ibm guide dr.philip 32012
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International Business ManagementComprehensive Written Exam Review
Dr Philip Nicholls
Welcome back to IBM
THE BEST OF IBM
February 2013
Comprehensive Written Examination CourseReview.
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International Business Management
The exam is scheduled for March 3rd 2013
Time and venue to be advisedCheck for yourselves
There are two questions
Each is worth 50 marks.pass grade 50%
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International Business Management
The IBM Comprehensive exam contains
nothing new yet this is just an overview;Go back to the lecture notes and texts for
more detail.
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International Business Management
The focus is on only
twomajor areas.
Foreign Direct Investment
and secondly
Trading Blocs*, Free Trade AgreementsGlobalization and the role of the Global Manager
*(as you should know trade bloc is a large trade area)
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International Business Management
The slides that follow have simply been liftedfrom my lecture notes and do not necessarily
follow a totally logical sequence
You need to refer to Czinkota the first fewchapters, and in particular Chapter Five for
trade blocs and FTAs.
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Basic Definitions
International trade is the production ofa product or service in one country and
its sale to a buyer in another country.
www.imf.org www.wto.org
Trading blocs facilitate international trade..How?
.Czinkota Chapters 1-5five in particular
http://www.imf.org/http://www.wto.org/http://www.wto.org/http://www.imf.org/ -
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Basic Definitions
Globalization is awareness, understanding
and response to global developments and
linkages. Czinkota
It is the global strategy involvingthe
integration of world-wide operations and thedevelopment ofstandardized products and
marketing approaches.Deresky
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International Business Management
F D I
Foreign Direct Investment
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Foreign Direct Investment (FDI)
The establishment or expansion ofoperations of a firm in a foreign country.
Like all investments it assumes a transferof capital. Czinkota.
There is always a long term element to FDI
which helps to explain corporate strategies andresponses to crisesthink about whathappened at the time of the change ofgovernment in September last year.
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Modes of entry may vary:-
How do MNCs start up a new venture in aforeign country
Greenfields.?????????????
Partnershipstrategic alliances
Franchises
Joint Ventures
Licensing agreements
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FDI .modes of investment
A greenfields investmentmay be verticalor
horizontal.
Vertical FDI takes place when the multinational
fragments the production process internationally,locating each stage of production in the countrywhere it can be done at the least cost.
Horizontal FDI occurs when the multinationalundertakes the same production activities inmultiple countries.
Published: Aizenman, Joshua and Nancy Marion. "The Merits Of Horizontal Versus Vertical FDI In The Presence OfUncertainty," Journal of International Economics, 2004, v62(1,Jan), 125-148
(With thanks to Tom)
FDI R i R f G i
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FDI ReviewReasons for Going
International
http://www.gwu.edu/~introint/lecture3/tsld003.htm
Classical trade theory emphasizes that cost of
production is paramount to international
competitiveness.
Although the motivations for international
investments are diverse, the searching out of
low cost factors or natural resources is one ofthe more important.
http://www.gwu.edu/~introint/lecture3/tsld003.htmhttp://www.gwu.edu/~introint/lecture3/tsld003.htm -
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The reasons for going internationalDeresky Chapter Six
They may be.
Reactive or defensive
Proactive or aggressive
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Reactive or defensiveDeresky Chapter Six p222
Globalization of competition
Trade barriers
Regulations and restrictions
Customer demands.or to solvelogistical problems
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Proactive or aggressiveDeresky Chapter Six p 223
Economies of scale
Growth opportunities
Resource access and cost saving.
Incentives
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We can say firms making FDI may becharacterized as:-
Market seeking
Resource seeking
Strategic asset seeking
Efficiency seeking
The detail follows..
John Dunning (www.globalization101.org/index.html)
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Market seeking:
Firms may go overseas to find new buyers for
goods and services. The top executives orowners of a company may realize that theirproduct is unique or superior to the competition
in foreign markets and seek to take advantage ofthis opportunity.
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Market seeking:
So market-seeking may happen when producershave saturated sales in their home market, or
when they believe investments overseas willbring higher returns than additional investmentsat home. This is often the case with high
technology goods.
Local markets may be saturated
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Resource seeking:
Put simply, a company may find it cheaper toproduce its product in a foreign subsidiary- for thepurpose of selling it either at home or in foreignmarkets.
The foreign facility may be able to obtain superior orless costly access to the inputs of production (land,
labor, capital, and natural resources) than at home.
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Strategic asset seeking:
Firms may seek to invest in other companies abroadto help build strategic assets, such as distributionnetworks or new technology.
R&D facilities
This may involve the establishment of partnershipswith other existing foreign firms that specialize incertain aspects of production (Salisbury,1999).
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Efficiency seeking (Financial Efficiency):
Multinational companies may also seek toreorganize their overseas holdings in responseto broader economic changes. For example,
the creation of a new free trade agreementamong a group of countries may suddenlymake a facility located in one of those
countries more competitive, because of accessfor the infrastructure, telecommunication,road.
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Efficiency seeking:
Stable banking systems; currency stability are
important factors
http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485641564http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485641446http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485639534http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485640265http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485639827http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485641825http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485641108http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097073472054http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485640517 -
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A good example of FDI.TATA and Corus
Access to markets..via the EU
Economies of scale
Access to technology
Spreading of risk; risk minimization
Able to raise more capital in Europe.
