4. IB UNIT 2 REGIONAL INTEGRATION.pptx
- 1. Regional and Economic Integration Sudhanshu Bhatt (https://www.linkedin.com/in/sudhanshu-bhatt-b3665115/) MBA –IBA 16.04.2023 References Bulatov, A. (2023). World Economy and International Business Theories, Trends, and Challenges. In Springer. https://doi.org/10.12737/16614 Hill, C. W. L. (2022). Global Business Today 12e Charles. Hill, C. W. L. (2023). International Business: Competing in Global Marketplace. In McGraw Hill LLC. https://doi.org/10.4324/9780203879412 Shenkar, O., Luo, Y., & Chi, T. (2022). International Business, Routledge. Routledge. Images sourced from the internet
- 2. Q1. Regional Economic Integration • Regional economic integration refers to the process of countries in a geographic region coming together to form a larger economic system. • There are several levels of economic integration that countries can participate in, ranging from basic cooperation to full political and economic union. Source: Hill, C. W. L. (2023). International Business: Competing in Global Marketplace. In McGraw Hill LLC. https://doi.org/10.4324/9780203879412
- 3. Q2. Types of Regional Economic Integration 1. Preferential trade agreements: This is the lowest level of regional economic integration and involves countries reducing tariffs or other trade barriers on specific goods or services. Examples include free trade agreements and bilateral investment treaties. 2. Free trade area: This level of integration involves countries removing all trade barriers between them for goods and services, but each country retains its own external tariffs and trade policies. Examples include the North American Free Trade Agreement (NAFTA) and the European Free Trade Association (EFTA). 3. Customs union: A customs union is a free trade area with a common external tariff on goods and services imported from non-member countries. This level of integration requires a high degree of coordination and cooperation between member countries. Examples include the Southern Common Market (MERCOSUR) and the East African Community (EAC). 4. Common market: This level of integration allows for the free movement of goods and services, as well as factors of production, such as labor and capital, between member countries. Examples include the European Union (EU) and the Gulf Cooperation Council (GCC). 5. Economic union: An economic union involves deeper integration than a common market, with the adoption of common policies on issues such as monetary and fiscal policy, taxation, and social policy. The member countries also have a shared legal framework, and there is often a high degree of political integration. The EU is an example of an economic union. 6. Political union: This is the highest level of regional economic integration, where member countries fully integrate politically and economically. A political union typically involves the creation of a single government, common currency, and common foreign policy. The European Union is working towards a political union, but it is not yet fully achieved.
- 4. Q3. The Pros for Regional Integration • Trade creation. These agreements create more opportunities for countries to trade with one another by removing the barriers to trade and investment. Due to a reduction or removal of tariffs, cooperation results in cheaper prices for consumers in the bloc countries. Studies indicate that regional economic integration significantly contributes to the relatively high growth rates in the less-developed countries. • Employment opportunities. By removing restrictions on labor movement, economic integration can help expand job opportunities. • Consensus and cooperation. Member nations may find it easier to agree with smaller numbers of countries. Regional understanding and similarities may also facilitate closer political cooperation.
- 5. Q4. The Political Cause for Regional Integration 1.Trade diversion: Regional agreements may cause member countries to trade more with each other than with nonmember nations, potentially leading to increased trade with less efficient or more expensive producers. This can inadvertently protect weaker companies and act as a trade barrier with countries outside of the bloc. 2.Employment shifts and reductions: Regional agreements can lead to production moving to cheaper labor markets in member countries, while workers may move to gain access to better jobs and wages. However, sudden shifts in employment can tax the resources of member countries. 3.Loss of national sovereignty: As regional agreements are made, nations may have to give up more of their political and economic rights. The economic crisis in Greece is an example of how regional agreements can threaten the rights of member nations to determine their own domestic economic policies.
