Dr.

SHAKUNTALA MISRA NATIONAL REHABILITATION UNIVERSITY

Lucknow

Faculty of Law

PROJECT ON

[Regional Economic Integration]

For

COURSE ON ‘International Trade Law’

Submitted by

[Ashish Singh]

Academic Session: 2018-19

Under the Guidance of

Ms. Monisha Thapar

Ast. Prof. in Law & Faculty for International Trade Law
Faculty of Law
Dr. Shakuntala Misra National Rehabilitation University

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Table of Contents
Introduction.................................................................................................................................................2
Regional integration and Economic Blocs...................................................................................................2
Most Famous economic blocs.....................................................................................................................3
How did the EU influence on the automakers HONDA?.............................................................................4
EFTA...........................................................................................................................................................5
Swiss benefits from EFTA...........................................................................................................................6
1. Machinery............................................................................................................................................6
2. Pharmaceuticals...................................................................................................................................6
3. Chemicals............................................................................................................................................7
4. Instruments and measuring devices.....................................................................................................7
5. Watches................................................................................................................................................8
NAFTA........................................................................................................................................................8
How did NAFTA help Mexican companies?...............................................................................................8
MERCOSUR...............................................................................................................................................9
CARICOM................................................................................................................................................11
Some benefits of the CARICOM Single Market and Economy are:......................................................12
APEC benefits for Australia......................................................................................................................12
COMUNIDAD ANDINA DE NACIONES (CAN)...................................................................................13
CER...........................................................................................................................................................14
ASEAN.....................................................................................................................................................15
ASEAN- an opportunity............................................................................................................................16
CONCLUSION.........................................................................................................................................17

Introduction
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A large number of diverse regional economic arrangements have evolved over the past

half century with an especially creative burst of regionalism over the past fifteen years.

This trend toward regionalism occurs as markets become more integrated on a regional

and global basis. Does the integration of markets for goods, services and capital drive

the creation of regional institutions? Or, does the creation of regional institutions drive

the integration of markets? The short answer is that the relationship is reciprocal but not

Deterministic; it varies across regions and is conditioned by several contextual factors.

My project examines the reciprocal relationship between economic integration and

institutional integration.

Regional integration and Economic Blocs

Regional economic integration involves groups of countries forming alliances to promote free

trade, cross-national investment, and other mutual goals. This integration results from regional

economic integration blocs in which member countries agree to eliminate tariffs and other

restrictions on the cross-national flow of products, services, capital and in more advanced stages

labor within the bloc. The countries in an economic bloc become parties to a free trade

agreement, which eliminates tariffs, quotas and other trade barriers. The countries that become

members of an economic bloc, there are various stages of the regional integration. First stage is

the free trade area in which tariffs and other trade barriers are eliminated and that emerge when

nations sign a free trade agreement. Second is the customs union-a free trade area in which

common trade barriers are imposed on nonmember countries. Third is the common market-a

customs union in which factors of production moves freely among the members and the last type

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of the regional integration are the economic union-common markets in which some important

policies are harmonized among the member states.

Most Famous economic blocs

There are roughly 200 economic integration agreements in the world. The European Union is the

most advanced among the blocs, comprising 27 countries in Europe. The European Union has

increased market access, improved trade rules, and harmonized standards among its members.EU

was formed after the world war 2 with the main objective of peace and prosperity between the

countries that were in war. During the years the EU advanced more and more and it still

continues to develop itself. Nowadays EU is much more that bringing peace among the

countries- today Europe is also home to the European trade agreement association. This

agreement allows free trade among the 27 member states. Outside Europe there are others blocs

such as the one in the Americas the North American Free Trade Agreement (NAFTA). This bloc

is conducted of Canada, Mexico and the United States of America. Other economic blocs in the

Americas include MERCOSUR, CARICOM, and CAN. In the Asia/Pacific region, ASEAN,

APEC, and the Australia and New Zealand Closer Economic relations Agreement (CER) are the

leading blocs. Economic blocs in Africa and the Middle East have experienced only limited

success.

How did the EU influence on the automakers

HONDA?

