Regional Economic Integration Chapter 8 © The McGraw Hill Companies, Inc., 2000

Levels of Economic Integration Level of Integration Political Union Economic Union NAFTA Common Market Customs Union Free Trade Area Figure 8.1 in text EU 1992 © The McGraw Hill Companies, Inc., 2000 8-1

Economic Case for Regional Integration Stimulates economic growth in countries Countries specialize in those goods and services efficiently produced. Additional gains from free trade beyond international agreements such as GATT and WTO. 8-2 © The McGraw Hill Companies, Inc., 2000

Political Case for Economic Integration Economic interdependence creates incentives for political cooperation and reduces potential for violent confrontation. Together, the countries have the economic clout to enhance trade with other countries or trading blocs. 8-3 © The McGraw Hill Companies, Inc., 2000

Impediments to Regional Integration Groups within countries may be hurt. Potential loss of sovereignty and control over domestic issues. Debate: Integration is trade creation? Integration is trade diversion? 8-4 © The McGraw Hill Companies, Inc., 2000

Political World Map 8-5 © The McGraw Hill Companies, Inc., 2000

Regional Economic Integration Agreements among countries in a geographic region to reduce, and ultimately remove, tariff and nontariff barriers to the free flow of goods, services and factors of production among each other. 8-6 © The McGraw Hill Companies, Inc., 2000

Growth of Regional Arrangements 8-7 © The McGraw Hill Companies, Inc., 2000

8-8 © The McGraw Hill Companies, Inc., 2000

Map 8.1 8-9 © The McGraw Hill Companies, Inc., 2000

European Union GDP 8-10 © The McGraw Hill Companies, Inc., 2000

European Union and the US (April, 1998) 8-11 © The McGraw Hill Companies, Inc., 2000

US Top European Trading Partners $ Billions 8-12 © The McGraw Hill Companies, Inc., 2000

Annual Real GDP Growth Rates EU and US Annual Real GDP Growth Rates % 8-13 © The McGraw Hill Companies, Inc., 2000

EU and US Unemployment % 8-14 © The McGraw Hill Companies, Inc., 2000

EU and US Inflation % 8-15 © The McGraw Hill Companies, Inc., 2000

630 directly elected members EU Governance European Council European Commission 20 Commissioners appointed by members for 4 year terms Heads of State and Commission President Proposing, implementing, monitoring legislation. Resolves policy issues Sets policy direction. Council of Ministers 1 representative from each member Ultimate controlling authority. No EU laws w/o approval. European Parliament Court of Justice 630 directly elected members Propose amendments to legislation, veto power over budget and single-market legislation, appoint commissioners. 1 judge from each country Hears appeals of EU Laws. 8-16 © The McGraw Hill Companies, Inc., 2000

Map 8.2 8-17 © The McGraw Hill Companies, Inc., 2000

North American Free Trade Agreement Became law: January 1,1994 Over 15 year period: tariffs reduced (99% of goods traded) NTBs reduced investment opportunities increased Protects intellectual property Applies national environmental standards Special treatment for many industries 8-18 © The McGraw Hill Companies, Inc., 2000

NAFTA and Mexico Maquiladora Millions of Workers 8-19 © The McGraw Hill Companies, Inc., 2000

Employment in Foreign-Operated Factories in Mexico 8-20 © The McGraw Hill Companies, Inc., 2000

Canadian Workers Move South Thanks to NAFTA Thousands 8-21 © The McGraw Hill Companies, Inc., 2000

Andean PACT Map 8.2 8-22 © The McGraw Hill Companies, Inc., 2000

ANCOM: Andean Pact Bolivia, Colombia, Ecuador, Peru, Venezuela Cartagana Agreement, 1969. One of oldest still in existence Population: 97 mm (14% of hemisphere) GNP: $122.6 billion Changed from FTA to customs union in 1992 8-23 © The McGraw Hill Companies, Inc., 2000

US Trade With The Andean Community $ Billions 8-24 © The McGraw Hill Companies, Inc., 2000

Mercosur Map 8.2 8-25 © The McGraw Hill Companies, Inc., 2000

The Mercosur Accord 1988: Argentina, Brazil. 1990: Paraguay, Uruguay 1995: Agreed to move toward a full customs union. Population: 209 mm (27% of hemisphere) GNP: $656.6 billion (8% of hemisphere) Trade doubled in first 3 years 8-26 © The McGraw Hill Companies, Inc., 2000

US Trade With Mercosur 8-27 $ Billions © The McGraw Hill Companies, Inc., 2000

Other Hemisphere Associations Central American Common Market CARICOM Free Trade Area of the Americas 8-28 © The McGraw Hill Companies, Inc., 2000

ASEAN 8-29 © The McGraw Hill Companies, Inc., 2000

Association of Southeast Asian Nations Created in 1967 400 million citizens Economic, political and social cooperation Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. 8-30 © The McGraw Hill Companies, Inc., 2000

Association of Southeast Asian Nations 8-31 © The McGraw Hill Companies, Inc., 2000

Net Flows of Private Capital to Indonesia, Malaysia, Philippines, South Korea and Thailand Thru April 30. 8-32 © The McGraw Hill Companies, Inc., 2000

Asian Trade Flows 8-33 Destination of Exports Source of Imports % © The McGraw Hill Companies, Inc., 2000

Map 8.3 8-34 © The McGraw Hill Companies, Inc., 2000

Asia Pacific Economic Cooperation Founded in 1989 to ‘promote open trade and practical economic cooperation’. ‘Promote a sense of community’. 18 members GDP: $13 trillion (1995) 50% of total world income 40% of global trade 8-35 © The McGraw Hill Companies, Inc., 2000