- 6. Impediments To Regional Integration 1.Economic costs: While economic integration can benefit a majority of people, it can also result in short to medium-term costs for certain groups. For instance, the establishment of NAFTA led to Canadian and U.S. workers losing their jobs as production moved to Mexico. These groups have been at the forefront of opposition to NAFTA and may oppose any further integration. 2.Concerns over national sovereignty: Close economic integration demands that countries give up some degree of control over key issues such as monetary policy, fiscal policy, and trade policy. This has been a major stumbling block in the EU. For example, concerns about national sovereignty resulted in Great Britain opting out of the common currency, the euro, as it required relinquishing control of the country’s monetary policy to the EU. Concerns over national sovereignty, particularly with regard to immigration policy, were also the major factor persuading the British government to hold a referendum on their continuing membership in the EU in 2016. 3.Additionally, some economists argue that the benefits of regional integration have been oversold, while the costs have often been ignored. They point out that a regional free trade agreement will benefit the world only if the amount of trade it creates exceeds the amount it diverts. Trade diversion occurs when lower-cost external suppliers are replaced by higher-cost suppliers within the free trade area. In such cases, the trade diversion effects might outweigh the trade creation effects. The only way to guard against this possibility, according to those concerned about this potential, is to increase the scope of the WTO so it covers non-tariff barriers to trade.
- 7. The European Union (ECONOMIC UNION) Source: Hill, C. W. L. (2023). International Business: Competing in Global Marketplace. In McGraw Hill LLC. https://doi.org/10.4324/97802038 79412
- 8. European Union (EU) Brief History of European Union (EU) • The European Union (EU) is a political and economic union of 27 member states located primarily in Europe. The EU was established after World War II with the aim of promoting economic cooperation and preventing future wars between European countries. It was created with the signing of the Treaty of Rome in 1957 by six countries - Belgium, Germany, France, Italy, Luxembourg, and the Netherlands. Over the years, the EU has expanded its membership and developed policies in a wide range of areas, including trade, agriculture, environmental protection, and security. Current Challenges and Opportunities for the EU • The EU faces several challenges in the current political and economic climate. One of the most pressing issues is the ongoing refugee crisis, with millions of people fleeing conflict and poverty in the Middle East and Africa seeking refuge in Europe. The EU also faces economic challenges, such as high levels of debt in some member states and the fallout from the 2008 financial crisis. Other challenges include rising nationalism and populism in some member states, as well as tensions between EU institutions and member states. • Despite these challenges, the EU also has many opportunities for further integration and cooperation. The EU is currently negotiating several trade agreements, including the Comprehensive Economic and Trade Agreement (CETA) with Canada and the Transatlantic Trade and Investment Partnership (TTIP) with the United States. The EU has also launched initiatives to promote renewable energy, combat climate change, and strengthen its security and defense capabilities. Future Outlook for the EU • The future of the EU is uncertain, but many believe that it will continue to play a significant role in global politics and economics. The EU is likely to face further challenges in the coming years, such as managing the fallout from Brexit and navigating the complex geopolitical landscape. However, the EU also has the potential to deepen its integration and expand its influence through initiatives such as the European Green Deal and the Digital Single Market. The EU will need to work collaboratively and strategically to address these challenges and seize these opportunities in the years to come.
- 9. The North American Free Trade Agreement (COMMON MARKET)
- 10. The North American Free Trade Agreement Brief History • The North American Free Trade Agreement (NAFTA) was established in 1994, building on the free trade agreement between the United States and Canada that took effect in 1989. NAFTA was intended to eliminate tariffs on trade between the United States, Canada, and Mexico. The agreement was ratified by all three governments in 1993 and went into effect on January 1, 1994. Current Challenges and Opportunities • NAFTA has been both praised and criticized. Supporters argue that it has led to increased trade, investment, and job growth across the region, while opponents claim that it has led to job losses in the United States and Canada and has contributed to environmental degradation in Mexico. NAFTA has also faced challenges, including disputes over intellectual property, labor standards, and trade deficits. The renegotiation of NAFTA began in 2017, resulting in the United States-Mexico-Canada Agreement (USMCA), which was signed in 2018 and ratified in 2020. The USMCA includes new provisions on intellectual property, digital trade, labor standards, and environmental protection. Future Outlook • The USMCA has replaced NAFTA, but it remains to be seen how it will impact trade and investment in the region. Some economists predict that the USMCA will have a positive impact on economic growth, while others are more cautious. The agreement includes provisions aimed at encouraging the production of goods in North America and reducing the trade deficit between the United States and Mexico. The USMCA also includes a sunset clause, which means that the agreement will expire in 16 years unless it is renewed by all three countries. The future of North American regional integration will depend on how the USMCA is implemented and how the three countries continue to work together on trade and other issues.
