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WK4 Agenda• Hot topic: – News, students’ need, Gen R– No class last week of July– Exam I next week! Chapter1-7

• Video & Info Search Discovery• Homework– Executive summary– Whole class team work?

• Benefit, cost, risk analysis=>ASEAN outlook

– Verifiable information(challenging vs. impressive)– “Those who know don’t talk, those who talk don’t know”

vs. “Those who talk bulls_ _t, _ _upid kids don’t talk”– Win win MIB, BBA 2010

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ASEAN

• From the Video clips:• What countries are the ASEAN member?• What’s ASEAN+3?• What’s the benefit of ASEAN?• What’s the road ahead?• How do we start?

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EU• From the video clips:• What’s the status form

of economic integration for EU?

• Where are we?• What’s political union?• Should Turkey join EU?• What’s the problem?

Political Union: one country

Economic Union: integrate member economies:

common currency

Common Market: free flow on factor of production

(capital&labor)

Customs Union: FTA+ common trade policies

with non members: ANDEAN Pact

Free trade area: each member has its own trade policy with nonmembers:

ASEAN, NAFTA

MIB, BBA 2010 4

NAFTA

• From the video clips:• Was NAFTA a

mistake?• What’s their

problem?• How will they fix the

problem?

Political Union: one country

Economic Union: integrate member economies:

common currency

Common Market: free flow on factor of production

(capital&labor)

Customs Union: FTA+ common trade policies

with non members: ANDEAN Pact

Free trade area: each member has its own trade policy with nonmembers:

ASEAN, NAFTA

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Info Search

• In 4 groups find out more information on ASEAN, EU, NAFTA, and WTO.

• Present your knowledge in a game.– Who wants to be a millionaire?– Are you smarter than the 5th grade?– Press the button.

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Homework

• In four groups find the information on the amount of trade, product types, rules, tariffs of the products to the outside producers, possible trade negotiation:

1. Thai and EU2. Thai and the US.3. Thai and China4. Trade within ASEAN• Compare your information with the Bilateral of Korea and

EU, Korea and the US., and China bilateral with other countries.

• What’s the big picture of these jigsaws?MIB, BBA 2010

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WK4.2 Agenda

• Hot topics:– News: new TVs– Tutoring vs. Internship

• Practice Listening “True or false”• Lecture• Mind map & Homework

MIB, BBA 2010

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Practice Listening “True or False”• There are three organizations under WTO(GATS,

TRIPS, and IMF)• The development of GATT started with G7, G10,

G15, G24 and G77.• G to G is not allowed for WTO members.• WTO irresolvable issues includes: government

subsidies, intellectual property, human rights, and environmental protection.

• Dr. Supachai is the current director general of WTO.

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Development of World Trading System

1947

•After WWII, the US. and other nations realized the value of free trade.

•General Agreement on Tariffs and Trade (GATT): to gradually eliminate barriers to trade.

1980-

1990

•The world trading system was strained, Japanese Neo Mercantilist policies created the political pressure.

•Persistent trade deficit by the U.S. cause economic problem for some industries and political for the government i.e. U.S. Japan auto industry, and textile.

•There are ways to get around GATT regulations, therefore, the Uruguay round started in 1986 to focus on services, intellectual property, and agriculture.

1995

•1995 WTO was created and has two sisters organizations—GATS (General Agreement on Trade in Services) and TRIPS (Trade Related Aspects of Intellectual Property Rights)

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Development of World Trading System

2001

•WTO is an effective advocate and facilitator of future trade deals—particularly in services area.

•Most countries (153 members) have adopted WTO recommendations.

•1997: 68 countries opened trade for telecommunication, 102 countries opened to banking, securities, and insurance. The agreement also include FDI.

•1999: WTO meet in Seattle but failed to agree on cross border trade for agriculture and investment in services

•2001 China joined WTO.

2001

•Current issues for WTO in Doha round: •Limiting the use of

antidumping laws.•Phase out subsidies

and tariffs in agriculture.

•Enforce strong protection for intellectual property: to enforce patent 20 years and copy rights lasting 50 years.

•Reducing barriers to cross border investment.

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WTO Principle

1. Non-discrimination-Most favored nation treatment(MFN)-MFN exception: GSP(Generalized system of preferences)-Bilateral agreement-Antidumping duty proof-Countervailing duty proof (action against subsidies)-Safeguard measure: trigger volume-National treatment: same as the local products

2.Reciprocity-Exception: developing countries

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WTO Agreements

1. Multilateral Agreements (obligations)-Uruguay round to open free trade-Agriculture: change import quota to tariff, reduce subsidies-Multi Fiber Agreement-Sanitary and phytosanitary measures-Technical barriers to trade-Import license: automatic in 10-30 days-Custom Valuation: use price actually paid or payable-Export checking-Rules of origin

2. Plurilateral Agreement(Only those countries that sign the contract for this agreement)-G to G: 23 countries signed the agreement on transparent and equal in G to G business.-Commercial Aircraft agreement: 21 countries signed the agreement on importing commercial aircraft procedures and incentive

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WTO Agreements

1. Multilateral Agreements (obligations)-Anti dumping-Subsidies-Safe guard rules: can increase the tariffs or decrease the quota if proven serious injury-Investment policy: no more local content requirement-General Agreement on Trade in Services(GATS): open free trade in service industry-Trade Related Aspects of Intellectual Property Rights(TRIPS): protect patent, trademark, copy rights-Dispute resolution

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Regional Economic Integration

• Regional Economic Integration: agreements between countries to reduce tariff and NTB to the free flow of goods, services and factors of production.

