1. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-1 International Business Environments & Operations 14e Daniels ● Radebaugh ● Sullivan

2. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-2 Chapter 8 Cross-National Cooperation and Agreements

3. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-3 Learning Objectives  To identify the major characteristics and challenges of the World Trade Organization  To discuss the pros and cons of global, bilateral, and regional integration  To describe the static and dynamic impact of trade agreements on trade and investment flows  To define different forms of regional economic integration  To compare and contrast different regional trading groups  To describe other forms of global cooperation such as the United Nations and OPEC

4. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-4 Introduction  Economic integration the political and monetary agreements among nations and world regions in which preference is given to member countries  Bilateral integration  Regional integration  Global integration

5. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-5 The World Trade Organization Learning Objective 1: To identify the major characteristics and challenges of the World Trade Organization

6. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-6 The World Trade Organization  World Trade Organization (WTO) The major body for  reciprocal trade negotiations  enforcement of trade agreements  General Agreement on Tariffs and Trade (GATT)

7. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-7 GATT: Predecessor to the WTO  GATT formed in 1947 to abolish quotas and reduce tariffs  Most favored nation (MFN) clause trade without discrimination  Succeeded by WTO in 1995

8. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-8 What Does The WTO Do?  WTO continues the MFN clause of GATT provides a mechanism for dispute settlement  Doha Round  agricultural subsidies  Criticized for failing to pay enough attention to labor and environmental concerns undermining global diversity benefitting rich at the expense of the poor

9. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-9 The Rise Of Bilateral Agreements Learning Objective 2: To discuss the pros and cons of global, bilateral, and regional integration

10. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-10 The Rise Of Bilateral Agreements  Bilateral agreements can be between two individual countries or can involve one country dealing with a group of other countries  Also known as Preferential trade agreements (PTAs) Free trade agreements (FTAs)

11. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-11 Regional Economic Integration  Regional trade agreements integration confined to a region and involving more than two countries  Examples include European Union (EU) European Free Trade Area (EFTA) North American Free Trade Area (NAFTA) Association of Southeast Asian Nations (ASEAN) Common Market of Eastern and Southern Africa (COMESA)

12. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-12 Regional Economic Integration Learning Objective 4: To define different forms of regional economic integration

13. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-13 Regional Economic Integration  Major types of economic integration Free trade area  no internal tariffs Customs union  no internal tariffs plus common external tariffs Common market  customs union plus factor mobility

14. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-14 The Effects Of Integration Learning Objective 3: To describe the static and dynamic impact of trade agreements on trade and investment flows

15. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-15 The Effects Of Integration  Effects of regional integration Static effects  trade creation  trade diversion Dynamic effects Economies of scale

16. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-16 The Effects Of Integration Impact of Trade Agreements

17. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-17 Major Regional Trading Groups Learning Objective 5: To compare and contrast different regional trading groups

18. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-18 The European Union  European Union (EU) changed from the European Economic Community to the European Community to the European Union the largest and most successful regional trade group in the world provides free trade of goods, capital, and people uses common external tariffs has a common currency

19. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-19 The European Union European Trade and Economic Integration

20. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-20 The European Union  European Commission provides political leadership, drafts laws, and runs the various daily programs of the EU  Council of the EU composed of the heads of state of each member country  European Parliament has legislative power, control over the budget, and is supervisor of executive decisions  European Court of Justice interprets and applies EU treaties

21. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-21 The European Union  Single European Act designed to eliminate the remaining nontariff barriers to trade in Europe  Lisbon Treaty strengthens the EU’s governance process and improves the ability of the EU to make and implement decisions  Treaty of Maastricht fostered political and monetary union  the euro

22. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-22 The European Union  Companies doing business in the EU need to determine where to produce products determine what their entry strategy will be balance the commonness of the EU with national differences

23. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-23 NAFTA  The North American Free Trade Agreement (NAFTA) includes Canada, the U.S., and Mexico involves free trade in goods, services, and investments includes countries of different sizes and wealth  Some U.S. trade and investment has been diverted to Mexico  Free trade area rules of origin

24. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-24 NAFTA  Regional content at least 50% of the net cost of most products must come from the NAFTA region  Additional provisions Workers rights The environment Dispute resolution mechanism

25. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-25 Regional Economic Integration In The Americas  There are six major regional economic groups in the Americas Caribbean Community (CARICOM) Central American Common Market (CACM) Central American Free Trade Agreement (CAFTA –DR) Andean Community (CAN) Southern Common Market (MERCOSUR) Latin American Integration Association (LAIA)

26. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-26 Regional Economic Integration In The Americas Economic Integration in Central America and the Caribbean

27. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-27 Regional Economic Integration In The Americas Latin American Economic Integration

28. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-28 Regional Economic Integration In Asia  Regional integration in Asia includes  the Association of Southeast Asian Nations (ASEAN) ASEAN Free Trade Area  the Asia Pacific Economic Cooperation (APEC) open regionalism

29. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-29 Regional Economic Integration In Asia The Association of Southeast Asian Nations

30. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-30 Regional Economic Integration In Africa  Several efforts at economic integration exist Pan Arab Free Trade Area (PAFTA) Arab League Gulf Cooperation Council (GCC) African Union (AU)

31. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-31 Regional Economic Integration In Africa Regional Integration in Africa

32. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-32 Other Forms Of International Cooperation Learning Objective 6: To describe other forms of global cooperation such as the United Nations and OPEC

33. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-33 Other Forms Of International Cooperation  The United Nations (UN) established in 1945 promotes peace and security UNCTAD  helps developing countries participate in international trade  Nongovernmental Organizations (NGOs) private, nonprofit institutions that are independent of the government

34. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-34 Commodities And The World Economy  Commodities raw materials or primary products that enter into trade  Many commodity agreements exist to discuss issues disseminate information improve product safety  OPEC

35. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-35 Organization Of The Petroleum Exporting Countries  OPEC producer cartel that relies on quotas to influence prices  establishes production quotas for member countries  Saudi Arabia  produces about 42% of the world’s crude and18% of its natural gas Downside of high prices  incentive to invest in non-OPEC countries  balancing social, political, and economic objectives

36. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-36 The Future: Regional Integration And The WTO  Regional integration could help the WTO Regionalism can lead to liberalization of issues not covered by the WTO Regionalism is more flexible Regional deals lock in liberalization

37. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 8-37 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.