.any more?
http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485641564http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485641446http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485639534http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485640265http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485639827http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485641825http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485641108http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097073472054http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485640517http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485641564http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485641446http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485639534http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485640265http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485639827http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485641825http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485641108http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097073472054http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485640517 -
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TATA
.
The Tata family of enterprises comprises 98companies in seven business sectors. This
section [www.tata.com] lists all thesecompanies under the sectors in which theyoperate, besides the two promotercompanies of the Group. Visitors can, byclicking on the relevant links, get a profile ofindividual companies, their subsidiaries (if
any), their products and services, contactdetails, etc.
http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485641564http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485641446http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485639534http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485640265http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485639827http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485641825http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485641108http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097073472054http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1097485640517http://www.tata.com/0_about_us/business/index.htm -
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MNCs want certainty. Consider the following.
The naturally prefer host countries that offer
Political instability Currency instabilityeconomic stability
Social stability
Nationalism/ protectionism International competition/ local competition
Environmental factors.GDP market prospectslocation and access to other markets.
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Revision: Strategies and Modes of Entry vary:-
MNCs TNCs can stay at home and export
products or they can decide to make direct or
indirect investments in a host country.
Refer to the slides at the end of last weeks
lecture.
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Revision: Strategies and Modes of Entry vary:-
HOWdo MNCs start up a new venture in aforeign country?
Direct or indirect investment; building a
factory for example..or buying shares;Strategic alliances:- franchising, licensing orpartnerships
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FDI brings many benefits to a host country.
Including increased employment and raising the
GDPquality of life..+. many flow on effects
The education and up skilling of the workforce
Improving the balance of payments in terms of
increasing exports and reducing imports
Increasing tax revenues for governments
and
Wh t l ???
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What else???................ Introducing new technology+infrastructure
Injecting fresh capital..
Attracting other firms; increasing competition
Utilizing unused resources
Giving people a wider range of product choices
Raising peoples social expectations +intangibles
like national pride .think Thailand and China
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Criticisms of MNCs..Global FDI activities 1
In various ways MNCs may exploit host countryresources, physical and financial creating eithergreater demand and hence higher costs or shortagesof materials that may impact negatively on localpeople.
MNCs may, for example, increase the costs to localbusiness in a host country to raise capital, or to holdexisting staff or recruit new staff.
The majority (sometimes even 100 percent) of thestock of most subsidiaries is owned by the parentcompany. Consequently, the host-country may havelittle control over the operations of corporations withintheir borders.
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Criticisms of MNCs. Global FDI activities 2
MNCs usually reserve the key managerial andtechnical positions for expatriates. As a result,they do not contribute to the development of
host-country personnel.
MNCs may not adopt the latest or safest
technology in host countries.
MNCs concentrate their R&D activities at home,
restricting the transfer of modern technology-
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Criticisms of MNCs. Global FDI activities 3
MNCs give rise to the demand for luxurygoods in host countries at the expense ofessential consumer goods.
Many MNCs set-up their foreign operations bypurchasing existing firms rather thandeveloping new productive facilities in hostcountries.
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Criticisms of MNCs. Global FDI activities 4
MNCs dominate major business sectors, thuscontributing to inflation by stimulating demand forscarce resources and earning excessively high profitsand fees.
MNCs are not accountable to their host nations butonly respond to home-country governments; they arenot concerned with host-country plans for
development.
MNCs repatriate their profits. That is, they send their
profits back to their home countries.
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The disadvantages of FDI relate to the criticisms
One disadvantage which is also a criticism
is the erosion of local cultures
The disadvantages of FDI to a host country more or
less correspond to the criticisms of MNCs
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FDI
Any discussion of FDI has to involve the use of
examples.that is you have to be able to illustratewhat you are explaining by reference to MNCs and
world events
I t ti l B i M t
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International Business Management
Written Comprehensive Review Class
Now
Globalization, the GlobalManager ,
and
Trade Blocs What is Globalization?
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What is Globalization?
Involves designing and operating systems to work with
people around the world to ensure sustained competitiveadvantage.makes trade easier and more efficient
Creation of trade blocks and FTAs and the reduction oftrade barrierstaxes and tariffs.
Exemplified by McDonalds, Walmart, Boeing etc
Benefits.reduction of transaction costsetc
Corporations maintain competitive advantage..gaineconomies of scale
Has seen the emergence of the Global Manager
Gl b li ti i t t d d
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Globalization inter-connectedness and
uniformity
The standardization of the business worldandinter-dependent economies
Standardization of rules and regulations and standards
Promoted by FTAs and trade bloc expansionWe now talk of a world economy.
Globalization facilitates the movement of peoplecapital and resources(for good or evil)
Creation of world wide organizations and watchdogs
Increases in human trafficking and spread of disease
Gl b li ti i t t d d
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Globalization inter-connectedness and
uniformity
The standardization of the business worldand
inter-dependent economies
Globalized rules, regulations and standards in suchareas as health and safety
CSR is being globally standardized
Promoted by FTAs and trade bloc expansion
We now talk of a world economy.
