Table of Contents

Table of Contents....................................................................................................... 1
Introduction................................................................................................................ 2
Regional integration and Economic Blocs...................................................................2
Most Famous economic blocs.....................................................................................3
How did the EU influence on the automakers HONDA?..............................................4
EFTA........................................................................................................................... 5
Swiss benefits from EFTA............................................................................................6
The Impact of the European Community's internal market on the EFTA-By Richard
K. Abrams...................................................................................................................6
1. Machinery ........................................................................................................... 6
2. Pharmaceuticals .................................................................................................6
3. Chemicals ........................................................................................................... 7
4. Instruments and measuring devices ...................................................................7
5. Watches ..............................................................................................................7
NAFTA......................................................................................................................... 8
How did NAFTA help Mexican companies?..................................................................8
MERCOSUR................................................................................................................. 9
CARICOM..................................................................................................................11
Some benefits of the CARICOM Single Market and Economy are:.........................12
APEC benefits for Australia.......................................................................................12
COMUNIDAD ANDINA DE NACIONES (CAN)...............................................................13
CER........................................................................................................................... 14
ASEAN....................................................................................................................... 14
ASEAN- an opportunity ............................................................................................15
CONCLUSION............................................................................................................16

1
Introduction
A large number of diverse regional economic arrangements have evolved over the past

half century with an especially creative burst of regionalism over the past fifteen years.

This trend toward regionalism occurs as markets become more integrated on a regional

and global basis. Does the integration of markets for goods, services and capital drive

the creation of regional institutions? Or, does the creation of regional institutions drive

the integration of markets? The short answer is that the relationship is reciprocal but not

Deterministic; it varies across regions and is conditioned by several contextual factors.

My project examines the reciprocal relationship between economic integration and

institutional integration.

Regional integration and Economic Blocs

Regional economic integration involves groups of countries forming alliances to promote

free trade, cross-national investment, and other mutual goals. This integration results

from regional economic integration blocs in which member countries agree to eliminate

tariffs and other restrictions on the cross-national flow of products, services, capital and

in more advanced stages labor within the bloc. The countries in an economic bloc

become parties to a free trade agreement, which eliminates tariffs, quotas and other

trade barriers. The countries that become members of an economic bloc, there are

various stages of the regional integration. First stage is the free trade area in which

tariffs and other trade barriers are eliminated and that emerge when nations sign a free

trade agreement. Second is the customs union-a free trade area in which common trade
2
barriers are imposed on nonmember countries. Third is the common market-a customs

union in which factors of production moves freely among the members and the last type

of the regional integration are the economic union-common markets in which some

important policies are harmonized among the member states.

Most Famous economic blocs

There are roughly 200 economic integration agreements in the world. The European

Union is the most advanced among the blocs, comprising 27 countries in Europe. The

European Union has increased market access, improved trade rules, and harmonized

standards among its members.EU was formed after the world war 2 with the main

objective of peace and prosperity between the countries that were in war. During the

years the EU advanced more and more and it still continues to develop itself. Nowadays

EU is much more that bringing peace among the countries- today Europe is also home

to the European trade agreement association. This agreement allows free trade among

the 27 member states. Outside Europe there are others blocs such as the one in the

Americas the North American Free Trade Agreement (NAFTA). This bloc is conducted

of Canada, Mexico and the United States of America. Other economic blocs in the

Americas include MERCOSUR, CARICOM, and CAN. In the Asia/Pacific region,

ASEAN, APEC, and the Australia and New Zealand Closer Economic relations

Agreement (CER) are the leading blocs. Economic blocs in Africa and the Middle East

have experienced only limited success.

3
How did the EU influence on the automakers
HONDA?

We all know that Honda is the first Japanese automobile and motorcycle manufacturer.

Honda key assembly affiliates are Honda industry in Italy and “Montessa” Honda in

Spain. These companies were designed in the first place for concentration on the

assembly of specific types of motorcycle model appropriate too different European

location in order to benefit from various economies. At the same time each assembler

exported its own model to the other Honda locations in Europe in order to gain

economies in joint production and marketing- in other words any given model is

produced in one location, but a full range of models is offered for sale in all locations.

