UNIVERSITY OF MUMBAI

PROJECT ON MARKETING STRATEGIES OF MTS

MASTER OF COMMERCE (BANKING AND FINANCE)SUBJECT: MARKETING STRATEGIES

SEMESTER- I 2012-13

In Partial Fulfillment of the Requirement under Semester Based Credit and Grading System for Post Graduates (PG)

Program under Faculty of Commerce

SUBMITTED BY:KUNWAR ARIF KHAN

ROLL NO: 68

PROJECT GUIDE (Mr. RAHUL CHOPRA)

K.P.B HINDUJA COLLEGE OF COMMERCE, 315 NEW CHARNI ROAD, MUMBAI 400004.

CERTIFICATE

This is to certify that Mr. ARIF KHAN of M.Com. banking and finance Semester

Ist [ 2012-2013] has successfully completed the Project on “NAFTA and APEC

economic integration” under the guidance of Dr. (Ms. Rajeshwary G.)

Project Guide

Course Coordinator

Internal Examiner

External Examiner

Principal

Date:Place: Mumbai

DECLARATION

I Mr. ARIF KHAN the student of M.Com (Banking and finance) Ist Semester (2012-2013), hereby declare that I have complete the project on Strategic Managemt of NAFTA and APEC integration.

The Information submitted is true and original to the best of my knowledge.

ARIF KHAN

(Signature)

ACKNOWLEDGEMENT

I wish to express my sincere gratitude to Professor as well as our project guide Dr. Mr. RAHUL CHOPRA of Hinduja College of Commerce, Charni Road, Mumbai for providing me an opportunity to present a project on ‘Project On Marketing Strategies Of Mts’ This project has not only developed my skills as academics are concerned but also to a further extent help to know the topic in a much better way. I would also love to express my gratitude to our librarians who co-operate in completion of my project.

INTRODUCTION

The North American Free Trade Agreement (NAFTA) is an agreement signed by the governments of Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994. It superseded the Canada – United States Free Trade Agreement between the U.S. and Canada. In terms of combined GDP of its members, as of 2010 the trade bloc is the largest in the world.

NAFTA has two supplements: the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC).

Negotiation and U.S. ratification

Following diplomatic negotiations dating back to 1986 among the three nations, the leaders met in San Antonio, Texas, on December 17, 1992, to sign NAFTA. U.S. President George H. W. Bush, Canadian Prime Minister Brian Mulroney and Mexican President Carlos Salinas, each responsible for spearheading and promoting the agreement, ceremonially signed it. The agreement then needed to be ratified by each nation's legislative or parliamentary branch.

Before the negotiations were finalized, Bill Clinton came into office in the U.S. and Kim Campbell in Canada, and before the agreement became law, Jean Chrétien had taken office in Canada.

The proposed Canada-U.S.trade agreement had been very controversial and divisive in Canada, and the 1988 Canadian election was fought almost exclusively on that issue. In that election, more Canadians voted for anti-free trade parties (the Liberals and the New Democrats) but the split caused more seats in parliament to be won by the pro-free tradeProgressive Conservatives (PCs). Mulroney and the PCs had a parliamentary majority and were easily able to pass the Canada-US FTA and NAFTA bills. However, Mulroney himself had become deeply unpopular and resigned on June 25, 1993. He was replaced as Conservative leader and prime minister by Kim Campbell. Campbell led the PC party into the1993 election where they were decimated by the Liberal Party under Jean Chrétien, who had campaigned on a promise to renegotiate or abrogate NAFTA; however, Chrétien subsequently negotiated two supplemental agreements with the new US president. In the US, Bush, who had worked to "fast track" the signing prior to the end of his term, ran out of time and had to pass the required ratification and signing into law to incoming president Bill Clinton. Prior to sending it to the United States Senate, Clinton introduced clauses to protect American workers and allay the concerns of many House members. It also required US partners to adhere to environmental practices and regulations similar to its own.

With much consideration and emotional discussion, the House of Representatives approved NAFTA on November 17, 1993, 234-200. The agreement's supporters included 132 Republicans

and 102 Democrats. NAFTA passed the Senate 61-38. Senate supporters were 34 Republicans and 27 Democrats. Clinton signed it into law on December 8, 1993; it went into effect on January 1, 1994.[2][3] Clinton while signing the NAFTA bill stated that "NAFTA means jobs. American jobs, and good-paying American jobs. If I didn't believe that, I wouldn't support this agreement

The goal of NAFTA was to eliminate barriers to trade and investment between the US, Canada and Mexico. The implementation of NAFTA on January 1, 1994 brought the immediate elimination of tariffs on more than one-half of Mexico's exports to the U.S. and more than one-third of U.S. exports to Mexico. Within 10 years of the implementation of the agreement, all US-Mexico tariffs would be eliminated except for some U.S. agricultural exports to Mexico that were to be phased out within 15 years. Most U.S.-Canada trade was already duty free. NAFTA also seeks to eliminate non-tariff trade barriers and to protect the intellectual property right of the products.

