Over the first decade of the agreement, almost all tariffs between Mexico, Canada, and the United States were phased out. US companies, for example, sell more than $25 billion in products to the Latin American and Caribbean regions annually, ranking it among the top US export markets. With the removal of virtually all tariffs and other barriers to trade, the CAFTA-DR agreement is making commerce with these countries even easier, opening opportunities to a range of industries. “About the US–ASEAN Business Council,” US–ASEAN Business Council, accessed December 31, 2010, http://www.usasean.org/Aboutus/index.asp. type of regional integration agreement. Figure 5.3 Countries in the EU (as of May 1, 2011). In Mexico, patience and the willingness to wait are still highly valued—and necessary—in business transactions. Because the EU’s $18.4 trillion economy makes up 30 percent of the world economy, its poor prospects are likely to rebound on the United States, Asia, and other regions.“Staring into the Abyss,” Economist, July 8, 2010, accessed December 28, 2010, http://www.economist.com/node/16536898. At the same time, the army continues to exert tight control over the state, particularly in and around towns where residents are known to support the rebels. Despite the perceived benefits, economic policymakers in the EU admit that the Union’s labor markets are suffering from rigidity, regulation, and tax structures that have contributed to high unemployment and low employment responsiveness to economic growth. As you learned in the opening case study, the EU originally began in 1950 to end the frequent wars between neighboring countries in the Europe. It’s the most significant agreement since the two countries split at the end of the Chinese Civil War in 1949.34 It will boost the current $110 billion bilateral trade between both sides. APEC is the only regional trading group that uses the term member economies, rather than countries, in deference to China. “African Economic Community,” accessed April 30, 2011, http://en.wikipedia.org/wiki/African_Economic_Community. P. K. Abdul Ghafour, “GCC Common Market Becomes a Reality,” Arab News, January 2, 2008, accessed April 30, 2011. MERCOSUR has brought nations with long-standing rivalries together. Mexico has fared the best from NAFTA as trade has increased dramatically. Although it is the poorest state in Mexico, Chiapas has the richest natural resources, including oil, minerals, and electrical power. 30. Understand regional economic integration. While Hong Kong is now managed by China as a Special Administrative Region (SAR), it continues to enjoy special economic status. This trend was triggered by the EU market integration. Central European Free Trade Agreement (CEFTA) is a trade agreement between non-EU countries in Central and Southeastern Europe, which currently includes Albania, Bosnia and Herzegovina, Croatia, Macedonia, Moldova, Montenegro, Serbia, and the United Nations Interim Administration Mission on behalf of Kosovo (UNMIK)—all of whom joined in 2006.19, Originally signed in 1992, CEFTA’s founding members were the Visegrad Group, also called the Visegrad Four or V4, which is an alliance of four Central European states—the Czech Republic, Hungary, Poland, and Slovakia. The grouping of Belgium, Luxembourg, and the Netherlands. Mohsin Khan, “The GCC Monetary Union: Choice of Exchange Rate Regime,” Peterson Institute for International Economics, April 2009, accessed April 30, 2011. For international companies looking to access these markets, the United States, recognized worldwide for its stable regulatory and legal framework and for its robust infrastructure, is the most logical place to set up operations. (San Francisco: Jossey-Bass, 1998). Foreign Affairs and International Trade Canada, “Fast Facts: North American Free Trade Agreement,” December 15, 2009, accessed December 30, 2010, http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/nafta-alena/fast_facts-faits_saillants.aspx?lang=eng. MERCOSUR constituents compose nearly half of the wealth created in all of Latin America as well as 40 percent of the population. With this treaty, the EU identified three aims. Now the world’s fourth-largest trading bloc after the EU, NAFTA, and the Association of South East Asian Nations (ASEAN),9 the group has been strategically oriented to develop the economies of its constituents, helping them become more internationally competitive so that they would not have to rely on the closed market arena. The six founding nations were France, West Germany, Italy, and the Benelux countries (Belgium, Luxembourg, and the Netherlands), all of which signed a treaty to run their coal and steel industries under a common management. China already absorbed Hong Kong in 1999, after the hundred-year lease to Britain ended. US multinational companies, such as John Deere, Zenith, Mattel, and Xerox, run the majority of the more than 3,600 maquiladoras in northern Mexico. Identify the major regional economic areas of cooperation. A rural region in southern Mexico, Chiapas is home to extremely poor Mayan, Ch’ol, Zoque, and Lacandón Indians. Joanna Klonsky and Stephanie Hanson, “Mercosur: South America’s Fractious Trade Bloc,” Council on Foreign Relations, August 20, 2009, accessed April 30, 2011. 25. Regional economic integration is when exists a trade agreement between countries within a region that agree to lower tariffs and regulations with each other; in some cases they may agree to trade some items exclusively. In all, more than two thousand companies headquartered outside the United States operate in Florida. Cooperation Council for the Arab States of the Gulf website, accessed April 30, 2011. 