Transcript Notes for chapter 9/10/11

International Marketing
Chapter 10
Multinational Market Regions
and Market Groups
Introduction
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The evolution and growth of multinational market regions—
those groups of countries that seek mutual economic benefit
from reducing interregional trade and tariff barriers—are the
most important global trends today
Organizational form varies widely among market regions, but
the universal goal of multinational cooperation is economic
benefit for the participants
Political and social benefits sometimes accrue, but the dominant
motive for affiliation is economic.
The world is awash in economic cooperative agreements as
countries look for economic alliances to expand access to free
markets.
Traits of Successful Economic Unions
1.
2.
3.
4.
5.
Economic Compatibility (similar
economic systems)
Political Compatibility (similar
political systems)
Cultural Compatibility
Geographic factors
Weakness in some must be balanced
by strengths in others
Patterns of Multinational Cooperation
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There are five fundamental groupings for regional economic
integration as follows:
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Viewed on a spectrum, each requires greater levels of
cooperation among member nations and include:
1.
2.
3.
4.
Regional Cooperation Groups
Free Trade Areas
Customs Unions
Common Markets and
Economic Unions
5. Political Unions
Regional Cooperation Groups
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A group of countries that have
agreed to participate in basic
industries beneficial to each or
jointly develop joint ventures
that benefit both countries, e.g.,
Colombia and Venezuela built
a hydroelectric dam on the
Orinico river which both share
Free Trade Areas
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A group of countries that have agreed to reduce drastically (but
not eliminate) all trade barriers such as customs duties and nontariff barriers (standards)
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Member countries can have different trade policies for other
external countries
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Examples of Free Trade
Areas: NAFTA, and
European Free Trade Area
(EFTA) between Iceland,
Liechtenstein, Norway,
and Switzerland
Customs Unions
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In addition to drastically reducing trade barriers from FTA
identified previously, a group of countries that have agreed to
eliminate customs duties levied among member countries
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Also establishes common external barriers like imposing a
common tariff on goods imported from countries out of the
association.
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Examples of Customs Unions:
East African Customs Union
between Ethiopia, Kenya,
Sudan, Tanzania, Uganda,
and Zambia
Common Markets
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In addition to drastically reducing trade barriers, and eliminating customs
duties levied from FTA and Customs Unions identified previously, a
common market is a group of countries that allow:
 the free flow of capital and labor (engineers, doctors, and lawyers can
work without recertification) among members
 a common currency
 a common central bank; and
 common policies on transportation, agriculture, social services, welfare,
and taxes
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Latin America boasts three common markets: the
Central American Common Market (CACM), the
Andean Common Market, and the Southern Cone
Common Market (MERCOSUR).
The three have roughly similar goals and seek eventual
full economic integration.
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Political Unions
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The highest level of cooperation among member countries
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A group of countries that have agreed to complete political and
economic integration and cooperation among members
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Examples of Political Unions:
COMECON (Council for
Mutual Economic Assistance),
and U.S.S.R., but it no longer
exists
Global Markets and Multinational Market Groups
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Many Multinational Market Groups have emerged due to
recent trends that include:
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The globalization of markets
The restructuring of Eastern Europe into
independent market-driven economies
The dissolution of the Soviet Union into
independent states and
The worldwide trend toward economic
cooperation
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Various examples of Multinational Market Groups are
provided next
European Market Regions
European Union History
Symbol of the Euro
Newly Independent States
CIS or Commonwealth of Independent States
North American Free-Trade Area (NAFTA)
Canada
United States
Mexico
NAFTA Rules of Origin
Tariff shift rule
Value-content rule
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Non-NAFTA imports undergo sufficient manufacture
or processing to become products that can qualify
under a different tariff classification.
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A set percentage of the value of the good must be
North American (usually coupled with a tariff
classification shift requirement). Some goods are
subject to the value-content rule only when they
fail to pass the tariff classification test because of
non-NAFTA inputs.
Economic Cooperation Organization (ECO)
Pakistan
Iran
Turkey
Azerbaijan
Turkmenistan
Uzbekistan
Central European Free-Trade Area (CEFTA)
Poland
Hungary
Slovakia
Czech Republic
Slovenia
Romania
Southern Cone Free Trade Area (MERCOSUR)
Argentina
Bolivia
Brazil
Chile
Paraguay
Uruguay
Latin American Integration Association (LAIA)
Argentina
Mexico
Bolivia
Paraguay
Brazil
Peru
Chile
Uruguay
Columbia
Venezuela
Ecuador
Andean Common Market (ANCOM)
Bolivia
Columbia
Ecuador
Peru
Venezuela
Panama
Central America Common Market (CACM)
Guatemala
Costa Rica
Nicaragua
Honduras
Caribbean Community and Common Market
(CARICOM)
Antigua
Jamaica
Barbuda
Montserrat
Belize
St. Kitts-Nevis
Dominica
Anguilla
Grenada
St. Lucia
Guyana
St. Vincent
Trinidad-Tobago
Association of Southeast Asian Nations
(ASEAN)
Brunei
Singapore
Indonesia
Thailand
Laos
Vietnam
Malaysia
Myanmar
Philippines
Association of Southeast Asian Nations
(ASEAN) + 3
Brunei
Singapore
Indonesia
Thailand
Laos
Vietnam
Malaysia
Japan
Myanmar
S. Korea
Philippines
China
Economic Cooperation Organization (ECO)
Pakistan
Iran
Turkey
Azerbaijan
Turkmenistan
Uzbekistan
Asia-Pacific Economic Cooperation (APEC)
Australia
Japan
Philippines
Brunei
South Korea
Russia
Canada
Malaysia
Singapore
Chile
Mexico
Taiwan
China
New Zealand
Thailand
Hong Kong
Papua New Guinea
U.S.A.
Indonesia
Peru
Vietnam
Economic Community of West African States
(ECOWAS)
Benin
Guinea-Bissau
Burkina Faso
Liberia
Cote d’ Ivoire
Mali
Gambia
Mauritania
Ghana
Niger
Guinea
Nigeria
Southern African Development Community
(SADC)
Angola
Gabon
Botswana
Mali
Lesotho
Mauritania
Namibia
Niger
Malawi
Senegal
Mauritius
Togo
East African Customs Union
Ethiopia
Kenya
Sudan
Tanzania
Uganda
Zambia
West Africa Economic Community
Senegal
Togo
Burkina Faso
Cote d’Ivoire
Mali
Mauritania
Niger
Customs and Economic Union of Central
Africa (CEUCA)
Cameroon
Central African Republic
Gabon
People’s Republic of Congo
Maghreb Economic Community
Algeria
Libya
Morocco
Tunisia
Arab Common Market
Iraq
Kuwait
Jordan
Syria
Egypt
Future Multinational Trade Groups
1. United States/Japan
2. Hong Kong/Taiwan
3. Asia-Pacific Rim Countries
4. Hong Kong/Taiwan/Coastal Provinces of Southern China
5. Western Hemisphere (North and South America) F.T.A.
6. Transatlantic Free Trade Area (U.S.A. & EU)
7. NAFTA including Central America
8. SAFTA