Fair & Free Trade on Coffee business

Coffee prices soar and businessmen in the middle of it rake in profits at the expense of the coffee farmer who for years has been on the verge of absolute poverty after investing heavily on the incumbent commodity through massive inputs and labour. However this has been the commonplace media hype about the coffee problem and the businessmen connections in the global markets. The truly profound is that the cost of producing coffee in the farm level has outdone the purpose of doing so due to lack of regulation of the coffee trade and maximising the price to benefit the farmer.

In the farm level of the coffee business the farmers have gradually doubted the importance of coffee as a cash crop due to absence of regulation and protection of their inputs to the market through farming. As such the issue of free and fair trade in context lacks within the market structures which interlink these farmers and the coffee buyers. The problem now needs both legal redress and coffee producing states coming in to look at the checks and balances in the market.

So far the general overview on the fair and free trade is on the basis of an effective movement that will curb extremes of manipulation. But what is the truly profound on this demographic aspect of market implications is based on the fact that most coffee cooperatives have failed to deliver to both the farmers and the market in terms of having free and fair trade policies. These policies have a varied approach to contracts based on coffee sales and gains from coffee sales.

This has reduced market value aspects and confidence of coffee sellers in the market levels hence reduced price equity and a subsequent low price implication on the coffee market price. This has drawn free and fair trade policies to be eyed sceptically due to aspects of cyclical structural outlooks on coffee. Inflation and political implications weigh heavily on market capitalization and cooperatives fail to address the need for standardized market value and quality of coffee opening corruption and extortion windows hence the subsequent rip offs based on irregular facade of the latter.

Chris Kenning: The coffee connection: Published by Courier Journal September 2007 (www. couorier-journal. com) Fair and free trade is becoming increasingly popular at the farm level with confidence in it growing profoundly. The general perception is that it is helping farmers to earn a living from the coffee farming. Previously this has been intrinsic and the complexity of it being based on the long marketing and sales chain.

This has blocked the small scale farmer’s ability to understand and access the market and compete with the sellers as well as lobby for better prices in context forming one of the complexities hindering coffee from benefiting the millions of peasants who are coffee farmers. Free trade policies have jumped this jinx and closed the corruption-extortion window through increased equity for the farmer through cooperative based regulation and contracts which guarantee good coffee prices on a minimum value basis which obviously is insulation.

As such free and fair trade practice is the onset of profiting out of coffee farming for the coffee farmers in a long term basis and will offset the traditional antagonism of middlemen extorting activities. This practice also has regulated labour issues and bars child labour in coffee farms while it addresses and refers farmers to the Fair Trade Labelling Organization, which certifies coffee farmers.

Read more

To What Extent Was Whig/Liberal Dominance 1846-68 a Result of Their Free Trade Agenda

To what extent was Whig/Liberal dominance in the period 1846-68 a result of their free trade agenda? Between the years 1846 and 1868, the Conservative party was only in power for a total of just under four years – 1852, 1858-97 and 1866-68. Throughout these short-lived periods, they were never able to achieve a majority and this illustrates and defines the extent of Whig/Liberal dominance in this period.

Their dominance was without doubt partially as a result of their free-trade agenda, but other factors, such as other policies the grouping made in this period, the gravitation of the Peelites towards the Whigs, the growth of popular Liberalism, the work of specific individuals and the weakness of the Conservatives also caused their dominance in this period. Whig/Liberal dominance in the period 1846-68 was, without doubt, caused to some extent as a result of their free trade agenda.

In 1849 the Navigation Acts, which restricted the nationality of ships carrying British trade, were abolished, thereby causing a huge increase in the number of ships carrying British trade and thus, an increase in British exports. The Companies Acts of 1858 and 1862 played vital roles in bringing more investment into Britain as they limited the liability of the ordinary shareholder and laid out precise rules for companies about their registration and accounts. In the period 1859-65, whilst Gladstone was Chancellor of the Exchequer, income tax was reduced from 9d in the pound to 6d in the pound, and only payable by those earning over ? 00 per annum. This meant that ordinary people had more money in their pocket to spend and put back into the British economy. Gladstone also managed to abolish paper duties in 1861, meaning that the cost of newspapers and magazines fell and ordinary people were able to buy them. He also worked consistently to remove almost all duties on imported goods into Britain. Finally, the Cobden-Chevalier treaty, signed in 1860, was an integral part of the Whig/Liberals’ free trade agenda in this period.

Anglo-French relations had been strained in the years leading up to 1860 with French expansion into Italy, and Gladstone agreed with free trader Richard Cobden that signing a free-trade treaty with France would ease the political tension. He was right, and the treaty helped to double British exports to France in the next 10 years as it reduced the duties British manufacturers and coal owners had to pay when importing to France. As Philip Magnus writes in his biography of Gladstone, ‘the repeal of so many duties helped to reduce the cost of living. People had more money in their pocket as a result of the Whig/Liberals’ policy, so naturally supported them. The free-trade agenda helped the emerging Whig/Liberal party to win the support of what had become the largest single grouping within the electorate, the middle classes. This was as a result of the period of prosperity Britain went through, illustrated by the fact that ‘exports rose by 350% between 1842 and 1873. ’ The Whig/Liberal grouping was in power for a large amount of this period of prosperity, and so got the credit for it with the electorate.

The free-trade agenda was also an important factor in causing Whig/Liberal dominance because it united the grouping. Within the grouping, there were Whigs, Liberals, Peelites and Radicals, representing all shades of the political spectrum from centre-right (Whigs) to left (Radicals) . They were seen as a ‘curious amalgam’ as a result of their different political standpoints, and the unity which the issue of free trade gave the group was vital in keeping it strong and together. The dominance of the Whig/Liberal grouping from 1846-68 was also caused by the other policies the grouping made in this period.

They pursued a sensible social policy which affected many areas of life. They made vaccination compulsory to try and eradicate smallpox, and introduced a Factory Act in 1853 which limited working hours for women and children. The Smoke Abatement Act of 1853 played a major part in cutting down on coal and other fumes which were dirtying the air and affecting the environment. The 1857 Divorce and Matrimonial Causes Act allowed divorce through regular courts. This made divorce accessible to all, because previously divorces could only be granted in the House of Lords, which was hugely expensive.

The Offences against the Person Act of 1861 helped to clarify criminal law and made many parts of it more humane. Finally, the state grant to education increased radically to ? 1. 3 million by 1862, helping to improve the education that children received. The other main area of policy which helped the dominance of the Whig/Liberal grouping was their attitude towards the non-conformists. As I have mentioned above, the middle class had become the largest single grouping within the electorate and many of them were non-conformist.

The Anglican Church had a monopoly over religion in Britain, despite the fact that the Religious Census of 1851 showed that almost half the church-goers in England were non-conformists. Therefore, the Whig/Liberals decided to tackle the issue. Their pressure during the 1850s forced universities to open their doors to everyone, not just Anglicans. As John Vincent writes in ‘The Formation of the British Liberal Party’: ‘The non-conformist community…had of course traditionally looked to the old Whig party…that allegiance was now potentially available to the Liberal Party. The Whig/Liberals, with their positive attitude towards non-conformist grievances, helped win their support, adding to their dominance in this period. However, as Duncan Watts argues, ‘(Palmerston’s) ministry had no obvious domestic policy at all. ’ The Government in this period actually made few significant policy changes, and this leads on to my next point. The Conservative Party, as shown often throughout history, thrive when they are able to persuade the electorate that the opposition party have radical tendencies. In this case, nothing of note occurs so the Conservatives were unable to portray the Whig/Liberals being at all radical.

This contributed to their weakness in this period. The sustained weakness of the Conservatives in this period also helped to cause Whig/Liberal dominance. As well as the fact that they were unable to portray the Whig/Liberal grouping as radical, they were also weak for a number of other reasons. Firstly, they held limited electoral appeal. This was primarily because they followed a very unpopular policy in the form of protectionism – defending the interests of the landed classes. This was highlighted in Disraeli’s Budget of 1852 which, while pleasing the Conservative backbenchers with its tax breaks on malt, was not popular with anyone else.

Also, as Robert Stewart writes, ‘The Conservative Party was, and suffered electorally for being, firmly tied to the agricultural community. ’ The middle classes, in the main, lived in urban areas and the Conservative focus on the countryside did not serve them well. They had poor party unity, and had a big problem in broadening their appeal without losing their traditional support. If they had been able to shed their protectionist reputation and improve their image, then they may have gained some non-conformist middle-class support, but they were not able to and so the Whig/Liberals dominated the period 1846-68. For a generation after the repeal of the Corn Laws, the Conservatives ceased to be a governing party. ’ In 1846, the majority of the ‘talent’ in the Conservative Party – the Peelites – defected to the Whigs in protest at the party’s refusal to commit to freer trade. This meant that the Conservatives were left with ‘no obvious leader ’ – making them even less of an electoral threat to the Whig/Liberals, but more importantly giving numbers and talent to the Whigs as the Peelites gravitated towards them. The gravitation of the Peelites towards the Whigs is clearly another important cause of Whig/Liberal dominance in the years 1846-68. At any moment any or all of them (the Peelites) would have been welcomed back into the Conservative ranks or assimilated into the Liberal ranks. ’ (Philip Magnus). However, the Conservatives, with their protectionist leanings (as illustrated in the 1852 Budget with tax breaks for the rich) were unattractive to the Peelites, who saw free trade as a key issue. In contrast, the Whigs were far more receptive to free trade, and the Peelites found ‘cohabitation not entirely distasteful’ (Eric Evans) when they decided to from a coalition with the Whigs in 1846 after the collapse of the Conservative government.

