regional trade agreement

1. REGIONAL TRADE
AGREEMENTS
Presented by:-
Prabhat Verma 248
Mukul Gupta 284
Prerit Srivastava 270
Abhishek Nagpal 08

2. REGIONAL TRADE AGREEMENT
A Trade agreement (also known as trade pact) is a wide ranging tax, tariff and trade treaty that
often includes investment guarantees. The most common trade agreements are of the
Preferential And Free Trade types are concluded in order to reduce (or eliminate) tariffs, quotas
and other trade restrictions on items traded between the signatories.
In the WTO, Regional Trade Agreements (RTAs) are defined as reciprocal trade agreements
between two or more partners. They include free trade agreements and customs unions.
A free-trade area is the region encompassing a trade bloc whose member countries have
signed a free-trade agreement (FTA). Such agreements involve cooperation between at least
two countries to reduce trade barriers – import quotas and tariffs – and to increase trade of
goods and services with each other.
• Following the RTA between Mongolia and Japan in June 2016, all WTO members now have
an RTA in force.
• As of 20 June 2017, 279 RTAs were in force.

3. OBJECTIVES
• To obtain economic benefits.
• To pursue non-economic objectives
• To ensure increased security of market access.
• To improve members bargaining strength.
• To promote regional infant industries.
• Trade Diversion.

4. ADVANTAGES
• The Resources are pooled
• Rapid Technological Innovations
• Elimination of Tariffs
• Increased economic growth
• More dynamic business climate
• Lower government spending
• Foreign direct investment

7. TYPES OF INTEGRATION
• Free Trade Area
• Preferential Trade Area
• Common Market
• Economic Union
• Custom Union

8. REGIONAL TRADE AGREEMENTS
• Consider two countries - Brazil and Argentina
• Suppose these countries initially pursue independent and non-
preferential trade policies
• Trade policies of these two countries are not coordinated in any way and
do not discriminate among countries
• There is no integration of the countries’ labor, capital, and money markets
• First-level RTA is known as Preferential trade area
• Brazil and Argentina lower their trade barriers between each
other, but do not eliminate them
• Labor and capital markets remain unintegrated
• Because the two countries have not fully eliminated trade
barriers between each other, this type of RTA is not allowed by
the WTO.

9. • Second-level RTA is known as Free Trade Area
• Brazil and Argentina eliminate the trade barriers between each other
• With regard to non-member countries Brazil and Argentina pursue independent policies
• Labor and capital markets remain unintegrated
• Third-level regional agreement is known As Customs Union
• Brazil and Argentina eliminate the trade barriers between each other
• Additionally, member countries adopt common trade barriers with regard to non-member
countries (often referred to as a common external tariff)
• Labor and capital markets remain unintegrated
• Fourth-level RTA is known as Common Market
• A customs union in which labor and capital markets are integrated into a regional market
• Any restrictions on movements of labor and physical capital (direct foreign investment) have been
removed
REGIONAL TRADE AGREEMENTS

10. • WTO members who wish to form FTAs or CUs may do so
• However, there are certain requirements
• Trade barriers against non-members cannot be “higher or more restrictive than” those
in existence prior to the FTA or CU
• FTA or CU must be formed “within a reasonable length of time”
• FTA or CU must eliminate trade barriers on “substantially all the trade” among the
members
• With regard to services, the General Agreement on Trade in Services (GATS) requires
that the FTA or CU involve “substantial sectoral coverage”
REGIONAL TRADE AGREEMENTS

11. • How to determine whether a product is from a partner country
• Suppose that Brazil and Argentina form a RTA
• Shirt produced in Venezuela is imported into Brazil and label “Made in Brazil” is attached
• Shirt can then be imported into Argentina with no restrictions or tariffs—product is not
really made in Brazil
• To protect against such possibilities, RTA members usually define rules of origin
• Can be defined in a number of ways, including by
• Amount of value added in an RTA partner country
• Degree of product transformation
REGIONAL TRADE AGREEMENTS

12. THE ECONOMIC EFFECTS OF REGIONAL
TRADE AGREEMENTS
• Trade creation
• Occurs when the formation of a FTA or CU leads to a switching of imports from a high-cost
source to a low-cost source
• Tends to improve welfare
• Trade diversion
• Occurs when imports switch from a low-cost source to a high-cost source
• Tends to worsen welfare

13. REGIONALISM & MULTILATERALISM
• Represent two alternative trade policy options available to the countries of the
world
• The 1950s and 1960s saw “first wave” of RTAs in developing world
• The 1980’s saw beginning of “second wave” of RTAs
• What role will the second wave of RTAs play vis-à-vis the multilateral efforts
toward trade liberalization pursued under the GATT-WTO framework
• Will the second wave of RTAs complement the multilateral framework or will it
work at cross-purposes to this framework?

