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Assignment

 

Topic: Levels of economic Integration

Trade alliances.

Submitted to: Sir Fawad Bashir

Submitted by: Qaisar SardarKhokher

Class: MBA-8-F

Roll NO. 2541

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Management is no longer constrained by national borders. Managers in all sizesand types of organizations are faced with opportunities and challenges of managing in global environment.Two important features of global environment that managers must understandare…

• Regional trade alliances

• Different types of global environment

What is trade alliance?Trade alliance is formed to reduce the trade barriers and increase the economicco-operation on small scale. Many country with in same geographic area often

 join together to establish various forms of economic cooperation. Now a day global competition has been reshaped by creation of regional tradingand cooperation agreements.Examples:

1. European union (EU)2. north America free trade free alliance (NAFTA)3. association of south east Asian nations (ASEAN)4. Latin America free trade organization (LAFTA)

Five steps to build a trade allianceTrade theorists have identified five steps of economic cooperation. These stepsare…

1. Free trade area2. Customs union

3. Common markets4. Economic and monetary union5. Political union

1. Free trade areaThe countries involved widraw duties among themselves. While they maintaintheir own tariffs against outsiders. The purpose of free trade area is to facilitatetrade among member nations. The problem with this kind of arrangement is thelake of coordination of tariff against the nonmembers, enabling nonmembers todirect their export products to enter the free trade area at the point of lowest

external tariffs.2. A custom union

It is an extension of free trade area in sense that member countries must alsoagree on a common schedule of identical tariff rates. In effect the objective of the customs union is to harmonize trade regulations and to establish common

 barriers against outsiders. Uniform tariff and common commercial policyagainst members are necessary to prevent them to taking advantages of situation

 by taking goods initially to a member country that has lowest joint boundaries.

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The world oldest customs union is the Bulex custom union recent example isTurkey and EU it is too effect in from 1996.

3. A common market It is higher and more complex level of economic interaction then either a freetrade area or a custom union. In a common market, countries remove allcustoms and other restrictions on the movement of the factors of production

among the members of common markets. As a result, business laws and labour laws standardized to ensure undistorted competition. For an outsider, the pointof entry is no longer dictating member countries with in common markets. The

 point of entry is now determined by member’s non tariff barrier. The outsider strategy should be to enter a member country that has least non tariff restrictions because goods can be shipped freely once inside the commonmarket.

4. Monetary unionSome authorities prefer to distinguish a monetary union from an economic

union. In essences it means one money or single currency. The Delorescommittee has issued a report entitled economic and monetary union ineuropion community. That defines monetary union as having three basiccharacteristics…

• Total and irreversible convertibility of currencies.• Complete freedom of capital movements in fully integrated financial

markets.

• Irrevocably fixed exchange rate with no flections margins betweenmember currencies.

The economic advantage of single currency includes the elimination of currency risk and lower transition costs. The European commissions’s onemarkets, one money report defines an economic union as single market for goods, services, capital, and labour complimented by common polices andcoordination in several economic and structural areas. Economic union providesnumber of areas of benefits in term of efficiency and economic growth thetransaction cost associated with one currency another eliminated, and theelimination of foreign exchange risk should improve trade and capital mobility .In addition stronger competition polices should permute efficiency gains. Interm of inflation the implementation of an economic union is a demonstration

of a credible committee to stable prices.

5. A political unionIt is ultimate type of economic cooperation because it involves the integrationof both economic and political polices.With France and Germany leading the way, the European Union has beenmoving toward social, political, and economic integration. EU goal is to form

 political union similar to one created by United States.

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Three important regional alliances.

European Union 

( Abbr. EU)

An economic and political union established in 1993 after the ratification of theMaastricht Treaty by members of the European Community, which forms itscore. In establishing the European Union, the treaty expanded the politicalscope of the European Community, especially in the area of foreign andsecurity policy, and provided for the creation of a central European bank andthe adoption of a common currency by the end of the 20th century.

Organizational structure

EC, which is The core of the EU, originally referred to the group of WesternEuropean nations that belonged to each of three treaty organizations—theEuropean Coal and Steel Community (ECSC), the European EconomicCommunity (EEC), and the European Atomic Energy Community (Euratom).In 1967 these organizations were consolidated under a comprehensivegoverning body composed of representatives from the member nations anddivided into four main branches—the European Commission (formerly theCommission of the European Communities), the Council of the EuropeanUnion (formerly the Council of Ministers of the European Communities), theEuropean Parliament, and the Justice. Although the EU has no single seat of 

government, many of its most important offices are in Brussels, Belgium. TheEuropean Commission, which has executive and some legislative functions, isheadquartered there, as is the Council of the European Union; it is also wherethe various committees of the European Parliament generally meet to preparefor the monthly sessions in Strasbourg, France. In addition to the four main

 branches of the EU's governing body, there are the Court of Auditors, whichoversees EU expenditures; the Economic and Social Committee, a consultative

 body representing the interests of labor, employers, farmers, consumers, andother groups; and the European Council, a consultative but highly influential

 body composed primarily of the president of the Commission and the heads of government of the EU nations and their foreign ministers.

