest source of

foreign direct investment.

However, India accounts

for just 1.7% of total EU

trade. India attracts only

0.3 % of the EU's world-

wide investments.


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investment and increase its exports through greater openness.

Indian Commerce Minister Kamal Nath pointed out that while tariffs may be low

in the developed world, markets are becoming increasingly difficult to penetrate

due to mounting stringency of standards, cumbersome and complex rules andprocedures and frequent use of trade defense instruments.

The EUs anti-dumping actions against Indian products were another major

concern for India, the Indian commerce minister said. A disproportionately large

number of products in textiles, electronics, chemicals, pharmaceuticals, herbal

remedies and steel sectors face such actions.

India seeks greater access to European marketsIndia urged the European Union (EU) to provide greater access to its markets for

its products at the start of a summit which aims to strengthen ties between Europe

and the emerging economic power. Non-tariff barriers are increasingly hampering

market access and the potential growth of exports from India and addressing these

issues has become absolutely essential, Dr. Manmohan Singh, the Prime Minster

of India said.

Many of Indias products find some form of discrimination and trade protection,

which needs positive resolution by the EU. These are export products which help

sustain Indias small farmers, said the Indian Prime Minister. Further elaborating

the issues of concern affecting Indian exports, Dr. Singh said, "One such is an

imminent EC directive on Traditional and Herbal Medicines that would affect

access of Ayurvedic Products."

India rejects EU proposal

India and Brazil have stressed that single coefficient for tariff reduction could not

be accepted and there must be different coefficients for the developed and

developing countries with flexibilities for their policy space as provided in the July

Framewrok.


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Commerce minister Kamal Nath termed European Commissions trade

commissioner Peter Mandelsons fresh offer from the EU in the WTO negotiations

as a mixed bag. The EU offered to reduce average agricultural tariffs by 46 per

cent and to cut its highest agricultural tariff by 60 per cent, in the market accessnegotiations.

India-EU investment, trade pact in the offing

Despite being at odds with each other in WTO fora, New Delhi and Brussels are

embracing a freer bilateral investment and trade regime. While the 5th India-EUSummit held in The Hague in November merely vowed to address bilateral

investment and issues, the sixth summit in New Delhi on September 7 is likely to

be marked by a more definite move towards clinching an investment/trade

agreement with the 25-member bloc.

We will set up a joint study group this time. The idea is to explore the possibility

of a bilateral agreement that encompasses investment and trade, said a senior

commerce department official. He added that an agreement similar to a

comprehensive economic cooperation agreement (Ceca) could well be on the

horizon, although it was premature to speak of the finer aspects of the upcoming

pact. The study group will decide all that, he said.

Industry leaders have demanded the two countries enter into specialised free trade

agreement (FT) in services, considering that Indian IT companies find it lucrative

to cater to the West European markets from bases in countries that acceded to the

EU bloc lately. (Over 20% of Indias software exports are to the EU at present).

The official, however, refused to comment on this proposal.


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The EU is Indias largest trading partner and the biggest source of FDI. From 1991

to 2003, the total FDI approvals for the EU (15) had been $15 billion, with inflows

of 6.2 billion euros ($5.6 billion). FDI flows in mainly from UK, Germany, and

the Netherlands, followed by France, Italy and Belgium. EU investment in Indiahas mainly taken place in the power/energy, telecommunications and transport

sectors.

During 2004, EU-India trade jumped to 33 billion euros, registering an increase of

17%. Although, EU is Indias largest trading partner, India accounts for just 1.7%

of total EU trade.


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South Asian Association for Regional

Cooperation (SAARC)

Establishment

South Asian Association for Regional Cooperation (SAARC) is the largest

regional organization in the world by population, covering approximately 1.47

billion people. SAARC is an economic and political organization of seven

countries in Southern Asia. The organization was established on December 8,

1985 by India, Pakistan, Bangladesh, Sri Lanka, Nepal, Maldives, and Bhutan.

