GATS & WTO

Economic Integration
Economic
Union

(Unification of Monetary and Fiscal Policies

Complete Economic and Monetary Union

Common
Market

No Tariffs or Other Trade Barriers among Member

Nations
Harmonize trade Policies toward the Rest of the world
Free Movement of Labour and Capital among
member countries

Customs
Union

No Tariffs or Other Trade Barriers among Member

Nations
Harmonizes Trade Policies toward the Rest of the
World

Free
Trade
Preferential
Trade
Arrangements

No Trade Barriers Between Member Nations

Lower Barriers on Trade Between Member Nations

General Agreement on Trade in

Services (GATS)
GATS) is a treaty of the World Trade
Organization (WTO) that entered into
force in January 1995 as a result of
the Uruguay Round negotiations
The treaty was created to extend the
multilateral trading system to service
sector

General Agreement on Trade in

Services (GATS)
overall goal of the GATS is to remove
barriers to trade, members are free
to choose which sectors are to be
progressively liberalised, under which
mode of supply a particular sector
would be covered under, and to what
extent to which liberalisation will
occur over a given period of time.

The GATS agreement covers four modes of supply

for the delivery of services in cross-border trade: :
Criteria

Supplier
Presence

Service delivered within the

territory of the Member, from
Mode 1:
Cross-border the territory of another
Service
Member
supply
supplier not
present within
Service delivered outside the the territory of
territory of the Member, in
Mode 2:
the member
Consumptio the territory of another
n abroad
Member, to a service
consumer of the Member

Mode 3:
Commerci
al
presence

Service delivered within the

territory of the Member,
through the commercial
presence of the supplier

Mode 4:
Presence
of a
natural
person

Service delivered within the

territory of the Member, with
supplier present as a natural
person

Service
supplier
present
within the
territory of
the
Member

GATT
1947
23 countries
To revive economies from recession before
world war II.
Objectives: To raise standard of living, full
employment, develop full use of resources
of the world, expand production and
international trade.
Several rounds of negotiations held during
1947 to 1960.

Uruguay Round

1.
2.
3.
.

Significant round Uruguay round,

initiated in 1986 and concluded in 1991
Mr.Arthur Dunkel Director General of
GATT.
Dunket proposals:
TRIMs Trade related investment
measures
TRIPs Trade related intellectual property
rights
Textiles, clothing, agriculture
subsidiaries.
Agreement regarding multilateral trading

Cont.
Results of Uruguay round
strengthen the world economy and
lead to more trade, investment,
employment and income growth
throughout the world.
The World Trade Organization (WTO)
was established on January 1, 1995
to implement the final act of Uruguay
round agreement of GATT.
Membership 153(2011)

Differences between GATT

and WTO
GATT
Set of rules and
multilateral
agreement.
Designed with an
attempt to establish
International trade
organisation.
Applied on a
provisional basis

WTO
Permanent institution

Established to serve
its own purpose.

Full and permanent

activities

Cont
Rules are applicable
to trade in
merchandise goods

Rules applicable to
trade in merchandise,
services and
intellectual property.
Agreements
multilateral

Originally
multilateral, but
plurilateral
agreements added
Dispute settlement
Dispute settlement
system not faster and system fast and
automatic
automatic.

WTO GENESIS
WTO Came into existence on 1995 with the
conclusion of Uruguay Round Multilateral Trade
Negotiations at Marrakesh on 15th April 1994.
One of the youngest of the international
organizations, the WTO is the successor to the
General Agreement on Tariffs and Trade (GATT)
established in the wake of the Second World
War.
The WTOs overriding objective is to help trade
flow smoothly, freely, fairly and predictably.

India signatory to GATT 1947 along with twenty two

other countries

Eight rounds of negotiations had taken place during

five decades of its existence

Contd.

Structure
The WTO has nearly 153 members, accounting for over 97% of world
trade. Around 30 others are negotiating membership.
Decisions are made by the entire membership. This is typically by
consensus.
The WTOs top level decision-making body is the Ministerial
Conference which meets at least once every two years.
Below this is the General Council (normally ambassadors and heads
of delegation in Geneva, but sometimes officials sent from members
capitals) which meets several times a year in the Geneva
headquarters. The General Council also meets as the Trade Policy
Review Body and the Dispute Settlement Body.
At the next level, the Goods Council, Services Council and
Intellectual Property (TRIPS) Council report to the General
Council.

WTO
Basic purpose is to promote international trade
without any discrimination.
Designed to play the role of a watchdog in the
spheres of trade in goods, services, foreign
investment, intellectual property rights etc.
Member countries should give equal treatment to
the products imported from any other member
countries.
A member country should treat the foreign
products once they enter their country exactly
equal to those of similar domestic products.
Since 1995, WTO has become the engine as well
as the vehicle to promote globalization in all
spheres of economic life.