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In practice.
Globalizationmeans that people all over the
world eat Mars Bars, drink Coca Cola or Johnny
Walker (or both), use Nokias, listen to jazz,
drive Toyotas, wear Nikes, watch Hollywood
movies, use Gillette, apply Nivea, and
smell the same aftershaves or perfumes.
wear blue jeans and eat pasta and BigMacsand , may also study in anInternational University .andeducation is
being standardized!!!
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Yet not everybody likes banks
Anger against the banks continues..
Goldman Sachs has
been fined 20m pounds
by the regulatory
authorities in the UK
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Equally, not everyone is happy about tradeblocs and big business
Look at www.bilaterals.org...
This is because not everybody agrees thatFTAs are beneficial
One view of the AUSFTA
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In this globalized world we have seen theemergence of the global manager.
What is a global manager
Many of you are or will become global managers
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Qu. What is the role of the global manager?
In a word the role of a global manager is ..
.complex
A global manager must follow the rules set by each country and his/her
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own..and must adapt to the political, social, cultural and economicenvironment of the host country.
(Deresky 2006 p13)
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IBM Dr Philip Nicholls
Another definition:-
Global management is the process of
developing strategies, designing andoperating systems, and working withpeople around the world to ensure
sustained competitive advantage.. (Deresky 2006)
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So you need to review What are trade blocs?
Based on Czinkotas definition:-
Trade blocs are formed by agreements among
countries to establish links that facilitate themovement of goods, services, capital and labor
across borders.
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What are trading blocs; another definition ?
There is a more comprehensive definition which you
will find in Wikipedia. http://en.wikipedia.org/wiki/Trade_bloc
A trade bloc is a largefree trade areaformedby one or moretax, tariff and tradeagreements.
Typically trade pacts that define such a bloc specify formal
adjudication bodies, e.g. NAFTA trade panels. This may include
even a more democratic and participative system, as the EUand its arliament.
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Trading blocs?
They are usually between countries that are
geographically close to each other, they involve freetrade areasand degrees ofeconomic integration
..there is a maze of acronyms..
EU, ASEAN, ANCOM, CACM, CARICOM, COMESSA,ECOWAS, GCC, NAFTA, and MERCOSURto name afewOPEC and Cairns are not
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Trade Blocs are about :
Economic Integration
free trade areas
customs unionscommon markets +
economic union.
Forms of economic alliances.
Czinkota talks of four levels of economic
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Czinkota talks of four levels of economicintegration
Free Trade Areas..the least restrictive form of economic integration ..no
discriminatory taxes, quotas or tariffs are allowedyet it may
be an agreement limited to only some goods..scheduled
goods
Customs Unions
..one step further along the spectrum of economic
integration they have a common trade policy towards nonmembers and imports from non members are subject to the
same tariffs.
The final two levels of economic integration
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The final two levels of economic integration.Czinkota
The Common Market
.further down the spectrum no barriers between
members; a common external trade policy. .and in addition,
factor mobility.immigration and cross border investment freedupand mobility of capital, labor and technology
The Economic Union
Goes furtherthe integration of economic policies as well as
the free movement of goods. Harmonization of monetary
policies, taxation and government spendingleads to apolitical
union
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Trade blocs and Free Trade Agreements; a tradebloc is a large free trade area.
Issues of economic integration
Regional regulation, reduced tariffs..Favored treatment and preferences
Butalso, the other side of that coin is theexclusion of others
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Economic integration: advantages
Advantages may include maximization of resource use;
Domestic suppliers gain bigger marketsaccess tomarkets
The removal of tariffs and quotas make many
products cheaper and this has a flow on effect
through the simple laws of competition..
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Economic integration; advantages (continued)
Advantages through larger markets include economiesof scale;
Greater production for an enlarged market internaleconomies of scale
Easier access to factors of production; access tocheaper labor, finance and technology..externaleconomies of scale
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Economic integration; advantages (continued)
The outcomes include greater regionalcooperation; the more even distribution ofwealth; cross cultural integration and
understanding and the reduction of nationalismin favor of regionalism.
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Yet there may be disadvantages also
Poor countries may experience a labor drain;lose trades people ..cause local labor shortages
May not be able to attract the investment dueto poor infrastructure for example
The rich may get richer and the poor poorer;Mexico as a part of NAFTA
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What is a trading bloc?
It is the outcome of an agreement (usuallymany agreements in fact) between countriesto facilitate the movement of goods,services, labor and capital across borders.
The word mobilityis a key descriptor.
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Correspondingly
Free Trade Agreement (FTA)
An FTA is an agreement between two or more
countries to create a free trade area; that is anarea in which all barriers to trade among them areremoved or modified, although sometimes only forcertain specified goods and services.
Czinkota.
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And.
What is a Free Trade Area?
