Regional Economic Integration Copyright © 2014 Pearson Education, Inc. 8.

Regional Regional Economic Economic

IntegrationIntegration

Copyright © 2014 Pearson Education, Inc.

8

8 - 2Copyright © 2014 Pearson Education, Inc.

Chapter ObjectivesChapter Objectives

• Define regional economic integration and identify its five levels.

• Discuss the benefits and drawbacks of regional economic integration.

• Describe regional integration in Europe and its pattern of enlargement.

• Discuss regional integration in the Americas and analyze its future prospects.

• Characterize regional integration in Asia and how it differs from integration elsewhere.

• Describe integration in the Middle East and Africa and explain the slow progress.


NestléNestlé

• Largest food company in the world• Food is integral to cultural fabric• Must monitor regional integration

• Largest food company in the world• Food is integral to cultural fabric• Must monitor regional integration


Process whereby countries in a geographic region cooperate to reduce or eliminate barriers to the international flow of products, people, or capital

Regional Economic IntegrationRegional Economic Integration


Levels of Regional IntegrationLevels of Regional Integration

Coordinate aspects of members’ economic and political systemsPolitical UnionPolitical Union

Remove barriers to trade, labor, and capital,set a common trade policy against nonmembers, and coordinate members’ economic policies

Economic Economic UnionUnion

Remove barriers to trade, labor, and capital among members, and set a common trade policy against nonmembers

Common MarketCommon Market

Remove barriers to trade among members, and set a common trade policy against nonmembers

Customs Customs UnionUnion

Remove barriers to trade among members, but each country has own policies for nonmembers

Free-Trade Free-Trade AreaArea


Benefits of IntegrationBenefits of Integration

Trade creation

Greater consensus

Political cooperation

Creates jobs

Trade creation

Greater consensus

Political cooperation

Creates jobs


Drawbacks of IntegrationDrawbacks of Integration

Trade diversion

Shifting employment

Less sovereignty

Trade diversion

Shifting employment

Less sovereignty


Discussion QuestionDiscussion Question

What are several potential benefits of regional economic integration and several potential drawbacks of integration?


Answer to Discussion Answer to Discussion QuestionQuestion

Potential benefits of regional economic integration include trade creation, greater consensus, political cooperation, and job creation.

Potential drawbacks include trade diversion, shifting employment, and less sovereignty.


European UnionEuropean Union

Pop: 500 million

GDP: $15 trillion

Members: 27

Economic Union

Began: 1951


European Union: Early YearsEuropean 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

Single European Act (1987): Harmonized regulations, strived for lower barriers

Maastricht Treaty (1991): Set single currency targets, outlined eventual political union

European Union (1994): Final name change and reduced barriers further


Culture Matters:Culture Matters:Czech ListCzech List

Don’t rush familiarity

Build relationships

Find a Czech partner

Hire local professionals

Establish who’s in charge


European Union EnlargementEuropean Union Enlargement

Stable institutions of human rights, democracy, and law

Functioning and capablemarket economy

Assume economic, monetary, and political obligations

Adopt rules of the Community, Court of Justice, and Treaties

Future EU members must meet the four

Copenhagen Criteria


Five Key EU InstitutionsFive Key EU Institutions

EuropeanCommission

Council of theEuropean Union

EuropeanParliament

Court ofAuditors

Court of Justice


European Free Trade European Free Trade AssociationAssociation

Iceland, Liechtenstein, Norway, Switzerland

Feared lost sovereignty Feared destructive rivalry Desired free-trade gains Cooperates with EU

Pop: 12.5 million

GDP: $707 billion

Members: 4

Free-Trade Area

Began: 1960



All future members of the European Union must meet what are called the __________ criteria, which demonstrate a country’s readiness for membership.

a. European

b. Maastricht

c. Copenhagen


North AmericanNorth AmericanFree Trade AgreementFree Trade Agreement

Pop: 445 million

GDP: $16 trillion

Members: 3

Free-Trade Area

Began: 1994


NAFTA Effects NAFTA Effects

JobsJobsand wagesand wages

Three-nationThree-nationtrade flowstrade flows

FutureFutureexpansion?expansion?

