1. Regional Trade Blocks International business is significantly impacted by schemes of economic integration of different nations. As a building block of economic development of the member countries. Foster economic cooperation between countries. It may sometimes become a stumbling block for firms located outside the block. 265 RTAs notified by NTO by 2003 Mexico was participating in 13 RTAs

2. Forms of integration (RTA – Regional Trade Agreements) There are different levels of integration Free Trade Area Customs Union Common Market Economic Union Economic Integration Free Trade among members Free Trade among members Free Trade among members Free Trade among members Free Trade among members Common External Commercial policy Common External Commercial policy Common External Commercial policy Common External Commercial policy Free factor Mobility within The market Free factor Mobility within The market Free factor Mobility within The market Harmonized Economic Policies Harmonized Economic Policies Super national Organizational Structure

3. Prominent Trade Blocks 1.European Union (EU) European Economic Community, European Common Market or the European Community (EC) is most successful regional economic integration.

4. Formed in 1958 (01 Jan, EEC) – Belgium, France, Germany (west), Italy, Luxembourg & Netherlands by virtue of treaty of Rome, 1957. It required every member to :  Eliminate tariffs, quotas & other barriers to intra community trade.  Devise a common internal tariff on their imports.

5.  Harmonize their taxation & monetary policies & social security policies.  Adopt common policy on agriculture, transport & competition in industry. EEC was expanded in 1973 – UK, Denmark & Ireland Greece joined In 1981. Spain, Portugal – 01, Jan 1986 Austria, Finland & Sweden – in 1990s

6. 01 July, 1968 – Established Customs Union 1979 – European Monetary System 1992 – Integrated Market (common market) Population lager than US & GDP close to US & higher than Japan it was a huge market

7. May 01, 2004 – Membership rise to 25 from 15 – Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovak Republic, Hungary, Slovenia, Cyprus & Malta Turkey Bulgaria & Romania – Joined in 2007 – 27

8. Indo EU Trade – Largest trade partner Exports Imports 2005-06 Rs. 107, 127 croresRs. 101, 600crores 1990-91Rs. 8951 croresRs. 12, 680 crores 1970-71Rs. 282 croresRs. 320 crores 2007 (India) Import - Rs. 26.2 B Export - Rs. 29.4 B

9. 2. NAFTA (North American Free trade Agreement) US + Canada – 1988 + Mexico – 1994. Eliminate all tariffs moving among 3 member countries. It includes not only trade liberalization (most RTBs) but also labor & environmental standards.

10. 3.LAFTA - Latin American Free Trade Association Argentina, Bolivia, Brazil, Chile, Paraguay, Peru, Uruguay & Venezuela CACM – Central American Common Market EI Salvador, Guatemala, Honduras, Nicaragua & Costa Rica

11. 4.ASEAN – Association of South East Asian Nations – 1967. Indonesia, Malaysia, Philippines, Singapore, Thailand 1984 – Brunei, Darussalam, 1995 : Vietnam 1997 – Myanmar, Laos, 1999 - Cambodia

12. 5.GCC (Gulf Cooperation Council) 1981, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia & UAE 6.SAARC – South Asian Association of Regional Cooperation – 1985 – Bangladesh, Bhutan, Indi Maldives, Nepal, Pakistan, Sri Lanka Intra – regional trade of SAARC is insignificant

13. SAPTA – SAARC preferential trading arrangement in 6 th SAARC summit on 2 nd April 1993 & came into effect from 7 Dec 1995. Transformed as SAFTA – South Asian Free Trade Area w.e.f. 01 July 2006.

14. 7.APEC (Asia Pacific Economic Cooperation) : 1989 Australia, Brunei, Darussalam, Canada, Indonesia, Japan, Malaysia, New Zealand, Philippines, The Republic of Korea, Singapore, Thailand & US. 1991 – China, Hong Kong, Taiwan, 1993 – Mexico, Papua, New guinea 1994 – Chile 1998 – Peru, Russia & Vietnam

15. Role of Regional & International Institutes (a)WTO – World Trade Organization (HQ – Geneva) ITO was proposed to be set up along with IMF & world bank on the recommendations of Bretton Woods conference Instead of ITO GATT was established in 1947.

16. GATT was biased in favor of developed countries Developing countries insisted on establishing ITO To solve this issue, the UN appointed a committee in 1963, the committee recommended, as a via media, the UNCTAD ( UN conference on Trade & development) in 1965 which could manage some concessions for the developing countries.

17. Uruguay Round (1986 – 1994) – outcome on Tariffs, non- tariff measures, rules, services, IPR, Dispute settlement, creation of WTO. Final act was signed at a meeting in Marrakesh, morocco in April 1994.

18. Objectives of WTO Raising standard of living & incomes, promoting full employment & optimum utilization of world resources. Introduce sustainable development (Development & environment) Developing & LDCs secure a better share of growth.

19. Functions of WTO Administrating & implementing multilateral agreements. Acting as a forum for multilateral trade organizations Seeking to resolve trade disputes Cooperating with other international institutions involved in Global economic policy – making.

20. Maintaining trade related database. Members are to notify detailed trade measures & statistics. Acting as a management consultant for world trade Technical assistance & training for developing countries.