16. Caribbean Community (CARICOM) Secretariat website, accessed April 30, 2011, http://www.caricom.org/index.jsp. “the formal merger of two or more previously independent units into a single larger unit, with some type of common government” (Karl W. Deutsch et al., 1957: 5-6). Forced to compete with large multinationals and Mexican conglomerates, many traditional family-owned firms have had to close because they were unable to compete in the global marketplace. Lucy Hornby, “Taiwan and China Sign Trade Pact,” Reuters, June 29, 2010, accessed April 30, 2011, http://www.reuters.com/article/2010/06/29/us-china-taiwan-signing-idUSTRE65S17Z20100629. Canada is currently negotiating a similar treaty called the Canada Central American Free Trade Agreement. It’s important to remember several distinctions. An example is the North American Free Trade Agreement (NAFTA). Emphasis is placed on opening markets, eliminating trade barriers a… Business and particularly interpersonal business relationships were viewed as something that should be pleasurable, like other important aspects of life. Switzerland has also chosen to not join the EU, although it is part of similar bilateral agreements. Preferential trade agreementsA trading arrangement in which anation grants partial trade preferencesto one or more trading partners. Caribbean Community (CARICOM) Secretariat website, accessed April 30, 2011. As a result of the Pacific Ocean connection, this geographic grouping includes the United States, Canada, Mexico, Chile, Peru, Russia, Papua New Guinea, New Zealand, and Australia with their Asia Pacific Rim counterparts.33 This assortment of economies and cultures has, at times, made for interesting and heated discussions. The six member states are Bahrain, Kuwait, Saudi Arabia, Oman, Qatar, and the United Arab Emirates (UAE). The challenges for businesses include finding themselves outside of a new trading bloc or having the “rules” for their industry change as a result of new trade agreements. Here a few examples: North American Free Trade Agreement (NAFTA): Canada, Mexico and the USA. 43. Some of the regional blocs also created side agreements with other regional groups leading to a web of trade agreements and understandings. North America is one of the largest trading blocs. “Tri-lateral [merchandise] trade has nearly tripled since NAFTA came into force in 1994. Deepening of democratic government systems. 34. The North American Free Trade Agreement (NAFTA) came into being during a period when free trade and trading blocs were popular and positively perceived. Staffed with lawyers in an advocacy department, global firms work to maintain relationships with all of the interested parties. For international companies looking to access these markets, the United States, recognized worldwide for its stable regulatory and legal framework and for its robust infrastructure, is the most logical place to set up operations. The unrest in Chiapas stems from long-standing economic and social injustice in the region and from the Indians’ isolation and exploitation by the local oligarchy of landowners and mestizo bosses (caciques). Ambitiously, in 2017 and after, the AEC intends to foster the creation of a free-trade zone and customs union in its regional blocs. 35. This is the case, particularly, for relatively low-skilled labor. At the same time, it’s making the CAFTA-DR countries richer and increasing the purchasing power of their citizens. Louise Greenwood, “Q&A: Free Trade Zones in Africa,” BBC Africa Business Report. With this treaty, the EU identified three aims. 12. ... Free Trade • Free trade is a type of trade policy that allows traders to act and transact without interference from government. In the past decade, there has been an increase in these trading blocs with more than one hundred agreements in place and more in discussion. This is one reason why global businesses have teams of in-house professionals monitoring the WTO as well as the regional trade alliances. Enterprise Florida, “Your Business: International,” The CAFTA Intelligence Center, accessed December 30, 2010, http://www.caftaintelligencecenter.com/subpages/location-International.asp. Trade liberalization and export promotion 3. Customs union. In 2002, ASEAN and China signed a free trade agreement that went into effect in 2010 as the ASEAN–China Free Trade Area (ACFTA). In particular, competitiveness and efficiency have become higher priorities, although company owners and managers still like to surround themselves with people they know and to groom their sons and sometimes their daughters to be their successors. “About the US–ASEAN Business Council,” US–ASEAN Business Council, accessed December 31, 2010, 46. The Council’s members include the largest U.S. companies working in ASEAN, and range from newcomers to the region to companies that have been working in Southeast Asia for over 100 years…. In 2009, ASEAN and India also signed the ASEAN–India Free Trade Agreement (FTA). Economic cooperation or integration may take any one or a combination of any of the following forms: (i) Economic Union, (ii) Customs Union, (iii) Free Trade Area, (iv) Sectoral or Partial Integration, (v) Preferential Trading, (vi) Long-term Trade Agreements. However, the Treaty of Maastricht in 1993 stands out as an important moment; it’s when the realeconomic union was created. “Central European Free Trade Agreement,” last modified February 12, 2011, accessed February 16, 2011, http://en.wikipedia.org/wiki/Central_European_Free_Trade_Agreement. Having long-established personal and professional relationships with key ASEAN decision makers, the Council is able to arrange genuine dialogues, solve problems and facilitate opportunities in all types of market conditions, and provide market entry and exclusive advisory services.