14. REGIONALISM & MULTILATERALISM
• Opponents argue
• RTAs are discriminatory by nature
• They draw attention to “spaghetti-bowl” nature of second-wave RTAs
• Meaning the overlapping nature of most RTAs, with most WTO
members holding simultaneous membership in many RTAs at once
• For example, Mexico has signed FTA agreements with the United
States, Canada, Nicaragua, Costa Rica, Chile, Bolivia, El Salvador,
Guatemala, Honduras, Colombia, Venezuela, and the European
Union
• The negotiating energies put into RTAs will detract from those put into
multilateral agreements under the auspices of the WTO

15. REGIONALISM & MULTILATERALISM
• Key issue facing multilateral trading system is how to best manage and regulate RTAs
• Responsibility falls to the WTO Committee on RTAs
• A number of points are worth stressing here
• GATT era oversight of RTAs was inadequate
• Marrakesh Agreement establishing WTO included an “understanding” on RTAs
• Specified that the relevant measure to assess the phrase “shall not be higher or more
restrictive than” is a weighted average of tariff rates and that “within a reasonable
length of time” is to be no more than ten years
• Specifies that all new RTAs must be notified to the WTO and a WTO working party is to
be established to examine each notification and to ascertain its impact on the
multilateral trading system
• WTO could go further and tighten its requirements on the external protection of FTAs
and CUs
• Is possible to lessen the tensions between regionalism and multilateralism but probably not
possible to eliminate these tensions entirely.

16. TYPES OF FREE TRADE AGREEMENT
• BILATERAL AGREEMENT
Bilateral trade agreements are between two nations at a time, giving them favored trading status with each
other. The goal is to give them expanded access to each other's markets, and increase each country's
economic growth.
• MULTILATERAL AGREEMENT
Multilateral trade agreements are commerce treaties between three or more nations. The agreements
reduce tariffs and make it easier for businesses to import and export. Since they are among many
countries, they are difficult to negotiate.
• “Multilateralism” refers to the GATT/WTO system as well as the trade negotiations that take
place among all GATT/WTO members as a group
• Recall that one of the founding principles of this system is nondiscrimination
• Involves the most favored nation (MFN) and national treatment (NT) sub-principles
• Each WTO member must grant to each other member treatment as favorable as they extend to any
other member country

17. GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT)
GATT was a legal agreement between many countries, whose overall purpose was to promote
international trade by reducing or eliminating trade barriers such as tariffs or quotas. According to its
preamble, its purpose was the "substantial reduction of tariffs and other trade barriers and the
elimination of preferences, on a reciprocal and mutually advantageous basis.“
• The objectives of GATT are:
» to raise standard of living.
» to ensure full employment
» to develop the full use of the resources of the world, and
» to expand production and international trade.

18. WORLD TRADE ORGANISATION
The World Trade Organization (WTO) is an intergovernmental organization that
regulates international trade. The WTO officially commenced on 1 January 1995
under the Marrakesh Agreement, signed by 123 nations on 15 April 1994, replacing
the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. It is
the largest international economic organization in the world.
WTO has the following five specific functions;
• The WTO shall facilitate the implementation, administration and operation.
• The WTO shall provide the forum for negotiations among its members.
• The WTO shall administer the ‘Understanding on Rules and Procedures Governing the
settlement of Disputes.’
• The WTO shall administer the ‘Trade Review Mechanism’.
• The WTO shall cooperate, as appropriate, with the IMF and IBRD and its affiliated agencies.

