Global Environment

Unit Contents
 Globalization - concepts and forms
 Regional economic integration
 A brief overview of the regional economic groupings such as
NAFTA, APEC, ASEAN, SAARC, SAFTA and BIMSTEC;
Economic reforms in South Asia
 World Trade Organization (WTO): Objectives, structure,
principles, agreements and most favoured nation treatment
 Benefits of the WTO trading system
 Nepal's membership and commitments-opportunities and
threats for Nepalese business
 Recent trends and development in global environment .
 Concept of Globalization

 Globalization is the process of integration

between national economies and rest of the
world.
 It is facilitated by the factors like multinational

corporations, information technology,

international and regional institutions such as
Word Bank, IMF, WTO, EU, ASEAN, SAARC,
etc.
 Forms of Globalization

1.Economic Globalization
2.Political Globalization
3.Environmental Globalization
4.Cultural Globalization
 Effects of Globalization

 Positive Effects
1. Enhance Productivity and Income
2. Transfer of Capital, Technology and Management
3. Growth in Export
4. Increase Employment
5. Utilization of Local Resources
6. Emergence of Newly Industrialized Nations
 Negative Effects
1. Crisis in National Sovereignty
2. Economic Inequality
3. Job Insecurity
4. Unequal Competition
5. Exchange Rate Uncertainties
 Globalization in Nepal

1. Foreign Employment Opportunities

2. Foreign Direct Investment (FDI)
3. Foreign Trade Globalization
4. Privatization and Industrial Growth
5. Trade competitiveness and transfer of
technology
6. Impact on tourism sector
7. Information technology (IT)
8. Impact on poverty reduction
 Regional Economic Integration (Regional Economic Groupings)

 Regional economic integration is defined as an

arrangement between different countries that often
includes the reduction or elimination of trade barriers,
and the co-ordination of monetary and fiscal policies.
 It is simply the regional economic groupings of the
nations for promoting each other's welfare objective.
 Regional economic groups are the associations of
countries situated in a particular region whereby they
come to a common understanding regarding rules and
regulations to be followed while exporting and
importing goods among them.
 Stages/Levels of Regional Integration

1. Freer Trade Area

2. Customs Union
3. Common Market
4. Economic Union
5. Political Union
 Effects of Regional Economic
8
Integration
 Benefits of Regional Integration
1. Trade Creation
2. Greater Consensus
3. Political Cooperation
4. Employment Opportunities
 Drawbacks of Regional Integration
1. Trade Diversion
2. Shifts in Employment
3. Loss of National Sovereignty
 A Brief Overview of the Regional Economic Groupings

 Economic grouping of the countries of the same

region or areas increases the size of market,
aggregate demand for products and services, overall
productivity, employment and ultimately economic
activity of the region.
 At the same time, people of the region get a variety
of products at comparatively lower prices. The
number of regional groups has grown rapidly in
recent decades. More than one-third of world trade
now takes place within such groups.
 North American Free Trade Association (NAFTA)

10

 The North American Free Trade Agreement

(NAFTA) is a comprehensive trade agreement that
sets the rules of trade and
 NAFTA has systematically eliminated most tariff and
non-tariff barriers to free trade and investment
between three NAFTA countries. It went into effect
on January 1, 1994.
 Objectives

11

 To eliminate trade barriers and facilitate the cross-border

movements of goods and services between the parties.
 To promote conditions of fair competition
 To substantially increase investment opportunities
 To provide adequate and effective protection and
enforcement of intellectual property rights in each territory.
 To create effective procedures for the implementation and
application of this agreement, for its joint administration
and for resolution of disputes.
 To establish a framework for further trilateral, regional and
multilateral co-operation to expand and enhance benefits of
this agreement.
 Asia-Pacific Economic Cooperation (APEC)

12

 The Asia-Pacific Economic Cooperation (APEC) is a

regional economic forum established in 1989 to
leverage the growing interdependence of the Asia-
Pacific.
 APEC’s 21 members aim to create greater prosperity
for the people of the region by promoting balanced,
inclusive, sustainable, innovative and secure growth
and by accelerating regional economic integration.
 Objectives

13

 To develop and strengthen the multilateral trading

system among the member nations
 To increase the interdependence and prosperity of
member economies
 To promote sustainable economic growth in the
region.
 APEC Process