Purpose

The Association provides a platform for the peoples of South Asia to work

together in a spirit of friendship, trust and understanding. It aims to promote the

welfare of the peoples of South Asia and to improve their quality of life through

accelerated economic growth, social progress and cultural development in the

region.


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Cooperation in the SAARC is based on respect for the principles of sovereign

equality, territorial integrity, political independence, noninterference in internal

affairs of the Member States and mutual benefit. Regional cooperation is seen as a

complement to the bilateral and multilateral relations of SAARC Member States.Decisions are taken on the basis of unanimity. Bilateral and contentious issues are

excluded from the deliberations of SAARC.

History

Preparatory meetings were held prior to the First Summit in Dhaka. The Foreign

Secretaries in 1981 in Colombo and the Foreign Ministers in 1983 in New Delhi

identified areas to promote regional cooperation. The areas of cooperation under

the reconstituted Regional Integrated Programme of Action which is pursued

through the Technical Committees now cover: Agriculture and Rural

Development; Health and Population Activities; Women, Youth and Children;

Environment and Forestry, Science and Technology and Meteorology; Transport;

and Human Resource Development.

Objectives

The objectives of SAARC are:

1. to promote the welfare of the peoples of SOUTH ASIA and to improvetheir quality of life;

2. to accelerate economic growth, social progress and cultural development inthe region and to provide all individuals the opportunity to live in dignity

and to realise their full potentials;

3. to promote and strengthen collective self-reliance among the countries ofSOUTH ASIA;


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4. to contribute to mutual trust, understanding and appreciation of oneanother's problems;

5. to promote active collaboration and mutual assistance in the economic,social, cultural, technical and scientific fields;

6. to strengthen cooperation with other developing countries;7. to strengthen cooperation among themselves in international forums on

matters of common interests; and

8. to cooperate with international and regional organisations with similar aimsand purposes.

Fundamental Principles

1. Cooperation within the framework of the ASSOCIATION shall be based onrespect for the principles of sovereign equality, territorial integrity, political

independence, non-interference in the internal affairs of other States and

mutual benefit.

2. Such cooperation shall not be a substitute for bilateral and multilateralcooperation but shall complement them.

3. Such cooperation shall not be inconsistent with bilateral and multilateralobligations.


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SAARC Summits held since 1985

1st SAARC Summit 7 - 8 December 1985 Dhaka

2nd SAARC Summit 16 - 17 November 1986 Bangalore

3rd SAARC Summit 2 - 4 November 1987 Katmandu

4th SAARC Summit 29 - 31 December 1988 Islamabad

5th SAARC Summit 21 - 23 November 1990 Male'

6th SAARC Summit 21 December 1991 Colombo

7th SAARC Summit 10 - 11 April 1993 Dhaka

8th SAARC Summit 2 - 4 May 1995 New Delhi

9th SAARC Summit 12 - 14 May 1997 Male'

10th SAARC Summit 29 - 31 July 1998 Colombo

11th SAARC Summit 4 - 6 January 2002 Katmandu

12th SAARC Summit 2 - 6 January 2004 Islamabad

13th SAARC Summit 12-13 November 2005 Bangladesh

How it Operates?

Working Groups have also been established in the areas of: Information and

Communications Technology (ICT); Biotechnology; Intellectual Property Rights

(IPR); Tourism; and Energy. Summits, which are the highest authority in SAARC,

are to be held annually. The country hosting the Summit holds the Chair of the

Association. Pakistan which hosted the Twelfth Summit in January 2004 is thecurrent Chairperson of the Association. The Thirteenth Summit took place in

Bangladesh in January 2005.

The Standing Committee comprising Foreign Secretaries, monitors and

coordinates SAARC programmes of cooperation, approves projects including their


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financing and mobilizes regional and external resources. It meets as often as

necessary and reports to the Council of Ministers. The Governors of the Central

Banks of Member States under the auspices of SAARCFINANCE meet regularly

to consider cooperation in financial matters.

