Cross-national cooperation and agreements

Last updated

Integration is a political and economic agreement among countries that gives preference to member countries to the agreement. [1] General integration can be achieved in three different approachable ways: through the World Trade Organization (WTO), bilateral integration, and regional integration. [1] In bilateral integration, only two countries economically cooperate with one another, whereas in regional integration, several countries within the same geographic distance become joint to form organizations such as the European Union (EU) and the North American Free Trade Agreement (NAFTA). Indeed, factors of mobility like capital, technology and labour are indicating strategies for cross-national integration along with those mentioned above.

Contents

The World Trade Organization

The WTO is one of the most effective trade agreements among nations. The WTO replaced the General Agreement on Tariffs and Trade (GATT) in 1995 and has 125 member nations.currently 164 member are part of WTO. Many believe GATT initiated rampant liberalization in trade in 1947 and its move contributed to the expansion of trade all over the world by eliminating tariff and quotas. Moreover, WTO continued GATT's principle with more multilateral forum, which enables governments to settle agreements or to dispute them regarding trade.

Rapid growth of trade among nations has forced the agreement to be acknowledged as a fundamental basis for the member nations to follow certain rules and regulations as the signatories of the agreement. As a result, WTO expanded its mission to include trade in services, investments, intellectual property, sanitary measures, plant health, agriculture, and textiles, as well as technical barriers to trade. [2]

The European Union (EU)

The largest and most comprehensive regional economic group is the EU. It began as a free trade agreement with the goal to become a customs union and to integrate in other ways. The formation of the European Parliament and the establishment of a Euro the common currency make EU the most ambitious in comparison to other regional trade groups. [1] It progressed from being the European Economic Community (EEC) to the European Community (EC) to finally the European Union. Iceland, Liechtenstein, Norway, and Switzerland who decided not to leave European Free Trade Area are linked together with the EU as a customs union. [2] The EU comprises 28 countries, including 12 countries from mostly Central and Eastern Europe that joined since 2004. The EU abolished trade barriers on intra-zonal trade, instituted a common external tariff, created a common currency, the euro. [2]

The implications of the EU for corporate strategy are:

North American Free Trade Agreement (NAFTA)

NAFTA is designed to eliminate tariff barriers and liberalize investment opportunities and trade in services. NAFTA includes Canada, Mexico, and the United States, where went into effect in 1994. The United States and Canada historically have had various forms of mutual economic cooperation. They signed the Canada-United States Free Trade Agreement effective January 1, 1989, which eliminated all tariffs on bilateral trade by January 1, 1998. In February 1991, Mexico approached the United States to establish a free trade agreement. The formal negotiations that began in June 1991 included Canada. The resulting North American Free Trade Agreement became effective on January 1, 1994. [2]

The main provisions in NAFTA are:

Regional economic integration in the Americas

There are six major regional economic groups in the Americas and they can be further divided into Central America and South America. The major reason for these different groups in Central and South America entering into collaboration was market size. [2] The Caribbean Community and Common Market (CARICOM) and the Central American Common Market (CACM) are both found in Central America. The two major blocs in South America are the Andean Community (CAN) and the Southern Common Market (MERCOSUR) which is the major trade group. MERCOSUR comprises Brazil, Argentina, Paraguay, and Uruguay. It generates 75 percent of South America's GDP and this makes MERCOSUR the fourth largest trade bloc in the world after the EU, NAFTA, and the Association of Southeast Asian Nations (ASEAN). [2]

Since August 23, 2008, there exists another integration initiative, the Union of South American Nations (UNASUR). It includes all independent states of South America with about 400 Million people and intends to create a level of integration similar to the European Union by 2025.

Regional economic integration in Asia

Regional economic integration has not been as successful in Asia as in the EU or NAFTA because most Asian countries have relied on U.S. and European markets for their exports. [2] The Association of Southeast Asian Nations (ASEAN), formed in 1967, consisted of the following countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. The ASEAN Free Trade Area (AFTA), formed officially in 1993, was for the purpose of cutting tariffs on inter-regional trade to a maximum of 5% by 2008. [2] ASEAN is the third largest free trade agreement in the world after the EU and NAFTA and above MERCOSUR. The Asia Pacific Economic Cooperation (APEC), founded in 1989, was to promote multilateral economic cooperation in trade and investment in the Pacific Rim. [3] APEC is composed of 21 countries that border the Pacific Rim; progress toward free trade is hampered by size and geographic distance between member countries and the lack of a treaty.

Regional economic integration in Africa

There are several regional trade groups in Africa that are registered with the WTO, including:

Created in 2002 by 53 African nations, the African Union took the place of the Organization of African Unity (OAU). The OAU was established in 1963 and focuses its energy and resources on political issues in Africa (notably colonialism and racism) and the pursuit of market liberalization and economic growth in Africa. [2]

Notes

  1. 1 2 3 Daniels, John D., Lee H. Radebaugh, and Daniel P Sullivan. International Business: Environment and Operations. NJ: Prentice Hall, 2009
  2. 1 2 3 4 5 6 7 8 9 10 11 12 Daniels, J., Radebaugh, L., Sullivan, D. (2007). International Business: environment and operations, 11th edition. Prentice Hall. ISBN   0-13-186942-6
  3. ↑ "About APEC - Asia-Pacific Economic Cooperation". Archived from the original on 2008-12-04. Retrieved 2014-01-07.

