Post on 14-Apr-2018
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TRADING BLOCKS
EUROPEAN ECONOMIC
UNION
MS. INDRAYANI DEEKSHIT
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TRADING BLOCKS - COVERAGE
Various forms of economic integration
Formation of Trading BlocksConditions for success
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TRADING BLOCKS LEARNING
OBJECTIVE
Understanding the underlying logic
Factors responsible for successObjectives and functioning of various
Trade blocks
EU / NAFTA / ASEAN / EFTA / LAIA /SAARC / APEC / MERCOSUR / ANDEAN
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BENEFITS OF ECONOMIC
INTEGRATION
Business opportunities created
Unnecessary competition avoidedMinimises economic consequences ofpolitically independent countries andpolitical boundaries
Small economies are grouped into alarger single economy and market
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BENEFITS OF ECONOMIC
INTEGRATION
Resources are pooled, increasing
efficiency and productivity.Financial Resources are pooled for
large-scale operations
Size of market increases.Economic activity increases
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TYPES OF ECONOMIC
INTEGRATION
Free Trade Area No barriers between
participating countries.
Customs Unions Members abolishtariffs or charge low rates. There is auniform commercial policy reg. non-members.
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TYPES OF ECONOMIC
INTEGRATION
Common Market All member
countries lower / abolish tariffsandadopt uniform commercial policy of
restrictions / barriers with non-
members. There is free movement ofHuman Resources and Capital.
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TYPES OF ECONOMIC
INTEGRATION
Economic Union - All member countries
lower / abolish tariffs andadopt uniformcommercial policy of restrictions / barriers
with non-members. There is free
movement of Human Resources and
Capital. The countries achieve uniformity in
Monetary and Fiscal Policy among markets.
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TRADE CREATION
Occurs when lower-cost partner
countrys imports displace higher-priceddomestic production, thereby
decreasing costs of production and
consumer prices within the country.
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TRADE DIVERSION
Occurs when lower-cost partner
countrys imports from outside theblock are displaced by higher-cost
imports from within the block.
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EUROPEAN UNION
In 1952 - West Germany, Italy, Belgium,Netherlands and Luxembourg formed the
European Coal and Steel Community (ECSC).
Aim of ECSC was to eliminate import duties andquotas on coal, iron ore, steel and scrap and
regulate trade between member countries.
1957Facility was extended to all commodities.
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EUROPEAN COMMON MARKET
(EEC European economic
community)
EEC Originally comprised of 6 countriesFrance, Federal Republic of Germany, Italy,Belgium, Netherlands and Luxembourg.In 1973 UK, Ireland, Denmark joined.
In 1981 Greece joined.
In 1984 Portugal and Spain joined.In 1986 Austria, Finland & Swedenjoined.
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EUROPEAN COMMON MARKET
AND THE EUROPEAN UNION
It became the European Union withintroduction of uniform monetary policy,common currency and fiscal policy.In 2004 Cyprus, Czech Republic, Estonia,Greece, Hungary, Latvia, Lithuania, Malta,Slovakia and Slovenia joined EU.
As on 2005 total of 25 countries becamepart of EU
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EUROPEAN UNION
Requirements for joining EU :
Country should be a European one
Country should be Democratic
EU consists of ECSC, EEC and EuropeanAtomic Energy Commission ( Euratom )
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MAIN OBJECTIVE OF EUROPEAN
ECONOMIC UNION
The setting up of a common market to promote,throughout the community :
-a harmonious development through economicactivities
- a continuous and balanced expansion
- an increase in stability and accelerated raising of
the standard of living and- closer relations between the member states
belonging to it.
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ACTIVITIES OF EUROPEAN
ECONOMIC UNION BASED ON
OBJECTIVES
Elimination of customs duties andquantitative restrictions with regard to export
/ import among membersEstablishment of common customs tariffs andcommon commercial policy with regard tonon-members
Abolition of all obstacles related to movementof persons, services and capital amongmember countries
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ACTIVITIES OF EUROPEAN
ECONOMIC UNION BASED ON
OBJECTIVES
Formulation of common policy for
agriculture and transportEstablishment of system to ensurecompetition
Application of programme in order to co-
ordinate economic policies
Application of procedures and programmeto control disequilibrium
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ACTIVITIES OF EUROPEAN
ECONOMIC UNION BASED ON
OBJECTIVES
Approximation of legislation of member
governmentsEstablishment of European Social Fund
Establishment of European InvestmentBank for mobilisation of fresh resources
Development of association with thecountries to promote economic and socialdevelopment
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IMPORTANT MILESTONES IN
ESTABLISHMENT OF EEC
1958 Rome Treaty setting up EEC &
Euratom1973 UK, Ireland, Denmark join EEC
1981 Greece joins EEC.
1986- Spain, Portugal join.1990 Fall of Berlin Wall
1992 Maastricht Treaty signed
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IMPORTANT MILESTONES IN
ESTABLISHMENT OF EEC
1993 Single market comes into force
1994 Single market of 19 countries formed
European Economic Area ( EEA )1995 Austria, Finland, Sweden join EEC.
1999- New currency Euro introduced.
