Project Essay on: Is it more advantageous for emerging countries to agree international trade agreements with the EU on a bilateral

or multilateral basis? Why?

Introduction
Recently globalization and the integration of capital market has made it possible for investors to have an increasingly become a priority for investing capital in such emerging markets that are promising in the long term for high returns. However Emerging markets are said to be highly volatile and other extrinsic factors which are needed to be considered before investing in emerging regions or country. There are many factors that come in the mind of investor such as the rising debt markets, credit ratings, and market maturity in terms of its operations and performance. There significance over the importance of being one of the emerging economies comes from a number of factors such as they are consisted with population, resourceful e.g. Natural resources of Gas, Oil etc, size of the industries and ease of policies1. Although they do really face some challenging situations while growing such as to keep government intervention limited, corruption, business environment, monetary and fiscal policies and less political influence or disturbance in the country.

What are International Trade Agreement

International trade agreements are an important factor in order to develop poor countries or emerging economies. Developed economies are a boon for emerging ones to develop their market through exporting their goods to the rich countries and in return get receipts in foreign currency which will enhance the balance of payment position. Such relationships can be based over bilateral, multilateral or regional accords. It affects people at every level e.g. agriculture sector to service sector. However the developed economies make use of such agreements by implementing or regulating pricing through tariffs, exports and method of production e.g. by imposing a standard for quality 2.

States often get in to international agreements with each other in order improve trade relations and prevent the national boundaries or diffuse such existence in order to establish a healthy international trade relationship. It can be done through multilateral and bilateral agreements.

Bilateral versus Multilateral

Bilateral relations are built between only two states i.e. between U.S.A and India. Such relations are based upon political, military and economic. It helps to prevent in complexities that are involved while dealing with more than two nations. Bilateral trade agreements are made on particular exchange of goods e.g. raw material for manufacturing purposes. If the bilateral relations do not match up the criteria of the agreement then it can have spillover effects such as it can cause friction between the nations. Multilateral on the other hand is based upon more than two countries. In this relationship the risk associated with the agreements are distributed among the members thus becoming more favorable situation for all the states in the agreement. Mostly such relations are based on the common ground or problems/needs between the both the partys concerning issues [3] [4] [5].

Emerging economies trade agreements with EU

Emerging economies are referred as developing economies, which have the potential and lack of resources to exploit them. Such economies have different macroeconomic problem but most of them can be solved through an increase in international trade which help them to boost their local productivity and an increase in income and employment opportunities. This will not only open gates for economic agreement but will enhance the bilateral relations in terms of social security and an increase of investment.6 European Union consist of 27 members states which includes wealthiest and productive ones in the union. It does not only give access to source of suppliers but also a huge market for business.7 It can be derived that using single currency i.e. EURO enables to collaborate all the European markets in to One Single market. There are number of sources available to find out the information regarding EU countries such as Enterprise Europe Network (EEN) helping businesses across the Europe in establish their any kind of trading/business operations. However
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there are risk associated while trading with single currency region i.e. fluctuation in euro to pound or pound to euro value might become unfavorable in either buying or selling situation. Thus there are certain remedies such as by opening up a Euro Currency account, it will help you out of the fluctuation exchange rate factor i.e. you do not have to make conversion of currencies. There are also other advantages in EU trading, that almost all the states in EU have common regulations which enable the business expansion and market penetration growth easier rather than achieving each and every countries regulation standards. EU trade policy is integrated with its development policy. In this they have granted cut-rate for emerging markets and make most of the imports from them under generalized system of preferences.8 Such advantageous can only be possible through multilateral relationship as bilateral are much based on international security based while multilateral are focused on world problem e.g. energy crisis, lack of education/ poverty, health/sanitation problems, food crisis etc. It gives the sense that we are one world and problems are shared and the aids given to the countries are not bound, thus it will enhance the sense of an increase in goodwill for the donor country and for the multilateral relation. Tied relations might not help any economy as for a developing economy, they will have to pay back it through purchasing or investing the aid received in to the donor country thus this might not be long term or direct affecting the emerging economy. Multilateral relations will help in not only building and gaining the confidence of public of both countries but will help in creating a prosperous environment among the two nations or in the region. European Union can gain advantages over having cheap labor and product exchange e.g. Baltic countries of Europe might gain international trade advantages through having relations with Asian emerging countries, trading fisheries products from Asian countries to EU while EU can export technology for agriculture to boost primary sector of emerging/developing country. Emerging countries needed to boost their economies through international trade and for that they need to increase their export through having access to bigger markets where the goods can be exported and in return from its receipts economic development could be done. Through exports, having a free trade agreement with EU will have a huge impact over the export country through generating greater foreign currency and achieving a greater market for its products or goods. This will create a competitive environment which will result in gaining comparative advantage. The ease of doing business will be established through having access in to various EU countries, expanding your local products market in the whole region. Having access to EU, tariffs, quotas
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and embargo have a great and direct impact on export goods, thus elimination of such barriers will lead to decrease in price for them and cheaper products could be imported in EU. Due to standardized rate and common currency will lead to transparency in making payment and receipts over exports and trading of goods within the trade bloc will be much more easily i.e. EU countries. Uncertainty over the exchange rate of the currency factor is eliminated; this is another advantage over having access to EU.

