Regional Economic Integration

Report
8
Regional Economic
Integration
Copyright © 2014 Pearson Education, Inc.
Chapter Objectives
• Define regional economic integration and identify its five
levels.
• Discuss the benefits and drawbacks of regional
economic integration.
• Describe regional integration in Europe and its pattern of
enlargement.
• Discuss regional integration in the Americas and analyze
its future prospects.
• Characterize regional integration in Asia and how it
differs from integration elsewhere.
• Describe integration in the Middle East and Africa and
explain the slow progress.
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Nestlé
• Largest food company in the world
• Food is integral to cultural fabric
• Must monitor regional integration
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Regional Economic Integration
Process whereby
countries in a
geographic region
cooperate to reduce
or eliminate barriers
to the international
flow of products,
people, or capital
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Levels of Regional Integration
Free-Trade Area Remove barriers to trade among members, but
each country has own policies for nonmembers
Customs Union
Remove barriers to trade among members, and
set a common trade policy against nonmembers
Remove barriers to trade, labor, and capital
Common Market among members, and set a common trade
policy against nonmembers
Economic Union
Remove barriers to trade, labor, and capital,
set a common trade policy against nonmembers,
and coordinate members’ economic policies
Political Union
Coordinate aspects of members’ economic and
political systems
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Benefits of Integration
 Trade creation
 Greater consensus
 Political cooperation
 Creates jobs
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Drawbacks of Integration
 Trade diversion
 Shifting employment
 Less sovereignty
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Discussion Question
What are several
potential benefits of
regional economic
integration and
several potential
drawbacks of
integration?
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Answer to Discussion Question
Potential benefits of regional
economic integration include
trade creation, greater
consensus, political
cooperation, and job creation.
Potential drawbacks include
trade diversion, shifting
employment, and less
sovereignty.
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European Union
Pop: 500 million
GDP: $15 trillion
Members: 27
Economic Union
Began: 1951
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European Union: Early Years
European Coal and Steel Community (1951):
Removed trade barriers in coal, iron, and steel
European Economic Community (1957): Outlined
and took initial steps toward common market
European Community (1967): Expanded to other
industries including atomic energy
Single European Act (1987): Harmonized
regulations, strived for lower barriers
Maastricht Treaty (1991): Set single currency
targets, outlined eventual political union
European Union (1994): Final name change and
reduced barriers further
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Culture Matters:
Czech List
 Don’t rush familiarity
 Build relationships
 Find a Czech partner
 Hire local professionals
 Establish who’s in charge
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European Union Enlargement
Stable institutions of human
rights, democracy, and law
Future EU members
must meet the four
Copenhagen Criteria

Functioning and capable
market economy
Assume economic, monetary,
and political obligations
Adopt rules of the Community,
Court of Justice, and Treaties
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Five Key EU Institutions
European
Parliament
Court of Justice
Council of the
European Union
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Court of
Auditors
European
Commission
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European Free Trade Association
Iceland, Liechtenstein,
Norway, Switzerland
 Feared lost sovereignty
 Feared destructive rivalry
 Desired free-trade gains
 Cooperates with EU
Pop: 12.5 million
GDP: $707 billion
Members: 4
Free-Trade Area
Began: 1960
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Discussion Question
All future members of the
European Union must
meet what are called the
__________ criteria,
which demonstrate a
country’s readiness for
membership.
a. European
b. Maastricht
c. Copenhagen
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Answer to Discussion Question
All future members of the
European Union must
meet what are called the
__________ criteria,
which demonstrate a
country’s readiness for
membership.
a. European
b. Maastricht
c. Copenhagen
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North American
Free Trade Agreement
Pop: 445 million
GDP: $16 trillion
Members: 3
Free-Trade Area
Began: 1994
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NAFTA Effects
Three-nation
trade flows
“Fast track”
Authority
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Jobs
and wages
Future
expansion?
Single
currency?
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Central American Free
Trade Agreement
Established in 2006 to
include 7 countries
U.S., Costa Rica, Guatemala,
Honduras, El Salvador,
Nicaragua, & Dominican Rep.
Combined value of goods
traded is around $32 billion
Should create regional
investment, peace, and stability
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CAFTA-DR Effects?
More trade and
better-paying jobs
OR
Poorer farms and
small businesses
Source: dinozzaver/Fotolia
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Andean Community
 Internal tariff reduction
 Common external tariff
 Common transport policies
 Ideological conflict
Pop: 97 million
GDP: $220 billion
Members: 4
Customs Union
Began: 1969
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Southern Common Market
 Also called MERCOSUR
 Very successful early
 Impaired by ideology and
economic hardships
 Future “SAFTA”?
Pop: 266 million
GDP: $2.8 trillion
Members: 5
Customs Union
Began: 1988
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Central America / Caribbean
Peace driving tentative optimism
Pop: 33 million
GDP: $120 billion
Members: 5
+/- Common Market
Began: 1961
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Members offer each other little
Pop: 6 million
GDP: $30 billion
Members: 15
Common Market
Began: 1973
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Free Trade Area of the Americas
Would be the largest freetrade area on the planet
Pop: 830 million
GDP: $ trillions
Members: 34
Free-Trade Area
From northern tip of Alaska
to southern tip of Tierra del
Fuego in South America
Could mean enormous cost
savings for business
Protests by many groups is
slowing progress
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Discussion Question
What is the
objective of the
Free Trade Area of
the Americas and
what are its
prospects for
success?
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Answer to Discussion Question
The Free Trade Area of the
Americas would be a trading bloc
stretching from Alaska to Tierra
del Fuego in South America. It
would likely supersede all existing
trading blocs in North, Central,
and South America.
It faces opposition from labor
organizations, environmentalists,
and others opposed to
globalization.
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Association of Southeast
Asian Nations
GOALS:
Promote economic, social,
and cultural development
Safeguard economic and
political stability
Serve as a forum to
resolve disputes
Pop: 560 million
GDP: $1.1 trillion
Members: 10
General Cooperation
Began: 1967
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Asia-Pacific Economic Cooperation
Group of 21 nations ringing the Pacific Ocean
that accounts for over half of world trade
1. Not designed as a free-trade bloc
2. Strengthen multilateral trade system
3. Liberalize trade and investment rules
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Closer Economic
Relations Agreement
Key Points:
• Australia and New Zealand
• Eliminated trade barriers 5 years early
• Recognize each other’s qualified professionals
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Middle East
Gulf Cooperation Council
 Six Arab nations (1980)
 Economic and political aims
 Travel freely without visas
 Cooperation on property rights
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Africa
Economic Community of West African States
• Some progress on migration, roads, and telecoms
• Impaired by instability, poverty, and bad policies
African Union
• Joined 53 nations in 2002
• Want united and strong Africa
• Seek peace, security, stability
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Discussion Question
What is the name of
the group of 21 nations
that ring the Pacific
Ocean whose stated
aims do not include
formation of a formal
free trade bloc?
a. Pacific Cooperation Council
b. Asia-Pacific Economic Cooperation
c. Association of Southeast Asian Nations
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Answer to Discussion Question
What is the name of
the group of 21 nations
that ring the Pacific
Ocean whose stated
aims do not include
formation of a formal
free trade bloc?
a. Pacific Cooperation Council
b. Asia-Pacific Economic Cooperation
c. Association of Southeast Asian Nations
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otherwise, without the prior written permission of the publisher.
Printed in the United States of America.
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