1. Global Linkages Country A Country B Management Linkages Policy Linkages Trade and Investment Linkages

2. Global Linkages Country A Country B Management Linkages Integration Trade and Investment Linkages

3. Regionalization of Economic Activity F Levels of Economic Integration –Free Trade Area –Customs Union –Common Market –Economic Union F Effects on trade and FDI patterns F Evolution toward worldwide integration F Impact on management of MNCs

4. Trade and Investment in Isolation 20% 40% 10% 100% 33% Prevailing Tariff Levels and Investment Patterns FDI Trade

5. Free Trade Area 20% 100% 33% F No tariffs among members F Tariffs with non-members unchanged Consequences External Tariffs? Trade Creation? Trade Creation? Trade Diversion? Trade Diversion? Regional content? Regional content? Export jobs? Export jobs?

6. Trade and Investment in Isolation 40% 33% Cheapest Producer Imports

7. Trade Creation from FTA Formation 33% Cheapest Producer Imports

8. Trade and Investment in Isolation 40% 33% Cheapest Producer Imports

9. Trade Diversion from FTA Formation 33% Cheapest Producer Imports

10. Customs Union 33% F FTA plus... F Common tariff policy for non- members 33%

11. Common Market F Customs Union plus... F Reduction of non-tariff barriers among members No Non-Tariff Barriers Shift in International Strategy

12. EC Single European Act F Free Movement of Goods –Abolish border controls –Reduce state subsidies to industries –Mutual recognition of technical standards F Free Movement of Services –Mutual recognition of regulatory standards –Increase competition for public procurement –Harmonize regulation in telecom and transportation industries

13. F Free Movement of Capital –Abolish exchange controls –Allow cross border securities trading –Cross border banking –Initiation of ECU denominated financial instruments F Free Movement of Labor –Abolish border checks –Mutual recognition of skills, education –Common immigration policy EC Single European Act

14. Common Market £ DM FFDkK ÖS National Currencies Consequences Strain on F/X rates Strain on F/X rates …tax rates? …tax rates? …growth? …growth? …trade? …trade?

15. Economic Union F Common Market plus... F Single currency F Harmonization of Monetary and Fiscal Policies

16. Multilateralism in Trade and Investment Regimes: WTO Europe Pacific Rim North America

17. Regionalization/Triad: Building Block or Stumbling Block? EuropeanUnion PacificRim NAFTA

18. Impact of Integration on MNCs Country A Country B Management Linkages ? Integration Trade and Investment Linkages

19. Impact of Integration on MNCs F Shift in Globalization Drivers –Market drivers –Cost drivers –Competition drivers F Entry Mode Decisions –Regional stand-alone attractiveness –Regional strategic importance F International Strategy –Location and integration of value-creating activities