A region or area in which barriers to tradeare removed with respect to all of somecommodities. Eg NAFTA CAFTA TAFTA EU
http://www.aseansec.org/
For example go to Chpt 5 Czinkota
http://www.aseansec.org/http://www.aseansec.org/ -
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o e a p e go to C pt 5 C ota
1. European Union (EU)2. European Free Trade Association (EFTA)3. Caribbean Community (CARICOM)4. Economic Community of West African States (ECOWAS)5. Economic and Monetary Community of Central Africa (CEMAC)6. East African Community (EAC)7. South American Community of Nations (CSN)8. Gulf Cooperation Council (GCC)
9. Southern African Customs Union (SACU)10. Common Market for Eastern and Southern Africa (COMESA)11. North American Free Trade Agreement (NAFTA)12. Association of Southeast Asian Nations (ASEAN)13. South Asian Association for Regional Cooperation (SAARC)14. Eurasian Economic Community (EurAsEC)
15. Agadir Agreement16. Central American Common Market (CACM)17. Pacific Regional Trade Agreement (PARTA of PIF)18. African Economic Community (AEC)19. The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic
Cooperation. (BIMSTEC)
Study Chapter Five of Czinkota
http://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_blochttp://en.wikipedia.org/wiki/Trade_bloc -
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62
Study Chapter Five of Czinkota
And other sources, for example.
http://wikipedia.org/wiki/Trade_bloc
Trading blocs may create FTAs with othercountriesEU JapanEU and ..Vietnam
with??????
As discussed there are numerous trade
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63
As discussed there are numerous tradeblocs..
Agadir Agreement (2004)..now GAFTA
Agreement for the Establishment of a Free Trade Zonebetween the Arabic Mediterranean Nations
Agreement for the Establishment of a Free TradeZone between the Arabic Mediterranean Nations(Agadir Agreement, signed in Rabat on25February2004, for entry
into force on1January2006)
The Hashemite Kingdom of Jordan, the TunisianRepublic, the Arab Republic of Egypt, and theKingdom of Morocco.
http://www.bilaterals.org/article.php3?id_article=2513
The recent development with respect to
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The recent development with respect toASEAN
Asian leaders seek to make it an EU-styletrade bloc
Officials said the East Asian nations would
carry out a feasibility study for a freed
trade zoneAsian leaders meeting in
Thailand are discussing plans to
"lead the world" by forming an EU-style
You must review Trade Blocs.go to
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I have posted the following slides based on work done
by executive MBA Students.
EU
NAFTA
CAFTA
SAARCASEAN
BIMSTEC
ou ust e e ade ocs go to
Chapter 5 of Czinkota and the www
What I want you to understand about trade blocs is
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that they share a common purpose and have many
things in common in terms of successful operation
You will also note what factors limit or impede the
success of trade blocs.
Remembering all through this presentation that a
trade bloc is effectively a large Free Trade
Agreement
http://www.google.co.th/imgres?imgurl=http://www.landcoalition.org/cpl-blog/wp-content/uploads/global-deal.jpg&imgrefurl=http://www.landcoalition.org/cpl-blog/%3Fp%3D2467&h=282&w=425&sz=171&tbnid=ToEC59YAUnnJHM:&tbnh=84&tbnw=126&prev=/images%3Fq%3Dtrade%2Bbloc%2B%2Bimages&hl=en&usg=__b1y9Bi-GZJBusbSL2YI36M-Nl_o=&sa=X&ei=fM5kTKGeGo3auQOshbDcDA&ved=0CAoQ9QEwAghttp://www.google.co.th/imgres?imgurl=http://upload.wikimedia.org/wikipedia/en/4/43/ActiveBlocs.PNG&imgrefurl=http://webspace.webring.com/people/oa/anil.ari_global/&h=1400&w=2753&sz=97&tbnid=QtE4m-53ZuXz2M:&tbnh=76&tbnw=150&prev=/images%3Fq%3Dtrade%2Bbloc%2B%2Bimages&hl=en&usg=__Y77LSP6mIEEprtYW3Dmfr-2rFR8=&sa=X&ei=fM5kTKGeGo3auQOshbDcDA&ved=0CAgQ9QEwAQ -
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The basic questions .
What is the definition of a trade bloc, and
FTAgreement and a FTArea
How are trade blocs related to globalization and
what is the future trend with respect to trade
blocsbe able to give examples
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Firstly we will look at the EU
The most significant of the trade
blocs and the model adopted bymany other trade alliances
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EuropeanUnion
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Scope of Presentation
Introduction The History of European Union
Why is the European Union?
What does the EU do?
The Single Market
Economic and monetary union (EMU) and the euro
Positive VS Negative Outcomes The European Union on the world stage
What future for Europe?
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European Union Flag
It is the symbol not only of the
European Union but also ofEurope's
unity and identity in a wider sense.The circle of gold stars represents
solidarity and harmony between the
peoples of Europe.
The number of stars has nothing to do
with the number of Member States.
There are twelve stars because the
number twelve is traditionally the
symbol of perfection, completeness
and unity. The flag therefore remains
unchanged regardless of EU
enlargements.
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Motto United in diversity
The motto means that, via the EU, Europeans are
united in working together for peace and
prosperity, and that the many different cultures,
traditions and languages in Europe are a positiveasset for the continent.
The 9th of May has become a European symbol
(Europe Day) which, along with the flag, the
anthem, the motto and the single currency (theeuro), identifies the political entity of the
European Union. Europe Day is the occasion for
activities and festivities that bring Europe closer
to its citizens and peoples of the Union closer to
one another.