Related Research Articles

Customs union Type of trade bloc with a free trade area and common external tariff

A customs union is generally defined as a type of trade bloc which is composed of a free trade area with a common external tariff.

Free-trade area Regional trade agreement

A free-trade area is the region encompassing a trade bloc whose member countries have signed a free trade agreement (FTA). Such agreements involve cooperation between at least two countries to reduce trade barriers, import quotas and tariffs, and to increase trade of goods and services with each other. If natural persons are also free to move between the countries, in addition to a free-trade agreement, it would also be considered an open border. It can be considered the second stage of economic integration.

The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. According to its preamble, its purpose was the "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis."

World Trade Organization Intergovernmental trade organization

The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. Governments use the organization to establish, revise, and enforce the rules that govern international trade. It officially commenced operations on 1 January 1995, pursuant to the 1994 Marrakesh Agreement, thus replacing the General Agreement on Tariffs and Trade (GATT) that had been established in 1948. The WTO is the world's largest international economic organization, with 164 member states representing over 98% of global trade and global GDP.

Trade agreement Wide ranging taxes, tariff and trade treaty

A trade agreement is a wide-ranging taxes, tariff and trade treaty that often includes investment guarantees. It exists when two or more countries agree on terms that help them trade with each other. The most common trade agreements are of the preferential and free trade types, which are concluded in order to reduce tariffs, quotas and other trade restrictions on items traded between the signatories.

A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organization, where barriers to trade are reduced or eliminated among the participating states.

Index of international trade articles Wikimedia list article

This is a list of international trade topics.

In international economic relations and international politics, most favoured nation (MFN) is a status or level of treatment accorded by one state to another in international trade. The term means the country which is the recipient of this treatment must nominally receive equal trade advantages as the "most favoured nation" by the country granting such treatment. In effect, a country that has been accorded MFN status may not be treated less advantageously than any other country with MFN status by the promising country.

Preferential trading area Type of trade bloc

A preferential trade area is a trading bloc that gives preferential access to certain products from the participating countries. This is done by reducing tariffs but not by abolishing them completely. It is the first stage of economic integration.

A free-trade agreement (FTA) or treaty is an agreement according to international law to form a free-trade area between the cooperating states. There are two types of trade agreements: bilateral and multilateral. Bilateral trade agreements occur when two countries agree to loosen trade restrictions between the two of them, generally to expand business opportunities. Multilateral trade agreements are agreements among three or more countries, and are the most difficult to negotiate and agree.

Trade and Investment Framework Agreement

A Trade and Investment Framework Agreement (TIFA) is a trade pact that establishes a framework for expanding trade and resolving outstanding disputes between countries.

Regional integration

Regional Integration is a process in which neighboring countries enter into an agreement in order to upgrade cooperation through common institutions and rules. The objectives of the agreement could range from economic to political to environmental, although it has typically taken the form of a political economy initiative where commercial interests are the focus for achieving broader socio-political and security objectives, as defined by national governments. Regional integration has been organized either via supranational institutional structures or through intergovernmental decision-making, or a combination of both.

Market access Ability to sell goods and services across borders

In international trade, market access is a company's ability to enter a foreign market by selling its goods and services in another country. Market access is not the same as free trade, because market access is normally subject to conditions or requirements, whereas under ideal free trade conditions goods and services can circulate across borders without any barriers to trade. Expanding market access is therefore often a more achievable goal of trade negotiations than achieving free trade.

Pacific Union

The Pacific Union was a proposed development of the Pacific Islands Forum, suggested in 2003 by a committee of the Australian Senate, into a political and economic intergovernmental community. The union, if formed, would have a common charter, institutions and currency. Although John Howard, the former Prime Minister of Australia, spoke of a Pacific Union whilst in office, his government's emphasis was focused on bilateral relations and agreements with the individual states of the Forum.

International Trade Centre Multilateral agency

The International Trade Centre (ITC) is a multilateral agency which has a joint mandate with the World Trade Organization (WTO) and the United Nations (UN) through the United Nations Conference on Trade and Development (UNCTAD).

Mercosur South American economic agreement

Mercosur, Mercosul, or Ñemby Ñemuha, officially Southern Common Market, is a South American trade bloc established by the Treaty of Asunción in 1991 and Protocol of Ouro Preto in 1994. Its full members are Argentina, Brazil, Paraguay, and Uruguay. Venezuela is a full member but has been suspended since 1 December 2016. Associate countries are Bolivia, Chile, Colombia, Ecuador, Guyana, Peru, and Suriname.

Commercial policy

A commercial policy is a government's policy governing international trade. Commercial policy is an all encompassing term that is used to cover topics which involve international trade. Trade policy is often described in terms of a scale between the extremes of free trade on one side and protectionism on the other. A common commercial policy can sometimes be agreed by treaty within a customs union, as with the European Union's common commercial policy and in Mercosur. A nation's commercial policy will include and take into account the policies adopted by that nation's government while negotiating international trade. There are several factors that can have an impact on a nation's commercial policy, all of which can have an impact on international trade policies.

The spaghetti bowl effect is the multiplication of free trade agreements (FTAs), supplanting multilateral World Trade Organization negotiations as an alternative path toward globalization. The term was first used by Jagdish Bhagwati in 1995 in the paper: “US Trade policy: The infatuation with free trade agreements”, where he openly criticized FTAs as being paradoxically counter-productive in promoting freer and more opened global trades. According to Bhagwati, too many crisscrossing FTAs would allow countries to adopt discriminatory trade policies and reduce the economic benefits of trade.

This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.