“…global multinationals have … viewed developing Asia [countries]…as an offshore-production platform. The offshore- efficiency solution is still an attractive option. But what really could be powerful [is] a growing opportunity to tap the region’s 3.5 billion consumers.” Stephen Roach, Chairman, Morgan Stanley Asia McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

5-2  Regionalism or Globalism? Regional Trade World’s Largest Importers/Exporters Asia’s Growth Most Attractive Global Business Locations Regional over Global  Regional Economic Blocs  Free Trade Areas  Customs Unions  Common Markets  Political Union  Major Trade Arrangements  Fair Trade  Emerging Markets BRIC  Summary

5-3  Global trade Agreement would allow many countries to enjoy trade with each other free from most restrictions  The difficulties experienced in attempting to achieve multilateral or global trade agreements have led m any countries focus on regional trade arrangements  Regional trade and free trade blocs Free trade blocs lower trade barriers among members without having to lower barriers for non-members

5-4 Figure 5-2

5-5

5-6 Figure 5-3

5-7

5-8  Ample evidence that a regional rather than a global strategy prevails among countries and businesses Triad and regional trade are dominant, e.g. 67 percent of EU member’s exports are to other EU countries Most multinational corporations pursue regional, not global strategies, e.g. approximately 90 percent of all cars manufactured in Europe are sold in Europe

5-9  Integrated economies such as the European Union, NAFTA and Mercosur “Single markets," united by  harmonized regulatory standards  common levels of social protection Firms act under both the rules of the economic region in addition to those of the nation state. Three main forms of regional trade agreements 1.Free-Trade Areas 2.Customs Unions 3.Common Markets

5-10  Arrangements in which countries give each other preferential treatment in trade by eliminating tariffs and other barriers on goods  Aim to reduce or eliminate tariffs and non-tariff barriers among member countries  Each member determines the extent of external tariffs it maintains with non-member countries

5-11 Figure 5-4

5-12  Same provisions as a free-trade area with one major addition – a common external tariff

5-13  The most advanced form of trade bloc  Combines the provisions of a free-trade area and a customs union with two additional criteria The free movement of people Free movement of capital The largest common market is the European Union

5-14  Established as the European Economic Community in 1958 with six member countries, increased to 27 members in  The EU has two additional goals The establishment of a monetary union The establishment of a political union.

5-15  South America's largest trading bloc with a combined GDP of $1.1 trillion  Combined market encompasses more than 250 million people and accounts for more than three-quarters of the economic activity on the continent  MERCOSUR tariff policies regulate imports and exports and the bloc can arbitrate trade disputes among its members.

5-16  Combined population of 120 million people, land area of 1.85 million sq kilometers and a combined gross domestic product of $ 41 billion  Working to form a common market and a monetary union; and ultimately a Political Federation of the East African States

5-17  Population of about 560 million, and a combined gross domestic product of US$ 1,100 billion  Objective is to create a stable, prosperous and highly competitive economic region with a free flow of goods, services, skilled labor, investment and capital

5-18  Both a customs union and a common market, allowing for the free movement of goods, capital and people among member countries  Members have some of the fastest growing economies in the world  Economic and technical cooperation agreement with the EU, in the fields of energy, industry, agriculture, fisheries, and science

5-19  Fair trade is an approach to international commerce that aims to ensure that producers in developing countries receive a fair price for goods and services, decent working conditions, a commitment from buyers; security for sellers  Global marketers should be aware of the growing importance of these organizations. Their market share has become significant in some countries

5-20  Term includes all developing countries A measure of national income is the most used indicator of a country's development Measures of national income in emerging markets are lower than developed countries, But market potential for many products is substantial  One determinant of an ‘emerging market’ is economic reforms that result in Stronger, more responsible performance Transparency Efficiency in capital markets.

5-21  Brazil, Russia, India, China Offer high consumer potential and that could overtake the economies of the developed world by 2050 Insert igure 5-6 Figure 5.6 BRIC Real GNP Growth—

5-22  Intra-regional trade accounts for 10% of all world trade. The growth of intra-regional trade results from regional trading blocs.  China has become a major economic power, with more exports and imports than Japan and Germany.  Most of the world’s economic growth is shifting to emerging nations. While not limited to, they are usually represented by the BRIC countries, Brazil, Russia, India and China. The BRIC countries have experienced rapid economic growth; have large consumer markets and an abundance of skilled human resources. However, other emerging markets like South Korea, Taiwan and Eastern European countries such as Poland, Hungary and the Czech Republic are also developing rapidly.