 Evolution

The history of the EU began shortly after World War II, when there developedin Europe a strong revulsion against national rivalries and parochial loyalties.While postwar recovery was stimulated by the Marshall Plan, the idea of aunited Europe was held up as the basis for European strength and security and

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the best way of preventing another European war. In 1950 Robert Schuman,France's foreign minister, proposed that the coal and steel industries of Franceand West Germany be coordinated under a single supranational authority.France and West Germany were soon joined by four other countries—Belgium,Luxembourg, the Netherlands, and Italy—in forming (1952) the ECSC. TheEEC (until the late 1980s it was known informally as the Common Market) and

EURATOM were established by the Treaty of Rome in 1958. The EEC,working on a large scale to promote the convergence of national economies intoa single European economy, soon emerged as the most significant of the threetreaty organizations.

The Brussels Treaty (1965) provided for the merger of the organizations intowhat came to be known as the EC and later the EU. Under Charles de Gaulle,France vetoed (1963) Britain's initial application for membership in theCommon Market, five years after vetoing a British proposal that the CommonMarket be expanded into a transatlantic free-trade area. In the interim, Britain

had engineered the formation (1959) of the European Free Trade Association.In 1973 the EC expanded, as Great Britain, Ireland, and Denmark joined.Greece joined in 1981, and Spain and Portugal in 1986. With Germanreunification in 1990, the former East Germany also was absorbed into theCommunity.

The Single European Act (1987) amended the EC's treaties so as to strengthenthe organization's ability to create a single internal market. The Treaty of European Union, signed in Maastricht, the Netherlands, in 1992 and ratified in

1993, provided for a central banking system, a common currency to replace thenational currencies (the euro, see European Monetary System), a legaldefinition of the EU, and a framework for expanding the EU's political role,

 particularly in the area of foreign and security policy. The member countriescompleted their move toward a single market in 1993 and agreed to participatein a larger common market, the European Economic Area (est. 1994), with mostof the European Free Trade Association (EFTA) nations. In 1995, Austria,Finland, and Sweden, all former EFTA members, joined the EU, but Norwaydid not, having rejected membership for the second time in 1994.

A crisis within the EU was precipitated in 1996 when sales of British beef were banned because of “mad cow disease” .Britain retaliated by vowing to paralyzeEU business until the ban was lifted, but that crisis eased when a British planfor eradicating the disease was approved. The ban was lifted in 1999, butFrench refusal to permit the sale of British beef resulted in new strains withinthe EU. In 1998, as a prelude to their 1999 adoption of the euro, 11 EU nationsestablished the European Central Bank; the euro was introduced into circulationin 2002 by 12 EU nations.

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The EU was rocked by charges of corruption and mismanagement in itsexecutive body, the European Commission (EC), in 1999. In response the EC'sexecutive commission including its president, Jacques Santer , resigned, and anew group of commissioners headed by Romano Prodi was soon installed. Inactions taken later that year the EU agreed to absorb the functions of theWestern European Union, a comparatively dormant European defense alliance,

thus moving toward making the EU a military power with defensive and peacekeeping capabilities.

The installation in Feb., 2000, of a conservative Austrian government thatincluded the right-wing Freedom party, whose leaders had made xenophobic,racist, and anti-Semitic pronouncements, led the other EU members to impose anumber of sanctions on Austria that limited high-level contacts with theAustrian government. Enthusiasm for the sanctions soon waned, however,among smaller EU nations, and the issue threatened to divide the EU. A face-saving fact-finding commission recommended ending the sanctions, stating that

the Austrian government had worked to protect human rights, and the sanctionswere ended in September.

In 2003 the EU and ten non-EU European nations (Estonia, Latvia, Lithuania,Poland, the Czech Republic, Slovakia, Hungary, Slovenia, Cyprus, and Malta)signed treaties that resulted in the largest expansion of the EU the followingyear, increasing the its population by 20% and its land area by 23%. Most of thenewer members are significantly poorer than the largely W European older members. The old and new member nations at first failed to agree on a

constitution for the organization; the main stumbling block concerned voting,with Spain and Poland reluctant to give up a weighted system of votingscheduled for 2006 that would give them a disproportionate influence in the EUrelative to their populations. In Oct., 2004, however, EU nations signed aconstitution with a provision requiring a supermajority of nations to passlegislation. The constitution, which must be ratified by all members to comeinto effect, was rejected by voters in France and the Netherlands in 2005,leading EU leaders to pause in their push for its ratification.

