Table of ContentsIntroduction.................................................................................................................................................2
Regional integration and Economic Blocs....................................................................................................2
Most Famous economic blocs.....................................................................................................................3
How did the EU influence on the automakers HONDA?..............................................................................4
EFTA.............................................................................................................................................................5
Swiss benefits from EFTA.............................................................................................................................6
1. Machinery............................................................................................................................................6
2. Pharmaceuticals..................................................................................................................................6
3. Chemicals.............................................................................................................................................7
4. Instruments and measuring devices....................................................................................................7
5. Watches...............................................................................................................................................8
NAFTA..........................................................................................................................................................8
How did NAFTA help Mexican companies?.................................................................................................8
MERCOSUR..................................................................................................................................................9
CARICOM...................................................................................................................................................11
Some benefits of the CARICOM Single Market and Economy are:........................................................12
APEC benefits for Australia........................................................................................................................12
COMUNIDAD ANDINA DE NACIONES (CAN)..............................................................................................13
CER............................................................................................................................................................14
ASEAN........................................................................................................................................................15
ASEAN- an opportunity..............................................................................................................................16
CONCLUSION.............................................................................................................................................17
1
IntroductionA large number of diverse regional economic arrangements have evolved over the past
half century with an especially creative burst of regionalism over the past fifteen years.
This trend toward regionalism occurs as markets become more integrated on a regional
and global basis. Does the integration of markets for goods, services and capital drive
the creation of regional institutions? Or, does the creation of regional institutions drive
the integration of markets? The short answer is that the relationship is reciprocal but not
Deterministic; it varies across regions and is conditioned by several contextual factors.
My project examines the reciprocal relationship between economic integration and
institutional integration.
Regional integration and Economic BlocsRegional economic integration involves groups of countries forming alliances to promote
free trade, cross-national investment, and other mutual goals. This integration results
from regional economic integration blocs in which member countries agree to eliminate
tariffs and other restrictions on the cross-national flow of products, services, capital and
in more advanced stages labor within the bloc. The countries in an economic bloc
become parties to a free trade agreement, which eliminates tariffs, quotas and other
trade barriers. The countries that become members of an economic bloc, there are
various stages of the regional integration. First stage is the free trade area in which
tariffs and other trade barriers are eliminated and that emerge when nations sign a free
2
trade agreement. Second is the customs union-a free trade area in which common trade
barriers are imposed on nonmember countries. Third is the common market-a customs
union in which factors of production moves freely among the members and the last type
of the regional integration are the economic union-common markets in which some
important policies are harmonized among the member states.
Most Famous economic blocsThere are roughly 200 economic integration agreements in the world. The European
Union is the most advanced among the blocs, comprising 27 countries in Europe. The
European Union has increased market access, improved trade rules, and harmonized
standards among its members.EU was formed after the world war 2 with the main
objective of peace and prosperity between the countries that were in war. During the
years the EU advanced more and more and it still continues to develop itself. Nowadays
EU is much more that bringing peace among the countries- today Europe is also home
to the European trade agreement association. This agreement allows free trade among
the 27 member states. Outside Europe there are others blocs such as the one in the
Americas the North American Free Trade Agreement (NAFTA). This bloc is conducted
of Canada, Mexico and the United States of America. Other economic blocs in the
Americas include MERCOSUR, CARICOM, and CAN. In the Asia/Pacific region,
ASEAN, APEC, and the Australia and New Zealand Closer Economic relations
Agreement (CER) are the leading blocs. Economic blocs in Africa and the Middle East
have experienced only limited success.
3
How did the EU influence on the automakers HONDA?
We all know that Honda is the first Japanese automobile and motorcycle manufacturer.
Honda key assembly affiliates are Honda industry in Italy and “Montessa” Honda in
Spain. These companies were designed in the first place for concentration on the
assembly of specific types of motorcycle model appropriate too different European
location in order to benefit from various economies. At the same time each assembler
exported its own model to the other Honda locations in Europe in order to gain
economies in joint production and marketing- in other words any given model is
produced in one location, but a full range of models is offered for sale in all locations.