The two groups shared a progressive nature and a common focus (free trade) so the Peelites decided to join the Whigs. This gave them an edge over the Conservatives both in terms of numbers and talent. Finally, the Peelites wanted to be in power, and realised that the Conservatives were unpopular amongst the electorate, so gravitated towards the Whigs and aided their dominance in the period 1846-68. A fifth key aspect which helps to explain Whig/Liberal dominance in 1846-68 s the role of key individuals, particularly Palmerston, Gladstone and Bright. Firstly, Lord Palmerston was instrumental in setting up the Willis Rooms meeting at which the Liberal Party was officially formed out of the Whigs, Peelites, Liberals and Radicals. Secondly, his ‘immense appeal…and powerful presence’ (Stephen Lee) helped to keep the coalition together in its infancy between 1859 and 1865, as well as the fact that he managed to keep all the factions happy because they were all represented in the Cabinet.

The fact that ‘to the man in the street, he personified British patriotism ’ (i. e. Palmerston’s popularity with the electorate), gave the coalition time to fuse. Palmerston’s conservative approach to domestic policy made him difficult for the Conservatives to oppose because they could not portray him as dangerously radical. H However, also very important was Palmerston’s death, which allowed for a truly ‘Liberal’ party to grow under Gladstone, as Palmerston’s policies were not especially liberal. Gladstone himself is another key individual.

He ‘breathes life into the dry bones of the Liberal Party’ (Paul Adelman) and this was as a result a number of reasons, mainly during his time as Chancellor (1852-55 and 1859-65). He gained support for the Whig/Liberal grouping with his successful and very popular Budgets. This support came both from the middle classes with his promise to end income tax and general position of aiding free trade, and from the working class with his removal of tariffs on things like paper, which made newspapers accessible to them.

His rhetoric spoke well of the working classes, and his noises about parliamentary reform also helped him gain their support. His reputation for sound finance helped him to win the respect of many independent backbench MPs. His sophisticated knowledge, oratorical skill and hard work impressed Parliament and the electorate, whilst he ‘gave to popular Liberalism an identifiable public face with which the Liberal electorate could easily associate’ (Winstanley), thus helping their dominance in this period. The final key individual who aided the Whig/Liberal grouping’s dominance is John Bright, leader of the Radicals.

He persuaded all the members of the diverse grouping which were the Radicals to come to the Willis Rooms Meeting in 1859 and eventually to become a part of the Liberal party. He also gave Gladstone his full support as Bright believed that Gladstone would the most progressive leader when Palmerston died, which would be advantageous to the Radicals. To this end, he persuaded Gladstone to cultivate non-conformist links, as well as links with the newly emerging Labour elite, in order to popularise himself outside of the House of Commons.

Bright also persuaded various other groups, such as the non-conformists, trade unionists and other Radicals to support Gladstone. This was also because he wanted to ensure Gladstone became leader after Palmerston, and all this explains why Donald Read writes ‘Bright, as much as Gladstone, created the Gladstonian Liberal Party. ’ As shown from the evidence above, key individuals played a major part in the dominance by the Whig/Liberals between 1846 and 1868.

A final key factor which caused Whig/Liberal dominance in the period 1846-68 was the growth of popular Liberalism and grass-roots support for it. John Vincent believed that ‘the tail was leading the head’ – that is to say the Whig/Liberal dominance in government was as a result of grassroots support, not the other way round. He thought that this growth was as a result of three main factors: ‘the creation of a cheap daily provincial press, the growth of militant non-conformism, and the rise of organised labour’ (John Vincent).

The growth of a cheap press, mainly dominated by Liberal politicians (e. g. the Baines family with the ‘Leeds Mercury’) meant that the Liberals’ message could be spread across the country, and thus helped to build up an ‘articulate, self-conscious, provincial Liberalism’ which helped the dominance of the Whig/Liberals no end. ‘The non-conformists were prepared to place their wealth, their votes – a bloc of 87 non-conformists MPs were returned in 1865 – together with their influence, their zeal and their organising ability at the disposal of the Liberal Party’ (John Vincent).

This meant that the Whig/Liberals gained all the helpful features mentioned above as a result of the growth of militant non-conformity, and this helped their position of dominance. The rise of organised labour also helped the Whig/Liberal because, as Vincent suggests, ‘to vote Liberal was closely tied to the growing ability of whole new classes to stand on their own feet’ – the people of organised labour saw the Whig/Liberals as the party to represent them, and thus the Whig/Liberals gained support and votes from this section of the electorate.

Thus we can see that the growth of popular Liberalism was a key factor in the Whig/Liberals’ dominance in 1846-68. To conclude, it is obvious that all the factors mentioned above had an important role to play in causing the dominance of the Whig/Liberal grouping. The gravitation of the Peelites towards the Whigs is a key factor because it kept the Conservatives weak in this period. The role of key individuals was also vital because this meant the grouping followed an agenda of free trade, thus winning middle class support.

Middle class support was also won with other policies the grouping followed, such as their addressing of non-conformist grievances. The role of key individuals also helped the growth of popular Liberalism because it meant that the electorate had familiar, popular faces to associate the party with. It can also be argued that what the Whig/Liberals didn’t do was crucial to their dominance because they followed a moderate policy, meaning that the Conservatives were unable to portray them as radical.

Thus, dominance is both as a result of factors inside Parliament and outside Parliament, but it is clear that the moderate policies and free trade agenda is the most important factor in the Whig/Liberal dominance because the moderate policies and free-trade agenda won the support of the middle classes, made the party popular at grassroots level, meant that the Tories could not portray the grouping as dangerously radical and meant that the Peelites felt that the Whigs were more suitable for them to join than the Conservatives.

Thus, free trade and moderate policies is the most important cause of Whig/Liberal dominance between the years 1846 and 1868.

Read more

Is Free Trade Fair Trade

McConnel and Brue define free trade as “the absence of artificial (government imposed) barriers to trade among individuals and firms in different nations”. Free trade has long been thought as the desirable model of trade that brings about prosperity to nations practicing it. However, I beg to differ and believe that free trade does not materialize its theoretical promises. Critical analysis of free trade theory reveals that free trade is anything but fair trade.

I have attempted to analyze the classical and neoclassical models of free trade theory and identify inherent problems within the very concept of free trade. Careful analysis reveals that when applied to the contemporary world economy, the very postulates of these theories favor developed countries over the developing countries. David Ricardo has showed that relative cost difference is an important determinant of the theory of international trade.

He founded the principle of comparative advantage, which suggests that under competitive forces, countries will ultimately produce goods, which provide them comparative advantage in terms of cost. This serves as the classical approach towards free trade and implies that countries should specialize in producing those commodities in which they possess a relative cost advantage. They will be more productive in making these goods and can trade them for other goods in which they do not possess a comparative advantage.

On the other hand, neoclassical free trade theory described in the “Heckscher–Ohlin theorem: A country will export the good that uses intensively the factor in which it is relatively abundant”. This model exerts the conclusion that countries differ in their relative productivities because of the difference in factors of production available to them. Countries utilize factors in which they have abundance and produce commodities accordingly. In theory, production and trade would help countries encash such abundant resources because excess output will be exported.

Whereas, goods that require factors scarce in an economy can be imported. In effect, comparative advantage implied that countries possessing advantage in producing agricultural or other simple products should relocate resources within the economy to focus on producing a specialized set of goods and vice versa. Following this dictate, many developing economies that were mostly agrarian channeled their resources to produce food commodities. On the other hand, their developed peers focused efforts on producing value goods, as they were more skilled at it.

This theory had predicted that “trade between dissimilar countries implies a positive welfare effect on both countries since they can exploit their absolute and comparative advantages. Only costs of transporting goods between countries can keep them from exploiting those advantage”. However, in practice developing nations focused themselves on producing goods that had lower international market value. Whereas, developed nations focused on further developing their technologies and produced goods with greater international market value.

Therefore, developing nations stayed at a comparative disadvantage as compared to their developed counterparts. Similarly, factor endowment theory concluded that trade brings gains to countries. It assumed that all countries have similar access to technology. It also predicted that “international real wage rates and capital costs will gradually tend towards equalization” . However, the realities are different, as technology available to the developing and developed nations is different. Therefore, developing nations do not have much to encash on.

The prediction of equalization of real wages and capital costs also never materialized. In effect, the difference between wages of employees of developed countries and developing countries has only increased over the years. Free trade assumes that all countries possess similar factors of production which are fixed within the nations. They are completely utilized and immobile to move beyond borders. However, the reality is different; human capital and technology are dynamic factors and trade in fact increases inequality of production resources between countries.

In context, the developed countries posses an advantage over developing countries because they have superior capital resources and will continue to specialize in research and development to produce more capital goods. Whereas, developing countries are disadvantaged in capital resources and mostly posses labor resources. Therefore, they will continue to specialize in labor intensive goods and the gap of resources will widen. Free trade also assumes that factors of production are internationally immobile. This has been proved wrong by the new world economy.

As capital moves from developed nations to developing countries through outsourcing and other operations. These developed nations, through their multinational corporations, then take advantage of cheap labor force existing in developing countries. They reap the benefits of local markets and channel profits back home. This does no good to the developing nations, as these profits do not add to their GDP, rather, contribute to the GNP of developed nations. Therefore, the prediction of free trade that indicated the benefits of trade gains to nationals, never materialize.

On the other hand, as the trade widens the disparity of incomes between the developing and the developed countries, labor or human capital also relocates itself. Therefore, skilled or knowledge workers in developing countries immigrate to developed countries. This brain drain causes huge losses in human capital of the developing countries, where, such labor force is crucially needed. Yet the developed countries benefit from such movements of skilled workers to their countries. Multinational corporations emerge as the most powerful bodies of the world as the business borders blur and globalization affects trade.

Today the profits of these multinational corporations actually exceed the GDPs of many countries. Therefore, these corporations have become a powerful political entity and can actually influence terms of trade in their favor. Free trade also assumes that customer preferences and consumer demand are independent and influence production of goods. The goods that are preferred by consumers internationally will be produced more as they would satisfy consumer needs and the consumers will get the best quality due to competitive forces.