In the area of intellectual property, the North American Free Trade Agreement Implementation Act made some changes to the Copyright law of the United States, foreshadowing the Uruguay Round Agreements Act of 1994 by restoring copyright (within NAFTA) on certain motion pictures which had entered the public domain.

Mechanisms

NAFTA's effects, both positive and negative, have been quantified by several economists, whose findings have been reported in publications such as the World Bank's Lessons from NAFTA for Latin America and the Caribbean, NAFTA's Impact on North America, and NAFTA Revisited by the Institute for International Economics.  Some argue that NAFTA has been positive for Mexico, which has seen its poverty rates fall and real income rise (in the form of lower prices, especially food), even after accounting for the 1994–95 economic crisis.[10] Others argue that NAFTA has been beneficial to business owners and elites in all three countries, but has had negative impacts on farmers in Mexico who saw food prices fall based on cheap imports from US agribusiness, and negative impacts on US workers in manufacturing and assembly industries who lost jobs. Critics also argue that NAFTA has contributed to the rising levels of inequality in both the US and Mexico. Some economists believe that NAFTA has not been enough (or worked fast enough) to produce an economic convergence,[11] nor to substantially reduce poverty rates. Some have suggested that in order to fully benefit from the agreement, Mexico must invest more in education and promote innovation in infrastructure and agriculture.

Trade

The agreement opened the door for open trade, ending tariffs on various goods and services, and implementing equality between Canada, USA, and Mexico. NAFTA has allowed agricultural goods such as eggs, corn, and meats to be tariff-free. This allowed corporations to trade freely

and import and export various goods on a North American scale. Since the implementation of NAFTA, the countries involved have been able to do the following

Exports

At $248.2 billion for Canada and $163.3 billion for Mexico, they were the top two purchasers of US exports in 2010.

US goods exports to NAFTA in 2010 were $411.5 billion, up 23.4% ($78 billion) from 2009 and 149% from 1994 (the year prior to Uruguay Round) and up 190% from 1993 (the year prior to NAFTA). US exports to NAFTA accounted for 32.2% of overall US exports in 2010.

The top export categories (2-digit HS) in 2010 were machinery ($63.3 billion), vehicles (parts) ($56.7 billion), electrical machinery ($56.2 billion), mineral fuel and oil ($26.7 billion), and plastic ($22.6 billion).

US exports of agricultural products to NAFTA countries totaled $31.4 billion in 2010. Leading categories included red meats, fresh/chilled/frozen ($2.7 billion); coarse grains ($2.2 billion); fresh foods (excluding nuts) ($1.8 billion); and fresh vegetables ($1.7 billion).

US exports of private commercial services, excluding military and government, to NAFTA were $63.8 billion in 2009 (the latest data available), down 7% ($4.6 billion) from 2008, but up 125% since 1994

Imports

At $276.4 billion for Canada and $229.7 billion for Mexico, they were the second and third largest suppliers of goods imports to the United States in 2010.

US goods imports from NAFTA totaled $506.1 billion in 2010, up 25.6% ($103 billion), from 2009, up 184% from 1994, and up 235% from 1993. US imports from NAFTA accounted for 26.5% of overall U.S. imports in 2010.

The five largest categories in 2010 were mineral fuel and oil (crude oil) ($116.2 billion), vehicles ($86.3 billion), electrical machinery ($61.8 billion), machinery ($51.2 billion), and precious stones (gold) ($13.9 billion).

US imports of agricultural products from NAFTA countries totaled $29.8 billion in 2010. Leading categories include fresh vegetables ($4.6 billion); snack foods including chocolate ($4.0 billion); fresh fruit (excluding bananas) ($2.4 billion); live animals ($2.0 billion); and red meats, fresh/chilled/frozen ($2.0 billion).

US imports of private commercial services excluding military and government were $35.5 billion in 2009 (latest data available), down 11.2% ($4.5 billion) from 2008 but up 100% since 1994.

Trade balances

The US goods trade deficit with NAFTA was $94.6 billion in 2010, a 36.4% increase ($25 billion) over 2009.

The US goods trade deficit with NAFTA accounted for 26.8% of the overall U.S. goods trade deficit in 2010.

The US had a services trade surplus of $28.3 billion with NAFTA countries in 2009.

Investment

The US foreign direct investment (FDI) in NAFTA Countries (stock) was $357.7 billion in 2009 (latest data available), up 8.8% from 2008.

The US direct investment in NAFTA countries is in nonbank holding companies, and in the manufacturing, finance/insurance, and mining sectors.

The foreign direct investment, of Canada and Mexico in the United States (stock) was $237.2 billion in 2009.

Industry

Maquiladoras (Mexican factories that take in imported raw materials and produce goods for export) have become the landmark of trade in Mexico. These are plants that moved to this region from the United States, hence the debate over the loss of American jobs. Hufbauer's (2005) book shows that income in the maquiladora sector has increased 15.5% since the implementation of NAFTA in 1994. Other sectors now benefit from the free trade agreement, and the share of exports from non-border states has increased in the last five years while the share of exports from maquiladora-border states has decreased. This has allowed for the rapid growth of non-border metropolitan areas, such as Toluca, León and Puebla; all three larger in population than Tijuana, Ciudad Juárez, and Reynosa.