Meanwhile, in 2003 the EU embarked, in minor ways, on its first official

military missions when EU peacekeeping forces replaced the NATO force inMacedonia and were sent by the United Nations to Congo (Kinshasa); thefollowing year the EU assumed responsibility for overseeing the peacekeepersin Bosnia. EU members also took steps toward developing a common defensestrategy independent of NATO, and agreed in 2004 to admit Bulgaria andRomania in 2007 (contingent on those nations meeting the criteria for membership). José Manuel Barroso succeeded Prodi as president of theEuropean Commission late in 2004.

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 European Union

European flag

Motto: In varietate concordia

(Latin: Unity in diversity)

Anthem: Ode to Joy (orchestral)

Capital Brussels

GDP (2005)

- Total (PPP)- Per capita (PPP)

Ranked 1st3 

$12,329,110 million$26,900

Currencies

Euro (EUR or €)4

Other currencies:British pound (GBP or £),Cyprus pound (CYP or C£),Czech koruna (CZK or Kč),Danish krone (DKK or kr),Estonian kroon (EEK or kr),

Hungarian forint (HUF or Ft),Latvian lat (LVL or Ls),Lithuanian litas (LTL or Lt),Maltese lira (MTL or Lm),Polish złoty (PLN or zł),Slovak koruna (SKK or Sk),Slovene tolar (SIT),Swedish krona (SEK or kr)

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The European Union or the EU is an intergovernmental and supranational union of 25 European countries, known as member states. Two new member states will join in 2007 - Romania and Bulgaria. The European Union wasestablished under that name in 1992 by the Treaty on European Union (theMaastricht Treaty). However, many aspects of the Union existed before thatdate through a series of predecessor relationships, dating back to 1951.

The European Union's activities cover all areas of public policy, from health and economic policy to foreign affairs and defense. However, the extent of its

 powers differs greatly between areas. Depending on the area in question, theEU may therefore resemble:

• a federation (for example, on monetary affairs, agricultural, trade andenvironmental policy, economic and social policy)

• a confederation (for example, on home affairs)• an international organization (for example, in foreign affairs)

Year Country

1952 Belgium, France, West Germany, Italy, Luxembourg, The Netherlands (founding members)

1973 Denmark , Ireland, United Kingdom

1981 Greece

1986 Portugal, Spain

1990 East Germany reunites with West Germany and becomes part of the EU

1995 Austria, Finland, Sweden

2004 Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta,Poland, Slovakia, Slovenia

2007 Romania, Bulgaria

Note:

• Greenland, which was granted home rule by Denmark in 1979, left theEuropean Community in 1985, following a referendum.

• Romania and Bulgaria will join the EU on 1 January 2007 

 European Union: European Communities plus CFSP and PJCC 

The European Communities are one of the three pillars of the European Union, being both the most important pillar and the only one to operate primarilythrough supranational institutions. The other two "pillars" – Common Foreignand Security Policy, and Police and Judicial Co-operation in Criminal Matters – are looser intergovernmental groupings. Confusingly, these latter two conceptsare increasingly administered by the Community (as they are built up frommere concepts to actual practice).

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 Evolution of the structures of the European Union.

 Single market 

Many of the policies of the EU relate in one way or another to the development

and maintenance of an effective single market. Significant efforts have beenmade to create harmonized standards – which are designed to bring economic

 benefits through creating larger, more efficient markets.

The power of the single market reaches beyond the EU borders, because to sellwithin the EU, it is beneficial to conform to its standards. Once a non-member country's factories, farmers and merchants conform to EU standards, much of the cost of joining the union has already been sunk. At that point, harmonizingdomestic laws in order to become a full member is relatively painless, and maycreate more wealth through eliminating the customs costs.

The single market has both internal and external aspects:

 Internal policies

• Free trade of goods and services among member states (an aim further extended to three of the four EFTA states by the European EconomicArea, EEA)

• A common EU competition law controlling anti-competitive activities of companies (through antitrust law and merger control) and member states(through the State Aids regime).

• The Schengen treaty allowed removal of internal border controls andharmonization of external controls between its member states. Thisexcludes the UK and Ireland, which have derogations, but includes thenon-EU members Iceland and Norway. Switzerland also voted viareferendum in 2005 to become part of the Schengen zone.

• Freedom for citizens of its member states to live and work anywherewithin the EU with their spouses and children, provided they can supportthemselves (also extended to the other EEA states).

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• Free movement of capital between member states (and other EEA states).• Harmonization of government regulations, corporations law and

trademark registrations.• A single currency, the Euro (excluding the UK , and Denmark , which

have derogations). Sweden, although not having a specific opt-out clause,has not joined the ERM II, voluntarily excluding itself from the monetary

union.• A large amount of environmental policy co-ordination throughout the

Union.• A Common Agricultural Policy and a Common Fisheries Policy.• Common system of indirect taxation, the VAT, as well as common

customs duties and excises on various products.• Funding for the development of disadvantaged regions (structural and

cohesion funds).

