978-1305500891 Chapter 8 Lecture Note

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CHAPTER 8

CAPITALIZING ON GLOBAL

AND REGIONAL INTEGRATION

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1. make the case for global economic integration.

2. understand the evolution of the GATT and the WTO, including current challenges.

3. make the case for regional economic integration.

4. understand regional economic integration efforts in Europe, the Americas, the Asia

Pacific, and Africa.

5. participate in two leading debates concerning global and regional economic integration.

6. draw implications for action.

GENERAL TEACHING SUGGESTIONS

You might consider obtaining some articles or video dealing with anti-globalization protests and

point out some quotes from protesters. Have debate between two groups defending and opposing

the views of the protestors.

OPENING CASE DISCUSSION GUIDE

Emerging Markets: Launching the Learjet 85: A NAFTA Collaboration

Companies are taking advantage of NAFTA to expand their supply chains. Bombardier, a

Canadian company, used parts designed, manufactured, and obtained from several locations to

make the Learjet 85. Sources included Mexico, Canada, Ireland, and the US.

CHAPTER OUTLINE: KEY CONCEPTS AND TERMS

Sections I through 1X of Chapter 8

I. GLOBAL ECONOMIC INTEGRATION

1. Key Concept

The case for global economic integration includes both political and economic benefits

for global economic integration.

2. Key Terms

European Union (EU) refers to the official title of European economic integration

since 1993.

General Agreement on Tariffs and Trade (GATT) is a multilateral agreement

governing the international trade of goods (merchandise).

Global economic integration refers to efforts to reduce trade and investment

barriers around the globe.

Multilateral trading system is the global system that governs international trade

among countries—otherwise known as the GATT/WTO system.

Nondiscrimination is a principle that a country cannot discriminate among its

trading partners.

North American Free Trade Agreement (NAFTA) is a free trade agreement among

Canada, Mexico, and the United States.

Regional economic integration refers to efforts to reduce trade and investment

barriers within one region.

World Trade Organization (WTO) is the official title of the multilateral trading

system and the organization underpinning this system since 1995.

II. ORGANIZING WORLD TRADE

1. Key Concept

The GATT (1948–1994) significantly reduced tariff rates on merchandise trade. The

WTO (1995–present) was set up not only to incorporate the GATT but also to cover trade

in services, intellectual property, trade dispute settlement, and peer review of trade

policy. The Doha Round, intended to promote more trade and development, has failed to

accomplish its goals.

2. Key Terms

Doha Round is a round of WTO negotiations to reduce agricultural subsidies, slash

tariffs, and strengthen intellectual property protection that started in Doha, Qatar, in

2001. Officially known as the “Doha Development Agenda,” it was suspended in

2006 due to disagreements.

General Agreement on Trade in Services (GATS) is a WTO agreement governing

the international trade of services.

Trade-Related Aspects of Intellectual Property Rights (TRIPS) is a WTO

agreement governing intellectual property rights.

III. REGIONAL ECONOMIC INTEGRATION

1. Key Concept

Political and economic benefits for regional integration are similar to those for global

integration. Regional integration may undermine global integration and lead to some loss

of countries’ sovereignty.

2. Key Terms

Common market is a market that combines everything a customs union has. In

addition, a common market permits the free movement of goods and people.

Customs union is one step beyond a free trade area (FTA); a customs union imposes

common external policies on nonparticipating countries.

Economic union has all the features of a common market. Members also coordinate

and harmonize economic policies (in areas such as monetary, fiscal, and taxation) to

blend their economies into a single economic entity.

Free trade area (FTA) is a group of countries that remove trade barriers among

themselves.

Monetary union is a group of countries that use a common currency.

Political union is the integration of political and economic affairs of a region.

IV. REGIONAL ECONOMIC INTEGRATION IN EUROPE

1. Key Concept

The EU has delivered more than half a century of peace and prosperity, launched a single

currency, and constructed a single market. Its challenges include internal divisions and

enlargement concerns.

2. Key Terms

Euro is the currency used in 18 EU countries.

Euro zone is the 18 EU countries that currently use the euro as the official currency.

Schengen is a passport-free travel zone within the EU.

V. REGIONAL ECONOMIC INTEGRATION IN THE AMERICAS

1. Key Concept

Despite problems, NAFTA has significantly boosted trade and investment among

members. In South America, the prominent regional deals are Andean Community,

Mercosur, USAN/UNASUR and CAFTA.

2. Key Terms

Andean Community is a customs union in South America that was launched in

1969.

Mercosur is a customs union in South America that was launched in 1991.

Union of South American Nations (USAN/UNASUR) is a regional integration

mechanism integrating two existing customs unions (Andean Community and

Mercosur) in South America.

United States–Dominican Republic–Central America Free Trade Agreement

(CAFTA) is a free trade agreement between the United States and five Central

American countries and the Dominican Republic.

VI. REGIONAL ECONOMIC INTEGRATION IN THE ASIA PACIFIC

1. Key Concept

Regional integration in Asia Pacific centers on CER, ASEAN, APEC, and TPP.

2. Key Terms

Asia-Pacific Economic Cooperation (APEC): is the official title for regional

economic integration involving 21 member economies around the Pacific.

Association of Southeast Asian Nations (ASEAN) is the organization underpinning

regional economic integration in Southeast Asia.

Australia–New Zealand Closer Economic Relations Trade Agreement

(ANZCERTA or CER) is a free trade agreement between Australia and New

Zealand.

Trans-Pacific Partnership (TPP) is a multilateral free trade agreement being

negotiated by 12 Asia Pacific countries.

VII.REGIONAL ECONOMIC INTEGRATION IN AFRICA

1. Key Concept

Regional integration deals in Africa are both numerous and ineffective.

2. Key Terms

None

VIII. DEBATES AND EXTENSIONS

1. Key Concept

Debates: Is regional integration a building block or a stumbling block for global

integration? Does the WTO really matter?

2. Key Terms

None

IX. MANAGEMENT SAVVY

1. Key Concept

Given the acceleration of regionalism, managers are advised to focus more at regional

than global levels. Managers also need to understand the rules of the game and their

transitions at both global and regional levels.

2. Key Terms

None