Environment

Securing U.S. congressional approval for NAFTA would have been impossible without addressing public concerns about NAFTA’s environmental impact. The Clinton administration negotiated a side agreement on the environment with Canada and Mexico, the North American Agreement on Environmental Cooperation (NAAEC), which led to the creation of the Commission for Environmental Cooperation (CEC) in 1994. To alleviate concerns that NAFTA, the first regional trade agreement between a developing country and two developed

countries, would have negative environmental impacts, the CEC was given a mandate to conduct ongoing ex post environmental assessment of NAFTA.

In response to this mandate, the CEC created a framework for conducting environmental analysis of NAFTA, one of the first ex post frameworks for the environmental assessment of trade liberalization. The framework was designed to produce a focused and systematic body of evidence with respect to the initial hypotheses about NAFTA and the environment, such as the concern that NAFTA would create a "race to the bottom" in environmental regulation among the three countries, or the hope that NAFTA would pressure governments to increase their environmental protection mechanisms.The CEC has held four symposia using this framework to evaluate the environmental impacts of NAFTA and has commissioned 47 papers on this subject. In keeping with the CEC’s overall strategy of transparency and public involvement, the CEC commissioned these papers from leading independent experts.

Overall, none of the initial hypotheses were confirmed. NAFTA did not inherently present a systemic threat to the North American environment, as was originally feared, apart from potentially the ISDS provisions of Ch 11. NAFTA-related environmental threats instead occurred in specific areas where government environmental policy, infrastructure, or mechanisms, were unprepared for the increasing scale of production under trade liberalization. In some cases, environmental policy was neglected in the wake of trade liberalization; in other cases, NAFTA's measures for investment protection, such as and measures against non-tariff trade barriers, threatened to discourage more vigorous environmental policy. The most serious overall increases in pollution due to NAFTA were found in the base metals sector, the Mexican petroleum sector, and the transportation equipment sector in the United States and Mexico, but not in Canada.

Agriculture

From the earliest negotiation, agriculture was (and still remains) a controversial topic within NAFTA, as it has been with almost all free trade agreements that have been signed within the WTO framework. Agriculture is the only section that was not negotiated trilaterally; instead, three separate agreements were signed between each pair of parties. The Canada–U.S. agreement contains significant restrictions and tariff quotas on agricultural products (mainly sugar, dairy, and poultry products), whereas the Mexico–U.S. pact allows for a wider liberalization within a framework of phase-out periods.

The overall effect of the Mexico–U.S. agricultural agreement is a matter of dispute. Mexico did not invest in the infrastructure necessary for competition, such as efficient railroads and highways, creating more difficult living conditions for the country's poor. Still, the causes of rural poverty can be directly attributed to NAFTA in fact, Mexico's agricultural exports increased 9.4 percent annually between 1994 and 2001, while imports increased by only 6.9 percent a year during the same period.

One of the most affected agricultural sectors is the meat industry. Mexico has gone from a small-key player in the pre-1994 U.S. export market to the 2nd largest importer of U.S. agricultural products in 2004, and NAFTA may be credited as a major catalyst for this change. The allowance of free trade removed the hurdles that impeded business between the two countries. As a result, Mexican farmers have provided a growing meat market for the U.S., leading to an increase in sales and profits for the U.S. meat industry. This coincides with a noticeable increase

in Mexican per capita GDP that has created large changes in meat consumption patterns, implying that Mexicans can now afford to buy more meat and thus per capita meat consumption has grown.

Production of corn in Mexico has increased since NAFTA's implementation. However, internal corn demand has increased beyond Mexico's sufficiency, and imports have become necessary, far beyond the quotas Mexico had originally negotiated. Zahniser & Coyle have also pointed out that corn prices in Mexico, adjusted for international prices, have drastically decreased, yet through a program of subsidies expanded by former president Vicente Fox, production has remained stable since 2000.

The logical result of a lower commodity price is that more use of it is made downstream. Unfortunately, many of the same rural people who would have been likely to produce higher-margin value-added products in Mexico have instead emigrated. The rise in corn prices due to increased ethanol demand may improve the situation of corn farmers in Mexico.

In a study published in the August 2008 issue of the American Journal of Agricultural Economics, NAFTA has increased U.S. agricultural exports to Mexico and Canada even though most of this increase occurred a decade after its ratification. The study focused on the effects that gradual "phase-in" periods in regional trade agreements, including NAFTA, have on trade flows. Most of the increase in members’ agricultural trade, which was only recently brought under the purview of the World Trade Organization, was due to very high trade barriers before NAFTA or other regional trade agreements.

