Regional Economic and Political Integration

1
Regional Economic and Political Integration

• Reasons for Globalization
• Air transport industry
• FedEx, and Brussels-Based HDL have become the
  primary movers of companies components, raw
  materials, and finished products.
• eCommerce
• Shorter product cycles
• Just-in-time manufacturing
• Global sourcing and sale

2
Regional Economic and Political Integration

• Ramification of Globalization
• No one wants obsolete technology. Thus,
  Semiconductors and equipments are the new
  perishable products.
• 90 of global GNP has become accessible within 48
  hours

3
Regional Economic and Political Integration

• Facilitators of Globalization
• United Nations
• WTO
• IMF
• International Aviation Authority Air transport
  coordinator
• The World Bank
• International Telecommunications Union, which
  coordinates satellite-based transfer of data and
  information.
• Deregulation and Privatization trends
• Formation of trade blocs.

4
Regional Economic and Political Integration

• Globalization cannot take place without rules and
  regulations that all nation-states abide to. So,
  we have to have a legal system that is acceptable
  to all.

5
International Monetary System

• Different exchange rate systems
• 1a-- Another countrys currency as the legal
  Tender

6
International Monetary System

• Different exchange rate systems
• 1b-- Common External Currency a currency that
  is created for external transactions among
  nations of the community, usually former colonies.

7
International Monetary System

• 1c-- Multi-country currency Euro (1999 and was
  circulated in 2002), is created to be used by all
  countries in the Union.

8
International Monetary System

• 2-- Currency Board

9
International Monetary System

• 3-- Fixed to a currency or a currency basket

10
International Monetary System

• 4-- Currency with a band

11
International Monetary System

• 5-- Crawling Peg currencies are devalued
  according to a pre-specified plan in accordance
  with the relative inflation rate.

12
International Monetary System

• 6-- Crawling bands the band within which the
  exchange rate can crawl is adjustable.

13
International Monetary System

• 7--- Managed float.

14
International Monetary System

• 8-- Free float

15
International Monetary System

• Demand and supply of foreign exchange and the
  exchange rate

Euro/Dollar
1.3
Demand for the US Supply of Euro US
exports Europes imports Europes investment in
the US profits returned to the US
1.0
0.7
16
Convertibility

• Hard currencies (convertible)
• Soft currencies (inconvertible)

17
FUNCTIONS OF WTO

• Multilateral trade negotiations
• oversee national and regional trading policies
• reduction of barriers to trade
• Resolution of trade disputes

18
Free Trade Good for all

• Wherever goods go tanks will not go

19
Free Trade Good for all

• Wherever goods go tanks will not go
• Promotes global competition
• lower prices and variety of goods
• companies must become more efficient and
  innovative

20
Free Trade Good for all

• Wherever goods go tanks will not go
• Promotes global competition
• lower prices and variety of goods
• companies must become more efficient and
  innovative
• Because of uneven distribution of resources trade
  is a necessity

21
Free Trade Good for all

• Wherever goods go tanks will not go
• Promotes global competition
• lower prices and variety of goods
• companies must become more efficient and
  innovative
• Because of uneven distribution of resources trade
  is a necessity
• It helps transfer of technology, therefore,

22
Free Trade Good for all

• Wherever goods go tanks will not go
• Promotes global competition
• lower prices and variety of goods
• companies must become more efficient and
  innovative
• Because of uneven distribution of resources trade
  is a necessity
• It helps transfer of technology, therefore,
• It helps with development of all involved by

23
Free Trade Good for all

• Wherever goods go tanks will not go
• Promotes global competition
• lower prices and variety of goods
• companies must become more efficient and
  innovative
• Because of uneven distribution of resources trade
  is a necessity
• It helps transfer of technology, therefore,
• It helps with development of all involved by
• efficient allocation of resources

24
Free Trade Good for all

• Wherever goods go tanks will not go
• Promotes global competition
• lower prices and variety of goods
• companies must become more efficient and
  innovative
• Because of uneven distribution of resources trade
  is a necessity
• It helps transfer of technology, therefore,
• It helps with development of all involved by
• efficient allocation of resources
• It increases awareness to the world problems and
  events

25
Free Trade Good for all

• Wherever goods go tanks will not go
• Promotes global competition
• lower prices and variety of goods
• companies must become more efficient and
  innovative
• Because of uneven distribution of resources trade
  is a necessity
• It helps transfer of technology, therefore,
• It helps with development of all involved by
• efficient allocation of resources
• It increases awareness to the world problems and
  events
• It increases economic growth and employment

26
Free Trade Bad for all

• Global competition means
• loss of jobs

27
Free Trade Bad for all

• Global competition means
• loss of jobs
• Advanced countries argue that LDCs have an unfair
  advantage because of their cheap labor

28
Free Trade Bad for all

• Global competition means
• loss of jobs
• Advanced countries argue that LDCs have an unfair
  advantage because of their cheap labor
• Infant industry argument

29
Free Trade Bad for all

• Global competition means
• loss of jobs
• Advanced countries argue that LDCs have an unfair
  advantage because of their cheap labor
• Infant industry argument
• Strategic industries (agriculture, defense,
  utilities, telecommunications) are sheltered

30
Free Trade Bad for all

• Global competition means
• loss of jobs
• Advanced countries argue that LDCs have an unfair
  advantage because of their cheap labor
• Infant industry argument
• Strategic industries (agriculture, defense,
  utilities, telecommunications) are sheltered
• Non-tariff trade barriers through
• rules and regulations
• financial restrictions.

