This action might not be possible to undo. Are you sure you want to continue?
One of the most notable trends in the global economy in recent years has been the accelerated movement toward regional economic integration Regional Economic Integration: Agreements between groups of countries in a geographic region to reduce, and ultimately remove, tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other.
By entering into regional agreements groups of countries aim to reduce trade barriers more rapidly than can be achieved under the auspices of the WTO Opportunities are created by avoiding unnecessary competition The specter of the EU and NAFTA turning into ëconomic fortress”that shut out foreign producers with high tariff barriers is particularly worrisome to those who believe in the value of unrestricted free trade
Advantages of Economic Integration
Pooled resources – Factors of production of the countries are combined, enabling economies of division of labour & specialization To pool required financial resources for the large-scale operations Reduced the prices of the products/services
LEVELS OF ECONOMIC INTEGRATION
Free Trade Area:
In a free trade area all barriers to the trade of goods and services among member countries are removed. In the theoretically ideal free trade area, no discriminatory tariffs, quotas, subsidies, or administrative impediments are allowed to determine its own trade policies with regard to nonmembers. Ex: EFTA and NAFTA
Customs Union: eliminates trade barriers between member-countries and adopts a common external trade policy.
Ex: Andean Pact
theoretically ideal common market has no barriers to trade between member-countries and a common external trade policy.
in a customs union, in a common market factors of production also are allowed to move freely between member-countries. Thus, labour and capital are free to move, as there are no restrictions on immigration, emigration, or cross-border flows of capital between member-countries.
Economic Union: An Economic Union involves the free flow of products and factors of production between member-countries and the adoption of a common external trade policy. A full economic union also requires a common currency, harmonization of the member-countries tax rates and a common monetary and fiscal policy.
THE CASE FOR REGIONAL INTEGRATION
A - THE ECONOMIC CASE FOR
Unrestricted free trade will allow countries to specialize in the production of goods and services that they can produce most efficiently Opening a country to free trade stimulates economic growth in the country, which in turn creates dynamic gains from trade. Flows of FDI can transfer technological, marketing and managerial know-how to host nations. Stimulates Economic Growth
B – POLITICAL CASE FOR INTEGRATION Incentives are created or political cooperation between neighboring states By grouping their economies together, the countries can enhance their political weight in the world. C – IMPEDIMENTS TO INTEGRATION Costs, painful adjustments Concerns over national sovereignty
THE CASE AGAINST REGIONAL INTEGRATION A - TRADE CREATION Occurs when high-cost domestic producers are replaced by low-cost external suppliers within the free trade area. B - TRADE DIVERSION
Occurs when lower-cost external suppliers are replaced by higher-cost suppliers within the free trade area. A regional free trade agreement will benefit the world only if the amount of trade exceeds the amount it diverts. In theory, GATT and WTO rules should ensure that a free trade agreement does not result in trade diversion.
REGIONAL ECONOMIC INTEGRATION IN EUROPE
The EU is the product of two political factors: a) Devastation of two wars b) Desire to hold their own on the world’s political and economic stage TREATY OF ROME – 1957 In 1973, first enlargement of the EC Other additions, Greece in 1981, Spain and Portugal in 1986, and in 1996 by Finland, Austria and Sweden With a population of 350 million and a GDP greater than that of the United States, these enlargements made the EU a potential global superpower.
In 1994, following the ratification of the Maastricht treaty Single European Act: The main problem with the EC was the disharmony of the member-countries technical, legal, regulatory and tax standards. The rules of the game differed substantially from country to country, which stalled the creation of a true single internal market. The “White Paper” was published in 1985, proposing that all impediments to the formation of a single market be eliminated by 1992. Objectives of the Act: frontier controls, mutual recognition of standards, public procurement, financial markets, lifting barriers, exchange controls, freight transport. “The United States of Europe”
The Treaty of Maastricht Common currency, lower cost of doing business in Europe, reduce risks that arise from currency fluctuations. National authorities would lose control over monetary policy Enlargement of the European Union: Eastern European Countries? Fortress Europe?
REGIONAL ECONOMIC INTEGRATION IN THE AMERICAS A - The Nafta Agreement
Nafta became law January 1, 1994. Guidelines: - Abolition within 10 years of tariffs on 99% of the goods traded among Mexico, Canada, and the U.S. - Remove most of the barriers on the cross-border flow of services - Protect intellectual property rights - Removes most restrictions on FDI among the three members - Members are allowed to apply its own environmental standards
Arguments against NAFTA: - mass exodus of jobs from the US and Canda (Perot’s “Sucking Sound”) - Expose Mexican firms to highly efficient Canadian and American firms. - Painful Economic Restructuring and Unemployment in Mexico - Loss of National Sovereignty
B - FTAA
Free Trade Area of the Americas - a proposed agreement to eliminate or reduce the trade barriers among all countries in the Americas
Enlargement of NAFTA or the creation of two major trading blocks in the Americas SAFTA and NAFTA
ASIAN AND AFRICAN TRADING BLOCKS
ASEAN, APEC AFRICAN COOPERATION
VII - COMMODITY AGREEMENTS
BUFFER-STOCK SYSTEM MULTIFIBER ARRANGEMENT (MFA)
VIII - THE UNITED NATIONS
IX - THE ENVIRONMENT
THE RIO EARTH SUMMIT
A Trading Block
A trade bloc is a large free trade area formed by one or more tax, tariff and trade agreements. Typically trade pacts that define such a bloc specify formal adjudication bodies, e.g. NAFTA trade panels. This may include even a more democratic and participative system, as the EU and its parliament.
