NAFTA covers the following areas:
Market access – tariff and nontariff barriers, rules of origin and governmental procurement.
Trade rules – safeguards, subsidies, health and safety standards.
Services – provides for the same safeguards for trade and services.
Investments – establishes investments rules.
Intellectual property – the countries pledge to provide adequate and effective protection.
Dispute settlement – provides a dispute-settlement process.
NAFTA is a good example of trade diversion. Many U.S and Canadian companies have reallocated their manufacturing facilities from Asia to Mexico to enjoy cheap labor "closer to home".
Asia - Pacific Economic Cooperation (APEC)
APEC composed of 21 countries that border the Pacific Rim – both in Asia as well as the Americas.
APEC objectives are to promote multilateral economic cooperation in trade and investment in the Pacific Rim. However, progress toward free trade is hampered by the size of APEC and the geographic distance between member countries.
Having said that, APEC has a potential to become a significant economic bloc, especially because it generates such a large percentage of the world's output and merchandise trade.
To describe the rationale and success of commodity agreements
Primary Commodity consists of crude petroleum, natural gas, copper, tobacco, coffee, tea, and sugar. Primary commodities are important to both consumers and producers.
The rationale behind commodity agreements is to stabilize the price and supply of selected commodities.
Commodity agreements are of two basic types: Producer's alliance, and international commodity control agreement (ICCAs).
Producer's alliance – are exclusive agreements between producing and exporting countries. (For example: OPEC, the Organization of Petroleum Exporting Countries which exercise its power in 1973 oil crisis).
Commodity price is heavily influenced by short term factors, such as weather conditions and business cycles. Countries try to counteract price instability through different stabilization schemes, such as: exercise market power by a monopolistic power, commodities futures, (well in my view, that is one of the things that responsible for price fluctuation) quota system – which determine how producers and consumers divide total output and sales.
In my view commodity agreements have a limited success. All works fine till an unexpected storm has a diverse impact on the café in Brazil, or political factors have artificial impact on the price of oil (in 1973).
Hence, very much like with insurance policy, you don't pay a great attention until the time of need…..
To discuss the effects of economic integration on the environment.
As the new century approaches, there has been a discernible shift in the economic and political equation. Groups are coming together all over the world with the idea of defending themselves economically against the incursions of other blocs into their areas. These groups also want to increase their influence in their own areas as well as outside it. Europe is adopting a single currency that will translate eventually into an entity functioning as a single economy. The Far East has already made their own regional trade agreements and free trade zones. Realizing the seriousness of such a threat, Asian countries have already adopted necessary protective measures to protect themselves. Even the United States has felt the need for a regional grouping. Witness it's teaming up with Canada and Mexico to form North American Free trade Agreement (NAFTA).
The impact of economic integration on the environment could be seen by three fundamental factors:
First, improvements in the technology of transportation and communication have reduced the costs of transporting goods, services, and factors of production and of communicating economically useful knowledge and technology.
Second, the tastes of individuals and societies have generally, but not universally, favored taking advantage of the opportunities provided by declining costs of transportation and communication through increasing economic integration.
Third, public policies have significantly influenced the character and pace of economic integration, although not always in the direction of increasing economic integration.
Background
Ford faced multiple problems in its European activity. Profits were down, market share was slipping, and people complained about how Ford's products were old and not well positioned in the market. The overall impression was " A Dinosaur in the Internet age …"
The financial area reflected the overall impression (loses of $5.4 billion - $1.1 billion in Europe).
Steps were taken in the form of production's unification, massive dismissal, and the introduction of "flex factories" i.e factories which can produce multiple cars on one production line.
Issue
Should Ford Motor run the European market separately ?
Analysis
Advantages
If Ford will refer to Europe as a collection of individual markets rather than one common market, it could apply the following:
Ford would be able to apply a better "Market Segmentation" in areas such as: price, quality, customer age, income & buying behavior.
Ford would be able to apply a better "Market Demographic" in areas such as: yuppies, young professional, working woman etc.
Ford could analyze "behavior factors" such as: want simplicity and convenience, appreciate high quality etc.
Ford would answer better to "Market Needs" in terms of selection. Competitive price, convenience etc.
Ford would be "closer" to its market hence, be able to identify "Market Trends".
The focus on Europe as a whole, and the special care to each nationality, will make the diversification of Ford's products available to almost every segment of operation. The small and compact car's segment will be able to have (at last…) the right "ammunition" for prospect clients.
Production will take place in Europe, as a result prices will reflect the buying power of the local environment rather than the international one.
Disadvantages
"There is no place like home" - Ford Motors understand best the American taste (main market) and should not spend a fortune on a market where it has no fundamental impact i.e sell to the Europeans what you manufacturer in the U.S, without special effort.
The infrastructure involved in order to be dominated (as well as all the other supportive activities) would not be cost effective in the near future.
The weak dollar encourages import from the U.S, whereas manufacturing in Europe will not have the same benefit.
Conclusion
For years Ford has been the "underdog" within the European markets. It always followed the "lions" (Volkswagen, Renault, Fiat and Toyota) and missed opportunities to lead the market.
In today's competitive market, when the leaders are struggling for every niche Ford is fighting an already lost fight. The constant quest for alternative ways to concurred the European market might have a significant long term effect on the financials. Hence, Ford should widen up the implementation of the "flex factories" in the U.S and on the same time seek a joint venture with a European partner.
This could provide on one hand the benefit of economy of scale and on the other hand reduce financial exposure to markets fluctuations. Globalization is not just a "nice" word, it implies also that one should understand its strength as well as weaknesses and seek the most economical way internal or (in Ford's case) external.
Research assignment
http://www.citizenstrade.org/nafta.php
NAFTA – The North American Free Trade Agreement began on 1, January 1994.
The agreement was approved under "fast track" since it carried a promise to raise living standards, increase democracy, and create new jobs. Ten years later it seems that in many aspects the situation was worsen. The lack of citizen's involvement within the process as well as side agreements led to a less favorable agreement. The outcome could be seen by the millions of dollars which being paid in "damages" to corporate interests.