Mobility of persons

According to the Department of Homeland Security Yearbook of Immigration Statistics, during fiscal year 2006 (i.e., October 2005 through September 2006), 73,880 foreign professionals (64,633 Canadians and 9,247 Mexicans) were admitted into the United States for temporary employment under NAFTA (i.e., in the TN status). Additionally, 17,321 of their family members (13,136 Canadians, 2,904 Mexicans, as well as a number of third-country nationals married to Canadians and Mexicans) entered the U.S. in the treaty national's dependent (TD) status.[22] Because DHS counts the number of the new I-94 arrival records filled at the border, and the TN-1 admission is valid for three years, the number of non-immigrants in TN status present in the U.S. at the end of the fiscal year is approximately equal to the number of admissions during the year. (A discrepancy may be caused by some TN entrants leaving the country or changing status before their three-year admission period has expired, while other immigrants admitted earlier may change their statusto TN or TD, or extend TN status granted earlier).

Canadian authorities estimated that, as of December 1, 2006, a total of 24,830 U.S. citizens and 15,219 Mexican citizens were present in Canada as "foreign workers". These numbers include both entrants under the NAFTA agreement and those who have entered under other provisions of the Canadian immigration law.[ New entries of foreign workers in 2006 were 16,841 (U.S. citizens) and 13,933 (Mexicans)

Criticism and controversies

Canadian disputes

Garment workers assemble suits in a Toronto factory in 1901

There is much concern in Canada over the provision that if something is sold even once as acommodity, the government cannot stop its sale in the future.[25] This applies to the water from Canada's lakes and rivers, fueling fears over the possible destruction of Canadianecosystems and water supply.

In 1999, Sun Belt Water Inc., a company out of Santa Barbara, California, filed an Arbitration Claim under Chapter 11 of the NAFTA claiming $105 million as a result of Canada's prohibition on the export of bulk water by marine tanker, a move that destroyed the Sun Belt business venture. The claim sent shock waves through Canadian governments that scrambled to update water legislation and remains unresolved.

Other fears come from the effects NAFTA has had on Canadian lawmaking. In 1996, the gasoline additive MMT was brought into Canada by an American company. At the time, the Canadian federal government banned the importation of the additive. The American company brought a claim under NAFTA Chapter 11 seeking US$201 million,[26] from the Canadian government and the Canadian provinces under the Agreement on Internal Trade ("AIT"). The American company argued that their additive had not been conclusively linked to any health dangers, and that the prohibition was damaging to their company. Following a finding that the ban was a violation of the AIT,[27]the Canadian federal government repealed the ban and settled with the American company for US$13 million.[28] Studies by Health and Welfare Canada (now Health Canada) on the health effects of MMT in fuel found no significant health effects associated with exposure to these exhaust emissions. Other Canadian researchers and the U.S. Environmental Protection Agency disagree with Health Canada, and cite studies that include possible nerve damage.

Ponderosa Pine logs taken from Malheur National Forest, Grant County, Oregon.

The United States and Canada had been arguing for years over the United States' decision to impose a 27 percent duty on Canadian softwood lumber imports, until new Canadian Prime Minister Stephen Harper compromised with the United States and reached a settlement on July 1,

2006. The settlement has not yet been ratified by either country, in part due to domestic opposition in Canada.

Canada had filed numerous motions to have the duty eliminated and the collected duties returned to Canada.[31] After the United States lost an appeal from a NAFTA panel, it responded by saying "We are, of course, disappointed with the [NAFTA panel's] decision, but it will have no impact on the anti-dumping and countervailing duty orders." (Nick Lifton, spokesman for U.S. Trade Representative Rob Portman) On July 21, 2006, the United States Court of International Trade found that imposition of the duties was contrary to U.S. law.[33][34]

Change in income trust taxation

On October 30, 2007, American citizens Marvin and Elaine Gottlieb filed a Notice of Intent to Submit a Claim to Arbitration under NAFTA. The couple claims thousands of U.S. investors lost a total of $5 billion dollars in the fall-out from the Conservative Government'sdecision the previous year to change the tax rate on income trusts in the energy sector. On April 29, 2009, a determination was made that this change in tax law was not expropriation.[35]

Further criticism in Canada

A book written by Mel Hurtig published in 2002 called The Vanishing Country charged that since NAFTA's ratification more than 10,000 Canadian companies had been taken over by foreigners, and that 98% of all foreign direct investments in Canada were for foreign takeovers.[36]

OBJECTIVES OF NAFTA AUDITS (VERIFICATIONS)

This chapter explains the overall objective for conducting a North American Free Trade Agreement (NAFTA) exporter and/or producer verification. The specific verification program bjectives are also provided.

1 Verification Objective

The overall objective of the exporter and/or producer verification is to confirm that the product(s) certified by the exporter and/or producer qualify as originating in accordance with Chapter 4 of the NAFTA and the NAFTA Rules of Origin Regulations (the Regulations).

4.2 Objectives of the Verification Programs

Verification programs should be developed based on the verification objective stated in Section 4.1, the information gathered, and the concerns identified during the planning and preparation phase of the audit. Listed below are the specific verification program objectives subject to the verification process. Chapter 5 contains the verification programs and sub-programs which identify the recommended verification procedures to be utilized in meeting these objectives.

