INTERNATIONAL BUSINESS

ASSIGNMENT

Submitted by

Anju maria john

MBA-A

No:21
Regional economic integration

Regional economic integration refers to efforts to promote free and fair trade on
regional basis. Member countries remove all barriers to trade between themselves,
but are free to independently determine trade policies with nonmember nations.

EUROPEAN UNION

It is an international organisation comprising 28 European countries and governing

common economic, social, and security policies. Nineteen of the countries use the
euro as their official currency. The treaty was designed to enhance European
political and economic integration by creating a single currency(euro), a unified
foreign and security policy, and common citizenship rights and by advancing
cooperation in the area of immigration, judicial affairs.

The EU was awarded the Nobel prize for peace in 2012,in recognition of the
organisations efforts to promote peace and democracy in Europe.

Challenges faced by EU are

 North- south issues

 Brexit

The EU grew out of a desire to form a single European political entity to end the
centuries of warfare among European countries that culminated the world war 2
and decimated much of the continent. The European single Market was established
by 12 countries in 1993 to ensure the so called four freedoms the movement of
goods, services, people and money.

According to the European Union's official website, the purpose of the union is to
promote
 Peace
 Establish a unified and economic monetary system
 Promote inclusion and combat discrimination
  Break down barriers to trade and borders
 Encourage technological and scientific developments
 Environmental protection

NAFTA-North American free trade agreement

NAFTA is an agreement signed by Canada, Mexico, and united states, creating a

trilateral bloc in North America. The agreement came into force on january1, 1994.

Purpose

The purpose is to reduce trading costs, increase business investment, and help
North America to be more competitive in the global market place.

Benefits

NAFTA boosted trade by eliminating all tariffs between the three countries. it also
created agreements on international rights of business investors that reduce the cost
of commerce. it spurs investment and growth especially for small businesses.

Challenges faced by NAFTA

While it has also done good things for the economy, the NAFT has six weaknesses.
these disadvantages had a negative impact on both American and mexican workers
and even the environment

 US jobs were lost

 US wages were suppressed
 Mexico's Farmers were put out of business
 Maquiladora workers were exploited
 Mexico's environment deteriorated
 NAFTA called for free US access for Mexican trucks
 SAARC-South Asian association for regional cooperation

It is a regional intergovernmental organization and geopolitical union of states in

south Asia. it's member states include Afghanistan, Bangladesh, Bhutan, India,
Maldives, Nepal, Pakistan and Srilanka. Founded in the year 1985 in Dhaka
Bangladesh which is headquartered in Kathmandu Nepal.

SAARC provides a platform for the peoples of south Asia to work together in a
spirit of friendship, trust and understanding.

Motto - 'Deeper integration for peace and prosperity'

Objectives

 Accelerate the economic growth

 social progress
 cultural development
 Promote the welfare of the people of the south Asia and promote their
quality of life
 To promote mutual Trust, understanding, and appreciation of the problems
of one another.

Challenges

 Institutional limitations
 Narrow focus in action agenda
 Political divergence ad confrontational relationships
 Absence of civil society
 Conflict of vision
 Problem with regional leadership
 Weak secretariat
 Managing overlapping multinational cooperation
In SAARC Decisions in all levels are to be taken on the basis of unanimity, and
bilateral and contentious issues are excluded from the deliberations of the
association.

SAFTA- South Asian free trade area

SAFTA is an agreement reached on January 6, 2004, at the 12th SAARC summit

in Islamabad, Pakistan.
SAFTA is the free trade agreement of the south Asian Association for regional
cooperation. SAFTA was formed inorder to increase the level of trade and
economic cooperation among the SAARC nations by reducing the tariff and
barriers and also to provide special preference to the least developed countries
among the SAARC nations.

Challenges faced by SAFTA

SAFTA members are low income developing countries four of them were Bhutan,
Bangladesh, Maldives, and Nepal are amongst the least developed countries due to
a number of overriding problems that constrain their economic growth and
development.

ASEAN- Association of south east Asian nations

It is a regional intergovernmental organization comprising 10 countries in

Southeast Asia, which promote intergovernmental cooperation and facilitates
economic, political, security, military, educational, and sociocultural integration
among its members and other countries in Asia.

Motto : "One vision, One identity, One community"

ASEAN also regularly engages other countries in the Asia pacific region and
beyond. A major partner of shanghai cooperation organisation, ASEAN maintains
a global network of alliances and dialogue partners and is considered by many as a
global powerhouse, the central union for cooperation in Asia pacific, and a
prominent and influential organisation. It is involved in numerous international
affairs, and host diplomatic missions throughout the world. The ASEAN
secretariat is located in Jakarta, Indonesia.

Challenges

 Geopolitical stability and regional relationships.