Finally, in the international context, Honda European models are also exported to its

subsidiaries in USA, Brazil and Japan while its European network imports large and

medium-sized motorcycles from its USA and Brazil affiliates. As far the engine parts are

concerned Honda supplies were initially from France. And thanks to the EU there are no

trade barriers between Spain and France which allows the multinational companies

such as Honda free trade with other member states. Another benefit for Honda is the

lower average costs and by far larger market conducted of nearly 490 million

consumers.1

1
From the book “International Human resource management” may 2007
4
EFTA

The European Free Trade Association (EFTA) was established in 1960 by the

Stockholm Convention. The original purpose of this intergovernmental organization was

to remove customs duties on industrial products in trade among its Member States. The

current members of EFTA are Iceland, Liechtenstein, Norway and Switzerland. In

contrast to the European Union (EU), EFTA is not a customs union. Individual EFTA

States are basically free to set their own customs tariffs and arrange other foreign trade

measures vis-à-vis non-EFTA States. EFTA States have been using EFTA as a

platform for the joint negotiation of FTAs with third countries outside the EU. Fifteen

such agreements are currently in force and a number of agreements are being

negotiated.

5
Swiss benefits from EFTA 2

Switzerland is an important exporter of capital goods and intermediate inputs for mining,

forestry, paper production, agriculture and fisheries. As these sectors grow, exports

opportunities should also increase. In 2005 and 2006, the value of Swiss exports to

Chile grew by nearly 20% per year and consolidated in 2007.

1. Machinery
With strong pressure on prices, Swiss products may face difficulties linked with currency

fluctuations and with increased competition from Asia. In 2007, machines made 35% of

total Swiss exports to Chile - The export of non-electrical machines declined by 17%

while the export of electrical machines grew by 57%. No association represents the

machine sector in Chile.

2. Pharmaceuticals
This sector is the second largest Swiss export sector to Chile. In 2007, Swiss

pharmaceuticals exports to Chile increased by 27%. Drugs from Swiss companies are

also imported from other production sites. Both Novartis and Roche operate in Chile.

None of them has production or research sites. In recent years, a significant problem

has been Chile’s often inadequate intellectual property laws, which have allowed local

2
The Impact of the European Community's internal market on the EFTA-By Richard K.
Abrams

6
pharmaceutical companies to produce and commercialize copies of new and patented

drugs. Chile is slowly adapting its legislation but it remains to be seen whether the

situation for investigative laboratories will be significantly modified. Chile is on the

Priority Watch List of the United States Trade Representative and belongs to the

countries where intellectual property rights are not sufficiently enforced.

3. Chemicals
Chemicals are the fourth largest Swiss export sector to Chile. Products sold to Chile by

Swiss firms are increasingly supplied by their subsidiaries from the US, UK, China,

Brazil and other countries. Factors such as strategic restructuring, competition and the

depreciation of the dollar against the CHF and Euro (which cannot be passed on to the

buyers as prices are set in USD) contribute to shifts in trade flows.

4. Instruments and measuring devices

As with machinery, price competition plays an important role. The depreciation of the

USD3 has increased the competitiveness of US producers. There is a market for Swiss

high quality products in the mining and paper industries.

5. Watches
The sales of Swiss watches – luxury items – fluctuate with business cycles. With good

economic forecasts for the near future, demand for Swiss watches should continue to

grow. In 2007, Swiss exports of watches to Chile increased by 30%.

3
United states dollar-US currency
7
NAFTA 4

NAFTA is the most significant economic bloc in the Americas. NAFTA was launched in

1994. Its passage was smoothed by the existence, since the 1960s. For its members

countries (USA Canada, Mexico) the NAFTA agreement increased market access. The

agreement eliminated tariffs and trade between member states. It has also established

trade rules and uniform customs procedures and regulations, while prohibiting the use

of standards and technical regulations as trade agreements.

How did NAFTA help Mexican companies?

Mexico benefited greatly from NAFTA. The access to USA and Canada helped many

Mexican companies in industries such as electronics, automobiles, textiles, medical

products, and services. For example: Mexico now has 100 million-per-year dental

supply industry, in which entrepreneurs export labor-intensive products such as braces,

dental wax, and other tools used in dental work to the united states. Annual foreign

investment in Mexico rose from 4 billion dollars in 1993 to nearly 20 billion dollars by

2007 as United States of America and Canadian firms invested in their southern

neighbor. In the years following NAFTA’s passage, Mexico’s per capita income rose
4
North American free trade agreement
8
substantially, to about 11 000 dollars in 2007, making Mexico the wealthiest country in

Latin America in terms of per capita income. Nevertheless, increased purchasing power

of Mexican consumers meant that they could afford to buy products from Canada and

USA.