 External policies

• A common external customs tariff, and a common position ininternational trade negotiations.

• Funding for programmes in candidate countries and other EasternEuropean countries, as well as aid to many developing countries, throughits Phare and Tacis programmes.

• The establishment of a single market European Energy Community bymeans of the Energy Community South East Europe Treaty.

In a nut shell A key activity of the EU is the establishment andadministration of a common single market , consisting of a customs union , asingle currency (adopted by 12 of the 25 member states), a CommonAgricultural Policy, a common trade policy, and a Common FisheriesPolicy.

If considered a single unit, the European Union has the largest economy in theworld with a 2004 GDP of 11,723,816 million USD using PPP equivalence.The EU economy is expected to grow further over the next decade as morecountries join the union - especially considering that the new states are usually

 poorer than the EU average, and have the capacity to grow at a high rate.However, it is estimated that the euro zone will only grow around 0.3 per cent(Q2 2005) 1, while other industrialized nations will grow faster, such as theUnited States, which is estimated to grow three times as much at around 3.2%(Q2 2005). The European Council published on 17 November  2005 that theeconomy of the European Union will have grown approximately 1.5% in 2005.The euro zone however, will have grown 1.3% in 2005. The European Councilis hopeful that the European Union will grow further in 2006 and in 2007 (2.1%2006 2.4% 2007). Germany, the largest economy in the EU, will grow about:

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0.8% 2005, 1.2% 2006 and 1.6% 2007. After extremely slow growth, it seemsthat the EU will grow again in the next couple of years.

 References:

www.answer.com• Dictionary definition of European Union

The American Heritage® Dictionary of the English Language, Fourth Edition• Encyclopedia information about European Union

The Columbia Electronic Encyclopedia, Sixth Edition Copyright © 2003,

• Wikipedia information about European Union

This article is licensed under the GNU Free Documentation License

• Word Net information about European Union

Word Net 1.7.1 Copyright © 2001 by Princeton University. All rights reserved. Morefrom Word Net

North American Free Trade Agreement

( Abbr. NAFTA) 

 Encyclopedia

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 North American Free Trade Agreement (NAFTA), accord establishing a free-trade zone in North America; it was signed in 1992 by Canada, Mexico, and theUnited States and took effect on Jan. 1, 1994. NAFTA immediately lifted tariffson the majority of goods produced by the signatory nations. It also calls for thegradual elimination, over a period of 15 years, of most remaining barriers to

cross-border investment and to the movement of goods and services among thethree countries. Major industries affected include agriculture, automobile andtextile manufacture, telecommunications, financial services, energy, andtrucking. NAFTA also provides for labor and environmental cooperation amongmember countries. The pact contains provisions for the inclusion of additionalmember nations. Labor representatives have criticized NAFTA, claiming theagreement has led to numerous jobs lost in the United States because industrieshave moved plants to Mexico; NAFTA proponents point to the U.S. jobscreated because of increased imports by Mexico and Canada. The agreement

has negatively affected the economies of several Caribbean countries whoseexports to the United States now compete with duty-free Mexican exports.

 Investment 

A trade agreement between Canada, the United States and Mexico thatencourages free trade between these North American countries.

Investopedia Says: The agreement, implemented on January 1, 1994, is basedon the premise that removing as many tariffs as possible between these North

American countries will increase trade within the region and benefit eachcountry's economy.

 Politics

An agreement between the United States, Canada, and Mexico to establish freetrade. It took effect in 1994 and is designed to eliminate trade barriers betweenthe three nations by 2009. Many American labor unions oppose NAFTA onthe grounds that it takes away jobs from American workers as manufacturers

relocate in Mexico to take advantage of cheaper labor. Others argue that freetrade creates more jobs in the United States than it destroys.

The North American Free Trade Agreement, known usually as NAFTA, is afree trade agreement among Canada, the United States, and Mexico. NAFTAwent into effect on January 1, 1994. NAFTA is also used to refer to thetripartite trading bloc of  North American countries.

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 NAFTA called for immediately eliminating duties on half of all U.S. goodsshipped to Mexico and gradually phasing out other  tariffs over a period of about14 years. Restrictions were to be removed from many categories, includingmotor vehicles and automotive parts, computers, textiles, and agriculture. Thetreaty also protected intellectual property rights (patents, copyrights, andtrademarks) and outlined the removal of restrictions on investment among the

three countries. Provisions regarding worker and environmental protection wereadded later as a result of supplemental agreements signed in 1993. Thisagreement was an expansion of the earlier Canada-U.S. Free Trade Agreement of 1989. Unlike the European Union, NAFTA does not create a set of supranational governmental bodies, nor does it create a body of law which issuperior to national law. NAFTA is a treaty under international law. (Under United States law it is classed as a congressional-executive agreement rather than a treaty, but that reflects a peculiar sense of the term "treaty" in UnitedStates constitutional law, but that sense is not followed by international law or the laws of other states.)

