International

 Cooperation  Among  Nations

EB13F4
Tri  Djatmiko.
 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Big  Picture   and   Framework
Telkom  University
Managing  
The   Managing  
The  World   International  
International   International  
Marketplaces Business  
Environment Business
Operation

1. An  Overview  of   4. International  Trade   8. International 12. International Mar-­‐

International  &   &  Economic   Cooperation keting Manage-­‐
Global  Business Development ment
5. International   Among Nations 13. International Ope-­‐
2. The  Role  of   9. International Stra-­‐
Investments ration Manage-­‐
Culture  in   6. The  International   tegicl Management ment
International   Monetary  System  
10. Analyzing and En-­‐
14. International
Business   tering International
and  The  Balance  of   Financial, Tax &
3. The  Role  of  Ethics,   Payment Market Accounting
and  Social   11. International
7. Foreign  Exchange   Management
Organization Design
Respon-­‐sibility in   &  Financial  Market  
& Control, HRM and
Inter-­‐national   System
Labor Relations
Business

2 Creating the great business leaders

Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Contents
• Introduction: The International Cooperation
• The General Agreement on Tariffs and Trade
(GATT) & the World Trade Organization (WTO)
• Regional Economic Integration
• The European Union (EU)
• The ASEAN Economic Community (AEC)
• Other Regional Trading Blocs

3 Creating the great business leaders

Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business

Introduction:  The  International  Cooperation

4 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business The  International  Cooperation
• Governments all over realize that each is better off if they
cooperate & agree to forswear trade restriction
• International cooperative agreements form a major part of the
economic environment in which international business operate
• Of particular importance is the growth of regional trading blocs,
such as NAFTA (North American Free Trade Agreement), AFTA (Asia
Free Trade Area) etc.
• The boldest regional economic integration efforts is that the EU
(European Union) with 28 countries, most of whose members
(currently 19 countries) have replaced their national currencies
with a single currency, the Euro.
• The lattest Asean Economic Community which is effective starting
from beginning 2016, is also subject to be discussed
• Brexit, the UK is set to leave EU by April 2019, is the lattest
international cooperation.
5 Creating the great business leaders
 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business

The  General  Agreement  on  Tariffs  and  Trade  (GATT)  &  the  World  
Trade  Organization  (WTO)

6 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business GATT
• Developed as part of the Havana, Cuba, conference in 1947
• To ensure that post WW 2 international peace wouldn’t be threatened by
such trade wars
• Leading trading nations established ITO (International Trading Organization)
• Provided forum for trade ministers to discuss barriers to international
trade
• Instead, the ITO’s planned mission was taken over by the General Agreement
on Tariff & Trade (GATT)
• from 1947 to 1994, the signatories to the GATT fought to reduce barriers to
international trade
§ In January 1995, it was replaced by the WTO (World Trade
Organization), which adopted the GATT’s mission

7 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business The   Roles   of   GATT
• The GATT’s goal was to promote a free and competitive
international trading environment benefiting efficient producers by
sponsoring multilateral negotiations to reduce tariffs, quotas, and
other nontariff barriers.
• Because high tariffs were initially the most serious impediment to
world trade, the GATT first focused on reducing the general level of
tariff protection. It sponsored a series of 8 (eight) negotiating
“rounds”, generally named after the location where each round of
negotiations began during its lifetime.
• The cumulative effect of the GATT’s eight rounds was a substantial
reduction in tariffs. Tariffs imposed by the developed countries fell
from an average of more than 40 percent in 1948 to approximately
3 percent in 2005.
8 Creating the great business leaders
 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Negotiating  Trade  Rounds
Name Start Countries Subjects  covered/ Achievements
Sverage tariff  Cut  (%)
Geneva April  1947 23 Tariffs,  35% 45k  tariff  c oncession,  $10B  trade

Annecy/Fr April  1949 13 Tariffs,  NA 5k  tariff  c oncession

Torquay/UK Sept  1950 38 Tariffs,  25% 8.7k  tariff  c oncession,  25%  tariff  c ut

Geneva   Jan  1956 26 Tariffs,  admission     Jpn,  NA $2.5B  in  tariff  reductions

