Cross-National

Cooperation and
Agreements
 Economic integration
 Economic integration is a political and economic
agreements among countries that give preference to
member countries in the agreement for international
business.
 Three types of EI are:
 Bilateral
 Regional
 global
 Bilateral: When two countries decide to cooperate
together usually in the form of tariff reduction
 Regional: where a group of countries located in the
same geographic proximity decide to cooperate. For
e.g. European Union
 Global: same rule to all the countries in the world for
trade.
 Regional trade agreements
 Regional trade agreements are reciprocal pacts between two
or more partners that lie somewhat between bilateral and
global integration agreements
 As of 1 May 2018, 287 RTAs were in force.
 Some of the best known RTAs are the European Union, the
European Free Trade Association (EFTA), the North
American Free Trade Agreement (NAFTA), the Southern
Common Market (MERCOSUR), the ASEAN (Association
of Southeast Asian Nations)
 Many agreements (especially agreements involving the
United States) go beyond the liberalization of tariffs to
include such issues as intellectual property, foreign direct
investment, and services.
 Regional economic integration
 Three basic types of regional economic integration:
 Free trade agreements: abolish all tariffs between
member countries. For e.f NAFTA
 Custom Union: no internal tariffs plus common
external tariffs means hereby that same tariff rules
will be applied to non-agreement member countries.
 Common market : free mobility of factors
 Effect of economic integration

Static and Dynamic Effects: Static effects are

the
shifting of resources from inefficient to efficient
companies as trade barriers fall.
Dynamic effects are the overall growth in the
market and the impact on a company caused by
expanding production and by its ability to
achieve greater economies of scale
 NAFTA
• The North American Free Trade Agreement (NAFTA)
 treaty between Canada, Mexico and the United States. That
makes NAFTA the world’s largest free trade agreement
 The gross domestic product of its three members is more than
$20 trillion
 The three signatories agreed to remove trade barriers between
them
 On January 23, 2017, President Donald Trump signed an
executive order to renegotiate NAFTA. He wants Mexico to
cut its value-added tax and end the maquiladora program.
Trump prefers bilateral trade agreements to multilateral ones. 
  Disadvantages of NAFTA
•  it sent many U.S. manufacturing jobs to lower-cost Mexico
• workers who kept jobs in those industries had to accept lower
wages
• Mexico's workers suffered exploitation in
its maquiladora programs.
  Advantages of NAFTA
• U.S. grocery prices would be higher without tariff-free imports
from Mexico
• Imported oil from both Canada and Mexico has
prevented higher gas prices
• NAFTA has also increased trade and economic growth for all
three countries.
 How does NAFTA works
• NAFTA grants the most-favored-nation status to all co-
signers(three countries) that means countries must give all
parties equal treatment that includes foreign direct investment.
• NAFTA eliminates tariffs on imports and exports between
the three countries. It created specific rules to regulate trade in
farm products, automobiles and clothing. These also apply to
some services, such as telecommunications and finance.
• Exporters must get Certificates of Origin to waive tariffs.
That means the export must originate in the United States,
Canada or Mexico. A product made in Peru but shipped from
Mexico will still pay a duty when it enters the United States or
Canada. 
 Cont..
 NAFTA establishes procedures to resolve trade disputes
 The NAFTA Secretariat facilitates an informal resolution
between the parties. If this doesn't work, it establishes a panel
to review the dispute. That helps all parties to avoid costly
lawsuits in local courts.
 All NAFTA countries must respect patents, trademarks, and
copyrights. At the same time, the agreement ensures that these
intellectual property rights don’t interfere with trade.
 the agreement allows business travelers easy access
throughout all three countries. 
 new agreement (USMCA)
• The U.S., for example, won expanded access
to Canadian markets for U.S. dairy producers
• Canada won a key concession from U.S.
negotiators that preserved a dispute resolution
process.
• key provisions governing the auto industry
that will encourage more U.S. car production
while protecting Canadian and Mexican
companies from wider tariffs
• It will require 75 percent of auto components to
be built in North America, up from 62.5 percent.
• Forty to 45 percent of auto components will have
to be made by laborers making at least $16 an
hour.
• In a concession to Mexican and Canadian
business, the deal largely exempts passenger
vehicles, pickup trucks and auto parts from
possible Trump administration tariffs.
• U.S. farmers are getting slightly more access to
Canadian dairy markets.
•  Trump insisted the three countries use the
name United States-Mexico-Canada
Agreement, or USMCA, replacing NAFTA.
 European Union
 No customs duties at internal borders between the EU
Member States;
 Common customs duties on imports from outside the
EU;
 Common rules of origin for products from outside the
EU;
 A common definition of customs value.
 Cont..
 Ensuring that the common tariff is applied in the
same way all along the EU’s external borders;
 Introducing a common approach on warehousing
procedures;
 Facilitating movements of goods in “customs transit”;
 Replacing the wide variety of customs documents
with a single administrative document.

the objectives of the EU are to establish
European citizenship, ensure freedom, justice
and security, promote economic and social
progress, and assert Europe's role in the
world.

