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international
cooperation
among
nations
international business, 5th edition
chapter 10
Chapter Objectives
• Explain the importance of the GATT and
the WTO to international business
• Contrast the different forms of economic
integration among cooperating countries
• Analyze the opportunities for international
businesses created by completion of the
EU’s internal market
• Describe the other major trading blocs in
today’s world economy
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General Agreement on Tariffs and Trade
• Developed as part of the Havana,
Cuba, conference in 1947
• Provided forum for trade ministers
to discuss barriers to international
trade
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The Role of the GATT
The GATT’s goal was to promote a
free and competitive international
trading environment benefiting
efficient producers by sponsoring
multilateral negotiations to reduce
tariffs, quotas, and other nontariff
barriers
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Table 10.1 GATT Negotiating Rounds
10-5
Most Favored Nation (MFN) Principle
The most favored nation principle
requires that any preferential treatment
granted to one country
must be extended to all countries.
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Exceptions to the MFN Principle
• Members permitted to lower tariffs to
developing countries without lowering
them for more developed countries
• Regional arrangements promote
economic integration (e.g., EU and
NAFTA)
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Goals of the
World Trade Organization (WTO)
• Promote trade flows by encouraging
nations to adopt nondiscriminatory,
predictable trade policies
• Reduce remaining trade barriers through
multilateral negotiations
• Establish impartial procedures for resolving
trade disputes among members
10-8
Differences between WTO and GATT
• GATT focused on promoting trade in
goods; WTO’s mandate includes
– trade in goods
– trade in services
– international intellectual property protection
– trade-related investment
• WTO’s enforcement powers are stronger
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Figure 10.1 The WTO’s Principles of the
Trading System
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WTO Challenges
• The Cairns Group
• Multifibre Agreement
• General Agreement on Trade in Services
(GATS)
• Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS)
• Trade-Related Investment Measures
Agreement (TRIMS)
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Enforcement of WTO Decisions
• Country failing to live up to the
agreement may have a complaint filed
against it
• WTO panel evaluates complaint
• If found in violation, the country may be
asked to eliminate the trade barrier
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Rice producers
would likely benefit if trade barriers
were eliminated in this market.
The world market
for rice is distorted
by high tariffs,
ranging from 2043 percent.
10-13
Forms of Economic Integration
Free Trade Area
Customs Union
Common Market
Economic Union
Political Union
10-14
Figure 10.2 Forms of
Economic Integration
10-15
European Union (EU)
• Most important regional trading bloc
• 25 member countries
• 455.3 million population
• Combined GDP of $12.7 trillion
10-16
Map 10.1 The European Union
10-17
Governing Organizations
of the EU
• The Council of the European Union
• The European Commission
• The European Parliament
• The European Court of Justice
10-18
The first meeting of the European
Commission after the enlargement of the
EU to 25 members.
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Figure 10.3 The Co-Decision
Procedure
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Three Pillars of the Maastricht Treaty
• A new agreement to create common foreign and
defense policies among members
• A new agreement to cooperate on police,
judicial, and public safety matters
• The old familiar European Community, with new
provisions to create an economic and monetary
union among member states
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Components of the Treaty for Europe
(Treaty of Amsterdam)
• A strong commitment to attack the EU’s
chronic high levels of unemployment
• A plan to strengthen the role of the
European Parliament by expanding the
number of areas that require use of the
co-decision procedure
• Establishment of a two-track system
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Treaty of Nice
• Sought to reduce the risk of political
gridlock as the number of members
increase
– reduced number of areas where
unanimity is required for Council
approval
– adjusted number of votes assigned to
each Council member
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Major Regional Trade Associations
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• AFTA
• ECOWAS
• ANCOM
• EU
• APEC
• EFTA
• CACM
• GCC
• CARICOM
• MERCOSUR
• CEMAC
• NAFTA
• CER
• SADC
Map 10.2 Free Trade Agreements in
Central and South America
and the Caribbean
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Map 10.3 The ASEAN Members
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Map 10.4 Asia-Pacific Economic
Cooperation Initiative (APEC)
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Map 10.5 Free Trade Agreements
in Africa
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