Regional Economic Integration 8

8 - 2 Chapter Objectives Define regional economic integration and identify its five levels. Discuss the benefits and drawbacks of regional economic integration. Describe regional integration in Europe and its pattern of enlargement. Discuss regional integration in the Americas and analyze its future prospects. Characterize regional integration in Asia and how it differs from integration elsewhere. Describe integration in the Middle East and Africa and explain the slow progress.

8 - 3 Nestlé Largest food company in the world Food is integral to cultural fabric Must monitor regional integration

8 - 4 Process whereby countries in a geographic region cooperate to reduce or eliminate barriers to the international flow of products, people, or capital Regional Economic Integration

8 - 5 Levels of Regional Integration Coordinate aspects of members’ economic and political systems Political Union Remove barriers to trade, labor, and capital, set a common trade policy against nonmembers, and coordinate members’ economic policies Economic Union Remove barriers to trade, labor, and capital among members, and set a common trade policy against nonmembers Common Market Remove barriers to trade among members, and set a common trade policy against nonmembers Customs Union Remove barriers to trade among members, but each country has own policies for nonmembers Free-Trade Area

8 - 6 Benefits of Integration  Trade creation  Greater consensus  Political cooperation  Creates jobs  Trade creation  Greater consensus  Political cooperation  Creates jobs

8 - 7 Drawbacks of Integration  Trade diversion  Shifting employment  Less sovereignty  Trade diversion  Shifting employment  Less sovereignty

8 - 8 Discussion Question What are several potential benefits of regional economic integration and several potential drawbacks of integration?

8 - 9 Answer to Discussion Question Potential benefits of regional economic integration include trade creation, greater consensus, political cooperation, and job creation. Potential drawbacks include trade diversion, shifting employment, and less sovereignty.

European Union Pop: 500 million GDP: $15 trillion Members: 27 Economic Union Began: 1951

European Union: Early Years European Coal and Steel Community (1951): Removed trade barriers in coal, iron, and steel European Economic Community (1957): Outlined and took initial steps toward common market European Community (1967): Expanded to other industries including atomic energy Single European Act (1987): Harmonized regulations, strived for lower barriers Maastricht Treaty (1991): Set single currency targets, outlined eventual political union European Union (1994): Final name change and reduced barriers further

Culture Matters: Czech List Don’t rush familiarity Build relationships Find a Czech partner Hire local professionals Establish who’s in charge

European Union Enlargement Stable institutions of human rights, democracy, and law Functioning and capable market economy Assume economic, monetary, and political obligations Adopt rules of the Community, Court of Justice, and Treaties Future EU members must meet the four Copenhagen Criteria   

Five Key EU Institutions European Commission Council of the European Union European Parliament Court of Auditors Court of Justice

European Free Trade Association Iceland, Liechtenstein, Norway, Switzerland  Feared lost sovereignty  Feared destructive rivalry  Desired free-trade gains  Cooperates with EU Pop: 12.5 million GDP: $707 billion Members: 4 Free-Trade Area Began: 1960

Discussion Question All future members of the European Union must meet what are called the __________ criteria, which demonstrate a country’s readiness for membership. a. European b. Maastricht c. Copenhagen

Answer to Discussion Question All future members of the European Union must meet what are called the __________ criteria, which demonstrate a country’s readiness for membership. a. European b. Maastricht c. Copenhagen

North American Free Trade Agreement Pop: 445 million GDP: $16 trillion Members: 3 Free-Trade Area Began: 1994

NAFTA Effects Jobs and wages Three-nation trade flows Futureexpansion? “Fast track” AuthoritySinglecurrency?

Central American Free Trade Agreement Established in 2006 to include 7 countries U.S., Costa Rica, Guatemala, Honduras, El Salvador, Nicaragua, & Dominican Rep. Combined value of goods traded is around $32 billion Should create regional investment, peace, and stability

CAFTA-DR Effects? More trade and better-paying jobs Poorer farms and small businesses OR Source: dinozzaver/Fotolia

Andean Community  Internal tariff reduction  Common external tariff  Common transport policies  Ideological conflict Pop: 97 million GDP: $220 billion Members: 4 Customs Union Began: 1969

Southern Common Market  Also called MERCOSUR  Very successful early  Impaired by ideology and economic hardships  Future “SAFTA”? Pop: 266 million GDP: $2.8 trillion Members: 5 Customs Union Began: 1988

Central America / Caribbean Members offer each other little Peace driving tentative optimism Pop: 33 million GDP: $120 billion Members: 5 +/- Common Market Began: 1961 Pop: 6 million GDP: $30 billion Members: 15 Common Market Began: 1973

Free Trade Area of the Americas Would be the largest free- trade area on the planet From northern tip of Alaska to southern tip of Tierra del Fuego in South America Could mean enormous cost savings for business Protests by many groups is slowing progress Pop: 830 million GDP: $ trillions Members: 34 Free-Trade Area

Discussion Question What is the objective of the Free Trade Area of the Americas and what are its prospects for success?

Answer to Discussion Question The Free Trade Area of the Americas would be a trading bloc stretching from Alaska to Tierra del Fuego in South America. It would likely supersede all existing trading blocs in North, Central, and South America. It faces opposition from labor organizations, environmentalists, and others opposed to globalization.

Association of Southeast Asian Nations GOALS: Promote economic, social, and cultural development Safeguard economic and political stability Serve as a forum to resolve disputes Pop: 560 million GDP: $1.1 trillion Members: 10 General Cooperation Began: 1967

Asia-Pacific Economic Cooperation Group of 21 nations ringing the Pacific Ocean that accounts for over half of world trade 1. Not designed as a free-trade bloc 2. Strengthen multilateral trade system 3. Liberalize trade and investment rules

Key Points: Australia and New Zealand Eliminated trade barriers 5 years early Recognize each other’s qualified professionals Closer Economic Relations Agreement

Middle East Gulf Cooperation Council  Six Arab nations (1980)  Economic and political aims  Travel freely without visas  Cooperation on property rights

Economic Community of West African States Some progress on migration, roads, and telecoms Impaired by instability, poverty, and bad policies African Union Joined 53 nations in 2002 Want united and strong Africa Seek peace, security, stability Africa

Discussion Question a. Pacific Cooperation Council b. Asia-Pacific Economic Cooperation c. Association of Southeast Asian Nations What is the name of the group of 21 nations that ring the Pacific Ocean whose stated aims do not include formation of a formal free trade bloc?

Answer to Discussion Question a. Pacific Cooperation Council b. Asia-Pacific Economic Cooperation c. Association of Southeast Asian Nations What is the name of the group of 21 nations that ring the Pacific Ocean whose stated aims do not include formation of a formal free trade bloc?