Regional Organizations Salvatore (pg. 348) - PowerPoint Presentation

1. Regional OrganizationsSalvatore (pg. 348)

2. European Union

3. European Free Trade Association (EFTA)In 1960 the free trade area, EFTA was formed by the “outer seven” nation: the United Kingdom, Austria, Denmark, Norway, Portugal, Sweden and Switzerland and with Finland becoming an associate member in 1961. EFTA achieved free trade in industrial goods in 1967, but only a few special provisions were made to reduce barriers on trade on agricultural products. The maintenance by each nation of its own trade barriers against nonmembers can lead to the problem of trade deflection. This refers to the entry of imports from the rest of the world into the low-tariff member of the association to avoid the higher tariffs of other member. To combat trade deflection requires checking the original source and the final country of destination of all imports. This problem does not arise in custom union because of its common external tariff. In 1994, EFTA joined EU to form the European Economic Area (EEA) – a custom union that will eventually allow the free movement of most goods, services, capital and people among the 17 member nations.

4. North American Free Trade Agreement (NAFTA)In 1993, US, Canada and Mexico signed NAFTA, which took effect in 1994. Canada was already the largest trading partner of US with two-way yearly trade of about $150 billion. With $40 billion of exports to and $41 billion of imports from the US in 1993, Mexico was already the US third largest trading partner after Canada and Japan.This agreement lead to free trade in goods and services over the entire North American area. NAFTA also reduce barriers to cross-border investment among the three countries. The main impact of NAFTA was on trade between US and Mexico, between 1994 and 2004, two-way trade between US and Mexico increased by 166 percent. Free trade access to Mexico allows US industries to import labor-intensive components from Mexico and keep other operations in US rather than possibly losing all jobs in the industry to low-wage countries. The implementation of NAFTA benefitted Mexico by leading to greater export-led growth resulting from increased access to huge US market and by increasing FDI.Mexico suffered a net loss of jobs and incomes in agriculture but these losses were more than the net gains in industry.

5. Economic Integration among Developing Countries Central American Common Market (CACM) – established by Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua in 1960, dissolved in 1969 and then revived in 1990.Latin American Free Trade Association (LAFTA) – established in 1960 by Mexico and most of South America, which hoped to accelerate the process of integration and establish a common market. In 1980, the LAFTA was replaced by the Latin American Integration Association (LAIA).Southern Common Market – formed by Argentina, Brazil, Paraguay and Uruguay in 1991, became custom union in 1995 and was joined by Bolivia and Chile in 1996 and by Peru in 2003.Free Trade Area of the Americas (FTAA) – established in 1998 with the goal of free trade among the 34 democratic countries of North and South America. Caribbean Free Trade Association (CARIFTA) – set up in 1968 and transformed into a common market in 1973 with the membership of Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Montserrat, St. Lucia, St. Vincent and the Grenadines, Suriname and Trinidad and Tobago.

6. Economic Integration among Developing Countries East African Community (EAC) – established in 1967 by Kenya, Tanzania and Uganda.West African Economic and Monetary Union – includes Benin, Burkina Faso, Cote d’Ivorie, Guinea Bissau, Mali, Niger, Senegal and Togo. Southern Africa Development Community (SADC) – 12 members of Southern AfricaAssociation of South East Asian Nations (ASEAN) – includes, Brunei, Darussalam, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, Vietnam. It was a political association and in 1977 it decided to move towards a common market. South Asian Association of Regional Cooperation (SAARC) – In the ending years of the 1970s, the seven inner South Asian nations that included Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Srilanka agreed upon the creation of a trade bloc and to provide a platform for the people of South Asia to work together in a spirit of friendship, trust and understanding. In 2007 Afghanistan entered SAARC.