- 11. The Gulf Cooperation Council (CUSTOMS UNION)
- 12. The Gulf Cooperation Council Brief History of the Gulf Cooperation Council The Gulf Cooperation Council (GCC) is a political and economic alliance of six Arab states located in the Persian Gulf region. The GCC was established on May 25, 1981, in Abu Dhabi, UAE, with the signing of the GCC Charter by the leaders of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. The GCC's primary goal was to promote economic, political, and social cooperation among its member states, with the aim of strengthening their collective power and influence in the region. Over the years, the GCC has been instrumental in enhancing regional security, promoting economic development, and facilitating . In 2011, the GCC became more involved in regional politics and security, particularly in the wake of the Arab Spring protests that swept through the Middle East and North Africa. Current Challenges and Opportunities for the Gulf Cooperation Council The Gulf Cooperation Council faces several challenges and opportunities in the current geopolitical landscape. One of the most pressing challenges is the ongoing rift between member states Qatar and the other five GCC countries, which started in 2017 when Saudi Arabia, Bahrain, and the UAE imposed a blockade on Qatar over allegations of supporting terrorism. The blockade has strained diplomatic ties and economic relations within the GCC, and efforts to resolve the dispute have been unsuccessful. Another challenge is the COVID-19 pandemic, which has affected the GCC's economies, oil prices, and regional security. However, the pandemic has also presented opportunities for the GCC to diversify their economies, enhance their healthcare systems, and strengthen their cooperation in various areas, including cybersecurity and digital transformation. Future Outlook for the Gulf Cooperation Council The Gulf Cooperation Council's future outlook depends on several factors, including the resolution of the Qatar crisis, the stability of regional security, and the progress of economic and social reforms. The GCC has set several strategic goals, including creating a common market, implementing a customs union, and establishing a monetary union. The GCC's Vision 2030 initiative aims to transform the member states' economies, reduce their dependence on oil, and develop their human capital. The GCC has also strengthened its relations with other regional and global powers, such as China and Russia, and expanded its engagement with international organizations, such as the United Nations and the World Health Organization. The future of the GCC is likely to be shaped by its ability to overcome its challenges, capitalize on its opportunities, and adapt to the changing dynamics of the region and the world.
- 13. Common Market For Eastern And Southern Africa (COMMON MARKET)
- 14. Common Market For Eastern And Southern Africa Brief History The Common Market for Eastern and Southern Africa (COMESA) is a regional economic community established in 1994 with 19 member states in Africa. It was created to promote economic cooperation and integration among its member states, which range from small island nations like Seychelles to large countries like Egypt and the Democratic Republic of Congo. COMESA's mission is to create a fully integrated, internationally competitive, and prosperous region that is integrated into the global economy. The organization's headquarters is located in Lusaka, Zambia, and its main organs are the COMESA Authority, the Council of Ministers, and the Secretariat. Current Challenges COMESA faces several challenges in achieving its goals, including limited infrastructure, poor connectivity, and trade imbalances. Many of its member states lack basic infrastructure such as roads, ports, and electricity, which hampers economic growth and trade. Additionally, poor connectivity within the region hinders communication and access to information. Trade imbalances are another challenge, with some countries experiencing a surplus in trade while others experience a deficit. This creates disparities in economic development and trade relations. Other challenges include political instability, lack of institutional capacity, and corruption. Opportunities and Future Outlook Despite its challenges, COMESA presents several opportunities for economic growth and development in the region. The organization has created a free trade area with the aim of increasing intra-regional trade and investment. Additionally, COMESA has identified several priority areas for development, including agriculture, infrastructure, and energy. The organization has also established partnerships with other regional economic communities, such as the East African Community and the Southern African Development Community, to increase regional integration and cooperation. COMESA has also embraced technology and innovation, with the development of the COMESA Virtual Trade Facilitation System and the
