1. Capitalizing on Global & Regional Integration 8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2. LEARNING OUTCOMES 2 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1Make the case for global economic integration 2Explain the evolution of the GATT and the WTO, including current challenges 3Make the case for regional economic integration 4List the accomplishments, benefits, and costs of the European Union

3. LEARNING OUTCOMES 3 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5Identify the five organizations that promote regional trade in the Americas and describe their benefits and costs 6Identify the four organizations that promote regional trade in the Asia Pacific and describe their benefits and costs 7Articulate how regional trade should influence your thinking about global business

4. 4 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Economic Integration Regional economic integration: Efforts to reduce trade and investment barriers within one region Global economic integration: Efforts to reduce trade and investment barriers around the globe

5. 5 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Integrating the Global Economy Important developments after WWII General Agreement on Tariffs and Trade (GATT): Multilateral agreement governing the international trade of goods World Trade Organization (WTO): Multilateral trading system and the organization underpinning the system since 1995 European Union (EU): Official title of European economic integration since 1993

6. 6 Exhibit GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8.1 Benefits of Global Economic Integration

7. 7 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. General Agreement on Tariffs and Trade: 1948-1994 Reduced level of tariffs through multilateral negotiations Areas of concern No protection for services or intellectual property Loopholes needed reform - Multifiber Arrangement (MFA) Global recessions led governments to invoke nontariff barriers (NTBs)

8. 8 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. World Trade Organization: 1995-Present GATT’s successor Features General Agreement on Trade in Services (GATS) Trade-Related Aspects of Intellectual Property Rights (TRIPS) Trade dispute settlement mechanisms Trade policy reviews

9. 9 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Doha Round Formed in the aftermath of 9/11 attacks Promoted economic development in developing countries The Doha Development Agenda Reduce agricultural subsidies in developed countries Slash tariffs, especially in areas where developing countries might benefit Free up trade in services Strengthen intellectual property protection

10. 10 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Pros and Cons of Regional Economic Integration Promotes peace Free trade and investment raise incomes and stimulate economic growth Enables to handle disputes constructively Consistent rules prevent discrimination Pros Discrimination against firms outside of region Loss of sovereignty Cons

11. 11 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Types of Regional Economic Integration Free trade area Customs union Common market Economic union Political union

12. 12 Exhibit GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8.2 Types of Regional Economic Integration

13. 13 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Origin and Evolution of European Union Political origin Countries made an effort to integrate to end the cycle of hatred and violence European Coal and Steel Community (ECSC) Treaty, 1951 Signed by Belgium, France, (West) Germany, Italy, Luxembourg, and the Netherlands

14. 14 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Origin and Evolution of European Union (continued) Treaty of Rome, 1957 Launched the European Economic Community (EEC) Maastricht Treaty, 1993 Establishment of the European Union Lisbon Treaty, 2009 Amended the Maastricht Treaty that served as a constitutional basis for the EU

15. 15 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. European Union (EU) Holds 28 member countries, 500 million citizens, $18 trillion GDP Contributes 26% of the world’s GDP World’s largest economy Largest exporter and importer of goods and services

16. 16 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. European Union (EU) (continued) Euro: Currency used in 18 EU countries Built a single market in aviation EU and its predecessors gave more than 70 years of peace and prosperity

17. 17 Exhibit GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8.3 Benefits and Costs of Adopting the Euro

18. 18 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Challenges Faced by the EU Internal divisions Enlargement concerns

19. 19 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. North American Free Trade Agreement (NAFTA) Free trade agreement among Canada, Mexico, and the United States Benefits Trilateral merchandise trade increased to $1.1 trillion in the past two decades Increase in US exports with Canada and Mexico Costs Loss of jobs Many multinationals have shifted factory work to China

20. 20 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Economic Integration in South America Andean Community and Mercosur Customs unions formed in 1969 and 1991, respectively Not very effective as majority of its members’ trade is outside the region Union of South American Nations (USAN) Formed in 2008 Integrates two existing customs unions Modeled after EU

21. 21 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Economic Integration in South America (continued) United States-Dominican Republic-Central America Free Trade Agreement (CAFTA) Formed in 2005 Modeled after NAFTA Six CAFTA countries represent the second largest US export market in Latin America Central American countries include Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua

22. 22 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Economic Integration in the Asia Pacific Australia-New Zealand Closer Economic Relations Trade Agreement (ANZCERTA or CER) Removed tariffs and NTBs Allowed citizens of one country to freely work and live in the other country

23. 23 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Economic Integration in the Asia Pacific (continued 1) Association of Southeast Asian Nations (ASEAN) Established Asian Free Trade Area (AFTA) Main trade partners are outside the region Launched ASEAN-China Free Trade Agreement (ACFTA) in 2010

24. 24 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Economic Integration in the Asia Pacific (continued 2) Asia-Pacific Economic Cooperation (APEC) Includes members of ASEAN, CER, and NAFTA, as well as Japan, Chile, Peru, and Russia Contributes 46% of world trade Commands 54% of world GDP Provides a forum for members to make commitments that are largely rhetorical

25. 25 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Economic Integration in the Asia Pacific (continued 3) Trans-Pacific Partnership (TPP) Multilateral free trade agreement being negotiated by 12 Asia Pacific countries

26. 26 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Management Methods Focus on regional than global levels Regional strategies lessen liabilities that foreign organizations can cause Know the necessities at global and regional levels Good managers change with times and take advantage of new opportunities

27. 27 Exhibit GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8.4 Implications for Action

28. 28 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Debate: Food Versus Trade Food Developing nations strengthened food security policies Increased subsidization leads to WTO challenges and food wastage Trade TFA simplifies customs red tape but not the issues of agricultural subsidies Could boost global economy

29. KEY TERMS 29 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. North American Free Trade Agreement Regional economic integration Global economic integration General Agreement on Tariffs and Trade World Trade Organization European Union Multilateral trading system Non-discrimination General Agreement on Trade in Services Trade-Related Aspects of Intellectual Property Rights Doha Round Free trade area Customs union

30. KEY TERMS 30 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Common market Economic union Monetary union Political union Schengen Euro Euro zone Andean Community Mercosur Union of South- American Nations United States-Dominican Republic-Central America Free Trade Agreement Australia- New Zealand Closer Economic Relations Trade Agreement Association of Southeast Asian Nations Asia-Pacific Economic Cooperation Trans-Pacific Partnership

31. SUMMARY 31 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Global economic integration aims at reducing trade and investment barriers around the globe GATT aimed at reducing tariffs via intensive negotiations Regional economic integration aims to reduce trade and investment barriers within one region

32. SUMMARY 32 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The European Union currently contributes about 26% of the world’s GDP Organizations that promote regional trade in America North American Free Trade Agreement Andean Community and Mercosur Union of South American Nations United States-Dominican Republic-Central America Free Trade Agreement

33. SUMMARY 33 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Organizations promoting regional trade in the Asia Pacific Australia-New Zealand Closer Economic Relations Trade Agreement Association of Southeast Asian Nations Asia-Pacific Economic Cooperation and Trans- Pacific Partnership Managers should focus their attention more at regional levels

34. 34 GLOBAL3 | CH8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.