9/27/2020

Regional Market Introduction

Characteristics
and Preferential
Trade • This chapter looks
at:
Agreements
– Global trade
organizations
– Four types of
agreements
Global Marketing – Individual countries
Chapter 3 and their preferential
trade agreements

1 3-2
©2011 Pearson Education, Inc. publishing as Prentice Hall

The World Trade

GATT
Organization

• General Agreement on Tariffs and • Forum for trade-

related
Trade negotiations
– Treaty among nations to promote trade among 150
among members established in 1947 members
• Handled trade disputes – Based in Geneva
– Serves as dispute
• Lacked enforcement power mediator through
• Replaced by World Trade Organization in DSB
1995 – Has enforcement
power and can
3-3 impose sanctions 3-4
©2011 Pearson Education, Inc. publishing as Prentice Hall ©2011 Pearson Education, Inc. publishing as Prentice Hall

1

WTO Structure
3-5
©2011 Pearson Education, Inc. publishing as Prentice Hall
Free Trade Area
• Two or more countries agree to
abolish tariffs and other barriers
to trade amongst themselves
• Countries continue independent
trade policies with countries
outside agreement
• Rules of origin requirements
restrict transshipment of goods
from the country with the lowest
tariff to another
NAFTA Protest in Ottawa
3-7
©2011 Pearson Education, Inc. publishing as Prentice Hall
9/27/2020
Preferential Trade
Agreements
• Many countries seek to lower barriers to
trade within their regions
• PTAs give partners special treatment
and may discriminate against others
• Over 150 PTAs have been notified to
the WTO
3-6
©2011 Pearson Education, Inc. publishing as Prentice Hall
Customs Union
• Evolution of Free Trade Area
• Includes the elimination of internal barriers to
trade (as in FTA)
• AND establishes common external barriers to
trade
• Examples: The EU and Turkey, the Andean
Community, Mercosur, CARICOM, Central
American Integration System (SICA)
3-8
©2011 Pearson Education, Inc. publishing as Prentice Hall
2
 9/27/2020

Common Market Economic Union

• Includes the elimination of internal • Includes the elimination of internal barriers to

barriers to trade (as in free trade area) trade (as in free trade area)
• AND establishes common external barriers to
• AND establishes common external trade (as in customs union)
barriers to trade (as in customs union) • AND allows for the free movement of factors
• AND allows for the free movement of of production, such as labor, capital, and
information (as in common market)
factors of production, such as labor,
• AND coordinates and harmonizes economic
capital, and information and social policy within the union

3-9 3-10
©2011 Pearson Education, Inc. publishing as Prentice Hall ©2011 Pearson Education, Inc. publishing as Prentice Hall

Economic Union North America—NAFTA

European
Union Flag • Canada, United States, Mexico
• Full evolution of economic union • NAFTA established free trade area
– creation of unified central bank –All three nations pledge to
promote economic growth
– use of single currency
through tariff reductions and
– common policies on issues such as expanded trade and
agriculture, social policy, transport, investment
competition, mergers, taxation –No common external tariffs
– requires extensive political unity –Restrictions on labor and
other movements remain
– would lead to a central government in time
3-11 3-12
©2011 Pearson Education, Inc. publishing as Prentice Hall ©2011 Pearson Education, Inc. publishing as Prentice Hall
U.S.-Mexico Border Crossing

3
 9/27/2020

NAFTA Income and Population U.S. Goods Exports in 2008

3-13 3-14
©2011 Pearson Education, Inc. publishing as Prentice Hall ©2011 Pearson Education, Inc. publishing as Prentice Hall

U.S. Goods Imports in 2008 Latin America: SICA, Andean

Community, Mercosur, CARICOM

• Includes the Caribbean, Central, and

South America
• History of no growth, inflation, debt,
and protectionism has given way to free
markets, open economies, and
deregulation
• Some concern for further growth with
the rise of left-leaning politicians

3-15 3-16
©2011 Pearson Education, Inc. publishing as Prentice Hall ©2011 Pearson Education, Inc. publishing as Prentice Hall

