International Economic Cooperation and Agreement

Chapter No. 2 Page No. 96

International Business Environment
INTERNATIONAL ECONOMIC COOPERATION AND AGREEMENTS

REGIONAL ECONOMIC INTEGRATION (TRADE BLOC)

ECONOMIC INTEGRATION SCHEMES ALSO REFERRED AS

TRADE BLOCS.
REGIONAL INTEGRATION AGREEMENTS (RIAS).
REGIONAL TRADE AGREEMENTS (RTA).

IS AN IMPORTANT INTERNATIONAL BUSINESS
ENVIRONMENT.




MOST COUNTRIES IN THE WORLD ARE THE MEMBERS OF
– OR DISCUSSING PARTICIPATION IN – ONE OR MORE
TRADE BLOC.
AGREEMENTS HAVE BEEN CONCLUDED BETWEEN THE
LOW-INCOME AS WELL AS HIGH INCOME COUNTRIES.
MORE RECENTLY, STARTING WITH THE NORTH
AMERICAN FREE TRADE AREA (NAFTA) – HIGH INCOME
AND DEVELOPING COUNTRIES.
MORE THAN HALF OF WORLD TRADE NOW OCCURS
WITHIN ACTUAL OR PROSPECTIVE TRADE BLOCS.
JAPAN AND KOREA ARE TWO NOTABLE EXCEPTIONS TO
MEMBERSHIP IN ANY RIA.



RATIONALE / OBJECTIVES

TO OBTAIN ECONOMIC BENEFITS FROM ACHIEVING A
MORE EFFICIENT PRODUCTION STRUCTURE BY
EXPLOITING ECONOMIES OF SCALE.

TO PURSUE NON – ECONOMIC OBJECTIVES SUCH AS
STRENGTHENING POLITICAL AND MANAGING MIGRATION
FLOWS.

TO ENSURE INCREASED SECURITY OF MARKET ACCESS
FOR SMALLER COUNTRIES BY FORMING REGIONAL
TRADING BLOCS WITH LARGER COUNTRIES.
CONT….



RATIONALE / OBJECTIVES

TO IMPROVE MEMBER’S BARGAINING STRENGTH IN
MULTILATERAL TRADE NEGOTIATIONS.

TO PROMOTE REGIONAL INFANT INDUSTRIES WHICH CAN
NOT BE VIABLE WITHOUT A PROTECTED REGIONAL
MARKET.

TO PREVENT FURTHER DAMAGE TO THEIR TRADING
STRENGTH.



TYPES OF INTEGRATION

ECONOMIC INTEGRATION IS A GENERAL TERM WHICH
COVERS SEVERAL KINDS OF ARRANGEMENTS BY WHICH
TWO OR MORE COUNTRIES CAN AGREE TO DRAW THEIR
ECONOMIES CLOSER TOGETHER.

ALL OF THE ARRANGEMENTS HAVE ONE COMMON
FEATURE, THE USE OF TARIFFS TO DISCRIMINATE
AGAINST GOODS PRODUCED BY COUNTRIES NOT PARTY
TO THE AGREEMENT.




FREE TRADE AREA: IT IS A GROUPING OF COUNTRIES TO
BRING ABOUT FREE TRADE BETWEEN THEM.

CUSTOM UNION: IT ADOPTS A UNIFORM COMMERCIAL
POLICY AGAINST THE NON-MEMBERS.

COMMON MARKET: IT ALLOWS FREE MOVEMENT OF
LABOUR AND CAPITAL WITHIN THE COMMON MARKET,
AND HAVING THE CHARACTERISTICS OF CUSTOM UNION
AND FREE TRADE.




ECONOMIC UNION: AN ADVANCE LEVEL OF
INTEGRATION. APART FROM SATISFYING THE
CONDITIONS OF COMMON MARKET, IT ACHIEVES SOME
DEGREE OF HARMONIZATION OF NATIONAL ECONOMIC
POLICIES, THROUGH A COMMON CENTRAL BANK,
UNIFIED MONETARY AND FISCAL POLICY.

ECONOMIC INTEGRATION: IT IS CHARACTERIZED BY THE
COMPLETION OF THE REMOVAL OF ALL BARRIERS TO
INTRA-BLOC MOVEMENT OF GOODS AND FACTORS,
UNIFICATION OF SOCIAL AND ECONOMIC POLICIES.



