1. © 2010 Cengage Learning. All rights reserved. CHAPTER 8 GLOBAL  PENG

2. © 2010 Cengage Learning. All rights reserved. Chapter 8 LEARNING OBJECTIVES After studying this chapter, you should be able to: 1.Make the case for global integration 2.Explain the evolution of the GATT and the WTO, including current challenges. 3.Make the case for regional economic integration. 4.List the accomplishments, benefits, and costs of the European Union. 5.Identify the five organizations that organize regional trade in the Americas and describe their benefits and costs. 6.Identify the three organizations that organize regional trade in Asia Pacific. 7.Articulate how regional trade should influence your thinking about global business.

3. © 2010 Cengage Learning. All rights reserved. LO1: THE CASE FOR GLOBAL ECONOMIC INTEGRATION Global economic integration - efforts to reduce trade and investment barriers around the globe

4. © 2010 Cengage Learning. All rights reserved. LO2: THE EVOLUTION OF THE GATT AND WTO GATT (General Agreement on Tariffs and Trade; 1948-1994)  Reduced level of tariffs through multilateral negotiations.  Three areas of concern:  No protection for services or intellectual property.  Loopholes needed reform – Multifiber Arrangement (MFA)  Global recessions led goverments to invoke non-tariff barriers (MTBs)

5. © 2010 Cengage Learning. All rights reserved. LO2: THE EVOLUTION OF THE GATT AND WTO WTO (World Trade Organization; 1995- present)  Transformed GATT from provisional treaty to full- fledged international organization.  New features:  Agreement governing trade of services (GATS)  Agreement governing intellectual property rights (TRIPS)  Trade dispute settlement mechanisms  Trade policy reviews

6. © 2010 Cengage Learning. All rights reserved. LO3: THE CASE FOR REGIONAL ECONOMIC INTEGRATION Regional economic integration – efforts to reduce trade and investment barriers within one region. PROS Promotes peace; Disputes handled constructively; Consistent rules; Raise incomes and stimulate economic growth CONS Discrimination against firms outside of region; Some loss of sovereignty

7. © 2010 Cengage Learning. All rights reserved. LO3: REGIONAL ECONOMIC INTEGRATION

8. © 2010 Cengage Learning. All rights reserved. LO4: ACCOMPLISHMENTS OF THE EUROPEAN UNION  EU and predecessors have delivered over 50 years of peace.  Introduction of common currency, the euro.  Accounts for approximately 21% of world GDP.  Formation of a single market.

9. © 2010 Cengage Learning. All rights reserved. LO4: BENEFITS AND COSTS OF THE EUROPEAN UNION

10. © 2010 Cengage Learning. All rights reserved. LO5: FIVE ORGANIZATIONS IN THE AMERICAS  NAFTA (North American Free Trade Agreement; 1994)  Andean Community (1969)  Mercosur (1991)  Union of South American Nations (USAN; 2005)  United States-Dominican Republic- Central America Free Trade Agreement (CAFTA; 2005)

11. © 2010 Cengage Learning. All rights reserved. LO5: FIVE ORGANIZATIONS IN THE AMERICAS

12. © 2010 Cengage Learning. All rights reserved. LO6: THREE ORGANIZATIONS IN ASIA  Australia-New Zealand Closer Economic Relations Trade Agreement (ANZCERTA or CER; 1983)  Association of Southeast Asian Nations (ASEAN; 1967)  ASIA-Pacific Economic Cooperation (APEC; 1989)

13. © 2010 Cengage Learning. All rights reserved. LO6: THREE ORGANIZATIONS IN ASIA

14. © 2010 Cengage Learning. All rights reserved. DEBATE: REGIONAL INTEGRATION: BUILDING BLOCK OR STUMBLING BLOCK? Stumbling block: Prevents global integration because it provides preferential treatment for members and discrimination for non-members. Building block: Considered the next best thing in the absence of global economic integration. May present blocks for global integration.

15. © 2010 Cengage Learning. All rights reserved. LO7: THE INFLUENCE OF REGIONAL TRADE ON GLOBAL BUSINESS