Regional Economic and Political Integration

1. Regional Economic and Political Integration Reasons for Globalization: • Air transport industry: FedEx, and Brussels-Based HDL have become the primary movers of companies components, raw materials, and finished products. • eCommerce • Shorter product cycles • Just-in-time manufacturing • Global sourcing and sale

2. Regional Economic and Political Integration Ramification of Globalization: • No one wants obsolete technology. Thus, Semiconductors and equipments are the new “perishable” products. • 90% of global GNP has become accessible within 48 hours

3. Regional Economic and Political Integration Facilitators of Globalization: • United Nations • WTO • IMF • International Aviation Authority: Air transport coordinator • The World Bank • International Telecommunications Union, which coordinates satellite-based transfer of data and information. • Deregulation and Privatization trends • Formation of trade blocs.

4. Regional Economic and Political Integration Globalization cannot take place without rules and regulations that all nation-states abide to. So, we have to have a legal system that is acceptable to all.

5. International Monetary System Different exchange rate systems: 1a-- Another country’s currency as the legal Tender

6. International Monetary System Different exchange rate systems: 1b-- Common External Currency: a currency that is created for external transactions among nations of the community, usually former colonies.

7. International Monetary System 1c-- Multi-country currency: Euro (1999 and was circulated in 2002), is created to be used by all countries in the Union.

8. International Monetary System 2-- Currency Board

9. International Monetary System 3-- Fixed to a currency or a currency basket

10. International Monetary System 4-- Currency with a band

11. International Monetary System 5-- Crawling Peg: currencies are devalued according to a pre-specified plan in accordance with the relative inflation rate.

12. International Monetary System 6-- Crawling bands: the band within which the exchange rate can crawl is adjustable.

13. International Monetary System 7--- Managed float.

14. International Monetary System 8-- Free float

15. International Monetary System Demand and supply of foreign exchange and the exchange rate Euro/Dollar 1.3 Demand for the US $ Supply of Euro US exports Europe’s imports Europe’s investment in the US profits returned to the US 1.0 0.7

16. Convertibility • Hard currencies (convertible) • Soft currencies (inconvertible)

17. FUNCTIONS OF WTO • Multilateral trade negotiations • oversee national and regional trading policies • reduction of barriers to trade • Resolution of trade disputes

18. Free Trade: Good for all • Wherever goods go tanks will not go

19. Free Trade: Good for all • Wherever goods go tanks will not go • Promotes global competition: • lower prices and variety of goods • companies must become more efficient and innovative

20. Free Trade: Good for all • Wherever goods go tanks will not go • Promotes global competition: • lower prices and variety of goods • companies must become more efficient and innovative • Because of uneven distribution of resources trade is a necessity

21. Free Trade: Good for all • Wherever goods go tanks will not go • Promotes global competition: • lower prices and variety of goods • companies must become more efficient and innovative • Because of uneven distribution of resources trade is a necessity • It helps transfer of technology, therefore,

22. Free Trade: Good for all • Wherever goods go tanks will not go • Promotes global competition: • lower prices and variety of goods • companies must become more efficient and innovative • Because of uneven distribution of resources trade is a necessity • It helps transfer of technology, therefore, • It helps with development of all involved by

23. Free Trade: Good for all • Wherever goods go tanks will not go • Promotes global competition: • lower prices and variety of goods • companies must become more efficient and innovative • Because of uneven distribution of resources trade is a necessity • It helps transfer of technology, therefore, • It helps with development of all involved by • efficient allocation of resources

24. Free Trade: Good for all • Wherever goods go tanks will not go • Promotes global competition: • lower prices and variety of goods • companies must become more efficient and innovative • Because of uneven distribution of resources trade is a necessity • It helps transfer of technology, therefore, • It helps with development of all involved by • efficient allocation of resources • It increases awareness to the world problems and events

25. Free Trade: Good for all • Wherever goods go tanks will not go • Promotes global competition: • lower prices and variety of goods • companies must become more efficient and innovative • Because of uneven distribution of resources trade is a necessity • It helps transfer of technology, therefore, • It helps with development of all involved by • efficient allocation of resources • It increases awareness to the world problems and events • It increases economic growth and employment

26. Free Trade: Bad for all • Global competition means: • loss of jobs

27. Free Trade: Bad for all • Global competition means: • loss of jobs • Advanced countries argue that LDCs have an unfair advantage because of their cheap labor

28. Free Trade: Bad for all • Global competition means: • loss of jobs • Advanced countries argue that LDCs have an unfair advantage because of their cheap labor • Infant industry argument

29. Free Trade: Bad for all • Global competition means: • loss of jobs • Advanced countries argue that LDCs have an unfair advantage because of their cheap labor • Infant industry argument • Strategic industries (agriculture, defense, utilities, telecommunications) are sheltered

30. Free Trade: Bad for all • Global competition means: • loss of jobs • Advanced countries argue that LDCs have an unfair advantage because of their cheap labor • Infant industry argument • Strategic industries (agriculture, defense, utilities, telecommunications) are sheltered • Non-tariff trade barriers through • rules and regulations • financial restrictions.

