An insight into Regional Trading Blocs

Most members of regional trading blocs enjoy shared economic value and mutual trade agreements.

Asia Pacific Economic Cooperation also known as APEC is a regional forum that includes 21 Pacific Rim member economies which encourage free trade all over the region of Asia Pacific. The APEC was founded in the year 1989 in response to the increasing interdependence of the Asia-Pacific economies and the advent of the regional trading blocs in the rest of the world, to resolve the fears that the greatly industrialized country of Japan will be dominating the economic activity of the region of Asia-Pacific, also to found new markets for the agricultural goods and raw products outside of Europe.

A yearly meeting is head of the APEC economic larders’ which is attended by the heads of the government of all member economies except China (Taiwan). The location where the meeting is held is rotated every year between the member economies and a popular tradition which is followed by the majority of summits, which is that the leaders attending dress in a national costume for the host country. There are three official observers of APEC which include the Pacific Economic Cooperation Council, Association of Southeast Asian Nations Secretariat (ASEAN), and the Pacific Islands Forum Secretariat. APEC’s Host member of the year is believed to be invited in the first place for the physical representation to be present at G20 gatherings after the G20 guidelines.

At present, the APEC has 21 state members which include all the countries that are on the coastline of the Pacific Ocean. The criterion for the membership of APEC is that the member has to be a separate economy rather than a state. Therefore, in the APEC the term member ‘economies’ is used rather than member states. As a result of the decided criterion, Taiwan (officially the Republic of China participated under the name of ‘Chinese Taipei’) along with the People’s Republic of China, and Hong Kong which became a member of APEC as a British colony but now has become a Special Administrative Region of the People’s Republic of China.

In a summit meeting of 1994, APEC set an aim to achieve a free trade and investment system in the region of Asia Pacific by 2010 for the members with developed economies and by 2020 for the members with developing economies. The next year after the meeting APEC adopted the OSAKA Action Agenda, a plan to employ APEC’s aim of liberalizing the trade and investment, helping business activities, and encouraging economic and technical cooperation. Regardless of these commitments, APEC’s efficiency has been limited by its condition that all its decisions are to be made by consensus. Even though APEC seeks out harmony, decisions can be made in the absence of harmony; nonetheless, decisions are not lawfully binding on member governments. APEC is structured into several committees, ad hoc policy groups, working groups, and a business advisory council. These committees, which inspect matters, for instance, trade and investment, economic trends, and budgetary issues meet up twice per year. The working groups are lead by experts and consider particular numbers, including energy, tourism, fishing, transport, and telecommunications. The organization’s chair, which rotates yearly, hosts a summit meeting once a year and meetings of foreign and economic ministers and other senior executives.

The European Union (EU) is a political and economic union. There are 28 member states in EU which are largely located in Europe. The EU has developed an internal single market by using a standardized structure of laws that applies to all the member states. EU policies intend to guarantee free movement of people, goods, services and funds in the internal market, enactment of legislation in justice and home affairs and keeping up common policies on trade, agriculture, fisheries and local development. Passport controls have been eliminated to travel within the Schengen Area.

A monetary union was launched in 1999 and it was implemented in 2002 and included 19 EU member states which use the euro currency. The EU controls trade relations with third countries in the form of trade agreements. They are planed to make improved trading opportunities and conquer related barriers. In addition EU’s trade policy is used as a medium for the promotion of European principles and standards, from democracy and human rights to environment and social rights.

Trade agreements of EU differ depending on their content. The agreements include Economic Partnership Agreements (EPAs) which is support development of trade partners from African, Caribbean and Pacific countries. Free Trade Agreements (FTAs) which allow mutual market opening with developed countries and rising economies by granting better access to market. Furthermore, there is Association Agreements (AAs) which boost broader political agreements. Negotiations of trade agreements are carried out in keeping with the rules defined in Article 218 of the Treaty of the Functioning of the European Union. The EU also enters into non-preferential trade agreements, as part of broader deals for instance Partnership and Cooperation Agreements (PCAs).

Concretely, the Council focused particularly on:

  • The European Commission’s purpose to advocate splitting between separate agreements associated to investment and other trade provisions
  • And on the Council’s position in trade negotiations.

The Council plays a critical role in determining a new trade agreement.

  • In the initial stages, the Council authorizes the European Commission to negotiate a new trade agreement on behalf of the EU. This is completed by “negotiating mandate”. Through the related authorization, the Council providers negotiating directives which comprise the objectives, scope and possible time limits of the negotiations.
  • Then the Commission negotiates with the partner country on behalf of the EU, in close collaboration with the Council and the European Parliament.
  • As the agreement on the text of the deal is achieved with partners; the Commission submits official proposals to the Council for adoption.
  • After discussions, the Council implements a decision for the signature of the agreement on behalf of the EU. It then broadcasts the signed agreement to the European Parliament for approval.
  • In the concluding stages, after the European Parliament provides its approval, the Council implements the decision to finish the agreement.
  • The EU stands by the principles of the World Trade Organization (WTO).
  • In June 2018, in the situation of rising trade tensions around the world, the European Council stressed the requirement to protect and intensify the rules-based multilateral system.

This defines the main principles which will underpin the Council’s approach towards trade negotiations from now on.

