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Types of Multinational Trade Groups

Types of Multinational Trade Groups. Regional Cooperation Group —nations jointly participate in developing industries and infrastructure beneficial to each country

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Types of Multinational Trade Groups

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  1. Types of Multinational Trade Groups • Regional Cooperation Group—nations jointly participate in developing industries and infrastructure beneficial to each country • Free Trade Area—participants reduce or eliminate tariffs and trade barriers between members; each member maintains its own tariff schedule against non-members • Customs Union—participants reduce or eliminate tariffs and barriers for members and maintain a uniform tariff schedule imposed on non-members

  2. Types of Multinational Trade Groups (continued) • Common Market—members reduce or eliminate internal tariffs and maintain a uniform external tariff schedule; all restrictions on the free flow of capital and labor are removed between members • Political Union—internal tariffs are eliminated; uniform external tariffs are set; labor, capital, and goods flow freely between members; members agree to central governing agencies with jurisdiction over all members

  3. What are the consequences to a country if it is not a member of a multinational trade bloc? • Exports are significantly reduced • Tariffs on goods shipped into other countries are considerably higher • Non-tariff trade barriers are much more plentiful • It is much harder for domestic firms to be price competitive and participate in trade • There is less variety and higher prices in the domestic market • Political and economic alienation occurs

  4. Toward the “European Union” • 1957—Treaty of Rome—gave a blueprint and outline for the establishment of a European common market; ratified in 1958 • 1987—Single Europe Act—called for elimination of internal border controls, uniform product standards, mutual recognition of products, single customs document • 1992—Maastricht Treaty—allowed full implementation of Single Europe Act and called for the establishment of a single monetary unit • 1999—Euro available to banks and financial institutions, virtual trading begins • 2002—Euro notes and coins begin public circulation

  5. European Union Members • 15 Original Members—Austria, Belgium, Denmark (not in monetary union), Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Spain, Sweden (not in monetary union), Portugal, United Kingdom (not in monetary union) • 10 New Members (associate privileges began 1-1-04) Estonia, Latvia, Lithuania, Poland, Hungary, Czech Republic, Slovakia, Slovenia, Malta, Cyprus • Rejected: Turkey • Candidates for 2007: Bulgaria, Romania

  6. EU Governing Bodies • European Commission—initiates policy, proposes and supervises how laws will be executed • Council of Ministers—voting body; debates and decides which proposals to enact into law • European Parliament—amends legislation; has extensive budgetary powers • European Court of Justice—an appellate court that interprets and rules on laws under dispute

  7. Commonwealth of Independent States (CIS)—The other European Trade Bloc • Made up of former Soviet (USSR) republics • Members—Russia, Ukraine, Belarus, Armenia, Moldavia, Azerbaijan, Uzbekistan, Turkmenistan, Tajikistan, Kazakhstan, Kyrgyzstan, Georgia • Goals—open borders, establish free trade, establish no central government, repeal all Soviet laws, allow new currencies, jointly control nuclear weapons, fulfill all Soviet treaties and debt obligations

  8. NAFTA Key Provisions • Eliminates all tariffs on industrial goods • Eliminates multiple customs procedures • Establishes first comprehensive set of principles governing services • Establishes highest standards for protecting intellectual property • Prohibits the use of standards or regulations as obstacles to trade • Enforces tough rules of origin (to qualify as “duty free,” goods must contain 62.5 percent North American content)

  9. Other Trade Blocs in The Americas • Mercosur (largest in South America)—Brazil, Argentina, Paraguay, Uruguay, Bolivia, Chile • Andean Common Market—Columbia, Ecuador, Peru, Venezuela, Panama • Central American Common Market—Guatemala, Honduras, Costa Rica, Nicaragua • Caribbean Common Market—13 members • Latin American Integration Association (LAIA)—Long-term goal: Latin American common market

  10. Future of Trade Blocs—Asia?? • ASEAN (Association of Southeast Asian Nations)—considered a BEM by the U.S. Department of Commerce • Members—Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam, Myanmar, Laos • Evolving to ASEAN + 3 (China, Japan, South Korea)

  11. Future of Trade Blocs—The Americas, Africa, Middle East?? • NAFTA, SAFTA, of FTAA?? • Africa has many trade blocs but most are ineffective • Middle East has been least aggressive at forming regional trade blocs of any world region

  12. Future of Trade Blocs?? • Will members strongly support each other and work to exclude non-members? • Will members trade only with other members for certain goods? • Will blocs begin to negotiate trade deals with each other—i.e. bloc-to-bloc rather than country-to-country?

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