However, it can be seen that multinational corporations can easily change consumer behavior and preferences through aggressive marketing and advertisements. Today’s competition, is therefore not perfect competition but tilted towards the interests of multinational corporations of the developed nations. Embedded in the concept of free trade is the assumption of internal factor mobility. Internal factor mobility assumes that factors of production within an economy are mobile. This implies that resources can be shifted from one form to another in line with the world market trends.

However, in effect such resource movements are in most cases impossible. Specifically when applied to developing countries, which are mostly agrarian economies. For instance, an agrarian developing economy aiming to specialize itself in agricultural goods might have invested its resources in infrastructural developments. To build road or canals, they cannot pick up the road and place it elsewhere. Therefore, these resources become sunk costs and such resources cannot be relocated.

It also requires regulatory efforts on part of developing nations, and could consume many years before diversification of economy actually takes place. Even when developing countries consume efforts to manufacture labor intensive goods, to break the dependency on agricultural exports, they face resistance from developed countries. Developed countries put barriers in form of tariffs and quotas on such goods coming in from developing countries. Mostly this comes as a protectionist measure to safeguard national goods against the cheaper goods being produced in labor intensive countries.

“The United Nations estimated in 2001 that such trade restrictions cost the LDCs at least $100 billion annually-2% of their GNP”. M. Dunn and J. Mutti defend this strategy of developed countries: “If apparel manufacturers must pay wages that are ten times as high as in India or China, not surprisingly those firms feel that they are at an unreasonable competitive disadvantage. They are likely to argue for tariffs that offset these cost differences, thus putting them on a level playing field in competing with imports.

” However, the postulates of free trade such as factor endowment and comparative advantage encourage countries to pursue this strategy. When the same is necessary to protect economies of developing countries the developed countries neglect their concerns. Therefore, the entire concept of free trade dies by such steps prevalent in the contemporary economy. Free trade in the contemporary world is more or less influenced by the powerful countries that can safeguard their interests on the world forum.

These countries can bully other countries or lobby against them to let their products flow into these countries and yet prevent their cheaper products to invade their own markets. The political muscle of the developed countries puts them in a position to influence economic interests of other countries. Therefore, free trade is anything but fair to all of its counterparties. It favors the block of developed countries and adds to the problems of developing countries. Doctrines of free trade imply that developed countries that have gained superior resources in human capital, technology, and business will continue to dominate trade.Hence, free trade does not fulfill its promise of welfare to all but appears to be a new form of colonialism.

Bibliography

Bjornskov, Christian: Basics of International Economics-Compendium. Falkoner Alle, Ventus Publishers, 2000 Dunn, Robert M. and Mutti, John H. : International Economics, , NewYork, Routledge Taylor& Francis group, 2004 McConnel, Campbell R. and Brue,Stanley L. : Economics. New York. McGraw Hill Irwin, 2005 Todaro, Michael P. and Smith Stephen C. : Economic Development, Addison Wesley, 2002

Read more

India ASEAN Free Trade Agreement

Table of contents

Introduction

India and the association of South East Asian Nations (ASEAN) have concluded negotiations for a free trade Agreement (FTA) after years of difficult negotiations.

This agreement will be signed into a treaty at India-ASEAN summit to be held in Bangkok on February 26,2009 (Economic times, January 27, 2009) if every thing goes as planned. Expectation from India ASEAN FTA are high. Joint Media statement of Sixth ASEAM Economic Minister (AEM)-India consultations states that “the AIFTA (ASEAN-India free trade agreement) could be major avenue in harnessing the region’s vast economic potentials towards sustained progress and improved welfare not only for ASEAN and India but for greater East Asian regions as well”.

The India-ASEAN FTA is the result of many international and domestic factors on one hand, the trend of international regionalization and the proliferation of FTA’s and the failure of the Doha round of Multilateral talks to yield concrete results led both India and the ASEAN countries to consider alternative solution towards free trade. On the other hand the adoption policies by India and ASEAN to develop better cooperation with their immediate neighbours in recent years has helped accelerate this negotiation. (www. e_pao. net)

India and ASEAN: Historical Background

Although India and ASEAN countries have shared cultural and historical ties, India’s interaction with ASEAN countries was quite limited during the cold war as the two pursued policies which were not very conducive to deep rooted interaction. Soon after the end of second world war, India championed the process of decolonization and drew recognition and appreciation from different parts of the world. It become one of the founding members of Non-aligned Movement (NAM). Even though Indonesia was also a member of NAM alongside India, this relationship did not extend beyond that (Sinha, 2007 pg. 357)

The arrival of bipolar politics in southeast Asia, the Vietnam crisis and India’s close ties with the Soviet union led to the adoption of divergent policies by both India and ASEAN. ASEAN was formed in 1967 during the Vietnam war primarily to diffuse regional conflict and to promote better relations between members. Communists victory in Vietnam, Laos and combodia soon worsened the already fragile security situation of southeast Asia. Thus by 1976, ASEAN was forced to contemplate to become an association with security as its main concern. The reunification of veitnam and the Vietnamese invasion of Cambodia created another security dilemma. Sinha, 2007 pg. 350). While ASEAN chastised Vietnam, India supported Vietnam. ASEAN’s suspicions of the soviet union and the paronoia it had with anything communist led many including India, to regard ASEAN as allies of the capitalists and pro-American bloc. Suspicions was so high during this time that refused to hold dialogues with ASEAN twice in 1975 and 1980. But with end of the cold war, interactions between India and ASEAN became more frequent: and relations between the two began to improve at very fast pace. Following the end of cold war and collapse of soviet union, India began to adopt liberalization policies.

Mean while, ASEAN has also emerged as an important regional organization with great potential and opportunities for growth. The transformation of the international system and new outlook led to the adoption of the Look East policy in 1991, it marked a strategic shift in its foreign policy and perceptions towards its eastern neighbours. ASEAN’s strategic importance in the larger Asia-Pacific region and the potentials it has in becoming India’s major partner in trade and investment also added an impetus to India to develop closer ties with it.

In addition, considering the proposed South Asian Free Tade Area (SAFTA) is unlikely to produce any solid outcome, this policy shift and agreement on the part of India is a strategic s it is important. In continuance of India’s Look East policy, the process of interregional cooperation was institutionalized with India becoming a sectoral Dialogue partner of ASEAN in 1992; a full dialogue partner in 1995 and member of the ASEAN Regional Forum (ARF) in 1996. India because a summit level partner of ASEAN in 2002 and concluded the ASEAN-India partnership for peace, progress and shared prosperity in 2004.

India also became enganged in regional initiatives such as Mekong-guga cooperation (MGC) and Bay of Bengal Initiative for Multi-Sectoral Technical and Economic cooperation (BIMSTEC). India has also became member of EAST Asia Summit (EAS) in December, 2005, (Chakraborti, World Focus, 2008, 436).

India’s Look Best, ASEAN Look West Policies

The real turning point in India-ASEAN relations came with economic liberalization in 1991, the end of the cold war and enunciation of India’s “Look East” policy by Prime Minister PV Narsimha Rao. As publication of Indian ministry of external affairs observed. “There was confluence of nterests. A new world order, the economic Reforms in India along with its “Look East” policy, coincided with ASEAN’s “Look West” and regionalization drive. (Baru, February 2001 pg. 13. ) Under the “Look East” policy pursued increased trade and investment cooperation with South Korea and Singapore. Apart from extending India’s enduring relation with Vietnam, the policy also pursued greater economic relations with Malaysia, Thailand and Indonesia. India became a ‘Sectoral Dialogue Partner’ of ASEAN at the ASEAN’s Singapore, summit in 1992, and a ‘Full Dialogue partner’ of ASEAN at the Bangkok Summit in 1995.

In February 1995 the ASEAN-Indian Business council was set up. India was invited to the meeting of ASEAN Regional Forum (ARF) in July, 1996. At this it was decided that ARF would only admit as participants countries that have a direct influence on the peace and security of East Asia and pacific region. (Baru, 2001; pg 13). A key objective of India and ASEAN to move from derivative to direct relationship so that there are no distortions, no misperception, no ignorance and no intermediation.

There has been doubling of trade between India and ASEAN countries in 1990s and a marked increased in joint ventures and foreign direct investment between the two. Section VI and VII provide a comprehensive account of India-ASEAN trade and investment relation. Suffice it to say that ASEAN has emerged as the third largest foreign investor in India’s after US and EU. There are two dimensions of India’s new relationship with ASEAN. First, the trade and investment dimensions; second, the foreign policy and strategic dimension.

Neither of these relations has equal value to all the ASEAN countries clearly, India’s economic relations with some are more developed than with others. Similarly India’s political and strategic relation with some are more developed than with others. Suffice it to say that in no case is the relationship purely undimensional (Baru, 2001, pg 14)

Deepening Relationship Between India and ASEAN

The deepening of relationship between India and ASEAN is reflected in the buoyancy of trade figures between the two. During April-September 2007-2008, trade grew from US$ 15. 06 billion to US$ 17. 2 billion that is trade grew by 13 percent. India foreign trade with ASEAN, according to directorate General of commercial intelligence and statistics (DGCIS), is also on the rise. During the period 2005-06 to 2006-07 India’s export to ASEAN registered a growth rate of 20. 67 percent. Similarly India’s imports from ASEAN during the same period registered a growth rate of 66% India ASEAN trade stoo at US$ 38. 37 billion in 2007-08 and is projected to reach US$ 48 billion during 2008-09 (Economics times, Jan 10). At the first India-ASEAN summit held at Phnom Penh on November 5, 2001.

India called for an India-ASEAN within a 10 year time frame. In this context the second India-ASEAN summit held at Bali on October 8, 2003 was significant landmark in India-ASEAN relations. The summit saw the signing of the framework agreement for comprehensive economic cooperation between India and ASEAN. This agreement envisaged the establishment of an FTA within a period of ten years. In March 2004, an ASEAN-India Trade Negotiation committee (Al-TNC) was established to Negotiate the implementation of the provisions of the framework agreement.

