Five Minute

Presentation
 Chapter 8

Cross-National
Cooperation and
Agreements
 Learning Objectives
 Discuss the three major approaches to economic
integration
 Identify the major characteristics and challenges
of the World Trade Organization
 Discuss the pros and cons of global (the WTO),
bilateral, and regional integration
 Identify how the different approaches to
economic integration can be a free trade
agreement, a customs union, or a common
market
 Learning Objectives
 Describe the static and dynamic impact of
trade agreements on trade and investment
flows
 Compare and contrast different regional
trading groups
 Discuss other forms of global cooperation
such as the United Nations and OPEC
 Introduction
 In mid-to late 1940s, - how to get recover from
wreckage of WORLD WAR – II.
 Economic integration
 the political and monetary agreements among
nations and world regions in which preference is
given to member countries.
Methods to achieve Economic
Integration

 Global integration:
 Countries from all over the world decide to cooperate through
WTO.

 Bilateral integration :
 Two Countries decode to cooperate more closely together ,
usually in the form of tariff reductions.

 Regional integration
 A group of countries located in the same geographic proximity
decide to cooperate , as with European Union.
The World Trade Organization
 World Trade Organization (WTO)
 WTO started its work on Jan 01, 1995
 It has 161 member countries
 The major body for
 reciprocal trade negotiations

 enforcement of trade agreements

 General Agreement on Tariffs and

Trade (GATT)
 multilateral agreement regulating international
trade 
GATT: Predecessor to the WTO
 GATT
 formed in 1947 to abolish quotas and reduce
tariffs
 Most favored nation (MFN) clause
 trade without discrimination
 India has given MFN status to Bangladesh, Vietnam
and Pakistan
 Succeeded by WTO in 1995
 What Does The WTO Do?
 WTO
 continues the MFN clause of GATT
 provides a mechanism for dispute settlement
 Doha Round

 agricultural subsidies
 Criticized for
 failing to pay enough attention to labor and
environmental concerns
 undermining global diversity
 benefitting rich at the expense of the poor
The Rise Of Bilateral Agreements

 Bilateral agreements
 can be between two individual countries or can
involve one country dealing with a group of
other countries
 Also known as
 Preferential trade agreements (PTAs):
 In WTO parlance, preferential trade arrangements (PTAs) are unilateral
decisions under which a (usually a developed country) party decides unilaterally
to accord one or more other parties (usually developing countries, including
least developed countries - LDCs) preferential treatment in trade.

 Free trade agreements (FTAs): The goal is to abolish

all tariffs between member countries.
 Regional Economic Integration

 Regional trade agreements (RTAs)

 integration confined to a region and involving
more than two countries
 Examples include
 European Union (EU): November 1, 1993 – 28
member countries
 European Free Trade Area (EFTA): 03 May, 1960 –
4 member countries
 North American Free Trade Area (NAFTA): Jan
1994 – 3 member countries
 Association of Southeast Asian Nations (ASEAN):
Aug 1967 – 10 members
 Common Market of Eastern and Southern Africa
(COMESA): Dec 1994 – 20 members
 Regional Economic Integration

 Major types of economic integration:

 Free trade area

 no internal tariffs.

 Customs union
 no internal tariffs plus common external

tariffs from non members countries.

 Common market
 customs union + plus factor mobility
 The Effects Of Integration
 Effects of regional integration
 Static effects
 trade creation

 trade diversion

 Dynamic effects
 Economies of scale
The Effects Of Integration
Impact of Trade Agreements
 The European Union
 European Union (EU)
 changed from the European Economic
Community to the European Community to the
European Union
 the largest and most successful regional
trade group in the world
 provides free trade of goods, capital, and
people
 uses common external tariffs
 has a common currency
The European Union
European Trade and Economic Integration