31
Free Trade Bad for all

• Global competition means
• loss of jobs
• Advanced countries argue that LDCs have an unfair
  advantage because of their cheap labor
• Infant industry argument
• Strategic industries (agriculture, defense,
  utilities, telecommunications) are sheltered
• Non-tariff trade barriers through
• rules and regulations
• financial restrictions.
• Structural unemployment

32
Free Trade Bad for all

• Global competition means
• loss of jobs
• Advanced countries argue that LDCs have an unfair
  advantage because of their cheap labor
• Infant industry argument
• Strategic industries (agriculture, defense,
  utilities, telecommunications) are sheltered
• Non-tariff trade barriers through
• rules and regulations
• financial restrictions.
• Structural unemployment
• Cultural protectionism through prohibition of
  books and movies

33
Regional Economic and Political Integration

• Degree of Integration Types of Trade Blocs
• Free Trade Areas a scheme to eliminate tariffs
  within the are while each individual country
  keeps its tariff schedule vis-à-vis other
  countries outside the area. NAFTA is an example
  of FTA.

34
Regional Economic and Political Integration

• Degree of Integration Types of Trade Blocs
• Free Trade Areas a scheme to eliminate tariffs
  within the are while each individual country
  keeps its tariff schedule vis-à-vis other
  countries outside the area. NAFTA is an example
  of FTA.
• formed between the US and Canada in 1989.

35
Regional Economic and Political Integration

• Degree of Integration Types of Trade Blocs
• Free Trade Areas a scheme to eliminate tariffs
  within the are while each individual country
  keeps its tariff schedule vis-à-vis other
  countries outside the area. NAFTA is an example
  of FTA.
• formed between the US and Canada in 1989.
• Mexico joined in 1994 as the low cost producer,
  which caused American firms to change their
  outsourcing directions from Asia to Mexico.

36
Regional Economic and Political Integration

• Degree of Integration Types of Trade Blocs
• Free Trade Areas a scheme to eliminate tariffs
  within the are while each individual country
  keeps its tariff schedule vis-à-vis other
  countries outside the area. NAFTA is an example
  of FTA.
• formed between the US and Canada in 1989.
• Mexico joined in 1994 as the low cost producer,
  which caused American firms to change their
  outsourcing directions from Asia to Mexico.
• Plans to incorporate all of the Western
  Hemisphere into this bloc and create Free Trade
  Area of Americas FTAA. This would create a bloc
  which would look like this

37
Regional Economic and Political Integration

• Degree of Integration Types of Trade Blocs
• Free Trade Areas a scheme to eliminate tariffs
  within the are while each individual country
  keeps its tariff schedule vis-à-vis other
  countries outside the area. NAFTA is an example
  of FTA.
• formed between the US and Canada in 1989.
• Mexico joined in 1994 as the low cost producer,
  which caused American firms to change their
  outsourcing directions from Asia to Mexico.
• Plans to incorporate all of the Western
  Hemisphere into this bloc and create Free Trade
  Area of Americas FTAA. This would create a bloc
  which would look like this
• Population gt 850 milions
• GDP gt 12 Trillions
• Trade volume gt 3.5 Trillions

38
Regional Economic and Political Integration

• Degree of Integration Types of Trade Blocs
• Free Trade Areas
• Custom Union
• eliminates tariffs internally

39
Regional Economic and Political Integration

• Degree of Integration Types of Trade Blocs
• Free Trade Areas
• Custom Union
• eliminates tariffs internally
• unified tariff scheme vis-à-vis outside

40
Regional Economic and Political Integration

• Degree of Integration Types of Trade Blocs
• Free Trade Areas
• Custom Union
• Common Market
• eliminates tariffs internally
• unified tariff scheme vis-à-vis outside
• free movement of labor and capital internally

41
Regional Economic and Political Integration

• Degree of Integration Types of Trade Blocs
• Free Trade Areas
• Custom Union
• Common Market
• Full economic integration
• eliminates tariffs internally

42
Regional Economic and Political Integration

• Degree of Integration Types of Trade Blocs
• Free Trade Areas
• Custom Union
• Common Market
• Full economic integration
• eliminates tariffs internally
• unified tariff scheme vis-à-vis outside

43
Regional Economic and Political Integration

• Degree of Integration Types of Trade Blocs
• Free Trade Areas
• Custom Union
• Common Market
• Full economic integration
• eliminates tariffs internally
• unified tariff scheme vis-à-vis outside
• free movement of labor and capital internally

44
Regional Economic and Political Integration

• Degree of Integration Types of Trade Blocs
• Free Trade Areas
• Custom Union
• Common Market
• Full economic integration
• eliminates tariffs internally
• unified tariff scheme vis-à-vis outside
• free movement of labor and capital internally
• Standardization of products, labels, product
  testing and safety

45
Regional Economic and Political Integration

• Degree of Integration Types of Trade Blocs
• Free Trade Areas
• Custom Union
• Common Market
• Full economic integration
• eliminates tariffs internally
• unified tariff scheme vis-à-vis outside
• free movement of labor and capital internally
• Standardization of products, labels, product
  testing and safety
• Region-wide policies and laws on agriculture,
  energy, and corporate behavior
• .

46
Regional Economic and Political Integration

• Degree of Integration Types of Trade Blocs
• Free Trade Areas
• Custom Union
• Common Market
• Full economic integration
• Political integration
• Common economic and political sovereignty is
  sacrificed to integrate monetary and fiscal
  policies and to institute a common currency.