India, since than entered into numerous agreement with ASEAN. (Sharma, Third concept vol 21, pg 9,10) At the Sixth India- ASEAN summit held at Singapore on November last year, India proposed to increase its bilateral trade with ASEAN to the time of US$ 50 billion by the year 2010. The latest agreement is therefore the result of many years of tactfull policies that led to the thawing of the ice between these two important emerging power in Asia. In addition to these agreements with ASEAN, India has also made consistent efforts to develop bilateral ties with ASEAN members.

With Thailand, India has 61 years of diplomatic relation. India also has free trade agreement with Thailand that was signed in 2004. The framework agreement on bilaterals FTA of 2003 was the basis of this FTA with Thailand. Trade b/w the two increased from a mere US $ 606 million to US$ 3. 14 billion in 2006-07. With the CLV countries Cambodia, Laso and Vietnam, India entered into a number of bilateral agreements for cooperation in the fields of trade, science and technology, agriculture, defence, visa exemption, tourism, IT and culture.

India has major projects I in the projects in the field of education entrepreneurship development and IT in these three countries. In 2004, India extended a credit line of US$ 27 million to Vietnam. Malaysia is a major source of foreign direct investment (FDI) for India, particularly in the areas of LPG, power plant and highway construction. Trade between the two rose from US$ 2. 2 billion in 2002-03 to US$ 6. 6 billion in 2006-07. India public sector undertaking such as BHEL and IRCON have also undertaken and completed a number of projects in Malaysia (www. _pao. net). Presently after India-ASEAN FTA negotiations, it is reported that about 150 Indian Engineering firms are eying to diversify their export base in ASEAN markets and are planning to make Malaysia the Regional hub to penetrate the region. Many of these companies are exploring the possibilities of joint ventures, technology transfer and investment opportunities. It was mainly because of the insistence of Indonesia that India became a part of the East Asia summit in 2005. Relations between the two had been very good for many years.

Bilateral trade between the two increased by 44% from 2005-06 to 2006-07. India has a comprehensive Economic cooperation agreement (CECA) with Singapore since 2005. This agreement include bilateral investment promotion treaty. Double taxation avoidance agreement, an air service agreement and an FTA. Singapore, along with Indonesia had been an important factor for India’s inclusion into the East Asian summit. In addition, it was Singapore’s role that paved the way for India’s association with the ARF. Singapore is the biggest source of FDI for India among ASEAN countries.

During the period 2000to 2008, the cumulative FDI of Singapore into India was worth a whooping US $ 4. 35 billion. Concurrently, over two thousand Indian companies were based in Singapore (www. e_pao. net) India also has plans for a free trade area with Brunie, Indonesia and Malaysia by 2011 and with the remaining ASEAN countries by 2016. Since 1995, India have actively engaged Myanmar in Trade. It has singed several agreements and MOU’s including Tripartite Maritime Agreement with Myanmar and Thailand, border trade Agreement and for cooperation between civilian uthorities between India and Myanmar. Since 2000, a number of high level visits have taken place. During these visits, several agreements and MOU’s have been signed in areas ranging from hydroelectric projects on the Chindwin River and IT cooperation to cultural exchange programs. In year 2003 alone, Seven Agreements/ MOU’s were signed to promote trade and communication facilities. By 2006-07 bilateral trade between India and Myanmar reached US$ 650 Million as compared to US$ 341. 40 million in 2004-05 (www. e_pao. net).

Recently Concluded Free Trade Agreement Between India and ASEAN

India is in process of signing a free trade agreement (FTA) with ASEAN. On 28 August 2008, India ASEAN concluded a trade in goods agreement which will operationalize the FTA in merchandize trade. They will formally signing this TIG agreement in ASEAN-Indian Summit now to be held on 26 Feb 2009. (Economic times, 27 Jan 2009). When India and ASEAN Kicked off Negotiation on the bilateral FTA in 2002, they were supposed to finalise a comprehensive agreement that covers goods, service and investment.

However, regional grouping prevailed in India to conclude talks on goods, first and than move on to service and Investment. However signing of TIG Agreement was delayed as the negotiation got stuck a few times due to difference between parties on the coverage of the negative list. In free trade agreement countries are allowed to keep a small number of products out of coverage of the agreement. The issue of the negative list or the list of items that would be excluded from proposed FTA agreement had at one stage brought negotiations to a stands till. The items on the list would have limited or no tariff concession.

Indian negotiaters were cautious as there were apprehensions that the ASEAN countries are more competitive in sectors like agriculture, textile, auto and auto components and electronics. India would face negative consequence unless sensitive items in these sectors are protected India submitted a list of aground 1414 products as a negative list. These products counted for 42% of total exports of ASEAN to India. But as the Negotiations from ASEAN insisted that the products include in the FTA, should cover at least 90% of exports to India, a pruning of negative list was done by Rao, Inderjit Singh, (India’s Deputy Minister for Defence).

He reduced the number of items to be placed on a negative list from 1414 to 850 on 27 July 2006. In August 2006 These items were further reduced to 560 items. At the end it was decided that each signatory country of INDO-ASEAN FTA can have at most 489 products in its negative list provided that these products do not exceed more than 5% of total bilateral imports. India’s negative list includes 302 agriculture items, 81 items from textile and clothing, 52 items from machinery and auto and 32 items from chemicals and fertilizer plastics.

There are 22 other items from various other sectors which are also part of negative list (Thakurta, South Asian Journal, 2007, 107-108). It has been decided in Negotiation that for products which are not in negative list duties will be reduced in phased manger starting from 2009 and the duty cut will be completed by 2018. Under the pact, India and ASEAN will eliminate import duties on 71% products by December 31, 2012 and another 9% by 2015. Duties on 8-10% products that have been kept in the sensitive list will also be brought down to 5%. For all product in non negative list duty will be reduced to zero by 2018.

India has also identified 611 products, which will only get a partial duty cut. Among these products India has put five products on highly sensitive list. They are Tea, Coffee, pepper, palm oil and refined palm oil (The Economic Challenger, 2008). India stances during the negotiations indicates some what defensive position in goods sector. This is not surprising because India runs a fairly large trade deficits vis-a-vis ASEAN. Acc to data of Direction of Trade Statistics (DOTS) published by IMF, India had a trade deficit of $ 14,562 million in 2007 with ASEAN. This is around 15% of India’s total trade deficits.

Fore individual ASEAN members, India Trade Pattern show that for the last 10 years (1998-2007) it has a trade deficit each year with Singapore, Malaysia, Indonesia, Thailand and Myanmar. India runs a trade surplus with other ASEAN member including Vietnam and Philippines (TABLE 1).

Table 1: India’s Trade surplus/Deficits with ASEAN

Member countries (in million $) 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Brunei Daressalam 3. 05 1. 73 2. 63 2. 90 3. 72 4. 22 4. 31 32. 64 40. 34 50. 07
Cambodia 2. 85 6. 60 6. 88 2. 48 16. 97 18. 55 17. 10 21. 68 24. 43 30. 32
Indonesia -556. 28 -635. 64 -536. 55 -717. 28 -541. 06 -883. 68 -1160. 84 -1492. 88 -2450. 39 -3975. 02
Laos 0. 98 1. 35 5. 00 5. 52 1. 84 0. 59 2. 00 1. 59 5. 68 7. 05
Malaysia -1137. 28 -1504. 35 -820. 68 -1032. 57 -627. 00 -1044. 68 -1206. 95 -1231. 50 -4429. 51 -4599. 52
Myanmar -151. 45 -139. 05 -131. 31 -144. 76 -274. 11 -304. 77 -295. 35 -383. 30 -473. 73 -587. 90
Philippines 113. 80 85. 83 126. 53 147. 41 299. 41 236. 62 208. 86 272. 87 233. 00 176. 98
Singapore -754. 57 -862. 95 -655. 53 -2001. 17 -92. 87 26. 29 919. 87 209. 5 -4000. 42 -5664. 81
Thailand 63. 60 103. 33 174. 60 81. 65 301. 66 250. 02 72. 60 95. 74 -513. 20 -1035. 06
Vietnam 116. 70 136. 25 195. 85 157. 36 280. 97 356. 22 427. 08 534. 92 648. 69 1035. 88
Overall trade deficits -2298. 61 -2806. 93 -1632. 41 -3498. 46 -630. 45 -1340. 29 -1011. 32 -244. 77 -10915. 11 -14562. 02

Source: – (EPW, 15 Nov 2008) However, overall trade balance is significantly negative. The concern is that if India has already such a huge trade deficit, reduction of tariff rates may worsen the situation unless there is a significant export boost.

Among ASEAN members, India already has preferential trade agreement with Thailand Myanmar and Singapore. India, Myanmar and Thailand are part of the Bay of Bengal Institute for multi sectoral technical and economic cooperation (BIMSTEC) which is now knows as Bangladehs, India, Myanmar, Sri Lanka, and Thailand economic cooperation (BIMSTEC) (Thakurata, South Asian Journal No. 16, pg 108). India also has a seprate FTA with Thailand. India and Singapore have signed a comprehensive Economic cooperation agreement (CECA) few years back.

Though the terms and tariff reduction conditions of these agreements may be different from the present agreement but still it can be assumed that the marginal impact of Indo-ASEAN FTA will be less for these three ASEAN countries (i. e. Myanmar, Thailand and Singapore). Among other ASEAN members, India has significant trade with Malaysia, Indonesia and Philippines. Though the current volume of trade with Vietnam is low, Vietnam is one of the fastest growing countries in the world and trade potential between India and Vietnam is considered to be significant. Nityanand Deva, India’s look-East policy, www. indianmba. com/occasional_papers/ OP104/ OP104html.

How Tariff Profile Effects FTA?

Tariff reduction, especially of custom duties on imports of Agricultural commodities, is an extremely sensitive issue in India. Till India initiated economic reforms in 1991, the peak custom duty rate used to be as high as 150 percent. (Thakurata, South Asian Journal, pg 110). One assumed that India will have some advantage in the ASEAN market because of tariff margin given TIG agreement.