Dillon/Geneva Sept  1960 45 Tariffs,  NA $4.9B  worth  trff  c oncession

Kennedy/Gene-­ May  1964 62 Tariffs,  anti  dumping,  35% $4.0B  worth  trff  c oncession
va
Tokyo Sept  1973 102 Tariffs,  non  tariffs  measures,   $300B  worth  trff  reductions
33%
Uruguay Sept  1986 123 Tariffs,  non  tariffs  measures,   WTO,  40%  trff reductions,  
rules,  36% agricultural  subsidies,  textile  etc
Doha Nov  2001 159 Tariffs,  non  tariffs  measures,   Not  concluded.  Continued  to  Bali  
agrcltr Package  s igned  on  2013

9 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Most  Favored  Nation  Principle
• The most favored nation principle (MFN) requires that any preferential
treatment granted to one country must be extended to all countries.
• To help international businesses compete in world markets regardless
of their nationality, GATT sought to ensure that international trade was
conducted on a non discriminatory basis
• Under GATT rules, all members were required to utilize the MFN
principle in dealing with other members.
• For example: if the United States cut the tariff on imports of British
trucks to 20%, it also had to reduce its tariffs on imported trucks from
all other members to 20%
• Because of the MFN principle, multilateral, rather than bilateral, trade
negotiations were encouraged, thereby strengthening the GATT’s role.

10 Creating the great business leaders

Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Exemptions   to  MFN   Principle
1. To assist poorer countries in their economic
development efforts, the GATT permitted members to
lower tariffs to developing countries without lowering
them for more developed countries. In the U.S. tariff
code, such reduced rates offered to developing countries
are known as the generalized system of preferences
2. The second exemption is for regional arrangements that
promote economic integration, such as the EU and
NAFTA.

11 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business WTO
• The eighth and final round of GATT negotiations began in
Uruguay in 1986. The participants agreed to create the WTO.
• The World Trade Organization (WTO) came into being on
January 1, 1995. Headquartered in Geneva, Switzerland, as of
July 2016 the WTO includes 164 members and 22 observer
states.
• Members are required to open their markets to
international trade and to follow the WTO’s rules. The three
primary goals of the WTO are listed next.

12 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Goals   of   WTO
1. Promote trade flows by encouraging nations to adopt
nondiscriminatory, predictable trade policies
2. Reduce remaining trade barriers through multilateral
negotiations:
• In 1996, IT Agreement to eliminate tariffs on such products as
computers, S/W, fax machine & pagers
• In 1997, agreements covering financial services &
telecommunication
3. Establish impartial procedures for resolving trade disputes
among members

13 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Differences:  GATT   vs  WTO
Indeed, the GATT agreement was incorporated into the WTO
agreement. The WTO differs from the GATT in two important
dimensions:
• GATT focused on promoting trade in goods; whereas the WTO’s
mandate is much broader includes:
• trade in goods
• trade in services
• international intellectual property protection
• trade-­‐related investment
• WTO’s enforcement powers are stronger

14 Creating the great business leaders

Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business WTO’s  Trading  System  Principles

Source:  About  The  WTO,  www.wto.org

15 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business WTO   Challenges
The WTO faces variety of challenges. One is dealing with sectors of the
economy that seemingly receive government protection in every country
• The Cairns Group, a group of major agriculture exporters led by Argentina, Aussie etc
is pressuring is pressuring other members to ensure significant reduce barriers to
agriculture trade
• Multi-­‐fibre Agreement, similarly in textile trading
• General Agreement on Trade in Services (GATS), challenge faced by WTO in reducing
barriers to trade in services.
• Agreement on Trade-­‐Related Aspects of Intellectual Property Rights (TRIPS), how
the Uruguay round agreement substantially strengthened the protection granted to
owners of intellectual property rights and developed enforcement and dispute
settlement procedures to punish violators
• Trade-­‐Related Investment Measures Agreement (TRIMS) is but a modest start
toward eliminating national regulations on FDI that may distort or restrict trade

16 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Enforcement  of   WTO  Decisions
The enforcement power of the GATT was notoriously weak.
• Under WTO rules, a country failing to live up to the agreement—for
example, by imposing a nontariff barrier contrary to the WTO
agreement—may have a complaint filed against it.
• If a WTO panel finds the country in violation of the rules, the panel
will likely ask the country to eliminate the trade barrier.
• If the country refuses, the WTO will allow the complaining country to
impose trade barriers on the offending country equal to the damage
caused by the trade barrier.
• Furthermore, the offending country is not allowed to counter-­‐
retaliate by imposing new trade barriers against the complainant.

