Report

On
Cross National Cooperation and Agreements

Course Title - International Business

Assigned By:
Mashiat Zahin
Lecturer
Department of Marketing
Comilla University

Submitted by:
Md. Khalilur Rahman
ID: 11707012
Department of Marketing
Comilla University

Submitted on: 27th September, 2020

 Table of Content

Serial Topic Name Page

No No
01 Introduction 1

02 World Trade Organization 2

03 Regional Economic Integration 4

04 The North American Free Trade Agreement (NAFTA) 7

05 Regional Economic Integration In The Americas 8

06 Regional Economic Integration In Asia 9

07 Other Forms of International Cooperation 11

08 Commodity Agreements 12

09 Conclusion 14

10 References 14
 REPORT TOPIC

CROSS NATIONAL COOPERATION AND AGREEMENTS

 (1) INTRODUCTION

I am assigned for this report which is about “Cross-National Cooperation and

Agreements”. In this report I have discussed about World Trade Organization (WTO),
Regional Economic Integration in America, Asia and a large economic organization
NAFTA, some other forms of international cooperation and commodity agreements.
Economic integration is a term used to describe the political and monetary agreements
among nations and world regions in which preference is given to member countries. In
this report I have described the size of the regional market and the rules under which a
company must operate. How global and regional integration effect in economic situation
in whole world. Now here is the closer look of objectives, scope and limitations that I
have faced during making the report.

Objectives

In this report I have found the objectives that are to understand regional economic
integration, identify the major economic areas of cooperation, identify the major
characteristics and challenges of the World Trade Organization. From this report I have
also got some important strategic purpose by which one region get close with other one to
prosper together. Finally, the commodity agreements are very important for economic
development.

Scope

After doing this report I have gained some new ideas, new rules and regulations about
international business. It may create some opportunities for me to do international
business in future and also can be helpful for my professional life. It can be easily
understood that the report has made the scope for me for doing international business by
using these knowledge and how to do profit in international business.

Limitations

When making this report I have faced some limitations. I could not do field work for this
pandemic situation and for time limitations I could not collect enough information that
can make my report more attractive and informative. Last of all, I think that if the page
limitation is more than fifteen than I can add some more information about my topic in
my report.

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 (2) THE WORLD TRADE ORGANIZATION (WTO)

The World Trade Organization (WTO) is an international institution that oversees the
rules governing global trade. It is an intergovernmental organization that is concerned
with the regulation of international trade between nations. The WTO officially
commenced on 1 January 1995 under the Marrakesh Agreement, signed by 123 nations
on 15 April 1994, replacing the General Agreement on Tariffs and Trade (GATT), which
commenced in 1948. It is the largest international economic organization in the world.

The WTO deals with regulation of trade in goods, services and intellectual property
between participating countries by providing a framework for negotiating trade
agreements and a dispute resolution process aimed at enforcing participants' adherence to
WTO agreements, which are signed by representatives of member governments 9-10 and
ratified by their parliaments. The WTO prohibits discrimination between trading partners,
but provides exceptions for environmental protection, national security, and other
important goals.

The WTO's current Director General is Roberto Azevêdo, who leads a staff of over 600
people in Geneva, Switzerland. On 23 January 2017, the amendment to the WTO Trade
Related Aspects of Intellectual Property Rights (TRIPS) Agreement marks the first time.

GATT: Predecessor to the WTO

GATT means General Agreement on Tariffs and Trade. One of the key achievements of
the GATT was that of trade without discrimination. Every signatory member of the
GATT was to be treated as equal to any other. This is known as the most-favored-nation
principle, and it has been carried through into the WTO. The establishment of the world
trade organization (WTO-replacing the GATT under the final Act of Uruguay Round in
1994) as a permanent trade organization and the principle agency of the United Nations
(UN) with responsibility for international trade. The final Act signed by 124 governments
primarily focused on global reduction in trade barriers, establishment of multilateral
framework of discipline for trade in services and protection of trade-related property
rights.