The India-Asean pact on goods trade will result in the signatory countries abolishing customs tariffs on 80% of goods including key raw material like Iron ore and aluminum, plastic goods and certain kinds of machinery. The deal is likely to be operational from January 2009 when the signatories to the pact will begin cutting import tariff in phased manner, import duties on normal goods will be reduced to zero over a period of six years and on items in the sensitive list will have a partial tariff reduction over longer period of time. (The Economic challenger, pg 18).

It look six long years for the two sides to conclude the negotiation of ROO’s (Rules of origin). ROO means that goods exported from certain destination must have a minimum value addition in the country of origin of proportion specified. India has reportedly agreed to have 35 percent value addition and changes in tariff at level of sub heading whereas in case of bilateral arrangements with individual countries like Thailand and Singapore, the rules specify 40% value addition and tariff changes at the level of headings. ROO’s are major reason why negotiations between India and Thailand over expansion of items in FTA list are stalled.

New Delhi fears that further relaxation of ROO’s could lead to imports for third world via Thailand that would, in turn, antagonize Indian industry. (www. bilaterals. org/article. php3? id_artilce=13650) India lowered its duties on crude palm oil (CPO) and refined palm oil to 37. 5 and 45% (against 80%) respectively. It has also agreed to lower duties on coffee and tea to 45% and pepper to 50% (against 100%). Under the pact India-ASEAN will eliminate import duties on 71% products by December 31, 2012 and another 9% by 2015.

Duties on 8-10% products that have been kept in the sensitive list will also be brought down to 5%. India will keep 489 items in negative list of products to be excluded from tariff reduction commitments. Tariff rates in manufacturing goods in India is high whereas in major ASEAN countries are quite low. Therefore India is unlikely to get too much advantage because of tariff preference (The Economic Challenger, vol41, pg 18). On the other hand, the FTA is likely to allow the ASEAN countries to take advantage of the large gap between high Indian applied tariff rates and the preferential rates.

It is expected that agreement will open up considerable market for ASEAN countries in Agriculture, electronics, motor car equipment and other light manufacturing goods in India. This way negatively affect domestic farmer in agriculture and small and medium enterprises in light manufacturing including textile in India. There are reports that Asian development bank to contribute to a fund to help compensate industries that likely to be hit by Indo-Asean free trade agreement (Dasgupta and PAL, EPW Nov, 15, 2008).

What Are Effects of Service Trade on FTA

The crux of welfare gains from India ASEAN market integration does not rest on free trade in goods, but on free flow of service and investment. That is India’s service industries-IT services, design services and call operators-have long been a hub or source of outsourcing and off shoring from develop economies especially United States and the European Union. The India-ASEAN FTA that successfully liberalises trade in service and investment will therefore provide economic opportunities companies in ASEAN countries to strengthen their competitiveness in global market by fragmenting their production and establishing industrial clusters. www. bilaterals. org/article/phg3? id_article=13650). A treaty which involves services will be extremely important for India also because India sees a big market for its services export in ASEAN. India presently is one of top exporters of services and according to WTO data it is ranked 10th in the world ahead of ASEAN countries like Singapore (ranked 16th), Thailand (ranked 27th) and Malaysia (ranked 20th). In 2006 reports of services from India were around $74 billion.

India is particularly strong in Information technology enables services (ITES), professional services, telecommunication services, health care, financial services and distribution services. ASEAN is also big market for service imports. It is not importer of services and according to WTO (2007), total imports of service by ASEAN members was close to $ 150 billion in 2006. To put this figure in perspective, US imports of services was around $ 300 billion in the same year. ASEAN also has a major export interest in some services sector. Tourism in one of the most important services trade for ASEAN countries.

Apart from that they are major exporter of air transport, construction, logistics insurance and financial services. (Dasgupta and PAL, EPW Nov 15, 2008). When India and ASEAN kicked off negotiations on the bilateral FTA in 2002, they were supposed to finalize a comprehensive agreement that covers good, service and investment. However, regional grouping prevailed on India to conclude talks on goods first and then move on to services and investment. India’s trade with the ASEAN, its fourth largest trading partner after the EU, US and China has been growing at a compound annual growth rate of 27%.

Bilateral trade stood at 38. 37 billion in 2007-08 and is project to reach $ 48 billion in 2008-09. The agreement on services allow Indian service providers to access the ASEAN Market and set up operation there. The investment agreement in expected to work both ways in terms of attracting FDI from ASEAN member, especially Singapore and Malaysia, and providing opportunity to Indian companies in sectors like pharmaceuticals, coal mining and automobiles to invest in ASEAN region (Economic times, Jan 10, 2008).

For a major region which has liberal policies for merchandise trade, services trade in ASEAN in highly regulated. As Karmakar (2005) points out, services trade in ASEAN in highly regulated for foreign suppliers but the restrictions are also there for intra ASEAN, trade. Efforts are being made to gradually integrate service trade among ASEAN members. The ASEAN Framework agreement on services (AFAS) provide broad framework to achieve this.

The target is to make ASEAN a single market and production base through free flow of goods, services, investment, skilled labour and free flow of capital by 2015 (Dasgupta and Pal, EPW Nov 15, 2008).

How Energy Security Helpful to FTA?

Apart from other items, closer economic and political ties with ASEAN are likely to held India’s quest for energy security. Indian position on global civilian nuclear cooperation received a boost as the 16 leader’s of ASEAN and its dialogue partner signed what was described as landmark declaration on Energy security at the second East-Asia summit.

The Cebu Declaration on Energy security was signed by leaders of East Asia summit-an evolving regional forum that includes the ASEAN and six dialogue partners (China, Japan, South Korea, India, Australia and New Zealand). The declaration calls for reducing dependence on hydrocarbons and fossil fuel in the context of surging global crube oil prices and seeks to intensify the search for new and renewable energy resources and technologies with focus on civil nuclear power and biofuels (Thakurata, South Asian Journal No 16, pg 107).

India is heavily dependent on west Asia for oil imports, which is geopolitically tense part of the world. India is currently the world’s sixth largest energy consumer, and third largest oil and gas consumer in Asia after China and Japan. For India oil imports account for about 72% of total oil consumption of which 67% is being sourced from west Asia. Hence on external front India is pursuing diversification of supply sources and trying to significantly increase exploration of oil and gas. Among the ASEAN countries, India at present import crude oil from Malaysia and Brunei, which contributes 5. % of its total oil from Malaysia which comprises just 3. 5% of its total LPG import on the other hand, among the ASEAN countries, Indonesia, Malaysia and Vietnam have about 1% of total world’s proven oil reserves and 3% of the world’s proven gas reserves (Dasgupta and Pal, EPW Nov 15, 2008).

Conclusion

To conclude it can be said that the Indo ASEAN trade in goods agreement may not be beneficial for trade in short run but it can be thought of as a part of long runs strategy to improve India’s economic, and strategic presence in the neighbourhood.

Though India shares a land border with Myanmar and maritime border with Indonesia and Thailand, the ASEAN countries has never been economically very close to India. In fact India and the ASEAN countries are not considered natural trading partners. This is indirect contrast to China which was established a distributed regional network of production and trade in this region. The Indo-ASEAN FTA can be perceived as an intial step towards increased economic integration of India with South east Asia.

From a broader perspective, the Indo-ASEAN FTA can also be viewed as other cog in the wheel of increasing South-south cooperation. This is important because the world economic system is presently going through some significant changes. On the one hand there is severe economic showdown and major financial problem in the developed world. On the other hand there is talk of developing countries like China and India emerging as driver of southern economic growth. Though the impact of China on other developing countries is much stronger.

India can play a complementary role. While China provides a big market for exports, via a manufacturing supply chain for other Asian countries, India can potentially become a hub of services-led growth. If India aspires to play a prominent role in global economy and Governance, increased cooperation with ASEAN make a sense as a strategic move.

Bibliography:

  1. Baru, Sanjay, “India and ASEAN: The Emerging States Relationship Towards a Bay of Bengal community”. Indian Council for Research on International Economic Relation, February, 2001.
  2. Chakraboti, Tribdib, “India and Indo China states in the 21st century; Challenges and opportunities” World Focus Vol 347-348; Nov-Dec 2008.
  3. Dasgupta and Pal, “Does a Free Trade Agreement with ASEAN make sense” Economic and Political weekly. Nov 15, 2008,
  4. Economic Times, January 27, 2009.
  5. Joseph and Parayil, “India-ASEAN cooperation in Information and Communication Technology: Issues and Prospects: RIS Discussion paper (www. ries. org. in) Sharma, Madan Lal, “India ASEAN Relation”; Third Concept Dec 2007, Vol 21. No 250.
  6. Sinha, Prabha Chandra, Handbook of ASEAN and Regional Cooperation. 2th Summit and beyond 2007.
  7. Takhurata, “India’s free Trade Agreement with ASEAN” South Asian Journal, April June 2007,
  8. NO. 16. “The Free Trade Agreement with ASEAN”. The Economic Challenger 2008, No 11, issue 11.

Websites:

  1. www. aseansec. org/4920. htm
  2. www. artilcebase. com/politics_articles www. bilateral. org/rubrique. php3? id_rubriqu+159,13650,12959
  3. www. econoimctimes. com
  4. www. e_pao. net/epsubpageextracts. asp? src=education. scientificpapersIndia-ASEANFTA
  5. www. heindia_au. org/pr_072. html
  6. www. indianmba. com/occasional_papers/OP104. op104. html

Read more

Free Trade Agreement

Table of contents

This report was written to evaluate the benefits and challenges of ASEAN-Korea Free Trade Agreement (AKFTA) from Singapore’s perspective. Free trade agreements are treaties signed between two or more nations in order to create free trade areas between member countries. The free trade agreement that we will be focusing in this report would be the AKFTA. Research has shown that the three benefits that AKFTA has brought to companies in Singapore are economic benefits (trade in goods and services), intellectual property protection as well as human resource management and development. Two challenges that are faced by companies in Singapore are the lack of awareness and knowledge on AKFTA followed by the Rules of Origin (ROO). In conclusion, it can be seen that despite all the various benefits that AKFTA can provide for the companies in Singapore, all these would not be applicable if they do not know about AKFTA or do not have the knowledge on how to utilize it in their business. Hence, it is important that there are information-services that are capable of informing people about AKFTA as well as other FTAs that are applicable to them. On top of that, instructions on how to utilize these FTAs should also be specifically stated down on a proper channel such as a reliable official website that Singapore companies can refer to.

