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International Business Assignment - ASEAN

   

Added on  2020-10-22

11 Pages3050 Words279 Views
INTERNATIONALBUSINESS

Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1REI and Levels of Integration.....................................................................................................1TASK 2............................................................................................................................................2Objectives for formation of AFTA.............................................................................................2TASK 3............................................................................................................................................4Impact of AFTA on the Malaysian Economy.............................................................................4TASK 4............................................................................................................................................6Application of Comparative Advantage Theory of International Trade on AFTA....................6Summary.....................................................................................................................................7CONCLUSION................................................................................................................................8REFERENCES................................................................................................................................9

INTRODUCTIONInternational Business refers to that area of business which is focused around tradesconsisting of goods, technologies, services, capital, etc. beyond national borders and at a globallevel (Picciotto and Mayne, 2016). It undertakes cross border transactions of variouscommodities or services involving multiple countries. The following report is based on ASEANFree Trade Agreement (AFTA) and its impacts on the Malaysian Economy. It coversIntroduction to Regional Economic Integration (REI) and objectives for formulation of AFTA. Italso discusses application of comparative advantage theory of international trade on theagreement.TASK 1REI and Levels of IntegrationRegional Economic Integration could be explained as agreements between variouscountries of a particular geographical location which focuses on reduction or removal of barriersto ensure free flow of commodities and production factors between one another. The agenda ofsuch integration focuses on agreements which could be tariff or non-tariff barriers.There are various levels of Regional Economic Integration which could are effectivelydiscussed below:Free Trade: Under this, tariffs, which refer to imposed tax on various imported goods,are reduced by a substantial quantities among different member nations. In some casesthese tariffs are completely abolished. Tariffs within trades are constrained only to thirdcountries. Agenda of such agreements is to enhance comparative advantages andeconomies of scale. Free trade promotes and encourages economic efficiency, Forinstance, there is a partial reduction in tariffs seen in ASEAN Free Trade Agreement(AFTA) (Hamilton and Webster, 2018).Custom Union: Tariffs applied in this level is common between member nations as wellas third countries. The objective of custom union is to achieve a similar trade regime.Usefulness of this level while addressing re-export problems and to match competitivefields.Common Market: Capital as well as services are free to flow within member nationswhich results in comparative advantages and expansion of scale economies. However,1

there are various personal regulations like product standards imposed by each country(Stahl and Tung, 2015).Economic Union: A uniform market is created in this level by removing all the tariffsduring trade between the member nations. In addition, labours move freely too whichenables the employees to offer their service in another member country. Fiscal as well asmonitory policies are harmonised within member nations, implying a substantial state ofpolitical integration.Political Union: Such integration is quite advanced in nature where integrity isconcerned and a common government comes into operation. Under this, sovereignty ofmember nations are limited.Illustration 1: Levels of Economic Integration(Levels of Economic Integration, 2018)TASK 2Objectives for formation of AFTAASEAN Free Trade Agreement refers to trade bloc agreements which happened amongoriginal six members of ASEAN, which stands for Association of South East Asian Nations.These nations are Malaysia, Thailand, Singapore, Philippines, Indonesia and Brunei. It wasestablished in 1992 and was endorsed by six government heads (Vernon, 2017). At that time, itwas imperative to form such a scheme which could effectively facilitate economic integration2

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