In this chapter, you will explore regional economic integration. You will also: Learn about the five different levels of integration, understand the potential benefits and drawbacks of regional integration, and examine the progress of various efforts at integration around the world.
8 Regional Economic Integration Copyright © 2014 Pearson Education, Inc Chapter Objectives • Define regional economic integration and identify its five levels • Discuss the benefits and drawbacks of regional economic integration • Describe regional integration in Europe and its pattern of enlargement • Discuss regional integration in the Americas and analyze its future prospects • Characterize regional integration in Asia and how it differs from integration elsewhere • Describe integration in the Middle East and Africa and explain the slow progress Copyright â 2014 Pearson Education, Inc 8-2 Nestlộ ã Largest food company in the world • Food is integral to cultural fabric ã Must monitor regional integration Copyright â 2014 Pearson Education, Inc 8-3 Regional Economic Integration Process whereby countries in a geographic region cooperate to reduce or eliminate barriers to the international flow of products, people, or capital Copyright © 2014 Pearson Education, Inc 8-4 Levels of Regional Integration FreeTrade Area Customs Union Common Market Economic Union Political Union Copyright © 2014 Pearson Education, Inc Remove barriers to trade among members, but each country has own policies for nonmembers Remove barriers to trade among members, and set a common trade policy against nonmembers Remove barriers to trade, labor, and capital among members, and set a common trade policy against nonmembers Remove barriers to trade, labor, and capital, set a common trade policy against nonmembers, and coordinate Coordinate aspects of members’ members’ economic policies economic and political systems 8-5 Benefits of Integration Trade Trade creation creation Greater Greater consensus consensus Political Political cooperation cooperation Creates Creates jobs jobs Copyright © 2014 Pearson Education, Inc 8-6 Drawbacks of Integration Trade Trade diversion diversion Shifting Shifting employment employment Less Less sovereignty sovereignty Copyright © 2014 Pearson Education, Inc 8-7 Discussion Question What are several potential benefits of regional economic integration and several potential drawbacks of integration? Copyright © 2014 Pearson Education, Inc 8-8 Answer to Discussion Question Potential benefits of regional economic integration include trade creation, greater consensus, political cooperation, and job creation Potential drawbacks include trade diversion, shifting employment, and less sovereignty Copyright © 2014 Pearson Education, Inc 8-9 European Union Pop: 500 million GDP: $15 trillion Members: 27 Economic Union Began: 1951 Copyright © 2014 Pearson Education, Inc - 10 CAFTADR Effects? More trade and better-paying jobs OR Poorer farms and small businesses Source: dinozzaver/Fotolia Copyright © 2014 Pearson Education, Inc - 21 Andean Community Internal tariff reduction Common external tariff Common transport policies Ideological conflict Pop: 97 million GDP: $220 billion Members: Customs Union Began: 1969 Copyright © 2014 Pearson Education, Inc - 22 Southern Common Market Also called MERCOSUR Very successful early Impaired by ideology and economic hardships Future “SAFTA”? Pop: 266 million GDP: $2.8 trillion Members: Customs Union Began: 1988 Copyright © 2014 Pearson Education, Inc - 23 Central America / Caribbean Peace driving tentative optimism Pop: 33 million GDP: $120 billion Members: +/- Common Market Began: 1961 Copyright © 2014 Pearson Education, Inc Members offer each other little Pop: million GDP: $30 billion Members: 15 Common Market Began: 1973 - 24 Free Trade Area of the Americas Would be the largest freetrade area on the planet Pop: 830 million GDP: $ trillions Members: 34 Free-Trade Area From northern tip of Alaska to southern tip of Tierra del Fuego in South America Could mean enormous cost savings for business Protests by many groups is slowing progress Copyright © 2014 Pearson Education, Inc - 25 Discussion Question What is the objective of the Free Trade Area of the Americas and what are its prospects for success? Copyright © 2014 Pearson Education, Inc - 26 Answer to Discussion Question The Free Trade Area of the Americas would be a trading bloc stretching from Alaska to Tierra del Fuego in South America It would likely supersede all existing trading blocs in North, Central, and South America It faces opposition from labor organizations, environmentalists, and others opposed to globalization Copyright © 2014 Pearson Education, Inc - 27 Association of Southeast Asian Nations GOALS: Promote economic, social, and cultural development Safeguard economic and political stability Serve as a forum to resolve disputes Pop: 560 million GDP: $1.1 trillion Members: 10 General Cooperation Began: 1967 Copyright © 2014 Pearson Education, Inc - 28 AsiaPacific Economic Cooperation AsiaPacific Economic Cooperation Group of 21 nations ringing the Pacific Ocean that accounts for over half of world trade Not designed as a free-trade bloc Strengthen multilateral trade system Liberalize trade and investment rules Copyright © 2014 Pearson Education, Inc - 29 Closer Economic Relations Agreement Key Points: • Australia and New Zealand • Eliminated trade barriers years early ã Recognize each others qualified professionals Copyright â 2014 Pearson Education, Inc - 30 Middle East Gulf Cooperation Council Copyright © 2014 Pearson Education, Inc Six Arab nations (1980) Economic and political aims Travel freely without visas Cooperation on property rights - 31 Africa Economic Community of West African States • Some progress on migration, roads, and telecoms • Impaired by instability, poverty, and bad policies African Union • Joined 53 nations in 2002 • Want united and strong Africa • Seek peace, security, stability Copyright © 2014 Pearson Education, Inc - 32 Discussion Question What is the name of the group of 21 nations that ring the Pacific Ocean whose stated aims not include formation of a formal free trade bloc? a Pacific Cooperation Council b Asia-Pacific Economic Cooperation c Association of Southeast Asian Nations Copyright © 2014 Pearson Education, Inc - 33 Answer to Discussion Question What is the name of the group of 21 nations that ring the Pacific Ocean whose stated aims not include formation of a formal free trade bloc? a Pacific Cooperation Council b Asia-Pacific Economic Cooperation c Association of Southeast Asian Nations Copyright © 2014 Pearson Education, Inc - 34 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher Printed in the United States of America Copyright © 2014 Pearson Education, Inc - 35 .. .Chapter? ?Objectives • Define regional economic integration and identify its five levels • Discuss the benefits and drawbacks of regional economic integration • Describe regional integration. .. Inc 8-2 Nestlộ ã Largest food company in the world • Food is integral to cultural fabric ã Must monitor regional integration Copyright â 2014 Pearson Education, Inc 8-3 Regional? ?Economic? ?Integration. .. benefits of regional economic integration and several potential drawbacks of integration? Copyright © 2014 Pearson Education, Inc 8-8 Answer to Discussion Question Potential benefits of regional economic