The agreement was initially pursued by free-trade conservative governments inthe US and Canada, led by Canadian Prime Minister Brian Mulroney, and USPresident George H. W. Bush. There was considerable opposition on both sidesof the border, but in the United States it was able to secure passage after President Bill Clinton made its passage a major legislative initiative in 1993.After intense political debate and the negotiation of several side agreements, theUS House passed NAFTA by 234-200 (132 Republicans and 102 Democratsvoting in favor) and the US Senate passed it by 61-38. Some opposition persists

to the present day, although labour unions in Canada have recently removedobjections to the agreement from their platforms.

Official Emblem

The United States and Canada have been arguing for years over the UnitedStates' decision to impose a 27% duty on Canadian softwood lumber imports.Canada has filed numerous motions to have the duty eliminated and thecollected duties returned to Canada. Canada has won every case brought beforethe NAFTA tribunal, the last being on August 10, 2005. The United States

responded by saying "We are, of course, disappointed with the [NAFTA panel's] decision, but it will have no impact on the anti-dumping andcountervailing duty orders," (Neena Moorjani, spokeswoman for U.S. TradeRepresentative Rob Portman). The failure of the U.S. to adhere to the terms of the treaty has generated widespread political debate in Canada. The debateincludes imposing countervailing duties on American products, and possiblyshutting off all or some energy shipments, such as natural gas.

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 Effects

Controversy

 NAFTA has been controversial since it was first proposed. Transnationalcorporations have tended to support NAFTA in the belief that lower tariffs

would increase their profits. Labor unions in Canada and the United States haveopposed NAFTA for fear that jobs would move out of the country due to lower labor costs in Mexico. Some politicians, economists, and policy experts haveopposed free trade for fear that it will turn countries, such as Canada, into

 permanent branch plant economies. Farmers in Mexico have opposed and stilloppose NAFTA because the heavy agriculture subsidies for farmers in theUnited States have put a great deal of downward pressure on Mexicanagricultural prices, forcing many farmers out of business. Opposition to

 NAFTA also comes from environmental, social justice, and other advocacyorganizations that believe NAFTA has detrimental non-economic impacts to

 public health, the environment, etc. In Mexico, as only a single example, poverty has risen considerably since the signing of NAFTA. Wages there havedecreased by as much as 20 percent in some sectors. NAFTA's approval wasquickly followed by an uprising amongst Zapatista revolutionaries, and tension

 between them and the Mexican government remains a major issue.Furthermore, NAFTA was accompanied by dramatic reduction of the influenceof trade unions in Mexico's urban areas. NAFTA has been accompanied by adramatic increase of illegal immigration from Mexico to the United States;

 presumably, a significant fraction of these people are farmers forced off their 

land by bankruptcy. However, since NAFTA was signed, there has also beeneconomic growth in all three nations, with an increase in the standard of livingin Canada, and especially in Mexico, when compared to that in the UnitedStates. NAFTA has helped to integrate the three economies. Canada andMexico have reaped gains from free trade with the largest economy in theworld, while the United States has benefited from unhindered access to their markets and products as well.

Another matter that is particularly controversial is "Chapter 11", which allowscorporations to sue federal governments in the NAFTA region if they feel aregulation or government decision adversely affects their investment. It isargued this provision scares the government from passing environmentalregulation because of possible threats from an international business. For example Methanex, a Canadian corporation, filed a $970 million suit against theUnited States, claiming that a Californian ban on MTBE, a substance that hadfound its way into many wells in the state, was hurtful to the corporation's salesof methanol. In another case Metalclad, an American corporation, was awarded$16.5 million from Mexico after the latter passed regulations banning the toxicwaste dump it intended to construct in El Llano, Aguascalientes. Further, it has

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 been argued that the provision benefits the interests of Canadian and Americancorporations disproportionately more than Mexican businesses, which oftenlack the resources to pursue a suit against the much wealthier states. It has beena longtime fear of some Canadians that this provision gives large US companiestoo much power. There was one case where a Natural Gas company in NovaScotia which pumped from Sable Island wanted to sell cheaper gas to residents

in New Brunswick , a Canadian province, but threats of a lawsuit over Chapter 11 stopped these plans in their tracks.

Since NAFTA was signed, it has been difficult to analyze its macroeconomic effects due to the large number of other variables in the global economy.Various economic studies have generally indicated that rather than creating anactual increased trade, NAFTA has caused trade diversion, in which the

 NAFTA members now import more from each other at the expense of other countries worldwide. Some economists argue that NAFTA has increasedconcentration of wealth in both Mexico and the United States.