17 Creating the great business leaders

Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business

Regional  Economic  Integration

18 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Forms  of   Economic  Integration
Regional trading blocs differ significantly in form and function. The
characteristic of most importance to international businesses is the
extent of economic integration among a bloc’s members. This is of
utmost importance because it affects exporting and investment
opportunities available to firms from member and nonmember
countries. There are five different forms of regional economic
integration
Free  Trade  Area

Customs  Union

Common  Market

Economic  Union

Political  Union

19 Creating the great business leaders

Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Forms  of  Economic  Integration

(EU)

(CSME/Caribbean  S ingle  Market  &  E conomy)

(COMESA:  E astern  &  S outhern  Africa)

(Eurasian:  Belarus,  Kazakhtan &  Russia  )

(NAFTA/  North  American  Free  Trade  Agreement)

20 Creating the great business leaders

Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business

The  European  Union  (EU)

21 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business The   EU
• The creation of the EU was motivated by the desires of war-­‐weary Europeans to
promote peace and prosperity through economic and political cooperation
• The Treaty of Rome (1957) established the European Economic Community (EEC)
and called for the development of a common market among the six member states
(France, West Germany, Italy, and the Benelux)
• During the 1970s, the United Kingdom, Denmark, and Ireland joined the EEC, which
became commonly referred to as the European Community (EC)
• In 1993, the 12 EC members signed the Treaty of Maastricht; as a result of this
agreement, the EC became known as the EU. It became most important regional
trading bloc
• Today there are 28 member countries, with 511 million population (2017), &
combined GDP (PPP) of $20.7 trillion estimated in 2016
• The British government led by PM David Cameron held a referendum on the issue in
2016; a majority voted to leave the EU

22 Creating the great business leaders

Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business The   EU

23 Creating the great business leaders

Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Treaties  of   the   EU
Documents Signed  in  Force Notes
Brussels  Treaty 1948 Unconsolidated  body
Paris  Treaty 1951-­1952 ECSC  (coal  &  s teel)
Modified  Brussels  Treaty 1954-­1955 WEU
Rome  Treaties 1957-­1958 EURATOM  &  EEC
Merger  Treaty 1965-­1967 EC  s tarted
European  Council  c onclusion 1975 TREVI
Schengen  Treaty 1985 Schengen  Rules
Single  European  Act 1986-­1987 EPC  (political  coop)
Maastricht  Treaty 1992-­1993 3  Pillars  of  EU
Amsterdam  Treaty 1997-­1999 EC  announced
Nice  Treaty 2001-­2003 Withstand  Eastward  Expansion

Lisbon  Treaty 2007-­2009 To  complete  the  EU  

24 Creating the great business leaders

Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Governing  Organization  of   EU
The EU’s members are sovereign nations that have agreed to
cede certain of their powers to the EU. The EU can be
characterized both as an “intergovernmental government”
(because it is a government of national governments) and as a
“supranational government” (because it exercises power above
the national level). The EU is governed by four organizations
that perform its executive, administrative, legislative, and
judicial functions:
• The Council of the European Union (headquartered in Brussels, Belgium)
• The European Commission (also based in Brussels)
• The European Parliament (normally meets in Strasbourg, France)
• The European Court of Justice (sitting in Luxembourg)

25 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Three   Pillars   of   the   Maastricht  Treaty
The Maastricht Treaty rests on three “pillars” designed to further Europe’s
economic and political integration and these are:
• A new agreement to create common foreign and defense policies among
members
• A new agreement to cooperate on police, judicial, and public safety
matters
• The old familiar European Community, with new provisions to create an
economic and monetary union among member states
The Maastricht Treaty granted citizens the right to live, work, vote, and run
for election anywhere within the EU and strengthened the powers of the EU’s
legislative body, the European Parliament, in budgetary, trade, cultural, and
health matters. The treaty also created a new cohesion fund, a means of
funneling economic development aid to countries whose per capita GDP is less
than 90% of the EU average.
26 Creating the great business leaders
Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business The   Maastricht  Treaty