Functions of WTO

Administers 28 agreements contained in the final act

Oversees implementation of tariff cut and reduction of nontariff measures
Examines trade regimes of individual member countries
Watchdog of international trade
Provides Disputes Settlement Court
Acts as management consultant for world trade
Technical co-operation and training division established
WTO used as a forum by member countries for negotiations
Co-operates with other international institutions like IMF,
World Bank etc.
Oversees the national trade policies of member
governments.

Organisation structure of the

WTO

1.
2.
3.
4.

Four hierarchical levels:

Ministerial conference
General council
Councils
Committees and management
bodies.

Cont
WTO related issues
Dispute settlement mechanism of
WTO
WTO and Anti-dumping measures
WTO-The Third Pillar in Global
Business

Functions of WTO

Administering trade agreements

Acting as a forum for trade negotiations
Settling trade disputes
Reviewing national trade policies
Assisting developing countries in trade
policy issues, through technical assistance
and training programmes
Cooperating with other international
organizations

Role Of World Trade

Organization

 The Dispute settlement Body has the

sole authority to establish panels of
exports to consider the case and to
accept or reject the findings of the
panels or the results of an appeal .
It monitors the implementation of
rulings and recommendation and as
the power to authorise retaliation when
country does not comply with a ruling.

First stage consultation up to 60

days
Before taking any other actions the
countries in dispute have to talk to
each other to see if they can settle
their differences by themselves.
If that fails, they can also ask the
WTO director-general to mediate or
try to help in any other way.

Second Stage The Panel up to 45 days for

panel to be appointed, plus 6 months for the
panel to conclude.
If consultation fails the complaining country can ask for
a panel to be appointed .
The country in the dock can block the creation of
panel ones but when the disputes settlement body
meets for a second time .
The appointment can no longer be block unless there is
a consensus against appointing the panel
The Body Makes Rules And Regulations
The Panel final report should be normally be given to
the parties to the disputes with in 6 months
In the case of urgency including those concerning
perishable goods the deadline is shortened to 3 months

Contents

Why ASEAN?
ASEAN Community 2015
ASEAN Regional Marketing

26

Why ASEAN?
ASEAN Community 2015
ASEAN Regional Marketing

27

The Paradox of Globalization vs. Localization

The World is Flat

Thomas L. Friedman
New York Times columnist

The World is Still Round

Robert J. Samuelson
Newsweek columnist

28

Regionalization: The Right Balance

Globalization
Regionalization

Localization

ICT has allowed wide information

access.
Goods and services can move cheaper
thanks to cheap transportation and ICT.
The world is more borderless.
In a flat world, competition searches for
lowest cost.
Convenience of flows of information,
goods, services, and people within the
region
Relatively similar psychology and
national interest within region
National borders still have economic
meaning.
National markets exist and are defined
by psychology and politics.
National economic and political
setbacks can threaten globalization.29

paradox has forced countries to form regional

Source:
Wikipedia.com

30

Regionalization of Asia

31

Global View of Asia

Regional Blocs, including East Asia will be prominent

Principal blocs will be Europe, East Asia and the Americas.
The 21st Century is the Asian Century!
Asia will be almost half of the worlds economy by
2020

32

Asia Pre-Crisis: The Flying Geese

Before the crisis, the flying geese phenomenon was soaring
throughout Asia and influencing the Pacific Rim economies.

The formation resembled flying geese, headed by Japan, while the rest of the group
followed. Countries toward the front tend to transfer older industries to countries at
the back.
Note:
Flying Geese is a concept developed by Kaname Akamasu that best describes the economic structure of Asia before the
crisis.

33

Asian Crisis
But the crisis put an end of flying geese.

Source:
BBC

Asian Economic Crisis in 1997-1998: The End of Flying

Geese, The end of the good old days of the Asian miracle

34

Asia Post-Crisis: The Regional Squadrons

After the crisis, squadrons of the former flying geese, who
increasingly drive regional integration.

SAARC
Squadron

China
Squadron
Korea
Squadron
Japan
Squadron

ASEAN

35

ndia, where the world's workshop meets its offi

China

India

Heavy reliance on low

prices
Weak financial system
Inefficient capital system
Slow population growth

Red tape, corruption, tough

labor laws and
bureaucracy all deter
investment
Woeful infrastructure
Lackluster primary
education system
Exclusive growth
environment to the rich
The privatization of key
36
industries has stopped

Weaknesses

Weaknesses

Strong technology and service

industry
Relatively efficient capital
market
Strong private sector and legal
framework
Younger workforce
Growing population
Great university system
Strong entrepreneurial culture
Attracts higher prices

Strengths

Strengths

Manufacturing giant with the

lowest prices
Hybrid communist-capitalist
model that enables
development
Solid primary schools
Infrastructure that lures foreign
investment
Good distribution of wealth
with higher per-capita income

How should ASEAN ride the wave

of the rising East (read: Chindia)?