Finally, in the international context, Honda European models are also exported to its
subsidiaries in USA, Brazil and Japan while its European network imports large and
medium-sized motorcycles from its USA and Brazil affiliates. As far the engine parts are
concerned Honda supplies were initially from France. And thanks to the EU there are no
trade barriers between Spain and France which allows the multinational companies
such as Honda free trade with other member states. Another benefit for Honda is the
lower average costs and by far larger market conducted of nearly 490 million
consumers.1
1 From the book “International Human resource management” may 20074
EFTA
The European Free Trade Association (EFTA) was established in 1960 by the
Stockholm Convention. The original purpose of this intergovernmental organization was
to remove customs duties on industrial products in trade among its Member States. The
current members of EFTA are Iceland, Liechtenstein, Norway and Switzerland. In
contrast to the European Union (EU), EFTA is not a customs union. Individual EFTA
States are basically free to set their own customs tariffs and arrange other foreign trade
measures vis-à-vis non-EFTA States. EFTA States have been using EFTA as a
platform for the joint negotiation of FTAs with third countries outside the EU. Fifteen
such agreements are currently in force and a number of agreements are being
negotiated.
5
Swiss benefits from EFTA2
Switzerland is an important exporter of capital goods and intermediate inputs for mining,
forestry, paper production, agriculture and fisheries. As these sectors grow, exports
opportunities should also increase. In 2005 and 2006, the value of Swiss exports to
Chile grew by nearly 20% per year and consolidated in 2007.
1. Machinery With strong pressure on prices, Swiss products may face difficulties linked with currency
fluctuations and with increased competition from Asia. In 2007, machines made 35% of
total Swiss exports to Chile - The export of non-electrical machines declined by 17%
while the export of electrical machines grew by 57%. No association represents the
machine sector in Chile.
2. Pharmaceuticals This sector is the second largest Swiss export sector to Chile. In 2007, Swiss
pharmaceuticals exports to Chile increased by 27%. Drugs from Swiss companies are
also imported from other production sites. Both Novartis and Roche operate in Chile.
None of them has production or research sites. In recent years, a significant problem
has been Chile’s often inadequate intellectual property laws, which have allowed local
2 The Impact of the European Community's internal market on the EFTA-By Richard K. Abrams
6
pharmaceutical companies to produce and commercialize copies of new and patented
drugs. Chile is slowly adapting its legislation but it remains to be seen whether the
situation for investigative laboratories will be significantly modified. Chile is on the
Priority Watch List of the United States Trade Representative and belongs to the
countries where intellectual property rights are not sufficiently enforced.
3. Chemicals Chemicals are the fourth largest Swiss export sector to Chile. Products sold to Chile by
Swiss firms are increasingly supplied by their subsidiaries from the US, UK, China,
Brazil and other countries. Factors such as strategic restructuring, competition and the
depreciation of the dollar against the CHF and Euro (which cannot be passed on to the
buyers as prices are set in USD) contribute to shifts in trade flows.
4. Instruments and measuring devices As with machinery, price competition plays an important role. The depreciation of the
USD3 has increased the competitiveness of US producers. There is a market for Swiss
high quality products in the mining and paper industries.
5. Watches The sales of Swiss watches – luxury items – fluctuate with business cycles. With good
economic forecasts for the near future, demand for Swiss watches should continue to
grow. In 2007, Swiss exports of watches to Chile increased by 30%.
By Gary Clyde Hufbauer, Jeffrey J. Schott
3 United states dollar-US currency7
NAFTA4
NAFTA is the most significant economic bloc in the Americas. NAFTA was launched in
1994. Its passage was smoothed by the existence, since the 1960s. For its members
countries (USA Canada, Mexico) the NAFTA agreement increased market access. The
agreement eliminated tariffs and trade between member states. It has also established
trade rules and uniform customs procedures and regulations, while prohibiting the use
of standards and technical regulations as trade agreements.
How did NAFTA help Mexican companies?Mexico benefited greatly from NAFTA. The access to USA and Canada helped many
Mexican companies in industries such as electronics, automobiles, textiles, medical
products, and services. For example: Mexico now has 100 million-per-year dental
supply industry, in which entrepreneurs export labor-intensive products such as braces,
dental wax, and other tools used in dental work to the united states. Annual foreign
investment in Mexico rose from 4 billion dollars in 1993 to nearly 20 billion dollars by
2007 as United States of America and Canadian firms invested in their southern
neighbor. In the years following NAFTA’s passage, Mexico’s per capita income rose 4 North American free trade agreement
8
substantially, to about 11 000 dollars in 2007, making Mexico the wealthiest country in
Latin America in terms of per capita income. Nevertheless, increased purchasing power
of Mexican consumers meant that they could afford to buy products from Canada and
USA.