The Association also convenes meetings at Ministerial Level on specialized

themes. The Committee on Economic Cooperation consisting of Secretaries of

Commerce oversees regional cooperation in the economic field. The Association

has carried out Regional Studies on trade, manufactures and services, environment

and poverty alleviation, SAFTA and Customs matters. For strengthening

cooperation in information and media related activities of the Association, the

Heads of National Television and Radio Organizations of Member Countries meet

annually. Similarly, the SAARC Audio-Visual Exchange (SAVE) Committee

disseminates information both on SAARC and its Member States through regular

Radio and TV Programmes.

In the field of education, the Member States cooperate through the forums of

SACODiL (SAARC Consortium on Open and Distance Learning), and Heads of

Universities Grants Commission/Equivalent Bodies.

Council of Ministers

The Heads of State or Government during the Ninth SAARC Summit agreed for

the first time that a process of informal political consultations would prove useful

in promoting peace, stability and amity and accelerated socio-economic

cooperation in the region. The Leaders reiterated this intent during their Tenth and

Eleventh Summits in Colombo and Katmandu respectively. The Council of

Ministers comprising Foreign Ministers, meets at least twice a year. Its functions

include formulating policy, reviewing progress of regional cooperation,

identifying new areas of cooperation and establishing additional mechanisms that

may be necessary. The Council of Ministers has held twenty-four Regular


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Sessions up to January 2004. It has also held a Commemorative Session to mark

the First Decade of SAARC in New Delhi on 18 December 1995.The Standing

Committee has held twenty-nine Regular Sessions and four Special Sessions up to

January 2004.

South Asian Regional Cooperation

The idea of regional cooperation in South Asia was first mooted in May 1980. The

Foreign Secretaries of the seven countries met for the first time in Colombo in

April 1981. The Committee of the Whole, which met in Colombo in August 1981,

identified five broad areas for regional cooperation. New areas of cooperation

were added in the following years. The Objectives of the Association as defined in

the Charter are:

To promote the welfare of the peoples of South Asia and to improve their qualityof life.

To accelerate economic growth, social progress and cultural development in theregion and to provide all individuals the opportunity to live in dignity and to

realize their full potential;

To promote and strengthen collective self-reliance among the countries of SouthAsia;

To contribute to mutual trust, understand and appreciation of one another'sproblem;

To promote active collaboration and mutual assistance in the economic, social,cultural, technical and scientific fields;

To strengthen cooperation with other developing countries; To strengthen cooperation among themselves in international forums on matters

of common interest; and

To cooperate with international and regional organizations with similar aims andpurposes.


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The Declaration on South Asian Regional Cooperation was adopted by the

Foreign Ministers in 1983 in New Delhi. During the meeting, the Ministers also

launched the Integrated Programme of Action (IPA) in nine agreed areas, namely,

Agriculture; Rural Development; Telecommunications; Meteorology; Health andPopulation Activities; Transport; Postal Services; Science and Technology; and

Sports, Arts and Culture.

SAARC Preferential Trading Arrangement (SAPTA)

In December 1991, the Sixth Summit held in Colombo approved the establishment

of an Inter-Governmental Group (IGG) to formulate an agreement to establish a

SAARC Preferential Arrangement (SAPTA) by 1997. Given the consensus within

SAARC, the Agreement on SAPTA was signed on 11 April 1993 and entered into

force on 7 December 1995 well in advance of the date stipulated by the Colombo

Summit. The Agreement reflected the desire of the Member States to promote and

sustain mutual trade and economic cooperation within the SAARC region through

the exchange of concessions. The basic principles underlying SAPTA are given as

follows.

Overall reciprocity and mutuality of advantages so as to benefit equitably allContracting 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 successivestages through periodic reviews.

Recognition of the special needs of the Least Developed Contracting States andagreement on concrete preferential measures in their favour; and nclusion of all

products, manufactures and commodities in their raw, semi-processed and

processed forms.