THEORY OF CUSTOMS UNION

ACCORDING TO GATT, A CUSTOM UNION MEANS THE
SUBSTITUTION OF A SINGLE CUSTOMS TERRITORY FOR
TWO OR MORE CUSTOMS TERRITORIES. SO THAT:
1. DUTIES AND OTHER RESTRICTIVE REGULATIONS OF
COMMERCE ARE ELIMINATED WITH RESPECT TO
SUBSTANTIALLY ALL TRADE BETWEEN THE
CONSTITUENT TERRITORIES OF THE UNION.
2. SUBSTANTIALLY THE SAME DUTIES AND OTHER
REGULATIONS OF COMMERCE APPLIED BY EACH OF THE
MEMBERS OF THE UNION TO THE TRADE TERRITORIES
NOT INCLUDED IN THE UNION FROM NON-MEMBERS.

Chapter No. 2 Page No.100


A CUSTOMS UNION HAS:
1. STATIC EFFECTS: IT INVOLVES A REALLOCATION OF
RESOURCES AMONG EXISTING INDUSTRIES, USING
EXISTING SUPPLIES OF THE FACTORS AND EXISTING
TECHNOLOGY.
THERE ARE TWO TYPES OF STATIC EFFECTS,
PRODUCTION EFFECTS AND CONSUMPTION EFFECTS.

2. DYNAMIC EFFECTS: IT REFERS TO CERTAIN
DEVELOPMENTS LIKE INCREASED COMPETITION,
STIMULUS TO TECHNOLOGICAL CHANGES, STIMULUS TO
INVESTMENT AND INCREASED ECONOMIES OF SCALE.



PRODUCTION EFFECTS:
REFERS TO THE CHANGES IN THE SOURCE OF SUPPLY
OR PRODUCTION BASES OF A COMMODITY RESULTING
FROM THE FORMATION OF THE CUSTOMS UNION.
CONSUMPTION EFFECTS:
1. POSITIVE CONSUMPTION EFFECT. DUE TO INCREASED
EFFICIENCY IN SOURCE ALLOCATION THE REAL INCOME
OF THE CONSUMERS WILL INCREASE.

2. NEGATIVE CONSUMPTION EFFECT: DIVERSION OF THE
CONSUMER PURCHASES FROM LOW COST OUT SIDE
PRODUCERS TO HIGH COST PRODUCERS IN THE
CUSTOMS UNION.



EUROPEAN UNION

EUROPEAN ECONOMIC COMMUNITY (EEC)
IS ALSO KNOWN AS:
EUROPEAN COMMON MARKET (ECM)
EUROPEAN COMMUNITY (EC)
EUROPEAN UNION (EU)
EEC WHICH ORIGINALLY COMPRISE SIX NATIONS,
BELGIUM, FRANCE, FEDERAL REPUBLIC OF GERMANY,
ITALY, LUXEMBOURG AND NETHERLANDS WAS
BROUGHT INTO BEING BY THE TREATY OF ROME.



EUROPEAN ECONOMIC COMMUNITY
THE TREATY OF ROME REQUIRED EVERY MEMBER
COUNTRY TO:
ELIMINATE TARIFFS, QUOTAS AND OTHER BARRIERS ON
INTRA-COMMUNITY TRADE.
DEVISE A COMMON INTERNAL TARIFF ON IMPORTS FROM
THE REST OF THE WORLD.
ALLOW THE FREE MOVEMENT OF FACTORS OF
PRODUCTION WITHIN THE COMMUNITY.
HARMONIES THEIR TAXATION AND MONETARY POLICIES
AND SOCIAL SECURITY POLICIES.
ADOPT A COMMON POLICY ON AGRICULTURE,
TRANSPORT AND COMPETITION IN INDUSTRY.



EC 1992

A DETILED PROGRAMME FOR ATTAINING A SINGLE
INTEGRATED MARKET WAS SET FORTH BY THE EC
COMMISSION (THE EC’S EXECUTIVE BODY) IN JUNE 1985 IN A
WHITE PAPER ENTITLED “COMPLETING THE INTERNAL
MARKET”. THE EC COUNCIL (THE EC’S SUPREME DECISION
MAKING BODY ) PROMPTLY COMMITTED THE EC TO CARRY
OUT WHITE PAPER PROGRAMME. THIS PROGRAMME
WHICH ENVISAGED THE UNIFICATION OF THE
ECONOMIES OF THE MEMBER NATIONS INTO A SINGLE
MARKET IS EC 92.