Information on Free Trade Agreement

Free trade agreements (FTAs) are treaties that are discussed and signed between two or more countries in order to establish a free trade area between member countries. Within this free trade area, trading of goods and services can be commenced across national, regional and global borders without tariffs or other trade barriers. In addition, issues such as competition policy, commitments on services, government procurement, customs cooperation, foreign investment, intellectual property rights and other issues that will assist trade are addressed by modern FTAs. Usually one of the terms included in these FTAs would be that the member countries are required to impose a standardized tariff (common external tariff) on trade with non-member countries. This is to encourage and “push” greater trade between member countries.

Overview of ASEAN-Korea Free Trade Agreement (AKFTA)

Korea is the second Dialogue Partner with whom ASEAN has forged a free trade agreement. The Framework Agreement was signed in 2005 by ASEAN and Korea. Thereafter, ASEAN and Korea signed four other agreements that legally established the ASEAN-Korea Free Trade Agreement (AKFTA). This agreement came into effect with Singapore in 2006. ASEAN and Korea maintain close political collaboration on bilateral, regional, and international issues through existing instruments such as ASEAN-ROK Summit, ASEAN Regional Forum (ARF), East-Asia Summit (EAS), ASEAN Plus Three (APT) and Ministerial Meetings. The results of the AKFTA can be seen through trade volume in ASEAN, which has significantly increased by over 23% in the first year period of ASEAN-Korea Trade in Goods implementation. Similarly, bilateral trade volume between Korea and ASEAN nearly tripled going from 2001-2010, where the volume increased from US$32 billion to US$98.1 billion. Parties who are involved in the AKFTA are Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam and Korea. The following three agreements are major agreements under the AKFTA, which have been entered into force and implemented by ASEAN and Korea. 1 The ASEAN-Korea Trade in Goods Agreement entered into force in June 2007 . The ASEAN-Korea Trade in Services Agreement entered into force in May 2009 3. The ASEAN-Korea Investment Agreement entered into force in June 2009 .

Benefits of AKFTA on Companies in Singapore

 Economic Benefits – Trade in Goods and Services

The establishment of a large free market that includes 11 countries will bring about economic benefits to the region since it will attract more foreign direct investments (FDIs), which in turn creates more jobs. Due to the establishment of the AKFTA, bilateral trade volume between Korea and ASEAN from 2001–2010 has increased nearly three folds from US$32 billion to US$98.1 billion. Furthermore, annual average growth of trade with member countries has increased by 28.9%. This clearly tells us that the creation of AKFTA has successfully led the member countries to greater trade among themselves. This helps Singapore companies to become more competitive as they are able to freely trade between Korea and other ASEAN countries to achieve a comparative advantage.

When they are able to produce their goods and/or services at a lower opportunity cost as compared to companies in other countries, they are more capable to drive down the cost of their goods and/or services and that will allow them to achieve stronger sales margins. Stronger sales margin will facilitate the companies’ growth as well as the economy’s growth of Singapore as a whole. This will package Singapore to appear attractive to foreign investors, leading to an increase in FDIs. FDIs are vital for growth and even for the survival of the host country companies. With more foreign investments in Singapore, the companies in Singapore are better abled to expand in the country, region or even globally. This will once again lead to further growth in both the companies and Singapore’s economy. AKFTA increases economic efficiency in member countries by exposing their firms and industries to greater foreign competition and this can bring about significant returns. Similarly, AKFTA increases the international competitiveness of member countries by promoting competition and efficiency.

Intellectual Property Protection

The increasing openness in the global market gave rise to the need of a basic set of common rules to ensure that nations do not abuse intellectual property (IP). It is important to have adequate protection and enforcement of IP rights. AKFTA included guidelines on the protection of IP rights such as copyrights, designs, geographical indications as well as patents. Acting against the infringement of such IP rights will cut down on illegal copying or free-riding and the amount of counterfeit products being produced. IP Protection under the AKFTA allows companies in Singapore to obtain incomes from their direct exploitation (by their own company) as well as from indirect exploitation by third parties, under the legalized licensing contracts. These indirect incomes are important to small and medium enterprises (SMEs) in Singapore, as it sometimes exceed the earnings from the direct exploitation. With such improved protection of IP rights overseas, companies in Singapore will have a higher opportunity to market and pitch their ideas and products in third countries under the conditions that are similar to Singapore. It gives Singapore companies a competitive advantage in the commercial industry as unlawful exploitation by third countries is prevented. This is crucial for SMEs in Singapore as such IP rights will arm them like effective instruments in order for them to go out to compete with other large and powerful companies. Improved IP protection allows companies in Singapore to remain competitive and it will unfold more business opportunities and markets.

Human Resource Management and Development

An organisation’s most important asset is intellectual capital. Hence, the economic growth and success of countries is highly dependent on the people’s skills and knowledge. The Parties acknowledge this and therefore, Human Resource Management and Development is included under AKFTA. Under AKFTA, member countries commenced the exchange of people such as teachers, professionals, scholars and people who are engaged in scientific or educational activities etc. This is done to transfer competence and skills from one country to another in order to upgrade the people’s ability in the receiving country. Companies in Singapore benefit from this as they receive explicit knowledge and tacit knowledge. They pick up the good pointers from the member countries and apply it in their companies. When people in receiving companies achieve a higher level of competency and skills, they are able to contribute more (in terms of both quantity and quality) to the company. This will be beneficial to the company’s growth due to the increased efficiency and effectiveness of the company, which pulls them closer to their organizational goals.

The relationship of member countries will be strengthened through these various exchanges. This improved relationship will provide them with open doors to further opportunities to conduct exchanges with each other. Strong ties motivate member countries to conduct exchanges, which will result in the increased frequency of exchanges. When trust is established between member countries, the quality of the exchange will be better. The increase in the quantity and quality of these exchanges are usually accompanied by the development of human resource departments in receiving countries. In addition, conducting such exchanges prevents negative consequences such as isolation and resistance to ideas. Hence, through such exchanges, companies in Singapore can achiever a higher level of performance standards by acquiring perceptions and knowledge from member countries. This will reduce the amount of errors the companies make as they gain insight on how to avoid repetition of errors. There might be a breakthrough in these companies if they choose to change their work-style to the one introduced to them. All of these will lead the companies in Singapore to an increased level of efficiency and effectiveness. In conclusion, human resource management and development is made possible by AKFTA, which through various staff exchanges, increase the efficiency and effectiveness of companies in Singapore by the transfer of skills and competence. Challenges Faced By Companies in Singapore regarding to AKFTA .

Lack of Awareness and Knowledge on AKFTA

Despite the demonstrable benefits provided by AKFTA, more than 50% of Singapore companies do not use AKFTA. Many reasons were cited for the non-use of AKFTA and the lack of information on AKFTA emerged as the most significant reason. The lack of information on AKFTA deprived companies in Singapore of the opportunity to learn how to understand a tariff schedule and decipher AKFTA provisions. They may not understand the complex and differing rules of origin as well. Furthermore, there is no identification to proper official channels that informs companies of FTA tariff schedules, FTA rules and FTA trade regulations. The lack of information-related services about the AKFTA caused companies in Singapore to not having access to detailed information on whether and how their export products can benefit if they use AKFTA. This reduces the competitiveness of companies in Singapore as they might have lost the chance to gain from AKFTA as a result of their unawareness of the AKFTA or the lack of information on AKFTA. b. Rules of Origin

Rules of Origin (ROO) are instruments to decide which goods will enjoy preferential tariffs, which will help to prevent trade deflection among member countries. It has been argued that restrictive ROOs obstruct the use of AKFTA preferences, while complicated ROOs increase cost of transactions for companies. Several ROOs in overlapping FTAs post a serious threat to SMEs, whose financial ability might not be allow them to handle such costs. Restrictive ROOs seize companies in Singapore of the opportunity to obtain intermediate goods or raw materials from international sources where these items can be obtained at a lower cost. This can result in an increase in cost of production in Preferential Trade Arrangement (PTA). As a result of complex ROOs, transaction costs incurred by companies in Singapore will be higher. This may reduce trade between Singapore and other member countries due to the opportunity cost of engaging in such trade. Multiple ROOs threatens Singapore SMEs as they contribute significantly to business costs. Masahiro Kawai Ganeshan Wignaraja’s (2009) study found out that firm in Singapore had the most negative perceptions regarding multiple ROOs (38%). Negative perceptions regarding multiple ROOs might just cause Singapore companies to consider not using AKFTA after all. Hence, restrictive and complicated ROOs are capable of increasing business costs in companies in Singapore and this might turn them away from the idea of using AKFTA.

Conclusion

In conclusion, the report has shown that AKFTA has several benefits on companies in Singapore such as intellectual property protection, human resource management and development and generating more trade between Singapore and the member countries of AKFTA. However, despite all the various benefits that AKFTA can provide to companies in Singapore, all these would not be applicable if they do not know about AKFTA or do not have the knowledge on how to utilize it. Therefore, it is important that there are various informative channels that inform companies about AKFTA and other FTAs that are applicable to them. AKFTA and other FTAs would then be more widely known. On top of that, instructions on how to utilize these FTAs should also be specifically stated down on a proper channel such as a reliable official website that companies in Singapore can refer to. Similarly, negative perceptions about multiple ROOs hinder companies’ usage of AKFTA. Singapore can use various methods such as talks and workshops to reduce these negative perceptions towards multiple ROOs. All in all, AKFTA has successfully increased trade in Singapore.