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We all know that Honda is the first Japanese automobile and motorcycle manufacturer. Honda

key assembly affiliates are Honda industry in Italy and “Montessa” Honda in Spain. These

companies were designed in the first place for concentration on the assembly of specific types of

motorcycle model appropriate too different European location in order to benefit from various

economies. At the same time each assembler exported its own model to the other Honda

locations in Europe in order to gain economies in joint production and marketing- in other words

any given model is produced in one location, but a full range of models is offered for sale in all

locations. Finally, in the international context, Honda European models are also exported to its

subsidiaries in USA, Brazil and Japan while its European network imports large and medium-

sized motorcycles from its USA and Brazil affiliates. As far the engine parts are concerned

Honda supplies were initially from France. And thanks to the EU there are no trade barriers

between Spain and France which allows the multinational companies such as Honda free trade

with other member states. Another benefit for Honda is the lower average costs and by far larger

market conducted of nearly 490 million consumers.1

EFTA

The European Free Trade Association (EFTA) was established in 1960 by the Stockholm

Convention. The original purpose of this intergovernmental organization was to remove customs

duties on industrial products in trade among its Member States. The current members of EFTA

are Iceland, Liechtenstein, Norway and Switzerland. In contrast to the European Union (EU),
1
From the book “International Human resource management” may 2007
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EFTA is not a customs union. Individual EFTA States are basically free to set their own customs

tariffs and arrange other foreign trade measures vis-à-vis non-EFTA States. EFTA States have

been using EFTA as a platform for the joint negotiation of FTAs with third countries outside the

EU. Fifteen such agreements are currently in force and a number of agreements are being

negotiated.

Swiss benefits from EFTA 2

Switzerland is an important exporter of capital goods and intermediate inputs for mining,

forestry, paper production, agriculture and fisheries. As these sectors grow, exports opportunities

should also increase. In 2005 and 2006, the value of Swiss exports to Chile grew by nearly 20%

per year and consolidated in 2007.

2
The Impact of the European Community's internal market on the EFTA-By Richard K. Abrams

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1. Machinery
With strong pressure on prices, Swiss products may face difficulties linked with currency

fluctuations and with increased competition from Asia. In 2007, machines made 35% of total

Swiss exports to Chile - The export of non-electrical machines declined by 17% while the export

of electrical machines grew by 57%. No association represents the machine sector in Chile.

2. Pharmaceuticals
This sector is the second largest Swiss export sector to Chile. In 2007, Swiss pharmaceuticals

exports to Chile increased by 27%. Drugs from Swiss companies are also imported from other

production sites. Both Novartis and Roche operate in Chile. None of them has production or

research sites. In recent years, a significant problem has been Chile’s often inadequate

intellectual property laws, which have allowed local pharmaceutical companies to produce and

commercialize copies of new and patented drugs. Chile is slowly adapting its legislation but it

remains to be seen whether the situation for investigative laboratories will be significantly

modified. Chile is on the Priority Watch List of the United States Trade Representative and

belongs to the countries where intellectual property rights are not sufficiently enforced.

3. Chemicals
Chemicals are the fourth largest Swiss export sector to Chile. Products sold to Chile by Swiss

firms are increasingly supplied by their subsidiaries from the US, UK, China, Brazil and other

countries. Factors such as strategic restructuring, competition and the depreciation of the dollar

against the CHF and Euro (which cannot be passed on to the buyers as prices are set in USD)

contribute to shifts in trade flows.

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4. Instruments and measuring devices
As with machinery, price competition plays an important role. The depreciation of the USD3 has

increased the competitiveness of US producers. There is a market for Swiss high quality products

in the mining and paper industries.

5. Watches
The sales of Swiss watches – luxury items – fluctuate with business cycles. With good economic

forecasts for the near future, demand for Swiss watches should continue to grow. In 2007, Swiss

exports of watches to Chile increased by 30%.

By Gary Clyde Hufbauer, Jeffrey J. Schot

NAFTA 4

NAFTA is the most significant economic bloc in the Americas. NAFTA was launched in 1994.

Its passage was smoothed by the existence, since the 1960s. For its members countries (USA

Canada, Mexico) the NAFTA agreement increased market access. The agreement eliminated

tariffs and trade between member states. It has also established trade rules and uniform customs

procedures and regulations, while prohibiting the use of standards and technical regulations as

trade agreements.

3
United states dollar-US currency

4
North American free trade agreement
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How did NAFTA help Mexican companies?
Mexico benefited greatly from NAFTA. The access to USA and Canada helped many Mexican

companies in industries such as electronics, automobiles, textiles, medical products, and services.