EC 1992
THE UNIFICATION WOULD LEAD TO THE RESTRUCTURING
OF THE ECONOMY OF THE EC RESULTING, IMPROVEMENT
IN PRODUCTION, TRADE CREATION, AND INCREASE IN
CONSUMPTION.
THE REAL PURPOSE OF THE SINGLE MARKET IS TO
BOOST THE COMPETITIVENESS OF EUROPEAN INDUSTRY
AGAINST ITS RIVAL, PARTICULARLY USA, JAPAN AND
SOUTH-EAST ASIAN NATIONS.
THE BENEFIT OF LIBERALIZATION WILL BE EXTENDED TO
NON-EC COUNTRIES PROVIDED THEY RECIPROCATE.



INDO-EU TRADE
THE EC, AS A SINGLE UNIT, IS INDIA'S LARGEST PARTNER.
LARGEST TRADE PARTNERS OF INDIA HAVE BEEN WEST
GERMANY AND THE U. K.WITHIN EU.
INDIA’S MAIN EXPORTS TO EC INCLUDE TEXTILE, JUTE,
LEATHER AND LEATHER MANUFACTURES, POLISHED
DIAMONDS, ENGINEERING GOODS, CHEMICALS, MARINE
PRODUCTS.
IMPORTS INCLUDES EDIBLE OILS, FERTILIZERS, DAIRY
PRODUCTS, STEEL, CAPITAL GOODS, OPTICAL
INSTRUMENTS, ALUMINIUM AND COPPER PRODUCTS,
PHOTO AND CINEMATOGRAPHIC GOODS.



INDO-EU TRADE

EXPORT PERFORMANCE HAS BEEN REGARDED AS POOR.
SEVERAL FACTORS SUCH AS LACK OF PRICE
COMPETITIVENESS, POOR QUALITY, POOR IMAGE, BAD
REPUTATION IN DELIVERY SCHEDULE, POOR EXPORT
MARKETING SKILL.THESE PROBLEMS INDICATE THE AREA
OF CORRECTIVE MEASURES TO IMPROVE EXPORTS.
THE EC IS HIGHLY COMPETITIVE MARKET.
UNLESS COMPETITIVENESS MEASURES UPTO THE
INTERNATIONAL LEVEL THINGS WILL BECOME MORE
DIFFICULT.



INDO-EU TRADE

THE EC IS A VERY POTENTIAL MARKET AND INDIA
SHOULD PAY SUFFICIENT ATTENTION TO TAKING
ADVANTAGE OF THIS ENLARGING MARKET.
MANY COUNTRIES, INCLUDING JAPAN AND SOUTH-EAST
ASIAN COUNTRIES HAVE BEEN TAKING MEASURES TO
SET-UP THEIR MANUFACTURING / ASSEMBLING UNITS IN
THE COMMUNITY.
INDIA’S ACHIEVEMENT IN THIS DIRECTION HAS BEEN NOT
VERY SIGNIFICANT.



IMPLICATIONS OF EURO FOR INDIA.

THE EUROLAND ACCOUNTS FOR ABOUT ONE FIFTH OF
INDIA'S FOREIGN TRADE.
EURO WILL BENEFIT INDIAN EXPORTS AS PRODUCTS FROM
THIS COUNTRY WILL BECOME CHEAPER IN THE EUROLAND.
15 PRODUCT GROUPS FOR EXPORTS HAVE A PRICE
ELASTICITY WHICH WILL HELP THEM TO CAPTURE A
SIGNIFICANT PORTION OF THE EUROPEAN MARKETS WITH
LOWER PRICES.
THE PRESSURE TO INTRODUCE UNIFORM PRICES WILL COME
FROM THE HIGHER END OF DISTRIBUTION CHANNEL AND
INDIAN EXPORTERS WILL HAVE TO REDESIGN THEIR EXPORT
PRICING STRATEGIES ACCORDINGLY.



NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA)

NAFTA HAD ITS ORIGIN IN THE CANADA - U.S.

FREE TRADE AGREEMENT WHICH BECAME EFFECTIVE
ON JANUARY1, 1989.

MEXICO BECAME A MEMBER OF IT.

