By-

Prof. Sunil Garg

 Post Second World War period – Need and interest
arises in integrating national economies at regional
level.
 A trade block is a type of intergovernmental
agreement where regional barriers to trade (tariffs
and non-tariff barriers) are reduced or eliminated
among the participating states.
 Creating business opportunities
 Avoiding Unnecessary Competition
 Sharing Resources – Goods, Services,
Investment, Manpower, etc.
 Increases Market Size
 Eliminating trade restrictions among
member countries
 Reduce Custom & Tariffs and eliminate
them gradually
 Integration: Economic & Regional
Approach
 Member by Number: G7/G8 (developed

countries), G77 (developing countries)

and G20 (active group within developing
countries)
 Member by Name: Commonwealth, OECD

– Organization for Economic Corporation

& Development, and ESCAP- Economic &
Social Commission for Asia & Pacific
Type of Economic Groupings
Different level of integration: trade, currency &
political systems of the countries.

Alternative Removal of Common Free Harmonizati

Forms Tariff External Movement of on of
Barriers Tariff Labour & Economic
On Inter- Capital Policies
Trade
Free Trade Yes No No No
Area

Customs Yes Yes No No

Union

Common Yes Yes Yes No

Market

Economic Yes Yes Yes Yes

Union
Emergence:
- European Coal and Steel Community (ECSC) – Formed by
six countries West Germany, France, Italy, Belgium,
Netherlands and Luxembourg in 1952
- European Economic Community (EEC) –Six member
countries Belgium, France, Germany, Italy, Luxembourg
and Netherlands originally formed intothe EEC by the
treaty of Rome,1957. It came into force on 1st Jan1958.
The number of member countries of the EEC increased
from six to nine on Jan1, 1973 as United Kingdom,
Ireland and Denmark joined the community
- European Union - 27 member states in 2005– The largest,

most developed consumer market in the world, accounts

for about 40 per cent of world trade.
 Elimination of internal duties
 Establishment of common barrier
 Removal of restrictions on factors of
production,
 Harmonization of national economic
policies
 Responsible for the development of EU
Single International Market.
 Single Currency – Economy & Monetary
Union (EMU) – Euro
Benefits Achieved:
 Efficiency Gain
 Economic Growth
 Elimination of Currency Risk
 Lower Transaction Cost
 Capital Mobility
 Stable Prices
 Challenges: Deepening of Integration, Expansion of Membership &
Balancing of Two

Convergence criterion for participation in Single Currency:

 Annual inflation
 Public-sector budget deficit
 Public-sector budget debts
 Long term interest rates
 Common Exchange rate
 GATT / WTO
 UNCTAD – United National Conference on

Trade & Development

 World Bank – Development Projects, Groups:

IFC, IDA and MIGA(Multilateral Investment

Guarantee Agency)
 IMF – Monitoring Stability – provide short

term loans for balance of payment

 Work only for the interests of developing countries
 Forum for developing countries to discuss their
problems
 Meeting every four year
 Members include developing and developed
countries
 Currently, UNCTAD has 193 member States and is
headquartered in Geneva, Switzerland. UNCTAD
has 400 staff members and an annual regular
budget of approximately US$50 million and US$25
million of extra budgetary technical assistance
funds.
 Aim of WTO is to promote no-
discriminatory multilateral trading system
 Under Regional Groupings, countries
have to accord normally special status to
trade between member countries
 WTO set up CRTA – Committee on
Regional Trade Agreements
 Each member of WTO has to report on
these matters periodically