International Economic
Integration
The Changing World Context
Globalization and Economic Activity
The World Trade Organization :
The International Monetary Fund and the World Bank
Economic Integration
Economic Integration in Europe: The European
Union
Background Information
The Single Market
Economic Integration in North America—NAFTA
Economic Integration among
Developing Countries
Economic Integration in Asia
Association of South East Asian Nations
South Asian Association for Regional Cooperation
Asian Pacific Economic Cooperation
Economic Integration in Africa
Economic Community of West African States
Common Market for Eastern and Southern Africa
Southern African Development Community
Southern African Customs Union
Economic Integration in Latin America and
the Caribbean
Southern Common Market
Caribbean Community
Economic Integration in the Middle East
Closing Case
What about NAFTA?
After World War I & II, nations concentrated on implementing policies to strengthen their economies over others which led to stagflation.
Later on, economies and countries shifted their focus from their economies towards instead cooperating with other economies through economic integration and trade policies.
LDCs
Less Developed Countries
NICs
Newly Industrialized Countries
Advanced countries
United States
Canada
Japan
Australia
New Zealand
Hong Kong
Korea
Singapore
Taiwan
Israel
OPEC
Organization of Petroleum Exporting Countries
The surpluses of this organization were invested in the financial centers of Europe, America, and Asia, a fact that allowed banks to increase their lending to the developing countries.
In the 90s there was a remarkable shift toward the market economy in advanced and developing countries.
Governments privatized state-owned enterprises, markets were liberalized and deregulated, trade barriers were lowered, and the forces of demand and supply replaced central planning. Globalization, through the increased level of trade and capital movements, was intensified.
A result of globalization is the shift of technological advancements in:
Information technology
Telecommunications
Energy
Transport
Biotechnology
Economic policies
Globalization has been occuring since the 16th century and more since the start of the 20th century
The reason for a market economy is for increasing efficiency through competition and improving (specializing) factors of production
Globalization influences the movement of billions of dollars between countries
Weak banking and financial markets have slowly improved due to globalization to better increase the flow of capital into countries.
Successor to GATT
Created to regulate International Trade
Established on January 1, 1995 with 104 countries as signatories. Today the WTO has 144 countries.
Setup to enforce rules regarding international trade
encourage further trade liberalization
resolve trade disputes
ensure transparency in decision making
cooperate with all major international institutions
assist developing countries in benefiting fully from international trade
Benefits of establishing the WTO
Open access to markets
The 3 main factors that led to this
Focus on goods, services, and intellectual property
Strengthened mechanisms for reviewing trade policies and resolving trade disputes
The number of signatory countries increased significantly
IMF
World Bank
This was established to manage the Bretton Woods System of fixed exchange rates and to finance temporary payment deficits
Designed the examine the economies of member states on a regular basis
When a country runs into financial trouble, it can turn to the fund for short term financing while meeting the following conditions:
Contractionary monetary policy
interest rate increases and restrictions on the credit of the public sector
Contractionary fiscal policy
Reducing the government budget deficit through a combination of tax rises and cuts in government spending.
Currency devaluation
Contractionary income policy
Increasing the wage below the rate of inflation
Reduction of transfer payments.
Economic liberalization
Privatization of state-owned companies
Established in 1945 at the same time of the IMF
Goals
Improve Education
Reduce child mortality
Improve standards of living
Policy advice for countries
Technical Assistance for countries
Loans provided from the World Bank are divided into two types:
Investment loans
Adjustment loans
Given for a wide range of activities including dams, irrigation, transport, communication, etc.
Designed to support structural reforms in a specific sector of the economy
Has five institutions
International Bank for Reconstructions and Development (IBRD)
International Development
Association (IDA)
Provides investment and adjustment loans for middle income and poor countries
Makes “soft” loans to poorer countries on better
terms
International Finance Corporation (IFC)
Promotes private-sector investment in developing
countries
Multilateral Investment Guarantee Agency (MIGA)
Promotes foreign direct investment to developing countries by providing guarantees
International Center for Settlement of Investment Disputes (ICSID)
Provides arbitration on disputes between foreign investors and host countries
This refers to the discriminate reduction or elimination of trade barriers among participating nations
Began with the European Economic Community with:
Belgium
France
West Germany
Italy
Luxembourg
The Netherlands
The six founding members started negotiations for institutional structures for economic cooperation between the countries of western Europe
The central objective of the Rome Treaty was to integrate economies of member states by creating conditions of better economic efficiency
The singles market allowed for goods & services to be bought at a lower cost with more competition and productivity
Single European Act
Created to support and achieve the benefits of a single market
Aimed to achieve:
Free movement of goods and services
Free movement of people
Free movement of capital
Signed in Dec 1992 and was enabled until January 1, 1994 between the U.S., Canada, and Mexico
Other trade treaties between the countries were abolished
This agreement focuses on permitting free trade between the countries without changing the sovereignty of the countries.
Economic Integration in the Middle East
Has had less success than the rest of the world regarding economic integration. There are several arrangements between some countries and there have been attempts for regional integration but there has not been any external tariff established.