Canada

In Canada a large amount of the opposition to NAFTA comes from fears over the possible effects of various clauses and articles of the treaty. For example, if something is sold even once as a commodity, the government cannot stop itssale in the future. This of course applies to the water from Canada's Great Lakesand rivers, fueling fears over the possible destruction of Canadian ecosystemsand Canada's water supply. Other fears come from the effects NAFTA has had

on Canadian law making. In 1996, MMT, a chemical additive that some studieshad linked to nerve damage, was brought into Canada by an Americancompany. The Canadian government banned the importation of the additive but,when sued by the American company, was forced to settle out of court. TheAmerican company argued that their additive had not been conclusively linkedto any health dangers, and that the prohibition was damaging to their company.

 Language

From the perspective of North American consumers, one of the effects of 

 NAFTA has been the significant increase in bilingual or even trilingual labelingon products, for simultaneous distribution through retailers in Canada, the U.S.,and Mexico in French, English, and Spanish.

With reference Wikipedia.com

North American Free Trade Agreement

"NAFTA" is also an abbreviation for the

“ New Zealand Australia Free Trade Agreement ”.

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 References

• Greider, William (1997). One World, Ready or Not . Penguin Press. ISBN0-713-99211-5.

• During 2004. Source: CIA World Factbook 2005, IMF WEO Database• Public Citizen's Report on NAFTA•

George Bush Presidential Library and Museum

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( Abbr. ASEAN)

ESTABLISHMENT AND MEMBERSHIP  The Association of Southeast Asian Nations or ASEAN was establishedon 8 August 1967 in Bangkok by the five original Member Countries,

namely, Indonesia, Malaysia, Philippines, Singapore, and Thailand.Brunei Darussalam joined on 8 January 1984, Vietnam on 28 July 1995,Laos and Myanmar on 23 July 1997, and Cambodia on 30 April 1999.

The ASEAN region has a population of about 500 million, a total area of 4.5 million square kilometers, a combined gross domestic product of US$737 billion, and a total trade of US$ 720 billion. 

OBJECTIVES  

The ASEAN Declaration states that the aims and purposes of theAssociation are: (i) to accelerate the economic growth, social progressand cultural development in the region through joint endeavors in thespirit of equality and partnership in order to strengthen the foundation for a prosperous and peaceful community of Southeast Asian nations, and(ii) to promote regional peace and stability through abiding respect for 

  justice and the rule of law in the relationship among countries in theregion and adherence to the principles of the United Nations Charter. 

In 1995, the ASEAN Heads of States and Government re-affirmed that“Cooperative peace and shared prosperity shall be the fundamentalgoals of ASEAN.” 

Fundamental   Principles 

The Association represents the collective will of the nations of to bind themselves together infriendship and cooperation and, through joint efforts and sacrifices, secure for their peoplesand for posterity the blessings of peace, freedom, and prosperity. (The ASEAN Declaration,Bangkok, 8 August 1967)

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The Treaty of Amity and Cooperation (TAC) in Southeast Asia, signed atthe First ASEAN Summit on 24 February 1976, declared that in their relations with one another, the High Contracting Parties should beguided by the following fundamental principles:

• Mutual respect for the independence, sovereignty, equality,

territorial integrity, and national identity of all nations;• The right of every State to lead its national existence free from

external interference, subversion or coercion;• Non-interference in the internal affairs of one another;• Settlement of differences or disputes by peaceful manner;• Renunciation of the threat or use of force; and• Effective cooperation among themselves.

POLITICAL COOPERATION  

The TAC stated that ASEAN political and security dialogue andcooperation should aim to promote regional peace and stability byenhancing regional resilience. Regional resilience shall be achieved bycooperating in all fields based on the principles of self-confidence, self-reliance, mutual respect, cooperation, and solidarity, which shallconstitute the foundation for a strong and viable community of nations inSoutheast Asia. Some of the major political accords of ASEAN are as follows:

• ASEAN Declaration, Bangkok, 8 August 1967;• Zone of Peace, Freedom and Neutrality Declaration, Kuala

Lumpur, 27 November 1971;• Declaration of ASEAN Concord, Bali, 24 February 1976;• Treaty of Amity and Cooperation in Southeast Asia, Bali, 24

February 1976;• ASEAN Declaration on the South China Sea, Manila, 22 July

1992;• Treaty on the Southeast Asia Nuclear Weapon-Free Zone,

Bangkok, 15 December 1997; and• ASEAN Vision 2020, Kuala Lumpur, 15 December 1997.• Declaration of ASEAN Concord II, Bali, 7 October 2003

