Copyright © 2015 Pearson Education, Inc. . 7-. 2. Learning Objectives. Discuss the three major approaches to economic integration. Identify the major characteristics and challenges of the World Trade Organization. ID: 627062
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7-1
Chapter 8
Cross-National Cooperation and Agreements
Slide2Copyright © 2015 Pearson Education, Inc.
7-2Learning 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
Slide3Learning ObjectivesDescribe the static and dynamic impact of trade agreements on trade and investment flows
Compare and contrast different regional trading groupsDescribe other forms of global cooperation such as the United Nations and OPEC Copyright © 2015 Pearson Education, Inc. 8-3
Slide4Copyright © 2015 Pearson Education, Inc.
7-4Introduction
Economic integration
the political and monetary agreements among nations and world regions in which preference is given to member countries
Bilateral integration
Regional integration
Global integration
Slide5Copyright © 2015 Pearson Education, Inc.
7-5The World Trade Organization
World Trade Organization (WTO)
The major body for
reciprocal trade
negotiations
Reciprocal
trade agreement, international commercial treaty in which two or more nations grant equally advantageous trade concessions to each other. It usually refers to treaties dealing with tariffs. For example, one nation may grant another a special schedule of tariff concessions in return for equivalent advantages. Originally reciprocity agreements involved bilateral tariff reductions that were not to be extended to third countries.
Slide6Copyright © 2015 Pearson Education, Inc.
7-6The World Trade Organization
World Trade Organization (WTO)
The major body for
reciprocal trade negotiations
enforcement of trade agreements
General Agreement on Tariffs and Trade (GATT)
Slide7
Copyright © 2015 Pearson Education, Inc.
7-7GATT: Predecessor to the WTO
GATT
formed in 1947 to abolish quotas and reduce tariffs
Most favored nation (MFN) clause
trade without discrimination
Ran into problems:
Craftier complex methods of trade protection
Trade in services grew exponentially
Succeeded
by WTO in 1995
Slide8Copyright © 2015 Pearson Education, Inc.
7-8What 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
Slide9Copyright © 2015 Pearson Education, Inc.
7-9The 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
)
A preferential trade area (also preferential trade agreement, PTA) is a trading bloc that gives preferential access to certain products from the participating countries. This is done by reducing tariffs but not by abolishing them completely. A PTA can be established through a trade pact.
Free trade agreements (FTAs)
Slide10Copyright © 2015 Pearson Education, Inc.
7-10The Rise Of
Bilateral Agreements
Also
known as
Free
trade agreements (FTAs
)
A
free
-
trade
area is the region encompassing a
trade
bloc
whose member countries have signed a
free trade agreement
(
FTA
). Such
agreements
involve cooperation between at least two countries to
reduce
trade
barriers – import quotas and tariffs – and to increase
trade
of goods and services with each other.
Slide11Copyright © 2015 Pearson Education, Inc.
7-11Regional Economic Integration
Regional trade agreements
integration confined to a region and involving more than two countries
Examples include
European Union (EU)
European Free Trade Area (EFTA)
North American Free Trade Area (NAFTA)
Association of Southeast Asian Nations (ASEAN)
Common Market of Eastern and Southern Africa (COMESA)
Slide12Copyright © 2015 Pearson Education, Inc.
7-12Regional Economic Integration
Major types of economic integration
Free trade area
no internal tariffs
Customs union
no internal tariffs plus common external tariffs
Common market
customs union
plus factor mobility
Slide13Copyright © 2015 Pearson Education, Inc.
7-13The 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
Slide14Copyright © 2015 Pearson Education, Inc.
7-14The 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
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