• The most important aspect of the Maastricht

Treaty was the establishment of the Economic
and Monetary Union.
• Instead of the economic & monetary union,
consumer protection issue is another important
aspect

27 Creating the great business leaders

Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Economic   and  Monetary  Union

• The creation of a single currency called the euro

• European Central Bank -­‐ responsible for
controlling the Euro-­‐zone’s money supply,
interest rates, and inflation

28 Creating the great business leaders

Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business EU   Currencies
Currency Region
Euro Euro  Zone  (19  countries):  Austria,  Belgium,  Cyprus,  
Estonia,  France,  Finland,  Germany,  Greece,  Ireland,  
Italy,  Latvia,  Lithuania,  Luxembourg,  Malta,  Netherland,  
Portugal,  Slovakia,  Slovenia,  Spain
Bulgarian  Lev Bulgaria
British  Poundsterling United  Kingdom
Croatian  Kuna Croatia
Czech  Koruna Czech  Republic
Danish  Krone Denmark
Hungarian  Forint Hungary
Polish  Zloti Poland
Romanian  Leu Romania
Swedish  Krona Sweden

29 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Consumer  Protection
• Consumer protection is a group of laws and organizations designed
to ensure the rights of consumers as well as fair trade,
competition & accurate information in the marketplace.
• The laws are designed to prevent businesses that engage in fraud
or specified unfair practices from gaining an advantage over
competitors.
• Consumer protection is linked to the idea of consumer rights, & to
the formation of consumer organizations, which help consumers
make better choices in the marketplace & get help with consumer
complaints.
• For example: a government may require businesses to disclose
detailed information about products –particularly in areas where
safety or public health is an issue-­‐, such as food
30 Creating the great business leaders
Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Components  of  The  Amsterdam  Treaty
The Amsterdam Treaty, officially amending the treaty of
the EU, the Treaties establishing the EC & certain related
acts, was signed on 2 Oct 1997, & entered into force on 1
May 1999, include:
• A strong commitment to attack the EU’s chronic high levels of
unemployment
• A plan to strengthen the role of the European Parliament by
expanding the number of areas that require use of the co-­‐
decision procedure
• Establishment of a two-­‐track system, allowing groups of
members to proceed with economic and political integration
faster than the EU as a whole

31 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Treaty   of   Nice
• The Treaty of Nice was signed by European leaders on 26 Feb 2001 &
came into force on 1 Feb 2003.
• It amended the Maastricht Treaty (Treaty on EU) & the Treaty of
Rome (Treaty establishing EEC).
• The Treaty of Nice reformed the institutional structure of EU to
withstand eastward expansion, a task which was originally intended
to have been done by The Amsterdam Treaty, but failed to be
addressed at the time
• It sought to reduce the risk of political gridlock as the number of
members increases
• reduced number of areas where unanimity is required for Council approval
• adjusted number of votes assigned to each Council member in determining
a qualified majority was also adjusted

32 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Current   Challenges  of   EU
• Currently, however, the EU faces:
• a range of political and economic pressures, including slow growth and
persistently high unemployment in many EU countries, as well as
• the rise of populist political parties, at least some of which harbor anti-­‐EU or
“euroskeptic” sentiments.
• Such factors are complicating the EU’s ability to deal with a multitude
of internal and external challenges.
• Among the most prominent are:
• the June 2016 vote in the United Kingdom (UK) in favor of leaving the EU
(BREXIT);
• the Greek debt crisis and lingering concerns about the eurozone, 2010;
• ongoing migrant and refugee flows;
• a resurgent Russia; and
• a heightened terrorism threat
Source: Archick, Kristin; The European Union, Current Chlallenges and Future Prospects, February 2017; Congressional
Researcg Service
33 Creating the great business leaders
 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business BREXIT
The reasons behind (some):
• The interference of EU
• The UK tax payer’s money goes directly into EU Pound 14.5 billion a
year
• The EU regulations cost UK business over Pound 600million/week
• Link between immigration & EU membership
• The British press is far more Eurosceptic now than it was 1975

34 Creating the great business leaders

Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business

ASEAN  Economic  Community  (AEC)

35 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business The   ASEAN   Members
• The Association of Southeast Asian
Nations (ASEAN) was established in
August 1967 to promote regional
political and economic cooperation.
• Its founding members were Brunei,
Indonesia, Malaysia, the Philippines,
Singapore, and Thailand.
• Cambodia, Laos, Myanmar, and
Vietnam joined during the 1990s.

