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Chapter 8: Capitalizing on Global and Regional Integration
Chapter Outline
LO1: Make the case for global economic integration.
1. Key Concepts
This section details the political and economic benefits of global integration. While
emphasizing economic benefits, global economic integration is political in nature. Its
fundamental goal is to promote peace. There are at least three compelling economic reasons
for global economic integration. The first is to handle disputes constructively. A second
benefit is that global economic integration makes life easier for all participants. Finally,
global economic integration raises incomes, generates jobs, and stimulates economic
growth.
2. Key Terms
3. Discussion Exercise
Despite the benefits of global economic integration, there has also been some backlash. The
G8 summit in Genoa in 2001; the WTO Ministerial Conference of 1999 in Seattle; and the
G20 summit in London, 2009 were recent targets for protestors. The demonstrations of the
majority of protestors are organized by non-hierarchical groups that have political goals.
These goals usually revolve around the following points: the growing income disparity
between rich and poor nations, the detrimental environmental effects of global trade, and the
growth of global financial institutions.
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Chapter 8: Capitalizing on Global and Regional Integration
Global integration isn’t always beneficial; it often causes harm to people around the world.
If you, as a student, were the PR executive of Wal-Mart, how would you deal with this
problem? How would you deal with the potential public relations damage that comes from
being a frequent target of protests? Is there a possibility of positively accommodating
protestors’ interests?
LO2: Explain the evolution of the GATT and the WTO, including current challenges.
1. Key Concepts
2. Key Terms
LO3: Make the case for regional economic integration.
1. Key Concepts
2. Key Terms
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Chapter 8: Capitalizing on Global and Regional Integration
3. Discussion Exercise
How might regional economic integration help resolve some of these contentious political
issues? What types of industry might enable some level of integration within the Middle
East?
LO4: List the accomplishments, benefits, and costs of the European Union.
1. Key Concepts
2. Key Terms
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Chapter 8: Capitalizing on Global and Regional Integration
LO5: Identify the five organizations that promote regional trade in the Americas and
describe their benefits and costs.
1. Key Concepts
2. Key Terms
3. Discussion Exercise
During the presidential primaries and elections of 2016, NAFTA was a key point of debate.
Concerns over free trade in North America began, nearly 20 years ago, as arguments about
the ramifications of the treaty became key issues in the U.S. presidential election of 1992
and the Canadian election of 1993. In fact, the then Prime Minister of Canada, Brian
Mulroney, resigned from office four months before the 1993 elections because his support
for NAFTA had made him unpopular.
Born from such contention, how has NAFTA worked out? What were the positive and
negative effects it had on the three signatories—the United States, Canada, and Mexico?
Were fears of job losses in the United States realized? Should NAFTA be continued? Should
people continue to carry out other free trade agreements, given the result of NAFTA?
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Chapter 8: Capitalizing on Global and Regional Integration
LO6: Identify the four organizations that promote regional trade in the Asia Pacific and
describe their benefits and costs.
1. Key Concepts
2. Key Terms
LO7: Articulate how regional trade should influence your thinking about global business.
1. Key Concepts
Given the slowdown of multilateralism and the acceleration of regionalism, managers are
advised to focus their attention 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.
Debate: Emerging Markets/Ethical Dilemma
Food versus Trade
1. Key Concepts
Unfortunately, in July 2014, the TFA collapsed. This was because India withdrew its
support. India, like many developing countries, strengthened “food security” policies (a
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Chapter 8: Capitalizing on Global and Regional Integration
euphemism for agricultural subsidies) in response to recent swings in food prices. Such
subsidies would soon grow large enough to violate WTO rules, which dictate that no
developing country could subsidize more than 10 percent of the total value of harvests to
farmers.
Students can have a healthy debate on why India would not trade food for trade and also the
consequences of giving up the gains from smoother trade.
Closing Case Discussion Guide
What If NAFTA Goes Away?
In effect since 1994, the North American Free Trade Agreement (NAFTA) has no shortage of
controversies. As Trump has assumed power, the criticisms against NAFTA, potentially
culminating in a repeal of NAFTA, force individuals to entertain a previously unthinkable
scenario: What happens if NAFTA goes away?
