Post on 14-Dec-2015
Multinational Market Regions and Market Groups
Chapter 10
McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter Learning Objectives
1. The reasons for economic union1. The reasons for economic union
2. Patterns of international cooperation2. Patterns of international cooperation
3. The evolution of the European Community to the European Union
3. The evolution of the European Community to the European Union
4. Strategic implications for marketing in Europe4. Strategic implications for marketing in Europe
Chapter Learning Objectives
5. Evolving patterns of trade as Eastern Europe and the former Soviet states embrace the free-market system
5. Evolving patterns of trade as Eastern Europe and the former Soviet states embrace the free-market system
6. The trade linkage of NAFTA and South America and its regional effects
6. The trade linkage of NAFTA and South America and its regional effects
7. The development of trade within the Asia-Pacific Rim
7. The development of trade within the Asia-Pacific Rim
Introduction
• The evolution and growth of multinational market regions—those groups of countries that seek mutual economic benefit from reducing interregional trade and tariff barriers—are the most important global trends today
• Organizational form varies widely among market regions, but the universal goal of multinational cooperation is economic benefit for the participants
• Political and social benefits sometimes accrue, but the dominant motive for affiliation is economic.
• The world is awash in economic cooperative agreements as countries look for economic alliances to expand access to free markets.
Traits of Successful Economic Unions
1. Economic Compatibility (similar economic systems)
2. Political Compatibility (similar political systems)
3. Cultural Compatibility4. Geographic factors5. Weakness in some must be balanced
by strengths in others
Patterns of Multinational Cooperation
1. Regional Cooperation Groups2. Free Trade Areas3. Customs Unions4. Common Markets and
Economic Unions5. Political Unions
• There are five fundamental groupings for regional economic integration as follows:
• There are five fundamental groupings for regional economic integration as follows:
• Viewed on a spectrum, each requires greater levels of cooperation among member nations and include:
• Viewed on a spectrum, each requires greater levels of cooperation among member nations and include:
Regional Cooperation Groups
• A group of countries that have agreed to participate in basic industries beneficial to each or jointly develop joint ventures that benefit both countries, e.g., Colombia and Venezuela built a hydroelectric dam on the Orinico river which both share
Free Trade Areas
• Examples of Free Trade Areas: NAFTA, and European Free Trade Area (EFTA) between Iceland, Liechtenstein, Norway, and Switzerland
• A group of countries that have agreed to reduce drastically (but not eliminate) all trade barriers such as customs duties and non-tariff barriers (standards)
• A group of countries that have agreed to reduce drastically (but not eliminate) all trade barriers such as customs duties and non-tariff barriers (standards)
• Member countries can have different trade policies for other external countries
• Member countries can have different trade policies for other external countries
Customs Unions
• Examples of Customs Unions: East African Customs Union between Ethiopia, Kenya, Sudan, Tanzania, Uganda, and Zambia
• In addition to drastically reducing trade barriers from FTA identified previously, a group of countries that have agreed to eliminate customs duties levied among member countries
• In addition to drastically reducing trade barriers from FTA identified previously, a group of countries that have agreed to eliminate customs duties levied among member countries
• Also establishes common external barriers like imposing a common tariff on goods imported from countries out of the association.
• Also establishes common external barriers like imposing a common tariff on goods imported from countries out of the association.
Common Markets
• Latin America boasts three common markets: the Central American Common Market (CACM), the Andean Common Market, and the Southern Cone Common Market (MERCOSUR).
• The three have roughly similar goals and seek eventual full economic integration.
• In addition to drastically reducing trade barriers, and eliminating customs duties levied from FTA and Customs Unions identified previously, a common market is a group of countries that allow: the free flow of capital and labor (engineers, doctors, and lawyers can
work without recertification) among members a common currency a common central bank; and common policies on transportation, agriculture, social services, welfare,
and taxes
• In addition to drastically reducing trade barriers, and eliminating customs duties levied from FTA and Customs Unions identified previously, a common market is a group of countries that allow: the free flow of capital and labor (engineers, doctors, and lawyers can
work without recertification) among members a common currency a common central bank; and common policies on transportation, agriculture, social services, welfare,
and taxes
Political Unions
• Examples of Political Unions: COMECON (Council for Mutual Economic Assistance), and U.S.S.R., but it no longer exists
• The highest level of cooperation among member countries• The highest level of cooperation among member countries
• A group of countries that have agreed to complete political and economic integration and cooperation among members
• A group of countries that have agreed to complete political and economic integration and cooperation among members
Global Markets and Multinational Market Groups
1. The globalization of markets
2. The restructuring of Eastern Europe into independent market-driven economies
3. The dissolution of the Soviet Union into independent states and
4. The worldwide trend toward economic cooperation
• Many Multinational Market Groups have emerged due to recent trends that include:
• Many Multinational Market Groups have emerged due to recent trends that include:
• Various examples of Multinational Market Groups are provided next
• Various examples of Multinational Market Groups are provided next
North American Free-Trade Area (NAFTA)
CanadaCanada
United StatesUnited States
MexicoMexico
NAFTA Rules of Origin
Tariff shift ruleTariff shift rule • Non-NAFTA imports undergo sufficient manufacture or processing to become products that can qualify under a different tariff classification.
• Non-NAFTA imports undergo sufficient manufacture or processing to become products that can qualify under a different tariff classification.
Value-content ruleValue-content rule • A set percentage of the value of the good must be North American (usually coupled with a tariff classification shift requirement). Some goods are subject to the value-content rule only when they fail to pass the tariff classification test because of non-NAFTA inputs.