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The History of European Union
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The History of European Union
1951: The European Coal and Steel Communityis established by thesix founding members
1957: TheTreaty of Romeestablishes acommon market
1973: The Communityexpands to ninemember statesand develops its common policies
1979: The first direct elections to theEuropeanParliament
1981: The firstMediterranean enlargement
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The History of European Union1993: Completion of thesingle market
1993: The Treaty of Maastrichtestablishesthe European Union
1995: The EUexpands to 15 members
2002: Euro notes and coinsare introduced
2004: EU enlarged to25 countries
2007: EU expands to27 member states
2007: Treaty of Lisbon..now ratified
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Recent developments
Go to the EU official website.the EUresponse to the financial crisisAND
TheTreaty of Lisbonwas signed on 13 December 2007. It had to beratified by all 27 Member States before it could enter into force. Itsmain objectives are to make the EU more democratic, meeting the
European citizens expectations for high standards of accountability,openness, transparency and participation; and to make the EU moreefficient and able to tackle today's global challenges such as climatechange, security and sustainable development. Finally approved by allsignatories in December 2009.
http://europa.eu/index_en.htmhttp://europa.eu/index_en.htm -
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Thank You
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Now we will look at the NAFTA
This trade bloc has attracted a
lot of criticism.unlike the EU ithas not brought with it fairness
and equity to all.
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In a sense it may be argued that the rich have
become richer and the poor poorer
North American Free Trade Agreement
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The official web site
Establishment
Objectives
A Decade of SuccessCriticism & Failures
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Establishment of NAFTA NAFTA stands for North American
Free Trade Agreement.
NAFTA was preceded by anagreement between the UnitedState and Canada entitled theU.S.-Canada Free Trade
Agreement, which was enacted on
January 1,1989.
NAFTA was implement on January1,1994 and has now reachedmaturity.
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Establishment of NAFTA NAFTA member countries -
Canada, Mexico and UnitedStates of America.
Its purpose was to removetariff barriers betweenCanada, U.S. and Mexico.
The Agreement includes twosupplement agreements onlabor and environment.
The official objectives of NAFTA
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The official objectives of NAFTA Eliminate trade barriers within
North America all tariffs eliminated
within 15 years..done
Promote fair competition
Increase investment opportunities Especially in Mexico
Protects intellectual property rights
Implement procedures forresolution of disputes
Provide a framework for furtherbenefits.
NAFTA Initialing Ceremony, October 1992.From left to right: (Standing) Mexican President
Salinas, US President Bush, Canadian PrimeMinister Mulroney.
Contents of NAFTA (Agreement)
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( g ) GENERAL PART
Objectives
TRADE IN GOODS Market access of goods
Rules of Origin
Customs procedures
TECHNICALBARRIERS TO TRADE
GOVERNMENTPROCUREMENT
INVESTMENT ANDSERVICES ANDRELATED MATTERS
INTELLECTUAL
PROPERTY
ADMINISTRATIVEAND INSTITUTIONAL
PROVISION
OTHER PROVISIONS
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A Decade of SuccessINCREASED TOTAL TRADE AND
BROADER ECONOMIC TRENDS
Representing a free trade areawith about one-third of theworlds total GDP, the NAFTAeconomies are significantly larger
than that of the EuropeanUnion. Even with the addition often new members, the EUs GDPwill still be well behind that of theNAFTA region.
Led to economic growth andrising prosperity in the UnitedStates, Mexico and Canada.
htt : www.ustr. ov Document Librar Fact Sheets 2004 NAFTA A Decade of Success.html
A Decade of Success
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PROGRESS FOR ENVIRONMENT
AND LABOR
Through the North AmericanAgreement on EnvironmentalCooperation, NAFTA partnerspromote enforcement ofenvironmental laws.
Through the Commission forEnvironmental Cooperation (CEC),which was created from theNAFTA, all three countries havebenefited from coordinationwhich is increasing the
effectiveness of North Americanconservation efforts.
Many challenge thisassessment
htt : www.ustr. ov Document Librar Fact Sheets 2004 NAFTA A Decade of Success.html
Yet here are many critical web sites
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y
C i i i & F il
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Criticisms & Failures NAFTA does not facilitate trade,but promotes a limited integrated
continental economy.
Quoted from Mexicos former
foreign minister on NAFTA:An agreement for the richand powerful in the United
States, Mexico, and Canada
An agreement effectivelyexcluding ordinary people in
all three societies.
http://www.epi.org/content.cfm/bp173#pt3
http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173http://www.epi.org/content.cfm/bp173 -
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Next we will look at the CAFTA
The Central American Free Trade Agreement
For trade blocs to function political stability is a must.
The coup in Honduras in 2009 unsettled
trade relationships in the regionthisillustrates the close relationship between
political harmony and effective traderelations..globally
Location.below Mexico.
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Part I : OverviewBackground of signing
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Background of signing
CAFTA or Central America Free Trade Agreement is an expansion ofNAFTA. Its the agreement between U.S. and 5 Central AmericanNations which composed by Guatemala, El Salvador, Honduras, Costa Rica, andNicaragua.
And, It was renamed to CAFTA-DR when Dominican Republic joined thenegotiations.