The ASEAN Security Community is envisaged to bring ASEAN’s politicaland security cooperation to a higher plane to ensure that countries in theregion live at peace with one another and with the world at large in a

  just, democratic and harmonious environment 

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In 1992, the ASEAN Heads of State and Government declared thatASEAN should intensify its external dialogues in political and securitymatters as a means of building cooperative ties with states in the Asia-Pacific region. Two years later, the ASEAN Regional Forum or ARFwas established. The ARF aims to promote confidence-building,preventive diplomacy and conflict resolution in the region. The present

participants in the ARF include: Australia, Brunei Darussalam,Cambodia, Canada, China, European Union, India, Indonesia, Japan,Democratic Peoples' Republic of Korea, Republic of Korea, Laos,Malaysia, Myanmar, Mongolia, New Zealand, Pakistan, Papua NewGuinea, Philippines, Russian Federation, Singapore, Thailand, UnitedStates, and Vietnam. Through political dialogue and confidence building, no tension hasescalated into armed confrontation among ASEAN members since itsestablishment more than three decades ago.

ECONOMIC AND FUNCTIONAL COOPERATION  When ASEAN was established, trade among the Member Countries wasinsignificant. Estimates between 1967 and the early 1970s showed thatthe share of intra-ASEAN trade from the total trade of the Member Countries was between 12 and 15 percent. Thus, some of the earliesteconomic cooperation schemes of ASEAN were aimed at addressingthis situation. One of these was the Preferential Trading Arrangement of 

1977, which accorded tariff preferences for trade among ASEANeconomies. Ten years later, an Enhanced PTA Programme wasadopted at the Third ASEAN Summit in Manila further increasing intra-ASEAN trade. The Framework Agreement on Enhancing Economic Cooperation wasadopted at the Fourth ASEAN Summit in Singapore in 1992, whichincluded the launching of a scheme toward an ASEAN Free Trade Areaor AFTA. The strategic objective of AFTA is to increase the ASEANregion’s competitive advantage as a single production unit. Theelimination of tariff and non-tariff barriers among the member countriesis expected to promote greater economic efficiency, productivity, andcompetitiveness. The Fifth ASEAN Summit held in Bangkok in 1995adopted the Agenda for Greater Economic Integration, which includedthe acceleration of the timetable for the realization of AFTA from theoriginal 15-year timeframe to 10 years. In 1997, the ASEAN leaders adopted the ASEAN Vision 2020, whichcalled for ASEAN Partnership in Dynamic Development aimed at forging

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closer economic integration within the region. The vision statement alsoresolved to create a stable, prosperous and highly competitive ASEANEconomic Region, in which there is a free flow of goods, services,investments, capital, and equitable economic development and reducedpoverty and socio-economic disparities. The Hanoi Plan of Action,adopted in 1998, serves as the first in a series of plans of action leading

up to the realization of the ASEAN vision. In addition to trade and investment liberalization, regional economicintegration is being pursued through the development of Trans-ASEANtransportation network consisting of major inter-state highway andrailway networks, principal ports and sea lanes for maritime traffic,inland waterway transport, and major civil aviation links. ASEAN ispromoting the interoperability and interconnectivity of the nationaltelecommunications equipment and services. Building of Trans-ASEANenergy networks, which consist of the ASEAN Power Grid and theTrans-ASEAN Gas Pipeline Projects, are also being developed.

ASEAN cooperation has resulted in greater regional integration. Withinthree years from the launching of AFTA, exports among ASEANcountries grew from US$43.26 billion in 1993 to almost US$80 billion in1996, an average yearly growth rate of 28.3 percent. In the process, theshare of intra-regional trade from ASEAN’s total trade rose from 20percent to almost 25 percent. Tourists from ASEAN countriesthemselves have been representing an increasingly important share of 

tourism in the region. In 1996, of the 28.6 million tourist arrivals inASEAN, 11.2 million or almost 40 percent came from within ASEANitself. Today, ASEAN economic cooperation covers the following areas: trade,investment, industry, services, finance, agriculture, forestry, energy,transportation and communication, intellectual property, small andmedium enterprises, and tourism. Desiring to build a community of caring societies, the ASEAN leadersresolved in 1995 to elevate functional cooperation to a higher plane tobring shared prosperity to all its members. The Framework for ElevatingFunctional Cooperation to a Higher Plane was adopted in 1996 with atheme: “Shared prosperity through human development, technologicalcompetitiveness, and social cohesiveness.” Functional cooperation isguided by the following plans:

• ASEAN Plan of Action on Social Development;• ASEAN Plan of Action on Culture and Information;

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• ASEAN Plan of Action on Science and Technology;• ASEAN Strategic Plan of Action on the Environment;• ASEAN Plan of Action on Drug Abuse Control; and• ASEAN Plan of Action in Combating Transnational Crime

 

STRUCTURES AND MECHANISMS  The highest decision-making organ of ASEAN is the Meeting of theASEAN Heads of State and Government. The ASEAN Summit isconvened every year. The ASEAN Ministerial Meeting (ForeignMinisters) is held on an annual basis. Ministerial meetings on severalother sectors are also held: agriculture and forestry, economics, energy,environment, finance, information, investment, labour, law, regionalhaze, rural development and poverty alleviation, science andtechnology, social welfare, transnational crime, transportation, tourism,

youth, the AIA Council and, the AFTA Council. Supporting theseministerial bodies are 29 committees of senior officials and 122 technicalworking groups.