14

1. APEC: Cooperation and Consensus

2. APEC Capacity Building Projects
 Association of South east Asian Nations (ASEAN)

15

 Association of South East Asian Nations (ASEAN) was established

on 8 August 1967 in Bangkok by the five original member countries:
Indonesia, Malaysia, Philippines, Singapore, and Thailand.
 Brunei Darussalam joined on 1984, Vietnam on 1995, Laos and
Myanmar on 1997, and Cambodia on 1999. Therefore, there are ten
member countries associated with ASEAN.
 The ASEAN Community is comprised of three pillars, the Political-
Security Community, Economic Community and Socio-Cultural
Community.
 Every year following the ASEAN Ministerial Meeting, ASEAN
holds its Post-Ministerial Conference (PMC) to which the Secretary
of State is invited. In 1994, ASEAN took the lead in establishing the
ASEAN Regional Forum (ARF), which now has 27 members.
16

 Objectives
 To promote the economic, social and cultural
development of the region through cooperative
programmers.
 To safeguard the political and economic stability of the
region against big power rivalry; and
 To serve as a forum for the resolution of intra-regional
differences.
17

 Fundamental Principles
 Mutual respect for the independence, sovereignty, equality,
territorial integrity, and national identity of all nations;
 The right of every state to lead its national existence free
from external interference, subversion, or coercion;
 Non-interference in the internal affairs of one another;
 Settlement of differences or disputes by peaceful manner;
 Renunciation of the threat or use of force; and
 Effective cooperation among themselves.
18

 Activities
 Respect for the independence, sovereignty, equality,
territorial integrity and national identity of all ASEAN
Member States;
 Shared commitment and collective responsibility in
enhancing regional peace, security and prosperity;
 Renunciation of aggression and of the threat or use of
force or other actions in any manner inconsistent with
international law;
 Reliance on peaceful settlement of disputes;
19

 Contribution
Cooperation in Industrial Development, Cooperation in
Finance and Banking, Cooperation in Investment,
Cooperation in Food, Agriculture and Forestry, Cooperation
in Minerals, Cooperation in Energy, Cooperation in
Transportation and Communications, Cooperation in
Tourism, Cooperation in Services, Cooperation in
Intellectual Property, Private Sector.
 South Asian Association for Regional Cooperation (SAARC)

20

 The South Asian Association for Regional Cooperation

(SAARC) comprises of eight countries - Bangladesh,
Bhutan, India, the Maldives, Nepal, Pakistan, Sri Lanka
and Afghanistan (new member nation since 2007).
 SAARC is a manifestation of the determination of the
peoples of South Asia to work together towards finding
solutions to their common problems in a spirit of
friendship, trust and understanding and to create an
order based on mutual respect, equity and shared
benefits.
21

 Objectives
 To promote the welfare of the peoples of South Asia and
to improve their quality of life;
 To accelerate economic growth, social progress and
cultural development in the region and to provide all
individuals the opportunity to live in dignity and to
realize their full potentials;
 To promote and strengthen collective self-reliance
among the countries of South Asia;
 To contribute to mutual trust, understanding and
appreciation of one another's problems;
 SAARC Structure

22

 Summits
 Council of Ministers
 Standing Committee
 Programming Committee
 Technical Committee
 Working Groups
 SAARC Apex Bodies

23

 SAARC apex bodies are: SAARC Chamber of

Commerce & Industry (SCCI), South Asian
Association for Regional Cooperation in Law
(SAARCLAW), South Asian Federation of
Accountants (SAFA), South Asia Foundation (SAF),
Foundation of SAARC Writers and Literature
(FOSWAL) and South Asia Initiative to End Violence
Against Children (SAIEVAC).
 SAARC Activities*

