[MUSIC] Now we'll speak about trade cooperation between large and advanced economies and emerging market economies. This is important because in spite of the progress in emerging markets advanced economies still matter a lot in global trade. Generally, they share of advanced economies and global exports in goods and services in 2013 was about 60% of which more than 30% half of it came for the European Union and Eurozone counts 25.3% of global exports of goods and services. US less below 10%, Japan even less 3.6%, but all G7 economies, meaning United States, Canada, Japan, and four European economies, United Kingdom, Germany, France, and Italy. They account for subsidy 0.4% of the global exports. So still they play very important role. Let's start me from the European Union, which is the biggest trading partner in the world economy. And to understand how it works and why it may be attractive partner for other, let's start from the main characteristics of this block. It started in 1957 as a European economic committee. On the base of Treaty of Rome. Signed by six founding members. Germany, France, Italy, and three countries. But then it went through seven subsequent enlargements, so now it has 28 member states and still a couple of candidates, which may become members in the coming years. It based on Custom Union and Common Market, which covers all 20 members. Also one of the components of the huge Economic and Monetary Union. But this involved in the Monetary 18 members or other members have permanent of house like United Kingdom and Denmark. Or there are candidates to join so country. And then there is Schengen zone. The zone of free movement of people with no internal borders which involves 23 member states plus four non-members, countries of European economy: Norway, Iceland, Lichtenstein and Switzerland. EU has it's own budget, it's not very high 1% of the overall gross national income of the EU. But involves quite substantial cross-country redistribution, several common policies. And including Justice and Home Affairs and Common Foreign Security Policy. So, this is not only economic but also political blocks. Generally, it represents non-homogenous architecture because of various opt-outs, transitory period to join the full policies of country in specific provisions. So, in fact, we have Europe of various speeds. Economically, it accounts for almost 20% of the world's GDP in Purchasing Power Parity terms in 2012. It accounted more, but because of the rapid expansion of emerging market economies, its share is gradually decreasing, but still is very substantial. Euro, the common currency, is the second most important currency in the world after US dollar. The EU is also a source of capital and technology in financial corporate governance center. And find a large internal market, due to the institution of Single European Market. And also EU is quite open for import of industrial goods. It's external tariffs, as we analyze in one of the previous parts, is relatively low. So it creates interest of other countries and economic blocks especially in neighboring countries in close economic cooperation. And there are some special provisions in EU Treaty on cooperation with neighboring countries. Here I quote Article 8 of The treaty of European Union, which says European Union shall develop a special relationship with neighbouring countries, aiming to establish an area of prosperity and good neighbourliness founded on the values of the Union and characterized by close and peaceful relation based on cooperation. So, this is combination of economic and political goals. But still putting very important attention on economic cooperation, in how it looks, this external relation of EU. I will not analyze here external the relation with countries of European economic around Switzerland or other territories. I will concentrate on countries, which we consider as emerging markets. First, EU is involved in close and increasing cooperation, economy cooperation, with its future members. Actual EU candidates, such as Macedonia, Montenegro, Serbia, and Turkey, and potential candidates, like Albania, Bosnia & Herzegovina and Kosovo. And they all in economic terms are parties, except Kosovo which is under process of negotiation, as parties of stabilization and association agreements, which involve deep free trade agreement and partial access to Single European market. And also, political provision related to association, EU association process. And EU, as mentioned in the previous part of our lecture, has a customs union with Turkey, which covers only trade and manufactured goods. Then in 2004 you launched the European neighborhood policy which was policy framework covering both economic and political aspects of corporation with two groups of neighbors. Eastern countries of former Soviet Union and southern, so called Southern and Eastern Mediterranean countries. In regarding eastern neighborhood, it covers six countries, Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Ukraine, which move from General Partnership and Cooperation Agreement to Association Agreement and Deep Comprehensive Free Trade Agreement. And three countries, although they completed negotiation of such Deep and Comprehensive Free Trade Agreement, Georgia, Moldova, and Ukraine. Other eastern neighbor Russia has also framework of corporation based on quite similar principes like eastern partnership of so called free form