Read the excerpt below from Wall Street journal (9/6/02): …Late yesterday in New York, the euro was trading around cents, up from cents late Wednesday but well off its high of cents earlier yesterday. Against the yen, the dollar was worth yen late yesterday, up from yen Wednesday. In trading against the Swiss franc, the dollar was valued at francs yesterday, down from francs, while the British pound was worth $1.5675, up from $ Wednesday. Qs: 1.Is the exchange rate quote for the U.S. dollar a direct or indirect quote on the (a) yen? (b) euro? (c) Swiss franc? (d) sterling (British pound)? 2.(a) From Wednesday to Thursday, what percentage change in the value of the dollar occurred against the yen? (b) sterling (Remember to mind your quoted and base currencies!) 3.Using the euro as the base currency, what is Thursday’s cross rate between the yen and euro? 4.Using sterling as the base currency, what is Thursday’s cross rate between the Swiss franc and sterling?

RegionalEconomicIntegration Free Trade Area Customs Union Common Market Economic Union Political Union

Major Regional Trading Groups Economic Integration European Union Free Trade Areas European Free Trade Association Central European Free Trade Agreement North American Free Trade Agreement Association of South East Asian Nations Customs Union MERCOSUR Common Market Caribbean Community and Common Market Central American Common Market Andean Group Greater Economic Integration

Benefits of Regional Economic Integration

Drawbacks of Regional Economic Integration

Single European Act Single European Coal and Steel CommunityEuropean Community MaastrichtTreaty Integration in Europe EuropeanEconomicCommunity

Structure of the European Union EuropeanParliament EuropeanCommission Council of Ministers EuropeanCouncil Court of Justice

North American Free Trade Agreement (NAFTA) United States - Canada Free Trade Agreement Integration in North America

Integration in Latin America Latin American Free Trade Association (LAFTA) Southern Common Market (MERCOSUR) Latin American Integration Association (ALADI) The Andean Community Pact

Central America and the Caribbean CaribbeanCommunity and the Common Market (CARICOM) CentralAmerican Common Market (CACM)

Free Trade Area of the Americas (FTAA) TransatlanticEconomic Partnership (TEP) Proposed Trade Agreements

Integration in Asia Association of Southeast Asian Nations (ASEAN) Asia Pacific EconomicCooperation(APEC)

Integration in the Middle East and Africa GulfCooperation Council (GCC) Economic Community of West African States (ECOWAS)

General Agreement on Tariffs and Trade (GATT) Created in 1947 by 23 countries Intended to negotiate reductions in trade restrictions and develop common procedures for handling imports and exports Efforts led to a number of multilateral reductions in tariffs and nontariff barriers for member countries –across-the-board reductions –each country negotiated exceptions to its reductions Codes of conduct developed in each of five areas Inherent weakness of GATT Cumbersome negotiations Most-favored nation— trade concessions applied to all trading partners No mechanism to assure compliance with negotiated agreements

World Trade Organization (WTO) Created in 1995 to replace GATT Negotiating process Ongoing negotiations about –restrictions on trade in services –nontariff barriers to trade –protection of intellectual-property rights –investment policies that affect trade Granting of normal trade relations Apply to WTO members Eliminates the free-rider complaint raised during GATT negotiations Certain exceptions recognized Settlement of disputes Clearly defined settlement mechanism Sanctions may be applied to countries not complying with rulings

Dealing with Governmental Trade Influences When faced with import competition, companies may Move production to a lower-cost country Concentrate on market niches in which there is less international competition Effect internal adjustments Companies may require assistance of government to limit imports or open foreign markets Governments deny some requests for assistance companies attitudes differ toward protectionism Companies likely to lose from protectionism –those that depend heavily on trade –those that have integrated production in different global locations Companies likely to gain from protectionism have single or multidomestic production facilities