© 2010 Cengage Learning. All rights reserved. CHAPTER 8 GLOBAL PENG.

© 2010 Cengage Learning. All rights reserved.

CHAPTER 8

GLOBAL PENG

© 2010 Cengage Learning. All rights reserved.

Chapter 8 LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1. Make the case for global integration 2. Explain the evolution of the GATT and the WTO,

including current challenges. 3. Make the case for regional economic integration. 4. List the accomplishments, benefits, and costs of

the European Union. 5. Identify the five organizations that organize

regional trade in the Americas and describe their benefits and costs.

6. Identify the three organizations that organize regional trade in Asia Pacific.

7. Articulate how regional trade should influence your thinking about global business.

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LO1: THE CASE FOR GLOBAL ECONOMIC INTEGRATION

Global economic integration - efforts to reduce trade and investment barriers around the globe

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LO2: THE EVOLUTION OF THE GATT AND WTO

GATT (General Agreement on Tariffs and Trade; 1948-1994)

Reduced level of tariffs through multilateral negotiations. Three areas of concern:

No protection for services or intellectual property.

Loopholes needed reform – Multifiber Arrangement (MFA)

Global recessions led goverments to invoke non-tariff barriers (MTBs)

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LO2: THE EVOLUTION OF THE GATT AND WTO

WTO (World Trade Organization; 1995-present)

Transformed GATT from provisional treaty to full-fledged international organization. New features:

Agreement governing trade of services (GATS)

Agreement governing intellectual property rights (TRIPS)

Trade dispute settlement mechanisms Trade policy reviews

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LO3: THE CASE FOR REGIONAL ECONOMIC INTEGRATION

Regional economic integration – efforts to reduce trade and investment barriers within one region.

PROSPromotes peace;

Disputes handled constructively;Consistent rules;

Raise incomes and stimulate economic growth

CONSDiscrimination against firms

outside of region;Some loss of sovereignty

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LO3: REGIONAL ECONOMIC INTEGRATION

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LO4: ACCOMPLISHMENTS OF THE EUROPEAN UNION

EU and predecessors have delivered over 50 years of peace.

Introduction of common currency, the euro. Accounts for approximately 21% of world GDP.

Formation of a single market.

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LO4: BENEFITS AND COSTS OF THE EUROPEAN UNION

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LO5: FIVE ORGANIZATIONS IN THE AMERICAS

NAFTA (North American Free Trade Agreement; 1994) Andean Community (1969) Mercosur (1991) Union of South American Nations (USAN; 2005) United States-Dominican Republic-Central America Free Trade Agreement (CAFTA; 2005)

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LO5: FIVE ORGANIZATIONS IN THE AMERICAS

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LO6: THREE ORGANIZATIONS IN ASIA

Australia-New Zealand Closer Economic Relations Trade Agreement (ANZCERTA or CER; 1983)

Association of Southeast Asian Nations (ASEAN; 1967)

ASIA-Pacific Economic Cooperation (APEC; 1989)

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LO6: THREE ORGANIZATIONS IN ASIA

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DEBATE: REGIONAL INTEGRATION: BUILDING BLOCK OR STUMBLING BLOCK?

Stumbling block: Prevents global integration because it provides preferential treatment for members and discrimination for non-members.

Building block: Considered the next best thing in the absence of global economic integration. May present blocks for global integration.

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LO7: THE INFLUENCE OF REGIONAL TRADE ON GLOBAL BUSINESS