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Ch.6: International Environment:Regional Political & Economic

Integration

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Levels of Economic Integration

Free Trade Area

Customs Union

Common Market

Economic Union

Political Union

Level of Integration

NAFTA

EU 1992

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Economic Case for Regional Integration

Stimulates economic growth in countries Countries specialize in those goods and

services efficiently produced. Additional gains from free trade beyond

international agreements such as GATT and WTO.

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Political Case for Economic Integration

Economic interdependence creates incentives for political cooperation and reduces potential for violent confrontation.

Together, the countries have the economic clout to enhance trade with other countries or trading blocs.

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Political World Map

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Regional Economic Integration

Agreements among countries in a geographic region to reduce, and ultimately remove, tariff and nontariff barriers to the free flow of goods, services and factors of production among each other.

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The European Union [EU]

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European Union and the US(April, 1998) Europe* USA

Population (mm) 300 267.7% of World GDP 19.4% 19.6%% of World Trade 18.6% 16.6%GDP Growth 2.4% 3.8%Budget Balanceas % of GDP

- 2.8% 0

*Countries likely to be part of common currency: Austria, Belgium, Finland, France, Germany, Ireland, Italy,Luxembourg, Netherlands, Portugal and Spain.

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EU Governance

Heads of State and

CommissionPresident

1 representative

from each member

20 Commissioners appointed by members for 4 year terms

European Council

Resolves policy issues Sets policy direction.

European Commission Proposing,

implementing, monitoring legislation.

Council of MinistersUltimate controlling authority. No EU laws w/o approval. European

Parliament630

directly elected

members

Propose amendments to legislation, veto power over budget and single-market legislation, appoint commissioners.

1 judge from each country

Court of Justice

Hears appeals of EU Laws.

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North American Free Trade Agreement

Became law: January 1,1994 Over 15 year period:

tariffs reduced (99% of goods traded) NTBs reduced investment opportunities increased

Protects intellectual property Applies national environmental standards Special treatment for many industries

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Andean PACT

Map

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ANCOM: Andean Pact Bolivia, Colombia, Ecuador, Peru,

Venezuela Cartagana Agreement, 1969. One of oldest

still in existence Population: 97 mm (14% of hemisphere) GNP: $122.6 billion Changed from FTA to customs union in

1992

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Mercosur

Map

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The Mercosur Accord

1988: Argentina, Brazil. 1990: Paraguay, Uruguay

1995: Agreed to move toward a full customs union.

Population: 209 mm (27% of hemisphere) GNP: $656.6 billion (8% of hemisphere) Trade doubled in first 3 years

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Other Hemisphere Associations

Central American Common Market CARICOM Free Trade Area of the Americas

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ASEAN

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Association of Southeast Asian Nations

Created in 1967 400 million citizens Economic, political and social cooperation Brunei, Indonesia, Malaysia, the

Philippines, Singapore, Thailand and Vietnam.

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Asia Pacific Economic Cooperation

Founded in 1989 to ‘promote open trade and practical economic cooperation’. ‘Promote a sense of community’.

18 members GDP: $13 trillion (1995) 50% of total world income 40% of global trade