8-1Copyright © 2009 Pearson

Education, Inc. publishing as Prentice Hall

Cross-National Cooperation and Agreements

8-2Copyright © 2009 Pearson

Education, Inc. publishing as Prentice Hall

GATT

• The General Agreement on Tariffs and Trade (GATT), begun in 1947, created a continuing means for countries to negotiate the reduction and elimination of trade barriers and to agree on simplified mechanisms for the conduct of international trade

8-3Copyright © 2009 Pearson

Education, Inc. publishing as Prentice Hall

WTO

• The World Trade Organization (WTO) replaced GATT in 1995 as a continuing means of trade negotiations that aspires to foster the principle of trade without discrimination and to provide a better means of mediating trade disputes and of enforcing agreements

8-4Copyright © 2009 Pearson

Education, Inc. publishing as Prentice Hall

Regional Economic Integration

• Efforts at regional economic integration began to emerge after World War II as countries saw benefits of cooperation and larger market sizes

8-5Copyright © 2009 Pearson

Education, Inc. publishing as Prentice Hall

The Effects of Integration

• Once protection is eliminated among member countries, trade creation allows MNEs to specialize and trade based on comparative advantage

8-6Copyright © 2009 Pearson

Education, Inc. publishing as Prentice Hall

European Union • Regional, as opposed to global, economic integration occurs

because of the greater ease of promoting cooperation on a smaller scale

• The European Union (EU) is an effective common market that has abolished most restrictions on factor mobility and is harmonizing national political, economic, and social policies

• The EU is comprised of 27 countries, including 12 countries from mostly Central and Eastern Europe that joined since 2004– created a common currency, the euro

8-7Copyright © 2009 Pearson

Education, Inc. publishing as Prentice Hall

The North American Free TradeAgreement (NAFTA)

• The North American Free Trade Agreement (NAFTA) is designed to eliminate tariff barriers and liberalize investment opportunities and trade in services

• Key provisions in NAFTA are labor and environmental agreements

8-8Copyright © 2009 Pearson

Education, Inc. publishing as Prentice Hall

Regional economic integration in the Americas

• Caribbean Community (CARICOM)• Central American Common Market (CACM)• Central American Free Trade Agreement (CAFTA-DR)• Andean Community (CAN)• The Southern Common Market (MERCOSUR)• The proposed South American Community of

Nations.

8-9Copyright © 2009 Pearson

Education, Inc. publishing as Prentice Hall

Regional economic integration in Asia & Africa

• Association of Southeast Asian Nations (ASEAN)

• Asia Pacific Economic Cooperation (APEC)• The African Union