Citations

  1.  FTA. (2013). Trade Agreements. Retrieved from http://www.dfat.gov.au/fta/
  2. MITI GOV MY. (2011). ASEAN-Korea. Retrieved from http://www.miti.gov.my/cms/content.jsp?id=com.tms.cms.article.Article_FTA-FAQs/AKFTA
  3. Embassy of Republic of Korea (2010). Implementation of Korea-ASEAN FTA. Retrieved from http://www.dti.gov.ph/uploads/DownloadableForms/mac-akfta-korea05Nov10.pdf
  4. (2009). Intellectual Property. Retrieved from http://trade.ec.europa.eu/doclib/docs/2009/january/tradoc_142108.pdf
  5. IESingapore. (2011). Korea-Singapore Trade. Retrieved from http://www.iesingapore.gov.sg/wps/wcm/connect/ie/My+Portal/Market+Guide/Market+Information/North+Asia/South+Korea/News/Doing+business+in+Korea+knowing+your+FTAs
  6. Ritva, Laakso-Manninen., & Riitta, Viitala. (2007). Competence Management and Human Resource Development. Retrieved from http://www.haaga-helia.fi/fi/palvelut-ja-yhteistyo/julkaisut/HRDWeb.pdf
  7. Genevieve, Decuzman. (2010). Impediments to FTA Use. Retrieved from http://www.adbi.org/working-paper/2010/01/13/3431.fta.philippine.business/impediments.to.fta.use/

Read more

The Trilemma of Globalisation: Free Trade, Fair Trade or Fear Trade

Ken Costa Chairman: Europe, Middle East and Africa UBS Investment Banking Department 2 Finsbury Avenue London EC2M 2PP Cass Business School 2 March 2006 EMBARGO UNTIL 19:30pm 2 March 2006 The Trilemma of Globalisation: Free Trade, Fair Trade or Fear Trade In discussing the challenges presented by today’s diverse global environment few topics can be as important as the issue of globalisation. It is at the heart of the structural change that has taken place in our generation as borders have shrunk, technology changed and communications enhanced.

Economists believe – almost universally, which says something(! ) that globalisation is a net benefit. But, if recent examples are to go by, there seems to be a growing doubt gnawing at its foundation. Globalisation faces a trilemma. Which is to be master? Free Trade, Fair Trade or Fear Trade. Free Trade For globalisation to succeed there needs to be a common acceptance of the frictionless flow of capital across borders and the determination to eliminate 2 impediments to the free movement of resources and products. Free trade is the pillar on which the argument for globalisation is founded.

For the last decade we have lived with the prevailing sense that the globalised environment is here to stay. There has of course been a vigorous debate about how the benefits should be shared, the implications of the growing technology divide and the sustainability of regional development. But by and large the foundations have been in place. What has become disquieting recently has been the realisation that some of the most basic premises of globalisation are far from secure. The case for globalisation still has to be made. Globalisation still needs to be nurtured as a beneficial system and hown to be demonstrably favourable to all participants in the global market place. This is an argument that needs to be advanced and argued for and can not merely be assumed. Fear Trade But free trade seems to have been supplanted by fear trade. The recent actions in the United States to prevent the completion of the acquisition by the Dubai Ports World of the US ports previously owned by P&O underlines the serious challenge to the argument. Here we have the US, the major exemplar of modern capitalism, wishing to restrict the take-over by one foreign company of another foreign company with operations in the United States.

This action is unfortunately not an isolated example, it comes sharply on the heels of the decision to prevent CNOC, a Chinese company, from acquiring Unocal in the US. The ports case has become a testing place for the future direction of globalization. At issue is ownership. There are after all in any market regulations that govern ways in which corporations 3 act. In any event these ports will overwhelmingly be run by and managed, as they have been in the previous foreign owners’ hands, by US citizens. Of course there are arguments for national security.

That would be true in any country. But it is of deep concern when these concerns are deployed selectively discriminating between one foreign owner and another. Friends of the United States, and I count myself as one, will do the country the highest favour by lobbying actively against these barriers. Not only on their merits but also because of the sign that is given. Free trade flourishes in a climate of reciprocal openness and mutual advantage, fear trade now seems to be an underlying assumption lurking not only in this decision in the United States but in other countries as well.

Security, national interest, cultural preservation and other nationalist reactions can easily stoke these fears. Italy have complained about protectionist activities within the European Union, but recently, albeit unsuccessfully, Italy attempted to prevent nonItalian acquisitions of domestic banks. In France, the Prime Minister has attacked “fragmented share capital” as being a risk to independence and is looking to bolster the barriers to takeover activity in France. These trends will grow if the strongest and freest markets continue to act in a protectionist way.

Those committed to developing sustainable and responsible flows of capital worldwide have a full task to remain vigilant to promote vigorously the need to have a competitive and sustainable global economic order. 4 All participants in the global economy, Government, business, consumers, will need to find a common language to prevent misunderstanding and actions that could easily lead to disastrous protectionist decisions similar to those in 1914 or the 1930’s. Protection can grow rapidly fuelled by job losses, eroding cultural influence, security concerns and ultimately the visceral reaction against foreigners.

The openness of markets to trade and to the acquisition of assets lies at the centre of the future prosperity for all. There are risks if this protectionism grows unchecked. Inflation will creep back because the benefits of globalisation will not be felt, interest rates will therefore inevitably hedge higher with a sell-off in the bond markets, pressure on the equity markets and the inevitable liquidity problems could lead to capital controls. A dark scenario and one which I believe is avoidable.

But it does require a concerted effort to win both the economic argument but also the ethical ones. Fair Trade Fair trade has therefore emerged in the debate. Unfortunately the concept seems to have been colonised by particular single interest lobby groups seeking to address for example levels of sub-economic activity in Africa and arguing for an increase in the price structure of consumer goods in the developed world. In the end the fairest trade will still be the freest provided the benefits are seen to be shared equitably.

Globalised markets have to, and above all be seen to, benefit all: the strongest and the weakest. When the strong economies wish to exclude access to them by emerging economies the very base of the argument is eroded. For this reason, and in a different 5 sphere it remains a moral affront to those who are committed to future global prosperity that the WTO is unable to reach agreement to allow access, without the burden of duties, by the developing world to the markets of the economically prosperous world.

The diverse global environment raises questions of standards and sustainability of economic activity. These are moral issues. They should be tackled as such. But that does not mean that they are not economic ones too. Take for example one of the questions that is posed by globalisation. Is the move away from regulated markets to unregulated ones simply a means of avoiding the high hurdles of regulation in the developed world? Take the tobacco industry for instance.

Do the global tobacco companies seeking entrance into new markets do so in order to evade the onerous restrictions of the major OECD markets? Similarly polluting factories in third world countries where the desire for employment places pressure on local governments to allow activities which would be frowned on in the home countries of multi-national corporations. Low labour costs have brought huge advantages to consumers in the Western world but at what cost to the emerging markets in which they operate?

But the moral debate is not a one way street. The clash of civilisations was a debate in ancient Rome and Greece long before Huntingdon raised the topic, but globalisation now means that people find out much more about each others’ cultures much more rapidly. It is true that many international corporations have seen their numerators expand as the top line has grown through sales to emerging markets. Similarly, the 6 denominators of the P & L have benefitted as costs have shrunk through outsourcing and manufacturing at lower costs.

But on the other hand many emerging markets have also benefitted as their standards of living have increased and transparency has grown. If we wish to make poverty history and I profoundly hope that this objective remains at the forefront of every global citizen then it will come about by working with the grain of capital flows, by recognizing the reward for risk and through supportive actions by Government creating the climate for enterprise to flourish. We work on the natural assumption that it is a good thing to understand each other’s cultures, aspirations and diversity.

However we do have to work on one unfortunate fact of human life. It is not good news but bad news that travels fastest. The Danish cartoon incidents and the activities of radical minorities are flashed across our screens and soon become representative of the cultures being depicted. Every global business will need to develop the necessary training programmes not only to enable the free flow of information to work effectively but to determine how globalising information could bring together incompatible elements of culture.

Essentially this is a political question – how can free speech and cultural sensitivities be reconciled? But ultimately it will be on the ground an important issue for businesses who try to create core values for global workforces. Will education of itself lead to greater tolerance? This is a topic too large for this address. But suffice it to say that education and prosperity will not of themselves eliminate global tensions though they are essential pre-requisites. 7 8 Diversity Diversity is important to this process.

Diversity enhances competitiveness enabling the most innovative, creative solutions to be advanced as perspectives, eclectically drawn across cultures, countries, products, markets are pooled to provide answers to the issues of the day. For example, UBS needs talented people who can efficiently and effectively work across multiple cultures and time zones. Diversity is therefore not an issue merely of gender or ethnicity but it reflects an open and flexible culture which tries to understand the motivations and aspirations of different people and their points of view.

These dialogues above all are integrated into the day to day operations of the firm. To respond to the pressures and to come up with innovative solutions requires close co-operation and the working together of a very disparate group of people with a very common set of values and a common desire to understand and appreciate the ways in which common goals can be achieved whilst recognising diverse and local aspirations. There is I believe an even more fundamental issue that will require addressing. There is strong evidence that in a young and mobile workforce material satisfaction is not sufficient to retain their commitment and motivation.

There is a deep hunger, almost spiritual, that is diffused and not traditionally expressed but which needs addressing. There is a desire among young people across the globe that there is more to life than the pursuit of material prosperity. Concern for the environment, for just practices in the workplace and for a balanced working life are key themes in this emerging generation. Traditionally this has been a “no go” area. After all religion and work do not mix. But any desire for a values-based organisation will require 9 careful attention to be given to a much deeper understanding and respect for he religious beliefs, cultural and spiritual aspirations of this new global workforce. A new dialogue of understanding faith in business space is rapidly becoming a global imperative for business. Securities Industry Having made these general remarks it is worth looking at trends in the financial industry. ?

