International Cooperation
Among
Nations
Griffin & Pustay
10-1
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International Business, 6th Edition
chapter 10
Chapter Objectives
• Explain the importance of the GATT and
the WTO to international business
• Contrast the different forms of economic
integration among cooperating countries
• Analyze the opportunities for international
businesses created by completion of the
EU’s internal market
• Describe the other major trading blocs in
today’s world economy
10-2
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General Agreement on Tariffs and Trade
• Developed as part of the Havana,
Cuba, conference in 1947
• Provided forum for trade ministers
to discuss barriers to international
trade
10-3
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The Role of the GATT
The GATT’s goal was to promote a
free and competitive international
trading environment benefiting
efficient producers by sponsoring
multilateral negotiations to reduce
tariffs, quotas, and other nontariff
barriers
10-4
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Table 10.1 GATT Negotiating Rounds
10-5
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Most Favored Nation (MFN) Principle
The most favored nation principle
requires that any preferential treatment
granted to one country
must be extended to all countries.
10-6
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Exceptions to the MFN Principle
• Members permitted to lower tariffs to
developing countries without lowering
them for more developed countries
• Regional arrangements promote
economic integration (e.g., EU and
NAFTA)
10-7
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Goals of the
World Trade Organization (WTO)
• Promote trade flows by encouraging
nations to adopt nondiscriminatory,
predictable trade policies
• Reduce remaining trade barriers through
multilateral negotiations
• Establish impartial procedures for resolving
trade disputes among members
10-8
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Differences between WTO and GATT
• GATT focused on promoting trade in
goods; WTO’s mandate includes:
– trade in goods
– trade in services
– international intellectual property protection
– trade-related investment
• WTO’s enforcement powers are stronger
10-9
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Figure 10.1 The WTO’s Principles of the
Trading System
10-10
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WTO Challenges
• The Cairns Group
• Multifibre Agreement
• General Agreement on Trade in Services
(GATS)
• Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS)
• Trade-Related Investment Measures
Agreement (TRIMS)
10-11
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Enforcement of WTO Decisions
• Country failing to live up to the
agreement may have a complaint filed
against it
• WTO panel evaluates complaint
• If found in violation, the country may be
asked to eliminate the trade barrier
10-12
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Forms of Economic Integration
Free Trade Area
Customs Union
Common Market
Economic Union
Political Union
10-13
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Figure 10.2 Forms of
Economic Integration
10-14
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European Union (EU)
• Most important regional trading bloc
• 27 member countries
• 491 million population
• Combined GDP of $14.4 trillion
10-15
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Map 10.1 The European Union
10-16
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Governing Organizations
of the EU
• The Council of the European Union
• The European Commission
• The European Parliament
• The European Court of Justice
10-17
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The European Parliament shares responsibility
for adopting the EU’s budget with the
European Commission
10-18
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Figure 10.3 The Co-Decision
Procedure
10-19
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Three Pillars of the Maastricht Treaty
• A new agreement to create common foreign and
defense policies among members
• A new agreement to cooperate on police,
judicial, and public safety matters
• The old familiar European Community, with new
provisions to create an economic and monetary
union among member states
10-20
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Maastricht Treaty
The most important aspect of the
Maastricht Treaty was the
establishment of the Economic and
Monetary Union.
10-21
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Economic and Monetary Union
• The creation of a single currency
called the euro
• European Central Bank responsible for controlling the
Eurozone’s money supply, interest
rates, and inflation
10-22
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Components of the Treaty for Europe
(Treaty of Amsterdam)
• A strong commitment to attack the EU’s
chronic high levels of unemployment
• A plan to strengthen the role of the
European Parliament by expanding the
number of areas that require use of the
co-decision procedure
• Establishment of a two-track system
10-23
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Treaty of Nice
• Sought to reduce the risk of political
gridlock as the number of members
increases
– reduced number of areas where
unanimity is required for Council
approval
– adjusted number of votes assigned to
each Council member
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The North American Free Trade
Agreement
Implemented in 1994 to reduce
barriers to trade and investment
among Canada, Mexico, and the
United States
10-25
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Major Regional Trade Associations
10-26
• AFTA
• ECOWAS
• ANCOM
• EU
• APEC
• EFTA
• CACM
• GCC
• CARICOM
• MERCOSUR
• CEMAC
• NAFTA
• CER
• SADC
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Map 10.2 Free Trade Agreements in
Central and South America
and the Caribbean
10-27
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Map 10.3 The ASEAN Members
10-28
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Map 10.4 Asia-Pacific Economic
Cooperation Initiative (APEC)
10-29
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Map 10.5 Free Trade Agreements
in Africa
10-30
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