Global business environment Individual coursework
Nowadays, Regional integration by establishing trading bloc seems to be inevitable for most of countries because limited resources like oil and financial capital encouraged them to establish such a trading bloc like NAFTA. Among several trading bloc, European Union evolved more integrated politically and economically over last sixty years. Furthermore, European union have their own flag, parliament, council and commission. Every trading bloc must have their own characteristics in terms of politics and economics. What is similarities and differences between EU and other trading bloc? what kind of positive and negative influences has come to EU members and NAFTA members? In this essay, firstly writer will compare and contrast EU and NAFTA with the help of the level of regional economic integration. Secondly, similarities and differences between EU and NAFTA will be examined through backgrounds and history. In the end, positive and negative aspects from EU and NAFTA will be compared
Firstly, trading bloc characteristics can be differentiated by the level of regional economic integration. The free trade area, customs union, common market, economic union and political union are determined by the level of regional economic integrations. When the integration level is highest between countries in terms of economy and politics, it belongs to Political union however when it has lowest level, then it belongs to free trade area. Free trade area is least integrated level of economic integration. there is not tariff barrier in order to maximize the trade of goods and services between countries however when other countries export to countries where belongs to free trade area bloc, they have to pay differently to each countries. North America Free Trade association(USA,Canada,Mexico) can be typical example for this trading bloc. Within NAFTA, there is no tariff and trade barrier so that many foreign direct investment from USA to Mexico was executed at the beginning of the NAFTA. Customs union is the next level of free trade area. In this regional economic integration level, there is not tariff barrier however there is the same tariff when other countries export to trading bloc countries so that it is further integrated between countries and EU started as customs union as European community. This is one of remarkable difference between EU and NAFTA. Among NAFTA members, each members has different tariff and trade barrier to other countries. On the other hand, EU members have the same tariff to other countries. Common market is the next level of customs union. In this integration level, there are no restriction between countries so that labor and capital can be transferred without restriction between countries. EU passport is the example however in NAFTA trading bloc, either Canadian or Mexican cannot work without Visa in USA In Economic union level, fiscal and monetary policy between countries must be integrated and remarkable difference is that they have common currency like Euro. The following are the countries which uses euro common currency in euro zone. Even EU is not complete economic union because only 16 countries from all EU members use common currency because England was aware that the value of pound would be depreciated when pound would integrate with EURO currency. It seems to remove the exposure of risk in the movement of exchange rate when each countries trade each other however there is typical disadvantage like Greece financial crisis. The government of Greece could not print out the currency to pay debt due to Economic union characteristic. There is no possibility to make one currency between NAFTA members because most of all NAFTA is just free trade agreement rather than economic union and USA would not like to change their currency into others due to their value of dollar in the world. Dollar is vehicle currency which is world widely...
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