37

ASEAN Countries at a Glance

38

The Rising East: Threat or Opportunity?

Opportunity

Threat

Individual countries in
ASEAN are nothing
compared to Chindia

ASEAN
Integrati
on

ASEAN is the only region

capable of being in the
driver seat of the
Greater East Asia
integration*

* ASEAN is the first to seat ASEAN countries together with China, India,
Japan, South Korea, Australia, and New Zealand, as well as Russia (as an
observer) in one table during the first East Asia Summit.
39

The First East Asia Summit Driven by ASEAN

Initiated by ASEAN, the first East Asia Summit held in Kuala
Lumpur, Malaysia, in December 2005, brought together leaders
of the former flying geese, with the objective to establish the
East Asia Free Trade Area by 2015 and moving towards the New
Asia.

(Observ
er)

40

ASEAN in the Driving Seat of the Greater East

ASEAN

High
Bargaining
Power

Neutral
Position
ASEAN is not
considered a threat to
China, India, Japan,
South Korea, Australia,
and New Zealand

Attractive
Single
Regional
Market
Huge market
High
consumption
Less
competitive

Competitive
Regional
Production
Base
Smooth flow of
goods, services,
and people
under FTA
Abundance of
natural
41

Why ASEAN?
ASEAN Community 2015
ASEAN Regional Marketing

42

Towards ASEAN Community 2015

ASEAN COMMUNITY 2015

ASEAN
Security
Community
(ASC)

ASEAN
Economic
Community
(AEC)

ASEAN SocioCultural
Community
(ASCC)

The Peaceful, Prosperous, and People-Centric ASEAN

Regional Production Base

Production/Supply

Single Regional Market

Consumption/Demand

Dual Track Strategy

43

What does ASEAN Integration Mean?

All barriers to the free

flow of goods,
services, capital, and
skilled labor are
removed

The region will

become a more level
playing field

Tariffs will be eliminated and non-tariff

barriers will be gradually phased out
Rules and regulations will be simplified
and harmonized
ASEAN investors will be permitted to
invest in sectors formerly closed to
foreigners and the services sector will
also be opened up
Applicable international standards and
practices are followed, and policies on
intellectual property rights and
competition are put in place
Regional infrastructure will be more
developed with the expansion of
transportation, telecommunications and
energy linkages
44

Four Key Success Factors of ASEAN Integration

Rigorous Focus on
High-Impact
Sectors

Workable
Institutions

Continued Support
by ASEAN Leaders

More Effective
Public-Private
Collaboration

Source: McKinsey&Company, ASEAN Competitiveness Study, 2003.

45

orporate Trends Supporting ASEAN Integratio

Global trends in manufacturing indicate a shift towards
adopting flexible production techniques and integrated
production chains

It is no longer cost effective for all manufacturing activities to be

done in in-house or in a single country

MNCs are integrating their manufacturing activities across several

locations

MNCs are not only seeking large consumer markets but also
regional sites where they can establish efficient production
networks

Regional Production Base

46

Potential Cost Savings from ASEAN Integration

47

A Balanced Approach is Needed

Benefits to MNCs
Targeting more sales
volume in the ASEAN
market
Components
procurement on an
ASEAN-wide basis
More product
specialization to
achieve economies of
scale
Greater emphasis on
profitability using
ASEAN-wide operations

Benefits to Local
Companies
More export
opportunities to ASEAN
market
ASEAN-wide expansion
opportunity for
corporate growth
strategy
Technology and
financial support
opportunities from
MNCs
ASEAN-wide pool of
talent

A Balanced Approach
48

Why ASEAN?
ASEAN Community 2015
ASEAN Regional Marketing

49

50

What is Marketing?