- 15. The Association of Southeast Asian Nations (ASEAN)
- 16. Brief History The Association of Southeast Asian Nations (ASEAN) was established in 1967 with the signing of the Bangkok Declaration by five founding members, namely Indonesia, Malaysia, Philippines, Singapore, and Thailand. Since then, the organization has expanded to include Brunei Darussalam, Vietnam, Laos, Myanmar, and Cambodia. The aim of ASEAN is to promote economic, social, and cultural cooperation among member states, and to enhance regional peace and stability. Over the years, ASEAN has implemented several initiatives to deepen economic integration, such as the ASEAN Free Trade Area (AFTA) and the ASEAN Economic Community (AEC) Blueprint. Current Challenges Despite progress made, ASEAN still faces several challenges to its regional integration. One of the biggest challenges is the differing levels of economic development among member states, which can make it difficult to implement policies that benefit all countries equally. Another challenge is the lack of political will among member states to fully commit to regional integration, which can result in slow decision-making processes and delays in implementing agreements. Additionally, ASEAN's limited institutional capacity and weak enforcement mechanisms can undermine the effectiveness of its initiatives. Opportunities and Future Outlook ASEAN's regional integration presents several opportunities for member states. The region's combined population of over 650 million people and growing middle class provide a large consumer market for businesses. Greater economic integration can also lead to increased investment and job creation. Additionally, ASEAN's strategic location at the crossroads of major shipping lanes and its growing infrastructure make it an attractive hub for trade and investment. Looking ahead, ASEAN aims to deepen its integration by prioritizing areas such as digital integration, sustainable development, and regional connectivity. Despite the challenges, ASEAN's continued The Association of Southeast Asian Nations
- 17. BRICS (Brazil, Russia, India, China and South Africa)
- 18. Brief history BRIC is a grouping acronym that stands for Brazil, Russia, India, and China. The concept was first coined in 2001 by Goldman Sachs, a financial institution, to highlight the four countries' emerging economies' potential. In 2009, the four countries held their first BRIC summit in Russia, where they discussed various economic issues and signed agreements on cooperation. In 2011, South Africa joined the group, and the acronym was updated to BRICS. Since then, the group has held annual summits, discussing topics such as economic growth, energy, and climate change. Current challenges The BRICS countries face various challenges that threaten their economic growth and regional integration. One major issue is the ongoing trade war between the United States and China, which has affected the global economy and, consequently, the BRICS countries. Additionally, the countries have different economic structures and priorities, making it challenging to coordinate policies and integrate their economies. Political instability, corruption, and other governance issues also pose significant challenges to the countries' economic growth and integration. The war between Russia and Ukraine has had some impact on BRICS integration. Russia's annexation of Crimea in 2014, followed by its support for separatists in eastern Ukraine, strained Russia's relationship with the other BRICS countries, particularly India and Brazil. However, it's worth noting that BRICS integration is primarily focused on economic cooperation, and the conflict between Russia and Ukraine is largely a political and military issue. Therefore, while the conflict may have had some impact on BRICS integration, it is unlikely to have a significant long-term effect on the group's overall goals and cooperation. Opportunities and future outlook Despite the challenges, the BRICS countries also have opportunities for economic growth and integration. For instance, they can leverage their large populations and natural resources to develop their economies and become more self-sufficient. The countries can also strengthen their cooperation through initiatives such as the BRICS New Development Bank, which provides funding for infrastructure and other development projects. Additionally, the countries can explore new partnerships with other emerging economies and work together to address global issues such as climate change and pandemic response. Overall, the BRICS countries have BRICS (Brazil, Russia, India, China and South Africa)
- 19. • To be continued………