INBS 250 INBS 250
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This 4 page Class Notes was uploaded by Maria Notetaker on Thursday September 15, 2016. The Class Notes belongs to INBS 250 at Montclair State University taught by Nahra in Spring 2015. Since its upload, it has received 10 views. For similar materials see Introduction to International Business in International Business at Montclair State University.
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Date Created: 09/15/16
Ch. 9 - Regional Economic Integration Friday, February 27, 2015 10:01 AM Economic Integration: when 2 or more govs get together, sign a business agreement on how they will open up their markets and allow import & export to take place, and what kind of environment they will create in regard to tariffs and trade barriers 3 types of regional trade agreements; Free trade area: (1) eliminate tariffs amongst members only [over a period of years to give companies a time to adapt] (2) eliminate trade barriers Customs unions: 2 or more countries unify their customs systems [2 or more countries will have the same import tariffs] Common market: allow free flow of capital (you can move your money into another country without any restrictions) and free flow of labor The effects of economic integration Static effects: moving resources from inefficient to efficient firms as trade barriers fall o Trade creation: production moves from less efficient domestic producers to more efficient regional producers o Trade diversion: diverting trade from country to cheaper locations Dynamic effects: *europa.eu >> role of the EU (EU council) (European commission) Parliament to pass a law: majority of citizens have to approve of 28 different countries European Union Devastation of 2 world wars in Western Europe prompted the formation of the EU 1987 Single European Act worked to establish EU European council European commission European " Is the Euro a good thing? Maastricht Treaty: committed the EU to adopt a single currency (2nd largest currency zone in the worlf after that of the US dollar) ; 18 of the 28 countries use the euro (10 use their own) ; volatile trading history with the US dollar o Benefits of the euro Savings from having to handle one currency instead of many Easier to compare prices around Europe firms forced to be more competitive Gives strong boost to the development of capital market Increases range of investment options (open to both individuals and institutions) o Costs of the euro Loss of control over national monetary policy EU is not an optimal currency area Challenges facing the EU o Slides on powerpoint EU is a free trade area (can import/export products without paying any tariffs or having any trade barriers) EU is also a customs union (all 28 countries have the same single tariff system) Labor force of all 28 countries can work without any restrictions/work visa/permits (free flow of labor) EU is open borders ; EU is combination of all 3 agreements ; opens up opportunities NAFTA (North American Free Trade Agreement) 1994 Only a free trade agreement and nothing else Eliminated tariffs Eliminated trade barriers US, Mexico, Canada Dealt with both goods and services Protects intellectual property rights Removes most restrictions on FDI between members ; build your own infrastructure Each country applies its own environmental standards and its own labor standards They have a dispute settlement process ; if not satisfied, they go to WTO court (trade matters only) MERCOSUR Free trade pact between Brazil, Argentina, Paraguay, Uruguay and Venezuela CAFTA (central American trade agreement) CARICOM ASEAN (association of southeast asian nations) ASEAN Free Trade Area (AFTA) APEC (asiapacific economic cooperation) Commodity Agreements: economic cooperation designed to stabilize the price and supply of primary commodities through use of buffer stocks and/or quota systems Producers alliances: exclusive membership agreements between or amongst producing countries (a cartel) o OPEC (organization of oil exporting countries) commodity unifies the countries involved International commodity control agreements (ICAAs): agreements b/t producing and consuming countries o International cocoa organization (ICO) o International sugar organization (ISO)