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CH 2 Economic Integration

The document discusses different levels of economic integration between countries, from loose cooperation to full economic union. It provides examples for each level, including ASEAN, NAFTA, the EU, and describes some of their goals and impacts like reducing trade barriers, harmonizing policies, and creating large unified markets.

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arsha
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73 views

CH 2 Economic Integration

The document discusses different levels of economic integration between countries, from loose cooperation to full economic union. It provides examples for each level, including ASEAN, NAFTA, the EU, and describes some of their goals and impacts like reducing trade barriers, harmonizing policies, and creating large unified markets.

Uploaded by

arsha
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Ch.

8 Economic Integration
 A group of counties come together and agree to
cooperate in international trade by various
means.
 Mainly economic advantages.
 Trade creation and trade diversion, reduced
Import Prices, Increased competition and
economies of scale, Higher factor Productivity.
 Political Factors and power in international
markets.
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Levels of Economic
Integration.

Regional Cooperation Groups.


Free trade areas.
Full customs union.
Common market.
Economic union.

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Regional Cooperation
Groups.
 Cooperate to develop basic industries like steel, hydro-electricity etc.
 Joint ventures, pooling of technologies/resources.
 Mainly less developed countries.
 No effect on trade or tariff barriers.

 For Example - A.S.E.A.N.


Brunei, Burma, Cambodia, Indonesia, Laos,
Malaysia, the Philippines, Singapore,
Thailand and Vietnam

 The South Asian Association


for Regional Cooperation (SAARC)
Bangladesh, Bhutan, India,
Maldives, Nepal, Pakistan
and SriLanka.

ASEAN
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Free Trade Areas.
 No Internal Tariffs.
 External Tariffs could be different.
 Cooperation on economic issues.
 No free labor or capital movements.
 N.A.F.T.A. --

 U.S.-Israel, European Free Trade Area

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Full Customs Union.
 No Internal Tariffs.
 Common External Tariffs.
 No Free labor or
capital movements.
 Usually a small country
close to a large one.
 France-Monaco
 Italy-San Marino.

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Common Market.
 No Internal Tariffs.
 Common External Tariffs.
 Free flow of labor and capital.
 Southern Cone Common Market
(Mercosur) - Argentina, Brazil,
Paraguay, Uraguay, Bolivia,
and Chile.
 Caribbean Community
and Common Market.

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Economic Union.
 No Internal Tariffs.
 Common External Tariffs.
 Free flow of labor and capital.
 Integration of economic policies.
 Harmonize monetary policies, taxation, and
government spending.
 Common currency or fixed exchange rates.
 E.U. - Full monetary union by 1999 and single
European currency by 2002.

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European Community/
European Union.
 Economic, monetary, fiscal and political union.
 Single Euporean Act (A true common market for
goods, people and money by 1992)
 Maastricht Treaty 1994 (Economic and monetary
union with a commitment to political union).
 EC institutions - The European Commission,
Council of Ministers, European Parliament,
European Court of Justice.
 http://europa.eu.int/inst-en.htm

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EU Institutions.
 The European Commission - Executive branch,
commissioners oversee 23 directorates such as
agriculture, transportation, etc.
 Council of Ministers- votes based on country size, final
power to decide EU actions.
 European Parliament - 626 members elected by popular
votes in member countries, advisory body with very little
power.
 European Court of Justice - Judicial branch, mainly
matters related to trade and business disputes.

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Strategic Implications of
E.U.
 One Large market - standardization.
 Global Strategies - production, distribution, financing
etc.
 Transaction costs eliminated.
 Economies of scale in - Production, transportation,
promotions, pricing etc.
 Highly competitive environment - efficiencies needed to
compete.
 Mergers and other shakeouts in industry.
 Centralization and consolidation.

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NAFTA.
 Benefits similar to the E.U. in terms of one Large market
 Additionally Mexico is a different economy with different
comparative advantages.
 Stop firms from looking for cheap labor in outside
markets.
 Encourage foreign investment in this market.
 Increase competitiveness in outside markets
 Labor and environmental issues.
 North American Agreement on Labor Cooperation and
Commission on Environmental Compliance.

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NAFTA.
 Market Access - eliminate all tariffs on products traded between the
three countries within 10 years – Dec 2005.
 Nontariff Barriers - Mexico will eliminate all non-tariff barriers like
quotas, Import licenses.local content requirements, etc.
 Rules of Origin - Tariff-Shift rule and Value-Content (62.5%) Rule.
 Customs Administration - uniform customs procedures and
regulations.

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NAFTA.
 Investment – No requirements like exports, local
content, transfer of technology, limits on imports.
 Services - allowed to open wholly owned subsidiaries
and operate without any restrictions.
 Intellectual Property - protection of intellectual property.
 Government Procurement - fair and open competition,
and transparent and predictable procurement
procedures.
 Standards - prohibits the use of standards and technical
regulations as obstacles to trade.

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Latin America.
 Economic and trade liberalization.
 Deregulation, Privatization and control of inflation.
 Economic cooperation between each other and with the
U.S.
 Free Trade Area of the Americas (FTAA).

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Southern Cone common
market (MERCOSUR).
 Uniform external tariffs and
free movement of goods,
capital, labor and services.
 No central institutions like EC.
http://www.mercosurinvestment.com/intro.html
 Strongest agreement, working well
and seeking to expand
- Other Latin american countries,
U.S., Canada, and EC (1999).

 South American Free Trade Area (SAFTA).

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ASEAN Free Trade Area
 Indonesia
 Malaysia
 The Philippines
 Singapore
 Thailand
 Myanmar
 Laos
 Brunei
 Cambodia
 Thailand
 Vietnam

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AFTA.
 Primary Multinational group in Asia.
 Fastest growing economies in the region.
 Economic integration and cooperation.
 Reduced Tariff and non-tariff barriers,
guaranteed member access to markets, and
harmonized investment incentives.
 All non-tariff barriers removed immediately,
import tariffs reduced to 0-5% in 2003, 0% by
2010.

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APEC - Asia Pacific
Economic Cooperation
 The Asia-Pacific Economic Cooperation
forum is a loose grouping of countries
bordering the Pacific Ocean who have
pledged to facilitate free trade and economic
cooperation
 Its 21 members range from China and
Russia to the United States, Japan and Australia,
and account for 45% of world trade.
 Progress on free trade initiatives was seriously
dented by the 1997-98 Asian crisis,
which hurt the economies of the
fast-growing newly industrialized countries
like South Korea and Indonesia,
and the SARS epidemic of 2003.
 But recently China suggested it would be interested in establishing a free-trade zone with the growing
economies of South-east Asia.
 http://www.apecsec.org.sg/

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03/09/98

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