NAFTA IS A LARGE TRADING BLOC WITH A COMBINED
POPULATION AND TOTAL GNP GREATER THAN THE
15 MEMBER EU.

NAFTA COULD FURTHER EXPAND SUBSTANTIALLY BY
ADDING MORE COUNTRIES IN THE FUTURE.




NAFTA COVERS THE FOLLOWING AREAS:

MARKET ACCESS.
TRADE RULES SERVICES.
INVESTMENT.
INTELLECTUAL PROPERTY.
DISPUTE SETTLEMENT.




NAFTA HAS ACHIEVED SUBSTANTIAL TRADE
LIBERALIZATION.
TRADE BETWEEN THE U.S. AND CANADA AND THE U.S.
AND MEXICO IS SUBSTANTIAL AND HAS BEEN RISING
FAST.
THE TWO TRADING RELATIONSHIP BETWEEN THE UNITED
STATES AND CANADA IS THE LARGEST IN THE WORLD.
MEXICO REPLACED JAPAN AS THE SECOND LARGEST
MARKET FOR U.S. EXPORTS.




FOREIGN INVESTMENT IN MEXICO HAS RISEN
SUBSTANTIALLY SINCE THE AGREEMENT.

COMPANIES FROM OUTSIDE NAFTA HAVE BEEN
MAKING LARGE INVESTMENT IN MEXICO TO GAIN A
FREE ENTRY TO THE HUGE MARKET.



ECONOMIC INTEGRATION IN DEVELOPING COUNTRIES

ECONOMIC INTEGRATION OF DEVELOPING COUNTRIES HAS
BEEN ADVOCATED BY MANY EXPERTS AS A MEANS TO
ACCELERATE ECONOMIC DEVELOPMENT AND STRENGTHEN
THEIR TRADING AND BARGAINING POWER VIS-A-VIS THE
DEVELOPED ECONOMIES.

THE UNITED NATIONS CONFERENCE ON TRADE AND
DEVELOPMENT (UNCTAD) HAS FELT THAT REGIONAL
ECONOMIC GROUPING, INTEGRATING OR OTHER FORMS OF
ECONOMIC COOPERATION SHOULD BE PROMOTED AMONG
DEVELOPING COUNTRIES AS A MEANS OF EXPANDING.




THE ASSOCIATION OF SOUTH EAST ASIAN NATIONS (ASEAN)
WAS FORMED BY THE BANGKOK DECLARATION 1967 BY FIVE
COUNTRIES, VIZ., INDONESIA, MALAYSIA, PHILIPPINES,
SINGAPORE AND THAILAND. WITH A VIEW TO ACCELERATE
ECONOMIC PROGRESS.
ASEAN DOES NOT FUNCTION AS A REGIONAL TRADE
ARRANGEMENT, IT HAS BECOME AN EFFECTIVE
INTERLOCUTOR FOR COOPERATION IN ECONOMIC MATTERS
AND FOREIGN AFFAIRS WITH OECD.
THE ASEAN NOW CONSTITUTE A LARGER MARKET FOR
JAPAN THAN DOES THE UNITED STATES.




THERE IS A STRONG VIEW THAT INDIA SHOULD ALSO
INTEGRATE WITH ASEAN.

THE FIRST ASEAN - INDIA SUMMIT HELD IN
NOVEMBER 2002 HAS BEEN EXPECTED TO SET THE
STAGE FOR INDIA TO MOVE PURPOSEFULLY AHEAD
TO ACHIEVE THIS.



SOUTH-SOUTH COOPERATION

AS THE SOUTH COMMISSION POINTS OUT,
IT HAS BECOME APPARENT THAT THE DYNAMICS OF
ECONOMIC GROWTH IN THE NORTH IS NO LONGER A
RELIABLE OR SUFFICIENT MOTOR FOR GENERATING
SUSTAINED GROWTH IN THE SOUTH… NEITHER CAN
SOUTH RELY ON THE NORTH TO PROVIDE IT WITH
TECHNOLOGY ON TERMS AND CONDITIONS THAT SUIT
THE SOUTH, OR HELP IT TO GENERATE ITS OWN
TECHNOLOGY.