Differentiation
Core Tactic

Being Strategy

d
an
Br
y
tit
en
Id

Brand

BRAND

Value Indicator

Br
an
dI
ma
ge

Positioning

Brand
Integrity

51

Nine Core Elements of Marketing

(mind-share)

(market-share)

STRATEGY

Explore

Positioning

TACTIC

Engage

Differentia
tion

'BEING'
STRATEGY

'CORE' TACTIC

7
8
9
Process

VALUE
'ENABLER'

Execute

VALUE

(heart-share)

V
52

Three Types of ASEAN Marketing Companies

(3) THE
MULTINATIONAL
S FOCUSING ON
ASEAN
MULTINATIONALS

ASEAN

LOCALS

LOCALS

(2) THE LOCALS GOING ASEAN

(1) THE LOCAL CHAMPIONS

53

Local Champions

S Play small by serving niche markets

T Address the local needs and wants

Maintain high level of customer intimacy

54

MBF Cards of Malaysia

Local Champio

Malaysias largest
and most
innovative and
issuer of niche
cards

Brand
Integrity

Differentiation
Selection of cards
suited to niche
segments
Early adoption of
new card
technologies

d
an
Br

Brand

y
tit
en
Id

BRAND
BRAND

MBF Cards

Br
an
dI
ma
ge

Positioning

55

Goldilocks of the Philippines

Local Champio

The bakeshop with

international
standards catering
to Filipino taste

Brand
Integrity

Differentia
tion
Varieties of
Philippines original
bakery products and
cuisine
Understanding of
Pinoy values and
sentiments

d
an
Br
y
tit
en
Id

Bran
d

BRAND
BRAND

Goldilocks

Br
an
dI
ma
ge

Positioni
ng

56

Bengawan Solo of Singapore

Local Champio

The convenient
gift and souvenir
options of handmade premium
cakes, kueh, and
cookies

Brand
Integrity

d
an
Br

Brand

Differentiation
High quality handmade products with
attractive and
exclusive packaging
Convenience for
order, delivery, and
collection
Gift voucher
packages

y
tit
en
Id

BRAND
BRAND

Bengawan Solo

Br
an
dI
ma
ge

Positioning

57

Locals Going Regional

S
Translate the regional positioning to local context

TEnsure regional visibility and availability

Build regional brand

58

Extra Joss of Indonesia

Locals Going
Regional

Differentia
tion
In sachets, not in

d
an
Br
en
Id

Bran
d

BRAND
BRAND

tit
y

Extra Joss

ge

bottles
Generation Biang
(core generation)
Large retail
distribution networks

Im
a

The affordable
core essence of
energy drink for
core generation

Brand
Integrity

Br
an
d

Positioni
ng

59

Black Canyon of Thailand

Locals Going Regional

Positioni
ng

Food houses that

combine West and
East

Brand
Integrity

Differentia
tion Western
Extensive

and Asian (especially

Thai) food and coffee
menu
Wild Wild West name
and dcor
Large chain of
outlets

tit
y

Black Canyon

ge
Im
a

en
Id

BRAND
BRAND

Br
an
d

d
an
Br

Brand

60

AirAsia of Malaysia
Locals Going Regional

Positioni
ng

ASEAN no-frills
and fun low-cost
carrier

Brand
Integrity

Differentiat
ion
Low-cost structure

Fun internal culture

tit
y

AirAsia

ge
Im
a

en
Id

BRAND
BRAND

Br
an
d

d
an
Br

Brand

61

MNCs Focusing on ASEAN

S Coordinate the regional strategy

T Execute the local customization

Maintain the consistency of the global value

62

Glorecalization Approach for MNCs

MNC Type 1 - Strategy,
Tactic, and Value are
determined by the global
office with little
modification. Regional and
Strategy
Tactic
Value
local
offices merely
act
as
supervisor and operator.

MNC Type 2 - MNC with

Glorecalization
Approach: Consistent
global value,
Coordinated regional
strategy,
and Value
Strategy
Tactic
Customized local tactic
(The 3C Formula)
Consistent

Global
Office
(Conceptor)

Global
Office
(Composer)

Regional
Office
(Supervisor)

Regional
Office
(Conductor)

Local
Office
(Operator)

Local
Office
(Improviser)

Global
Value

Coordinated
Regional
Strategy

Customized
Local
Tactic

63

Yamaha Motor

Consistent
Global Value

Coordinated
Regional
Strategy

Customized
Local Tactic

Yamaha Brand and Three Tuning Forks

logo
The spirit of creating Kando (feelings of
deep satisfaction and excitement) as the
brand mission
Yamaha technology and production
Growth strategy for ASEAN
Profitability strategy for US and Europe

Different product mix for each ASEAN

country
Different communication approach for
each ASEAN country
64

Toyota Kijang

Consistent
Global Value

Coordinated
Regional
Strategy

Customized
Local Tactic

Toyota Brand and Three Ovals logo

Japan-quality manufacturing
Sales, Service, and Spare parts businesses

Positioning: ASEAN Family Car

Different communication approach for

each ASEAN country

65

Conclusions
ASEAN is a regional bloc of 550 million
customers with rich resources.
ASEAN is sure to get attention from MNCs
and investors both as a source of products
and a market for products.
ASEAN will bring benefits to the companies
in all 10 ASEAN countries because it will
lower their costs and provide larger
opportunities .
66