““Fast track”Fast track”AuthorityAuthority

SingleSinglecurrency?currency?


Central American FreeCentral American FreeTrade AgreementTrade Agreement

Established in 2006 toinclude 7 countries

U.S., Costa Rica, Guatemala, Honduras, El Salvador,

Nicaragua, & Dominican Rep.

Combined value of goods traded is around $32 billion

Should create regional investment, peace, and stability


CAFTA-DR Effects?CAFTA-DR Effects?

More trade and better-paying jobs

Poorer farms and small businesses

OROR

Source: dinozzaver/FotoliaSource: dinozzaver/Fotolia


Andean CommunityAndean Community

Internal tariff reduction

Common external tariff

Common transport policies

Ideological conflict

Pop: 97 million

GDP: $220 billion

Members: 4

Customs Union

Began: 1969


Southern Common MarketSouthern Common Market

Also called MERCOSUR Very successful early Impaired by ideology and

economic hardships Future “SAFTA”?

Pop: 266 million

GDP: $2.8 trillion

Members: 5

Customs Union

Began: 1988


Central America / CaribbeanCentral America / Caribbean

Members offer each other littlePeace driving tentative optimism

Pop: 33 million

GDP: $120 billion

Members: 5

+/- Common Market

Began: 1961

Pop: 6 million

GDP: $30 billion

Members: 15

Common Market

Began: 1973


Free Trade Area of the Free Trade Area of the AmericasAmericas

Would be the largest free-trade area on the planet

From northern tip of Alaska to southern tip of Tierra del Fuego in South America

Could mean enormous cost savings for business

Protests by many groups is slowing progress

Pop: 830 million

GDP: $ trillions

Members: 34

Free-Trade Area



What is the objective of the Free Trade Area of the Americas and what are its prospects for success?



The Free Trade Area of the Americas would be a trading bloc stretching from Alaska to Tierra del Fuego in South America. It would likely supersede all existing trading blocs in North, Central, and South America.

It faces opposition from labor organizations, environmentalists, and others opposed to globalization.


Association of SoutheastAssociation of SoutheastAsian NationsAsian Nations

GOALS:

Promote economic, social, and cultural development

Safeguard economic and political stability

Serve as a forum to resolve disputes

Pop: 560 million

GDP: $1.1 trillion

Members: 10

General Cooperation

Began: 1967

Pop: 560 million

GDP: $1.1 trillion

Members: 10

General Cooperation

Began: 1967


Asia-Pacific Economic Asia-Pacific Economic CooperationCooperation

Asia-Pacific Economic Asia-Pacific Economic CooperationCooperation

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


Key Points:

• Australia and New Zealand

• Eliminated trade barriers 5 years early

• Recognize each other’s qualified professionals

Key Points:

• Australia and New Zealand

• Eliminated trade barriers 5 years early

• Recognize each other’s qualified professionals

Closer EconomicCloser EconomicRelations AgreementRelations Agreement


Middle EastMiddle East

Gulf Cooperation Council

Six Arab nations (1980)

Economic and political aims

Travel freely without visas

Cooperation on property rights


Economic Community of West African States• Some progress on migration, roads, and telecoms

• Impaired by instability, poverty, and bad policies

African Union• Joined 53 nations in 2002

• Want united and strong Africa

• Seek peace, security, stability

AfricaAfrica



a. Pacific Cooperation Council

b. Asia-Pacific Economic Cooperation

c. Association of Southeast Asian Nations

What is the name of the group of 21 nations that ring the Pacific Ocean whose stated aims do not include formation of a formal free trade bloc?

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.

Copyright © 2014 Pearson Education, Inc.

8 - 35

Regional Economic Integration Copyright © 2014 Pearson Education, Inc. 8.

Documents

Transcript of Regional Economic Integration Copyright © 2014 Pearson Education, Inc. 8.