SCOPE OF ECDC

SOUTH-SOUTH COOPERATION CAN PROVIDE IMPORTANT
NEW OPPORTUNITIES FOR DEVELOPMENT BASED ON:
GEOGRAPHICAL PROXIMITY.
SIMILARITIES IN DEMAND AND TASTES.
RELEVANCE OF RESPECTIVE DEVELOPMENT
EXPERIENCE, KNOW HOW AND SKILL.
AVAILABILITY OF COMPLEMENTARY NATURAL AND
FINANCIAL RESOURCES AND MANAGEMENT SKILLS.
ADDITIONAL POSSIBILITIES FOR TRADING ARE ALSO
OFFERED BY THE GREATER DIVERSITY IN LEVEL OF
DEVELOPMENT.



SCOPE OF ECDC

IT IS IMPORTANT THAT COOPERATION SHOULD NOT ONLY
TAKE PLACE BETWEEN GOVERNMENT AGENCIES, TRADING,
INDUSTRIAL AND FINANCIAL ENTERPRISES, TRADE UNIONS,
RESEARCH ORGANIZATION, NON GOVERNMENTAL
ORGANIZATIONS, AND THE MEDIA OF THE SOUTH SHOULD
ALL BE ENCOURAGED AND HELPED TO CONTRIBUTE TO THE
ADVANCEMENT OF THE COLLECTIVE CAUSE OF THE SOUTH
AND ITS SOLIDARITY IN ACTION.



RATIONALE

OBJECTIVES OF SSC:

TO ACCELERATE THE PACE OF DEVELOPMENT.

TO INCREASE ECONOMIC EFFICIENCY.

TO STRENGTHEN THE STATUS OF THE SOUTH
VIS-À-VIS THE NORTH.



FUNCTIONAL AREAS OF COOPERATION

FUNCTIONAL AREAS DESERVE PRIORITY AND SUSTAINED
ACTION:

FINANCE.
TRADE.
INDUSTRY AND BUSINESS.
SERVICES.
SCIENCE AND TECHNOLOGY.
ENVIRONMENT AND DEVELOPMENT.
FOOD SECURITY.
TRANSPORT AND OTHER INFRASTRUCTURAL LINKS.
INFORMATION AND COMMUNICATIONS.
PEOPLE TO PEOPLE CONTACTS.



SAARC

THE SOUTH ASIAN ASSOCIATION FOR REGIONAL
COOPERATION (SAARC) INVOLVING SEVEN
COUNTRIES, INDIA, BANGLADESH, NEPAL, BHUTAN,
SRI LANKA, AND MALDIVES WAS FORMALLY
LAUNCHED IN DECEMBER 1985.

THE FUNDAMENTAL GOAL OF SAARC IS TO
ACCELERATE ECONOMIC AND SOCIAL
DEVELOPMENT THROUGH OPTIMUM UTILIZATION OF
THEIR HUMAN AND MATERIAL RESOURCES.



OBJECTIVES OF SAARC

TO PROMOTE THE WELFARE OF THE PEOPLE OF SOUTH
ASIA AND TO IMPROVE THEIR QUALITY OF LIFE.
TO ACCELERATE ECONOMIC GROWTH, SOCIAL
PROGRESS AND CULTURAL DEVELOPMENT IN THE
REGION AND TO PROVIDE ALL INDIVIDUALS THE
OPPORTUNITY TO LIVE IN DIGNITY AND REALIZE THEIR
FULL POTENTIAL.
TO PROMOTE AND STRENGTHEN COLLECTIVE SELF
RELIANCE AMONG THE COUNTRIES OF SOUTH ASIA.
TO CONTRIBUTE TO MUTUAL TRUST, UNDERSTANDING
AND APPRECIATION OF EACH OTHER’S PROBLEMS.
CONT…..



OBJECTIVES OF SAARC

TO PROMOTE ACTIVE COLLABORATION AND MUTUAL
ASSISTANCE IN THE ECONOMIC, SOCIAL, CULTURAL,
TECHNICAL AND SCIENTIFIC FIELD.
TO STRENGTHEN COOPERATION WITH OTHER
DEVELOPING COUNTRIES.
TO STRENGTHEN COOPERATION AMONG
THEMSELVES IN INTERNATIONAL FORUMS ON
MATTERS OF COMMON INTERESTS.
TO COOPERATE WITH INTERNATIONAL AND
REGIONAL ORGANIZATIONS WITH SIMILAR AIMS AND
PURPOSES.