MERCOSUR
MERCOSUR, consisting of Argentina, Brazil, Paraguay, and Uruguay, is the third
largest preferential trading group in the world. Since its inception in 1991, MERCOSUR
has made considerable progress in integrating the economies of its members. The
integration--- an almost complete free trade area and a partial customs union-has been
accompanied by a significant increase in U.S. exports and investment to the region. In
general, the United States has viewed the evolution of MERCOSUR as being supportive
of its political interests as well, although MERCOSUR is seen as favoring a slower
approach to hemispheric economic integration. In the future, MERCOSUR faces
challenges affecting the size of its membership, the depth of its integration, and the
strength of its institutions
How MERCOSUR did help its members?
The impact of the creation of MERCOSUR has also been reflected in the increasing flow of
intraregional investments. Macroeconomic stability in Argentina, together with the strong
9
economic growth seen in the last four years in this country, has created incentives for both
investors in the sub region and multinational corporations. In response to the opportunities
afforded by a larger economic market, multinational corporations have formed partnerships with
entrepreneurs in the sub region or have set up subsidiaries in a broad range of production and
commercial sectors. In the automotive sector, for example, there have been complementary
production agreements and other arrangements to encourage specialization. In the areas of
food, textiles, plastics and construction materials, partnerships have been set up between
Brazilian and Argentine producers. The abundant supply of energy in Paraguay has attracted
investment in the chemical sector. There has also been increased growth in services, including
investment in tourism in Uruguay and Brazil, the establishment of branches of foreign banks in
Montevideo and Buenos Aires, and the interest shown by Chilean investors in insurance and
reinsurance. To a large extent, the increased flow of investments to the sub region can be
attributed to privatization programs and greater liberalization in these countries, but the
reduction of barriers to foreign investment has also played a significant role.
10
5
CARICOMThe Caribbean Community (CARICOM), is an organization of 15 Caribbean nations
and dependencies. CARICOM's main purposes are to promote economic integration
and cooperation among its members, to ensure that the benefits of integration are
equitably shared, and to coordinate foreign policy. Its major activities involve
coordinating economic policies and development planning; devising and instituting
special projects for the less-developed countries within its jurisdiction; operating as a
regional single market for many of its members (CARICOM Single Market); and
5 Indicator of the export by destination and the correlation between MERCOSUR and other blocs11
handling regional trade disputes. The secretariat headquarters is based in Georgetown,
Guyana.
Some benefits of the CARICOM Single Market and Economy are: Increased production and trade in goods and services in a combined market of over
approximately million persons and for the world beyond
Competitive products of better quality and prices
Improved services provided by enterprises and individuals, including transportation
and communication
Greater opportunity for travel
Opportunities for nationals to study and work in CARICOM countries of their choice
Increased employment and improved standards of living
APEC benefits for Australia6
A continent between the Indian Ocean and South Pacific Ocean, Australia is the
smallest continent and the sixth largest economy in the world. The continent is
approximately 7.6 million kilometers mostly of plateaus, deserts, and fertile plains in the
southeast. Its 19.4 million populations is concentrated along the eastern and
southeastern seaboard, mainly in cities or major regional centers. Australia is a
resource rich economy with a wide range of mineral, energy and other resources.
In the past eleven years until 2001, Australia’s economic growth has averaged around
3.6 percent per year. In 2001, GDP was about US$ 467 billion (1995 US$ at PPP) and
6 From the book “Asian recorder” published 199712
the unemployment rate was around 6.9 percent. The Australian economy has remained
relatively robust through the global economic slowdown during the last few years, owing
much to the buoyant property market and strong domestic demand. Australia has
avoided recession in the global slowdown, and is expected to continue to outperform
most developed economies in 2004.Over 70 percent of Australia’s international trade is
with APEC7 economies and around 60 percents within Asia. Australia is a major
exporter of coal, LNG and uranium with the resource sector being the largest exporting
sector of the Australian economy, comprising over 35 percent of Australia’s export
earnings. Consequently, the Australian economy is sensitive to changes in foreign
earnings arising from fluctuations in resource prices on international markets.
