1. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea NAFTA MERCOSUR EU (15) A F T A Australia- New Zealand APEC F T A A Chapter 8:Regional Economic Integration

2. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea TOPIC PLAN LECTURE NOTES – AUSTRALIA’S MERCHANDISE TRADE WITH THE REST OF THE WORLD – COMPARATIVE TRADE INDICATORS – AUSTRALIA’S POSITION IN THE SERVICES TRADE – AUSTRALIA AS A DESTINATION OF FDI – AUSTRALIA’S DIRECT INVESTMENT ABROAD TUTORIAL EXERCISES

3. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea Regional Economic Integration Agreements among countries in a geographic region to reduce, and ultimately remove, tariff and non-tariff barriers to the free flow of goods, services and factors of production among each other. It is estimated that currently there are about 220 regional trade arrangements!

4. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea REGIONAL TRADE ARRANGEMENTS Exception to MFN Rule Five levels of regional economic integration: –Industrial free trade area –Full free trade area –Customs Union –Common Market –Economic Union

5. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea Regional Economic Integration FREE TRADE AREA(FTA) NO Tariffs and quotas among members National tariffs against non-members Partial(Industrial)FTA and Full FTA Bilateral FTA:Australia-New Zealand Plurilateral FTA: EFTA, NAFTA, AFTA. Free Trade Area

6. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea NO Tariffs and quotas among members COMMON TARRIFF against non-members Examples: European community (1968) MERCOSUR Regional Economic Integration Customs Union Free Trade Area Customs Union

7. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea Abolition of restrictions on factor movements Example: The European “Single Market” (1992) Regional Economic Integration Common Market Customs Union Free Trade Area Common Market

8. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea Regional Economic Integration Economic Union Free Trade Area Customs Union Common Market Economic Union Harmonisation and Unification of Economic Policies Example: European Union

9. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea Trade Effects of Integration Trade creation –Trade up through lower cost goods and services Trade diversion –Less efficient producers inside the area replace more efficient external producers Regional versus Global integration

10. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea European Economic Integration 1950: European Coal and Steel Community (6) –France,Western Germany,Italy, Belgium,Luxemburg,the Netherlands 1957: The European Communities (6) –Customs union (July 1,1968) 1973:UK,Ireland,Denmark Greece (1981),Spain and Portugal (1986) –1992:The European Single Market 1996: Austria, Finland and Sweden –European Monetary Union (2002) 1997: Invitation to Hungary, Poland, the Czech Rep., Estonia, Slovenia

11. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea Merchandise trade of the EU(15), 1990-2000(US$B. and %) Based on WTO 2001

12. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea Intra-Imports as a % of total merchandise imports of selected regional trading blocs

13. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea North American Free Trade Agreement (NAFTA) US,Canada,Mexico Became law: January 1,1994 Over 15 year period: –tariffs reduced (99% of goods traded) –Non-Tariff barriers reduced –investment opportunities increased Protects intellectual property 3 side agreements: –Environmental Protocol –Labour Protocol –The Snap-back provision Special treatment for many industries

14. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea Merchandise trade of the NAFTA(3),1990-2000,US$B. and % Based on WTO 2001

15. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea MERCOSUR (Southern Common Market) Originated in 1988 as a free trade pact between Brazil and Argentina. Expanded in March 1990 to include Paraguay and Uruguay Combined population of 200 million 1995: 5 year plan to move to a full customs union Objective:The South American Free Trade Area(SAFTA)

16. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea Merchandise trade of the MERCOSUR(4),1999 (Billion US dollars and percentage)

17. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea The Free Trade Area of the Americas (FTAA) Old plan of ex-US president George Bush, pursued now by his son. FTAA=34 nations(including NAFTA and MERCOSUR members) with a population of 880 million. The world’s largest free trade area. The Quebec 34-country Summit of March 2001 has agreed on an FTAA to be launched in 2005 President Bush will need fast-track authority(now renamed Trade promotion Authority)

18. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea APEC=ASIA PACIFIC ECONOMIC COOPERATION Russian Federation China Canada United States Chile Australia New Zealand Japan S.Korea Peru Hong.Kong Vietnam Thailand Singapore Brunei Malaysia Mexico Philippines Indonesia PapuaNG Chinese Taipei Members of APEC

19. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea Major APEC activities for the promotion of regional trade&business APEC’s Three Pillars : Trade and investment liberalisation –by 2010 for industrialised economies,and –no later than 2020 for developing economies Business facilitation Economic and technical co-operation

20. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea ASEAN (10) Singapore, Indonesia, Thailand, Malaysia, Philippines Brunei, Vietnam, Burma, Laos, Cambodia (550 million) On the Common Effective Preferential Tariff (CEPT) of AFTA,the 6 founding members agreed (individually) to achieve a minimum of 85% of the tariff lines on their inclusion lists in the 0-5 % range by 2000, covering 90 % of intra-ASEAN trade They also brought forward from 2003 to 2002 the date of implementation of the CEPT ASEAN + 3

21. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea Merchandise trade of ASEAN 1990-2000(US$Billion, and %) Based on WTO 2001

22. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea MFN Simple Mean tariffs 1999 versus CEP tariff rates 1999,2003,% in selected ASEAN countries MFNCEPT 1999 CEPT 2003 Indonesia10.95.853.71 Malaysia7.13.172.06 Philippines104.452.06 Thailand21.69.754.64

23. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea Three-way Balance(E.Asia,EU,US) Output,Trade with the ROW,Reserves Based on Fred Bergsten’s Economist article

24. Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides prepared by John Gionea The share of Regional Trading Blocs in Australia’s merchandise exports, 1974, 1989, 2000-01 Regional Bloc 197419892000/01 European Union 16.514.411.7 NAFTA12.412.511.5 ASEAN8.09.613.3 MERCOSUR0.20.50.6 SAARC3.41.83.1 APEC65.870.673.0