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CHAPTER VIII

REGIONAL ECONOMIC INTEGRATION

INTERNATIONAL BUSINESS

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Learning ObjectivesDefine regional economic integration, and identify its five levels. Discuss the benefits and drawbacks associated with regional economic integration.Describe regional integration in Europe, and its pattern of enlargement.Characterize regional integration in Asia, and discuss how it differs from integration elsewhere.Describe regional integration in the Middle East and Africa, and explain why progress there has been slow.

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WHAT IS REGIONAL ECONOMIC INTEGRATION?

Regional Economic Integration

(regionalism):

Process whereby countries in a geographic

region cooperate with one another to

reduce or eliminate barriers to the

international flow of products, people, or

capital.

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WHAT IS REGIONAL ECONOMIC INTEGRATION?

Levels of Regional IntegrationFree- Trade AreaCustoms UnionCommon MarketEconomic UnionPolitical Union

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Levels of Regional Integration

Free- Trade Area: Economic integration whereby countries seek to remove all barriers to trade between themselves , but each country determines its own barriers against nonmembers

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Levels of Regional Integration

Customs Union : Economic integration whereby country remove all barriers to trade between themselves but erect a common trade policy against nonmembers

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Levels of Regional Integration

Common Market

Economic integration whereby countries

remove all barriers to trade and the

movement of labor and capital between

themselves but erect a common trade

policy against nonmembers.

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Levels of Regional Integration

Economic Union

Economic integration whereby

countries remove barriers to trade

and the movement of labor and

capital, erect a common trade policy

against nonmembers, and coordinate

their economic policies.

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Levels of Regional Integration

Political Union

Economic and political integration

whereby countries coordinate aspects

of their economic and political

systems.

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Levels of Regional Integration

Free-Trade Area

Customs Union

Common Market

Economic Union

Political Union

Greater integration

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EFFECTS OF REGIONAL ECONOMIC INTEGRATION

Benefits of Regional Integration

Drawbacks of Regional Integration

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Benefits of Regional Integration

Trade CreationGreater ConsensusPolitical CooperationEmployment Opportunities

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Benefits of Regional Integration

Trade CreationIncrease in the level of trade between nations that results from regional economic integration.

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Benefits of Regional Integration

Greater Consensus

• The Benefits of trying to eliminate trade

barriers in smaller groups of countries.

• It can be easier to gain consensus from

fewer members as opposed to.

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Benefits of Regional Integration

Political Cooperation

• Be political benefits from efforts toward

regional economic Integration.

• A group of nations can have significantly

greater political weight than each nation

has individually.

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Benefits of Regional Integration

Employment Opportunities

• Expand employment opportunities by

enabling people to move from one

country to another.

• Simply to earn a higher wage.

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Drawbacks of Regional Integration

Trade diversionShifts in Employment Loss of National Sovereignty

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Drawbacks of Regional Integration

Trade diversion

Diversion of trade away from nations

not belonging to a trading bloc and

toward member nations

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Drawbacks of Regional Integration

Shifts in EmploymentIndustries requiring mostly unskilled labor

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Drawbacks of Regional Integration

Loss of National Sovereignty

Successive levels of integration

require that nations surrender more

of their national sovereignty

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INTEGRATION IN EUROPE

European Union

European Free Trade Association

(EFTA)

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European Union

European monetary union

Enlargement of the European Union

Structure of the European Union

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European Union

European Monetary Union

The European Union that established

its own central bank and currency

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European UnionEnlargement of the European Union

1525 (May 2004)Some certain demands (Copenhagen Criteria): Has stable institutions (democracy, law, Human

Rights, Minorities) Market Economy Is able to assume the obligations of membership

(economic, monetary, political union) Adopt the rules and regulations of the

community

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European Union

Structure of the European Union• European Parliament

• Council of the European Union

• European Commission

• Court of Justice

• Court of Auditors

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European Free Trade Association (EFTA)

European Free Trade Association (EFTA)

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INTEGRATION IN THE AMERICAS

North American Free Trade Agreement

(NAFTA)

Andean Community

Latin American Integration Association

(ALADI)

Southern Common Market (MERCOSUR)

Central America and the Caribbean

Free Trade Area of the Americas (FTAA)

Transatlantic Economic Partnership (TEP)

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North American Free Trade Agreement (NAFTA)

Local Content Requirements and

Rules of Origin.

Effects of NAFTA

Expansion of NAFTA

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North American Free Trade Agreement (NAFTA)

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Andean Community

Main Objectives:

Tariff Reduction for Trade

Common Policies

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Andean CommunityLatin American Free Trade Association (LAFTA)

Includes 5 South American Countries

Bolivia

Colombia

Ecuador

Peru

Venezuela

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Latin American Integration Association (ALADI)

Its main objective is the establishment of a

common market, in pursuit of the

economic and social development of the

region.

Its members are: Argentina, Bolivia, Brazil,

Cuba, Chile, Colombia, Ecuador, Mexico,

Paraguay, Peru, Uruguay and Venezuela.

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Southern Common Market (MERCOSUR)

Customs Union

Members : • Argentina • Brazil • Paraguay • Uruguay• Venezuela

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Southern Common Market (MERCOSUR)

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Central America and the Caribbean

Caribbean Community & Common

Market

Central American Common Market

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Caribbean Community & Common Market

Members: 15 Antiqua and

Barbuda Bahamas Barbados Belize Dominica Grenada Guyana

Haiti Jamaica Montserrat Saint Kitts and Nevis Saint Lucia Saint Vincent and

Grenadines Suriname Trinidad and Tobago

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Free Trade Area of the Americas (FTAA)

Anti & Barbuda

Argentina Bahamas Barbados Belize Bolivia Brazil Canada Chile Colombia Costa

Rica Dominica

Dominican Ecuador El

Salvador Grenada Guatemal

a Guyana Haiti Honduras Jamaica Mexico Nicaragua Panama

Paraguay Peru Saint Kitts &

Nevis Saint Lucia Saint Vincent Suriname Trinidad US Uruguay Venezuela

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Transatlantic Economic Partnership (TEP)

The Transatlantic between US and EU

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INTEGRATION IN ASIA

Association of Southeast Asian

Nations (ASEAN)

Asia Pacific Economic Cooperation

(APEC)

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ASEAN

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ASEAN

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ASEAN

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ASEAN

Members 10 Brunei Myanmar Cambodia Indonesia Laos

Malaysia Philippines Singapore Thailand Vietnam

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INTEGRATION IN THE MIDDLE EAST AND AFRICA

Gulf Cooperation Council (GCC)

Economic Community of West

African States (ECOWAS)

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Gulf Cooperation Council (GCC)

Members:

• Bahrain

• Kuwait

• Oman

• Qatar

• Saudi Arabia

• The United Arab Emirate

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Economic Community of West African States (ECOWAS)

Formation of a customs union and

eventual common market and monetary

union.

Ecowas nations comprise a large portion

of the economic activity in sub-Saharan

Africa.

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THE END