Introduction: Economic integration around the world has been
one of the most significant trends since world war two. The
creation of regional groups is intended to provide both economic
stability and growth, as well as Increasing the level of political
cooperation amongst the member nations. The creation of common
markets and the promotion of free trade and investment flows.
Requires A willingness on the part of member nations to subordinate
national interests to those of the group.
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MEMBER STATE OF THE EUROPEAN UNION
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EU Started in 1957 with 6 Countries: Germany Belgium Luxembourg
Netherlands FranceItaly
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EU In 1957
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In 1973: 3 Countries Has Joined The EU: Ireland United Kingdom
Denmark EU Total Countries: 9
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EU In 1973
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In 1981: Greece Has Joined The EU: Greece EU Total Countries:
10
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EU In 1981
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In 1986: 2 Countries Has Joined The EU: PortugalSpain EU Total
Countries: 12
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EU In 1986
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In 1995: 3 Countries Has Joined The EU: FinlandSwedenAustria EU
Total Countries: 15
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EU In 1995
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In 2004: 10 Countries Has Joined The EU: Hungary Slovenia
Lithuania EU Total Countries: 25 Latvia Cyprus Estonia Czech
Republic Slovakia Malta Poland
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EU In 2004
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In 2007: 2 Countries Has Joined The EU: RomaniaBulgaria EU
Total Countries: 27
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EU In 2007-Now
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Total Countries of Member State of The EU
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North America Free Trade Agreement (NAFTA)
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CONTENTS NAFTA AFTA APEC GCC
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NAFTA The North American Free Trade Agreement
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NAFTA The North American Free Trade Agreement (NAFTA) is a
regional agreement between the Government of Canada, the Government
of the United Mexican States and the Government of the United
States of America to implement a free trade area. The North
American Free Trade Agreement (NAFTA) between Canada, the United
States and Mexico entered into force on January 1, 1994.
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NAFTA
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AFTA Asia Free Trade Association
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AFTA The AFTA agreement was signed on 28 January 1992 in
Singapore. AFTA Countries: Vietnam BruneiMalaysiaPhilippines
IndonesiaSingaporeThailand
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APEC Asia Pacific Economic Cooperation Forum
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APEC
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GCC Cooperation Council for the Arab States of the Gulf
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GCC Main objectives Among the stated objectives are:
1)formulating similar regulations in various fields such as
economy, finance, trade, customs, tourism, legislation, and
administration; 2)fostering scientific and technical progress in
industry, mining, agriculture, water and animal resources;
3)establishing scientific research centers; 4)setting up joint
ventures; 5)encouraging cooperation of the private sector;
6)strengthening ties between their peoples; and 7)establishing a
common currency by 2010
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The Pros and Cons of Integration: First: The Pros (Advantages):
(I).The pros (Advantages): 1- Offers the opportunity for increased
wealth. There is evidence to suggest that the Gross National
Product (GNP) of countries that are members of major economic
groups will rise faster than that of non members. 2- A greater
level of political cooperation between member countries and a sense
that it is easier to reach a consensus view with a small
group.
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The Pros and Cons of Integration: Second: The cons
(Disadvantages): (II).The cons (disadvantages): 1- Can lead to a
diversion of trade which favors member countries at the expense of
non-members. 2- Possible employment consequences of greater levels
of integration. Within the EU, there are no restrictions on the
movement of labor between countries. Might lead to brain drain ( )
3- Possible impact upon national sovereignty subordination of
national interests to those of the group.
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Levels of Economic Integration: Levels of integration (in
ascending order): ( ) I. Free trade area. II. Customs union. III.
Common market. IV. Economic union. EXPLAINED IN DETAIL ON THE NEXT
SLIDES
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Levels of Economic Integration 1- Free trade area: A region
within which all trade restrictions between member states are
removed. 2- Customs union: Members agree a common policy for the
regulation of trade with non-member countries.
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Levels of Economic Integration 3- Common market: The
elimination of regulatory barriers extends beyond the trade in
goods and services into the establishment of free movement of
capital and labor across member states. 4- Economic union: Takes
economic integration to its final conclusion via the harmonization
of national economic policies, Co-determined via a joint
legislators.
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The Economic Significance of The Major Trading Blocs Europe: EU
is the most integrated of all the economic blocs. Estimates have
been made of the benefits likely to have accrued from the single
market. The single market creates more competitive economic
environment within Europe. Resulting is more efficient working
practices and a superior identification and satisfaction of
consumer wants.
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The Economic Significance of The Major Trading Blocs North
America: NAFTA, mentioned earlier, is clearly dominated by the huge
US economy, with the USA being the most important trading partner
for both Mexico and Canada. Mexico is by far the poorest economy in
the trading bloc and, as already indicated.. The NAFTA agreement
has given rise to complaints by US labor unions of job losses.
Caused by companies investing in Mexico.
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The Economic Significance of The Major Trading Blocs North
America: The aims of NAFTA are much ambitious than those of the EU.
The objective is the gradual elimination of restrictions on trade
and investment flows by 2010. The expansion of free trade area is
now up for discussion.
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The Economic Significance of The Major Trading Blocs
Asia-Pacific: The Asia Pacific region is less structured economic
blocs than those of Europe and North America. The groups declared
objectives are to counterbalance the power of NAFTA and the EU.
And, encourage the liberalization of trade amongst group members.
The target of NAFTA is 2020. The major problem of APEC is the
diversity of its membership. The geographic spread of membership is
also very wide.
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The % Global FDI ASEAN vs. China
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How Economic Integration Affects World trade The importance of
Intra-Regional Trade Flows (1999) Table 302 (p.60): ( ) Bloc% total
imports % total exports which are intra-regional which are
intra-regional North America27.139.6 W. Europe67.669.1 Asia56.746.6
The statistics show that despite their size and diversity, the
large trading blocs still engage in trade with the rest of the
world. Both Asia and the EU find that over half of local
requirements can be met from regional imports, but for NAFTA, the
level of regional self-sufficiency ( ) is much lower.
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How Economic Integration Affects World trade Intra-Regional
Exports as % of Total Exports (excluding services) Table 3.3 (p.61)
Bloc19901999Average growth Rate (%) of intra-regional exports
NAFTA42.654.110 EU65.163.44 Mercosur8.920.34 ASEAN20.122.112
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Intra-NAFTA Exports by Value (IMF data)
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Exports to NAFTA Countries as a Proportion of Total Exports
(IMF data)
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The Future: Regional Versus Global Free Trade One problem of
regional integration is that it raises the prospect of conflict
between the national sovereignty of the member states and the needs
of the group. At the same time, the individual states benefit from
the added bargaining power that goes with being part of a large and
influential trading bloc. It would seem that there are strong links
between international trade and regionalization, and as suggested
earlier, These links help influence corporate planning at a global
level.
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Regional Integration And Its Effects on Multinational Companies
The potential roles for foreign subsidies: 1- The supply of goods /
services purely to local markets in the host country. 2- Using the
law of comparative advantage, companies will site subsidiaries in
locations which can then export output at relatively low cost. 3-
Well-established subsidiaries, with high levels of expertise that
can develop, Produce and market.. new products that will
significantly affect the multinational business.