© 2013 Cengage Learning. All rights reserved. CHAPTER 8 GLOBAL2 PENG © iStockphoto.com/Baris...

© 2013 Cengage Learning. All rights reserved.

CHAPTER 8

GLOBAL2 PENG

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CHAPTER 8 LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1. Make the case for global economic integration.

2. Explain the evolution of the GATT and the WTO, including current challenges.

3. Make the case for regional economic integration.

4. List the accomplishments, benefits, and costs of the European Union.


CHAPTER 8 LEARNING OBJECTIVES

After studying this chapter, you should be able to:

5. Identify the five organizations that promote regional trade in the Americas and describe their benefits and costs.

6. Identify the three organizations that promote regional trade in the Asia Pacific and describe their benefits and costs.

7. Articulate how regional trade should influence your thinking about global business.


LO1: THE CASE FOR GLOBAL ECONOMIC INTEGRATION

Global economic integration - efforts to reduce trade and investment barriers around the globe


LO2: THE EVOLUTION OF THE GATT AND WTO

GATT (General Agreement on Tariffs and Trade; 1948-1994)

Reduced level of tariffs through multilateral negotiations. (TRADE ONLY!!) Three areas of concern:

No protection for services or intellectual property

Loopholes needed reform Global recessions led goverments to

invoke non-tariff barriers (NTBs)


THE EVOLUTION OF THE GATT AND WTO

WTO (World Trade Organization; 1995-present)

Transformed GATT from provisional treaty to full-fledged international organization. New features:

Agreement governing trade of services (GATS)

Agreement governing intellectual property rights (TRIPS)

Trade dispute settlement mechanisms Trade policy reviews


TRADE DISPUTE SETTLEMENT

WTO does not have enforcement capability

WTO simply recommends that losing countries change their laws or practices and authorizes the winning countries to use tariff retaliation to compel the offending countries to comply with the WTO rulings.


WTO – THE DOHA ROUND (2001-2006)

Officially, The Doha Development Agenda

A round of WTO negotiations to reduce agricultural subsidies, slash tariffs, and strengthen intellectual property protection that started in Doha, Qatar, in 2001

Suspended in 2006 due to disagreements


WTO – THE DOHA ROUND

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.


LO3: THE CASE FOR REGIONAL ECONOMIC INTEGRATION

Regional economic integration – efforts to reduce trade and investment barriers within one region.

PROSPromotes peace;

Disputes handled constructively;Consistent rules;

Raises incomes and stimulates

economic growth


THE CASE AGAINST REGIONAL ECONOMIC INTEGRATION

Regional economic integration – efforts to reduce trade and investment barriers within one region.

CONSDiscrimination against firms

outside of region;Some loss of sovereignty


TYPES OF REGIONAL ECONOMIC INTEGRATION


TYPES OF REGIONAL INTEGRATION

Free trade area (FTA) – group of countries that remove trade barriers among themselves

Customs union – one step beyond an FTA; imposes common external policies on nonparticipating countries

Common market – customs union, plus additionally permits the free movement of goods and people


REGIONAL INTEGRATION

Economic union – Having all the features of a common market, members also coordinate and harmonize economic policies (in areas such as monetary, fiscal, and taxation) to blend their economies into a single economic entity.

Monetary union – a group of countries that use a common currency

Political union – integration of political and economic affairs of a region.


LO4: EVOLUTION OF THE EUROPEAN UNION

Political origins – effort to stop cycle of hatred and violence.

First step – European Coal and Steel Community (1951).

1957 – Treaty of Rome launches European Economic Community (EEC).

1993 – Treaty of Maastricht, establishing European Union, goes into effect.

2009 – Lisbon Treaty, amended Maastricht Treaty to include appointment of long-term President of European Council and a High Representative of Union of Foreign Affairs.


THE EU TODAY

Schengen – passport-free travel zone within the EU

Euro – currency currently used in 16 EU countries

Euro Zone – 16 EU countries that currently use the euro as the official currency


ACCOMPLISHMENTS OF THE EUROPEAN UNION

EU and predecessors delivered more than 50 years of peace.

Has 27 member countries, 500 million citizens, $15 trillion GDP.

Introduction of common currency.

Built a single market.


BENEFITS AND COSTS OF THE EUROPEAN UNION


Should it be economic and political union, or purely economic?

Cost of enlargement

Membership of Turkey

EU à la carte?

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CHALLENGES FOR THE EU


LO5: NAFTA

NAFTA (North American Free Trade Agreement; 1994)

Benefits: In first decade, trade between US and Canada grew

twice as fast as before NAFTA. US exports to Mexico tripled, to $161 billion. Mexican exports to US tripled, and GDP per capital

rose 24%. Costs:

Real wages in Mexico have stagnated. Many firms shifting multinational work to China.


OTHER ORGANIZATIONS IN THE AMERICAS & ASIA

Andean Community (1969) and Mercosur (1991) Union of South American Nations (USAN; 2008) United States-Dominican Republic-Central America Free Trade Agreement (CAFTA; 2005) Australia-New Zealand Closer Economic Relations Trade Agreement (ANZCERTA or CER; 1983) Association of Southeast Asian Nations (ASEAN; 1967) Asia-Pacific Economic Cooperation (APEC; 1989)

** NOT ON EXAM!! **


LO7: THE INFLUENCE OF REGIONAL TRADE ON GLOBAL BUSINESS

© 2013 Cengage Learning. All rights reserved. CHAPTER 8 GLOBAL2 PENG © iStockphoto.com/Baris...

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