COMUNIDAD ANDINA DE NACIONES (CAN)8
The original Andean Pact was founded in 1969 by Bolivia, Chile, Colombia, Ecuador
and Peru. In 1973, the pact gained its sixth member, Venezuela. In 1976, however, its
membership was again reduced to five when Chile withdrew. Venezuela announced its
withdrawal in 2006, reducing the Andean Community to four member states. Recently,
with the new cooperation agreement with MERCOSUR, the Andean Community gained
four new associate members: Argentina, Brazil, Paraguay and Uruguay. These four
MERCOSUR members were granted associate membership by the Andean Council of
7 Asia Pacific Economic Cooperation-incorporates 21 nation .It members account 85%of total regional trade
8 CAN is expected to merge with MERCOSUR to form a new economic bloc13
Foreign Ministers meeting in an enlarged session with the Commission (of the Andean
Community) on July 7, 2005. This moves reciprocates the actions of MERCOSUR
which granted associate membership to all the Andean Community nations by virtue of
the Economic Complementarity Agreements (Free Trade agreements) signed between
the CAN and individual MERCOSUR members.
CERCloser Economic Relations (CER) is a free trade agreement between the
governments of New Zealand and Australia. It is also known as the Australia New
Zealand Closer Economic Relations Trade Agreement (ANZCERTA) and
sometimes shortened to (CERTA). It came into force on 1 January 1983, although the
actual treaty was not signed until 28 March 1983 .One of the most important results of
CER was the Protocol on the Acceleration of Free Trade in Goods, which resulted into
the total elimination of tariffs or quantitative restrictions between the two countries by 1
July 1990.Advantages for theirs companies are not very much comparing to the other
bigger blocs such as EU, NAFTA…. with way bigger market but anyhow there are still
advantages for their companies such as no trade barriers which mean they can import
inputs that are needed to make the product, increased productivity, lowering average
cost etc.
ASEAN
14
The Association of Southeast Asian Nations (ASEAN) is a geo-political and
economic organization of 10 countries located in Southeast Asia, which was formed on
8 August 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand.9 Since
then, membership has expanded to include Brunei, Burma (Myanmar), Cambodia,
Laos, and Vietnam. Its aims include the acceleration of economic growth, social
progress, cultural development among its members, the protection of the peace and
stability of the region, and to provide opportunities for member countries to discuss
differences peacefully.
In 2005, the bloc spanned over an area of 4.46 million km2 with a combined GDP of
about USD896.5 billion/2,728 billion dollars growing at an average rate of around 5.6%
per annum. In 2008, its combined GDP had grown to more than USD $1.5 trillion with a
population of approximately 580 million people
ASEAN- an opportunity Southeast Asia has benefited from the emergence of the new regional economic actors,
which reflects shits in international competitiveness. Japanese industry moved to the
9 “Bangkok Declaration”14 March 2007.15
ASEAN countries following the 1986 yen appreciation in response to the declining
competitiveness of the Japanese home based production. The major relocated
industries were those in which US companies were not major players and in which
European companies were similarly affected by rising home currencies and responded
also by relocating to ASEAN countries. More recently the emergence of rapidly growing
china and of Vietnam and Burma as markets for ASEAN commodity and manufactured
exports and destinations for ASEAN commodity and manufactured exports and
destinations for ASEAN investment is contributing to regional growth and increased
regional integration. For instance Singapore is Vietnam’s largest trade partner while its
main investors are from Taiwan and Hong Kong. China is also beginning to invest in
Southeast Asia with more than 50 companies expected to set up shop in Singapore
alone in 1993 and a state-owned weapons manufacturer announcing the establishment
of assembly operations in Malaysia for the local market for export10
CONCLUSION
According to my paper I assume that economic regional integration are vital for the
people in general and we as a country should do whatever it takes to achieve the
10 Lynda c Lyn “Models and Partners”16
privilege of being part of a regional bloc in our case part of the EU. Macedonia has 2
million consumers and with the absence of trade barriers with other countries the EU
would give Macedonian firms easier access to a total market of around 490 million
buyers. Having this in mind my comment is that our governments countries should try
harder to resolve issues with the member states in order to enter the EU so can we as a
country have the same opportunities with some of the countries I have mentioned above
in my research.
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THE ROLE OF THE REGIONAL
ECONOMIC INTEGRATION ON THE
INTERNATIONAL BUSINESS
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