The CAFTA-DR was signed by US. President, George W. Bush on AUG 2 2005. and now it become into effect by the approval from El Salvador,Honduras, Nicaragua, Guatemala, and Dominican Republic. Excepted CostaRica which still hasnt yet signed by their President.
Part I : OverviewAims of CAFTA DR
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The goal of this agreement is To make a Free TradeZone similar to NAFTA which currently encompassesUSA , Canada and Mexico .
CAFTA-DR is step towards achieving a Free Trade Areaof Americas ( FTAA ); an area encompassing all of North andSouth America and the Caribbean nations (except Cuba andVenezuela)
Aims of CAFTA-DR
Eliminate tariffs on 80% US exports
Necessarily precursor to executionof Puebla Panama
Part II : Why CAFTA-DR is important
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Barriers to trade fall:
Service providers gain access:
Investment opportunities open:.
Part II : Why CAFTA-DR is important
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Greater prosperity and stability in the
region:
This has changed in 2009
Political issues impact on trade...
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2010 in Honduras
Mr Zelaya addressed his supporters from the Brazilian embassy inTegucigalpa
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Now we will look at SAARC;
is SAARC working?
Why?
About SAARC
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About SAARCSAARC stands for South Asian Association of Regional Cooperation
SAARC was officially born in 1985Its mission is to promote the well-being of the populations of South
Asia and improve their standard of living
SAARC is comprised of Eight Members
Afghanistan Bangladesh Bhutan India
Republic of MaldivesNepal Pakistan
Sri Lanka
http://upload.wikimedia.org/wikipedia/commons/1/11/Flag_of_Sri_Lanka.svghttp://upload.wikimedia.org/wikipedia/en/e/e3/Flag_of_Pakistan_%28bordered%29.svghttp://upload.wikimedia.org/wikipedia/commons/9/9b/Flag_of_Nepal.svghttp://upload.wikimedia.org/wikipedia/commons/0/0f/Flag_of_Maldives.svghttp://upload.wikimedia.org/wikipedia/commons/4/41/Flag_of_India.svghttp://upload.wikimedia.org/wikipedia/commons/9/91/Flag_of_Bhutan.svghttp://upload.wikimedia.org/wikipedia/commons/f/f9/Flag_of_Bangladesh.svghttp://upload.wikimedia.org/wikipedia/commons/9/9a/Flag_of_Afghanistan.svg -
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About SAARC (contd.)Headquarters Kathmandu, Nepal
Leader Secretary General Lyonpo Chenkyab Dorji
Membership 8 members states; 6 observers
SAARC is the only regional organization for cooperationin South Asia.
To promote Mutual Collaboration and assistance in the
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Note:-These objectivesare common to all trade blocs
SAARCS Aims
To promote Mutual Collaboration and assistance in the
economic, social, cultural, technical and scientific field
To reinforce links among
countries of this area
Social Progress
and
Cultural Development
To speed up
economic growth
Ineffectiveness
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Ineffectiveness Inability to play a crucial role in integrating South Asia Pakistans unwillingness to implement the tariff reduction in SAFTA
Economic, political, and territorial disputes
SAARC roles diminished A mere platform for annual talk and meeting among members
Political Issues SAARC intentionally laid more stress on core issues rather than more
decisive political issues:
Kashmir dispute between India and Pakistan
Civil war in Sri Lanka - Between government and the
Liberation Tigers of Tamil Eelam Uncertain political situation in Afghanistan
FTA F T d A t
http://upload.wikimedia.org/wikipedia/en/e/e3/Flag_of_Pakistan_%28bordered%29.svghttp://upload.wikimedia.org/wikipedia/commons/9/9a/Flag_of_Afghanistan.svghttp://upload.wikimedia.org/wikipedia/commons/1/11/Flag_of_Sri_Lanka.svghttp://upload.wikimedia.org/wikipedia/commons/4/41/Flag_of_India.svghttp://upload.wikimedia.org/wikipedia/en/e/e3/Flag_of_Pakistan_%28bordered%29.svghttp://upload.wikimedia.org/wikipedia/en/e/e3/Flag_of_Pakistan_%28bordered%29.svg -
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FTA Free Trade AgreementMembers unwillingness on signing FTA
India has several trade pacts with Maldives, Nepal, Bhutan and Sri Lanka
Trade agreements with Pakistan and Bangladesh have been stalled due
to political and economic concerns
12th SAARC Summit at Islamabad
South Asia Free Trade Agreementa framework for the
establishment of a free trade area covering 1.4 billion people
EU SAARC R l ti
http://upload.wikimedia.org/wikipedia/commons/1/11/Flag_of_Sri_Lanka.svghttp://upload.wikimedia.org/wikipedia/en/e/e3/Flag_of_Pakistan_%28bordered%29.svghttp://upload.wikimedia.org/wikipedia/commons/9/9b/Flag_of_Nepal.svghttp://upload.wikimedia.org/wikipedia/commons/0/0f/Flag_of_Maldives.svghttp://upload.wikimedia.org/wikipedia/commons/4/41/Flag_of_India.svghttp://upload.wikimedia.org/wikipedia/commons/9/91/Flag_of_Bhutan.svghttp://upload.wikimedia.org/wikipedia/commons/f/f9/Flag_of_Bangladesh.svghttp://upload.wikimedia.org/wikipedia/commons/9/9a/Flag_of_Afghanistan.svg -
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EU / SAARC Relations EU values cooperation and regional integration efforts in South Asia. In 1999, EU and SAARC agreed to cooperate on improving market access
for SAARC products into the EU.
