Regional Trading Agreements

Regional Trading Agreements

 

Efforts to eliminate trade barriers result in bilateral, regional, and global trade agreements.  Supply managers should know who the major trading partners with their countries are, what trade agreements are in place, and what opportunities exist in emerging economic markets.

 

  • North American Free Trade Agreement (NAFTA) – took effect for the U.S., Canada, and Mexico in 1994.  Goods that are wholly produced in the United States, Canada, or Mexico are classified as “originating goods” and are eligible for preferential reduced tariffs.  Other goods are taxed as if they were from any other country.
  • The European Union (EU) – In 2002 the euro became the sole currency of the EU member states allowing for easier price comparisons and lower foreign currency transaction costs.
  • ASEAN – The Association of South East Asian Nations (ASEAN) was established in 1967.  The ASEAN Free Trade Area (AFTA) was created in January 1992 to eliminate tariff barriers and with a view to integrate the ASEAN economies into a single production base creating a regional market of 500 million people.
  • Mercosur – established in 1991, and encompasses Argentina, Brazil, Paraguay, and Uruguay in a customs union.  Often referred to as the Common Market of the South, Mercosur is four times as big as the EU area, encompasses more than 250 million people, and accounts for more than three-quarters of the economic activity on the continent.
  • Andean Community (CAN) – originated in 1969 (includes Bolivia, Ecuador, Colombia, and Peru) with the ultimate aim to create a Latin American Common Market.  A free trade area was established in 1993 and a common external customs tariff in 1994.  CAN has a combined population of 98 million, and a GDP in 2008 of US$745.3 billion. CAN and Mercosur, the two main South American trading blocs, agreed in 2008 to engage in negotiations to form the Union of South American Nations (USAN).  CAN is also negotiating with the EU to obtain more favorable trading relations.
  • The World Trade Organization (WTO) – The WTO was formed on January 1, 1995, and it replaced the General Agreement on Trade and Tariffs (GATT).  The WTO is the international organization overseeing the multilateral trading system.  The WTO’s overriding objective is to help trade flow smoothly, freely, fairly and predictably.

 

 

Emerging Markets

 

Although there is no common definition of an