Ch.

6: International Environment: Regional Political & Economic Integration

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Regional Integration (RI) means unification of countries in larger whole. It is aimed to strengthen their ties, relationship and thereby to achieve development and good and harmonized relations with member countries. Need for integration 1. Trade growth 2. Growth in investments or build climate for investment 3. Reduce trade barriers and make smooth business 4. Enhance infrastructure 5. Economic developments

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Impact of Integration 1. Creation and diversion of trade 2. Over all growth of region 3. Implement efficient trade practice 4. Economic growth by increasing production and income 5. By entry of new entrants - healthy competition 6. Reduction of tariff and prohibitions 7. Built confidence between member countries 8. Reduce conflicts and chance to war

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Levels of Economic Integration

Political Economic Union NAFTA Common Union Free Customs Market Union Trade Area EU 1992
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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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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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The European Union [EU]

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Map

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European Union and the US (April, 1998)

Europe* Population (mm)
% of World GDP % of World Trade GDP Growth Budget Balance as % of GDP

USA 267.7 19.6% 16.6% 3.8% 0

300 19.4% 18.6% 2.4% - 2.8%

*Countries likely to be part of common currency: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain.

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EU Governance
European Council
Heads of State and Commission President
Resolves policy issues Sets policy direction.

European Commission
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 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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Propose amendments to legislation, veto power over budget and singlemarket legislation, appoint commissioners.

Map

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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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Andean PACT

Map

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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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Mercosur

Map

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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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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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Map

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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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The 2012 BRICS summit was the fourth annual BRICS summit, an international relations conference attended by the heads of state or heads of government of the five member states Brazil, Russia, India, China and South Africa. The summit was held at at Taj Mahal Hotel[1] in New Delhi, India on 29 March 2012[2] and began at 10:00 Indian Standard Time.[3] This is the first time that India has hosted a BRICS summit.[4] The theme of the summit was "BRICS Partnership for Global Stability, Security and Prosperity Agenda 1. Common development bank 2. An urgent need to implement the 2010 Governance and Quota Reform before the 2012 International Monetary Fund World Bank Annual Meeting. 3. Candidatures from developing world for the position of the President of the World Bank reiterating that the heads of IMF and the World Bank 4. To promote trade in local currencies, the BRICS countries signed the Master Agreement on Extending Credit Facility in Local Currency and the Multilateral Letter of Credit Confirmation Facility Agreement to replace the United States dollar as the main unit of trade between them 5. Foreign policy issues 6. Bilateral initiatives
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The decision taken by Pakistan and India to scale down tariff to a maximum of five per cent and remove all non-tariff barriers (NTBs) by 2020 will lead to regional integration, according to an official of the Geneva-based World Trade Organisation (WTO). The current progressive dialogue on trade between Pakistan and India will not only benefit the two economies but will also serve to increase trade among Saarc countries, China's rapid economic development is going to deliver real benefits rather than pose threats to its Asian neighbor, including ASEAN countries and Japan. At the conference organized by China Daily, Long pointed out that economic integration in Asia is of strategically importance for all countries in the region as well as those companies including multinationals operating in this region. China has become a very active participant in regional economic co-operation and integration in recent years. The objective of the initiatives is to let other Asian countries share the economic achievements that China has made in the past decades, said Long. The country has demonstrated its strong willingness and commitment to regional integration such as establishing a free trade area with ASEAN (Association of Southeast Asian Nations) countries and proposing such an area with Japan and South Korea in recent years. So it is important for international business managers to have watch in such regional integration agreement , which helps to find out new market or business opportunity. Like businessman from India and Pakistan get opportunity of business by such pact. Same way businessmen of Asian countries can get business opportunity to do business in China.

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