Transcript Document

Chapter 10:
International
Cooperation
Among
Nations
International Business, 4th Edition
Griffin & Pustay
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©2004 Prentice Hall
Chapter Objectives
 Explain the importance of the GATT and
the WTO to international business
 Contrast the different forms of economic
integration among cooperating countries
 Analyze the opportunities for international
businesses created by completion of the
EU’s internal market
 Describe the other major trading blocs in
today’s world economy
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The GATT’s Beginning
 General Agreement on Tariffs and
Trade
 Developed as part of the Havana, Cuba
conference in 1947
 Provided forum for trade ministers to
discuss barriers to international trade
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The Role of the GATT
 Goal: to promote a free and
competitive international trading
environment benefiting efficient
producers
 Accomplished by sponsoring
multilateral negotiations to reduce
tariffs, quotas, and other nontariff
barriers
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Table 10.1 GATT Negotiating Rounds
Round
Dates
# of Participants
Average Tariff
Cut (%)
Geneva
1947
23
35
Annecy
1949
13
NA
Torquay
1950-1951
38
25
Geneva
1956
26
NA
Dillon
1960-1962
45
NA
Kennedy
1964-1967
62
35
Tokyo
1973-1979
99
33
Uruguay
1986-1994
117
36
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Figure 10.1a The History of GATT’s Effect on
World Trade in Goods
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Figure 10.1b The History of GATT’s Effect on
World Trade in Goods
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Most Favored Nation (MFN) Principle
 Sought to ensure that international trade
was conducted on a nondiscriminatory basis
 Requires that any preferential treatment
granted to one country must be extended to
all countries
– If the US cut the tariff on imports of British
trucks to 20%, it also had to reduce tariffs on
imported trucks from all other members to 20%
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Exceptions to the MFN Principle
 Members permitted to lower tariffs to
developing countries without lowering
them for more developed countries
– Generalized system of preferences in
U.S. Tariff Code
 Regional arrangements promote
economic integration (e.g., EU and
NAFTA)
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World Trade Organization (WTO)
 Headquartered in Geneva, Switzerland
 Began January 1, 1995
 Included 146 members and 30 observer
countries as of June 2003
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Goals of the WTO
 Promote trade flows by encouraging
nations to adopt nondiscriminatory,
predictable trade policies
 Reduce remaining trade barriers
through multilateral negotiations
 Establish impartial procedures for
resolving trade disputes among
members
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Differences between WTO and GATT
 GATT focused on promoting trade in goods;
WTO’s mandate includes
–
–
–
–
trade in goods
trade in services
international intellectual property protection
trade-related investment
 WTO’s enforcement powers are stronger
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Figure 10.2 The WTO’s Principles of the
Trading System
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WTO Challenges
 The Cairns Group
 Multifibre Agreement
 General Agreement on Trade in Services
(GATS)
 Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS)
 Trade-Related Investment Measures
Agreement (TRIMS)
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Enforcement of WTO Decisions
 Country failing to live up to the agreement
may have a complaint filed against it
 WTO panel evaluates complaint
 If found in violation, the country may be
asked to eliminate the trade barrier
 If country refuses, WTO will allow
complaining country to impose comparable
trade barriers on the offending country
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The WTO’s success
in lowering trade
barriers has attracted
protests. Many
believe the WTO
ignores the impact of
its policies on human
rights, the
environment, and the
wages and job
security of workers
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Forms of Economic Integration
 Free Trade Area
 Customs Union
 Common Market
 Economic Union
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Figure 10.3 Forms of Economic Integration
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European Union (EU)
 Most important regional trading bloc
 15 member countries
 377 million population
 Total GDP $7.9 trillion
 10 additional members in 2004
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Table 10.2 The European Union, 2001 Data
Population
GDP
Per Capita Income
Belgium
10.3
227.6
28210
France
59.2
1302.8
25280
Luxembourg
0.4
18.6
48080
Germany
82.2
1873.9
25530
Italy
57.7
1090.9
24340
Netherlands
16.0
375.0
19130
Denmark
5.4
162.8
27950
Ireland
3.8
101.2
27460
United Kingdom
59.9
1406.3
24460
Greece
10.6
116.3
17860
Portugal
10.2
108.5
17270
Spain
39.5
577.5
20150
Austria
8.1
188.7
27080
Finland 10-20
Sweden
5.2
122.0
8.9
210.1
25180
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Creation of EU
 Motivated by desires of war-weary
Europeans to promote peace and prosperity
through economic and political cooperation
 Treaty of Rome, 1957
–
–
–
–
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France
West Germany
Italy
Benelux Nations (Belgium, the Netherlands,
and Luxembourg)
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Map 10.1 The European Union
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Table 10.3 EU Candidate Countries
Country
Population
GDP
Per Capita GDP
Czech Republic
10.3
56.4
14550
Cyprus
0.8
9.4
20780
Estonia
1.4
5.3
10020
Hungary
10.2
52.4
12570
Latvia
2.3
7.5
7870
Lithuania
3.5
11.8
7610
Malta
0.4
3.6
16530
Poland
38.7
174.6
9280
Slovak Republic
5.4
20.5
11610
Slovenia
2.0
18.8
18160
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Governing Organizations of the EU
 The Council of the European Union
 The European Commission
 The European Parliament
 The European Court of Justice
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A weekly
meeting at the
European
Commission.
The commission
administers the
EU’s bureaucracy
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Figure 10.4 The Co-Decision Procedure
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Three Pillars of the Maastricht Treaty
 A new agreement to create common foreign
and defense policies among members
 A new agreement to cooperate on police,
judicial, and public safety matters
 The old familiar European Community, with
new provisions to create an economic and
monetary union among member states
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Components of the Treat for Europe
(Treat of Amsterdam)
 A strong commitment to attack the EU’s
chronic high levels of unemployment
 A plan to strengthen the role of the
European Parliament by expanding the
number of areas that require use of the codecision procedure
 Establishment of a two-track system
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Treaty of Nice
 Effective Februar2003
 To reduce the risk of political gridlock
as the number of members increase,
– reduced number of areas where
unanimity is required for Council
approval
– adjusted number of votes assigned to
each Council member
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Table 10.4 Major Regional Trade Associations
Acronym
Full Name
AFTA
ASEAN Free Trade Area
ANCOM
Andean Pact
APEC
Asia-Pacific Economic Cooperation
CACM
Central American Common Market
CARICOM
Caribbean Community and Common Market
CEMAC
Monetary and Economic Community of Central Africa
CER
Australia-New Zealand Closer Economic Trade Relations Agreement
ECOWAS
Economic Community of West African States
EU
European Union
EFTA
European Free Trade Association
GCC
Gulf Cooperation Council
MERCOSUR
Southern Cone Customs Union
NAFTA10-30
North American Free Trade Agreement
SADC
South African Development Community
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Map 10.2 Free Trade Agreements in Central and
South America and the Caribbean
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Trade among Andean Pact members has been
hindered by rough terrain of the Andes Mountains
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Map 10.3 The ASEAN Members
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Map 10.4 Asia-Pacific Economic
Cooperation Initiative (APEC)
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Map 10.5 Free Trade Agreements in Africa
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