SAPTA
THE SIXTH SAARC SUMMIT HELD IN COLOMBO STRONGLY
MOOTED THE IDEA OF A SAARC PREFERENTIAL TRADING
ARRANGEMENT (SAPTA) AND ALL THE FOREIGN MINISTERS
OF MEMBER STATES SIGNED THE AGREEMENT.
THE BASIC PRINCIPLES OF SAPTA ARE :

OVERALL RECIPROCITY AND MUTUALITY OF
ADVANTAGES.
STEP-BY-STEP NEGOTIATIONS AND EXTENSION OF
PREFERENTIAL TRADE ARRANGEMENT IN STAGES.
INCLUSION OF ALL TYPES OF PRODUCTS--- RAW,
SEMI –PROCESSED AND PROCESSED.
SPECIAL AND FAVOURABLE TREATMENT TO
LEAST DEVELOPMENT COUNTRIES (LDCs).



SAPTA

SPECIAL TREATMENT TO LDCs INCLUDE:
ALLOWANCE OF FAVOURABLE PERCENTAGE POINTS.
APPLICATION OF RELAXED RULES OF ORIGIN.
FAVOURABLE TERMS FOR TECHNICAL ASSISTANCE.
DUTY FREE ACCESS.
DEEPER TARIFF PREFERENCES.
REMOVAL OF NON-TARIFF AND PARA-TARIFF BARRIERS.
NEGOTIATION OF LONG TERM CONTRACTS TO
SUPPORT SUSTAINABLE EXPORTS AND PROVISION OF
SPECIAL FACILITIES WITH REGARD TO SHIPPING AND
DOCUMENTATION.
TRAINING FACILITIES AND SUPPORT TO EXPORT
MARKETING.



SAPTA

ALL THE SAARC COUNTRIES HAVE SUBSTANTIALLY
REDUCED IN TARIFF AND MODIFIED TARIFF STRUCTURES IN
VIEW OF ECONOMIC POLICY REFORMS.
TO IMPROVE THE EFFICIENCY OF THE DOMESTIC
INDUSTRIES.
THIS PROCESS SHOULD HELP THE EXPANSION OF
INTRA-REGIONAL TRADE.
THE PRESENCE OF NON-TARIFF BARRIERS IN DIFFERENT
FORMS ARE ACTING AS CONSTRAINTS TO REALIZE THE
POTENTIAL FOR TRADE EXPANSION.



SAPTA

TODAY ,SAARC COUNTRIES SHARE IN TOTAL WORLD
TRADE IS NOT EVEN 1 PER CENT.

THEIR TRADE AMONG THEMSELVES LINGERS BELOW
3 PER CENT OF THEIR TOTAL FOREIGN TRADE.

WHEN COMPARED WITH MORE THAN 60 PER CENT FOR
INTRA-EUROPEAN UNION TRADE OF THEIR GLOBAL
TRADE AND NEARLY 40 PER CENT FOR NORTH AMERICA
AND EAST ASIA, IT IS VERY POOR.



SAPTA

THERE IS A VIEW THAT WHAT IS NEEDED IS A CUSTOMS
UNION AND NOT A FREE TRADE AREA BECAUSE A FREE
TRADE AREA HAS AN IMPORTANT PROBLEM THAT GOODS
FROM A NON-MEMBER COUNTRY MAY ENTER A MEMBER
COUNTRY AND FROM THERE FREELY FLOW THROUGH OUT
THE FREE TRADE AREA CAUSING DAMAGE TO THE
DOMESTIC INDUSTRY / AGRICULTURE OF SOME OF THE
MEMBERS.THE ‘RULE OF THE ORIGIN’ DESIGNED TO CHECK
THIS DOES NOT WORK.



INDO-LANKA FREE TRADE AGREEMENT

OBJECTIVES:
TO PROMOTE THROUGH, THE EXPANSION OF TRADE
DEVELOPMENT OF THE ECONOMIC RELATIONS.
TO PROVIDE FAIR CONDITIONS OF COMPETITION FOR TRADE.
IN THE IMPLEMENTATION OF THIS AGREEMENT BOTH THE
COUNTRIES WOULD PAY DUE REGARD TO THE PRINCIPLES
OF RECIPROCITY.
TO CONTRIBUTE, IN THIS WAY, BY THE REMOVAL OF
BARRIERS TO TRADE TO THE HARMONIOUS DEVELOPMENT
AND EXPANSION OF WORLD TRADE.
THE FREE TRADE AGREEMENT IS LIKELY TO BENEFIT
SRI LANKA A LOT AND THE BENEFIT TO INDIA MAY NOT BE
MUCH AS SRI LANKA IS A SMALL MARKET.


