In a highly competitive global world, mastering international business administration is becoming necessary for managers worldwide to successfully perform diverse business activities with other parties in different countries.
2. OUTLINE:
1. The General Agreements on Tariffs and Trade and the World Trade
Organization
2. Regional Economic Integration
3. The European Union
4. Other Regional Trading Blocs
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3. 1) The General Agreements on Tariffs and Trade and the
World Trade Organization
The collapse of international economy occurred during the
Great Depression between World Wars I and II.
By raising tariff and quota barriers, each nation believed that it
could help its industries and citizens.
In 1947, representatives of leading trading nations have met in
Havana, Cuba and created the ITO (International Trade
Organization).
Its mission was to promote international trade.
GATT WTO
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4. 1.1. GATT
Its mission was taken over by the General Agreement on Tariffs and trade (GATT), which was
developed as part of the Havana conference.
The goal of GATT was to promote a free and competitive trading environment that benefits
efficient producers.
To help international businesses compete in world markets regardless of their nationality, the
GATT sought to ensure that international trade was conducted on a nondiscriminatory basis.
This was accomplished through using the most favored nation (MFN) principle, which mentions
that the most favored nation principle requires that any preferential treatment granted to one
country must be extended to all countries.
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5. 1.2. WTO
The World Trade Organization (WTO) was founded in 1995, and is comprised of 153 member
countries and 30 observer countries.
The WTO has three primary goals:
1. To promote trade flows by encouraging nations to adopt non-discriminatory
and predictable trade policies.
2. To reduce remaining trade barriers through multilateral negotiations.
3. To establish impartial procedures for resolving trade disputes among members.
The WTO is also focusing on reducing barriers to trade in services. One approach currently in
use is the principle of national treatment, in which a country treats foreign firms the same as it
treats domestic firms.
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6. 2) Regional Economic Integration
Regional alliances to promote liberalization and international trade are an important feature of
the post-World war II international landscape.
FORMS OF ECONOMIC INTEGRATION:
Countries are seeking to integrate their economies to open
new markets for their businesses and lower prices for their
consumers.
There are five types of regional economic integration between countries:
Common
Market
Economic
Union
Political
Union
Free Trade
Area
Customs
Union
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7. 2.1. Free Trade Area
A free trade area eliminates all barriers to trade among member countries, but allows each
country to establish its own external trade barriers.
A problem with free trade areas is the potential for trade deflection whereby nonmember
countries try to avoid trade barriers by initially exporting their products to a member country
with low trade barriers, then re-exporting the products to a member country with high trade
barriers.
2.2. Customs Union
A customs union combines the elimination of barriers to internal trade among member
countries with the adoption of common external trade policies toward nonmembers.
A current example of a customs union is the Mercosur Accord, an agreement among Argentina,
Brazil, Paraguay, and Uruguay.
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8. 2.3. Common Market
A common market combines the elements of a customs union with a policy that allows for
the mobility of factors of production.
The European Union is an example of a common market.
2.4. Economic Union
An economic union eliminates trade barriers between member countries, establishes a
common external trade policy, follows a policy of factor mobility, and coordinates
economic policies of member countries.
An example of an economic union is the Belgium-Luxembourg Economic Union. In addition,
the European Union is currently moving toward economic union status.
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9. 2.5. Political Union
A political union combines the elements of an economic union with the added feature of
complete political integration.
The United States, transformed from 13 separate colonies into one, is an example of a political
union.
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10. 3) The European Union
The European Union (EU) is the most important trading bloc
in the world today.
27 countries currently “belong” to the EU, making it the
world’s richest market, with a total GDP of $14.4 trillion.
The EU is governed by four organizations:
The European
Commission
The European
Parliament
The European
Court of Justice
The Council of
the Economic
Union
Made up of 27 members,
each of whom is
responsible to his or her
home government, is the
EU’s main decision-
making body.
Is composed of 27
individuals whose
loyalty is to the EU
rather than their home
countries
Made of 785 elected
representatives, is the weakest
of the governing bodies. It
originally acted in a
consultative manner in EU
policy making, but has
expanded its role under the
Maastricht Treaty.
It interprets the meaning
of EU law and ensures
that EU regulations and
policies are followed by
member states.
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11. 4) Other Regional Trading Blocs
The success of the EU in enriching its members has spawned
the development of new trading blocs.
Today nearly every continent has one regional trading group.
Other regional trading blocs are:
The North American
Free Trade Agreement
(NAFTA)
Caribbean
Basin
Initiative
(CBI)
The Central
America-Dominican
Republic Free Trade
Agreement (CAFTA-
DR)
The North American Free Trade Agreement (NAFTA)
was implemented in 1994 to reduce barriers to trade
and investment among Canada, Mexico, and the United
States.
The agreement was built upon a trade agreement that
had been signed between the U.S. and Canada six years
earlier and upon the extensive amount of trade that
already existed among the three countries.
The agreement will be phased in over a 15-year period.
Facilitate the economic development
of the nations of Central America
and the Caribbean Sea was initiated
by the U.S. in 1983.
The CBI overlaps two regional free
trade areas, the Central American
Common Market (CACM) and the
Caribbean Community and Common
Market (CARICOM).
Has signed by the U.S.,
Costa Rica, El Salvador,
Guatemala, Honduras,
and Nicaragua in 2004.11
12. Additional regional trading blocs are:
The Australia-New Zealand Agreement.
The Association of South East Asian Nations (ASEAN)
The Asian Free Trade Area (AFTA)
The Asia-Pacific Economic Cooperation (APEC)
The South African Development Coordination Conference (SADCC)
The Economic Community of West African States
4) Other Regional Trading Blocs (Cont.)
The MercosurAccord
Agreement among Argentina,
Brazil, Paraguay, and Uruguay to
cut internal tariffs and establish
common external tariffs.
The agreement is expected to
revitalize the stagnating
economies of Brazil and Argentina
by stimulating new flows of FDI.
The Andean Community
Was established in 1969 to
promote free trade among
Bolivia, Chile, Colombia,
Ecuador, and Peru.
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