©2004 Prentice Hall10-1 Chapter 10: International Cooperation Among Nations International Business, 4 th Edition Griffin & Pustay

©2004 Prentice Hall10-1

Chapter 10:InternationalCooperationAmong Nations

International Business, 4th Edition

Griffin & Pustay


Chapter Objectives

Explain the importance of the GATT and the WTO to international business

Contrast the different forms of economic integration among cooperating countries

Analyze the opportunities for international businesses created by completion of the EU’s internal market

Describe the other major trading blocs in today’s world economy


The GATT’s Beginning

General Agreement on Tariffs and Trade

Developed as part of the Havana, Cuba conference in 1947

Provided forum for trade ministers to discuss barriers to international trade


The Role of the GATT

Goal: to promote a free and competitive international trading environment benefiting efficient producers

Accomplished by sponsoring multilateral negotiations to reduce tariffs, quotas, and other nontariff barriers


Table 10.1 GATT Negotiating Rounds

Round Dates # of Participants Average Tariff Cut (%)

Geneva 1947 23 35

Annecy 1949 13 NA

Torquay 1950-1951 38 25

Geneva 1956 26 NA

Dillon 1960-1962 45 NA

Kennedy 1964-1967 62 35

Tokyo 1973-1979 99 33

Uruguay 1986-1994 117 36


Figure 10.1a The History of GATT’s Effect on World Trade in Goods


Figure 10.1b The History of GATT’s Effect on World Trade in Goods


Most Favored Nation (MFN) Principle

Sought to ensure that international trade was conducted on a nondiscriminatory basis

Requires that any preferential treatment granted to one country must be extended to all countries– If the US cut the tariff on imports of British

trucks to 20%, it also had to reduce tariffs on imported trucks from all other members to 20%


Exceptions to the MFN Principle

Members permitted to lower tariffs to developing countries without lowering them for more developed countries– Generalized system of preferences in

U.S. Tariff Code Regional arrangements promote

economic integration (e.g., EU and NAFTA)


World Trade Organization (WTO)

Headquartered in Geneva, Switzerland Began January 1, 1995 Included 146 members and 30 observer

countries as of June 2003


Goals of the WTO

Promote trade flows by encouraging nations to adopt nondiscriminatory, predictable trade policies

Reduce remaining trade barriers through multilateral negotiations

Establish impartial procedures for resolving trade disputes among members


Differences between WTO and GATT

GATT focused on promoting trade in goods; WTO’s mandate includes – trade in goods – trade in services – international intellectual property protection– trade-related investment

WTO’s enforcement powers are stronger


Figure 10.2 The WTO’s Principles of the Trading System


WTO Challenges

The Cairns Group Multifibre Agreement General Agreement on Trade in Services

(GATS) Agreement on Trade-Related Aspects of

Intellectual Property Rights (TRIPS) Trade-Related Investment Measures

Agreement (TRIMS)


Enforcement of WTO Decisions

Country failing to live up to the agreement may have a complaint filed against it

WTO panel evaluates complaint If found in violation, the country may be

asked to eliminate the trade barrier If country refuses, WTO will allow

complaining country to impose comparable trade barriers on the offending country


The WTO’s success in lowering trade

barriers has attracted protests. Many

believe the WTO ignores the impact of its policies on human

rights, the environment, and the

wages and job security of workers


Forms of Economic Integration

Free Trade Area Customs Union Common Market Economic Union


Figure 10.3 Forms of Economic Integration


European Union (EU)

Most important regional trading bloc 15 member countries 377 million population Total GDP $7.9 trillion 10 additional members in 2004


Table 10.2 The European Union, 2001 DataPopulation GDP Per Capita Income

Belgium 10.3 227.6 28210

France 59.2 1302.8 25280

Luxembourg 0.4 18.6 48080

Germany 82.2 1873.9 25530

Italy 57.7 1090.9 24340

Netherlands 16.0 375.0 19130

Denmark 5.4 162.8 27950

Ireland 3.8 101.2 27460

United Kingdom 59.9 1406.3 24460

Greece 10.6 116.3 17860

Portugal 10.2 108.5 17270

Spain 39.5 577.5 20150

Austria 8.1 188.7 27080

Finland 5.2 122.0 25180

Sweden 8.9 210.1 24670


Creation of EU

Motivated by desires of war-weary Europeans to promote peace and prosperity through economic and political cooperation

Treaty of Rome, 1957– France– West Germany– Italy– Benelux Nations (Belgium, the Netherlands,

and Luxembourg)


Map 10.1 The European Union


Table 10.3 EU Candidate CountriesCountry Population GDP Per Capita GDP

Czech Republic 10.3 56.4 14550

Cyprus 0.8 9.4 20780

Estonia 1.4 5.3 10020

Hungary 10.2 52.4 12570

Latvia 2.3 7.5 7870

Lithuania 3.5 11.8 7610

Malta 0.4 3.6 16530

Poland 38.7 174.6 9280

Slovak Republic 5.4 20.5 11610

Slovenia 2.0 18.8 18160


Governing Organizations of the EU

The Council of the European Union The European Commission The European Parliament The European Court of Justice


A weekly meeting at the

European Commission.

The commission administers the

EU’s bureaucracy


Figure 10.4 The Co-Decision Procedure


Three Pillars of the Maastricht Treaty

A new agreement to create common foreign and defense policies among members

A new agreement to cooperate on police, judicial, and public safety matters

The old familiar European Community, with new provisions to create an economic and monetary union among member states


Components of the Treat for Europe (Treat of Amsterdam)

A strong commitment to attack the EU’s chronic high levels of unemployment

A plan to strengthen the role of the European Parliament by expanding the number of areas that require use of the co-decision procedure

Establishment of a two-track system


Treaty of Nice

Effective Februar2003 To reduce the risk of political gridlock

as the number of members increase, – reduced number of areas where

unanimity is required for Council approval

– adjusted number of votes assigned to each Council member


Table 10.4 Major Regional Trade Associations

Acronym Full Name

AFTA ASEAN Free Trade Area

ANCOM Andean Pact

APEC Asia-Pacific Economic Cooperation

CACM Central American Common Market

CARICOM Caribbean Community and Common Market

CEMAC Monetary and Economic Community of Central Africa

CER Australia-New Zealand Closer Economic Trade Relations Agreement

ECOWAS Economic Community of West African States

EU European Union

EFTA European Free Trade Association

GCC Gulf Cooperation Council

MERCOSUR Southern Cone Customs Union

NAFTA North American Free Trade Agreement

SADC South African Development Community


Map 10.2 Free Trade Agreements in Central and South America and the Caribbean


Trade among Andean Pact members has been

hindered by rough terrain of the Andes Mountains


Map 10.3 The ASEAN Members


Map 10.4 Asia-Pacific Economic Cooperation Initiative (APEC)


Map 10.5 Free Trade Agreements in Africa

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©2004 Prentice Hall10-1 Chapter 10: International Cooperation Among Nations International Business, 4 th Edition Griffin & Pustay