 Governance challenges for businesses.
 New business models
 Changing demographics
 Inclusive growth and sustainable development.
 Regional digital economy
 Economic integration

AIFTA (ASEAN-India free Trade Area)

 The ASEAN–India Free Trade Area (AIFTA) is a free trade area

among the ten member states of the Association of Southeast Asian
Nations (ASEAN) and India. The initial framework agreement was
signed on 8 October 2003 in Bali, Indonesia and the final agreement
was on 13 August 2009. The free trade area came into effect on 1
January 2010.
 India hosted the latest ASEAN-India Commemorative Summit in New
Delhi on 26th January 2018. In the financial year 2017-18, Indo-
ASEAN bilateral trade grew by almost 14% to reach US$ 81.3 billion.
India's imports from ASEAN were valued at US$ 47.13 billion while
its exports to ASEAN stood at US$ 34.2 billion.
 The ASEAN–India Free Area emerged from a mutual interest of both
parties to expand their economic ties in the Asia-Pacific region. India's
Look East policy was reciprocated by similar interests of many ASEAN
countries to expand their interactions westward.
  The signing of the ASEAN-India Trade in Goods Agreement paves the
way for the creation of one of the world’s largest FTAs – a market of
almost 1.8 billion people with a combined GDP of US$2.8 trillion.
 The ASEAN-India FTA will see tariff liberalization of over 90 percent
of products traded between the two dynamic regions, including the so-
called “special products,” such as palm oil (crude and refined), coffee,
black tea and pepper. Tariffs on over 4,000 product lines will be
eliminated by 2016, at the earliest.

INDO-SRILANKA FREE TRADE AGREEMENT(ISFTA)

The Indo-Sri Lanka Free Trade Agreement (ISFTA), which was signed on 28th
December 1998 and entered into force with effect from 1st March 2000, provides
duty free concessions to a wide range of products traded between the two
countries. Sri Lanka’s final tariff liberalization commitment under ISFTA came
into effect since November 2008 and with this completion of the commitment, the
ISFTA which came into effect from March 2000 has been fully implemented.
However, Sri Lanka has already got a fully duty free access to the vast Indian
market under the ISFTA since the end of March 2003. Thus, the entrepreneurs
based in Sri Lanka can now export more than 4000 product lines to the Indian
market on duty free basis.

WHY INDIA IS IMPORTANT AS A TRADING PARTNER

India is Sri Lanka’s third largest trading partner globally, while Sri Lanka is
India’s second largest trading partner in the SAARC. It is the number one source of
supplies accounting for twenty percent of Sri Lanka’s total imports and third
largest export destination for Sri Lankan products absorbing six percent of total
exports. Among tourists, Indian visitors make the largest single group having a
share of twenty seven percent of total arrivals. In the investment field, India is
among the top five foreign investors in Sri Lanka. Trade between Sri Lanka and
India has grown rapidly after the entry into force of the Indo-Sri Lanka Free Trade
Agreement in March 2000. The value of bilateral trade increased from US$658
million in 2000 to US$ 3.6 billion in 2013.

OBJECTIVES OF THE AGREEMENT

 To promote through the expansion of trade the harmonious development of

the economic relations between India and Sri Lanka.
 To provide fair conditions of competition for trade between India and Sri
Lanka
 In the implementation of this Agreement the Contracting Parties shall pay
due regard to the principle of reciprocity
 To contribute in this way, by the removal of barriers to trade, to the
harmonious development and expansion of world trade

DUTY CONCESSIONS GRANTED BY INDIA FOR SRI LANKAN

EXPORTS

All products other than those are in the Negative List of India are eligible to
receive 100 tariff concessions (on basic customs duty) without any restriction
except for the following products which are subjected to specific arrangements.

DUTY CONCESSIONS GRANTED BY SRI LANKA FOR INDIAN

EXPORTS

All products other than those are in the Negative List of Sri Lanka including
cement (HS Code 2523.21 and 2523.29 / despite it is being in the Negative List of
Sri Lanka) are eligible to receive 100 tariff concessions on Basic Customs duty.

ISFTA RULES OF ORIGIN

In order to receive ISFTA benefits, the merchandise exported between India and
Sri Lanka should comply with the following Rules of Origin criteria.

(i) Wholly Obtained Products

All wholly obtained products such as tea, fish, spices etc. will be able to enjoy duty
free benefits at each other's markets without difficulty, provided they are eligible
for duty concessions.

(ii) Products not Wholly Produced or Obtained

These include the products manufactured using imported raw materials. In order to
enjoy ISFTA benefits, the products should comply with the following criteria.

 The Domestic Value Addition (DVA) in the exporting country should not be
less than35% of the FOB value of the finished product and
 HS Codes of the imported raw materials and the finished products should be
different at 4-digit level. (Change of Tariff Heading criteria)

(iii) Cumulative Rules of Origin

The Cumulative Rules of Origin encourage the contracting states ( India and Sri
Lanka ) to source raw materials needed for their exports from each other.
Accordingly, an exporter has to show only a minimum DVA of 25% of the FOB
value of the finished product, provided the raw materials imported from the other
contracting state accounts for not less than 10% of the FOB value of the particular
product. (In other words, the aggregate value addition should not be less than 35%
of the FOB value of the finished product, while the DVA in the exporting country
should be minimum 25% of the FOB value)