No member state has withdrawn the EU or its predecessors; however the United Kingdom indicated intent to depart after a membership referendum in June 2016. The government of the UK invoked Article 50 of the Treaty on EU. The EU (Withdrawal) Act 2018 states “exit day” to be March 29th, 2019.

The COMESA (Common Market for Eastern and Southern Africa) is a free trade area trade bloc which includes 21 member countries extending from Tunisia to Swaziland. COMESA was established in December 1994, substituting a Preferential Trade Area which existed ever since 1981. 9 of the member states created a free trade area in 2000 (Djibouti, Egypt, Madagascar, Malawi, Kenya, Mauritius, Sudan, Zambia and Zimbabwe), along with Rwanda and Burundi which joined the FTA in 2004, the Comoros and Libya joined in 2006, Seychelles joined in 2009 and Tunisia and Somalia joined recently in 2018. COMESA is one of the leaders of the African Economic Community.

In 2008, COMESA decided on to an extended free-trade zone together with members of two other African trade blocs, the East African Community (EAC) and the Southern Africa Development Community (SADC). In addition, COMESA is considering a common visa scheme to enhance tourism.

COMESA was formed to act as an association of free independent countries which decided to cooperate in developing their natural and human resources for the betterment of all their citizens. In this circumstance, the major focus of COMESA has been on the development of a big economic and trading unit to conquer trade barriers faced by individual States.

The aims of COMESA reflect on the priorities of the organization to promote a sustainable economic development. The objectives include: encouraging a balance and harmony in the development of states’ production and the marketing structures’, to support joint development in every field of economic activity and to jointly adopt macro- to co-operate in the production of an enabling environment for foreign and domestic investment, to co-operate in the endorsement of harmony, security and steadiness amongst the member States in order to improve economic development in the area; to co-operate in making stronger relations among the Common Market and the rest of the world, to give towards the organization’s  development and the comprehension of the objectives of the African Economic Community.

The executive arrangement of COMESA comprises of the following Organs: The Heads of State and Government (COMESA Authority); the committee of Ministers, The COMESA Court of Justice, The Committee for the Heads of Central Banks, The Intergovernmental Committee, The Technical Committees and The Secretariat.

North American Free Trade Agreement (NAFTA)

One fourth of U.S. imports including crude oil, gold, vehicles, fresh produce, machinery, livestock and processed foods originate from Mexico and Canada. Both the countries are second and third largest suppliers of the imported good in the US. Furthermore, almost one-third of the exports in US such as machinery, vehicle parts, mineral oil/fuel and plastics are intended for Mexico and Canada.

NAFTA (North American Free Trade Agreement) was created during the presidency of George H.W. Bush, as the first stage of his enterprise for America’s initiative. Administration of Clinton signed NAFTA into the law in 1993, believing that it would produce 200,000 jobs in US within two years and 1 million jobs within five years as country’s export play a huge role in the economic growth. The administration also predicted a remarkable increase in US imports from Mexico in under the lower tariff.

The US initiated Bilateral trade negotiation with Canada almost 30 years ago, which lead to the US-Canada Free Trade Agreement, that entered into force in January 1989. In 1991, US started the bilateral talks with Mexico which Canada joined as well. The NAFTA followed, it entered with force in January, 1994. Tariffs were removed gradually and all the duties and quantitative restraints. NAFTA includes chapter which also covers rules of origin, customs process, agricultural, sanitary and phytosanitary measures, government procurement, investment, protection of intellectual property, trade in services and settlement procedures for disputes.

NAFTA did not remove the regulatory requirements on companies which wished to trade internationally, including the rule of regulations and requirement of documents which prove that the good being traded can be traded under NAFTA.  This free trade agreement includes administrative, criminal and civil penalties for all business’ which violate any of the laws or custom process of all three countries. Two other regulations were added to the NAFTA which were: North American Agreement on Environment Cooperation (NAAEC) and the North American Agreement on labor (NAALC). These regulations were added to prevent businesses from relocating to other countries because of low wages, looser environmental regulation, lenient regulations reading worker health and safety.

In 2017 after the consultation of relevant congressional committees, the US trade Representative Mr. Robert Ligthizer informed the congress that president Trump plans to initiate negotiations with Mexico and Canada regarding NAFTA.

In an interview with Reuters on 17th January, 2018, President Trump said:

“We’re renegotiating NAFTA now. We’ll see what happens. I may terminate NAFTA. A lot of people are going to be unhappy if I terminate NAFTA. A lot of people don’t realize how good it would be to terminate NAFTA because the way you’re going to make the best deal is to terminate NAFTA.”

The president of US has a lot of goals in the NAFTA negotiations which includes decreasing the trade discrepancy with Mexico, to strengthening the ‘rules of origin’ for the auto manufacturers, to limit the liability of internet companies, revising the mechanisms for investor-state dispute and to allow NAFTA to expire after ever five year if all of the three countries fail to renew it.

All three countries in the NAFTA have agreed that all the information that is exchanges in the NAFTA negotiations like the negotiating text, proposals of every government, the accompanying the explanatory material and all the emails related to the negotiations are to be kept confidential. This means that the information is not available under the Freedom of information Act.