21. Principles of WTO Transparency MFN Treatment National Treatment Free Trade Principal Dismantle Trade Barriers Rule based Trading system Treatment of LCDs Competition Environment Principles Of WTO

22. Structure of WTO Ministerial Conference Director General Secretariat Dispute Settlement General Council Trade Policy Review Board Committee on Budget Committee on Trade & Development Committee on BOP Council for Services Trade related Intellectual Property Rights council Council for Goods

23. Key subject to WTO Agriculture Info Tech Agreement (ITA) Health & Safety Measures Multilateral Agreement on Investment Helping LDCs & Food Importing Countries Textiles & Clothing TRIPS TRIMS (Trade Related Investment Measures) GATS (General Agreement on Trade in Services) Dispute Settlement

24. Dispute settlement body General Council Meeting as Trade Policy Review body. General Council as Dispute Body Appellate Body

25. Dispute Settlement Panels Committees on Trade & Environment Trade & Development Sub – Committees on LDCs BOP Regional Trade Agreement Budget, Finance & Administrative Council for Trade in Goods Committees on Market access Agriculture Sanitary Measures Tech. Barriers to Trade Anti- Dumping Import Licensing Customers Valuation Safe Guards TRIMS Council for Services Financial Services GATS rules Council for TRIPS  General Agreement on Trade in Services

26. International Monetary Fund ( IMF) IMF is an international organization that overseas the global financial system by following the macro – economic policies of its member countries, in particular those with an impact on exchange rates & the BOP.

27. It also offers financial & technical assistance to its members, making It international lender of last resort. HQWashington D.C. Established in 1944 Total Member Countries 185 to stabilize exchange rates & to surprise the reconstruction of the world’s international payment system.

28. Countries contribute to a pool which could be borrowed from, on a temporary basis, by countries with payment imbalances. It provides aids & concessional loans (long term & short term) 3.49% for SDRs. Currency – Special Drawing Rights (SDRs) 25% in other currencies 75% in own currencies MD – Dominique Strauss- Kahn

29. Responsibilities : Foster Global Monetary Cooperation Secure financial stability Facilitate international trade Promote high employment & sustainable Economic growth & Reduce poverty

30. Structure Pmt. Seats US Germany UK France Japan China Russia Saudi Arabia Managing Director 24 Member Executive Board Board of Governors all Nations are represented 16 members are elected for 2 yrs. Governor (India) – P. Chidamaram Alternate Governor – Y.D. Reddy

31. Data Dissemination In 1996 & 1997 IMF established standards to guide members in the dissemination to the public of their economic & Financial data. The primary objective is to encourage member countries to build a frame works to improve data quality & increase statistical capacity.

32. Membership Qualification Any country may apply for membership to the IMF. First considered by IMF’s Executive Board E.B. submits a report to the BOG of IMF with

33. Recommendations in the form “Membership Resolution” (It has amount of Quota in the IMF & form of payment of subscription) Board of Governors adopt “Membership Resolution” The applicant state take legal steps required under its own law to enable If to sign the IMF’s articles of agreement & fulfill obligations of IMF membership.

34. Any member withdraw form IMF (very rare) (in 2007, Ecuador announcedHugo Chavez ) Member’s Quota determines the amount of its subscription, its voting weight, its access to IMF financing & allocation of SDRs.

35. A member state can’t unilaterally increase its quota increases must be approved by the Executive Board & are linked to formula (country’s size, economy etc.) In 2001, China was prevented from increasing its quota.

36. Member’s Quota & Voting Powers Country Quota %Vote % Millions of SDRsNumbers China8090.13.72811513.66 France 1073854.941076354.86 Germany13008.25.991303325.88 India4158.21.91418321.89 Japan13312.86.131333786.02 Saudi 6985.53.21701053.17 Arabia UK10738.54.941076354.86 USA37149.317.0937174316.79 Switzer3458.51.59348351.57 Land

37. Assistance & Reforms : Primary objective of IMF is to provide financial assistance to countries that experience serious financial & economic difficulties using funds deposited with the IMF from the Institute’s 185 countries Member states with BOP problems may request loans

38. In return countries are required to launch certain reforms. These are required because countries with fixed exchange rate policies can engage in fiscal, monetary & political practices may lead to the crisis itself. For example, nations with severe budget deficit, rampant inflation, strict price controls, safer under – valued or over valued currencies (fixed exchange rate)

39. The structural adjustment programs are intended to ensure that IMF is actually helping to prevent financial crises rather merely funding financial recklessness.

40. Financing Facilities Concessional & Non – concessional lending PRGF (poverty reduction & growth facility) 0.5 % rate of interest 5 ½ - 10 yrs. 1.Standby Arrangements (SBA) 2.Extended Fund Facility (EFF) 3.Supplemental Reserve Facility (SRF) 4.Contingent Credit Lines (SCL) 5.Compensatory Financing Facility (CFF)

41. 1.Short term BOP problem, 12 – 18 months 2.More serious BOP problem 3 yrs 3.Very short term financing on large scale 3.5% rate & 1 – 1½ yrs. Sudden loss of market confidence – Emerging Market Economy 4.To prevent crisis 1½ - 3 ½ % up to 1 yr. 5.Sudden shortfall in export earnings or increased cost of cereal imports. no surcharge. 12 – 18 months.