International bussiness the challenge of global competition 11e chapter 04

Learning Objectives  Describe the influence the mainly political international institutions have on international businesses and their relevance to international business  Identify t

International Institutions from an

Learning Objectives

 Describe the influence the mainly political international

institutions have on international businesses and their

relevance to international business

 Identify the major organs of the United Nations, their

general purpose, and their significance to international

business

 Discuss the World Trade Organization and its

predecessor, GATT

 Appreciate the resources of the Organisation for

Economic Cooperation and Development

Learning Objectives

OPEC

effectiveness of the major ones

challenges

Figure 4.1 International Institutions by

purpose

International Political Institutions

– International organization of 191 member-nations

dedicated to the promotion of peace and global

stability; has many functions related to business

– General Assembly

• Deliberative body of the UN made up of

all member-nations, each with one vote regardless of size, wealth, or power

International Political Institutions

– Security Council

• Main policy-setting body of the UN,

composed of 15 members including 5 permanent members

– Economic and Social Council (ECOSOC)

• UN body concerned with economic and

social issues such as trade, development, education, and human rights

International Political Institutions

– International Court of Justice (ICJ)

• UN body that renders legal decisions

involving disputes between national governments

– Secretariat

• The staff of the UN, headed by the

secretary-general

Figure 4.2 Millennium Development

Goals Chart of Progress

Figure 4.2 Millennium Development

Goals Chart of Progress

Cooperative Military and Security

Agreements

– Security alliance of 26 North American and

European nations (Map 4.3)

– Security alliance of six members of the

Commonwealth of Independent States (former

Union of Soviet Socialist Republics)

Cooperative Military and Security

Agreements

– Ten-member body formed to promote peace and

cooperation in Southeast Asia

(Map 4.4)

International Economic Institutions

– A multinational body of 149 members that deals

with rules of trade between nations

– Outgrowth of General Agreement on Tariffs and

Trade (GATT), that functioned to encourage trade liberalization from 1947 to 1995

International Economic Institutions

• Most favored nation (MFN) clause

– Agreement that GATT member-nations

would treat all members equally in trade matters

• Uruguay Round

– The last extended conference of GATT

negotiations (table 4.1)

Table 4.1 Gatt Rounds

International Economic Institutions

– Trade will be without discrimination

– Trade should be freer, with trade barriers negotiated

downward

– Trade should be predictable

– Trade should be more competitive

– Trade should be more beneficial for less developed

countries, encouraging development and economic reform

International Economic Institutions

– Trade-related intellectual property rights (TRIPS)

• WTO agreement that protects copyrights,

trademarks, trade secrets, and other intellectual property matters

Organisation For Economic

Cooperation and Development

Development (OECD)

– Group of developed countries dedicated to

promoting economic expansion in its

member-nations (Table 4.2)

Table 4.2 OECD Member Countries

Other Economic Institutions

– Cartel of 11 petroleum exporting countries (Table

4.3)

– Group of government leaders from major

industrialized nations that meets regularly to

discuss issues of concern (Figure 4.5)

Table 4.3 World Petroleum Products

Consumption by Region, 1960-2004

Figure 4.5 The G8 Members

(www.undp.org)

http://atlas.nrcan.gc.ca/site/english/maps/reference/international/g8/map.jpg

Economic Integration

• Free trade area (FTA)

– Area in which tariffs among members have been

eliminated, but members keep their external tariffs

• Customs Union

– Collaboration that adds common external tariffs to

an FTA

• Common Market

– Customs union that includes mobility of services,

people, and capital within the union

Canada, Mexico, and the United States

European Free Trade Agreement

(EFTA)

– Founded in 1960 by seven European countries:

• Austria, Denmark, Norway, Portugal,

Sweden, Switzerland, Finland, Iceland, Liechtenstein, and the United Kingdom

– Today, a 4-nation non-EU FTA in Europe:

Norway, Iceland, Liechtenstein, Switzerland

African Trade Agreements

– Promote economic growth the continent

– Economic Community of West African States

Figure 4.7 African Trade Agreements

Mercosur (Mercosul)

– Created in 1991 by the Treaty of Asuncion

– Economic free trade area in South America

modeled on the EU (Figure 4.8)

Figure 4.8 Regional Trade Agreements in

Central America and South America

– FTA among the United

States and several

Central American

nations (Figure 4.8)

• Andean Community

(CAN)

– South American

five-nation trading bloc

• ASIA-Pacific

Economic Cooperation

– Serves as a regional

vehicle for promoting open trade and

practical economic cooperation

The European Union (EU)

– A body of 25 European countries dedicated to

economic and political integration (Figure 4.9)

– Romania and Bulgaria join in 2007, to move

membership to 27

Figure 4.9 European Union:

Member-Nations and Candidate Member-Nations

Institutions of The EU

• European Parliament

– EU legislative body

whose members are

popularly elected from

• European Court of

Justice (ECJ)

– Court that rules on

issues related to EU policies

European Monetary Union (EMU)

– Group that established use of euro in the

12-country euro zone

– The three countries from “old EU” that do not

participate are Denmark, Sweden, and the United

Kingdom

– Slovenia joins in 2007

– The single currency reduces the cost of doing

business across EMU country borders