MERCOSUR

MERCOSUR, consisting of Argentina, Brazil, Paraguay, and Uruguay, is the third

largest preferential trading group in the world. Since its inception in 1991, MERCOSUR

has made considerable progress in integrating the economies of its members. The

integration--- an almost complete free trade area and a partial customs union-has been

accompanied by a significant increase in U.S. exports and investment to the region. In

general, the United States has viewed the evolution of MERCOSUR as being supportive

of its political interests as well, although MERCOSUR is seen as favoring a slower

approach to hemispheric economic integration. In the future, MERCOSUR faces

challenges affecting the size of its membership, the depth of its integration, and the

strength of its institutions

How MERCOSUR did help its members?

The impact of the creation of MERCOSUR has also been reflected in the increasing flow of

intraregional investments. Macroeconomic stability in Argentina, together with the strong

9
economic growth seen in the last four years in this country, has created incentives for both

investors in the sub region and multinational corporations. In response to the opportunities

afforded by a larger economic market, multinational corporations have formed partnerships with

entrepreneurs in the sub region or have set up subsidiaries in a broad range of production and

commercial sectors. In the automotive sector, for example, there have been complementary

production agreements and other arrangements to encourage specialization. In the areas of

food, textiles, plastics and construction materials, partnerships have been set up between

Brazilian and Argentine producers. The abundant supply of energy in Paraguay has attracted

investment in the chemical sector. There has also been increased growth in services, including

investment in tourism in Uruguay and Brazil, the establishment of branches of foreign banks in

Montevideo and Buenos Aires, and the interest shown by Chilean investors in insurance and

reinsurance. To a large extent, the increased flow of investments to the sub region can be

attributed to privatization programs and greater liberalization in these countries, but the

reduction of barriers to foreign investment has also played a significant role.

10
 5

CARICOM
The Caribbean Community (CARICOM), is an organization of 15 Caribbean nations

and dependencies. CARICOM's main purposes are to promote economic integration

and cooperation among its members, to ensure that the benefits of integration are

equitably shared, and to coordinate foreign policy. Its major activities involve

coordinating economic policies and development planning; devising and instituting

special projects for the less-developed countries within its jurisdiction; operating as a

regional single market for many of its members (CARICOM Single Market); and

5
Indicator of the export by destination and the correlation between MERCOSUR and other
blocs
11
handling regional trade disputes. The secretariat headquarters is based in Georgetown,

Guyana.

Some benefits of the CARICOM Single Market and

Economy are:
− Increased production and trade in goods and services in a combined market of over

approximately million persons and for the world beyond

− Competitive products of better quality and prices

− Improved services provided by enterprises and individuals, including transportation

and communication

− Greater opportunity for travel

− Opportunities for nationals to study and work in CARICOM countries of their choice

− Increased employment and improved standards of living

APEC benefits for Australia 6

A continent between the Indian Ocean and South Pacific Ocean, Australia is the

smallest continent and the sixth largest economy in the world. The continent is

approximately 7.6 million kilometers mostly of plateaus, deserts, and fertile plains in the

southeast. Its 19.4 million populations is concentrated along the eastern and

southeastern seaboard, mainly in cities or major regional centers. Australia is a

resource rich economy with a wide range of mineral, energy and other resources.

6
From the book “Asian recorder” published 1997
12
In the past eleven years until 2001, Australia’s economic growth has averaged around

3.6 percent per year. In 2001, GDP was about US$ 467 billion (1995 US$ at PPP) and

the unemployment rate was around 6.9 percent. The Australian economy has remained

relatively robust through the global economic slowdown during the last few years, owing

much to the buoyant property market and strong domestic demand. Australia has

avoided recession in the global slowdown, and is expected to continue to outperform

most developed economies in 2004.Over 70 percent of Australia’s international trade is

with APEC7 economies and around 60 percents within Asia. Australia is a major

exporter of coal, LNG and uranium with the resource sector being the largest exporting

sector of the Australian economy, comprising over 35 percent of Australia’s export

earnings. Consequently, the Australian economy is sensitive to changes in foreign

earnings arising from fluctuations in resource prices on international markets.

