Cross-National Cooperation and Agreements

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Week 14
International Business
Cross-National Cooperation and Agreements

*1 Economic Integration
-Approaches to economic integration may be:
-Bilateral integration – two countries cooperate closely, usually in the form of tariff reductions -Regional integration – a group of countries located in the same geographic proximity decide to cooperate, i.e. the European Union -Global integration – countries worldwide cooperate through the WTO

*2 The World Trade Organisation
-GATT: Predecessor to the WTO
-Most Favoured Nation
-Dispute Settlement
-The Rise of Bilateral Agreements

Regional Economic Integration
-Regional trade agreements – integration confined to a region and involving more than two countries -Geographic proximity is an important reason for economic integration

Major Types of Economic Integration
-Free trade area – no internal tariffs
-Customs union – no internal tariffs plus common external tariffs -Common market – customs union plus factor mobility

*3 Effects of Integration
-Static Effects
-Dynamic Effects
-Trade Creation
-Trade Diversion
-Economies of Scale
-Increased Competition

Major Regional Trading Groups
-European Union
-North American Free Trade Agreement
-The Americas: CARICOM, MERCOSUR, CAN, LAIA
-ASEAN
-APEC
-The African Union

*4 European Union
-Predecessors
-Organisational Structure
-The Single European Act
-Monetary Union
-Expansion
-Bilateral Agreements

*5 How to Do Business with the EU: Implications for Corporate Strategy -Companies need to determine where to produce products
-Companies need to determine that their entry strategy will be -Companies need to balance the commonness of the EU with national differences

*6 NAFTA Rational
-US – Canadian trade is the largest bilateral trade in the world -The US is Mexico’ and Canada’s largest trading partner

Rules of Origin and Regional Content
-Rules of origin-goods and services must originate in North America t get access to lower tariffs -Rules of Regional Content – 50% of the net cost of most products must come from NAFTA region

*7 Impact of NAFTA
-Wages, Investment, and Labour: An abundance of cheap labour and lax environmental standards has enticed US companies to invest heavily in Mexico -A major Challenge to NAFTA is illegal immigration

*8 How to Do Business with NAFTA: Implications for Corporate Strategy -Predictions and Outcomes:
-Companies would look at NAFTA as one big regional market -US companies would run Canadian and Mexican companies out of business once the markets opened up -Mexico looked at as a consumer market rather than a production location

*9 Regional Economic Integration in the Americas
-The Caribbean Community (CARICOM)
-MERCOSUR
-The Andean Community (CAN)
-Latin American Integration Association (LAIA)

Economic Integration in Central America and the Caribbean
*see lecture slides for Economic Integration in Central America and The Caribbean Map

*10 Regional Economic Integration in Asia
-Association of Southeast Asian Nations (ASEAN)
-Brunei Darussalam, Cambodia, China, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam

*11 Calls for Closer Cooperation
-Asia Pacific Economic Cooperation (APEC)
-Challenges to Solidity:
-Lack of binding treaties
-Goal of “Open Regionalism”:
-Trade liberalisation to non-APEC countries on an unconditional, MFN, or reciprocal basis

Regional Economic Integration in Africa
-There are several African trade groups, but they rely more on their former colonial owners and other developed markets for trade than they do on each other

*12 Future: Will the WTO Overcome Bilateral and Regional Integration Efforts? -Regional integration might actually help the WTO achieve its objectives -NAFTA and the EU will continue to develop stronger linkages and expand -Regional integration in Africa will continue at a slow pace due...
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