• Regional trade promote free trade• Will trade blocks compete against each other?

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Level of Economic IntegrationPolitical Union: one country

Economic Union: integrate member economies, harmonized tax rates,

and common currency

Common Market: free flow on factor of production (capital&labor) MERCOSUR in

the near future (Brazil, Argentina, Paraguay, and Uruguay )

Customs Union: FTA + common trade policies with non members: ANDEAN Pact (Bolivia, Columbia, Ecuador,

and Peru)

Free trade area: remove all barriers, each

member has its own trade policy with

nonmembers: ASEAN, NAFTA

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Economic Integration

• Advantages– Trade creation: low cost

producers within the free trade replace high cost domestic producers

– Unanimity: greater political clout in world politic

– Political cooperation: dependency on each other reduces the likelihood of violent conflict

– Job opportunity

• Disadvantages– Trade diversion: high

cost suppliers within the free trade replace lower cost external suppliers

– Job loss– Loss of national

sovereignty: UK fear of less flexibility in national monetary policy

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European Union• 27 Member states of the European Union• What countries are the original members?• What are the candidate countries?

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Evolution of The European Union

1999-Present: Without Frontier & Further Expansion2004+10 new members

1987: The Single EU Act: Single Market by Dec. 19921991: Treaty of Maastricht: Single currency(12 out of 25) except Britain, Denmark, Sweden

1957: European Economic Community, Treaty of Rome to create a common market

1951: European Coal and Steel Community, remove barriers to trade

After two WW: a desire for peace, hold their own on the world’s political and economic stage

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EU InstitutionsEuropean Council: Resolves major policy issue and sets policy directions

European Commission: Implementing and enforcing EU law

Council of the EU: The ultimate controlling authority within the EU

The EU Parliament: debate the legislation proposed by the EU Commission and forwarded to it by the EU Council

Court of Justice: Thu supreme appeals court for EU law

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EU 2020

• 10 Year strategic plan for EU towards a green and innovative economy

• Smart growth – developing an economy based on knowledge and innovation.

• Sustainable growth – promoting a more resource efficient, greener and more competitive economy.

• Inclusive growth – fostering a high-employment economy delivering economic, social and territorial cohesion.

• Action: 3% R&D, Education, Digital Society

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NAFTA

• The North American Free Trade Agreement(1994) consists of America, Canada, and Mexico.

• Removed all tariffs and barriers in 2008.• Protects Intellectual Property Rights.• Removed restrictions on FDI.• Each country use its own environmental standards.• Two commissions to impose fines and remove trade

privileges when environmental standards, health and safety, labor, and minimum wage are ignored.

• NAFTA superhighway?MIB, BBA 2010

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NAFTA• Supporters:• All countries will benefit.– Increase jobs in Mexico– The US and Canada will

have access to larger and more prosperous market, with lower consumer goods produced in Mexico

– The US and Canadian firms with production sites in Mexico will be more competitive on world market

• Critics:• Job loss and wage level

would decline in the US and Canada

• Mexican workers would immigrate north

• Pollution would increase due to Mexican lower environmental standard

• Mexico would lose its sovereignty

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NAFTA• Hills• The impacts was subtle.• Political stability in

Mexico.• Other Latin American

countries want to join.• US and Canada are

adopting a wait and see attitude.

• Others• NAFTA didn’t deliver the

promising result that the people had expected.

• It creates trade diversion• Other problems still exist—

drugs, immigration, pollution, and labor

• Other Latin American and South American countries are adopting a wait and see attitude—use Cuba as a litmus test with the US.

MIB, BBA 2010

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ASEAN

• Formed in 1967• Created ASEAN Free Trade Area(AFTA) in 1993

(10 years tariffs and barriers reduction plan, except for sensitive list until 2010)

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AFTA

• Advantages– Trade creation: lower price and better quality

500 million people, increase competitive advantage to ASEAN producers (economy of scales, factor of productions, attract FDI)

– Unanimity– Political cooperation: dependency on each other

reduces the likelihood of violent conflict, and not depend on the world super power countries

– Job opportunity

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ASEAN 2020• TradeTechnology• TradeBetter quality of life• ASEAN AFTAAEC 2015ASEAN ONE 2020• ASEAN 2020—Partnership in Dynamic

Development– Prosperous ASEAN with stability– High competitive advantage– Economic Union (Free trade, free flow of factor of

production, integrate economy, common currency, harmonize tax rate)

– Get rid of poverty and social inequality

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Summary• Why do countries participate in Economic

integration? Level of integration?• What organization regulate the trade rules?• What’s the key success factor for economic

integration? How can we apply sufficiency philosophy?

• What did you learn from NAFTA and EU?

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Manager Implication

StrengthOpportunities

-Market expansion-Economies of scale-Optimal Location

Weakness

Threat-Competition-Government intervention-Shut out from the trade bloc

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WK4.3 Agenda

• Discussion– ASEAN Companies– Vocabularies– TRIPS and NTM

• Mind map continue• Homework discussion

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Homework

• What information can you get from the table?• What would be the possible trade diversion?• How can we solve this problem?• What would be the competition?

Countries Thai Intra Trade(amount and products)

Thai Inter Trade(amount and products)

Singapore EU

Malaysia China

Indonesia US

Other ASEAN countries Japan