OBJECTIVES OF THE VERIFICATION PROGRAMS

A. NON-QUALIFYING OPERATIONS PROGRAM

To ensure that the good does not qualify as originating because of mere dilution with water or another substance or because of a production or pricing practice designed to circumvent the Rules of Origin as set out in Chapter 4 of the NAFTA.

B. TARIFF CLASSIFICATION PROGRAM

To ensure that all non-originating materials are sufficiently transformed in the NAFTA territory so as to undergo the necessary tariff classification change as required by the Specific Rule of Origin applicable to the exported good and to ensure that the finished good and the non-originating materials used to produce it are properly classified.

REGIONAL VALUE CONTENT REQUIREMENT

C. TRANSACTION VALUE METHOD - (RVC) - PROGRAM

To ensure that the Regional Value Content requirement, as required by the rules of origin, has been met where the Transaction Value Method has been used.

D. NET COST METHOD - (RVC) - PROGRAM

To ensure that the Regional Value Content requirement, as required by the rules of origin, has been met where the Net Cost Method has been used.

E. TRANSSHIPMENT PROGRAM

To verify that the originating good, by reason of having undergone production that satisfies the requirements of Article 401 of the NAFTA, (1) Is not withdrawn from Customs control outside the territories of the NAFTA countries and (2) Does not undergo further production or any other operation outside the territories of the NAFTA countries, other than unloading, reloading, or any other operation necessary to preserve it in good condition, such as inspection, removal of dust that accumulates during shipment, ventilation, spreading out or drying, chilling, replacing salt, sulphur dioxide or other aqueous solutions, replacing damaged packing materials and containers and removal of units of the good that are spoiled or damaged and present a danger to the remaining units of the good, or to transport the good to the territory of a NAFTA country.

For additional verification programs from the other Parties, refer to the respective Annex, Section 4.2 at the end of this Chapter.  

ARTICLES UNDER NAFTA.

Article 101: Establishment of the Free Trade Area

The Parties to this Agreement, consistent with Article XXIV of the General Agreement on Tariffs and Trade, hereby establish a free trade area.

Article 102: Objectives

1. The objectives of this Agreement, as elaborated more specifically through its principles and rules, including national treatment, most-favored-nation treatment and transparency, are to:

a) eliminate barriers to trade in, and facilitate the cross-border movement of, goods and services between the territories of the Parties;

b) promote conditions of fair competition in the free trade area;

c) increase substantially investment opportunities in the territories of the Parties;

d) provide adequate and effective protection and enforcement of intellectual property rights in each Party's territory;

e) create effective procedures for the implementation and application of this Agreement, for its joint administration and for the resolution of disputes; and

f) establish a framework for further trilateral, regional and multilateral cooperation to expand and enhance the benefits of this Agreement.

2. The Parties shall interpret and apply the provisions of this Agreement in the light of its objectives set out in paragraph 1 and in accordance with applicable rules of international law.

Article 103: Relation to Other Agreements

1. The Parties affirm their existing rights and obligations with respect to each other under the General Agreement on Tariffs and Trade and other agreements to which such Parties are party.

2. In the event of any inconsistency between this Agreement and such other agreements, this Agreement shall prevail to the extent of the inconsistency, except as otherwise provided in this Agreement.

Article 104: Relation to Environmental and Conservation Agreements

1. In the event of any inconsistency between this Agreement and the specific trade obligations set out in:

a) the Convention on International Trade in Endangered Species of Wild Fauna and Flora, done at Washington, March 3, 1973, as amended June 22, 1979,

b) the Montreal Protocol on Substances that Deplete the Ozone Layer, done at Montreal, September 16, 1987, as amended June 29, 1990,

c) the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, done at Basel, March 22, 1989, on its entry into force for Canada, Mexico and the United States, or

d) the agreements set out in Annex 104.1,

such obligations shall prevail to the extent of the inconsistency, provided that where a Party has a choice among equally effective and reasonably available means of complying with such obligations, the Party chooses the alternative that is the least inconsistent with the other provisions of this Agreement.

2. The Parties may agree in writing to modify Annex 104.1 to include any amendment to an agreement referred to in paragraph 1, and any other environmental or conservation agreement.

Article 105: Extent of Obligations

The Parties shall ensure that all necessary measures are taken in order to give effect to the provisions of this Agreement, including their observance, except as otherwise provided in this Agreement, by state and provincial governments.

Annex 104.1: Bilateral and Other Environmental and Conservation Agreements

1. The Agreement Between the Government of Canada and the Government of the United States of America Concerning the Transboundary Movement of Hazardous Waste, signed at Ottawa, October 28, 1986.

2. The Agreement Between the United States of America and the United Mexican States on Cooperation for the Protection and Improvement of the Environment in the Border Area, signed at La Paz, Baja California Sur, August 14, 1983.