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The development in World trade

The WTO (World Trade Organization) has been established in 1995 as the successor of
the GATT (General Agreement on Tariffs and Trade). Currently the organization has 153
members. The WTO is an international organization that governs and maintains rules and
regulations for conducting trade among different countries.

The main functions of the WTO are –

➢ administer WTO agreements,

➢ act as a negotiating forum,
➢ handle trade disputes,
➢ monitor national trade policies,
➢ provide technical assistance and trainings,
➢ Cooperate with international organizations.

The basic principles of the WTO are –

➢ MFN (most favored nation) treatment equal treatment to all members in all
respect,
➢ National treatment, equal or similar treatment to domestic and imported products
➢ Ensures predictability through practicing transparency in all stages of activities.

Bangladesh is founder member of the WTO and has been actively participating in all the
activities of the WTO, including negotiations. As an LDC (Least-developed country),
Bangladesh is entitled to enjoy various kinds of special & differential treatment (S&DT)
under the WTO system.

What Does The WTO Do?

The WTO adopted the principles and trade agreements reached under the auspices of
GATT but expanded its mission to include trade in services, investment, intellectual
property, sanitary measures, plant health, agriculture, textiles, as well as technical barriers
to trade. Its 159 members collectively account for more than 97 percent of world trade
and include the BRIC countries (Brazil, India, China, Russia, which was finally admitted
to membership in 2012).

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Most Favored Nation

The WTO continued the MFN clause of GATT, which implies that member countries
should trade without discrimination, basically giving foreign products “national
treatment.”

Some exceptions are allowed, as follows:

1. Developing countries’ manufactured products have been given preferential treatment

over those from industrial countries.

2. Concessions granted to members within a regional trading alliance, such as the EU,
have not been extended to countries outside the alliance.

3. Countries can raise barriers against member countries who they feel are trading
unfairly.

Dispute Settlement

One function of the WTO that is garnering growing attention is the organization’s dispute
settlement mechanism, in which countries may bring charges of unfair trade practices to a
WTO panel, and accused countries may appeal. There are time limits on all stages of
deliberations, and the WTO’s rulings are binding. If an offending country fails to comply
with the panel’s judgment, its trading partners have the right to compensation. If this
penalty is ineffective, then the offending country’s trading partners have the right to
impose countervailing sanctions. However, the effectiveness of this system is under
serious debate, given the ambiguity and time-consuming nature of certain cases.

Negotiations to solve the dispute between the two companies and their representative
governments outside of WTO arbitration broke down in 2004 and both parties elected to
lodge formal complaints to the WTO.

(3) REGIONAL ECONOMIC INTEGRATION

Regional trade agreements are reciprocal pacts between two or more partners that lie
somewhat between bilateral and global integration agreements. According to the World
Trade Organization, 354 RTAs were in force as of mid-January 2013. Some of the best
known RTAs are the European Union, the European Free Trade Association (EFTA), the
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North American Free Trade Agreement (NAFTA), the Southern Common Market
(MERCOSUR), the ASEAN (Association of Southeast Asian Nations) Free Trade Area
(AFTA), and the Common Market of Eastern and Southern Africa (COMESA).

Geography matters

It’s logical that most trade groups contain countries in the same area of the world.
Neighboring nations tend to ally for several reasons:

❖ The distances that goods need to travel are short.

❖ Consumers’ tastes are likely to be similar, and distribution channels can easily be
established.

Neighboring countries may have common histories and interests, and they may be more
willing to coordinate their policies than non-neighbors. Even though geographic
proximity is a major factor leading to RTAs, this is not the case for all agreements.
Germany exports and imports about 58 percent of its merchandise to other EU members;
exports and imports with EU countries.

Neighboring countries often share a common history, language, culture, and currency.
Unless the countries are at war with each other, they have usually developed trading ties
already. Close proximity reduces transportation costs, thereby making traded products
cheaper in general. From the standpoint of tariff reduction, the two main types of
agreements are free trade agreements and customs unions.