European Union ASEAN APEC NAFTA SAARC ANDEAN PACT MERCOSUR
The European Union (EU) is a union of twenty-seven independent states based on the Euriopean Communities and founded to enhance political, economic and social co-operation. Formerly known as European Community (EC) or European Economic Community (EEC).
The European Union is composed of 27 independent sovereign countries which are known as member states: Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.
To join the EU, a country must meet the Copenhagen criteria, defined at the 1993 Copenhagen European Council. These require a stable democracy which respects human rights and the rule of law; a functioning market economy capable of competition within the EU; and the acceptance of the obligations of membership, including EU law. Evaluation of a country's fulfillment of the criteria is the responsibility of the European Council.
The EU is regulated by a number of institutions, primarily the Council of the European Union, the European Commission, and European Parliament.
Organization of EEC
European Council is the main administrative body Each member country is represented by one minister in this council Each member country holds the presidency of the council for six-monthly period by rotation This committee is also called ‘Corper’ Corper is the link between the EEC & member governments
European Council acts as the executive agent of the EEC in
Making routine decisions Formulating rules of conduct Preparing new legislations Enabling members to carry out the provisions of the treaty
Organization Structure of EEC
European Commission: assists the European council, member of the commission are appointed for a period of four years which can be renewed Court of Justice: disputed related to agriculture, social security for migrants & competition policy Court of Auditors: auditing the EEC Budget, monitoring the EEC expenditure, laying down improved procedures for collection of duties & levies
European Parliament: provides consultations & information to the commission, approve or reject the draft budget prepared by the commission & dismiss the commission if necessary Advisory Committees: economic & social committee, Monetary committee, consultative committee on coal & steel industry
Functioning of the EEC
Common Agricultural Policy (CAP) Common Fisheries Policy European Monetary Union:
Exchange rate mechanism, European monetary co-operation fund, factor mobility, regional development policy- European investment bank, European social fund, European regional development fund
Common Transport policy
ASSOCIATION OF SOUTHEAST ASIAN NATIONS
Established on 8 August 1967 in Bangkok by the five original Member Countries, namely, Indonesia, Malaysia, Philippines, Singapore, and Thailand. The ASEAN region has a population of about 500 million, a total area of 4.5 million square kilometers, a combined gross domestic product of almost US$ 700 billion, and a total trade of about US$ 850 billion.
to accelerate economic growth, social progress and cultural development in the region and to promote regional peace and stability through abiding respect for justice and the rule of law in the relationship among countries in the region and adherence to the principles of the United Nations Charter.
Member Countries Cambodia Brunei Darussalam Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand Vietnam
Asia-Pacific Economic Cooperation
The premier forum for facilitating economic growth, cooperation, trade and investment in the Asia-Pacific region APEC has 21 members - referred to as "Member Economies" - which account for approximately 41% of the world's population, approximately 56% of world GDP and about 49% of world trade.
APEC's 21 Member Economies
Australia; Brunei Darussalam; Canada; Chile; People's Republic of China; Hong Kong, China; Indonesia; Japan; Republic of Korea; Malaysia; Mexico;
New Zealand; Papua New Guinea; Peru; The Republic of the Philippines; The Russian Federation; Singapore; Chinese Taipei; Thailand; United States of America; Viet Nam.
The North American Free Trade Agreement (NAFTA) eliminated the majority of tariffs on products traded among the United States, Canada and Mexico, and gradually phases out other tariffs over a 10-year period.
The South Asian Association for Regional Cooperation
Established when its Charter was formally adopted on December 8, 1985 by the Heads of State or Government of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. SAARC provides a platform for the peoples of South Asia to work together in a spirit of friendship, trust and understanding. It aims to accelerate the process of economic and social development in Member States.
Type of Agreement
Free Trade Area with common external tariff. Bolivia, Colombia, Ecuador, Peru, and Venezuela. 103 million people. May 25, 1988/Indefinite. To establish free trade area, a common external tariff, and eventually a full common market
Mercosur is a Regional Trade Agreement (RTA) among Brazil, Argentina, Uruguay and Paraguay, founded in 1991 by the Treaty of Asunción, which was later amended and updated by the 1994 Treaty of Ouro Preto. Its purpose is to promote free trade and the fluid movement of goods, people, and currency.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.