36 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business ASEAN   Economic   Community   2015
• A Common Effective Preferential Tariff (CEPT) scheme to promote the free
flow of goods within ASEAN lead to the ASEAN Free Trade Area (AFTA).
• The AFTA is an agreement by the member nations of ASEAN concerning
local manufacturing in all ASEAN countries. The AFTA agreement was signed
on 28 January 1992 in Singapore.[
• When the AFTA agreement was originally signed, ASEAN had six members,
namely, Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand.
Vietnam joined in 1995, Laos and Burma in 1997, and Cambodia in 1999.
• The latecomers have not fully met the AFTA's obligations, but they are
officially considered part of the AFTA as they were required to sign the
agreement upon entry into ASEAN, and were given longer time frames in
which to meet AFTA's tariff reduction obligations
• The next step is ASEAN Economic Community (AEC)

37 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business The   AEC
vAEC Blueprint: Signed in vFour Pillars of AEC
2007
1. Single Market and Production
vDefined: The AEC will
“establish ASEAN as a Base
single market and 2. Competitive Economic Region
production base with the 3. Equitable Economic Develop-
goal of making ASEAN more
ment
dynamic and competitive.”
4. Integration into the Global
Economy
38 Creating the great business leaders
 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business The   Areas   of   Co-­‐operation
• Human resources development;
• Recognition of professional qualifications;
• Closer consultation on macroeconomic and financial policies;
• Trade financing measures;
• Enhanced infrastructure and communications connectivity;
• Development of electronic transactions through e-­‐ASEAN;
• Integrating industries across the region to promote regional sourcing; and
• Enhancing private sector involvement
• Through the free movement of:
• skilled labour,
• goods,
• services and
• investment,
• ASEAN will rise globally as one market with each member gaining from each
other's strengths,
• thus increasing its competitiveness and opportunities for development
39 Creating the great business leaders
 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Benefitting   from  the   AEC
1. Achieving the objectives of AEC translates to a better
investment climate in ASEAN.
2. The AEC facilitates the implementation of trade,
services, investment, and other reforms necessary in
each ASEAN Member States, thereby improving each
country’s location offers.
3. At the regional level, the AEC is critical in developing
the ASEAN as a region and making it one of the most
competitive economic blocs in the world.
(Invest in ASEAN, 16 October 2018)

40 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business ASEAN   Financial  Integration
• The AEC is the end-­‐goal of economic integration as outlined in the
ASEAN Vision 2020;
• to establish a single market and production base,
• characterised by the free movement of goods, services, investment, and a
freer flow of capital
• also facilitate the movement of businessmen, skilled labour, and talent
within the region;
• adoption of an ASEAN common currency
• Under the roadmap, approaches and milestones have been
identified in areas deemed crucial to financial and monetary
integration, namely:
• capital market development,
• capital account liberalisation,
• financial services liberalisation, and
• ASEAN currency co-­‐operation

41 Creating the great business leaders

Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business

Other  Major  Trading  Blocs

42 Creating the great business leaders

Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business North  American   Free   Trade  (NAFTA)
• Implemented in 1994 to reduce barriers to trade and
investment among Canada, Mexico, and the United
States
• It superseded the Canada-­‐ US Free Trade Agreement
• NAFTA has 2 supplements;
• North American Agreement on Environmental Cooperation
(NAAEC)
• North American Agreement on Labor Cooperation (NAALC)

43 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business Major  Regional  Trade  Associations
Every inhabited continent now contains at least one regional trading group. Europe, for example, has
many other smaller trading blocs, such as the European Free Trade Association, the European
Economic Area, and the Eurasian Economic Community. Trading blocs also exist in the Americas and
Asia.
• AFTA ASEAN Free Trade Area
• ANCOM Andean Community
• APEC Asia-­‐Pacific Economic Cooperation
• CACM Central American Common Market
• CARICOM Caribbean Community and Common Market
• CEMAC Monetary and Economic Community of Central Africa
• CER Australia–New Zealand Closer Economic Trade Relations Agreement
• ECOWAS Economic Community of West African States
• EU European Union
• EFTA European Free Trade Association
• GCC Gulf Cooperation Council
• MERCOSUR Southern Cone Customs Union
• NAFTA North American Free Trade Agreement
• SADC Southern African Development Community