Free Trade Agreement (FTA)

The goal of an FTA is to abolish all tariffs between member countries. It usually begins
modestly by eliminating them on goods that already have low tariffs, and there is usually
an implementation period during which all tariffs are eliminated on all products included
in the agreement. Moreover, each member country maintains its own external tariffs
against non - FTA countries. About 90 percent of the RTAs identified by the WTO are
free trade agreements.

Customs Union

In addition to eliminating internal tariffs, member countries levy a common external tariff
on goods being imported from nonmembers in order to establish a customs union. For

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example, when the EU was organized in 1957, it began to remove internal tariffs among
member states, but in 1967 it eliminated the remaining internal tariffs and established a
common external tariff, meaning that goods shipped into one member country from
abroad are free from tariffs in the rest of the member countries. Customs unions account
for less than 10 percent of the number of RTAs identified by the WTO, although the EU
is a significant trade group.

The Effects of Integration

Regional economic integration can affect member countries in social, cultural, political,
and economic ways. Initially, our focus is on its economic rationale.

Static and Dynamic Effects

Static effects are the shifting of resources from inefficient to efficient companies as trade
barriers fall. Dynamic effects are the overall growth in the market and the impact on a
company caused by expanding production and by its ability to achieve greater economies
of scale.

Static effects may develop when either of two conditions occurs:

❖ Trade Creation:

Production shifts to more efficient producers for reasons of comparative advantage,

allowing consumers access to more goods at lower prices. The strategic implication is that
companies that might be more efficient than producers. Investment also might shift to
countries that are more efficient.

❖ Trade Diversion:

Trade shifts to countries in the group at the expense of trade with other countries, even
though the nonmember companies might be more efficient in the absence of trade
barriers.

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 (4) THE NORTH AMERICAN FREE TRADE AGREEMENT
(NAFTA)

What is the North American Free Trade Agreement (NAFTA)?

The North American Free Trade Agreement (NAFTA) was implemented in order to
promote trade between the U.S., Canada, and Mexico. The agreement, which eliminated
most tariffs on trade between the three countries, went into effect on January 1, 1994.
Numerous tariff-particularly those related to agriculture, textiles, and automobiles-were
gradually phased out between January 1, 1994 and January 1, 2008. NAFTA’s purpose
was to encourage economic activity among North America's three major economic
powers.

Why NAFTA Was Formed?

About one-fourth of all U.S. imports, such as crude oil, machinery, gold, vehicles, fresh
produce, livestock, and processed foods, originate from Canada and Mexico, which are
the U.S.'s second- and third-largest suppliers of imported goods. In addition,
approximately one-third of U.S. exports, particularly machinery, vehicle parts, mineral
fuel/oil and plastics are destined for Canada and Mexico.

Key Takeaway

➢ The North American Free Trade Agreement (NAFTA) was implemented in 1994
to encourage trade between the U.S., Mexico, and Canada.
➢ President Trump made a campaign promise to repeal NAFTA, and in August
2018, he announced a new trade deal with Mexico to replace it.
➢ In September 2018, Canada joined the deal: the United States-Mexico-Canada
Agreement (USMCA), which was signed into effect on November 30, 2018.

NAFTA's Impact

Debate continues surrounding NAFTA's impact on its signatory countries. While the
United States, Canada, and Mexico have all experienced economic growth, higher wages,
and increased trade since NAFTA’s implementation, experts disagree on how much the
agreement actually contributed to these gains, if at all, on U.S. manufacturing jobs,
immigration, and the price of consumer goods. From the beginning, NAFTA critics were

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concerned that the agreement would result in U.S. jobs relocating to Mexico, despite the
supplementary NAALC. NAFTA affected thousands of U.S. auto workers in this way, for
example. Many companies have moved their manufacturing to Mexico and other
countries with lower labor costs.