24

 Creation of the SAARC Integrated Programme of Action (SIPA), including

Agriculture and Rural Development; Communications and Transport; Social
Development; Environment, Meteorology, and Forestry; Science and
Technology; Human Resources Development; and Energy.
 Establishment of SAARC regional centers, including Agricultural Information
Centre (Dhaka); Tuberculosis Centre (Kathmandu); Documentation Center
(New Delhi); Meteorological Research Centre (Dhaka); Human Resources
Development Centre (Islamabad); Energy Centre (Islamabad); Disaster
Management Centre (New Delhi).
 Organization of People to People contact programs, including SAARC Audio-
Visual Exchange (SAVE) Programme; SAARC Documentation Centre (SDC);
SAARC Scheme for Promotion of Organized Tourism; SAARC Chairs,
Fellowships, and Scholarships Scheme; SAARC Youth Volunteers Programme
(SYVOP); SAARC Visa Exemption Scheme; South Asian Festivals; SAARC
Consortium of Open and Distance Learning (SACODiL) and SAARC Awards .
 South Asian Free Trade Area
25
(SAFTA)
 South Asian Free Trade Area (SAFTA) was
conceived by the meeting of council of ministers at
New Delhi in December 1995. An Inter-
Governmental Expert-Group (IGEG) was set up in
1996 to identify the necessary steps for moving
toward a free trade area.
 Objectives of SAFTA

26

 Eliminating barriers to trade in, and facilitating the cross

border movement of goods.
 Promoting conditions of fair competition in the free trade
area, and ensuring equitable benefits to all members
taking into account their respective levels and patterns of
economic development.
 Creating effective mechanism for the implementation and
application of this agreement for its joint administration
and for the resolution of disputes.
 Establishing a framework for further regional
cooperation to expand and enhance mutual benefits.
 Principles of SAFTA

27

 SAFTA will be governed by the provisions of the agreement and

also by the rules, regulations, decisions, understandings and
protocols to be agreed upon within its framework by the Contracting
States;
 The Contracting States affirm their existing rights and obligations
with respect to each other under Marrakesh Agreement Establishing
the World Trade Organization and other Treaties/Agreements to
which such Contracting States are signatories;
 SAFTA shall be based and applied on the principles of overall
reciprocity and mutuality of advantages in such a way as to benefit
equitably all Contracting States, taking into account their respective
levels of economic and industrial development, the pattern of their
external trade and tariff policies and systems;
28

 SAFTA shall involve the free movement of goods, between

countries through, among other things, the elimination of
tariffs, para - tariffs and non-tariff restrictions on the
movement of goods, and any other equivalent measures;
 SAFTA shall entail adoption of trade facilitation and other
measures, and the progressive harmonization of legislations
by the Contracting States in the relevant areas;
 The special needs of the Least Developed Contracting States
shall be clearly recognized by adopting concrete preferential
measures in their favour on a non-reciprocal basis.
 The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC)

29

 The Bay of Bengal Initiative for Multi-Sectoral Technical and

Economic Cooperation (BIMSTEC) is a regional organization
comprising seven Member States lying in the littoral and
adjacent areas of the Bay of Bengal constituting a contiguous
regional unity.
 This sub-regional organization came into being on 6 June 1997
through the Bangkok Declaration.
 It constitutes seven Member States: five deriving from South
Asia, including Bangladesh, Bhutan, India, Nepal, Sri Lanka,
and two from Southeast Asia, including Myanmar and Thailand.
 Initially, the economic bloc was formed with four Member
States with the acronym ‘BIST-EC’ (Bangladesh, India, Sri
Lanka and Thailand Economic Cooperation).
 Objectives

30

 To create, manage and evaluate energy related data-base relevant to

the region; and taking into view various on-going activities and
suggest a road map for meaningful intra- BIMSTEC cooperation.
 To prepare and operationalise a framework for networking among the
national level institutions in the region.
 To prepare the groundwork, such as feasibility studies, data collection
etc. for intra- BIMSTEC energy related projects.
 To study, compile and disseminate the prevailing policies of the
BIMSTEC member countries indifferent areas of energy sector.
 To enhance cooperation for capacity building and sharing of
experiences on best practices, including reforms, regulation and
energy efficiency.
 To function as the secretariat for energy cooperation activities.
 Principles

31

 Cooperation within BIMSTEC will be based on

respect for the principle of sovereign equality,
territorial integrity, political independence, non-
interference in internal affairs, peaceful co- existence
and mutual benefit.
 Cooperation within BIMSTEC will constitute an
addition to and not be a substitute for bilateral,
regional or multilateral cooperation involving the
Member States.
 Priority Sectors

