INTERNATIONAL REPORT: Trading Blocs and the Future

September 1, 2006
/ Print / Reprints /
ShareMore
/ Text Size+
In addition to conflict in the Middle East, global terrorism and political unrest, there is another factor to consider that has an impact on both the short- and long-term growth of business: the continuing development of trading blocs and trade agreements



Figure 1.

So many factors affect the business environment today that it is becoming more difficult to make long-term strategic decisions. They include fighting in the Middle East, global terrorism, disruptions of the world's petroleum supplies, political unrest, chemical shortages, etc. Additionally, companies must cope with short-term raw-material price increases and globalization of their customer base, all the while maintaining a profitable operation.

There is now another factor to consider that has an impact on both the short- and long-term growth of business: the continuing development of trading blocs and trade agreements. How will this affect the adhesives and sealants industry?

Historically, trading blocs were formed to temporarily stimulate new business by creating or opening new markets and introducing new products without the impairment of high duties or other restrictions on trade between countries, usually within a geographic region.

In 1947, there was a need to organize a common mechanism for settling trade disputes between countries. The General Agreement on Tariffs and Trade (GATT) was formed, and it currently has 110 member countries.

Geographically oriented trade agreements started several years ago in Europe with the formation of the European Common Market, which has since evolved into the European Union, followed later by the Asia-Pacific Economic Cooperation forum (APEC) and, soon after, the North American Free Trade Agreement (NAFTA). In 1995, the World Trade Organization (WTO) was established to make foreign trade more transparent within and outside of these agreements. It provides rules and a common platform for governing the trading process. So far, 147 countries have joined the WTO. Unlike GATT, which is governed by consensus, the WTO is a legal entity.

There are currently 27 functional trading blocs and 16 free trade agreements around the globe, with 10 more being proposed or in process of being approved. There are another 30 bilateral trade agreements in place between two countries. The United States alone has 16 additional bilateral agreements in force.

Figure 2.

Are these good for trade? That depends upon the purpose of the agreement or the trading bloc. Many have evolved into a "club"-like organization, excluding or limiting trade by non-member participants. Figure 1 shows the location of the current major trading blocs organized by region. Because of the complex country membership, most of these are designed to the mutual exclusion of trade concessions to non-members. This is where the bilateral agreements enter the picture. The final focus, however, is to enable preferential trade with NAFTA, the EU and APEC.

Various bilateral side agreements are currently blurring the lines established by trading blocs and their original free-trade agreements. Three major regional trade agreements will soon emerge - the FTA (Free Trade Americas), the EU (which will include member countries from the former Soviet Union) and a "new" APEC, which will most likely exclude Japan. Two other trade agreements that could survive are the Organization of the Petroleum Exporting Countries (OPEC) and the Common Market for Southern and Eastern Africa (COMESA).

The effect on the adhesives and sealants industry is already under way. Formulators are forced to follow their customers into these regions to maintain their local/regional market and supply positions. Also in evidence is the development of trade barriers restricting new company entry, such as the recent REACH program in Europe, leading to more preferential treatment of local suppliers/formulators. This will lead to a diminishing trade by export/import means.

Did you enjoy this article? Click here to subscribe to Adhesives & Sealants Industry Magazine.

You must login or register in order to post a comment.

Multimedia

Videos

Image Galleries

ASI April 2014 Photo Gallery

Our April 2014 issue is now available!

Podcasts

ExxonMobil Tackifier Expansion

Dwight Tozer, vice president of ExxonMobil’s Adhesion Industry business, discusses the company’s latest tackifier expansion project with Editor-in-Chief Susan Sutton.

More Podcasts

Adhesives & Sealants Industry Magazine

ASI December 2014 cover

2014 December

The annual Buyers' Guide is here! You won't want to miss this.

Table Of Contents Subscribe

Bonding Plastics

Are you involved in bonding plastics or other difficult-to-bond substrates?
View Results Poll Archive

THE ADHESIVES STORE

handbook-sealant-tech.gif
Handbook of Sealant Technology

The Handbook of Sealant Technology provides an in-depth examination of sealants, reviewing their historical developments and fundamentals, adhesion theories and properties, and today’s wide range of applications.

More Products

ASI 2014 Buyers GuideASI's Buyers' Guide

Annual purchasing resource for equipment used in the manufacture/formulation of adhesives, sealants, pressure sensitives, tapes and labels and for application of finished adhesives. 

STAY CONNECTED

facebook_40px twitter_40  youtube_40pxlinkedin_40 google+ icon ASI 30px

Clear Seas Research

With access to over one million professionals and more than 60 industry-specific publications, Clear Seas Research offers relevant insights from those who know your industry best. Let us customize a market research solution that exceeds your marketing goals.