chapter four

International Institutions from an International Business Perspective

McGraw-Hill/Irwin International Business, 11/e

Copyright 2008 The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives
Describe the influence the mainly political
international institutions have on international businesses and their relevance to international business their general purpose, and their significance to international business predecessor, GATT

Identify the major organs of the United Nations,

Discuss the World Trade Organization and its Appreciate the resources of the Organisation for
Economic Cooperation and Development
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Learning Objectives Describe the major purpose and effectiveness of

OPEC

Identify economic integration agreements and the

effectiveness of the major ones
challenges

Discuss the impact of the EU and its future

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Figure 4.1 International Institutions by purpose

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International Political Institutions

The United Nations
International organization of 191 membernations 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

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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

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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

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Figure 4.2 Millennium Development Goals Chart of Progress

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Figure 4.2 Millennium Development Goals Chart of Progress

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Cooperative Military and Security Agreements

North Atlantic Treaty Organization (NATO)
Security alliance of 26 North American and European nations (Map 4.3)

Collective Security Treaty Organization (CSTO)

Security alliance of six members of the Commonwealth of Independent States (former Union of Soviet Socialist Republics)
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Cooperative Military and Security Agreements

Association of Southeast Asian Nations (ASEAN)
Ten-member body formed to promote peace and cooperation in Southeast Asia (Map 4.4)

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Map 4.3 & 4.4

NATO Map

Map of ASEAN Members

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International Economic Institutions

World Trade Organization (WTO)
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

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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)

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Table 4.1 Gatt Rounds

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International Economic Institutions

WTO Principles
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
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International Economic Institutions

WTO Challenges
Trade-related intellectual property rights (TRIPS) WTO agreement that protects copyrights, trademarks, trade secrets, and other intellectual property matters

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Organisation For Economic Cooperation and Development

Organisation For Economic Cooperation and Development (OECD)
Group of developed countries dedicated to promoting economic expansion in its member-nations (Table 4.2)

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Table 4.2 OECD Member Countries

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Other Economic Institutions

Organization of Petroleum Exporting Countries
Cartel of 11 petroleum exporting countries (Table 4.3)

The Group of Eight (G8)

Group of government leaders from major industrialized nations that meets regularly to discuss issues of concern (Figure 4.5)

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Table 4.3 World Petroleum Products Consumption by Region, 1960-2004

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Figure 4.5 The G8 Members (www.undp.org)

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

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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

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North American Free Trade Agreement (NAFTA)

NAFTA
Established January 1, 1994 Agreement creating a free trade area among Canada, Mexico, and the United States

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European Free Trade Agreement (EFTA)

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

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African Trade Agreements

African Trade Agreement (Figure 4.7)
Promote economic growth the continent Economic Community of West African States (ECOWAS) Common Market for Eastern and Southern Africa (COMESA) Southern African Development Community (SADC)

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Figure 4.7 African Trade Agreements

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Mercosur (Mercosul)
Mercosur (Mercosul)
Created in 1991 by the Treaty of Asuncion Economic free trade area in South America modeled on the EU (Figure 4.8)

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Figure 4.8 Regional Trade Agreements in Central America and South America

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Other Regional Agreements

Central American Free ASIA-Pacific Trade Agreement Economic (CAFTA) Cooperation
FTA among the United States and several Central American nations (Figure 4.8) Serves as a regional vehicle for promoting open trade and practical economic cooperation

Andean Community (CAN)

South American fivenation trading bloc

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The European Union (EU)

European Union
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

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Figure 4.9 European Union: MemberNations and Candidate Nations

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Institutions of The EU
European Parliament
EU legislative body whose members are popularly elected from member-nations

European Commission
Institution that runs the EUs day-to-day operations

Council of the European Union

Group that is the EUs primary policy-setting institution

European Court of Justice (ECJ)

Court that rules on issues related to EU policies

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European Monetary Union (EMU)

European Monetary Union
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

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