(5) REGIONAL ECONOMIC INTEGRATION IN THE AMERICAS

There are six major regional economic groups in the Americas, divided into Central
American and South American. Central America (excluding Mexico) has the Caribbean
Community (CARICOM), the Central American Common Market (CACM), and the
Central American Free Trade Agreement (CAFTA-DR)-which includes the members of
CACM but also Honduras and the Dominican Republic, along with the United States. The
two major groups in South America are the Andean Community (CAN) and the Southern
Common Market (MERCOSUR). The Andean Community is a customs union, whereas
MERCOSUR is set up to be a common market. The major reason for these different
collaborative groups was market size. Therefore, some form of economic cooperation was
needed to enlarge the potential market size so that Latin American companies could
achieve economies of scale and be more competitive worldwide.

CARICOM

The Caribbean Community (CARICOM) is working hard to establish an EU-style form of

collaboration, complete with full movement of goods and services, the right of
establishment, a common external tariff, free movement of capital and labor, a common
trade policy, and so on. It is officially classified by the WTO as an Economic Integration
Agreement. Many of these initiatives have come about through an initiative called the
CARICOM Single Market and Economy (CSME). However, it is important for
CARICOM to succeed in order to expand market size and attract more investment and
job.

MERCOSUR

The major trade group in South America is MERCOSUR, which was established in 1991
by Brazil, Argentina, Paraguay, and Uruguay. Its major goal is to become a customs
union with free trade within the bloc and a common external tariff. MERCOSUR is
classified as a customs union by the WTO for trade in goods and an economic integration

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agreement for trade in services. MERCOSUR is significant because of its size: a
population of 251 million and a GDP of $2.457 trillion. It generates 75 percent of South
America’s GDP, making it the third largest trading bloc in the world in terms of GDP
after the EU and NAFTA.

Pacific Alliance

Pacific Alliance, initially comprising Mexico, Colombia, Peru, and Chile. These countries
refer to themselves as more hospitable to trade and investment due to their adherence to
democracy and the rule of law rather than the more populist and protectionist
philosophies of other countries in CAN and MERCOSUR. Having borders with the
Pacific also means that they are trying to be a bridge between Latin America and the Asia
Pacific region, which makes sense given their dynamic and market-oriented economies.

Andean Community (CAN)

Although the Andean Community (CAN) is not as significant economically as

MERCOSUR, it is the second most important official regional group in South America.
CAN has been around since 1969. However, its focus has shifted from one of isolationism
and statism to being open to foreign trade and investment. Colombia, one of the founding
members of CAN, has changed significantly in recent years and entered into a bilateral
trade agreement with the U.S., solidifying its move to greater openness in comparison
with other members of CAN.

(6) REGIONAL ECONOMIC INTEGRATION IN ASIA

Regional integration in Asia has not been as successful as in Europe or North America
because most of the countries in the region have relied on U.S. and EU markets for as
much as 20 to 30 percent of their exports-not as extensive as in Latin America but still
significant. In addition, China and Japan, which are not members of ASEAN/AFTA, are
significant players in the region in terms of trade and investment.

Association of Southeast Asian Nations (ASEAN)

Organized in 1967, ASEAN is a comprehensive association that includes preferential

trade as one of its many goals. This preferential trade agreement comprises Brunei
Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore,

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Thailand, and Vietnam. With a combined GDP of $2.28 trillion and an estimated
population of 622.5 million people 38 it is a significant organization.

ASEAN Free Trade Area

The ASEAN Free Trade Area is a trade bloc agreement by the Association of Southeast
Asian Nations supporting local trade and manufacturing in all ASEAN countries and
facilitating economic integration with regional and international allies. On January 1,
1993, ASEAN officially formed the ASEAN Free Trade Area (AFTA) with the goal of
cutting tariffs on all intrazonal trade to a maximum of 5 percent by January 1, 2008. Free
trade is crucial to the member countries because their ratio of exports to GDP is almost 70
percent. The best achievement of AFTA is that is has reduced tariffs, attracted FDI, and
turned the region into a huge network of production, leading to what some call "factory
Asia".