31. Free Trade: Bad for all • Global competition means: • loss of jobs • Advanced countries argue that LDCs have an unfair advantage because of their cheap labor • Infant industry argument • Strategic industries (agriculture, defense, utilities, telecommunications) are sheltered • Non-tariff trade barriers through • rules and regulations • financial restrictions. • Structural unemployment

32. Free Trade: Bad for all • Global competition means: • loss of jobs • Advanced countries argue that LDCs have an unfair advantage because of their cheap labor • Infant industry argument • Strategic industries (agriculture, defense, utilities, telecommunications) are sheltered • Non-tariff trade barriers through • rules and regulations • financial restrictions. • Structural unemployment • Cultural protectionism through prohibition of books and movies

33. Regional Economic and Political Integration Degree of Integration: Types of Trade Blocs Free Trade Areas: a scheme to eliminate tariffs within the are while each individual country keeps its tariff schedule vis-à-vis other countries outside the area. NAFTA is an example of FTA.

34. Regional Economic and Political Integration Degree of Integration: Types of Trade Blocs Free Trade Areas:a scheme to eliminate tariffs within the are while each individual country keeps its tariff schedule vis-à-vis other countries outside the area. NAFTA is an example of FTA. • formed between the US and Canada in 1989.

35. Regional Economic and Political Integration Degree of Integration: Types of Trade Blocs Free Trade Areas:a scheme to eliminate tariffs within the are while each individual country keeps its tariff schedule vis-à-vis other countries outside the area. NAFTA is an example of FTA. • formed between the US and Canada in 1989. • Mexico joined in 1994 as the low cost producer, which caused American firms to change their outsourcing directions from Asia to Mexico.

36. Regional Economic and Political Integration Degree of Integration: Types of Trade Blocs Free Trade Areas:a scheme to eliminate tariffs within the are while each individual country keeps its tariff schedule vis-à-vis other countries outside the area. NAFTA is an example of FTA. • formed between the US and Canada in 1989. • Mexico joined in 1994 as the low cost producer, which caused American firms to change their outsourcing directions from Asia to Mexico. • Plans to incorporate all of the Western Hemisphere into this bloc and create Free Trade Area of Americas FTAA. This would create a bloc which would look like this:

37. Regional Economic and Political Integration Degree of Integration: Types of Trade Blocs Free Trade Areas:a scheme to eliminate tariffs within the are while each individual country keeps its tariff schedule vis-à-vis other countries outside the area. NAFTA is an example of FTA. • formed between the US and Canada in 1989. • Mexico joined in 1994 as the low cost producer, which caused American firms to change their outsourcing directions from Asia to Mexico. • Plans to incorporate all of the Western Hemisphere into this bloc and create Free Trade Area of Americas FTAA. This would create a bloc which would look like this: • Population > 850 milions • GDP > 12 Trillions • Trade volume > 3.5 Trillions

38. Regional Economic and Political Integration Degree of Integration: Types of Trade Blocs Free Trade Areas Custom Union: • eliminates tariffs internally

39. Regional Economic and Political Integration Degree of Integration: Types of Trade Blocs Free Trade Areas Custom Union: • eliminates tariffs internally • unified tariff scheme vis-à-vis outside

40. Regional Economic and Political Integration Degree of Integration: Types of Trade Blocs Free Trade Areas Custom Union: Common Market: • eliminates tariffs internally • unified tariff scheme vis-à-vis outside • free movement of labor and capital internally

41. Regional Economic and Political Integration Degree of Integration: Types of Trade Blocs Free Trade Areas Custom Union: Common Market: Full economic integration • eliminates tariffs internally

42. Regional Economic and Political Integration Degree of Integration: Types of Trade Blocs Free Trade Areas Custom Union: Common Market: Full economic integration • eliminates tariffs internally • unified tariff scheme vis-à-vis outside

43. Regional Economic and Political Integration Degree of Integration: Types of Trade Blocs Free Trade Areas Custom Union: Common Market: Full economic integration • eliminates tariffs internally • unified tariff scheme vis-à-vis outside • free movement of labor and capital internally

44. Regional Economic and Political Integration Degree of Integration: Types of Trade Blocs Free Trade Areas Custom Union: Common Market: Full economic integration • eliminates tariffs internally • unified tariff scheme vis-à-vis outside • free movement of labor and capital internally • Standardization of products, labels, product testing and safety

45. Regional Economic and Political Integration Degree of Integration: Types of Trade Blocs Free Trade Areas Custom Union: Common Market: Full economic integration • eliminates tariffs internally • unified tariff scheme vis-à-vis outside • free movement of labor and capital internally • Standardization of products, labels, product testing and safety • Region-wide policies and laws on agriculture, energy, and corporate behavior .

46. Regional Economic and Political Integration Degree of Integration: Types of Trade Blocs Free Trade Areas Custom Union: Common Market: Full economic integration Political integration Common economic and political sovereignty is sacrificed to integrate monetary and fiscal policies and to institute a common currency.