“About the US–ASEAN Business Council,” US–ASEAN Business Council, accessed December 31, 2010, http://www.usasean.org/Aboutus/index.asp. “Stop Meddling in Our Affairs: GCC Countries Tell Iran,” The Middle East Times, April 4, 2011, accessed April 30, 2011. Over the past few decades, there has been an increase in bilateral and multilateral trade agreements. NAFTA’s rules ensure that a foreign exporter won’t just ship to the NAFTA country with the lowest tariff for nonmember countries. Since inception, Myanmar (Burma), Vietnam, Cambodia, Laos, and Brunei have joined the association.Sanjyot P. Dunung, Doing Business in Asia: The Complete Guide, 2nd ed. A year before the official signing, the Dominican Republic joined the negotiations, and the agreement was renamed CAFTA-DR.14, The goal of the agreement is the creation of a free trade area similar to NAFTA. It shows how the EU can come out stronger from this crisis and how it can be turned into a smart, sustainable, and inclusive economy delivering high levels of employment, productivity, and social cohesion. “Future for Europe,” Europa, accessed April 30, 2011. China is eager for Hong Kong and Taiwan to serve as gateways to its massive market. As part of NAFTA, two side agreements addressing labor and environmental standards were put into place. For a variety of reasons—from geography and language to well-developed business and family connections—this is a role that Florida has been playing very successfully for a number of years and which, with the implementation of CAFTA-DR, is only gaining in importance.Enterprise Florida, “Your Business: International,” The CAFTA Intelligence Center, accessed December 30, 2010, http://www.caftaintelligencecenter.com/subpages/location-International.asp. 38. For example, many commentators see the political situation in the state of Chiapas as underscoring the alienation large groups have suffered as a result of the opening of the Mexican economy to global forces. The opening case study addressed some of the current challenges the EU is facing as a result of the impact of these aims. The pros of creating regional agreements include the following: The cons involved in creating regional agreements include the following: There are more than one hundred regional trade agreements in place, a number that is continuously evolving as countries reconfigure their economic and political interests and priorities. The European Economic Area (EEA) was established on January 1, 1994, following an agreement between the member states of the European Free Trade Association (EFTA) and the EC (later the EU). The United States, as the largest country member in NAFTA, won’t give up its rights to independently determine its economic and trade policies. The low standard of living in Chiapas and of Indians throughout Mexico remains a significant challenge for the Mexican government. In 2009, the twenty-seven EU countries signed the Treaty of Lisbon, which amends the previous treaties. 23. 28. Despite the perceived benefits, economic policymakers in the EU admit that the Union’s labor markets are suffering from rigidity, regulation, and tax structures that have contributed to high unemployment and low employment responsiveness to economic growth. Keith B. Richburg, “China, Taiwan Sign Trade Pact,” Washington Post, June 30, 2010, accessed April 30, 2011, http://www.washingtonpost.com/wp-dyn/content/article/2010/06/29/AR2010062900163.html. 19. K. Abdul Ghafour, “GCC Common Market Becomes a Reality,” Arab News, January 2, 2008, accessed April 30, 2011, http://archive.arabnews.com/?page=1§ion=0&article=105173&d=1&m=1&y=2008. 44. Poland, the Czech Republic, Hungary, Slovakia, and Slovenia joined the EU on May 1, 2004, with Bulgaria and Romania following suit on January 1, 2007.21 Croatia and Macedonia are in the process of becoming EU members.22. ASEAN’s primary focus is on economic, social, cultural, and technical cooperation as well as promoting regional peace and stability. “About CEFTA,” Central European Free Trade Agreement, accessed April 30, 2011. Similarly, Canadian and US companies have sought to enter the expanding Mexican domestic market. This assortment of economies and cultures has, at times, made for interesting and heated discussions. Accordingly, the organization has its own governing and decision-making institutions. Beijing is hoping closer economic ties will draw Taiwan further into its orbit.”36 While opposition in Taiwan sees the agreement as a cover for reunification with China, the agreement does reduce tariffs on both sides, enabling businesses from both countries to engage in more trade. Mexican maquiladoras have fared well in this arrangement by being the final production stop before entering the United States or Canada. With the Doha Round of the WTO dragging, APEC members have been discussing establishing a free-trade zone. To understand the different types of regional integration that have been observed until now. While the European Union (EU) has long been the most developed model of regional integration, it was severely shaken by the recent economic crisis, causing increasing doubts about the integration process. Among its various initiatives, the GCC calls for the coordination of a unified military presence in the form of a Peninsula Shield Force.38, In 1989, the GCC and the EU signed a cooperation agreement. 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