- EU provided technical support for the establishment of the South
Asian FTA.
- EU supported harmonization of SAARC standards.
SAARC EU
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Now we will look at ASEAN
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The Founding of ASEAN
Overview
Projects
Outcomes
We observe that nearly 12% of investment
f S
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came from within ASEAN in 2007
The Founding of ASEAN
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The Establishment
ASEAN or The Association of Southeast Asian Nationswas establishedon 8th August 1967 in Bangkok with 5originalmembers: -
Indonesia Malaysia Philippines Singapore Thailand
Later joined 8th January 1984 : Brunei Darussalam
28th
July 1995 : Vietnam 23rd July 1997 : Lao PDR and Myanmar 30th April 1999 : Cambodia
Population : 500 million Area : 4.5 million square kilometers Combined Gross Domestic Product : 700 billion USD
Total Trade : 850 billion USD
Overview
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Objectives
The aims and purposes: To accelerate economic growth, social progress and
cultural development in the region
To promote regional peace and stability throughabiding respect for justice and the rule of law in therelationship among countries in the region andadherence to the principles of the United NationCharter.
In 2003, ASEAN leaders resolved that an ASEANCommunity shall be established comprising 3 pillars;ASEAN Security CommunityASEAN Economic CommunityASEAN Socio-Cultural Community
Overview
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Vision 2020
A pact between of South East Asian nations
Outward looking
Living in peace
Stability and prosperity
Bonded together in partnership
Fundamental Principles
Overview
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Fundamental PrinciplesThe Fundamental principles of ASEAN contained in the
Treaty of Amity and Cooperation in Southeast Asia (TAC); Mutual respect for the independence, sovereignty,
equality, territorial integrity and national identity of allnations
The right of every State to lead its national existencefree from external interference, subversion or coercion
Non-interference in the internal affairs of one another
Settlement of differences or disputes by peaceful
manner
Renunciation of the threat or use of force
Effective cooperation among themselves
Structures and Mechanisms
Overview
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The highest decision-making organ of ASEAN is the Meeting of the ASEAN Heads of Statesand Government.
The ASEAN Summit is convened every year.
The ASEAN Ministerial Meeting (Foreign Ministers) is held annually for the followingsectors;
Agricultural and forestry Economics (Trade) Energy Environment
Finance Health
ASEAN established committees to support the conduct of ASEANs external relations. It
composed of head of diplomatic missions in the capitals as follows;
OttawaParis
Beijing Berlin Brussels
Information Investment Labor Law Regional haze Rural development and
poverty alleviation
Science & Technology
Social welfare Telecommunication Transnational crime Transportation Tourism Youth
Washington DC Wellington
New York
Seoul
Canberra Geneva Islamabud
London Moscow New Delhi Riyadh
ASEAN i d t i l C ti S h (AICO)
Projects
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ASEANindustrial Cooperation Scheme (AICO)
ASEAN Free Trade Area (AFTA)
ASEAN Investment Area (AIA)
e-ASEAN
ASEAN Framework Agreement on Service (AFAS)
ASEAN Framework Agreement on the Facilitation ofGoods in Transit(GIT)
ASEAN Integration System of Preferences (AISP)
ASEAN Industrial Cooperation Scheme (AICO)
Projects
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ASEANIndustrial Cooperation Scheme (AICO)Agreement Date: April 1996
Objective:1. Develop ASEAN Industry Products2. Increase productivity of ASEAN Industry Products3. Support and share the production capacity4. Decrease cost of raw material by reduce tax5. Increase investment between ASEAN member and foreign investment
6. To develop ASEAN Industry Product to be competitive.
Present Status:
1. Car manufacture and Spare part industry 115 projects2. Appliance and Electronic part 7 projects3. Machine for Agriculture 1 project4. Food manufacture 5 projects5. Safety mirror 1 project
* Thailand joins around 73 projects
ASEANFree Trade Area (AFTA)
Projects
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ASEANFree Trade Area (AFTA)
Agreement Date: November 1996
Objectives:1. To develop ASEAN economic in each member country2. To protect ASEAN industry3. To increase ASEAN Export Volume
Positive1. Trade between ASEAN expanding a lot.2. Raw material and import product from ASEAN member are cheap3. Consumer have benefit from cheap product price4. FDI increasing between ASEAN member
Negative1. ASEAN V.S. ASEAN (Some industry cannot be survive)2. Specific Raw material from non-member was expensive
ASEANInvestment Area (AIA)
Projects
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Agreement Date: Year 2000
Objective:1. Promote and develop investment between ASEAN member2. AIA policy will be open ASEAN Investment Area within 2010 for
ASEAN member3. For Non-ASEAN member can be join in this policy in year 20204. Increase more chance for MNC to invest in foreign
5. Open all industry in ASEAN for ASEAN member investing
Advantage :1. AIA policy will make ASEAN economic growth a lot from FDI2. Each MNC form member country will be free from trade barrier
Disadvantage :1. If ASEAN industry not strong before open AIA, it will loose2. If FDI from non-member success, money will flow out from
ASEAN country
Successful Outcomes
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Political & Security Issues
Economics Social development & Security
Culture & Information
Science & Technology
Environmental Issues
Human Rights
External relationship with Trade partners
Weaknesses
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Non-Interference in the Internal Affairs of other members(a toothless tiger)
Incapable of providing a concerted response to the financial disasters
- difference within region, hard to come-up with effective regional response e.g.