Evaluation
Bilateral trade relations approaches could foster negative regional trading blocs results such as more complexity that makes the flow of trade between the countries not smooth. However many people think that such relations are for major giant corporation that are only profit motivated and they do not think about the welfare of the society and people living in it. Emerging market economies cannot handle multilateral relations with EU as there needs to be a common ground between the emerging and EU nations, as emerging nations are itself are not up to economic indicator level that matches EU standards. Bilateral relations can only be the solution for the emerging economies as it will help in focusing on a particular concern i.e. labor expertise exchange, fisheries, raw mineral e.g. coal and gas. In the absence of a successful multilateral trade agreement, usually a number of bilateral agreements take place which is more specific and tied agreements. Multilateral agreements with EU for emerging countries might not be possible as EU have a developed region status and emerging economies are trying to come at the par level to be stated as developed nation. Thus for example Pakistan will be needed to enhance its trading capabilities, standards for trade. Emerging economies can make use of its positive factors in order to compete with local producers of EU, it can be possible through using its agriculture power such as they have high productivity and they have unique farming products that is not usual in all the regions e.g. Mangoes are highly cultivated in the south Asia region includes Pakistan and India mostly. These emerging economies can export such fruits to EU region and compete with their products more effectively in EU region. Secondly EU can import fishery products from emerging countries which can be obtained at a lower price. On the other hand EU can boost up their manufacturing sector by exporting technological advancement sharing by giving the modern farming techniques, mining and extraction machineries to those who have incapability to explore
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the hidden natural resources in emerging countries. Automobile industry can be exploited through introduction of high efficient cars in big populated emerging regions which can be beneficial for them. Oil and Gas imports for EU are important products which are in demand throughout across the globe. Thus duties and tariffs on such products should be cut and help such economies to improve their standards and procedure in the productivity and help them to alleviate the deprivation over the financial aspect in terms of balance of payment. Such measurements can be first implemented in the bilateral phase which will focus on specific trades later it can shift on multilateral agreements, after the trading gets at ease in the EU region.[9][10]

Conclusion
Emerging markets will be the important markets in the future for growth of trade in the world and would create a financial stability in the region. Thus they can become one of the critical role players in making political decisions. As they have huge untapped resources and potential to make more sustainable economic structure, however for such results stability in structural reforms will needed to be implemented while getting in to any agreement with trade blocs or in a bilateral relationship. Emerging market economies might be able to look towards a brighter promising future and opportunities for foreign and developed economies of investment will become more. However risks are needed to be measured while investing in such high volatile markets. Thus process can become stagnant or end at time.
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Dave Hall, Business Studies, 4th edition Smith, Charles (2007). International Trade and Globalisation, 3rd edition. Stocksfield: Anforme. ISBN 1-90550410-1. Blair, John and Michael Carroll. Local Economic Development: Analysis, Practices, and Globalization. Sage Publications, 2009 Sullivan, Arthur; Steven M. Sheffrin (2003). Economics: Principles in Action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 471. ISBN 0-13-063085-3. Whalley, John (1998). "Why do countries seek Regional Trade Agreements". The Regionalization of the World Economy. p. 64. ISBN 0226259951 "Emerging Economies and the Transformation of International Business" By Subhash Chandra Jain. Edward Elgar Publishing, 2006 p.384 Pinder, John, and Simon Usherwood. The European Union: A Very Short Introduction (2008) Anthony Aust (2000). Modern Treaty Law and Practice (Cambridge: Cambridge University Press) p. 112.

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Vienna Convention on the Law of Treaties, (1969) 1155 U.N.T.S. 331 (in force 1980). "Emerging Economies and the Transformation of International Business" By Subhash Chandra Jain. Edward Elgar Publishing, 2006 p.384

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