1. Regional Economic Integration

2. © Prentice Hall, 2006International Business 3e Chapter 8 - 2 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

3. © Prentice Hall, 2006International Business 3e Chapter 8 - 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

4. © Prentice Hall, 2006International Business 3e Chapter 8 - 4 Levels of Regional Integration Free-Trade Area -Remove all barriers to trade among members, but each country has own policies for nonmembers Customs Union - Remove all barriers to trade among members, and set a common trade policy against nonmembers Common Market - Remove all barriers to trade, labor and capital among members, and set a common trade policy against nonmembers Economic Union - Remove barriers to trade, labor and capital, set a common trade policy against nonmembers, and coordinate members’ economic policies Political Union - Coordinate aspects of members’ economic and political systems

5. © Prentice Hall, 2006International Business 3e Chapter 8 - 5 Effects of Integration Potential benefits - Trade creation - Greater consensus - Political cooperation - Creates jobs Potential drawbacks - Trade diversion - Shifts in employment - Loss of sovereignty

6. © Prentice Hall, 2006International Business 3e Chapter 8 - 6 European Union (EU) Pop: 455 million GDP: $9.3 trillion Members: 25 Economic Union Began: 1951

7. © Prentice Hall, 2006International Business 3e Chapter 8 - 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

8. © Prentice Hall, 2006International Business 3e Chapter 8 - 8 Five Key EU Institutions European Parliament Court of Auditors Court of Justice Council of the European Union European Commission

9. © Prentice Hall, 2006International Business 3e Chapter 8 - 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

10. © Prentice Hall, 2006International Business 3e Chapter 8 - 10 European Union Enlargement Future members must meet Copenhagen Criteria - 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

11. © Prentice Hall, 2006International Business 3e Chapter 8 - 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: $410 billion Members: 4 Free-Trade Area Began: 1960

12. © Prentice Hall, 2006International Business 3e Chapter 8 - 12 North American Free Trade Agreement US-Canada (CAFTA) 1989 US-Canada-Mexico (NAFTA) Trade in many goods, services Complicated rules of origin Effects still fiercely debated - Pop: 420 million - GDP: $12 trillion - Members: 3 - Free-Trade Area - Began: 1994

13. © Prentice Hall, 2006International Business 3e Chapter 8 - 13 NAFTA Effects Three-nation trade flows Jobs and wages “Fast track” authority Future expansion? Single currency?

14. © Prentice Hall, 2006International Business 3e Chapter 8 - 14 Andean Community Internal tariff reduction Common external tariff Common transport policies Impaired by ideological conflict - Pop: 105 million - GDP: $500 billion - Members: 5 - Customs Union - Began: 1969

15. © Prentice Hall, 2006International Business 3e Chapter 8 - 15 Southern Common Market MERCOSUR Very successful early Future “SAFTA”? Impaired by ideology and economic hardships - Pop: 220 million - GDP: $2 trillion - Members: 4 (+2) - Customs Union - Began: 1988

16. © Prentice Hall, 2006International Business 3e Chapter 8 - 16 Central America / Caribbean Central American Common Market (CACM) - Peace is driving tentative optimism Pop: 33 million GDP: $120 billion Members: 5 +/- Common Market Began: 1961 Caribbean Community and Common Market (CARICOM) - Members have little to offer each other Pop: 33 million GDP: $120 billion Members: 5 +/- Common Market Began: 1961

17. © Prentice Hall, 2006International Business 3e Chapter 8 - 17 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: $14 trillion - Members: 34 - Free-Trade Area

18. © Prentice Hall, 2006International Business 3e Chapter 8 - 18 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: $800 billion Members: 10 General Cooperation Began: 1967

19. © Prentice Hall, 2006International Business 3e Chapter 8 - 19 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

20. © Prentice Hall, 2006International Business 3e Chapter 8 - 20 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