44 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis   Free  Trade  Agreements  (FTA)  in  Central  and  South  America  and  the  
School   Economics   and   Business
Caribbean
• In 1983 the United States established the Caribbean Basin Initiative to facilitate the economic
development of the countries of Central America and the Caribbean Sea. The Caribbean Basin
Initiative (CBI) overlaps two regional free trade areas: the Central American Common Market
and the Caribbean Community and Common Market. The CBI, which acts as a unidirectional
free trade agreement, permits duty-­‐free import into the United States of a wide range of goods
that originate in Caribbean Basin countries, or that have been assembled there from U.S.-­‐
produced parts.
• The Central America-­‐Dominican Republic Free Trade Agreement (CAFTA-­‐DR). This agreement
among the United States, the five nations constituting Central America (Costa Rica, El Salvador,
Guatemala, Honduras, and Nicaragua) and the Dominican Republic was signed in 2004.
• The Mercosur Accord. In 1991, the governments of Argentina, Brazil, Paraguay, and Uruguay
signed the Mercosur Accord, an agreement to create a customs union among themselves. They
agreed to establish common external tariffs and to cut, over four years, their internal tariffs on
goods that account for 85 percent of intra-­‐Mercosur trade.
• Andean Community. The Andean Community resulted from a 1969 agreement to promote
free trade among five small South American countries—Bolivia, Chile, Colombia, Ecuador, and
Peru—to make them more competitive with the continent’s larger countries.
45 Creating the great business leaders
 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business APEC
• Asia-­‐Pacific Economic Cooperation (APEC) includes 21 countries from
both sides of the Pacific Ocean. It was founded in 1989 in response to
the growing interdependence of the Asia-­‐Pacific economies.
• A 1994 APEC meeting in Indonesia led to a declaration committing
members to achieve free trade in goods, services, and investment
among members by 2010 for developed economies and by 2020 for
developing economies.
• This objective was furthered at APEC’s 1996 meeting in Manila, where
many countries made explicit pledges to reduce barriers to Asia-­‐Pacific
trade.
• In 2004, merchandise exports from APEC members were valued at more
than $4.0 trillion and represented about 44% of total world
merchandise exports.

46 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business FTA   in  Africa
• Many African countries have also established regional trading blocs. The most
important of these groups are:
1. the Southern African Development Community (SADC),
2. the Monetary and Economic Community of Central Africa (CEMAC), and
3. the Economic Community of West African States (ECOWAS)
• Although these groups were established during the 1970s and early 1980s, they
have not had a major impact on regional trade. This is due to inadequate
intraregional transportation facilities and the failure of most domestic
governments to create economic and political systems that encourage significant
regional trade.
• Intra-­‐Africa trade to date accounts for less than 10 percent of the continent’s total
exports.

47 Creating the great business leaders

 Fakultas    Ekonomi  dan  B isnis  
School   Economics   and   Business References
• Ricky W. Griffin, Michael W. Pustay, ” International Business, a
Managerial Perspective”, 8th edition 2015, Pearson, USA. Chapter 10
• David R. Fred, David R. Forest. 2015. Strategic Management, Concept
and Cases. Fifteenth Edition. UK: Pearson Education Limited. Chapter 3.
• John J. Wild, Keneth L. Wild, ”International Business: The Challenges of
Globalization”,8th edition, 2015, Prentice-­‐Hall, USA. Chapter 8
• Thomson, Arthur A; Gamble, Margaret A; Gamble, John E; and
Strickland III, A J, “Crafting and executing strategy”, 19th edition, 2014,
McGraw Hill, USA. Chapter 9
• About The WTO, www.wto.org
• Archick, Kristin; The European Union, Current Chlallenges and Future
Prospects, February 2017; Congressional Research Service
• Invest in ASEAN, 16 October 2018,
48 Creating the great business leaders