International business

1. Trade Blocs

2. Trade Blocs
• Regional trade blocs are intergovernmental
associations that manage and promote trade
activities for specific regions of the world.

3. Types of trading bloc / Levels of
economic integration
• Free Trade Area
• Customs union
• Common market
• Economic union
• Economic integration

4. Free trade
area
Free trade
among
members
Custom union Free trade
among
members
Common
external
commercial
policy
Common
market
Free trade
among
members
Common
external
commercial
policy
Free factor
mobility
within the
market
Economic
union
Free trade
among
members
Common
external
commercial
policy
Free factor
mobility
within the
market
Harmonised
economic
policies
Economic
integration
Free trade
among
members
Common
external
commercial
policy
Free factor
mobility
within the
market
Harmonised
economic
policies
Supernational
organisational
structures

5. Major Trade Blocs
• EU (European Union )
• NAFTA (North American Free Trade Agreement)
• South-south cooperation
• SAPTA
• Indo-lanka free trade agreement

6. European Union
Objectives:-
• Setting up a common market
• Continuous & balanced expansion
• Closer relations between the member states.

7. • Founded in 1951 by six neighboring states Germany, France, Italy,
Belgium, Netherlands, and Luxembourg
• Initial aim was to create a single market for goods, services,
capital, and labour by eliminating barriers to trade and promoting
free trade between members
• In terms of dealing with non-members, common tariff barriers
were erected against cheap imports, such as those from Japan,
whose goods prices were artificially low because of the
undervalued yen
• 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

8. ACTIVITIES OF EU
• Elimination of custom duties, quantitative restrictions with
regard to export & imports.
• Establishment of a common custom tariff & commercial
policy.
• Abolition of all obstacles for movement of persons,
services & capital.
• Application of programmes in order to coordinate the
economic policies.

10. Benefits of EU
• European harmony- Europe has managed to heal the divisions
which were so painfully exposed in the World War –II. EU was awarded the
Nobel Peace Prize in 2012 for helping to promote peace and international co-
operation.
• Free trade within the bloc- Free trade and removal of non-tariff
barriers have helped reduce costs and prices for consumers.
• Market access and trade creation- Easier access to each
other’s markets & high cost domestic producers to be replaced by lower
cost, and more efficient imports.
• Flexible Economy- Free movement of labour and capital have helped
create a more flexible economy & the immigration of workers helped to fill
labour market shortages.
• Protection- Firms inside the bloc are protected from cheaper imports
from outside, such as cheap imports from China and Vietnam.

11. Problems/Challenges of EU
• Loss of benefits- The benefits of free trade between countries in
different blocs is lost.
• Distortion of trade-Trading blocs are likely to distort world trade,
and reduce the beneficial effects of specialization and the exploitation
of comparative advantage.
• Inefficiencies and trade diversion- Inefficient producers
within the bloc can be protected from more efficient ones outside the bloc.
• Unemployment- due to prolong recession.
• Prolonged Fall in GDP- Economic stagnancy
• More bureaucracy less democracy- EU has created extra
layers of bureaucracy whilst taking away decision making process further
from local communities.

12. NAFTA(North American Free Trade
Agreement)
• Initially trade between Canada & U.S.
• NAFTA went into effect in 1994 after the joining
of Mexico.
• U.S.- Canada trade is the largest bilateral trade
in the world.
• The U.S. 1st Mexico’s & Canada largest trading
partner.
• NAFTA is a powerful trading bloc with a
combined population and GNP greater than 15
member EU.

13. NAFTA covers the following trade
areas
• Market access
• Trade rules
• Services
• Investment
• Intellectual property
• Dispute settlement

14. Provisions of NAFTA
• Duty-free market access.
• Trade rules- safeguard, subsidies, countervailing
& antidumping duties, health & safety standards.
• Rules on trade in services & investment
• Protection of intellectual property.
• Dispute settlement mechanism.

16. SSC(South-South cooperation)
• Objectives
– To accelerate the pace of development
– To increase the economic efficiency
– To strengthen the status of the vis-à-vis north

17. • Functional areas
– Finance
– Trade
– Industry and business
– Services
– Science and technology
– Environment and development

18. SAPTA(SAARC preferential trade
agreement)
• The council of ministers have signed the SAARC
preferential trading arrangement agreement on
April 11, 1993.
• Basic principles
– Overall reciprocity and mutuality of advantages
– Step-by-step negotiations and extension of preferential trade
agreement
– Inclusion of all types of products
– Special and favorable treatment to least developed countries.

19. Objectives of SAPTA
• To gradually liberalize the trade among members of
SAARC.
• To eliminate trade barriers among SAARC countries
& reduce or eliminate tariffs.
• To promote and sustain mutual trade & economic
cooperation among member countries.

20. INDO-LANKA free trade agreement
• Agreement signed in Dec 28, 1998, a large
number of items eligible for duty free trade
• Objectives
– To promote through the expansion of trade
– To provide fair conditions of competition for trade
between India and Sri Lanka
– To remove the barriers of trade to the harmonious
development and expansion of world trade.

21. Thank You…