Chapter 8Regional
Economic Integration
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Define each level of regional integration
Identify the potential effects of integration
Discuss European integration and
enlargement
Characterize integration efforts in the
Americas
Identify why integration in Asia is unique
Discuss integration in the Middle East and
Africa
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2008
Regional Economic Integration
Process whereby
countries in a
geographic region
cooperate to
either reduce or
eliminate barriers
to the free flow of
products, people,
or capital
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Levels of Regional Integration
Coordinate aspects of members’ economic and
Political Union political systems
Remove barriers to trade, labor, and capital;
Economic Union set a common trade policy against nonmembers; and
coordinate members’ economic policies
Remove all barriers to trade, labor, and capital
Common Market among members; and set a common trade policy
against nonmembers
Customs Union
Remove all barriers to trade among members, and set
a common trade policy against nonmembers
Free-Trade Area
Remove all barriers to trade among members, but
each country has own policies for nonmembers
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Effects of Integration
Potential Potential
benefits drawbacks
Trade diversion
Trade creation Shifts in
Greater consensus employment
Political cooperation Loss of sovereignty
Creates jobs
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European Union (EU)
Pop: 485
million
GDP: $9.5
trillion
Members:
27
Economic
Union
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European Union: Early Years
European Coal and Steel Community (1951):
Removed trade barriers in coal, iron, and steel
European Economic Community (1957):
Outlined and took initial steps toward common
market
European Community (1967): Expanded to
other industries including atomic energy
European Union (1994): Final name change and
reduced barriers further
Additional milestones:
-
Single European Act (1987): Harmonized
regulations, strived for lower barriers
-
Maastricht Treaty (1991): Single currency targets,
outlined eventual political union
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Five Key EU Institutions
European
Parliament
Court of Court of
Justice Auditors
Council of European
the Commissio
European n
Union
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Business in Central Europe
Don’t rush familiarity
Build relationships
Find a Czech partner
Expect limited resources
Hire local professionals
Establish who’s in charge
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European Union Enlargement
• Stable institutions of
Future members must meet
human
Copenhagen Criteria ➔
rights, democracy, and law
• Functioning and capable
market economy
• Assume economic,
monetary,
and political obligations
• Adopt rules of Community,
Court of Justice, and
Treaties
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European Free Trade
Association
Iceland,
Liechtenstein,
Norway,
Switzerland
-
- Feared lost sovereignty
- Feared destructive rivalry
- Desired free-trade gains
Pop: 12
- Cooperates with EU
million
GDP: $620
billion
Members: 4
Free-Trade
Area
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Began:
2008 1960
North AmericanFree Trade
Agreement
Pop: 420
million
GDP: $12
trillion
Members: 3
Free-Trade
Area
Began:
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2008
NAFTA Effects
Three- Jobs
nation and wages
trade flows
“Fast track” Future Single
authority expansion? currency?
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Central American FreeTrade
Agreement
• CAFTA established in 2006
between U.S. and 6 others
• U.S., Costa Rica,
Guatemala,
Honduras, El Salvador,
Nicaragua, & Dominican
Rep.
• CAFTA should create
regional
integration, peace, and
stability
• Combined value of goods
traded is around $32 billion
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Andean Community
Internal tariff reduction
Common external tariff
Common transport policies
Impaired by ideological
conflict
Pop: 97
million
GDP: $216
billion
Members: 4
Customs
Union
Began: 1969
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Southern Common Market
MERCOSUR
Very successful early
Future “SAFTA”?
Impaired by ideology
and economic hardships
Pop: 220
million
GDP: $1
trillion
Members: 5
Customs
Union
Began:
1988
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Central America / Caribbean
Peace is driving
Members have little
tentative optimism
to offer each other
Pop: 33 million Pop: 6
GDP: $120 million
billion GDP: $30
Members: 5 billion
+/- Common Members:
Market 15
Began: 1961 Common
Market
Began:
1973
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Free Trade Area of the
Americas
. Would create the largest
free-trade area on the planet
. From northern tip of Alaska
Pop: 800 to southern tip of Tierra del
million Fuego in South America
GDP: $12
trillion
Members:
. Could mean enormous cost
34 savings for business
Free-Trade
Area . Protests by many groups is
slowing progress
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Association of SoutheastAsian
Nations
ASEAN
1. Economic, social, and cultural development
2. Safeguard economic and political stability
3. Serve as a forum to resolve disputes
Pop: 500
million
GDP: $740
billion
Members: 10
General
Cooperation
© Prentice Hall, International Business 4e Began: 1967
2008
Asia Pacific Economic
Cooperation
APEC: Group of 21 nations ringing the Pacific
Ocean that accounts for over half of world trade
1. Not designed as a free-trade bloc
2. Strengthen multilateral trade system
3. Liberalize trade and investment rules
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Middle East and Africa
Gulf Cooperation Economic Community of
Council West African States
(GCC) (ECOWAS)
Common market hopes
Six Arab nations (1980) (1975)
Economic and political aims Little progress to date
Free travel; property rights
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Chapter Review
Define each level of regional integration
Identify the potential effects of integration
Discuss European integration and
enlargement
Characterize integration efforts in the
Americas
Identify why integration in Asia is unique
Discuss integration in the Middle East and
Africa
© Prentice Hall, International Business 4e
2008