INTERNATIONAL COMMODITY AGREEMENT

INTERNATIONAL COMMODITY AGREEMENTS

BASIC OBJECTIVE OF STIMULATING A DYNAMIC AND STEADY
GROWTH AND ENSURING REASONABLE PREDICTABILITY IN
THE REAL EXPORT EARNING OF THE DEVELOPING
COUNTRIES SO AS TO PROVIDE THEM WITH EXPANDING
RESOURCES FOR THEIR ECONOMIC AND SOCIAL
DEVELOPMENT WHILE TAKING INTO ACCOUNT THE INTEREST
OF CONSUMERS IN IMPORTING COUNTRIES, THROUGH
REMUNERATIVE , EQUITABLE AND STABLE PRICES FOR
PRIMARY COMMODITIES, HAVING DUE REGARD TO THEIR
PURCHASING POWER , ASSURED SATISFACTORY ACCESS
AND INCREASED IMPORTS AND CONSUMPTION AS WELL AS
COORDINATION OF PRODUCTION AND MARKETING POLICES.



INTERNATIONAL COMMODITY AGREEMENTS

COMMODITY AGREEMENTS MAY TAKE ANY OF THE
FOUR FORMS:

QUOTA.

BUFFER STOCK.

BILATERAL CONTRACT.

MULTILATERAL CONTRACT.


QUOTA AGREEMENTS
INTERNATIONAL QUOTA AGREEMENT SEEK TO PREVENT A
FALL IN COMMODITY PRICES BY REGULATING THEIR SUPPLY.
EXPORT QUOTAS ARE DETERMINED AND ALLOCATED TO
PARTICIPATING COUNTRIES ACCORDING TO SOME
MUTUALLY AGREED FORMULA, AND THEY UNDERTAKE TO
RESTRICT THE EXPORT OR PRODUCTION BY CERTAIN
PERCENTAGE OF THE BASIC QUOTA DECIDED BY THE
CENTRAL COMMITTEE OR COUNCIL.
QUOTA AVOID ACCUMULATION OF STOCKS, REQUIRE NO
FINANCING AND DO NOT CALL FOR CONTINUOUS OPERATING
DECISIONS.
QUOTAS WOULD PROBABLY HAVE TO BE COMBINED WITH
BUFFER POOLS IN ORDER TO PROVIDE THE NECESSARY
SHORT-RUN FLEXIBILITY OF SUPPLY.



BUFFER STOCK AGREEMENT

INTERNATIONAL BUFFER STOCK AGREEMENT SEEK TO
STABILIES COMMODITY PRICES BY MAINTAINING THE
DEMAND-SUPPLY BALANCE.
THE BUFFER POOL METHOD HAS ALREADY BEEN TRIED IN
CASE OF TIN, COCOA AND SUGAR, AND COMMODITIES LIKE
RUBBER, TEA, AND COPPER HAVE BEEN SUGGESTED AS
PROSPECTIVE COMMODITIES FOR THE NEW AGREEMENTS.
THE BUFFER STOCK AGREEMENT SUFFER FROM CERTAIN
LIMITATIONS. IT CAN BE EFFECTED ONLY FOR THOSE
PRODUCTS WHICH CAN BE STORED AT A RELATIVELY LOW
COST WITHOUT THE DANGER OF DETERIORATION.



BILATERAL / MULTILATERAL CONTRACTS

BILATERAL CONTRACT TO PURCHASE AND SELL CERTAIN
QUANTITIES OF A COMMODITY AT AGREED PRICES MAY BE
ENTERED INTO BETWEEN A MAJOR IMPORTER AND
EXPORTER OF THE COMMODITY. IN SUCH AN AGREEMENT
THE UPPER AND THE LOWER PRICE ARE SPECIFIED.
IF THE MARKET PRICE RISES ABOVE THE UPPER LIMIT
SPECIFIED,THE EXPORTING COUNTRY IS OBLIGED TO SELL
TO THE IMPORTING COUNTRY A CERTAIN QUANTITY OF THE
COMMODITY AT THE UPPER PRICE FIXED BY THE
AGREEMENT.
IF THE MARKET PRICE FALLS BELOW THE LOWER LIMIT
SPECIFIED THE IMPORTER IS OBLIGED TO PURCHASE THE
CONTRACTED QUANTITY AT THE SPECIFIED LOWER PRICE.


