Transcript Regional Economic Integration Chapter 8

Regional Economic Integration
Chapter 8
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Levels of Economic Integration
Political
Economic Union
NAFTA
Common Union
Free Customs Market
Union
Trade
Area
Figure 8.1 in text
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EU 1992
8-1
Economic Case for
Regional Integration
Stimulates economic growth in countries
Countries specialize in those goods and
services efficiently produced.
Additional gains from free trade beyond
international agreements such as GATT and
WTO.
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Political Case for
Economic Integration
Economic interdependence creates incentives
for political cooperation and reduces potential
for violent confrontation.
Together, the countries have the economic
clout to enhance trade with other countries or
trading blocs.
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Impediments to
Regional Integration
Groups within countries may be hurt.
Potential loss of sovereignty and control over
domestic issues.
Debate:
Integration is trade creation?
Integration is trade diversion?
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Political World Map
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Regional Economic Integration
Agreements among countries in a
geographic region to reduce, and ultimately
remove, tariff and nontariff barriers to the
free flow of goods, services and factors of
production among each other.
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Growth of Regional
Arrangements
200
Regional
Arrangements
100
0
86-91
92-96
47 -97
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In Force
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8-8
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Map 8.1
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European Union GDP
4
2
% Growth
0
-2
90 91 92 93 94 95 96 97 98 99
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European Union and the US
(April, 1998)
Europe*
USA
Population (mm)
300
267.7
% of World GDP
19.4%
19.6%
% of World Trade
18.6%
16.6%
2.4%
3.8%
- 2.8%
0
GDP Growth
Budget Balance
as % of GDP
*Countries likely to be part of common currency: Austria, Belgium, Finland, France, Germany, Ireland, Italy,
Luxembourg, Netherlands, Portugal and Spain.
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US Top European Trading
Partners
$ Billions
3.5
3
2.5
2
1.5
Exports to
Imports from
1
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Switzerland
Italy
France
UK
0
Germany
0.5
8-12
EU and US
Annual Real GDP Growth Rates
%
15
10
EU
US
5
0
EU
-5
1992
1993
1994
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1995
1996
1997
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EU and US
Unemployment
%
15
10
US
EU
5
US
0
1992
1993
1994
1995
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1996
1997
1998
8-14
EU and US
Inflation
%
5
4
3
EU
2
1
US
EU
0
1992
1993
1994
1995
1996
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1997
1998 1999P
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EU Governance
European Council
Heads of State
and
Commission
President
European Commission
Resolves policy issues
Sets policy direction.
20 Commissioners
appointed by
members for
4 year terms
Proposing,
implementing,
monitoring legislation.
Council of Ministers
European Parliament
630
directly
elected
members
1
representative
from each
member
Propose amendments to
legislation, veto power
over budget and singlemarket legislation,
appoint commissioners.
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Ultimate controlling authority.
No EU laws w/o approval.
Court of Justice
1 judge
from each
country
Hears
appeals of
EU Laws.
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Map 8.2
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North American Free Trade
Agreement
Became law: January 1,1994
Over 15 year period:
tariffs reduced (99% of goods traded)
NTBs reduced
investment opportunities increased
Protects intellectual property
Applies national environmental standards
Special treatment for many industries
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NAFTA and Mexico
Maquiladora
Millions of Workers
1
0.85
0.7
0.55
0.4
1990
1992
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1994
1996
1998
8-19
Employment in Foreign-Operated
Factories in Mexico
800
750
700
650
600
Thousands
550
500
450
400
93
94
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95
96
97
8-20
Canadian Workers Move South
Thanks to NAFTA
Thousands
30
25
20
15
10
5
0
1993
1994
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1995
1996
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Andean PACT
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Map 8.2
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ANCOM: Andean Pact
Bolivia, Colombia, Ecuador, Peru,
Venezuela
Cartagana Agreement, 1969. One of oldest
still in existence
Population: 97 mm (14% of hemisphere)
GNP: $122.6 billion
Changed from FTA to customs union in
1992
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US Trade With The Andean Community
$ Billions
25
20
15
Imports
Exports
10
5
0
1995
1996
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1997
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Mercosur
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Map 8.2
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The Mercosur Accord
1988: Argentina, Brazil. 1990: Paraguay,
Uruguay
1995: Agreed to move toward a full
customs union.
Population: 209 mm (27% of hemisphere)
GNP: $656.6 billion (8% of hemisphere)
Trade doubled in first 3 years
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US Trade With Mercosur
$ Billions
30
25
20
Imports
Exports
15
10
5
0
1995
1996
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1997
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Other Hemisphere Associations
Central American Common Market
CARICOM
Free Trade Area of the Americas
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ASEAN
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Association of Southeast Asian
Nations
Created in 1967
400 million citizens
Economic, political and social cooperation
Brunei, Indonesia, Malaysia, the
Philippines, Singapore, Thailand and
Vietnam.
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Association of Southeast Asian
Nations
GDP Growth (%)
US Export to ASEAN
($billion)
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
45
40
35
30
25
20
15
10
5
0
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Net Flows of Private Capital to Indonesia,
Malaysia, Philippines, South Korea and
Thailand
100
80
60
40
$ Billions
20
0
-20
1991
92
93
94
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95
96
97
98
Thru April 30.
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Asian Trade Flows
NAFTA
Japan
Destination of Exports
South Korea
Source of Imports
Rest of World
0
5
10
15
20
25
%
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Map 8.3
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Asia Pacific Economic
Cooperation
Founded in 1989 to ‘promote open trade
and practical economic cooperation’.
‘Promote a sense of community’.
18 members
GDP: $13 trillion (1995)
50% of total world income
40% of global trade
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