APEC

Asia-Pacific Economic Cooperation (APEC) is a forum for 21 Pacific Rim countries (formally Member Economies) that seeks to promote free trade and economic cooperation throughout the Asia-Pacific region. Established in 1989 in response to the growing interdependence of Asia-Pacific economies and the advent of regional trade blocs in other parts of the world, initially, with the notion to the likely dominance of the sphere of economic influences of the highly industrialized Japan (a member of G8) in the Asia-Pacific region and for the economic interests of Australian agricultural/raw materialproducts to search for new buyers other than the demand-declining European market [1], APEC works gradually (to include members of Newly industrialized country at the time, although the agenda of free trade was a sensitive issue for the developing NIEs, and forASEAN economies to explore new export market opportunities of the natural resourcessuch as natural gas and seek regional economic integration (industrial integration) by means of foreign direct investment on the behalf of ASEAN) to raise living standards and education levels through sustainable economic growth and to foster a sense of community and an appreciation of shared interests among Asia-Pacific countries. Members account for approximately 40% of the world's population, approximately 54% of the world's gross domestic product and about 44% of world trade.[2] For APEC Economic Trends Analysis in 2012, see [3].

An annual APEC Economic Leaders' Meeting is attended by the heads of government of all APEC members except Republic of China (represented under the name Chinese Taipei) by a ministerial-level official. The location of the meeting rotates annually among the member economies, and until 2011, a famous tradition involved the attending leaders dressing in a national costume of the host member.

HISTORY

ABC news report of the first APEC meeting in Canberra, November 1990. Featuring delegates

watching the Melbourne Cup.

In January 1989, Australian Prime Minister Bob Hawke called for more effective economic cooperation across the Pacific Rim region. This led to the first meeting of APEC in theAustralian capital of Canberra in November, chaired by Australian Foreign Affairs Minister Gareth Evans . Attended by political ministers from twelve countries, the meeting concluded with commitments for future annual meetings in Singapore and South Korea.

Countries of the Association of Southeast Asian Nations (ASEAN) opposed the initial proposal, instead proposing the East Asia Economic Caucus which would exclude non-Asian countries such as the United States, Canada, Australia, and New Zealand. This plan was opposed and strongly criticized by Japan and the United States.

The first APEC Economic Leaders' Meeting occurred in 1993 when U.S. President Bill Clinton, after discussions with Australian Prime Minister Paul Keating, invited the heads of government from member economies to a summit on Blake Island. He believed it would help bring the stalled Uruguay Round of trade talks back on track. At the meeting, some leaders called for continued reduction of barriers to trade and investment, envisioning a community in the Asia-Pacific region that might promote prosperity through cooperation. The APEC Secretariat, based in Singapore, was established to coordinate the activities of the organization.

During the meeting in 1994 in Bogor, Indonesia, APEC leaders adopted the Bogor Goals that aim for free and open trade and investment in the Asia-Pacific by 2010 for industrialized economies and by 2020 for developing economies. In 1995, APEC established a business advisory body named the APEC Business Advisory Council (ABAC), composed of three

business executives from each member economy.

ABC news report of the first APEC meeting in Canberra, November 1990. Featuring delegates

watching the Melbourne Cup.

In January 1989, Australian Prime Minister Bob Hawke called for more effective economic cooperation across the Pacific Rim region. This led to the first meeting of APEC in theAustralian capital of Canberra in November, chaired by Australian Foreign Affairs Minister Gareth Evans . Attended by political ministers from twelve countries, the meeting concluded with commitments for future annual meetings in Singapore and South Korea.

Countries of the Association of Southeast Asian Nations (ASEAN) opposed the initial proposal, instead proposing the East Asia Economic Caucus which would exclude non-Asian countries such as the United States, Canada, Australia, and New Zealand. This plan was opposed and strongly criticized by Japan and the United States.

The first APEC Economic Leaders' Meeting occurred in 1993 when U.S. President Bill Clinton, after discussions with Australian Prime Minister Paul Keating, invited the heads of government from member economies to a summit on Blake Island. He believed it would help bring the stalled Uruguay Round of trade talks back on track. At the meeting, some leaders called for continued reduction of barriers to trade and investment, envisioning a community in the Asia-Pacific region that might promote prosperity through cooperation. The APEC Secretariat, based in Singapore, was established to coordinate the activities of the organization.

During the meeting in 1994 in Bogor, Indonesia, APEC leaders adopted the Bogor Goals that aim for free and open trade and investment in the Asia-Pacific by 2010 for industrialized economies and by 2020 for developing economies. In 1995, APEC established a business advisory body named the APEC Business Advisory Council (ABAC), composed of three business executives from each member economy.

ABC news report of the first APEC meeting in Canberra, November 1990. Featuring delegates

watching the Melbourne Cup.

In January 1989, Australian Prime Minister Bob Hawke called for more effective economic cooperation across the Pacific Rim region. This led to the first meeting of APEC in theAustralian capital of Canberra in November, chaired by Australian Foreign Affairs Minister Gareth Evans . Attended by political ministers from twelve countries, the meeting concluded with commitments for future annual meetings in Singapore and South Korea.

