international cooperation among nations

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chapter 10

international cooperation

Download IB-CH10 International Cooperation Among Nations

Chapter Objectives

Explain the importance of the GATT and the WTO to international business

Contrast the different forms of economic integration among cooperating countries

Analyze the opportunities for international businesses created by completion of the EU’s internal market

Describe the other major trading blocs in today’s world economy

General Agreement on Tariffs and Trade

Developed as part of the Havana, Cuba, conference in 1947

Provided forum for trade ministers to discuss barriers to international trade


The Role of the GATT

The GATT’s goal was to promote a free and competitive international trading environment benefiting efficient producers by sponsoring multilateral negotiations to reduce tariffs, quotas, and other nontariff barriers

Table 10.1 GATT Negotiating Rounds

Most Favored Nation (MFN) Principle

The most favored nation principle requires that any preferential treatment granted to one country                             must be extended to all countries.

Exceptions to the MFN Principle

Members permitted to lower tariffs to developing countries without lowering them for more developed countries

Regional arrangements promote economic integration (e.g., EU and NAFTA)

Goals of the
World Trade Organization (WTO)

Promote trade flows by encouraging nations to adopt nondiscriminatory, predictable trade policies

Reduce remaining trade barriers through multilateral negotiations

Establish impartial procedures for resolving trade disputes among members

Differences between WTO and GATT

GATT focused on promoting trade in goods; WTO’s mandate includes

trade in goods

trade in services

international intellectual property protection

trade-related investment

WTO’s enforcement powers are stronger

Figure 10.1 The WTO’s Principles of the
Trading System

WTO Challenges

The Cairns Group

Multifibre Agreement

General Agreement on Trade in Services (GATS)

Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)

Trade-Related Investment Measures Agreement (TRIMS)

Enforcement of WTO Decisions

Country failing to live up to the agreement may have a complaint filed against it

WTO panel evaluates complaint

If found in violation, the country may be asked to eliminate the trade barrier

Rice producers
would likely benefit if trade barriers were eliminated in this market.

The world market for rice is distorted by high tariffs, ranging from 20-43 percent.

Forms of Economic Integration

Figure 10.2 Forms of
Economic Integration

European Union (EU)

Most important regional trading bloc

25 member countries

455.3 million population

Combined GDP of $12.7 trillion



Map 10.1 The European Union

Governing Organizations
of the EU

The Council of the European Union

The European Commission

The European Parliament

The European Court of Justice


The first meeting of the European Commission after the enlargement of the EU to 25 members.

Figure 10.3 The Co-Decision Procedure

Three Pillars of the Maastricht Treaty

A new agreement to create common foreign and defense policies among members

A new agreement to cooperate on police, judicial, and public safety matters

The old familiar European Community, with new provisions to create an economic and monetary union among member states

Components of the Treaty for Europe (Treaty of Amsterdam)

A strong commitment to attack the EU’s chronic high levels of unemployment

A plan to strengthen the role of the European Parliament by expanding the number of areas that require use of the co-decision procedure

Establishment of a two-track system

Treaty of Nice

Sought to reduce the risk of political gridlock as the number of members increase

reduced number of areas where unanimity is required for Council approval

adjusted number of votes assigned to each Council member

Major Regional Trade Associations















Map 10.2 Free Trade Agreements in Central and South America
and the Caribbean

Map 10.3 The ASEAN Members

Map 10.4 Asia-Pacific Economic Cooperation Initiative (APEC)

Map 10.5 Free Trade Agreements
in Africa


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