Expansion of the Business: Financial sector activities are likely to experience substantial growth over the next decade. Two reasons can be singled out: Deregulation and liberalization mainly in emerging markets, and wealth accumulation and retirement provisioning all over the world. Over the past few decades, the trend towards deregulation and liberalization in financial services has contributed significantly to the industry’s expansion. This process is well advanced in many countries, mainly in the mature markets, but further liberalization is, however, likely in emerging market countries where domestic markets are still highly protected. In general, further liberalization of financial markets is expected to benefit investment banking and securities firms which are positioned to 10 ake advantage of any further opening of individual domestic capital markets. Global asset managers could benefit from the facilitation of cross-border mutual fund business, and possibly from a trend towards harmonized pension fund regulation. • Especially in mature markets, but basically to a global extent, financial sector activities are also likely to gain further importance, mainly due to two trends: On the one hand, wealth accumulation is likely to increase as a result of the shift from labour-intensive production to more capital-intensive activities.

We see a clear secular trend towards wealth accumulation that is likely to continue over the next decade. On the other hand, the fact that in the coming decades, most developed countries will be confronted with significant demographic shifts leads to a trend that pension reform is on the agenda of many governments around the world. Although each country will follow its own regulatory agenda, we believe a gradual shift from public unfunded to private funded pension schemes is likely to take place. Institutional asset management will be the sector most impacted by this trend. ?

Increasing Diversity of the Business: Financial market products are getting increasingly diverse and sophisticated with the main characteristics being securitisation, equitisation, and corporate restructuring. 11 • The transformation of financial services over the last years has been driven primarily by the increasing de-emphasis of traditional lending activities combined with the increasing importance of securities trading and financial markets. Corporations are frequently in a position to directly finance their funding needs by accessing the capital markets, expanding corporate bond markets.

At the same time, an increase in bank assets has fueled growth in the securitisation of these assets. We expect these trends to continue, as increasing transparency will further facility financing by way of the securities market. • Despite the bursting of the new economy bubble, the underlying trend towards an increasing role of equity finance and equity investments remains intact. Institutional and individual market participants will tend to invest a greater share of their assets into equity products and the corporate sector will increasingly rely on equity financing. We see long-term secular trends pointing towards an ongoing demand for advice on corporate restructuring, as trade liberalization and technological progress will increase global competition for corporations, pressuring them in turn to restructure and consolidate their business.

At the same time, cross-border consolidation in some industries has just begun. ? Further internationalization of business and new markets: It is crucial for financial sector firms to have at the same time both a strong 12 footprint in mature markets and expand actively into emerging markets. Economic growth is a key indicator of the potential for financial services in different regional markets. We expect the largest absolute GDP increase over the next 10 years to occur in North America, followed by Asia and Western Europe. Even though North America is set to grow at a slower rate than Asia, the absolute GDP increase will be higher. This demonstrates the importance of having a significant presence in the US and other mature markets. • At the same time, emerging markets, especially emerging Asia, have a huge potential.

GDP growth in China averaged more than 9% since 1979, and India is on track to achieve a high sustainable growth path in the foreseeable future. Other markets in the region are benefiting from the increased demand in the region and globally, increasing the attractiveness for global financial firms. Another important emerging area is the Gulf region, driven by sky-high oil prices and some first steps towards a further diversification of the countries’ economic structure. Based on remarkable macroeconomic stablisation efforts in recent years, Latin America finally seems to have overcome its historical volatility, providing interesting nvestment opportunities. 13 ? Alternative Asset Managers: Hedge funds and buyout groups are raising ever increasing sums of money to be deployed principally cross border. The current size of the hedge fund market is estimated at US$ 1. 2 trillion and will expand significantly in the years ahead. Highly liquid and mobile capital should not be seen as restless capital. Opportunities for long term foreign direct investments in the emerging markets continue to grow as infrastructure projects absorb capital and new investment opportunities allow for petro dollars and other pools of investment funds to help grow these economies. Challenges

An international presence in diverse global environment creates substantial challenges. Global firms have to integrate diverse cultures, strike the balance between global reach and local presence, match the structure and characteristics of its international workforce with functional and regional business needs, and establish infrastructure and processes to provide global communication and co-operation means. ? Integrating cultural diversity: A global firm’s clients and employees are generally, at least to a significant extent, not global in their nature and characteristics, but are based and anchored in their respective home countries.

This determines a broad variability of cultural and religious habits, business styles and customs, and consumptions models and needs a global firm is confronted with on a day by day 14 basis. In order to achieve long-term profitability and growth, this variability has to be managed and integrated into the firm. ? Striking the balance between global reach and local presence: In order to be perceived as a global player, global firms have to establish a global strategy and business model.

At the same time, due to the cultural diversity mentioned above, specific market and customer orientation has to be focused along country-specific needs. This is true for the products offered to the customers, the communication employed to establish and strengthen links with clients and stakeholders, and for every other interaction between the firm and the outside (local) world. ? Finding and strengthening a diversified workforce: Especially in the area of service providers, well-skilled staff is crucial for the long-term success of the company. International mobility and intercultural skills have to be ade core value of every corporate culture. Therefore, human capital management and attracting best people is crucial, especially as the international competition for skilled workforce becomes harder and more intense. Especially in the financial sector, specialist knowledge is required and decides on success in a specific region or business area. Hence, if companies wants to achieve continuous success, it has to establish internal talent development and management processes to ensure that employees are promoted in their personal and professional development.

To distinguish itself from its competitors, firms have to offer their staff unique development opportunities, thereby attracting current and future leaders. 15 ? Managing critical resources: Internal processes, corporate communication and IT face considerable challenges in a diverse global environment. As such, it is challenging to guarantee a consistent appearance in terms of brand, strategy and communication. In addition, doing business all over the world is especially challenging for the IT infrastructure and for know-how sharing on a global level. Yet, this offers economies of scale and synergies at the same time, e. g. y streamlining the brand and the public appearance, by having one integrated IT and know-how sharing platform and by reviewing internal processes re duplications, potential for improvements inefficiency and for streamlining and simplifying processes. UBS manages these challenges and makes them opportunities ? One Firm: We firmly believe our integrated business model creates more value than our businesses would as stand-alone units. Our clients all over the globe should effortlessly be able to access all the services our firm can provide, where and when they are required, and regardless of what combinations of teams lie behind the solutions.

This “one firm” approach facilitates cross-selling through client referrals and the exchange of produces and distribution services between businesses and thus contributes significantly to our revenue flows. The integrated business model and our “one firm” approach enable us to combine global reach with local sensitivity. 16 ? Innovative products: As one of the leading global financial services groups, UBS actively shapes the future development of financial markets.

As such, challenges emerging from today’s diverse global environment are converted into opportunities by meeting emerging cultural and business needs with innovative products tailored to specific cultural requirements. Another example is the growing importance of hedge funds on international financial markets, where UBS offers products and services specifically targeted at these clients. ? Managing and promoting diversity: • To UBS, diversity means recognizing and appreciating multiple backgrounds, cultures, and perspectives within its organisation.

UBS builds on these differences to produce cross-cultural teams that generate new ideas and creative solutions for our increasingly diverse clients. • Diversity consists of a broad range of aspects that vary in their degree of visibility going from gender over ethnicity, age, disability, sexual orientation, religion, nationality to though. • In addition, senior management takes the topic seriously and is often participating in meetings and employee forums on the topic. ? Corporate Social Responsibility: UBS makes responsible behavior an important part of its culture, identity and business practice. As a 7 leading global financial services firm, UBS wants to provide our clients with value-added products and services, promote a corporate culture that adheres to the highest ethical standards, and generate superior but sustainable returns for our shareholders. In order to retain the trust society gives to UBS, UBS conducts its business responsibly and at the same time engages in the communities that it is part of. Socially Responsible Investments In additional to financial considerations, UBS provides expertise in incorporating environmental and social aspects into our research and environmental activities.

Advice on social investments not only have to take into account financial considerations but also environment, social and ethical criteria. Human Resources To remain at the cutting edge of the rapid changes in the diverse global economy requires an enormous investment in leadership training talent management and attention to cultivating an environment within which entrepreneurial spirit can flourish. The handling of outsourcing, one of the most dynamic developments in the global economy, has become an important part of the HR process. It emains a challenge when developing outsourcing plans to minimize the impact on existing employees, to plan the transition with meticulous 18 execution and to ensure that the benefits are understood and communicated well before the plans inevitably leak out. Managing declining morale and performance of remaining employees is vital as they often suffer anxiety, envy and a last gasp of invigorated competitiveness. Any outsourcing activity is a time of upheaval and it is important therefore to underline not only what is changing but also what is not.

Conclusion Let me conclude by saying that global organizations face an unprecedented opportunity to grow their worldwide businesses. With this comes increased prosperity and therefore the need to ensure the attractions of globalisation are well understood by all participants; that the benefits of increased profitability are seen to be in the interests of all stakeholders not only the shareholders; and that the barriers to the flows of capital are removed as often as they are erected. Fear trade has no place in a fair and free globalised world.

Read more

North American Free Trade Agreement

NAFTA agreement was signed in 1992, ratified in 1993 and implemented in 1994. It was designed to completely rescind trade barriers between these three nations. It had been surmised that this agreement would enhance employment due to increase in trade (North American Free Trade Agreement (NAFTA) , 1995). This agreement, which is second only to […]

Read more
OUR GIFT TO YOU
15% OFF your first order
Use a coupon FIRST15 and enjoy expert help with any task at the most affordable price.
Claim my 15% OFF Order in Chat
Close

Sometimes it is hard to do all the work on your own

Let us help you get a good grade on your paper. Get professional help and free up your time for more important courses. Let us handle your;

  • Dissertations and Thesis
  • Essays
  • All Assignments

  • Research papers
  • Terms Papers
  • Online Classes
Live ChatWhatsApp