Countries of the Association of Southeast Asian Nations (ASEAN) opposed the initial proposal, instead proposing the East Asia Economic Caucus which would exclude non-Asian countries such as the United States, Canada, Australia, and New Zealand. This plan was opposed and strongly criticized by Japan and the United States.

The first APEC Economic Leaders' Meeting occurred in 1993 when U.S. President Bill Clinton, after discussions with Australian Prime Minister Paul Keating, invited the heads of government from member economies to a summit on Blake Island. He believed it would help bring the stalled Uruguay Round of trade talks back on track. At the meeting, some leaders called for continued reduction of barriers to trade and investment, envisioning a community in the Asia-Pacific region that might promote prosperity through cooperation. The APEC Secretariat, based in Singapore, was established to coordinate the activities of the organization.

During the meeting in 1994 in Bogor, Indonesia, APEC leaders adopted the Bogor Goals that aim for free and open trade and investment in the Asia-Pacific by 2010 for industrialized economies and by 2020 for developing economies. In 1995, APEC established a business advisory body named the APEC Business Advisory Council (ABAC), composed of three business executives from each member economy.

APEC's Three Pillars

To meet the Bogor Goals, APEC carries out work in three main areas:

1. Trade and Investment Liberalisation

2. Business Facilitation

3. Economic and Technical Cooperation[edit]APEC and Trade Liberalisation

According to the organization itself, when APEC was established in 1989 average trade barriers in the region stood at 16.9 percent, but had been reduced to 5.5% in 2004.[15]

[edit]APEC's Business Facilitation Efforts

APEC has long been at the forefront of reform efforts in the area of business facilitation. Between 2002 and 2006 the costs of business transactions across the region was reduced by 6%, thanks to the APEC Trade Facilitation Action Plan (TFAPI). Between 2007 and 2010, APEC hopes to achieve an additional 5% reduction in business transaction costs. To this end, a new Trade Facilitation Action Plan has been endorsed. According to a 2008 research brief published by the World Bank as part of its Trade Costs and Facilitation Project, increasing transparency in the region's trading system is critical if APEC is to meet its Bogor Goal targets.[16] The APEC Business Travel Card, a travel document for visa-free business travel within the region is one of the concrete measures to facilitate business. In May 2010 Russia joined the scheme, thus completing the circle.[17]

[edit]Proposed Free Trade Area of the Asia-Pacific

APEC is considering the prospects and options for a Free Trade Area of the Asia-Pacific (FTAAP), which would include all APEC member economies. Since 2006, the APEC Business Advisory Council, promoting the theory that a free trade area has the best chance of converging the member nations and ensuring stable economic growth under free trade, has lobbied for the creation of a high-level task force to study and develop a plan for a free trade area. The proposal for a FTAAP arose due to the lack of progress in theDoha round of World Trade Organization negotiations, and as a way to overcome the "spaghetti bowl" effect created by overlapping and conflicting elements of the umpteen free trade agreements—there are approximately 60 free trade agreements, with an additional 117 in the process of negotiation in Southeast Asia and the Asia-Pacific region.[18][18][19][20][20] The FTAAP is more ambitious in scope than the Doha round, which limits itself to reducing trade restrictions. The FTAAP would create a free trade zone that would considerably expand commerce and economic growth in the region.[18][20] The economic expansion and growth in trade could exceed the expectations of other regional free trade areas such as the ASEAN Plus Three (ASEAN + China, Japan, and South Korea).[21] Some criticisms include that the diversion of trade within APEC members would create trade imbalances, market conflicts and complications with nations of other regions.[20] The development of the FTAAP is expected to take many years, involving

essential studies, evaluations and negotiations between member economies.[18] It is also affected by the absence of political will and popular agitations and lobbying against free trade in domestic politics.[18] [6]

APEC Study Center Consortium

In 1993, APEC Leaders decided to establish a network of APEC Study Centres among universities and research institutions in member economies.[22]

Notable centers include:

Australian APEC Study Centre, Royal Melbourne Institute of Technology, Australia

Berkeley APEC Study Center, University of California, Berkeley, United States Chinese Taipei APEC Study Center, Taiwan Institute of Economic

Research, Taiwan HKU APEC Study Center, Hong Kong University, Hong Kong, China Kobe APEC Study Center, Kobe University, Japan Nankai APEC Study Center, Nankai University, China Philippine APEC Study Center Network, Philippine Institute for Development

Studies, Philippines The Canadian APEC Study Centre, The Asia Pacific Foundation of

Canada, Vancouver, Canada Indonesian APEC Study Centre, APEC Study Center University of

Indonesia, Indonesia. APEC Business Advisory Council

The APEC Business Advisory Council (ABAC) was created by the APEC Economic Leaders in November 1995 with the aim of providing advice to the APEC Economic Leaders on ways to achieve the Bogor Goals and other specific business sector priorities, and to provide the business perspective on specific areas of cooperation.