What about jobs? In brief, no “giant sucking sound” has been heard. NAFTA has allowed U.S.
firms to preserve more U.S. jobs, because 40 percent of the value of U.S. imports from Mexico
and 25 percent from Canada are actually made in the United States.
So what if NAFTA goes away? First, as an institutional framework, NAFTA merely represents
some relatively new rules of the game that are artificial and man-made. Second, if the Trump
administration unilaterally imposes high import tariffs, Canada and Mexico will certainly
respond in kind. Given the reality of NAFTA supply chain, a tariff is like erecting a wall in the
middle of a factory. Third, since both Canada and Mexico have free trade agreements (FTAs)
with the European Union (EU), the U.S. withdrawal from NAFTA will significantly help
increase EU firms’ market share there.
Finally, shutting down NAFTA does not bring back a large number of manufacturing jobs to the
United States. The recent crises facing U.S. manufacturing jobs, falling from 17 million to 11
million between 2000 and 2010, have little to do with NAFTA.
There is wide spread belief that Trump’s nasty rhetoric on NAFTA is just “talk.” Procedurally,
Trump is required to seek congressional approval if he merely wants to renegotiate NAFTA.
Congress is unlikely to support a policy to throw away so many benefits and to spark retaliatory
trade sanctions in America’s top two export markets—with so little gains. While NAFTA is not a
panacea and has its problems, dismantling it would be “lunacy,” according to Texas Monthly.
Video Case
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Chapter 8: Capitalizing on Global and Regional Integration
Watch “Delivering High Performance Research through Cross-Sector Collaboration” by
Peter Lacy of Accenture.
1. Lacy covered collaboration in projects involving different “cultures” in academic, business,
and government areas. How would you apply his discussion to the challenge of bringing
together leaders from various national cultures in regional economic integration?
2. Lacy stated that business people solve problems in months with real world applications, as
opposed to academics who may take many years and attempt to build on previous studies.
Show how globalization and the expanded use of technology could create a need for
business people to actually spend more time and academics to spend less time on problem
solving.
3. Suppose you are the CEO of a global corporation and you wish to achieve boundary
spanning through experience. What would be the benefit of using that approach as opposed
to developing empathy? How would you go about doing that?
4. Lacy applied the stakeholder concept to projects. What stakeholders exist when attempting
to create or expand regional economic integration?
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Chapter 8: Capitalizing on Global and Regional Integration
Additional Discussion Material
(From Prep Cards)
Critical Discussion Questions
1. The Doha Round collapsed because many countries believed that no deal was better than a
bad deal. Do you agree or disagree with this approach? Why?
2. On Ethics: Critics argue that the WTO single-mindedly promotes trade at the expense of
the environment. Therefore, trade—or more broadly, globalization—needs to slow down.
What is your view on the relationship between trade and the environment?
3. On Ethics: Critics argue that thanks to NAFTA, a flood of subsidized U.S. food imports
wiped out Mexico’s small farmers. Some 1.3 million farm jobs disappeared. Consequently,
the number of illegal immigrants in the United States skyrocketed. What is your view on
NAFTA and CAFTA?
Review Questions
1. What are some of the political and economic benefits of global economic integration?
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Chapter 8: Capitalizing on Global and Regional Integration
2. What happened to the Doha Development Agenda at the WTO?
3. Should the EU remain an economic union, or should it move to become a political union?
4. What achievements do NAFTA supporters point to as evidence of NAFTA’s success?
5. What are the leading examples of regional integration in South America and the Asia
Pacific?
6. List one disadvantage of global economic integration.
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Chapter 8: Capitalizing on Global and Regional Integration
7. Briefly summarize the history of the WTO.
8. What are the main features of the World Trade Organization (WTO)?
9. In what ways are the benefits of regional economic integration similar to global economic
integration?
Benefits include the following points:
10. What is one possible negative outcome of regional integration
11. Referring to Exhibit 8.2 as needed, name and describe the five main types of regional
economic integration.
12. What are the advantages and disadvantages of the EU’s adoption of the euro?
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Chapter 8: Capitalizing on Global and Regional Integration
13. What achievements do CAFTA supporters point to as evidence of its success?
14. What two trends indicate that managers should focus more on regional as opposed to
global issues?
15. How important is it for a manager to understand the political ramifications of global and
regional trade negotiations