CARTELS
EXISTENCE OF INTERNATIONAL CARTELS HAMPER FREE
TRADE IN THE CONCERNED PRODUCTS.
INTERNATIONAL CARTELS ARE AGREEMENTS BETWEEN
PRODUCERS LOCATED IN DIFFERENT COUNTRIES OR
BETWEEN GOVERNMENTS OF DIFFERENT COUNTRIES TO
RESTRICT COMPETITION.
WHILE DOMESTIC CARTELS ARE OFTEN PROHIBITED OR
CONTROLLED BY THE RESPECTIVE GOVERNMENTS,
INTERNATIONAL CARTELS ARE OFTEN SPONSORED BY THE
GOVERNMENTS OF THE RESPECTIVE COUNTRIES.
THE CARTEL IS BASICALLY A UNILATERAL DECISION BY
PRODUCERS TO COOPERATE .
MAJOR OBJECTIVE OF CARTEL IS TO RAISE PRICE AND
RESTRICT COMPETITION.


GSP AND GSTP

GENERALIZED SYSTEM OF PREFERENCES (GSP)

IT IS A SCHEME DESIGNED BY THE UNCTAD TO ENCOURAGE
EXPORTS OF DEVELOPING COUNTRIES TO DEVELOPED
COUNTRIES. UNDER THIS SCHEME, DEVELOPED COUNTRIES
GRANT DUTY CONCESSION ON IMPORTS OF SPECIFIED
MANUFACTURERS AND SEMI- MANUFACTURERS FROM
DEVELOPING COUNTRIES.
THE EEC COUNTRIES AND A NUMBER OF OTHER COUNTRIES
SUCH AS, USA, JAPAN, NORWAY, NEW ZEALAND, FINLAND,
SWEDEN, HUNGRY, SWITZERLAND, AUSTRALIA etc, HAVE
INTRODUCED THE GSP.
THE GSP FACILITY IS AVAILABLE ONLY TO DEVELOPING
COUNTRIES, IT IS SUBJECTED TO CERTAIN STRINGENT
LIMITATIONS.


GSP AND GSTP

GENERALIZED SYSTEM OF PREFERENCES (GSP)

A PARTICULAR ITEM IS QUALIFIED FOR GSP BENEFIT ONLY IF
THE FOLLOWING CONDITIONS ARE SATISFIED.
THE PRODUCT MUST BE INCLUDED IN THE GSP LSIT.
THE COUNTRY EXPORTING THE ITEM SHOULD BE DECLARED
UNDER THE GSP AS A BENEFICIARY.
THE VALUE ADDED REQUIREMENT CRITERIA MUST BE
COMPLIED WITH.
THE PRODUCT MUST BE IMPORTED INTO THE GSP DONOR
COUNTRY FROM A GSP BENEFICIARY COUNTRY.
THE EXPORTER MUST SEND TO HIS BUYER A CERTIFICATE
OF ORIGIN IN THE PRESCRIBED FORM DULY FILLED AND
DESIGNED BY HIM.


GSP AND GSTP

GLOBAL SYSTEM OF TRADE PREFERENCES (GSTP)
THE GROUP OF 77 MINISTERIAL CONFERENCE ON GSTP
AGREEMENT INCLUDED:
ACROSS THE BOARD TARIFF PREFERENCE MARGIN OF 10%.
THE REMOVAL OF REDUCTION OF NON –TARIFF BARRIERS
SELECTION OF SPECIFIC SECTORS AND PRODUCTS WHERE
TRADE PREFERENCES COULD BE EXTENDED AND TRADE
CREATING PRODUCTION SHARING AND MARKETING
ARRANGEMENTS.
HOWEVER EFFECTIVE THE GSTP MAY BE , IT CAN ONLY BE
ONE OF THE MANY INSTRUMENTS FOR PROMOTING SOUTH-
SOUTH FINANCIAL AND MONETARY COOPERATION, NEW
PAYMENT ARRANGEMENTS AND JOINT DEBENTURES IN
PRODUCTION AND MARKETING.

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