Section TwoCooperation Among Nations

International Businessby Ball, McCulloch, Frantz,

Geringer, and Minor

4

The Dynamics ofThe Dynamics ofInternational InstitutionsInternational Institutions

International Businessby Ball, McCulloch, Frantz,

Geringer, and Minor McGraw-Hill/Irwin Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

This chapter covers:

•The influence of international institutions

•The structure of the United Nations

•The importance of the WTO

•The European Union and NAFTA

•OECD

•OPEC

•Economic Integration

•Regional Trade Agreements

Chapter ObjectivesChapter Objectives

Understand the influence of international organizations

Discuss the structure and activities of the United Nations

Understand the World Trade OrganizationUnderstand the European Union, NAFTA and other

regional trade agreementsKnow about the Organization for Economic

Cooperation and DevelopmentDescribe the major purpose and effectiveness of OPECOutline the four major levels of economic integration

agreements

4-2

The United Nations (UN)The United Nations (UN)

The UN is possibly the best-known worldwide organization Established at the

end of WWII Mission peacekeeping Created many

international entities around the world

Highly decentralized

4-3

United Nations BodiesUnited Nations Bodies

UN work carried out through five main bodies The General Assembly The Security Council The Economic and Social Council The International Court of Justice The Secretariat

4-4

The General AssemblyThe General Assembly

All UN member-nations are members of the General Assembly

Each nation has one vote regardless of its size, wealth, or power

General assembly decisions have no legally binding force for governments or citizens

UN charter was signed in San Francisco, California in 1945Today there are 191 members

4-5

U.N. Security CouncilU.N. Security Council

Composed of 15 members 5 permanent and 10

chosen members The 5 permanent

members include the People’s Republic of China, France, Russia, the United Kingdom, and the United States.

Each permanent member has the power to veto any measure.

4-6

Insert Figure UN SC in session

Economic and Social CouncilEconomic and Social Council

Concerned with economic problems including

trade, transport, industrialization,

economic development, and social issues

Makes recommendations on how to improve

education and health conditions

Promotes respect for and observation of

human rights and freedoms of people

everywhere

4-7

International Court of JusticeInternational Court of Justice

Also called the “World Court” Only nations may be

parties to litigation before the “World Court”

The International Court of Justice has 15 judges who must come from 15 different countries Judges serve nine-

year terms

SecretariatSecretariat

Carries out day-to-day administrative functions

Headquartered in New York City Services the other principle UN organs Administers the UN’s programs and policies

Current Secretary-General Kofi A. Anna Received Nobel Peace Prize December 2001

4-9

History of Global International TradeHistory of Global International Trade

GATT 1947-1995 Established in 1947,

negotiations are conducted in “rounds”

1947 to 1986, eight “rounds” have taken place

Uruguay Round highly successful

January 1, 1995, the WTO replaced GATT

World Trade OrganizationDesigned to deal with

rules of trade between nations

Currently 147 members

Headquarters Geneva, Switzerland

Challenges World Trade

Agreements Protests and

demonstrations Relies on goodwill4-10

Organization for EconomicOrganization for EconomicCooperation and DevelopmentCooperation and Development

OECD Rich man’s club 30 wealthiest

nations Publishes extensive

research on international business and economic subjects

Members work to coordinate domestic and international policies4-11

Organization of Petroleum Exporting Organization of Petroleum Exporting

Countries (OPECCountries (OPEC))Eleven member nations

Most members are in the Middle East Iran, Iraq, Kuwait, Qatar, Saudi Arabia, the

United Arab Emirates

Three members are in Africa Algeria, Libya, and Nigeria

Two members are elsewhere in the world Indonesia and Venezuela

Non-OPEC oil producing countries Mexico, Norway, Russia and the United Kingdom

4-12

Economic and Political IntegrationEconomic and Political Integration

Free Trade Area Tariffs are abolished

among members-countries

Each member-country maintains its own external tariffs on imports from nonmember countries

Customs Union A Free Trade Area

where member-countries add a common external tariff

Common Market A Customs Union plus

the abolition of restrictions on the mobility of capital and labor among member-countries

Complete Economic Integration Involves a high degree

of political integration as member-countries surrender important elements of their sovereignty4-13

European UnionEuropean Union Background

Europe in shambles after WWII

Marshall Plan implemented by OEEC

1948 Benelux and Western European Union formed

1970’s UK, Ireland and Denmark joined EU

1991 Maastricht Treaty

4-14

European UnionEuropean Union

A supernatural entity, meaning that it is a regional government

In order to join the EU, member-nations give a certain amount of their sovereignty to the EU

“Fortress Europe” Currently 25 members

Ten new members in 2004 The largest import and export market in the

world

4-15

Institutions of the EUInstitutions of the EU

European Commission Guardian of the

Treaty Brussels, Belgium

Council of Ministers Policy-setting

institution Representative

from each country

Parliament of the EU Elected by popular

vote every 5 years Strasbourg,

France 732 members

European Court of Justice Decides Treaty of

Rome cases

4-16

EU ProblemsEU Problems

Cannot agree on system of power

Presence and expense of fraud

Financial scandal at Eurostat 2003

Low voter turnout Disagreement on

constitution EU regulations

impact US because of size

4-17

The European Monetary Union (EMU)The European Monetary Union (EMU)