• A set percentage of the value of the good must be North American (usually coupled with a tariff classification shift requirement). Some goods are subject to the value-content rule only when they fail to pass the tariff classification test because of non-NAFTA inputs.
Economic Cooperation Organization (ECO)
PakistanPakistan
IranIran
TurkeyTurkey
AzerbaijanAzerbaijan
TurkmenistanTurkmenistan
UzbekistanUzbekistan
Central European Free-Trade Area (CEFTA)
PolandPoland
HungaryHungary
SlovakiaSlovakia
Czech RepublicCzech Republic
SloveniaSlovenia
RomaniaRomania
Southern Cone Free Trade Area (MERCOSUR)
ArgentinaArgentina
BoliviaBolivia
BrazilBrazil
ChileChile
ParaguayParaguay
UruguayUruguay
Latin American Integration Association (LAIA)
ArgentinaArgentina
BoliviaBolivia
BrazilBrazil
ChileChile
ColumbiaColumbia
EcuadorEcuador
MexicoMexico
ParaguayParaguay
PeruPeru
UruguayUruguay
VenezuelaVenezuela
Andean Common Market (ANCOM)
BoliviaBolivia
ColumbiaColumbia
EcuadorEcuador
PeruPeru
VenezuelaVenezuela
PanamaPanama
Central America Common Market (CACM)
GuatemalaGuatemala
Costa RicaCosta Rica
NicaraguaNicaragua
HondurasHonduras
Caribbean Community and Common Market (CARICOM)
AntiguaAntigua
BarbudaBarbuda
BelizeBelize
DominicaDominica
GrenadaGrenada
GuyanaGuyana
JamaicaJamaica
MontserratMontserrat
St. Kitts-NevisSt. Kitts-Nevis
AnguillaAnguilla
St. LuciaSt. Lucia
St. VincentSt. Vincent
Trinidad-TobagoTrinidad-Tobago
Association of Southeast Asian Nations (ASEAN)
BruneiBrunei
IndonesiaIndonesia
LaosLaos
MalaysiaMalaysia
MyanmarMyanmar
PhilippinesPhilippines
SingaporeSingapore
ThailandThailand
VietnamVietnam
Association of Southeast Asian Nations (ASEAN) + 3
BruneiBrunei
IndonesiaIndonesia
LaosLaos
MalaysiaMalaysia
MyanmarMyanmar
PhilippinesPhilippines
SingaporeSingapore
ThailandThailand
VietnamVietnam
JapanJapan
S. KoreaS. Korea
ChinaChina
Economic Cooperation Organization (ECO)
PakistanPakistan
IranIran
TurkeyTurkey
AzerbaijanAzerbaijan
TurkmenistanTurkmenistan
UzbekistanUzbekistan
Asia-Pacific Economic Cooperation (APEC)
AustraliaAustralia
BruneiBrunei
CanadaCanada
ChileChile
ChinaChina
Hong KongHong Kong
IndonesiaIndonesia
JapanJapan
South KoreaSouth Korea
MalaysiaMalaysia
MexicoMexico
New ZealandNew Zealand
Papua New GuineaPapua New Guinea
PeruPeru
PhilippinesPhilippines
Russia Russia
SingaporeSingapore
TaiwanTaiwan
Thailand Thailand
U.S.A.U.S.A.
VietnamVietnam
© 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Economic Community of West African States (ECOWAS)
BeninBenin
Burkina FasoBurkina Faso
Cote d’ IvoireCote d’ Ivoire
GambiaGambia
GhanaGhana
GuineaGuinea
Guinea-BissauGuinea-Bissau
LiberiaLiberia
MaliMali
MauritaniaMauritania
NigerNiger
NigeriaNigeria
Southern African Development Community (SADC)
AngolaAngola
BotswanaBotswana
LesothoLesotho
NamibiaNamibia
MalawiMalawi
MauritiusMauritius
GabonGabon
MaliMali
MauritaniaMauritania
NigerNiger
SenegalSenegal
TogoTogo
East African Customs Union
EthiopiaEthiopia
KenyaKenya
SudanSudan
TanzaniaTanzania
UgandaUganda
ZambiaZambia
West Africa Economic Community
SenegalSenegal
TogoTogo
Burkina FasoBurkina Faso
Cote d’IvoireCote d’Ivoire
Mali Mali
Mauritania Mauritania
NigerNiger
Customs and Economic Union of Central Africa (CEUCA)
CameroonCameroon
Central African RepublicCentral African Republic
GabonGabon
People’s Republic of CongoPeople’s Republic of Congo
Maghreb Economic Community
AlgeriaAlgeria
LibyaLibya
MoroccoMorocco
TunisiaTunisia
Arab Common Market
IraqIraq
KuwaitKuwait
JordanJordan
SyriaSyria
EgyptEgypt
Maghreb Economic Community
McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
AlgeriaAlgeria
LibyaLibya
MoroccoMorocco
TunisiaTunisia
Arab Common Market
McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
IraqIraq
KuwaitKuwait
JordanJordan
SyriaSyria
EgyptEgypt
Future Multinational Trade Groups
1. United States/Japan
2. Hong Kong/Taiwan
3. Asia-Pacific Rim Countries
4. Hong Kong/Taiwan/Coastal Provinces of Southern China
5. Western Hemisphere (North and South America) F.T.A.
6. Transatlantic Free Trade Area (U.S.A. & EU)
7. NAFTA including Central America
8. SAFTA