20. TYPES OF BILATERAL FREE TRADE AGREEMENT
• THE ASSOCIATION OF SOUTH-EAST ASIAN NATIONS (ASEAN)
• SOUTH ASIAN ASSOCIATION FOR REGIONAL COOPERATION (SAARC)
• NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA)
• EUROPIAN UNION (EU)
• TRANS-PACIFIC PARTNERSHIP (TPP),

21. THE ASSOCIATION OF SOUTH-EAST ASIAN NATIONS
(ASEAN)
ASEAN is a regional intergovernmental organization comprising ten Southeast Asian states which
promotes Pan-Asianism and intergovernmental cooperation and facilitates economic, political,
military, educational and cultural integration amongst its members and Asian states.
It was formed on 8 August 1967.
ASEAN was preceded by an organization formed in 31 July 1961 called the Association of Southeast
Asia (ASA)
ASEAN has bilateral agreements with the following countries and blocs:
• ASEAN–China Free Trade Area (ACFTA), in effect as of 1 January 2010
• ASEAN–India Free Trade Area (AIFTA), in effect as of 1 January 2010
• ASEAN–Japan Comprehensive Economic Partnership (AJCEP), in effect as of 1 December 2008
• ASEAN–Korea Free Trade Area (AKFTA), in effect as of 1 January 2010
• ASEAN–Australia-New Zealand Free Trade Area (AANZFTA)

22. ASEAN Majors
Country
Population
(2016, millions)
GDP (nominal
2016)
(millions of US
dollars)
GDP (nominal
per capita)
(US dollars)
GDP (PPP 2017)
(millions of US
dollars)
GDP (PPP per
capita)
(US dollars)
Indonesia 261.1 $932,448 $3,640 $3,257,123 $12,432
Thailand 68.9 $406,949 $5,939 $1,226,407 $17,749
Philippines 103.3 $304,696 $2,982 $878,980 $8,270
Singapore 5.6 $296,967 $53,431 $514,837 $90,724
Malaysia 31.2 $296,359 $9,360 $922,057 $28,636
Vietnam 94.6 $201,326 $2,173 $648,234 $6,925
Six majors refers to the six largest economies in the area that are many times larger than the remaining four
ASEAN countries:

23. PURPOSE
The emergence and successful operation of EEC and NAFTA gave impetus for the forming
ASEAN member countries have developed economically at a fast rate in the lies is well
educated and skilled human resources. The ASEAN member countries are rich in oil,
agricultural goods and modern industrial products.
As set out in the ASEAN Declaration, the aims and purposes of ASEAN are:
• To accelerate economic growth, social progress, and cultural development in the region.
• To promote regional peace.
• To promote collaboration and mutual assistance on matters of common interest.
• To provide assistance to each other in the form of training and research facilities.
• To collaborate for the better utilization of agriculture and industry to raise the living standards of
the people.
• To promote Southeast Asian studies.
• To maintain close, beneficial co-operation with existing international organizations with similar
aims and purposes.

24. SOUTH ASIAN ASSOCIATION FOR REGIONAL COOPERATION
(SAARC)
The South Asian Association for Regional Cooperation (SAARC) is the regional
intergovernmental organization and geopolitical union of nations in South Asia. Its member
states include Afghanistan, Bangladesh, Bhutan, India, Nepal, the Maldives, Pakistan and Sri
Lanka. SAARC comprises 3% of the world's area, 21% of the world's population and 3.8%
(US$ 2.9 trillion) of the global economy, as of 2015.
SAARC was founded in Dhaka on 8th December, 1985.
The organization promotes development of economic and regional integration

25. SAARC Apex Bodies
SAARC has six Apex Bodies, they are-
• SAARC Chamber of Commerce & Industry (SCCI),
• South Asian Association for Regional Cooperation (SAARCLAW),
• South Asian Federation of Accountants (SAFA),
• South Asia Foundation (SAF),
• South Asia Initiative to End Violence Against Children (SAIEVAC),
• Foundation of SAARC Writers and Literature (FOSWAL)

26. OBJECTIVE
The objectives of the SAARC are:
• To improve the quality of life and welfare of the people.
• To develop the region economically, socially and culturally.
• To provide the opportunity to the people of the region to live in dignity and to exploit their
potentialities
• To enhance the self-reliance of the member countries jointly.
• To provide conducive climate for creating and enhancing mutual trust.
• To enhance the mutual assistance among member countries.
• To enhance the cooperation with other developing economies.
• To have unity among the member countries.
• To extend cooperation to other trade blocks.

27. NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA)
The North American Free Trade Agreement (NAFTA) is an agreement signed by Canada, Mexico, and
the United States, creating a trilateral trade bloc in North America. The agreement came into force
on January 1, 1994. It superseded the Canada–United States Free Trade Agreement between the U.S.
and Canada.
NAFTA has two supplements: the North American Agreement on Environmental Cooperation
(NAAEC) and the North American Agreement on Labor Cooperation (NAALC).