Thailand-IMF issue
Economics: contagious effect of currency depreciation and marketmeltdowns
Political: from bloody putsch in Cambodia Pol Pot
Environmental: poisonous smog from Indonesian forest fires
Recent developmentsASEANChina Free Trade Area
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ASEAN China Free Trade Area
TheASEANChina Free Trade Area (ACFTA), also known as the China
ASEAN Free Trade Area is a free trade area among the ten member states of
ASEAN and the Peoples Republic of China.
The initial framework agreement was signed on 4 November 2002 in Phnom Penh
with the intent on establishing a free trade area among the eleven nations by 2010
The free trade area came into effect on 1 January 2010
The ASEANChina Free Trade Area is the largest free trade area in terms of
population and third largest in terms of nominal .
Go to the web for further up to date data if you wish
http://www.aseansec.org/24161.htm
Recent developmentsASEANEU
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ASEAN EU
COUNCIL OF THE EUROPEAN UNION
Madrid, 26 May 201018th ASEAN-EU Ministerial Meeting Co-Chairs Statemen
The Ministers reaffirmed the unique character of the partnership between the EUand ASEAN, the two regions of the world that are most advanced in regionalintegration. This is a partnership built on over thirty years of dialogue and cooperation,
and based on a spirit of equality, mutual respect and mutual benefit.
The Ministers resolved to intensify relations further through deepening political
engagement and developing a comprehensive co-operation, based in particular onthe Plan of Action to Implement the Nuremberg Declaration on an EU-ASEANEnhanced Partnership for the period 2007-2012.
Changes in ASEAN
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Significant developments in 2010- 2011
The ASEAN Charter which you can access on thewww
ASEAN + 3 China, Japan and South Korea
ASEAN + 6 Australia, New Zealand and India
Critical issues remain unresolved
Issues of trans boundary pollution issues and the
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Issues oftrans boundary pollution issues and theintegrated development of the region needs to be
managed by ASEANThe building of dams..Laos and Chinathe managementof the Greater Mekong Sub-region.sharing of resources
Farming practices.use of fertilizers and pesticides with
run off into catchment areas .
Slash and burn farming which causes land degradation,erosion and air pollution across the region..trans-boundary pollution issues
Integrated fiscal and financial management
Inability to resolve territorial rights over the South China
But the Achilles Heal ??????????
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Today, ASEAN is not only a well-functioning,
indispensable reality in the region It is a real
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indispensable reality in the region. It is a real
force to be reckoned with far beyond the region.
It is also a trusted partner of the UnitedNations in the field of development...
Kofi Annan
Secretary-General of the United Nations
16 February 2000
?
Finally
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Bay of Bengal Initiative for Multi-SectoralTechnical and Economic Cooperation
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6 June 1997 : formed in Bangkok (BIST-EC,Bangladesh, India, Sri Lanka, Thailand EconomicCooperation)
22 Dec 1997 : Myanmar joined
In 2003 : Nepal and Bhutan has been joined
Groups name was changed to Bay of
Bengal Initiative for Multi-SectoralTechnical and Economic Cooperation orBIMSTEC.
BackgroundAgenda- Background
- Purposes
- Strengths
- Weaknesses
Purposes
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Purposes New Asian free trade area up by 2017 Cooperation framework linking South Asia
with South-east Asia
Working groups were set up to move thesectoral agenda
Increase cooperate on research anddevelopment based on resources availablefrom their own rich natural biodiversity
Aimed at producing breakthrough affordabledrugs, and also agreed to cooperate onenergy issues.
Agenda- Background- Purposes
- Strengths
- Weaknesses
Purposes
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Purposes BIMSTEC covers 13 Priority Sectors
1. Trade and Investment2. Transport and Communication3. Energy4. Tourism
5. Technology6. Fisheries
Agenda- Background
- Purposes
- Strengths
- Weaknesses
Purposes
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Purposes Sectors of Cooperation
7. Agriculture8. Public Health9. Poverty Alleviation10. Counter-Terrorism and Transnational
Crime
11. Protection of Biodiversity12. Culture13. People to People contact
Agenda- Background- Purposes
- Strengths
- Weaknesses
Strengths
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Strengths BIMSTEC provides a unique link between
South Asia and Southeast Asia
Bring 1.3 billion people together
21 percent of the world population, acombined GDP of US$750 billion
India and Thailand also made progress on thesidelines, under the Thai-India free tradeagreement.
Agenda- Background- Purposes
- Strengths
- Weakness
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You must go to the lecture notes and to
Czinkota..the Introductory chapters
and especially Chapter 5
Thats itgood luck
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I wish you well for the exam and for your
future careers..