Wto,Regional blocs,International commodity agreement and global trade

1. WTO,REGIONAL
BLOCS,INTERNATIONAL
COMMODITY AGREEMENT &
GLOBAL TRADE

2. MAR ATHANASIOS COLLEGE FOR
ADVANCED STUDIES
MACFAST,THIRUVALLA
Group members
Alpha Shine
Aneesh George
Chinchu P Thomas
Joji Thomas
Sukanya Devi

3. 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 watchdog in
the spheres of trade in goods and
services, foreign investment, intellectual property
rights, etc.

4. 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

5. 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.

6. 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

7. 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.

8.  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

9. 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

10.  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

11. 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

12. Major trade blocs
EU (EUROPEAN UNION)
 The world’s largest trading bloc
 Formed from the ‘Treaty of Rome’ in 1957
 It comprised of 6 membersGermany, 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.

14. 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 North American
Agreement on Environmental Cooperation
(NAAEC) and the North American Agreement on
Labour Cooperation (NAALC).

15. 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.

16. Organisation of Petroleum Exporting
Countries (OPEC)
 A permanent, intergovernmental
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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, Austria.

17. 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 AFTA are: 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

18. Objectives of ASEAN
 Discuss issues peacefully.
 Protection of regional peace and stability.
 Cultural Development among its members.
 Social Progress.
 Accelerating Economic Growth.

19. SAARC(South Asian Association for
Regional Cooperation)
 It was established on 8th December 1985.
 It consists of nations of South Asia that includes
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Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan
and Srilanka.
SAARC focus on areas such as Science and
Technology, agricultural and rural development, telecommunication, 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.

20. 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

21. Objectives:
 Expanding
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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

22. Forms of Commodity Agreements
1.
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
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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

23. 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.

24. 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.

25.  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.

26. 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.

27. 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

28. What are these trade barriers?
– They are tariffs imposed in international trade
– And non-tariff measures adopted by
importing/exporting countries

29. 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

30. 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

31. 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