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So far, four rounds of trade negotiations have been concluded under SAPTA

covering over 5000 commodities. Each Round contributed to an incremental trend

in the product coverage and the deepening of tariff concessions over previous

Rounds. The Member States are in the process of completing the necessaryprocedural formalities to give effect to the concessions extended in the Fourth

Round.

Agreement on South Asian Free Trade Area (SAFTA)

SAPTA was envisaged primarily as the first step towards the transition to a South

Asian Free Trade Area (SAFTA) leading subsequently towards a Customs Union,

Common Market and Economic Union. In 1995, the Sixteenth session of the

Council of Ministers (New Delhi, 18-19 December) agreed on the need to strive

for the realization of SAFTA and to this end an Inter-Governmental Expert Group

(IGEG) was set up in 1996 to identify the necessary steps for progressing to a free

trade area. The Tenth SAARC Summit (Colombo, 29-31 July 1998) decided to set

up a Committee of Experts (COE) to draft a comprehensive treaty framework for

creating a free trade area within the region, taking into consideration the

asymmetries in development within the region and bearing in mind the need to fix

realistic and achievable targets.


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The Agreement on South Asian Free Trade Area (SAFTA), drafted by the COE,

was signed on 6 January 2004 during the Twelfth SAARC Summit in Islamabad.

The Agreement is to enter into force on 1 January 2006. Currently, the Sensitive

Lists of products, Rules of Origin, Technical Assistance as well as a Mechanism

for Compensation of Revenue Loss for Least Developed Member States are under

negotiation.

Under the Trade Liberalization Programme scheduled for completion in ten years

by 2016, the customs duties on products from the region will be progressively

reduced. However, under an early harvest Programme for the Least Developed

Member States, India, Pakistan and Sri Lanka are to bring down their customs

duties to 0-5 % by 1 January 2009 for the products from such Member States. The

Least Developed Member States are expected to benefit from additional measures

under the special and differential treatment accorded to them under the

Agreement.

Custom Action Plan

SAARC has also initiated action on a series of practical measures to facilitate the

process of economic integration. In 1996, a Group on Customs Cooperation was

set up and entrusted with a mandate, inter-alia, to harmonize customs rules and

regulations; to simplify documentation and procedural requirements; to upgrade

infrastructure facilities; and to provide training facilities. has also been drawn up.

Four meetings of the Group have been held. A Customs Action Plan has been

agreed upon. The Fourth Meeting of the Group on Customs Cooperation

(Faridabad India, 12-13 August 2004) considered the Report of the Customs

Consultant engaged to study and make recommendations on measures to be taken

for simplification of procedures and standardization of customs documents and

declarations.


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The SAARC Process and its Future

What are the challenges facing SAARC today? What is the future of regional

cooperation in South Asia? Three important factors need to be taken into account

in analyzing these two questions. They include the charter of SAARC, need for

unanimity in taking decisions and the decision to avoid bilateral contentious

issues.

SAARC as a regional forum has been focusing more on the non-traditional aspects

of security and has deliberately excluded conventional security issues. The non-

traditional aspects of security are more vital both at national and regional levels.

SAARC as a regional mechanism assumes importance, especially in this context,

as the security discourse has been focussing more on non-traditional aspects in the

recent years.

SAARC also has a crucial role to play in the regional economic security. Poverty

being the facilitator of evils results in the trafficking of drugs and children, which

has ramification at the domestic and regional levels. Inequality and deprivation

exist in the region, which have political implications at these levels. Only aregional cooperation at economic level would be able to address this crucial

aspect. Though the SAARC charter on social issues have taken up these issues and

progress has been made, SAARC has to go a long way to achieve its economic and

social objectives.

SAPTA and SAFTA have not triggered the expected economic growth in South

Asian region. Though some progress has been made on SAPTA, it has not been

effective. Besides, SAARC has also been weak in dealing with the WTO issues.


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WORLD TRADE ORGANIZATION

The World Trade Organization (WTO) is the only international organization

dealing with the global rules of trade between nations. Its main function is toensure that trade flows as smoothly, predictably and freely aspossible.

