1. Chapter 8 Regional Economic Integration

2. International Business 4e
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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
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3. Regional Economic Integration
Process whereby countries in a geographic region cooperate to either reduce or eliminate barriers to the free flow of products, people, or capital
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4. 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
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5. Effects of Integration
Potential
benefits
Potential
drawbacks
Trade diversion
Shifts in employment
Loss of sovereignty
Trade creation
Greater consensus
Political cooperation
Creates jobs
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6. International Business 4e
European Union (EU)
Pop: 485 million
GDP: $9.5 trillion
Members: 27
Economic Union
Began: 1951
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7. 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
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8. Five Key EU Institutions
European Parliament
Court of Justice
Court of Auditors
Council of the European Union
European Commission
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9. 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
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10. 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 members must meet Copenhagen Criteria 
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11. European Free Trade Association
Iceland, Liechtenstein, Norway, Switzerland
Feared lost sovereignty
Feared destructive rivalry
Desired free-trade gains
Cooperates with EU
Pop: 12 million
GDP: $620 billion
Members: 4
Free-Trade Area
Began: 1960
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12. North American Free Trade Agreement
Pop: 420 million
GDP: $12 trillion
Members: 3
Free-Trade Area
Began: 1994
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13. International Business 4e
NAFTA Effects
Three-nation
trade flows
Jobs
and wages
“Fast track”
authority
Future
expansion?
Single
currency?
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14. Central American Free Trade Agreement
• CAFTA established in 2006
between U.S. and 6 others
• U.S., Costa Rica, Guatemala,
Honduras, El Salvador,
Nicaragua, & Dominican Rep.
• CAFTA should create regional
integration, peace, and stability
• Combined value of goods
traded is around $32 billion
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15. International Business 4e
Andean Community
Internal tariff reduction
Common external tariff
Common transport policies
Impaired by ideological conflict
Pop: 97 million
GDP: $216 billion
Members: 4
Customs Union
Began: 1969
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16. Southern Common Market
MERCOSUR
Very successful early
Future “SAFTA”?
Impaired by ideology and economic hardships
Pop: 220 million
GDP: $1 trillion
Members: 5
Customs Union
Began: 1988
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17. Central America / Caribbean
Peace is driving
tentative optimism
Members have little
to offer each other
Pop: 33 million
GDP: $120 billion
Members: 5
+/- Common Market
Began: 1961
Pop: 6 million
GDP: $30 billion
Members: 15
Common Market
Began: 1973
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18. 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: 800 million
GDP: $12 trillion
Members: 34
Free-Trade Area
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19. 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: 500 million
GDP: $740 billion
Members: 10
General Cooperation
Began: 1967
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20. 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
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21. Gulf Cooperation Council International Business 4e
Middle East and Africa
Economic Community of
West African States
(ECOWAS)
Common market hopes (1975)
Little progress to date
Gulf Cooperation Council
(GCC)
Six Arab nations (1980)
Economic and political aims
Free travel; property rights
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22. International Business 4e
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
© Prentice Hall, 2008
International Business 4e