32

1. Trade and investment ,Bangladesh

2. Technology, Srilanka
3. Energy, Myanmar
4. Transportation and communication, India
5. Tourism, India
6. Fisheries, Thailand
8th meeting of 2005 added 7 sectors as priority sectors:
7. Agriculture, Myanmar
8. Counter terrorism, India
9. People to people meet, Thailand
10. Poverty alleviation, Nepal
11. Cultural cooperation, Bhutan
12. Public health , Thailand
13. Environment and disaster, India
Likewise in 2008, 1 sector was added:
14. Climate change, Bangladesh
 Nepal and BIMSTEC *

33

 Nepal's Engagements
 Nepal has volunteered to act the lead country on Poverty
Alleviation sector in BIMSTEC.
 Nepal hosted the 2nd BIMSTEC Ministerial Meeting on Poverty
Alleviation in Kathmandu on 15-16 January 2012 which adopted
the Kathmandu Declaration and BIMSTEC Poverty Plan of Action
(PPA).
 The Seventeenth Session of the BIMSTEC Senior Officials’
Meeting (SOM) was held in Kathmandu on 7 February 2017. The
Meeting was preceded by the Second Preparatory Meeting to the
BIMSTEC-SOM and the Seventh Meeting of the Joint Working
Group on the Establishment of the BIMSTEC Permanent
Secretariat. This is the first ever Meeting that Nepal convened after
assuming the chairmanship of BIMSTEC in 2014.
34

 Nepal also hosted the meeting of the 5th Joint Working

Group on Counter Terrorism and Transnational Crime
(JWJ-CTTC) on 24-25 November 2011 in Kathmandu.
 Nepal hosted 4th Expert Group Meeting on
Agriculture Cooperation in April 2015 in Kathmandu.
 Nepal, along with other BIMSTEC Leaders, attended
the BRICS (Brazil, Russia, India, China and South
Africa)-BIMSTEC Outreach Summit in Goa, India on
16 October 2016 in order to explore the potential areas
for cooperation between BRICS and BIMSTEC.
 Economic Reforms in South Asia

35

 As globalization and regional integration gained its

momentum from the beginning of 1980s and the gain
from open trade is realized by the pioneer East Asian
Nations, the South Asian countries also tried to catch
up with the stream under the banner of South Asian
Association of Regional Cooperation (SAARC)
followed by various other integration, the latest one
being BIMSTEC.
 Major Economic Reforms
36

 Privatization of public enterprises.

 Reforms in tax and subsidy,
 Entry of private sector in education, health and
infrastructure development,
 Freedom to establish commercial banks,
 Freedom to establish financial institutions,
 Deregulation of interest rate,
 Reforms in Capital market,
 Reforms in external trade by reducing tariff and non-tariff
barriers,
 Reforms in foreign exchange.
 Main obstacles
37

 High cost of trading within the region,

 Absence of Regional Value Chain (RVC),
 Complicated and non-transparent Non-tariff Barriers
(NTBs),
 Lack of intra-regional foreign Direct Investment (FDI).
 Recommendation of Economic Reforms
38

 Move towards an eventual customs union.

 Eventual elimination of tariffs and sensitive lists.
 Elimination of non-tariff barriers,
 Move towards a Common External Tariff (CET),
 Encourage value chains,
 Promote intra-regional investment,
 Enhance connectivity for facilitating trade.
 World Trade Organization (WTO)

39

 ORIGIN OF WORLD TRADE ORGANIZATION

 World Trade Organization (WTO) is an international body dealing
with the rules of trade between nations.
 It has started functioning from January 1, 1995. On April 23, 2004,
Nepal also got its membership. Nepal was 147th nation to get the
membership of WTO.
 Many developing countries are currently negotiating for their
accession.
 WTO is a successor to General Agreement on Tariffs and Trade
(GATT) which was in place since 1948.
 Over the years, GATT evolved through various rounds of
negotiations. The last GATT round was the Uruguay round which
lasted from 1986 to 1994. This Uruguay round of negotiations led to
the creation of WTO.
 Objectives

40

 To ensure the reduction of tariffs and other barriers to trade.