Each economy nominates up to three members from the private sector to ABAC. These business leaders represent a wide range of industry sectors. ABAC provides an annual report to APEC Economic Leaders containing recommendations to improve the business and investment environment in the Asia-Pacific region, and outlining business views about priority regional issues. ABAC is also the only non-governmental organisation that is on the official agenda of the APEC Economic Leader’s Meeting.

Annual APEC Economic Leaders' Meetings

Since its formation in 1989, APEC has held annual meetings with representatives from all member economies. The first four annual meetings were attended by ministerial-level officials. Beginning in 1993, the annual meetings are named APEC Economic Leaders' Meetings and are attended by the heads of government from all

member economies except Taiwan, which is represented by a ministerial-level official. The annual Leaders' Meetings are not called summits.

Meeting developments

In 1997, the APEC meeting was held in Vancouver. Controversy arose after officers of the Royal Canadian Mounted Police used pepper spray against protesters. The protesters objected to the presence of autocratic leaders such as Indonesian president Suharto .[31][32][33][34][35][36]

At the 2001 Leaders' Meeting in Shanghai, APEC leaders pushed for a new round of trade negotiations and support for a program of trade capacity-building assistance, leading to the launch of the Doha Development Agenda a few weeks later. The meeting also endorsed the Shanghai Accord proposed by the United States, emphasising the implementation of open markets, structural reform, andcapacity building. As part of the accord, the meeting committed to develop and implement APEC transparency standards, reduce tradetransaction costs in the Asia-Pacific region by 5 percent over 5 years, and pursue trade liberalization policies relating to information technology goods and services.

In 2003, Jemaah Islamiah leader Riduan Isamuddin had planned to attack the APEC Leaders Meeting to be held in Bangkok in October. He was captured in the city of Ayutthaya, Thailand by Thai police on August 11, 2003, before he could finish planning the attack.[citation needed] Chile became the first South American nation to host the Leaders' Meeting in 2004. The agenda of that year was focused on terrorism and commerce, small and medium enterprise development, and contemplation of free trade agreements and regional trade agreements.

The 2005 Leaders' Meeting was held in Busan, South Korea. The meeting focused on the Doha round of World Trade Organization(WTO) negotiations, leading up to the WTO Ministerial Conference of 2005 held in Hong Kong in December. Weeks earlier, trade negotiations in Paris were held between several WTO members, including the United States and the European Union, centered on reducing agricultural trade barriers. APEC leaders at the summit urged the European Union to agree to reducing farm subsidies. Peaceful protests against APEC were staged in Busan, but the meeting schedule was not affected.

At the Leaders' Meeting held on November 19, 2006 in Hanoi, APEC leaders called for a new start to global free-trade negotiations while condemning terrorism and other threats to security. APEC also criticised North Korea for conducting a nuclear test and a missile test launch that year, urging the country to take "concrete and effective" steps toward nuclear disarmament. Concerns about nuclear proliferation in the region was discussed in addition to economic topics. The United States and Russia signed an agreement as part of Russia's bid to join the World Trade Organization.

The APEC Australia 2007 Leaders' Meeting was held in Sydney from 2–9 September 2007. The political leaders agreed to an "aspirational goal" of a 25% reduction of energy intensity correlative with economic development.  Extreme

security measures including airborne sharpshooters and extensive steel-and-concrete barricades were deployed against anticipated protesters and potential terrorists. However, protest activities were peaceful and the security envelope was penetrated with ease by a spoof diplomatic motorcade manned by members of the Australian television program The Chaser, one of whom was dressed to resemble the Al-Qaedaleader Osama bin Laden.

The APEC USA 2011 Leaders' Meeting was held on Honolulu, Hawaii 8–13 November 2011.[38]

APEC Leaders' Family Photo

At the end of the APEC Economic Leaders' Meeting, the leaders in attendance gather for what is officially known as the APEC Leaders' Family Photo. A long-standing tradition for this photo involved the attending leaders dressing in a costume that reflects the culture of the host member. The tradition dates back to the first such meeting in 1993 when then-U.S. President Bill Clinton outfitted the leaders in leather bombardier jackets. However, at the 2010 meeting, Japan opted to have the leaders dress in smart casual rather than the traditional kimono.[39] Similarly, when Honolulu was selected in 2009 as the site for the 2011 APEC meeting, U.S. President Barack Obama joked that he looked forward to seeing the leaders dressed in "flowered shirts and grass skirts". However, after viewing previous photos, and concerned that having the leaders dress in aloha shirts might give the wrong impression during a period of economic austerity, Obama decided that it might be time to end the tradition. Leaders were given a specially designed aloha shirt as a gift but were not required to wear it for the photo

CRITICISM

Criticism

APEC has been criticized for failing to clearly define itself or serve a useful purpose. According to the organization, it is "the premier forum for facilitating economic growth, cooperation, trade and investment in the Asia-Pacific region" established to "further enhance economic growth and prosperity for the region and to strengthen the Asia-Pacific community".[47] However, whether it has accomplished anything constructive remains debatable, especially from the viewpoints of European countries that cannot take part in APEC.