28. OBJECTIVES
The objectives of the NAFTA include:
 To create new business opportunities.
 To enhance the competitive advantage of the companies.
 To reduce the prices of the products and services.
 To enhance industrial development.
 To provide stable and predictable political environment.
 To develop industries in Mexico.
 To assist Mexico in earning additional foreign exchange.
 To improve and consolidate political relationship.

29. • Opening up of Government procurement markets in each member country of NAFTA.
• Residents of NAFTA countries can invest in any other NAFTA countries freely.
• Protection of intellectual properly rights of the NAFTA member countries.
• Simplification and harmonization of product standards.
• Free flow of employees from one member country to another.

30. EUROPIAN UNION (EU)
The European Union (EU) is a political and economic union of 28 member states that are located
primarily in Europe. It has an estimated population of over 510 million.
The EU has developed an internal single market through a standardized system of laws that apply in all
member states. EU policies aim to ensure the free movement of people, goods, services, and capital
within the internal market enact legislation in justice and home affairs, and maintain common policies
on trade, agriculture, fisheries, and regional development.
A monetary union was established in 1999 and came into full force in 2002, and is composed of 19 EU
member states which use the Euro currency.
The EU traces its origins from the European Coal and Steel Community (ECSC) and the European
Economic Community (EEC), established, respectively, by the 1951 Treaty of Paris and 1957 Treaty of
Rome.
The EU in 2016 generated a nominal Gross Domestic Product (GDP) of 16.477 trillion US dollars.

31. TRANS PACIFIC PARTNERSHIP (TPP)
The Trans-Pacific Partnership (TPP), or the Trans Pacific Partnership Agreement (TPPA), is a trade
agreement between Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New
Zealand, Peru, Singapore, the United States (until 23 January 2017) and Vietnam.
It is the largest trade agreement in history.
A final agreement was drafted on 5 October 2015, made public on 5 November 2015, and signed on 4
February 2016 in Auckland, New Zealand, concluding seven years of negotiations.

32. UNCTAD
(United Nations
Conference On Trade
& Development)

33. ABOUT UNCTAD
• Acronym for United Nations Conference on
Trade & Development
• Established in 1964
• Headquarters in Geneva, Switzerland
• Principle organ of United Nations General
Assembly
• 193 members
• 400 staff members
• It deals with trade, investment and development
issues

34. • To address problems of developing countries relating to
economic development
• Integrate developing countries into world economy
• Promote development friendly integration
WHY UNCTAD CAME INTO EXISTENCE?

35. BRIEF HISTORY OF UNCTAD
• First phase: 1964 to late 1970s
Rise and climax of UNCTAD’s negotiating role
• Second phase: 1980s
Strengthening the analytical capacity with greater focus on macroeconomic and financial
issues (debt-crisis)
• Third phase: 1990s onwards
The positive agenda and identification of the shortcomings of the mainstream development
strategy.

36. MAIN FUNCTIONS OF UNCTAD
• To promote international trade all over the world-between developed and developing
countries with different socio-economic system.
• To formulate principles and policies on international trade and related problems of
economic development.
• To make proposal for putting the said principles and policies into effect.
• To review and facilitate the co-ordination of activities of the other institutions within the
U.N. system in the field of international trade.
• To be available as a center for harmonious trade and related documents in the
development policies of governments.

37. OBJECTIVES
• To maximize trade, investments and development
opportunities
• To eliminate trade gap between developed and developing
countries
• To accelerate economic growth rate of developing
countries

38. ACTIVITIES
• Research and support of negotiations for commodity
agreements
• Technical elaborations of new trade schemes
• Activities that help developing countries in trade and
capital flow

39. HOW DOES UNCTAD WORK ?
Intergovernmental level
Commission
meetings
Expert
meetings
Monitoring of
inter-
governmental
activities
A TWO-TRACK
PROCESS
Consensus
Building
Policy
Analysis
Research and
analytical
studies
Human
resources
capacity-
building
Institutional
Capacity-
building

40. UNCTAD’S WORK
Investment, Enterprise
development, and technologies
Trade (goods, services and commodities),
services infrastructure and
Trade facilitation
Development
strategies
& global
interdependence
Least developed
& developing
countriesDEVELOPMENT