Regional Eco Integration
Transcript of Regional Eco Integration
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CHAPTER
Regional EconomicIntegration
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Key Issues
• Understand the different levels of economic
integration among nations
• What are the political and economic arguments for
and against regional integration?
• Be familiar with the world’s most important
regional economic agreements
• What are the implications for business from
regional economic integreation?
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Regional conomic Integration
• !greements among geographically
pro"imate countries to reduce#remove tariffand non$tariff barriers to free flow of % &oods
% 'ervices
% (actors of production
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)evels of conomic Integration
• (ree *rade !rea +(*!,-
% removes tariffs among members
% members retain own trade policies toward others
• .ustoms Union +.U,- (*! and / % common trade policy toward others
• .ommon 0ar1et +.0,- .U and / % elimination of intra$mar1et factor of production
movements
•conomic Union +U,- .0 and / % full integration of member economies +common
policy,
• 2olitical Union- U and /
% political integration
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Reasons for Regional Integration
• conomic enhancement of the member states % (ree trade
% (ee (3I
• 2olitical Reasons % )in1ed economies create interdependencies that
reduce the potential for armed conflict
% &rouping gives countries more political clout
world$wide• Impediments
% 2ainful ad4ustments in certain segments of economy
% *hreat to national sovereignty
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uropean Union
• 56 member countries7 869mm people7 &32 : U'
• 5;65 < members of coal and steel community
% (rance= &ermany +W>,= Italy= Belgium= etherlands=
)u"embourg
• 5;6@ *reaty of Rome- uropean .ommunity % .ommon mar1et
% limination of internal trade barriers
% .ommon e"ternal tariff
% (ree movement of factors of production
• 5;@8 5st enlargement- Britain= Ireland= 3enmar1
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uropean Union• 5;A5 nd enlargement- &reece
• 5;A8 8rd enlargement- 2ortugal= 'pain• 5;; single uropean act
• Remove all frontier controls
• 2rinciple of mutual recognition to product standards
• Cpen public procurement to non$national suppliers
• )ift barriers of competition to ban1s and insurance
• Remove restrictions on foreign e"change transactions
• !bolish restriction on cabotage +truc1ing,
• 5;;D 0aastricht treaty- uropean Union
•5;;< Dth enlargement- !ustria= (inland= 'weden• 99 6th enlargement- .yprus= the .Eech Republic=stonia= Fungary= )atvia= )ithuania= 0alta= 2oland= the'lova1 Republic and 'lovenia conclude accessionagreements>
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*he uro +G,
• 0aastricht treaty-
% uropean common currency adopted 5#5#;;
% .ommon foreign and defense policy
% .ommon citiEenship % U parliament with Hteeth
• G now used by 5 countries +"$'weden= 3enmar1=
Britain,
• .urrency was issued 5#5#99 and 5 national
currencies were withdrawn by !pril 99
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Benefits of the uro +G,
• )ower transaction costs for individuals # business
• 2rices comparable across the continent7 increased
competition• RationaliEation of production across urope to
reduce cost
•2an$uropean capital mar1et
• Increase range of investment options available to
both individuals and institutions
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.osts of the uro +G,
• )oss of monetary policy control at national level• .B sets interest rates and determines monetary policy
+(ran1furt= &er>,
• .B is not under political control7 issues instructions tonational central ban1s
• U is not an optimal currency area• ot enough similarities in the underlying structure of
economic activity +e>g>= (inland vs 2ortugal,
• Interest rates may be too high in depressed regions or too lowfor economically booming regions
• 0ay need to deal with this through fiscal transfers from prosperous to depressed regions
• conomic issues may come against political ones
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nlargement of the U
• nlargement means more disparity and moredifficult governance and control
• orway opted out of the U +5;;D,
• *he U plans to conclude accession negotiations by the end of the 99 with- .yprus= the .Eech
Republic= stonia= Fungary= )atvia= )ithuania=
0alta= 2oland= the 'lova1 Republic and 'lovenia>
• U' and !sian countries fear that U will become protectionist +Hfortress urope,
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*he !mericas
• orth !merican (ree *rade !greement +!(*!, % U'!= 0e"ico= .anada
• *he !ndean 2act
% Bolivia= .hile= cuador= .olombia= 2eru• 0R.C'UR +(*!,
% BraEil= !rgentina= 2araguay= Uruguay
• .entral !merican .ommon 0ar1et +.!RI.C0,
% .osta Rica= l 'alvador= &uatemala= Fonduras= icaragua
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lsewhere
• !ssociation of 'outheast !sian ations +!'!, % Brunei= Indonesia= )aos= 0alaysia= 0yanmar= the
2hilippines= 'ingapore= *hailand= Jietnam
• !sia 2acific conomic .ooperation % U'!= apan= .hina L 56 2acific nations
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!(*!
• U'!= .anada= 0e"ico +(*!$5;AA,
% U'!$.anada is world’s largest trading
relationship % U'! is 0e"ico’s largest trading partner
% 0e"ico= U'!’s third largest trading partner
• .ontinuation of opening processthrough elimination of tariffs
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!(*! $ Key provisions
• &eneral +effective 5#5#;D, % *ariffs reduced across all sectors by ;;M over 59 yrs
% (3I unrestricted +"$oil and railways in 0e"ico= .ulture
in .anada= airlines$communications U',
% o free movement of labor +"$white collar easement,
% 2rotection of intellectual property rights
% .ross$border flow of services unrestricted
% !pplication of environmental standards % *wo commissions have the right to impose penalties on
issues of health#safety= child labor= minimum wages
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Implications for Business
• Cpportunities
% )ess protectionism7 higher economic growth
% )ower cost of doing business +fewer borders,
• *hreats
% .ultural differences persist
% Increased price competition within bloc1s
% !cross$trading$bloc1 rivalry can increase barriers % Improvement of competitiveness of many local firm
within the bloc1s
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