For example: Mexico now has 100 million-per-year dental supply industry, in which

entrepreneurs export labor-intensive products such as braces, dental wax, and other tools used in

dental work to the united states. Annual foreign investment in Mexico rose from 4 billion dollars

in 1993 to nearly 20 billion dollars by 2007 as United States of America and Canadian firms

invested in their southern neighbor. In the years following NAFTA’s passage, Mexico’s per capita

income rose substantially, to about 11 000 dollars in 2007, making Mexico the wealthiest country

in Latin America in terms of per capita income. Nevertheless, increased purchasing power of

Mexican consumers meant that they could afford to buy products from Canada and USA.

MERCOSUR

MERCOSUR, consisting of Argentina, Brazil, Paraguay, and Uruguay, is the third

largest preferential trading group in the world. Since its inception in 1991, MERCOSUR has

made considerable progress in integrating the economies of its members. The integration--- an

almost complete free trade area and a partial customs union-has been

accompanied by a significant increase in U.S. exports and investment to the region. In general,

the United States has viewed the evolution of MERCOSUR as being supportive of its political

interests as well, although MERCOSUR is seen as favoring a slower approach to hemispheric

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economic integration. In the future, MERCOSUR faces challenges affecting the size of its

membership, the depth of its integration, and the strength of its institutions

How MERCOSUR did help its members?

The impact of the creation of MERCOSUR has also been reflected in the increasing flow of intraregional

investments. Macroeconomic stability in Argentina, together with the strong economic growth seen in the

last four years in this country, has created incentives for both investors in the sub region and multinational

corporations. In response to the opportunities afforded by a larger economic market, multinational

corporations have formed partnerships with entrepreneurs in the sub region or have set up subsidiaries in

a broad range of production and commercial sectors. In the automotive sector, for example, there have

been complementary production agreements and other arrangements to encourage specialization. In the

areas of food, textiles, plastics and construction materials, partnerships have been set up between

Brazilian and Argentine producers. The abundant supply of energy in Paraguay has attracted investment

in the chemical sector. There has also been increased growth in services, including investment in tourism

in Uruguay and Brazil, the establishment of branches of foreign banks in Montevideo and Buenos Aires,

and the interest shown by Chilean investors in insurance and reinsurance. To a large extent, the increased

flow of investments to the sub region can be attributed to privatization programs and greater liberalization

in these countries, but the reduction of barriers to foreign investment has also played a significant role.

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 5

CARICOM
The Caribbean Community (CARICOM), is an organization of 15 Caribbean nations and

dependencies. CARICOM's main purposes are to promote economic integration and cooperation

among its members, to ensure that the benefits of integration are equitably shared, and to

coordinate foreign policy. Its major activities involve coordinating economic policies and

development planning; devising and instituting special projects for the less-developed countries

within its jurisdiction; operating as a regional single market for many of its members

(CARICOM Single Market); and handling regional trade disputes. The secretariat headquarters is

based in Georgetown, Guyana.

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Indicator of the export by destination and the correlation between MERCOSUR and other blocs
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Some benefits of the CARICOM Single Market and Economy are:
 Increased production and trade in goods and services in a combined market of over

approximately million persons and for the world beyond

 Competitive products of better quality and prices

 Improved services provided by enterprises and individuals, including transportation and

communication

 Greater opportunity for travel

 Opportunities for nationals to study and work in CARICOM countries of their choice

 Increased employment and improved standards of living

APEC benefits for Australia 6

A continent between the Indian Ocean and South Pacific Ocean, Australia is the smallest

continent and the sixth largest economy in the world. The continent is approximately 7.6 million

kilometers mostly of plateaus, deserts, and fertile plains in the southeast. Its 19.4 million

populations is concentrated along the eastern and southeastern seaboard, mainly in cities or

major regional centers. Australia is a resource rich economy with a wide range of mineral, energy

and other resources.

In the past eleven years until 2001, Australia’s economic growth has averaged around 3.6 percent

per year. In 2001, GDP was about US$ 467 billion (1995 US$ at PPP) and the unemployment

rate was around 6.9 percent. The Australian economy has remained relatively robust through the

global economic slowdown during the last few years, owing much to the buoyant property

6
From the book “Asian recorder” published 1997
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market and strong domestic demand. Australia has avoided recession in the global slowdown,

and is expected to continue to outperform most developed economies in 2004.Over 70 percent of

Australia’s international trade is with APEC7 economies and around 60 percents within Asia.

Australia is a major exporter of coal, LNG and uranium with the resource sector being the largest

exporting sector of the Australian economy, comprising over 35 percent of Australia’s export

earnings. Consequently, the Australian economy is sensitive to changes in foreign earnings

arising from fluctuations in resource prices on international markets.