There are a number of ways of looking at the WTO. Its an

organization for liberalizing trade. Its a forum for governments to

negotiate trade agreements. Its a place for them to settle tradedisputes. It operates a system of trade rules.

The W.T.O is a negotiating forum. Essentially, the WTO is a place

where member governments go, to try to sort out the tradeproblems they face with each other. The first step is to talk. TheWTO was born out of negotiations, and everything the WTO doesis the result of negotiations. The bulk of the WTO's current workcomes from the 1986-94 negotiations called the Uruguay Roundand earlier negotiations under the General Agreement on Tariffsand Trade (GATT). The WTO is currently the host to newnegotiations, under the Doha Development Agenda launched in2001.

The WTO is not just about liberalizing trade, and in somecircumstances its rules support maintaining trade barriers forexample to protect consumers or prevent the spread of disease.

Set of rules:

At its heart are the WTO agreements, negotiated and signed by the bulk of theworlds trading nations. These documents provide the legal ground-rules forinternational commerce. They are essentially contracts, binding governments tokeep their trade policies within agreed limits. Although negotiated and signed bygovernments, the goal is to help producers of goods and services, exporters, andimporters conduct their business, while allowing governments to meet social andenvironmental objectives. The systems overriding purpose is to help trade flow asfreely as possible so long as there are no undesirable side-effects. That partlymeans removing obstacles. It also means ensuring that individuals, companies andgovernments know what the trade rules are around the world, and giving them theconfidence that there will be no sudden changes of policy.

Fact File:

Location: Geneva,SwitzerlandEstablished: 1 January 1995Created by: Uruguay Roundnegotiations (1986-94)Membership: 148 countries(on 13 October 2004)Budget: 169 million Swissfrancs for 2005

Secretariat staff: 630Head: Pascal Lamy(Director-General) Functions: Administering WTO tradeagreements Forum for tradenegotiations Handling trade disputes Monitoring national tradepolicies Technical assistance andtraining for developingcountries Cooperation with other

international organizations


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Structure:

The WTO has nearly 150 members, accounting for over 97% of world trade.Around 30

others are negotiating membership. Decisions are made by the entire membership.This is typically by consensus. A majority vote is also possible but it has neverbeen used in the WTO, and was extremely rare under the WTOs predecessor,

GATT. The WTOs agreements have been ratified in all members parliaments.The WTOs top level decision-making body is the Ministerial Conference whichmeets at least once every two years. The Fifth WTO Ministerial Conference willbe held in Cancn, Mexico from 10 to 14 September 2003.Below this is theGeneral Council (normally ambassadors and heads of delegation in Geneva, butsometimes officials sent from members capitals) which meets several times a year

in the Geneva headquarters. The General Council also meets as the Trade PolicyReview Body and the Dispute Settlement Body.

At the next level, the Goods Council, Services Council and Intellectual Property

(TRIPS) Council report to the General Council. Numerous specializedcommittees, working groups and working parties deal with the individualagreements and other areas such as the environment, development, membershipapplications and regional trade agreements.
http://en.wikipedia.org/wiki/Image:WTOmap_currentstatus.png


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Functions:

Administering WTO trade agreements

Forum for trade negotiations

Handling trade disputes

Monitoring national trade policies

Technical assistance and training for developing countries

Cooperation with other international organizations


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Conclusion:

It is not possible for a country to produce every thing that it needs or desires to

consume. Different countries produce different goods and services then they

exchange this goods and services among themselves through international trade.

Trading blocks are manifestation of the regional approach of trading relations.

Formation of trade blocks at global level is important for international trade

EU and SAARC have played a very important role in the development of trade.EU is Indias largest single trading partner. Eu is a veru potential and growing

market for export promotion

The most prominent policy goal of the European Union is the development and

maintenance of an effectivesingle market. Significant efforts have been made to

create harmonised standards designed to bring economic benefits through creating

larger, more efficient markets

Regional trade blocs resume its rapid growth despite the uncertain global

economic outlook and emerge as the center of gravity in the world economy.