spaces, political, technological free movement of people and economic cooperation. And then, as I mentioned, there is a group of 10 Southern and Eastern Mediterranean countries, which started since the mid 90s from so-called Barcelona Process and then upgraded to Union for Mediterranean in 2008. And the most of them apart Libya and Syria have association agreement free trade agreement with EU. But most of them have the same character related on to tariffs and tariffs for industrial goods, a bit sub-provision regarding agriculture. And only Morocco has now so-called a second generation agreement, which also extensively covers agriculture, it also involves some provision on non-tariff barriers and services. In going to beyond neighbors, EU also is involved with cooperation with other emerging market economies. And here's a quite long list of free trade agreements which are already enforced with Mexico, Chile, Korea, Columbia, and Peru. Because they are part of the southern part, Central America, CARIFORUM, South Africa, Madagascar, Mauritius, Seychelles, and Zimbabwe, Papua New Guinea and Fiji. And that is US also in process of negotiation at various stages and to conclude free trade agreements usually of new generations types of different comprehensive free trade agreement with Singapore, Malaysia, Vietnam, Thailand, India, and MERCOSUR countries. And also EU is an involves since 1960s, this, with cooperation with Asian, Caribbean, and Pacific countries. And which are subject of unilateral preferences, so-called GSP. And now there is a process of moving of some of these countries from, we saw the list of all from unilateral concession provided to them for mere lateral future agreement or multi-lateral, which also cover not only import of specific goods, but also we'll cover non-tariff barrier and agriculture, and services, and in rest. Now about US, whatever we said about you as large economic block and financial center, corporate center, technology center. All of it applies to the United States, is the biggest financial center in the world. And provider in the most important global currency US Dollar. But in terms of external it's not so much engaged in bi-lateral and multi-lateral free trade agreements as EU. It has a number of such agreements with Bahrain, with countries of Central America, with Chile, Israel, Jordan, Korea, Mexico under the multi-lateral NAFTA, Morocco, Oman, Panama, Peru, and Singapore. And similar situation concerns also three other measure, advanced economies. Japan, Canada, and Australia. Japan has a number of free trade agreements with emerging market economies, mostly in Asia, but also some in Latin America. There are trace agreements with ASEAN countries, as a group with Brunei Darussalam, with Chile, with India, Indonesia, Malaysia, Mexico, Peru, Philippines, Singapore, Thailand and Vietnam. And Canada is mostly involved in agreements with American, Latin American and North American countries and partly also with Asia. It has free trade agreement with a group of Central American countries, with Chile, with Columbia, Costa Rica, CARICOM countries, Dominican Republic, Panama, Peru. But also has free trade agreement with non-American countries. In Asia it is Jordan Middle East Jordan, Israel. In Asia, there is Singapore and Korea. And this is Ukraine in eastern Europe. And finally, Australia has free trade agreement with ASEAN countries and New Zealand, multi-lateral agreement. It has agreement with Chile, Papua New Guinea, Malaysia, Singapore, Thailand, with Gulf Cooperation countries as with China, so mostly Asia and Pacific region plus, Gulf countries. We can of course continue this list. But this is important to understand the overall picture. And this is a mixed picture we have a quite dense network of agreements. But this is not transparent. It's not transparent because the degree of corporation under those agreements are very different, country by country and partner by partner. So, it's not a consistent comprehensive system of free trade in several important emerging market economies do not participate in these bi-lateral deals. This Brazil, Argentina, South Africa, Russia, Pakistan, Bangladesh, Nigeria, which do not participate, they all participate marginal. Partly because they are not interested, but partly also because they are involved already in some regional agreements like Brazil. And they need a just negotiation with external partners such as Europe or US, so to the needs of the original partner. And this is definitely not equivalent of global trade liberalization. So, here, probably, was right saying, that such a bi-lateral or narrow regional agreement may service permits to global trading system. If it's not quickly followed by the new global trade agreement, either under restrictions or another framework. We just came to the end of our lecture site. We had opportunity to learn the origins of transition, how does this transition look in economic and political sphere, then about reforms in other emerging market economies on all continents. And then about emerging market and it's a global crisis, and finally about how the global economy in its market economy financial aspects including aspects is manage with an increasing shadow of the ending and increasing importance of emerging market economy. I hope, that this will help to understand you better this part of the global economy which we call emerging markets. Thank you very much for your attention. [MUSIC]
