Regional Economic Integration Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

International Business 5e Chapter Chapter Preview Define each level of regional integration Identify the potential effects of integration Discuss European integration and enlargement Characterize integration efforts in the Americas Identify why integration in Asia is unique Discuss integration in the Middle East and Africa

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter Process whereby countries in a geographic region cooperate to either reduce or eliminate barriers to the free flow of products, people, or capital Regional Economic Integration

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter 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 all barriers to trade, labor, and capital among members, and set a common trade policy against nonmembers Common Market Remove all barriers to trade among members, and set a common trade policy against nonmembers Customs Union Remove all barriers to trade among members, but each country has own policies for nonmembers Free-Trade Area

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter Effects of Integration Potential benefits Potential drawbacks  Trade diversion  Shifts in employment  Loss of sovereignty  Trade diversion  Shifts in employment  Loss of sovereignty  Trade creation  Greater consensus  Political cooperation  Creates jobs

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter European Union (EU) Pop: 495 million GDP: $18 trillion Members: 27 Economic Union Began: 1951

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter 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  European Union (1994): Final name change and reduced barriers further  Additional milestones: - Single European Act (1987): Harmonized regulations, strived for lower barriers - Maastricht Treaty (1991): Single currency targets, outlined eventual political union

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter Five Key EU Institutions European Commission Council of the European Union European Parliament Court of Auditors Court of Justice

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter Business in Central Europe Don’t rush familiarity Build relationships Find a Czech partner Expect limited resources Hire local professionals Establish who’s in charge

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter 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 Community, Court of Justice, and Treaties Future EU members must meet the Copenhagen Criteria   

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter 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

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter North American Free Trade Agreement Pop: 445 million GDP: $16 trillion Members: 3 Free-Trade Area Began: 1994

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter NAFTA Effects Jobs and wages Three-nation trade flows Futureexpansion? “Fast track” authoritySinglecurrency?

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter Central American Free Trade Agreement Established in 2006 between U.S. and 6 others U.S., Costa Rica, Guatemala, Honduras, El Salvador, Nicaragua, & Dominican Rep. Should create regional integration, peace, and stability Combined value of goods traded is around $32 billion

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter Andean Community  Internal tariff reduction  Common external tariff  Common transport policies  Impaired by ideological conflict Pop: 97 million GDP: $220 billion Members: 4 Customs Union Began: 1969

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter Southern Common Market  MERCOSUR  Very successful early  Future “SAFTA”?  Impaired by ideology and economic hardships Pop: 266 million GDP: $2.8 trillion Members: 5 Customs Union Began: 1988

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter Central America / Caribbean Members have little to offer each other Peace is 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

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter Free Trade Area of the Americas Would create 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: $12 trillion Members: 34 Free-Trade Area

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter Association of Southeast Asian Nations ASEAN 1. Economic, social, and cultural development 2. Safeguard economic and political stability 3. Serve as a forum to resolve disputes Pop: 560 million GDP: $1.1 trillion Members: 10 General Cooperation Began: 1967

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter Asia Pacific Economic Cooperation APEC: 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

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter Middle East and Africa Gulf Cooperation Council (GCC)  Six Arab nations (1980)  Economic and political aims  Free travel; property rights Economic Community of West African States (ECOWAS)  Common market hopes (1975)  Little progress to date

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter Chapter Review Define each level of regional integration Identify the potential effects of integration Discuss European integration and enlargement Characterize integration efforts in the Americas Identify why integration in Asia is unique Discuss integration in the Middle East and Africa

Regional Economic Integration Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

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