Regional trade liberalization accompanied by freer movements of investment,

technology and skills among the countries would generate substantial efficiency

gains by enabling the participants to exploit their complementarities to mutual

advantage. Cooperation in finance and monetary policy has the potential to helpthe region recover hundreds of billions of dollars of potential output lost due to

underutilization of capacity and pull the major economies. And the point is that the

more developing countries maintain high barriers to trade with other developing
http://en.wikipedia.org/wiki/Single_markethttp://en.wikipedia.org/wiki/Single_markethttp://en.wikipedia.org/wiki/Single_markethttp://en.wikipedia.org/wiki/Single_market


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countries, the more they cut themselves out of participating in the development of

these global production chains.

The existence of regional trade pacts could seriously affect global trade prospects

of countries which are not members of any major trade bloc. With all large trading

nations of the world belonging to one bloc or the other, India is left out, with its

membership restricted to the South Asian Association for Regional Cooperation

(SAARC). However, SAARC countries are not only economically weak, they are

also confronted with political problems which hamper further progress. India

should take the initiatives to enter into trade pacts based on South-South

collaboration as well as with major trading nations in the Asian region such as

China, Japan, Singapore and South Korea.

Countries are poor primarily because their human resources are uneducated,

poorly nourished and underemployed. To complicate the problem, population

growth in poor countries is far greater than the rest of the world. These countries

have poor infrastructures and frequently are governed by unsophisticated and

corrupt leaders. The modern efforts of the Regional trade blocs, World Bank and

the WTO unquestionably seek to change this cycle and create conditions where

human resources are far better utilized and internal "markets" develop. There has

been substantial progress in certain countries. Even at very low wages, the

introduction of industry and an infrastructure in these countries have employedhuman resources far more productively. Some economists believe that developing

countries need to rely on protective trade barriers in order to develop industry.


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But while the justice of the developing countries' demands can't be denied, it

would be wrong to think that increased trade with the rich countries is the only

way the poor countries can make a quid out of globalisation.

No, the developing countries have a lot to gain by increasing the trade between

themselves These reductions would help to explain why, over the 20 years the

developing countries have increased their share of global trade from about a

quarter to a third.

The more developing countries maintain high barriers to trade with other

developing countries, the more they cut themselves out of participating in the

development of these global production chains.

Trade blocs helps the poor countries protect against getting directly exposed to the

culture of globalization. That does not mean that globalization is bad. But in the

initial stages the poor countries do not have a better purchasing power or

negotiating power they have to adhere to certain extent according to the whims

and fancies of stronger economies. Even USA had got the benefit of regional trade

bloc in the nineteenth century, before now emerging as a strongest economy.

When some of the developing or less developed countries come together they have

a better negotiating power they ensure that they are not exploited and these

regional blocs help them attain the same.

Every country is endowed with different natural resources and capacities.

Not all resources can be fully utilized by any of the nations. And the resources

have to be shared amongst them to attain the desired development.

So by forming these trade blocs it is possible for the developing and under-developed nations to get the required support of all the developed nations andthereby attaining a state of global equilibrium.


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Relevance of regional trade block is limited not only to trade. The increasing

international pressure to combat terrorism and resolve regional conflicts and

regional security concerns have contributed to making regionalism not an option,

but a necessity especially, among developing countries with a burgeoning growthpotential. When it comes to security & terrorism, regional blocs like SAARC can

be a better & effective tool to fight it.

COUNTRIES FLORISH MORE WITH MORE TRADE

&

LESS BARRIERS


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Bibliography

Books:Export Management By Prof. Kale.

Websites:

1 www.eisil.org2

www.news.com

3 www.answers.com4 www.wto.org5 www.wikipedia.com6 www.bbcnews.com7 http://europa.eu/index_en.htm8 www.newyorktimes.com9 www.google.com
http://www.bbcnews./http://europa.eu/index_en.htmhttp://www.newyorktimes.com/http://www.newyorktimes.com/http://europa.eu/index_en.htmhttp://www.bbcnews./

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