COMUNIDAD ANDINA DE NACIONES

(CAN) 8

The original Andean Pact was founded in 1969 by Bolivia, Chile, Colombia, Ecuador and Peru.

In 1973, the pact gained its sixth member, Venezuela. In 1976, however, its membership was

again reduced to five when Chile withdrew. Venezuela announced its withdrawal in 2006,

reducing the Andean Community to four member states. Recently, with the new cooperation

agreement with MERCOSUR, the Andean Community gained four new associate members:

Argentina, Brazil, Paraguay and Uruguay. These four MERCOSUR members were granted

associate membership by the Andean Council of Foreign Ministers meeting in an enlarged

session with the Commission (of the Andean Community) on July 7, 2005. This moves

reciprocates the actions of MERCOSUR which granted associate membership to all the Andean

Community nations by virtue of the Economic Complementarity Agreements (Free Trade

agreements) signed between the CAN and individual MERCOSUR members.

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Asia Pacific Economic Cooperation-incorporates 21 nation .It members account 85%of total regional trade

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CAN is expected to merge with MERCOSUR to form a new economic bloc
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CER
Closer Economic Relations (CER) is a free trade agreement between the governments of New

Zealand and Australia. It is also known as the Australia New Zealand Closer Economic

Relations Trade Agreement (ANZCERTA) and sometimes shortened to (CERTA). It came

into force on 1 January 1983, although the actual treaty was not signed until 28 March 1983 .One

of the most important results of CER was the Protocol on the Acceleration of Free Trade in

Goods, which resulted into the total elimination of tariffs or quantitative restrictions between the

two countries by 1 July 1990.Advantages for theirs companies are not very much comparing to

the other bigger blocs such as EU, NAFTA…. with way bigger market but anyhow there are still

advantages for their companies such as no trade barriers which mean they can import inputs that

are needed to make the product, increased productivity, lowering average cost etc.

ASEAN
The Association of Southeast Asian Nations (ASEAN) is a geo-political and economic

organization of 10 countries located in Southeast Asia, which was formed on 8 August 1967 by

Indonesia, Malaysia, the Philippines, Singapore and Thailand.9 Since then, membership has

expanded to include Brunei, Burma (Myanmar), Cambodia, Laos, and Vietnam. Its aims include

the acceleration of economic growth, social progress, cultural development among its members,

the protection of the peace and stability of the region, and to provide opportunities for member

countries to discuss differences peacefully.

9
“Bangkok Declaration”14 March 2007.
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In 2005, the bloc spanned over an area of 4.46 million km 2 with a combined GDP of about

USD896.5 billion/2,728 billion dollars growing at an average rate of around 5.6% per annum. In

2008, its combined GDP had grown to more than USD $1.5 trillion with a population of

approximately 580 million people

ASEAN- an opportunity
Southeast Asia has benefited from the emergence of the new regional economic actors, which

reflects shits in international competitiveness. Japanese industry moved to the ASEAN countries

following the 1986 yen appreciation in response to the declining competitiveness of the Japanese

home based production. The major relocated industries were those in which US companies were

not major players and in which European companies were similarly affected by rising home

currencies and responded also by relocating to ASEAN countries. More recently the emergence

of rapidly growing china and of Vietnam and Burma as markets for ASEAN commodity and

manufactured exports and destinations for ASEAN commodity and manufactured exports and

destinations for ASEAN investment is contributing to regional growth and increased regional

integration. For instance Singapore is Vietnam’s largest trade partner while its main investors are

from Taiwan and Hong Kong. China is also beginning to invest in Southeast Asia with more than

50 companies expected to set up shop in Singapore alone in 1993 and a state-owned weapons
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manufacturer announcing the establishment of assembly operations in Malaysia for the local

market for export10

CONCLUSION

According to my paper I assume that economic regional integration are vital for the people in

general and we as a country should do whatever it takes to achieve the privilege of being part of

a regional bloc in our case part of the EU. Macedonia has 2 million consumers and with the

absence of trade barriers with other countries the EU would give Macedonian firms easier access

to a total market of around 490 million buyers. Having this in mind my comment is that our

governments countries should try harder to resolve issues with the member states in order to

enter the EU so can we as a country have the same opportunities with some of the countries I

have mentioned above in my research.

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Lynda c Lyn “Models and Partners”
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Bibliography

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