chapter four International Institutions from an International Business Perspective McGraw-Hill/Irwin International Business, 11/e Copyright © 2008 The McGraw-Hill Companies, Inc All rights reserved Learning Objectives Describe the influence the mainly political international institutions have on international businesses and their relevance to international business Identify the major organs of the United Nations, their general purpose, and their significance to international business Discuss the World Trade Organization and its predecessor, GATT Appreciate the resources of the Organisation for Economic Cooperation and Development 4-3 Learning Objectives Describe the major purpose and effectiveness of OPEC Identify economic integration agreements and the effectiveness of the major ones Discuss the impact of the EU and its future challenges 4-4 Figure 4.1 International Institutions by purpose 4-5 International Political Institutions • The United Nations – International organization of 191 member-nations dedicated to the promotion of peace and global stability; has many functions related to business – General Assembly • Deliberative body of the UN made up of all member-nations, each with one vote regardless of size, wealth, or power 4-6 International Political Institutions – Security Council • Main policy-setting body of the UN, composed of 15 members including permanent members – Economic and Social Council (ECOSOC) • UN body concerned with economic and social issues such as trade, development, education, and human rights 4-7 International Political Institutions – International Court of Justice (ICJ) • UN body that renders legal decisions involving disputes between national governments – Secretariat • The staff of the UN, headed by the secretary-general 4-8 Figure 4.2 Millennium Development Goals Chart of Progress 4-9 Figure 4.2 Millennium Development Goals Chart of Progress 4-10 Other Economic Institutions • Organization of Petroleum Exporting Countries – Cartel of 11 petroleum exporting countries (Table 4.3) • The Group of Eight (G8) – Group of government leaders from major industrialized nations that meets regularly to discuss issues of concern (Figure 4.5) 4-21 Table 4.3 World Petroleum Products Consumption by Region, 1960-2004 4-22 Figure 4.5 The G8 Members (www.undp.org) http://atlas.nrcan.gc.ca/site/english/maps/reference/international/g8/map.jpg 4-23 Economic Integration • Free trade area (FTA) – Area in which tariffs among members have been eliminated, but members keep their external tariffs • Customs Union – Collaboration that adds common external tariffs to an FTA • Common Market – Customs union that includes mobility of services, people, and capital within the union 4-24 North American Free Trade Agreement (NAFTA) • NAFTA – Established January 1, 1994 – Agreement creating a free trade area among Canada, Mexico, and the United States 4-25 European Free Trade Agreement (EFTA) • EFTA – Founded in 1960 by seven European countries: • Austria, Denmark, Norway, Portugal, Sweden, Switzerland, Finland, Iceland, Liechtenstein, and the United Kingdom – Today, a 4-nation non-EU FTA in Europe: Norway, Iceland, Liechtenstein, Switzerland 4-26 African Trade Agreements • African Trade Agreement (Figure 4.7) – – Promote economic growth the continent – Economic Community of West African States (ECOWAS) – Common Market for Eastern and Southern Africa (COMESA) – Southern African Development Community (SADC) 4-27 Figure 4.7 African Trade Agreements 4-28 Mercosur (Mercosul) • Mercosur (Mercosul) – Created in 1991 by the Treaty of Asuncion – Economic free trade area in South America modeled on the EU (Figure 4.8) 4-29 Figure 4.8 Regional Trade Agreements in Central America and South America 4-30 Other Regional Agreements • Central American Free Trade Agreement (CAFTA) – FTA among the United States and several Central American nations (Figure 4.8) • Andean Community (CAN) • ASIA-Pacific Economic Cooperation – Serves as a regional vehicle for promoting open trade and practical economic cooperation – South American fivenation trading bloc 4-31 The European Union (EU) • European Union – A body of 25 European countries dedicated to economic and political integration (Figure 4.9) – Romania and Bulgaria join in 2007, to move membership to 27 4-32 Figure 4.9 European Union: MemberNations and Candidate Nations 4-33 Institutions of The EU • European Parliament • European Commission – EU legislative body whose members are popularly elected from member-nations • Council of the European Union – Group that is the EU’s primary policy-setting institution – Institution that runs the EU’s day-to-day operations • European Court of Justice (ECJ) – Court that rules on issues related to EU policies 4-34 European Monetary Union (EMU) • European Monetary Union – Group that established use of euro in the 12country euro zone – The three countries from “old EU” that not participate are Denmark, Sweden, and the United Kingdom – Slovenia joins in 2007 – The single currency reduces the cost of doing business across EMU country borders 4-35 ... Describe the influence the mainly political international institutions have on international businesses and their relevance to international business Identify the major organs of the United... Describe the major purpose and effectiveness of OPEC Identify economic integration agreements and the effectiveness of the major ones Discuss the impact of the EU and its future challenges... United Nations, their general purpose, and their significance to international business Discuss the World Trade Organization and its predecessor, GATT Appreciate the resources of the Organisation