What is the basis for their support?

That is, what are the specific benefits that countries

seek by joining an economic bloc?

Economists are increasingly in agreement that free trade will bring long term overall
benefits to the world economy. These benefits will not be shared equally, and some
countries in the short term will suffer more in the process of structural adjustments.
However, the assumption is that all countries in the long term will find some industries in
which they have a comparative advantage. The ideological triumph of neo-classical
capitalism and its belief in free trade has been underlined by the bankruptcy of the
Soviet Union, Eastern Europe, and state-interventionist Latin America, and later by the
conversion of state-guided capitalism in East Asiafollowing the Asian economic crisis
to a more market-oriented model. The neo-liberal conversion has largely been promoted
by developed Western countries, but the increasing acquiescence of developing countries
is evident as they attempt to lure foreign investors into their countries.
Global free trade, envisioned in the immediate post-war period as a promoter of peace,
never materialized. Only Western capitalist countries joined the framework of the General
Agreement on Tariffs and Trade (GATT). Even among GATT members, differing interests
and politically significant protections delayed tariff reductions and blocked removal of
nontariff barriers (NTBs). The transformation of economies in the most developed
countries from manufacturing to the service and technology sectors has also expanded
the focus of trade negotiations to include these industries. The newly launched World
Trade Organization deals not only with the merchandise trade envisioned by GATT, but
also service trade (dealt with under the General Agreement on Trade in ServicesGATS)
and intellectual property rights under its Trade-Related Intellectual Properties (TRIPs)
rules.
On the lower-end of the industrial progression, agriculture remains a politically sensitive
area for many countries in both the developed and developing worlds. Generally,
developed countries in the temperate zone with large territory and low population
density (such as North America and Australasia) have industrialized agriculture that is
internationally competitive. In contrast, many Western European countries, Japan, and
the newly industrialized Asian economies (with the exceptions of Hong Kong and
Singapore, which have little arable land anyway) have protected their agriculture sectors.
Among the developing countries, there is a division between those with inefficient semisubsistence agriculture (like India) and those with highly competitive export agriculture
(such as Argentina). The Cairns Group within the WTO (the group of agricultural exporting
countries promoting free trade and a reduction of subsidies in agriculture) is made up of
both developed and developing countries.
There are various reasons why countries enter into PTAs:
1. Security Considerations: PTAs help enhance the regions external security, through the
coordination of member states.
2. Bargaining Power: Regardless of whether a PTA imposes a Common External Tariff
(CET), its members obtain bargaining power through it, insofar as the arrangement
improves their negotiating positions with third parties. For example, many Latin American
countries are said to have entered into PTAs among themselves, in order to improve their
negotiating powers with the US.
3. Enhanced Foreign Investment: Entering a PTA helps a country attract foreign
investment. Investment by member countries becomes cheaper and goods produced

through such investment get a ready market in all the countries engaged in the PTA. For
example, with the establishment of the EU, it became cheaper for France to import
British goods. This made it cheaper and, therefore, more attractive for British players to
invest in France. The attraction was strengthened by the fact that the resulting
production of goods and services now had a larger market all over the EU, because of the
removal of trade barriers facilitated by the PTA.
4. Expanded Trade and Gains from Specialisation: The reduction of tariffs facilitates trade
in products previously not traded. This leads to specialisation and exploitation of
economies of scale. A study by Broda and Weinstein, which looked at the gains from
import variety, showed that US gains from trade by importing from new supplying
countries amounted to 2.6 percent of its gross domestic product (GDP) in 2001.
5. Increase in Other PTAs: Increased participation in PTAs by others prompts a country to
join one, lest its markets get captured by countries engaged in PTAs. In addition, this can
boost the bargaining position in multilateral trade negotiations, through attainment of
greater market power. For example, many agree that the main objective of the Caribbean
Community and Common Market CARICOM was to strengthen the regions external
position through the co-ordination of member states trade policies. In fact, CARICOM
has, on some occasions, negotiated as a group at the WTO. Similarly, Prime Minister Said
Musa of Belize said that the proposed Central American-Caribbean FTA was necessary
because, we need to establish a common strategy so that we can obtain special
treatment in international trade negotiations.
6. Involvement in a WTO Dispute: Although it is recognised that a single GATT/WTO
dispute will prompt the involved countries to form PTAs, however, forming a PTA with
third parties can give a country hope in improving its leverage in the conflict. For
example, it is said that one of Argentinas key purposes for entering Southern Common
Market (MERCOSUR) was to secure preferential access to the Brazilian wheat market.
Brazil was Argentinas leading export destination for wheat and its position in that market
was threatened by Canadian and US export subsidy programmes, which Argentina had
unsuccessfully challenged in a WTO dispute.
When PTAs were first formed, they generally only covered trade in goods. However, as
they have evolved (the evolution process is discussed later), they have come to include
trade in services and investment. They have also started to cover trade facilitation issues
such as transport and logistics, RoO and other issues like government procurement and
intellectual property rights (IPRs).
What has led to the Growth of PTAs?
PTAs have grown at a rapid rate over the last two decades. It has been argued that the
current slowdown of the MTS vis--vis the Doha Round has led to an increase in regional
economic integration. The underlying argument here is that PTAs give member countries
an opportunity to enhance their bargaining powers, which, in turn, can be used to
negotiate from a position of strength at the GATT/WTO, thereby enabling the avoidance
of disadvantageous multilateral outcomes.
Further, GATT/WTO membership has increased from 22 states, since its inception in 1994,
to 153 in July 2008 . It is a common view that the increase in the number of member
nations gives each member state less leverage. This can particularly apply to smaller
countries, which have comparatively modest bargaining power, to begin with, and gives
them an incentive to band together to form a PTA to boost their influence.