COMUNIDAD ANDINA DE NACIONES

(CAN) 8

The original Andean Pact was founded in 1969 by Bolivia, Chile, Colombia, Ecuador

and Peru. In 1973, the pact gained its sixth member, Venezuela. In 1976, however, its

membership was again reduced to five when Chile withdrew. Venezuela announced its

withdrawal in 2006, reducing the Andean Community to four member states. Recently,

with the new cooperation agreement with MERCOSUR, the Andean Community gained

four new associate members: Argentina, Brazil, Paraguay and Uruguay. These four

7
Asia Pacific Economic Cooperation-incorporates 21 nation .It members account 85%of total
regional trade
8
13form a new economic bloc
CAN is expected to merge with MERCOSUR to
MERCOSUR members were granted associate membership by the Andean Council of

Foreign Ministers meeting in an enlarged session with the Commission (of the Andean

Community) on July 7, 2005. This moves reciprocates the actions of MERCOSUR

which granted associate membership to all the Andean Community nations by virtue of

the Economic Complementarity Agreements (Free Trade agreements) signed between

the CAN and individual MERCOSUR members.

CER
Closer Economic Relations (CER) is a free trade agreement between the

governments of New Zealand and Australia. It is also known as the Australia New

Zealand Closer Economic Relations Trade Agreement (ANZCERTA) and

sometimes shortened to (CERTA). It came into force on 1 January 1983, although the

actual treaty was not signed until 28 March 1983 .One of the most important results of

CER was the Protocol on the Acceleration of Free Trade in Goods, which resulted into

the total elimination of tariffs or quantitative restrictions between the two countries by 1

July 1990.Advantages for theirs companies are not very much comparing to the other

bigger blocs such as EU, NAFTA…. with way bigger market but anyhow there are still

advantages for their companies such as no trade barriers which mean they can import

inputs that are needed to make the product, increased productivity, lowering average

cost etc.

ASEAN
14
The Association of Southeast Asian Nations (ASEAN) is a geo-political and

economic organization of 10 countries located in Southeast Asia, which was formed on

8 August 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand.9 Since

then, membership has expanded to include Brunei, Burma (Myanmar), Cambodia,

Laos, and Vietnam. Its aims include the acceleration of economic growth, social

progress, cultural development among its members, the protection of the peace and

stability of the region, and to provide opportunities for member countries to discuss

differences peacefully.

In 2005, the bloc spanned over an area of 4.46 million km2 with a combined GDP of

about USD896.5 billion/2,728 billion dollars growing at an average rate of around 5.6%

per annum. In 2008, its combined GDP had grown to more than USD $1.5 trillion with a

population of approximately 580 million people

ASEAN- an opportunity
Southeast Asia has benefited from the emergence of the new regional economic actors,

which reflects shits in international competitiveness. Japanese industry moved to the

9
“Bangkok Declaration”14 March 2007.
15
ASEAN countries following the 1986 yen appreciation in response to the declining

competitiveness of the Japanese home based production. The major relocated

industries were those in which US companies were not major players and in which

European companies were similarly affected by rising home currencies and responded

also by relocating to ASEAN countries. More recently the emergence of rapidly growing

china and of Vietnam and Burma as markets for ASEAN commodity and manufactured

exports and destinations for ASEAN commodity and manufactured exports and

destinations for ASEAN investment is contributing to regional growth and increased

regional integration. For instance Singapore is Vietnam’s largest trade partner while its

main investors are from Taiwan and Hong Kong. China is also beginning to invest in

Southeast Asia with more than 50 companies expected to set up shop in Singapore

alone in 1993 and a state-owned weapons manufacturer announcing the establishment

of assembly operations in Malaysia for the local market for export10

CONCLUSION

According to my paper I assume that economic regional integration are vital for the

people in general and we as a country should do whatever it takes to achieve the

10
Lynda c Lyn “Models and Partners”
16
privilege of being part of a regional bloc in our case part of the EU. Macedonia has 2

million consumers and with the absence of trade barriers with other countries the EU

would give Macedonian firms easier access to a total market of around 490 million

buyers. Having this in mind my comment is that our governments countries should try

harder to resolve issues with the member states in order to enter the EU so can we as a

country have the same opportunities with some of the countries I have mentioned above

in my research.

17
 THE ROLE OF THE REGIONAL

ECONOMIC INTEGRATION ON THE

INTERNATIONAL BUSINESS

18
19