 To eliminate discriminatory treatment in international trade relations.
 To facilitate higher standards of living, full employment, a growing
volume of real income and effective demand and an increase in
production and trade in goods and services of the member nations.
 To make positive effect, which insures developing countries especially
the least developed secure level of share in the growth of international
trade that reflects the needs of their economic development?
 To facilitate the optimal use of the world’s resources for sustainable
development.
 To promote an integrated, more visible and durable trading system
incorporating all the resolutions of the Uruguay Round’s Multi literal
trade negotiations.
 Principles of the WTO

41

 Non-Discrimination
 Most Favored Nation (MFN) and National Treatment
 National Treatment
 Free Trade
 Predictability
 Promoting Fair Competition
 Encourage development and economic reforms
 Functions of WTO

42

 Administer and implement multilateral trade agreements

which together make up WTO.
 Act as a forum for multilateral trade negotiations.
 Seek to resolve trade disputes between WTO members.
 Oversee national trade policies
 Cooperate with other international institutions involved in
global economic policy-making, such as IMF and World
Bank
 Maintain trade-related data base.
 Act as a watchdog of international trade.
 Provide technical assistance and training for developing
countries.
 WTO Agreements
43

 Agreements Forming Part of GATT

 Agreement on Textile and Clothing (ATC)
 Agreement on Agriculture (AOA)
 General Agreement on trade in Services
(GATS)
 Agreement on Trade Related Aspects of
Intellectual Property Rights (TRIPS)
 Most Favored Nations Treatment
44

 In general terms, members of GATT agree that reduction in

tariffs and elimination of discrimination in international
commerce should be on a reciprocal and mutually advantageous
basis.
 To ensure against discrimination, members agree to grant to each
other unconditional most favored nation status in all import and
export duties, with certain exceptions.
 Article I of the Agreement deals with the ‘most favored nation
clause meaning that any advantage, favor, privilege or immunity
granted by a contracting party to any product originating in or
designed for any other country shall be accorded immediately
and unconditionally to a like product originating in or destined
for the territories of all other contacting parties.
 Benefits of the WTO Trading System

45

 The System helps Promote Peace

 Disputes are Handled Constructively
 System Based on Rules rather than Power makes life
Easier for Everyone
 Freer trade Reduces the Cost of Living
 Offers more Choices of Products and Qualities
 Trade increases revenue and Stimulates Economic
Growth
 Basic principles make the System More Efficient
 Governments are Protected by Lobby
 The system Encourages Good Governance
 Nepal's Membership in WTO

46

 Nepal applied for membership of GATT in 1989 as necessitated by its

geopolitical feature.
 Nepal did not take any initiatives to acquire membership prior to 1990s. It
remained only observer of the GATT. During 1990s the process of
liberalization gained momentum and in 1997 Nepal applied for membership of
WTO, an organization for rule based free trade.
 The fifth Ministerial Conference of WTO held in Cancun in September 2003
approved Nepal's accession to the WTO and offered membership, subject to
ratification by the government. Nepal was required to ratify the protocol of
accession by 31st March 2004, as per the terms of its accession.
 On 23rd April 2004, Nepal has formally been inducted in the WTO as its
147th member. For an economy, which had already started economic
liberalization program as early 1992, WTO accession does not come as a
surprise. This is so because Nepal had initially applied for membership to the
multilateral trading system in 1989.
 Nepal's Commitments in WTO

47

 Commitments on Agricultural Sector

 Commitments on Non-agricultural Sector
 Commitments on Service Sector
 Other Commitments
 WTO: Opportunities and Threats for Nepalese Business

48

 Opportunities
 Market access
 Special and Differential Treatments
 Transit Right
 Policy Stability
 Attract Foreign Direct Investment
 Gearing up Domestic Institutional Capability
 Benefit from Liberalization
 Access to Dispute Settlement Body
 Mobilization of Trade related Technical Assistance
49

 Threats
 Employment
 Negotiation for More Benefits
 Strengthening Institutions
 Specialization in Some Products and Services
 Making Industries Cost Effective
 Income Distribution and Poverty
 Monopoly of Multinational Companies in Patent
 Recent Trends and Development in Global Environment

50

 Global Banking Structure

 Sustainable and Clean Energy
 Increasing Economic Power of Emerging Markets
 Increasing Privatization
 Technological Revolution
 Changing Demographic Features
 International Arbitration
 Competitive Advantage
 Regional and Economic Blocs