1 Multinational
Market
Regions and Market
Groups
Suppose IBM wants
to sell computers to all European nations - can they
increase efficiency and work with several countries at the same time?
Suppose Campbells
wants to see to all countries in Southern Africa - are
there any ways to help choose which countries to work with first?
2 Succesful Economic Union Requirements
Economic Compatibility
- what is level of development
Political Compatibility
- are the governments the same philosophy?
Geographic Proximity
- not always, look at Hong Kong
Cultural Compatibility
- do they think similarly?
Weakness in some
must be balanced by strengths in others - also barriers to
entry by nonmember countries
Why do countries
try to work together? Cooperate in building
infrastructure, build on strengths
Look at US -
suppose each state had its own currency and laws, own
advertising regulations and tariffs
3 PATTERNS OF MULTINATIONAL COOPERATION
BASED ON INCREASING
INVOLVEMENT
Regional Cooperation
Groups
Free Trade Area
- free trade within, countries keep their own
external barriers, no free flow of labor
Customs Union
- free trade within, common tariffs for imports
Common Market
- free trade within, common tariff for imports, free
flow of labor, common antitrust law
Political Union
- coordinated under one political philosophy
European Trade Areas - 1997*
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The European Economic Area: EU, EFTA, and Associates
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Growth of the European Union
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The European Union (EU) is the result of a process of cooperation
and integration which began in 1951 between six countries (Belgium, Germany,
France, Italy, Luxembourg and the Netherlands).
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After nearly fifty years, with four waves of accessions (1973: Denmark,
Ireland and the United Kingdom; 1981: Greece; 1986: Spain and Portugal;
1995: Austria, Finland and Sweden), the EU today has fifteen Member States
and is preparing for its fifth enlargement, this time towards Eastern and
Southern Europe.
-
http://europa.eu.int/index-en.htm
4 European Union INSTITUTIONS.
Much money is
wasted in developed slightly different products for
closely-related countries .
European Commission
Council of Ministries
European Parliament
European Court
of Justice
Will it work?
Can markets be made efficient, reducing trade barriers,
coordinating laws, without imposing a homogenized culture?
5 Treaty of Amsterdam
To place employment
and citizens' rights at the heart of the Union.
To sweep away
the last remaining obstacles to freedom of movement and to
strengthen security.
To give Europe
a stronger voice in world affairs.
To make the Union's
institutional structure more efficient with a view to
enlarging the Union.
6 Level of Involvement with the EU
1. Firms based
in Europe with well-established manufacturing and
distribution operations in several European countries. They can economize
on
standards approval, patent approval, etc.
2. Firms with
operations in a single EU country. Can determine what is
needed for products to move within the market.
3. Firms that
export manufactured goods to the EU from an offshore
location. Can obtain multi-country approvals.
4. Firms that
have not actively exported to EU countries.
We will consider
several of the multinational organizations in class and view their websites.
It is important to try to determine what the trade philosophy is for any
specific multinational group.
Draft designs for the euro banknotes
A Comparison of the EU and NAFTA
Commonwealth of Independent States
NAFTA - Canada, U.S., Mexico
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http://www.mac.doc.gov/nafta/nafta2.htm
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http://www.mac.doc.gov/nafta/menu1.htm
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NAFTA is a comprehensive trade agreement that improves virtually all aspects
of doing business within North America. NAFTA will eliminate tariffs completely,
and removes many of the non- tariff barriers, such as import licenses,
that have helped to exclude U.S. goods from the other two markets, especially
Mexico.
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NAFTA ensures that investment will not be coerced by restrictive government
policies, that U.S. investors receive treatment equal to domestic investors
in Mexico and Canada. At the same time, NAFTA's extensive easing of cross-border
services rules ensures that if U.S. companies do not wish to invest in
another country to provide their service, they do not have to.
NAFTA
-
The best intellectual property provisions ever negotiated by the United
States ensure that the U.S. competitive advantage in high technology is
fully protected. NAFTA provides for guaranteed access to lucrative government
procurement contracts in Canada and Mexico.
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On January 1, 1994, Mexico eliminated tariffs on nearly 50 percent of all
industrial goods imported from the United States, including some of our
most competitive products such as machine tools, medical devices, semiconductors
and computer equipment, and telecommunications and electronic equipment.
Within five years, sixty-five percent of all U.S. exports of industrial
products to Mexico will enter Mexico tariff-free, including light trucks,
most auto parts, and paper products.
NAFTA - Non Tariff Barriers
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In addition to elimination of tariffs, Mexico will eliminate non-tariff
barriers and other trade- distorting restrictions. Upon implementation,
U.S. exporters started to reap the benefits from the removal of most import
licenses, which had acted as quotas, essentially limiting the importation
of products into the Mexican market. The benefits are two-fold: 1) exporters
are able to ship more of their products into Mexico; and 2) exporting is
more cost effective since exporters will no longer have to deal with the
uncertainty and administrative burden associated with obtaining an import
permit.
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NAFTA also eliminates a host of other Mexican barriers, such as local content,
local production and export performance requirements, that have acted to
limit U.S. exports. Local content requirements condition permission to
sell a product on the incorporation of a mandatory percentage of local
parts or labor. In other cases, companies must produce locally if they
want to sell to the domestic market, or they must export a certain percentage
of production. NAFTA eliminates all these requirements.
Central European Free-Trade Area (CEFTA)
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Poland, Hungary, Slovakia, Czech Republic, Slovenia,
Romania, Bulgaria
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http://www.cefta.org/
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Candidacy: Croatia, Latvia, Estonia, Lithuania, Ukraine
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The Central European Free Trade Agreement was signed on 21 December 1992
in Krakow, Poland. All the signatories had previously signed association
agreements with the EU, which is why CEFTA functions as a preparation for
full EU membership. The foundations for relations among CEFTA countries
are laid on the principles of the market economy. Progressive removal of
barriers for the major part of trading is in keeping with GATT regulations.
Southern Cone Free Trade Area (Mercosur)
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Argentina, Brazil, Paraguay, Uruguay, Bolivia and Chile
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190 million persons
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Have geographic proximity
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Similar in cultural philosophy
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http://www.mercosur.org/english/default.htm
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Their market is organized to provide business opportunities in many sectors,
with policies in
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Place that encourge business investment
Comparison of Exports Among Members of APEC and the EC
Future Multinational Trade Groups