Chapter 3

European Union Characteristics

- 28 countries - 450 million people - $15 trillion GNI - Euro currency, 1999 - Harmonization of laws and regulations - Price transparency - No customs at national borders

JEFTA 2019

- After four years of negotiations JEFTA entered into force in February 2019. - Almost all tariffs are eliminated between the European Union and Japan. - Agreement covers 638 million people and 28 percent of the world economy

USMCA Characteristics

- All three nations pledge to promote economic growth through tariff reductions and expanded trade and investment - No common external tariffs - Restrictions on labor and other movements remain

Andean Community

- Bolivia, Colombia, Ecuador, Peru, - Customs Union - Abolished foreign exchange, financial and fiscal incentives, and export subsidies - Established common external tariffs

The Association of Southeast Asian Nations (ASEAN)

- Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam - Trading partners U.S., Japan, EU, China - Geographically close; historically divided - "ASEAN plus six" (Japan, China, Korea, Australia, New Zealand, India) working towards an economic community - China/ASEAN FTA established in 2010 removes 90% of tariffs on traded goods

Central American Integration System (SICA)

- El Salvador, Honduras, Guatemala, Nicaragua, Costa Rica, and Panama - Moving towards a common market - Common External Tariff of 0 to 15% - Retains tariffs on goods also produced in importing country

Gulf Cooperation Council

- Established in 1981 by 6 countries with 45% of world's oil, only 18% of output - These countries are attempting to diversify industries

CARICOM

- Founded in 1973 by 15 members - 17 million population - Stagnant for 20 years - Customs Union in 1991 with common external tariffs - Rejected the idea of a economic union in 1998 as a single currency would not be especially beneficial. - Caribbean Basin Trade Partnership Act exempts textile and apparel exports to the U.S. market access from duties and tariffs. Caribbean Basin Initiative of 20 nations includes CARICOM.

SICA, Andean Community, Mercosur, CARICOM

- Includes the Caribbean, Central, and South America - History of no growth, inflation, debt, and protectionism has given way to free markets, open economies, and deregulation - Some concern for further growth with the rise of left-leaning politicians

The European Union (EU)

- Initially began with the 1958 Treaty of Rome - Objective is to harmonize national laws and regulations so that goods, services, people, and money could flow freely across national boundaries - 1991 Maastricht Treaty set stage for transition to an economic union with a central bank and single currency (the Euro)

Free Trade Area

- Two or more countries agree to abolish tariffs and other barriers to trade amongst themselves - Countries continue independent trade policies with countries outside agreement - Rules of origin requirements restrict transshipment of goods from the country with the lowest tariff to another

USMCA

- USMCA was agreed on in 2018; renegotiated parts of NAFTA - NAFTA established as a free trade area in 1994 - Canada, United States, Mexico

Signapore

- World's 2nd largest container port - 2nd highest standard of living in the region behind Japan - 5.4 million people - 95% literacy rate - Over 3,000 companies - Crime is nearly nonexistent

Economic Union Evolution

- creation of unified central bank - use of single currency - common policies on issues such as agriculture, social policy, - -- transport, competition, mergers, taxation - requires extensive political unity - would lead to a central government in time

Africa

54 nations over three distinct areas - Republic of South Africa - North Africa - Black Africa or sub-Saharan Africa Mena: Middle East and North Africa - Viewed as a regional entity Regional agreements - Economic Community of West African States - East African Cooperation - South African Development Community

Customs Union

Addition of common external tariffs to the provisions of free trade agreements - Evolution of Free Trade Area - Includes the elimination of internal barriers to trade (as in FTA) - AND establishes common external barriers (CETs) to trade

The Middle East

Afghanistan, Bahrain, Cyprus, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, the United Arab Emirates, Yemen - Primarily Arab, some Persian and Jews - 95% Muslim, 5% Christian and Jewish - Wide variation in Economic Freedom rankings - Bahrain is 12th, UAE is 28th, Saudi Arabia is 82nd - Oil prices drive commerce - 25% of world's oil in Saudi Arabia - Arab Spring 2011

Common Market of the South (MERCOSUR)

Argentina, Brazil, Paraguay, Uruguay, Venezuela - Customs union, seeks to become common market - Internal tariffs eliminated - Established common external tariffs up to 20% - In time, factors of production will move freely through member countries Bolivia, Chile, Ecuador, Peru - Associate members - Participate in free trade area but not customs union

Common Market

Elimination of all tariffs and other barriers, adopts a common set of external tariffs on nonmembers, and removal of all restrictions on the flow of capital and labor among member nations - Includes the elimination of internal barriers to trade (as in free trade area) - AND establishes common external barriers to trade (as in customs union) - AND allows for the free movement of factors of production, such as labor, capital, and information

Free Trade Areas

Formal agreement among two or more countries to reduce or eliminate customs ,duties, and non tariff barriers

The World Trade Organization

Forum for trade-related negotiations among 160 members - Based in Geneva - Serves as dispute mediator through DSB - Has enforcement power and can impose sanctions

Political Union

Highest level of integration resulting into a political union. Sometimes, countries come together in a loose political union for historical reasons, as in the case of British Commonwealth which exists as a forum for discussion and common historical ties

Preferential Trade Agreements

Many countries seek to lower barriers to trade within their regions - PTAs give partners special treatment and may discriminate against others - Over 300 PTAs have been notified to the WTO

Enonomic/Monetary Union

Represents the fourth level of integration with a single currency among politically independent countries - Includes the elimination of internal barriers to trade (as in free trade area) - AND establishes common external barriers to trade (as in customs union) - AND allows for the free movement of factors of production, such as labor, capital, and information (as in common market) - AND coordinates and harmonizes economic and social policy within the union

GATT (General Agreement on Tariffs and Trade)

Treaty among nations to promote trade among members established in 1947 - Handled trade disputes - Lacked enforcement power; nicknamed the General Agreement to Talk and Talk - Disputes lasted for years - Replaced by World Trade Organization in 1995