Asia Pacific Economic Cooperation (APEC)

Asia Pacific Economic Cooperation (APEC) is composed of 21 countries that border both
Asia and the Americas. All but three members of AFTA are members of APEC, plus
Canada, the U.S., Mexico, Peru, and Chile in the Americas; Australia and New Zealand;
and China, Japan, Korea, Russia, and Chinese Taipei. It is a large and powerful
organization that is focused on a wide range of activities related to trade and investment,
security, energy, sustainability, anticorruption, and transparency, among other things.

Trans-Pacific Partnership (TPP)

The TPP was initiated by the U.S. to spur economic growth and create jobs, and it
involves Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru,
Singapore, the United States, and Vietnam. The formation of the initiative was announced
in 2011, and Japan was added as a member in 2013. A main goal of the TPP is to enhance
trade and investment. The latest movement is the goal of establishing a Free Trade Area
of the Pacific.

What's next for regional economic integration in Asia?

The new normal is quite different now. There is structural slowdown in world trade, an
absence of leadership from the US or Europe in the push for openness and international
commitments are stalling. Further, the reforms that need to be undertaken now are the

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more difficult ‘second generation’ and behind-the-border reforms, as well as institutional
reforms. Despite the slowdown in the world economy, Asia is still growing at a higher
rate than any other region. There is an opportunity and responsibility for Asia to take the
leadership role in continuing necessary reforms and progressing RTAs that contribute to,
and strengthen, the global economic system.

(7) OTHER FORMS OF INTERNATIONA COOPERATION

Up to now, this topic has focused on treaties between nations designed to reduce trade
and investment barriers and increase trade and investment among member nations. We
have moved from the global-the WTO to the bilateral and the regional.

The United Nations

The first form of cooperation worth exploring is the United Nations, which was
established in 1945 to promote international peace and security and to help solve global
problems in such diverse areas as economic development, antiterrorism, and humanitarian
actions. If the UN performs its responsibilities, it should improve the environment in
which MNEs operate around the world, reducing risk and providing greater opportunities.

Organization and Membership

The UN family of organizations is too large to list, but it includes the WTO, the
International Monetary Fund, and the World Bank (the latter two discussed in subsequent
chapters). These organizations are all part of the Economic and social Council, one of six
principal organs of the UN system, which also includes the general Assembly, the
Security Council, and the international Court of justice.

UNCTAD

It was established to help developing countries participate international trade. UNCTAD's

main activities include globalization and development strategies, trade in goods and
services, commodities, investment and enterprise development, and trade logistics and
human resource development.

Nongovernmental Organizations (NGOs)

Non Governmental, nonprofit voluntary organizations are all lumped under the category
of NGOs: private institutions that are independent of any government. Some NGOs
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operate only within the confines of a specific country, whereas others are international in
scope. An example of the latter is the International Red Cross, which is concerned with
humanitarian issues around the world, not just in one country. One of the functions of
UNCTAD is to work with NGOs in helping shape policies and activities related to
concerns of developing countries. In addition to UNCTAD, there is a Committee on Non-
Governmental Organizations that is a part of the Economic and Social Council
(ECOSOC) of the UN that meets to discuss issues of importance to general and specific
NGOs.

(8) COMMODITY AGREEMENTS

An international commodity agreement is an undertaking by a group of countries to

stabilize trade, supplies and prices of a commodity for the benefit of participating
countries. An agreement usually involves a consensus on quantities traded, prices and
stock management.

Commodities refer to raw materials or primary products that enter into trade, Such as
metals or agricultural products. Primary commodity exports - such as crude petroleum,
natural gas, copper, tobacco, coffee, cocoa, tea sugar-are still important to developing
countries.

Objectives of Commodity Agreements

• Expanding the resources for economic and social development.

