Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-1 International Business Environments & Operations 14e Daniels ● Radebaugh ● Sullivan

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

8-1

International Business

Environments & Operations

14e

Daniels ● Radebaugh ● Sullivan


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Chapter 8

Cross-National Cooperation and

Agreements


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Learning Objectives To identify the major characteristics and

challenges of the World Trade Organization To discuss the pros and cons of global, bilateral,

and regional integration To describe the static and dynamic impact of

trade agreements on trade and investment flows To define different forms of regional economic

integration To compare and contrast different regional

trading groups To describe other forms of global cooperation

such as the United Nations and OPEC


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Introduction Economic integration

the political and monetary agreements among nations and world regions in which preference is given to member countries

Bilateral integration Regional integration Global integration


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The World Trade Organization

Learning Objective 1: To identify the major characteristics and challenges of the World Trade Organization


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The World Trade Organization

World Trade Organization (WTO) The major body for

reciprocal trade negotiations enforcement of trade agreements

General Agreement on Tariffs and Trade (GATT)


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GATT: Predecessor to the WTO

GATT formed in 1947 to abolish quotas and reduce

tariffs Most favored nation (MFN) clause

trade without discrimination Succeeded by WTO in 1995


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What Does The WTO Do? WTO

continues the MFN clause of GATT provides a mechanism for dispute settlement

Doha Round agricultural subsidies

Criticized for failing to pay enough attention to labor and

environmental concerns undermining global diversity benefitting rich at the expense of the poor


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The Rise Of Bilateral Agreements

Learning Objective 2: To discuss the pros and cons of global, bilateral, and regional integration


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The Rise Of Bilateral Agreements

Bilateral agreements can be between two individual countries or can

involve one country dealing with a group of other countries

Also known as Preferential trade agreements (PTAs) Free trade agreements (FTAs)


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Regional Economic Integration

Regional trade agreements integration confined to a region and involving

more than two countries Examples include

European Union (EU) European Free Trade Area (EFTA) North American Free Trade Area (NAFTA) Association of Southeast Asian Nations

(ASEAN) Common Market of Eastern and Southern

Africa (COMESA)


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Learning Objective 4: To define different forms of regional economic integration


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Major types of economic integration Free trade area

no internal tariffs Customs union

no internal tariffs plus common external tariffs

Common market customs union plus factor mobility


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The Effects Of Integration

Learning Objective 3: To describe the static and dynamic impact of trade agreements on trade and investment flows


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The Effects Of Integration

Effects of regional integration Static effects

trade creation trade diversion

Dynamic effects Economies of scale


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The Effects Of IntegrationImpact of Trade Agreements


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Major Regional Trading Groups

Learning Objective 5: To compare and contrast different regional trading groups


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The European Union European Union (EU)

changed from the European Economic Community to the European Community to the European Union

the largest and most successful regional trade group in the world

provides free trade of goods, capital, and people

uses common external tariffs has a common currency


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The European UnionEuropean Trade and Economic Integration


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The European Union European Commission

provides political leadership, drafts laws, and runs the various daily programs of the EU

Council of the EU composed of the heads of state of each

member country European Parliament

has legislative power, control over the budget, and is supervisor of executive decisions

European Court of Justice interprets and applies EU treaties


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The European Union Single European Act

designed to eliminate the remaining nontariff barriers to trade in Europe

Lisbon Treaty strengthens the EU’s governance process and

improves the ability of the EU to make and implement decisions

Treaty of Maastricht fostered political and monetary union

the euro


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The European Union Companies doing business in the EU need

to determine where to produce products determine what their entry strategy will be balance the commonness of the EU with

national differences


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NAFTA The North American Free Trade Agreement

(NAFTA) includes Canada, the U.S., and Mexico involves free trade in goods, services, and investments includes countries of different sizes and wealth

Some U.S. trade and investment has been diverted to Mexico

Free trade area rules of origin


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NAFTA Regional content

at least 50% of the net cost of most products must come from the NAFTA region

Additional provisions Workers rights The environment Dispute resolution mechanism


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Regional Economic Integration In The Americas There are six major regional economic

groups in the Americas Caribbean Community (CARICOM) Central American Common Market (CACM) Central American Free Trade Agreement

(CAFTA –DR) Andean Community (CAN) Southern Common Market (MERCOSUR) Latin American Integration Association

(LAIA)


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Regional Economic Integration In The Americas

Economic Integration in Central America and the Caribbean


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Regional Economic Integration In The Americas

Latin American Economic Integration


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Regional Economic Integration In Asia

Regional integration in Asia includes the Association of Southeast Asian

Nations (ASEAN) ASEAN Free Trade Area

the Asia Pacific Economic Cooperation (APEC) open regionalism


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Regional Economic Integration In Asia

The Association of Southeast Asian Nations


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Regional Economic Integration In Africa

Several efforts at economic integration exist Pan Arab Free Trade Area (PAFTA) Arab League Gulf Cooperation Council (GCC) African Union (AU)


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Regional Economic Integration In Africa

Regional Integration in Africa


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Other Forms Of International CooperationLearning Objective 6:To describe other forms of global cooperation such as the United Nations and OPEC


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Other Forms Of International Cooperation

The United Nations (UN) established in 1945 promotes peace and security UNCTAD

helps developing countries participate in international trade

Nongovernmental Organizations (NGOs) private, nonprofit institutions that are

independent of the government


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Commodities And The World Economy

Commodities raw materials or primary products that enter

into trade Many commodity agreements exist to

discuss issues disseminate information improve product safety

OPEC


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Organization Of The Petroleum Exporting

Countries OPEC

producer cartel that relies on quotas to influence prices

establishes production quotas for member countries

Saudi Arabia produces about 42% of the world’s crude

and18% of its natural gas Downside of high prices

incentive to invest in non-OPEC countries balancing social, political, and economic

objectives


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The Future: Regional Integration And The WTO

Regional integration could help the WTO Regionalism can lead to liberalization of issues

not covered by the WTO Regionalism is more flexible Regional deals lock in liberalization


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Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-1 International Business Environments & Operations 14e Daniels ● Radebaugh ● Sullivan