2004 Czech Rep., Estonia, Hungary, Latvia, Lithuania,
Malta, Poland, Slovak Rep. and Slovenia join EEC2007 Bulgaria & Romania join. Progressively, Cyprus,Malta, Slvenia, Slovakia adopt Euro
2010 & later Greek default looms large
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ORGANISATION OF EUROPEAN
ECONOMIC UNION
EUROPEAN COUNCIL AND ITS
SUPPORTING FRAMEWORK
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EUROPEAN
COUNCIL
COURT OFJUSTICE
COURT OFAUDITORS
EUROPEANCOMMISSION
EUROPEANPARLIAMENT
ADVISORYCOMMITTEE
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ORGANISATION OF EUROPEAN
UNION
EUROPEAN COUNCIL
Main Administrative body.Each member country represented
Presidency held for 6-mth period byrotation
Committee of permanent representativesCorper acts as Secretariat and takesdecisions
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ORGANISATION OF EUROPEAN
UNION
EUROPEAN COUNCIL
Makes routine decisionsFrames rules of conduct
Prepares new legislation
Enables members to carry out provisionsof Treaty
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ORGANISATION OF EUROPEAN
UNION
EUROPEAN COMMISSION
Assists the CouncilExecutive body of EU
Members have a 4-year tenure
Each commission is entrusted one or moreEU Policies
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ORGANISATION OF EUROPEAN
UNION
COURT OF JUSTICE
Adjudicates disputes regarding agriculture,social security and competition policy
Also adjudicates disputes between
members
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ORGANISATION OF EUROPEAN
UNION
COURT OF AUDITORS
Audits EEC budgetsMonitors expenditure
Lays down procedure for collection of
duties and levies
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ORGANISATION OF EUROPEAN
UNION
EUROPEAN PARLIAMENT
European Commission consults EuropeanParliament which :
provides consultation and information toCommission
approves or rejects draft budget preparedby Commission
dismisses Commission, if necessary
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ORGANISATION OF EUROPEAN
UNION
ADVISORY COMMITTEES
Economic & Social Committee representsactivities like employers, employee unions,liberal professions etc.
Monetary Committee examines monetaryproblems
Consultative Committee on Coal and steelIndustry studies problems of coal & steelindustries
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FUNCTIONING OF EU
COMMON AGRICULTURAL POLICY
Green Rate for member countries. Supportprice is converted into the National price atthe Green rate
Farmers free to produce as much as they can
Free movement of Agricultural productsImports allowed only if Demand > Supply.
If Supply > Demand, subsidies for exports
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FUNCTIONING OF EU
IMPACT OF COMMON AGRICULTURAL
POLICYRich farmers became richer
Unemployed farmers did not seek
alternative employmentConsumers did not get lower prices
But self-sufficiency in agriculture achieved
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FUNCTIONING OF EU
COMMON FISHERIES POLICY In 1970.
Market created for fresh, frozen &preserved fish
Common market standards were set and
facilities were for trading among membersEqual access to fishing areas was provided
to nationals of EU Countries
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EVOLUTION OF THE EUROPEAN
MONETARY UNION
Started in March 1979 with foll. Features :
Exchange rate mechanism to help membercountries to regulate inflation and interest rates
European Currency Unit, as a weighted averagebasket of all currencies in the EU as a means ofsettlement between member countries, with official
rate being calculated on a daily basis
European Monetary Co-operation Fund, to act as aclearing house for member countries
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EVOLUTION OF THE EUROPEAN
MONETARY UNION
Factor mobility Free movement of
persons. Services and capital amongmember countries
Regional Development Policy - to promote
balanced development and removedisparities. Financial assistance provided to
backward regions
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EVOLUTION OF THE EUROPEAN
MONETARY UNION
European Investment Bank set up in 1958,
to provide loans and guarantees to membergovts. for development of backward regions
and for modernisation, conversion and
development projects as well as for
projects where members have a common
interest
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EVOLUTION OF THE EUROPEAN
MONETARY UNION
European Social Fund for providing
vocational training and creation of jobs forjobless and anti-poverty programmes
European Regional Development Fund
set up in 1958 for providing loans fordevelopment of backward regions,
infrastructure and industrial service
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EVOLUTION OF THE EUROPEAN
MONETARY UNION
Common Transport Policy
For removal of obstacles for common market place
Integration of transport facilities
Organization and control of transport system
The EEC could not achieve the set objectives
completely, due to issues involved in infrastructurepricing, entry controls for transportation
EU emerged as one market from 01.01.1995becoming the largest, single market
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INTRODUCTION OF A COMMON
CURRENCYTHE EURO
On 1st Jan 1999, Exchange rates of
participating countries were irrevocably setand 11 currencies became sub-division of
Euro, which was used for electronic and
credit card transactions since 1999.
New Euro Bank notes were introduced in
2002.
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INTRODUCTION OF A COMMON
CURRENCYTHE EURO
12 member countries have adopted EuroBelgium, Germany, Greece (which joined in 2001),
Spain, France, Ireland, Italy, Luxembourg,Netherlands, Austria, Portugal and Finland.
Further, among the later entrants Slovenia,Cyprus, Malta, Slovakia & Estonia have also adopted
Euro taking total no. to 17 out of 27 members.Denmark, Sweden, UK are members but are notpart of single currency.
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ESTABLISHMENT OF EUROPEAN
CENTRAL BANK
ECB was established in 1998 to maintain
price-stability & conduct single monetarypolicy.
National Central Banks alongwith ECB are part
of the Euro system.
The primary objective of ECB is to decide and
implement monetary policy, conduct forex
operations and operate payment system
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ROLE OF NATIONAL CENTRAL
BANKS IN INTRODUCTION OF EURO
Introduction of Euro
Manage changeoverCreate necessary support system
Withdraw legacy currency
Provide advice.
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THANK YOU