Any member state may decide to withdraw
from the Union in accordance with its own
constitutional requirements.
A member state which decides to withdraw shall
notify the European Council of its intention. In
the light of the guidelines provided by the
European Council, the Union shall negotiate and
conclude an agreement with that State, setting out
the arrangements for its withdrawal, taking
account of the framework for its future
relationship with the Union.
The EU is run by five main bodies: European
Parliament, Council of the Union, European
Commission, Court of Justice, and the Court of
Auditors.
 Key Governing Bodies

The European Commission provides the EU’s
political leadership and direction. It is composed
of commissioners nominated by each member
government and approved by the European
Parliament for five-year terms of office.

President is nominated by each member and
approved by European parliament
The commission drafts laws that it submits to the
European Parliament and the Council of the
European Union.
The European Council is composed of representatives of
each member country whose interests it represents.
Along with the European Parliament, the council is
responsible for passing laws and making and enacting
major policies, including those in the areas of security
and foreign policy
The European Parliament is composed of 754 members
from all member nations; they are elected every five
years, and membership is based on country population
Its three major responsibilities are legislative power, control
over the budget, and supervision of executive decisions

The Court of Justice ensures consistent interpretation and

application of EU treaties. Member states, EC
institutions, and individuals and companies may bring
cases to the Court, which serves as an appeals court for
individuals, firms, and organizations fined by the
commission for infringing treaty law
Single European Act of 1987: cooperation in trade,
foreign policy, and the environment. The EU is
considering mandating country-of-origin labels
for products sold in the EU e.g. IKEA's
meatballs .

The Lisbon Treaty: December 1, 2009, objectives

of the Lisbon Treaty are to strengthen the EU’s
governance process and improve its ability to
make and implement decisions.
Monetary Union: The Euro In 1992, the members of
the EU signed the Treaty of Maastricht in part to
establish a monetary union. The decision to move to
a common currency, the euro, in Europe has
eliminated currency as a trade barrier for its adopters.
The Schengen Area: Agreement was signed in 1990
with gradual implementation allowing citizens to
cross internal borders without having to go through
border checks
 How to Do Business with the EU:


Determining where to produce.

Determining whether to grow through new
investments, through expanding existing
investments, or through joint ventures and
mergers

Balancing “common” denominators with
national differences.
 SAFTA(South Asian Free Trade
Area)
• The South Asian Free Trade Area (SAFTA) is the free trade
arrangement of the South Asian Association for Regional
Cooperation (SAARC). The agreement came into force in
2006, succeeding the 1993 SAARC Preferential Trading
Arrangement. SAFTA signatory countries are Afghanistan,
Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri
Lanka.
• SAFTA recognizes the need for special and differential
treatment for LDCs in its preamble.
• Market access: LDCs benefit from smaller
sensitive lists in some of the SAFTA members
(meaning that they have DFQF access in a
larger number of products) and less stringent
rules of origin (requirement of change of tariff
heading and value addition of 10% less than
the general requirement for non-LDCs; the
general rule is 60% and there are some
product-specific rules
• LDCs were allowed smaller initial tariff reduction
and longer implementation periods under. trade
liberalization programmes;
• LDCs can have a longer list of sensitive products
exempted from liberalization commitments than non-
LDC signatories;
• LDCs were granted greater flexibility in the
continuation of quantitative or other restrictions;
• There is a commitment of contracting states to give, until the
trade liberalization programme has been completed by all
Contracting States, special regard to the situation of LDCs
when considering the application of anti-dumping and/or
countervailing measures, providing an opportunity for
consultations and favourably considering accepting price
undertakings offered by exporters from LDCs;
• The agreement contains a rule whereby safeguard measures are
not to be applied against products originating in LDC
contracting states, “as long as its share of imports of the
product concerned in the importing Contracting State does not
exceed 5 per cent, provided Least Developed Contracting
States with less than 5 per cent import share collectively
account for not more than 15 per cent of total imports of the
product concerned”;
 Regional Economic Integration In
The Americas
 There are six major regional economic groups in the
Americas
 Caribbean Community (CARICOM)
 Central American Common Market (CACM)
 Central American Free Trade Agreement (CAFTA –
DR)
 Andean Community (CAN)
 Southern Common Market (MERCOSUR)
 Latin American Integration Association (LAIA)
Regional Economic Integration
In The Americas
Economic Integration in Central America and the Caribbean
Regional Economic Integration
In The Americas
Latin American Economic Integration
 Regional Economic Integration In
Asia
 Regional integration in Asia includes
 the Association of Southeast Asian Nations
(ASEAN)
 ASEAN Free Trade Area
 the Asia Pacific Economic Cooperation (APEC)
 open regionalism
Regional Economic Integration
In Asia
The Association of Southeast Asian Nations
 Regional Economic Integration
In Africa
 Several efforts at economic integration exist
 Pan Arab Free Trade Area (PAFTA)
 Arab League
 Gulf Cooperation Council (GCC)
 African Union (AU)
Regional Economic Integration
In Africa
Regional Integration in Africa
 Commodities
And The World Economy
• Commodities
 raw materials or primary products that enter into trade
• Many commodity agreements exist to
 discuss issues
 disseminate information
 improve product safety
• OPEC
 Organization Of The Petroleum
Exporting Countries
• OPEC
• producer cartel that relies on quotas to influence prices
• establishes production quotas for member countries
• Saudi Arabia
• produces about 42% of the world’s crude and18% of its
natural gas
• Downside of high prices
• incentive to invest in non-OPEC countries
• balancing social, political, and economic objectives