• Consider the interest of the consumers in importing countries.
• Considering the remunerative and equitable and stable prices for primary
commodities
• Considering the import purchasing power.
• Increased imports and consumption and also coordination of production and
marketing policy.
❖ Commodities and The World Economy

Both long term trends and short term fluctuations in commodity prices have important
consequences for the world economy. On the demand side, commodity markets play an
important role in industrial countries, transmitting business cycle disturbances to the rest
of the economy and affecting the growth rate of price. On the supply side, as noted above,

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primary products account for a significant portion of the GDP and exports of many
commodity producing countries.

Market movements and price fluctuations are influenced by a number of factors, such as
economic reports, large institutional block trades and such like. Of all these factors, one
that is often underestimated is the impact of commodity prices.

Economies that are net exporters, on the other hand, benefit from increasing prices, since
their income increases with the sale of those commodities. At the same time, a steep rise
in prices could reduce the demand for commodities and lead to losses.

❖ Consumers and producers

UNCTAD established a special unit on commodities to attempt to deal with the issues
facing developing countries because of high dependence on commodities, especially
agricultural commodities, for export revenue. Whereas many of the original commodity
agreements were designed to influence price through a variety of market interfering
mechanics, most of the existing ones have been established to discuss issues, disseminate
information, improve product safety and so on.

Because commodities are the raw materials used in the production process, it is important
for managers of companies that use them to understand the factors that influence their
prices.

❖ The Organization of The Petroleum Exporting Countries (OPEC)

The Organization of the Petroleum Exporting Countries (OPEC) is a permanent,

intergovernmental Organization, created at the Baghdad Conference on September Iran,
Iraq, Kuwait, Saudi Arabia and Venezuela. The Organization of the Petroleum Exporting
Countries is an intergovernmental organization of 13 nations. Founded on 14 September
1960 in Baghdad by the first five members, it has since 1965 been headquartered in
Vienna, Austria, although Austria is not an OPEC member state.

OPEC can have a strong influence on the oil market, especially if it decides to reduce or
increase its level of their production. Petrobras’ stock price has fallen, pushing down the
market value of the company below that of many smaller countries, including Colombia.
In addition, events beyond its control can influence prices. The rapidly escalating price of
crude oil prior to the global economic crisis was a mixture of rising demand worldwide

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(especially in China), political instability in the Middle East, and a shortage of refining
capacity, caused in part by environmental rules in some countries

The Downside of High prices Keeping oil prices high has some downside for OPEC
Competition from non-OPEC countries rises because the revenues accruing to the
competitors are higher. Because some OPEC countries are putting up roadblocks to
production, major producers like BP, ExxonMobil, and Shell are investing heavily in
areas like the Caspian Basin, the Gulf of Mexico. Production in these areas is expected to
grow significantly. High prices also attract competition to conventional oil, including
nonconventional oil.

(9) CONCLUSION

In conclusion, it can be stated that regional trade agreements (RTAs) are an increasingly
important element of the global economy. The World Trade Organization (WTO) is an
international institution that is concerned with the regulation of international trade
between nations. Regional economic integration could pave way for its members to
participate more effectively in the multilateral process of economic change, by providing
them with opportunities to experiment with the economic change at a smaller scale and
magnitude within the region. There are different viewpoints on the desirability and on the
efficient design of regional integration, especially involving developing countries. The
main purpose of (NAFTA) is to encourage economic activity among North America's
three major economic powerful Country USA, Mexico and Canada. Through this
agreement, they have strengthened the internal economic situation. Commodity
agreement is an undertaking by a group of countries to consider the interest of the
consumers in importing countries.

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Wikipedia contributors. (2020b, September 12). North American Free Trade Agreement.
Wikipedia.https://en.m.wikipedia.org/wiki/North_American_Free_Trade_Agreement

https://www.investopedia.com/articles/economics/08/commodity-market-move.asp

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understanding-inflation.asp

https://www.fool.com/knowledge-center/how-do-gold-prices-affect-the-economy.aspx.

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