To support the conduct of ASEAN’s external relations, ASEAN hasestablished committees composed of heads of diplomatic missions inthe following capitals: Brussels, London, Paris, Washington D.C., Tokyo,Canberra, Ottawa, Wellington, Geneva, Seoul, New Delhi, New York,Beijing, Moscow, and Islamabad.

 The Secretary-General of ASEAN is appointed on merit and accordedministerial status. The Secretary-General of ASEAN, who has a five-year term, is mandated to initiate, advice, coordinate, and implementASEAN activities. The members of the professional staff of the ASEANSecretariat are appointed on the principle of open recruitment andregion-wide competition. ASEAN has several specialized bodies and arrangements promotinginter-governmental cooperation in various fields: ASEAN University

Network, ASEAN-EC Management Centre, ASEAN Centre for Energy,ASEAN Agricultural Development Planning Centre, ASEAN EarthquakeInformation Centre, ASEAN Poultry Research and Training Centre,ASEAN Regional Centre for Biodiversity Conservation, ASEAN RuralYouth Development Centre, ASEAN Specialized Meteorological Center,ASEAN Tourism Information Centre, and ASEAN Timber TechnologyCentre. 

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In addition, ASEAN promotes cooperative activities with organizationswith related aims and purposes: ASEAN-Chambers of Commerce andIndustry, ASEAN Business Forum, ASEAN Tourism Association,ASEAN Council on Petroleum, ASEAN Ports Association, ASEANVegetable Oils Club, and the ASEAN-Institutes for Strategic andInternational Studies. Furthermore, there are 53 Non-Governmental

Organizations (NGOs), which have formal affiliations with ASEAN.Member Countries

Brunei Darussalam Cambodia Indonesia Laos Malaysia

Myanmar Philippines Singapore Thailand Vietnam

In a nut shell ASIAN is strongest economic power in the Asia as Kofi Annansaid,“Today, ASEAN is not only a well-functioning, indispensable reality inthe region. It is a real force to be reckoned with far beyond the region.It is also a trusted partner of the United Nations in the field of development…” 

 Kofi Annan

Secretary-General of the United Nations16 February 2000

 

 REFERENCE • Wikipedia information about ASEAN Free Trade Area

This article is licensed under the GNU Free Documentation License

• www.answer.com

• www.aseansec.org

Comparison of Regional blocs

Most active regional blocs

Regional Area (km²) Population GDP (PPP) ($US) Member

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bloc 1 states 1in millions per capita

EU 3,977,487 460,124,266 11,723,816 25,480 25

CARICOM 462,344 14,565,083 64,219 4,409 14+1

ECOWAS 5,112,903 251,646,263 342,519 1,361 15

CEMAC 3,020,142 34,970,529 85,136 2,435 6

EAC 1,763,777 97,865,428 104,239 1,065 3

CSN 17,339,153 370,158,470 2,868,430 7,749 10

GCC 2,285,844 35,869,438 536,223 14,949 6

SACU 2,693,418 51,055,878 541,433 10,605 5

COMESA 3,779,427 118,950,321 141,962 1,193 5

NAFTA 21,588,638 430,495,039 12,889,900 29,942 3

ASEAN 4,400,000 553,900,000 2,172,000 4,044 10

SAARC 5,136,740 1,467,255,669 4,074,031 2,777 8

Agadir 1,703,910 126,066,286 513,674 4,075 4

EurAsEC 20,341,700 181,216,423 1,643,379 9,069 5CACM 422,614 37,816,598 159,536 4,219 5

PARTA 528,151 7,810,905 23,074 2,954 12+2

Reference

blocs and

countries 2

Area (km²) Population

GDP (PPP) ($US)Political

divisionsin millions per capita

UN 133,178,011 6,411,682,270 55,167,630 8,604 191

AEC 29,910,442 853,520,010 2,053,706 2,406 53

India 3,287,590 1,102,600,000 3,433,000 3,100 35

China 9,596,960 1,306,847,624 7,249,000 5,200 33USA 9,631,418 296,900,571 11,190,000 39,100 50

Canada 9,984,670 32,507,874 958,700 29,800 13

Russia 17,075,200 143,782,338 1,282,000 8,900 891 Including data only for full and most active members2 The first two states in the World by area,  population and GDP (PPP)3 Including non-sovereign autonomous entities of other states

mm smallest value among the blocs comparedmm largest value among the blocs compared

During 2004. Source: CIA World Factbook   2005, IMF WEO Database