4
 9/27/2020

Central American Integration

Andean Community
System (SICA)
• El Salvador, Honduras, • Bolivia, Colombia,
Guatemala, Nicaragua, Ecuador, Peru,
Costa Rica, and Panama Venezuela
• Moving towards a • Customs Union
common market – Abolished foreign
• Common External Tariff exchange, financial
of 0 to 15% and fiscal incentives,
• Retains tariffs on goods and export subsidies
also produced in – Established common
importing country external tariffs

3-17 3-18
©2011 Pearson Education, Inc. publishing as Prentice Hall ©2011 Pearson Education, Inc. publishing as Prentice Hall

Common Market of the South MERCOSUR

(MERCOSUR)
• Argentina, Brazil, Paraguay, Uruguay,
Venezuela
• Customs union, seeks to become common
market
– Internal tariffs eliminated
– Established common external tariffs up to 20%
– In time, factors of production will move freely
through member countries
• Chile, Colombia, Ecuador, Peru, Bolivia
– Associate members
– Participate in free trade area but not customs union
3-19 3-20
©2011 Pearson Education, Inc. publishing as Prentice Hall *Indicates mean
©2011 Pearson Education, Inc. publishing as Prentice Hall

5
 9/27/2020

Caribbean Community and

CARICOM
Common Market (CARICOM)

3-21 3-22
©2011 Pearson Education, Inc. publishing as Prentice Hall ©2011 Pearson Education, Inc. publishing as Prentice Hall

Asia-Pacific: The Association of ASEAN

Southeast Asian Nations (ASEAN)

• Brunei, Cambodia, Indonesia, Laos,

Malaysia, Myanmar, Philippines,
Singapore, Thailand, Vietnam
• Trading partners U.S., EU, China
• Geographically close; historically divided
• “ASEAN plus six” (Japan, China, Korea,
Australia, New Zealand, India) working
towards an economic community
3-23 3-24
©2011 Pearson Education, Inc. publishing as Prentice Hall ©2011 Pearson Education, Inc. publishing as Prentice Hall

6
 9/27/2020

Singapore The European Union (EU)

• World’s 2nd largest
container port • Initially began with the 1958 Treaty of Rome
• 2nd highest standard
of living in the
• Objective is to harmonize national laws and
region behind Japan regulations so that goods, services, people,
• 4.2 million people and money could flow freely across national
• 93% literacy rate boundaries
• Over 3,000 • 1991 Maastricht Treaty set stage for
companies transition to an economic union with a central
• Crime is nearly bank and single currency (the Euro)
nonexistent
3-25 3-26
©2011 Pearson Education, Inc. publishing as Prentice Hall ©2011 Pearson Education, Inc. publishing as Prentice Hall

European Union The Middle East

• Afghanistan, Bahrain, Cyprus, Egypt, Iran, Iraq,
• 27 countries
Israel, Jordan, Kuwait, Lebanon, Oman, Qatar,
• 491 million people Saudi Arabia, Syria, the United Arab Emirates,
• Combined GNI of Yemen
$14.7 trillion – Primarily Arab, some Persian and Jews
• Euro currency, 1999 – 95% Muslim, 5% Christian and Jewish
– 34.7 million people, 24 million in Saudi Arabia
• Harmonization of
laws and regulations – 25% of world’s oil in Saudi Arabia
– Strong impact of world economic crisis on Dubai

3-27 3-28
©2011 Pearson Education, Inc. publishing as Prentice Hall ©2011 Pearson Education, Inc. publishing as Prentice Hall

7
 9/27/2020

Gulf Cooperation Council Africa

• 54 nations over three distinct areas

– Republic of South Africa
– North Africa
– Black Africa or sub-Saharan Africa
• Regional agreements
– Economic Community of West African States
– East African Cooperation
•Established in 1981 by 6 countries with 45% of world’s oil – South African Development Community

•These countries are attempting to diversify industries

3-29 3-30
©2011 Pearson Education, Inc. publishing as Prentice Hall ©2011 Pearson Education, Inc. publishing as Prentice Hall

Looking Ahead to Chapter 4

• Social and Cultural Environments

All rights reserved. No part of this publication may be reproduced, stored in a

retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.

Copyright © 2011 Pearson Education, Inc.

Publishing as Prentice Hall
3-31 3-32
©2011 Pearson Education, Inc. publishing as Prentice Hall ©2011 Pearson Education, Inc. publishing as Prentice Hall