Twelve EU nations currently participate in the EMU

The 12 participating member-nations make up an area often called the “euro zone”

The three countries that do not participate are Denmark, Sweden, and the United Kingdom

The EMU created a new currency, the euro, which became the official currency of the euro zone countries on January 1, 1999

4-18

Sources of FDI in the US by RegionSources of FDI in the US by Region

North American Free Trade AgreementNorth American Free Trade Agreement

Established on January 1, 1994

Created a free trade area among Canada, Mexico, and the United States

Purpose is to eliminate trade barriers among the three countries, creating a free trade area

Import duties have been eliminated or reduced among the three countries

4-20

Other Regional GroupingsOther Regional Groupings

Association of Southeast Asian Nations (ASEAN) Created in 1967 Brunei, Cambodia,

Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, Vietnam

European Free Trade Association (EFTA) Created in 1960 Most now members of

EU4-21

African Trade Agreements Economic

Community of West African States

Common Market for Eastern and Southern Africa

Southern African Development Community

The African Union Central American Free

Trade Agreement

Other Regional AgreementsOther Regional Agreements

Organization of American States An organization of 35 countries formed in 1948 in

the Western Hemisphere, dedicated to promoting cooperation in the region

Asia-Pacific Economic Cooperation Established in 1989 in response to the growing

response of the economies of Pacific Rim countries

Mercosur Created in 1991, this economic FTA consists of

Argentina, Brazil, Paraguay, and Uruguay

4-22

Principle Offices of U.N.Principle Offices of U.N.

U.N. PresidentU.N. President

H.E. Mr. Julian Robert Hunte, President of the fifty-eighth session of the United Nations General Assembly, is Minister for External Affairs, International Trade and Civil Aviation of Saint Lucia, a Senator and Member of Parliament, a Justice of the Peace and a business executive

WTO FactsWTO Facts

Location: Geneva, Switzerland

Established: 1 January 1995 Created by: Uruguay Round

negotiations (1986-94) Membership: 147 countries

(on 23 April 2004) Budget: 162 million Swiss

francs for 2004 Secretariat staff: 600 Head: Supachai

Panitchpakdi (director-general

Functions: Administering WTO

trade agreements Forum for trade

negotiations Handling trade

disputes Monitoring national

trade policies Technical assistance

and training for developing countries

Cooperation with other international organizations 

Regional Trade AgreementsRegional Trade Agreements

The vast majority of WTO members are party to one or more regional trade agreements. The surge in RTAs has continued unabated since the early 1990s. Some 250 RTAs have been notified to the GATT/WTO up to December 2002, of which 130 were notified after January 1995. Over 170 RTAs are currently in force; an additional 70 are estimated to be operational although not yet notified. By the end of 2005, if RTAs reportedly planned or already under negotiation are concluded, the total number of RTAs in force might well approach 300.

Top 10 States for EU Foreign Direct Top 10 States for EU Foreign Direct Investment 2001Investment 2001

StateInvestment,

USD billion

Texas 67.3

California 57.0

Michigan 38.8

New York 36.5

Illinois 26.4

Pennsylvania 24.5

New Jersey 20.7

Ohio 18.7

Louisiana 18.5

Indiana 18.4

Top 10 States Exporting to European Union, Top 10 States Exporting to European Union, 20022002

StateTotal value,

USD billion% 2001-02

California 18.58 -18.5

New York 9.5 -12.9

Texas 9.46 -11.6

Washington 7.89 -9.3

Massachusetts 6.47 -8.9

Illinois 6.02 -8.8

New Jersey 5.08 -13.9

Ohio 4.65 -10.6

Michigan 4.27 -0.7

Pennsylvania 3.71 -19.3Source: U.S. Census Bureau, Foreign Trade Division/ MISER 2002. Figures are for 2002.

Office of NAFTA and Inter-American Office of NAFTA and Inter-American AffairsAffairs

Our Mission One of the primary objectives of the Office of NAFTA

and Inter-American Affairs (ONIA) is to increase access to foreign markets for U.S. exports, through the elimination of tariff and non- tariff barriers to trade. Our approach is three-fold: heavily contribute to the coordination and

development of U.S. trade policy in the Western Hemisphere for the Department of Commerce.

advise the U.S. business community, policy-makers, and Congress concerning market access to Canada and Mexico under NAFTA, by providing accurate and timely information.

assist U.S. companies experiencing problems gaining access to Canadian and Mexican markets.

OECD Member CountriesOECD Member Countries

AustraliaAustriaBelgiumCanadaCzech RepublicDenmarkFinlandFranceGermanyGreeceHungaryIcelandIrelandItalyJapanKorea

LuxembourgMexicoNetherlandsNew ZealandNorwayPolandPortugalSlovak RepublicSpainSwedenSwitzerlandTurkeyUnited KingdomUnited States

OPECOPEC