Moreover, with the establishment of the WTO, which has a formal dispute settlement
mechanism, the formal lodging of such disputes has increased. As mentioned in Section
1, the involvement in or loss of a dispute enhances the chances of countries entering into
PTAs.

What is the main economic bloc for your country?

Regional Comprehensive Economic Partnership (RCEP) trading bloc.

Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade
agreement (FTA) between the ten member states of the Association of Southeast Asian
Nations (ASEAN) (Brunei, Burma (Myanmar), Cambodia, Indonesia, Laos, Malaysia, the
Philippines, Singapore, Thailand, Vietnam) and the six states with which ASEAN has
existing FTAs (Australia, China, India, Japan, South Korea and New Zealand). RCEP
negotiations were formally launched in November 2012 at the ASEAN Summit in
Cambodia
India overcame resistance from China to become a part of the Regional Comprehensive
Economic Partnership (RCEP) agreement, an Asean + 6 grouping which is set to emerge
as one of the most significant free trading blocs in the world,
The RCEP is an initiative to link the ten ASEAN member states and the group's Free Trade
Agreement partners, Australia, China, India, Japan, South Korea and New Zealand. The
grouping of 16 nations includes more than 3 billion people, has a combined GDP of about
$17 trillion, and accounts for about 40 percent of world trade. The first round of
negotiations on RCEP was held in May in Brunei.
The Big 3 Asian economies China, Japan and South Korea are working towards a free
trade pact. This could benefit India.
Among the Big-3, Indias trade relations with China are the strongest, despite the fact
that there is no FTA in place between the two countries. Total trade between both sides
amounted to $75.59 billion in fiscal year 2011-12 (9.51 per cent of Indias total trade). On
the other hand total trade between Japan and India was just $18.43 billion (2.32 per
cent), and Korea-India trade was lower at $17.45 billion (2.19 per cent).
Taken together, Indias trade with the region amounts to $111.47 billion, a share of 14.02
per cent of its total trade with the rest of the world.
Although there is talk of an FTA between China and India, not much progress has been
made. There are no government sponsored feasibility studies as yet and negotiations
seem distant.
COMPREHENSIVE ECONOMIC PARTNERSHIP AGREEMENT.

India signed a watered-down FTA, what they call a Comprehensive Economic Partnership
Agreement (CEPA), with Japan and Korea in 2011, but the ground results are far from
satisfactory. There has been a gradual increase in Indian exports and investment in both
regions, but the potential remains largely untapped. In fact, the agreement seems to
have largely benefited Japanese and Korean companies, which are making inroads into
India.
Since an FTA with China seems a distant dream, and is likely to involve many rounds of
negotiations spread over years, this is the opportune time for Indian policymakers and
businessmen to study how they can leverage the CEPA with Japan and Korea, to take
advantage of a trilateral FTA in East Asia and make inroads into the Chinese market.
What advantages has bloc membership brought to your country.

The objectives of this Agreement are to:

(a) Liberalise and facilitate trade in goods and services between the Parties;
(b) Increase investment opportunities and strengthen protection for investments and
investment activities in the Parties;
(c) Ensure protection of intellectual property and promote cooperation in the field
thereof;
(d) Promote cooperation for the effective enforcement of competition laws in each Party;
(e) Improve business environment in each Party;
(f) Establish a framework to enhance closer cooperation in the fields agreed in this
Agreement; and (g) create effective procedures for the implementation and application of
this Agreement and for the resolution of disputes.
This tends to be true for several reasons. First, competition increases. The elimination of
tariffs, quotas, and other restrictions allow companies who were once prevented from
doing business to compete on equal footing with national companies. Competition
usually lowers prices and improves quality by itself.
Secondly, the cost of production for goods and services tend to decline as companies
take advantage of the lower costs of labor, cheaper natural resources and easier access
to quality services and specialized knowledge.
The free movement of knowledge is especially important. Free trade allows companies to
set up subsidiaries in other countries where they can simply use their existing
technology. It also allows businesses to create arrangements where their company can
sell its knowledge easily to other businesses.
Specialization is also increased in free trade zones. A larger market allows countries to
spend their resources producing things that they do well, rather than inefficiently
producing goods or services that other countries can provide at lower prices. (In
economics this is called comparative advantage.)
Another advantage for consumers is that there is often a greater variety of goods and
services available in free trade blocs. Products like beer, detergent, clothing, and
machine tools are often produced in all the countries after the free trade agreement they
are often stocked in many stores. Products like satellite hook ups for televisions,
computers and telephones are usually made more available to developing countries.

Internet service providers are now able to sell to larger markets and more consumers
have opportunities to purchase or use these services.
What disadvantages has bloc membership produced

Possibly the greatest drawback to free-trade blocs is job and economic sector
displacement. For many reasons, some industries will be shut down or forced to downsize
because of increased competition from trading partners. These business sectors often
employ large numbers of workers who find that their jobs no longer exist. This is an
inevitable process in free-trade agreements. If some industries were not closed it would
mean that there was little need for the agreement in the first place. The workers who
lose their jobs are often without work for an extended period and when they do find work
it may well be at a lower wage.
As stated above, this is an inevitable result of restructuring that occurs in free-trade
pacts. This knowledge does not make it any easier for those who have lost their jobs or
businesses, however.
The other major possible drawback to free-trade agreements is increased dependency. As
countries become more specialized they become more dependent on their trading
partners. This means that each country loses some control over its economy or
sovereignty. Decisions by foreign businesses can greatly affect domestic economies.
Many are made uncomfortable knowing that most of their food is now grown in other
countries.