Regional Economic Interaction and Cooperative Agreements

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Regional Economic Interaction and Cooperative Agreements

To present different regional trading groups, such as the European Union (EU), the North American Free Trade Agreement (NAFTA), and Asia – Pacific Economic Cooperation (APEC).

The rationale behind trading groups lies upon the idea that a single market (or relatively single) because of its size and because of the possibilities that it offers for scientific, technical and commercial cooperation, gives a unique opportunity to a given industry. To improve its competitively, increase growth and employment and contribute to a better balance in the world economy.

The three well known examples of such markets are the European Union, the North American Free Trade, and the Asia – Pacific Economic Cooperation. However, they do differ in many aspects.

The European Union (EU)

The birth of the EU started after World War 2. From the ashes and destruction politicians understood that greater cooperation among the countries would speed up Europe's recovery.

In our days the EU presents a single market with common currency (the Euro), legislature, parliament, and court of justice. The EU accounts for a fifth of the world trade and its GNI is just behind NAFTA (2001).

In the near future the EU will expand dramatically with the joining of 13 new countries. This will increase the EU's population by 100 million and add $400 billion to its economic output. However, since most countries in Central and Eastern Europe are poor (These 13 had a significantly lower per capita GNI - $9,648 than the existing 15 members of the EU - $23,815) and relay heavily on agriculture, the outcome will strain the EU's financial resources. On the other hand, the addition 13 countries will certainly move the EU ahead of NAFTA in total population and increase the EU's power as an international trading block.

North American Free Trade Agreement (NAFTA)

NAFTA consists of three countries – the United States, Canada and Mexico. Two of them, Canada and the United States present the largest bilateral trade in the world. Within NAFTA, the United States is the central "axle" since its Mexico's and Canada's largest trading partner. Although it does not have a common currency nor legislature and other shared symbols, it presents (in my view) a more homogeneous entity. For example: language – English, is the dominant language, shared borders and somewhat shared foreign policy.

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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 ...

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