Chapter 10 1. The reasons for economic union 2. Patterns of international cooperation 3. The evolution of the European Community to the European Union 4. Strategic implications for marketing in Europe

Chapter Learning Objectives 5. Evolving patterns of trade as Eastern Europe and the former Soviet states embrace the free-market system 6. The trade linkage of NAFTA and South America and its regional effects 7. The development of trade within the Asia-Pacific Rim

Traits of Successful Economic Unions Economic Compatibility (similar economic systems) Political Compatibility (similar political systems) Cultural Compatibility Geographic factors Weakness in some must be balanced by strengths in others

Patterns of Multinational Cooperation There are five fundamental groupings for regional economic integration as follows: Regional Cooperation Groups Free Trade Areas Customs Unions Common Markets and Economic Unions Political Unions

Regional Cooperation Groups A group of countries that have agreed to participate in basic industries beneficial to each or jointly develop joint ventures that benefit both countries, e.g., Colombia and Venezuela built a hydroelectric dam on the Orinico river

Free Trade Areas A group of countries that have agreed to reduce drastically (but not eliminate) all trade barriers such as customs duties and non-tariff barriers (standards) Examples of Free Trade Areas: NAFTA, and European Free Trade Area (EFTA) between Iceland, Liechtenstein, Norway, and Switzerland

Customs Unions In addition to drastically reducing trade barriers from FTA identified previously, a group of countries that have agreed to eliminate customs duties levied among member countries Examples of Customs Unions: East African Customs Union between Ethiopia, Kenya, Sudan, Tanzania, Uganda, and Zambia

Common Markets In addition to drastically reducing trade barriers, and eliminating customs duties levied from FTA and Customs Unions identified previously, a common market is a group of countries that allow: the free flow of capital and labor (engineers, doctors, and lawyers can work without recertification) among members a common currency a common central bank; and common policies on transportation, agriculture, social services, welfare, and taxes Latin America boasts three common markets: the Central American Common Market (CACM), the Andean Common Market, and the Southern Cone Common Market (MERCOSUR).

Political Unions The highest level of cooperation among member countries Examples of Political Unions: COMECON (Council for Mutual Economic Assistance), and U.S.S.R., but it no longer exists

North American Free-Trade Area (NAFTA) Non-NAFTA imports undergo sufficient manufacture or processing to become products that can qualify under a different tariff classification. Canada United States Mexico

Central European Free-Trade Area (CEFTA) Poland Hungary Slovakia Czech Republic Slovenia Romania

Latin American Integration Association (LAIA) Argentina Mexico Bolivia Paraguay Brazil Peru Chile Uruguay Columbia Venezuela Ecuador

Association of Southeast Asian Nations (ASEAN) + 3 Brunei Singapore Indonesia Thailand Laos Vietnam Malaysia Japan Myanmar S. Korea Philippines China

Asia-Pacific Economic Cooperation (APEC) Australia Japan Philippines Brunei South Korea Russia Canada Malaysia Singapore Chile Mexico Taiwan China New Zealand Thailand Hong Kong Papua New Guinea U.S.A. Indonesia Peru Vietnam

Economic Community of West African States (ECOWAS) Benin Guinea-Bissau Burkina Faso Liberia Cote d’ Ivoire Mali Gambia Mauritania Ghana Niger Guinea Nigeria