Ch 2 Economic Integration

8/7/2019 Ch 2 Economic Integration

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Ch. 8 Economic Integration

A group of counties come together and agreeto cooperate in international trade by various

means. Mainly economic advantages.

Trade creation and trade diversion, reducedImport Prices, Increased competition and

economies of scale, Higher factor Productivity.

Political Factors and power in internationalmarkets.


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Levels of Economic

Integration.

Regional Cooperation Groups.

Free trade areas.

Full customs union.

Common market.

Economic union.


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Regional Cooperation

Groups.

Cooperate to develop basic industries like steel, hydro-electricity etc. Joint ventures, pooling of technologies/resources. Mainly less developed countries. No effect on trade or tariff barriers.

For Example - A.S.E.A.N.Brunei, Burma, Cambodia, Indonesia, Laos,Malaysia, the Philippines, Singapore,Thailand and Vietnam

The South Asian Associationfor Regional Cooperation (SAARC)Bangladesh, Bhutan, India,

Maldives, Nepal, Pakistanand SriLanka.

ASEAN


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Free Trade Areas.

No Internal Tariffs.

External Tariffs could be different.

Cooperation on economic issues.

No free labor or capital movements.

N.A.F.T.A. --

U.S.-Israel, European Free Trade Area


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Full Customs Union.


Common External Tariffs.

No Free labor or

capital movements.

Usually a small country

close to a large one. France-Monaco

Italy-San Marino.


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Common Market.



Free flow of labor and capital. Southern Cone Common Market

(Mercosur) - Argentina, Brazil,

Paraguay, Uraguay, Bolivia,

and Chile. Caribbean Community

and Common Market.


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Economic Union.



Free flow of labor and capital.

Integration of economic policies.

Harmonize monetary policies, taxation, and

government spending. Common currency or fixed exchange rates.

E.U. - Full monetary union by 1999 and single

European currency by 2002.


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European Community/

European Union.

Economic, monetary, fiscal and political union.

Single Euporean Act (A true common market for

goods, people and money by 1992) Maastricht Treaty 1994 (Economic and

monetary union with a commitment to politicalunion).

EC institutions - The European Commission,Council of Ministers, European Parliament,European Court of Justice.

http://europa.eu.int/inst-en.htm


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EU Institutions.

The European Commission - Executive branch,commissioners oversee 23 directorates such asagriculture, transportation, etc.

Council of Ministers- votes based on country size, finalpower to decide EU actions.

European Parliament - 626 members elected by popularvotes in member countries, advisory body with very little

power. European Court of Justice - Judicial branch, mainly

matters related to trade and business disputes.


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Strategic Implications of

E.U.

One Large market - standardization.

Global Strategies - production, distribution, financingetc.

Transaction costs eliminated.

Economies of scale in - Production, transportation,promotions, pricing etc.

Highly competitive environment - efficiencies needed tocompete.

Mergers and other shakeouts in industry.

Centralization and consolidation.


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NAFTA.

Benefits similar to the E.U. in terms of one Large market

Additionally Mexico is a different economy with differentcomparative advantages.

Stop firms from looking for cheap labor in outsidemarkets.

Encourage foreign investment in this market.

Increase competitiveness in outside markets

Labor and environmental issues. North American Agreement on Labor Cooperation and

Commission on Environmental Compliance.


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NAFTA.

Market Access - eliminate all tariffs on products traded between thethree countries within 10 years Dec 2005.

Nontariff Barriers - Mexico will eliminate all non-tariff barriers like

quotas, Import licenses.local content requirements, etc. Rules ofOrigin - Tariff-Shift rule and Value-Content (62.5%) Rule.

Customs Administration - uniform customs procedures andregulations.


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NAFTA.

Investment No requirements like exports, localcontent, transfer of technology, limits on imports.

Services - allowed to open wholly owned subsidiariesand operate without any restrictions.

Intellectual Property - protection of intellectual property.

Government Procurement - fair and open competition,and transparent and predictable procurement

procedures.

Standards - prohibits the use of standards and technicalregulations as obstacles to trade.


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Latin America.

Economic and trade liberalization.

Deregulation, Privatization and control of inflation.

Economic cooperation between each other and with theU.S.

Free Trade Area of the Americas (FTAA).


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ASEANFree Trade Area

Indonesia Malaysia The Philippines

Singapore Thailand Myanmar Laos Brunei Cambodia Thailand Vietnam


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AFTA.

Primary Multinational group in Asia.

Fastest growing economies in the region.

Economic integration and cooperation. Reduced Tariff and non-tariff barriers,

guaranteed member access to markets, andharmonized investment incentives.

All non-tariff barriers removed immediately,import tariffs reduced to 0-5% in 2003, 0% by2010.


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APEC - Asia Pacific

Economic Cooperation

The Asia-Pacific Economic Cooperation

forum is a loose grouping of countries

bordering the Pacific Ocean who have

pledged to facilitate free trade and economic

cooperation

Its 21 members range from China and

Russia to the United States, Japan and Australia,

and account for 45% of world trade.

Progress on free trade initiatives was seriously

dented by the 1997-98 Asian crisis,

which hurt the economies of the

fast-growing newly industrialized countries

like South Korea and Indonesia,and the SARS epidemic of 2003.

But recently China suggested it would be interested in establishing a free-trade zone with the growingeconomies of South-east Asia.

http://www.apecsec.org.sg/

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Ch 2 Economic Integration