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Chapter Focus

Chapter Focus. Examine the trend toward regional economic integration. By end 2001, all 136 WTO members reported participation in at least one regional trade agreement. Explore the economic and political debate surrounding integration. Review the progress, worldwide, toward integration.

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Chapter Focus

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  1. Chapter Focus • Examine the trend toward regional economic integration. • By end 2001, all 136 WTO members reported participation in at least one regional trade agreement. • Explore the economic and political debate surrounding integration. • Review the progress, worldwide, toward integration. • Map the implications for business.

  2. Economic Integration • Free Trade Area • All barriers to trade among members removed. • Each country can determine own trade policies toward nonmembers. • Customs Union • Eliminates barriers among members and has a common external trade policy. • Economic Union • No barriers among members, common external policy, common monetary and fiscal policy, harmonized tax rates and common currency. • Political Union • Has a coordinating bureaucracy accountable to all citizens.

  3. Economic Allow countries to specialize in products they produce efficiently. Easier to gain agreement than GATT/WTO. Role of FDI is enhanced. Exploit gains from free flow of goods and services and investment. Political Creates incentive for political cooperation. Reduces potential for violent confrontation. Enhanced clout to deal with ‘superpowers’. Case for Regional Integration

  4. Global Integration Impediments to Integration • Although a nation may benefit, groups within a nation may be hurt. • Concerns about national sovereignty. • Debate: • Trade creation. • Trade diversion.

  5. EU Evolution • Product of two political factors: • Devastation of WWI and WWII and desire for peace. • Desire for European nations to hold their own, politically and economically, on the world stage. • 1951 - European Coal and Steel Community. • 1957- Treaty of Rome establishes the European Community. • 1994 - Treaty of Maastricht changes name to the European Union.

  6. Jan. 1, 1994 Remove cross-border flow of services Abolish tariffs Protect intellectual property Remove FDI restrictions Apply national environmental standards Two commissions to enforce treaty NAFTA

  7. ANCOM: Andean Pact • Bolivia, Colombia, Ecuador, Peru, Venezuela • Cartagana Agreement, 1969. One of oldest still in existence. • Nearly failed. Rejuvenated in 1990 in the Galápagos Declaration. • Changed from FTA to customs union in 1992. • Still has many political and economic problems.

  8. The Mercosur • 1988: Argentina, Brazil. 1990: Paraguay, Uruguay • 1995: Agreed to move toward a full customs union. • Trade quadrupled between 1990-1998. • Has significanttrade diversionissues. • Yeats Report. • Economic problems, first in Brazil (1999), then in Argentina (2001) has put plans for the customs union on hold.

  9. Association of Southeast Asian Nations • Created in 1967. • Economic, political and social cooperation. • Little has been accomplished. • Brunei, Indonesia, Laos, Malaysia, the Philippines, Myanmar, Singapore, Thailand and Vietnam.

  10. Asia Pacific Economic Cooperation • Founded in 1990 to ‘promote open trade and practical economic cooperation’. • ‘Promote a sense of community.’ • 18 members. • 50% of world’s GNP. • 40% of global trade. • Brookings Institution: APEC “is in danger of shrinking into irrelevance as a serious forum.”

  11. Regional Trade Blocs in Africa • 9 trade blocs on the continent. • Many countries are members of more than one group. • Progress has been slow. • Political turmoil. • Deep suspicion of free trade. • Less developed, less diversified economies need “protection”.

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