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 The European Union
 European Commission
 provides political leadership, drafts laws, and
runs the various daily programs of the EU
 Council of the EU
 composed of the heads of state of each
member country
 European Parliament
 has legislative power, control over the budget,
and is supervisor of executive decisions
 European Court of Justice
 interprets and applies EU treaties
 The European Union
 Single European Act
 designed to eliminate the remaining nontariff
barriers to trade in Europe
 Lisbon Treaty
 strengthens the EU’s governance process and
improves the ability of the EU to make and
implement decisions
 Treaty of Maastricht
 fostered political and monetary union
 the euro
 The European Union
 Companies doing business in the EU need
to
 determine where to produce products
 determine what their entry strategy will be
 balance the commonness of the EU with
national differences
 NAFTA
 The North American Free Trade Agreement
(NAFTA)
 includes Canada, the U.S., and Mexico
 involves free trade in goods, services, and investments
 includes countries of different sizes and wealth
 Some U.S. trade and investment has been
diverted to Mexico
 Free trade area
 rules of origin
 NAFTA
 Regional content
 at least 50% of the net cost of most products
must come from the NAFTA region
 Additional provisions
 Workers rights
 The environment
 Dispute resolution mechanism
Regional Economic Integration In The
Americas
 There are six major regional economic
groups in the Americas
 Caribbean Community (CARICOM)
 Central American Common Market (CACM)
 Central American Free Trade Agreement
(CAFTA –DR)
 Andean Community (CAN)
 Southern Common Market (MERCOSUR)
 Latin American Integration Association
(LAIA)
Regional Economic Integration In
The Americas
Economic Integration in Central America and the Caribbean

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Regional Economic Integration In
The Americas
Latin American Economic Integration

7-30
Regional Economic Integration In
Asia
 Regional integration in Asia includes
 the Association of Southeast Asian
Nations (ASEAN)
 ASEAN Free Trade Area
 the Asia Pacific Economic Cooperation
(APEC)
 open regionalism
 SAARC (South Asian Association for Regional
Cooperation – 8 Dec 1985.
 The South Asian Association for Regional
Cooperation (SAARC) is the regional
intergovernmental organization and geopolitical
union of nations in South Asia.

 Its member states include Afghanistan,

Bangladesh, Bhutan, India, Nepal, the Maldives,
Pakistan and Sri Lanka.

 The motto was 'Deeper Integration for Peace and

Prosperity'.
Regional Economic Integration
In Africa
 Several efforts at economic integration
exist
 Pan Arab Free Trade Area (PAFTA)
 Arab League
 Gulf Cooperation Council (GCC)
 African Union (AU)
Regional Economic Integration in
Africa
Regional Integration in Africa

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 Other Forms Of
International Cooperation
 The United Nations (UN)
 established in 1945
 promotes peace and security
 UNCTAD
 helps developing countries participate in

international trade
 Nongovernmental Organizations (NGOs)
 private, nonprofit institutions that are
independent of the government
 Commodities And The World
Economy
 Commodities
 raw materials or primary products that enter
into trade
 Many commodity agreements exist to
 discuss issues
 disseminate information
 improve product safety
 OPEC
Organization Of The Petroleum Exporting
Countries
 OPEC
 producer cartel that relies on quotas to
influence prices
 establishes production quotas for member
countries
 produces about 33.6% of the world’s crude
and19% of its natural gas.

 Downside of high prices .

 incentive to invest in non-OPEC countries

 balancing social, political, and economic
objectives
 The Organization of the Petroleum Exporting
Countries is an intergovernmental organisation of 14
nations, founded in 1960 in Baghdad by the first five
members, and headquartered since 1965 in Vienna,
Austria.

 Members Countries : Currently, the Organization

comprises 15 Member Countries – namely Algeria, Angola,
Congo, Ecuador, Equatorial Guinea, Gabon, IR Iran, Iraq,
Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab
Emirates and Venezuela.

 Aim: In accordance with its Statute, the mission of the

Organization of the Petroleum Exporting Countries (OPEC)
is to coordinate and unify the petroleum policies of its
Member Countries and ensure the stabilization of oil
markets in order to secure an efficient, economic and
regular supply of petroleum to consumers,
The Future: Regional Integration And
The WTO
 Regional integration could help the WTO
 Regionalism can lead to liberalization of issues
not covered by the WTO
 Regionalism is more flexible
 Regional deals lock in liberalization
 Why do countries go for
cooperation?
 Economic integration
 Diplomatic integration
 Socio-cultural integration