Hello and welcome to this podcast. Today, we will discuss the important role that the international economic community plays in promoting the world.
An international economic community is a formal organization established between countries that often share each other's problems. These countries formulate common economic policies through meetings and consultations among themselves. The International Economic Community usually takes the form of an Economic Community or a bilateral** agreement. A bilateral agreement is an agreement between two countries to lower barriers.
For example, two countries may enter into a preferential tariff agreement that gives one country (or several countries) more** preferences than the others. When a member of the Commonwealth of Great Britain (a former British territory) conducts a ** with the UK, they pay less tariffs than other countries. Canada and Australia are both former British territories but remain members of the Commonwealth of Nations. You'll notice that the Canadian currency still features Queen Elizabeth's head, while the Australian flag still contains the image of the Union Jack.
In other cases, the state may form a free ** zone. In a free zone, there are few tariffs or rules between partners, but countries outside the zone must pay tariffs set by individual member states.
Let's get to know some of the well-known international economic communities.
The North American Free Compact (NAFTA) created the largest free zone in the world. The agreement was ratified by the U.S. Congress in 1993. It includes Canada, the United States, and Mexico, with a total population of 4500 million, with an economic aggregate of more than 20$8 trillion.
NAFTA was later modified by the U.S.-Mexico-Canada Agreement (USMCA). The USMCA was largely accepted and went into effect on July 1, 2020.
Canada is one of the largest partners of the United States, with which it signed the Pact of Freedom in 1988. As a result, most of the new long-term opportunities that NAFTA brings to U.S. businesses come from Mexico, which is the third-largest partner of the U.S. Prior to NAFTA, Mexico had an average tariff of only 4% on U.S. exports, and most goods entered the U.S. duty-free, so the main impact of NAFTA was opening the Mexican market to U.S. companies. When the treaty entered into force, tariffs on about half of the goods on both sides of the Rio Grande disappeared. Since NAFTA went into effect, the U.S.-Mexico** volume has grown from $80 billion to $515 billion per year. The agreement eliminated a series of licensing requirements, quotas, and tariffs in Mexico that restricted the trade of U.S. goods and services. For example, the agreement allows U.S. and Canadian financial services firms to have subsidiaries in Mexico for the first time in 50 years.
However, NAFTA also faces some challenges.
Recently, the United States notified Canada and Mexico** of their intention to renegotiate certain aspects of the North American Liberty Agreement**.
The cork dispute was one of the longest-running disputes between the United States and Canada, resulting in the United States imposing tariffs on Canadian softwood imports. At the center of the dispute is the U.S. claim that Canada** is unfairly subsidizing Canadian timber production by providing public land, while U.S. producers are cutting softwood on their own land. Why anti-liberal groups support these tariffs because doing so would lead to cork***
The real test of NAFTA is whether it can bring growing prosperity on both sides of the Rio Grande. For Mexicans, NAFTA must provide constantly** wages, better benefits, and a growing middle class with enough purchasing power to continue buying American and Canadian goods. That vision seems to be working. At Delphi Auto Parts' factory in Ciudad Juarez, just across the border from El Paso, Texas, the assembly line is a cross-section of the Mexican working class. Since NAFTA lowered barriers to investment and investment, Delphi has significantly expanded its presence in the country. Today, it employs 70,000 Mexicans who receive up to 70 million U.S.-made components a day to assemble into parts. Wages here are low by American standards – an assembly line worker with two years of experience earns about $2 per hour$30. But that's three times the minimum wage in Mexico, and the Delphi job is one of the most coveted positions in Ciudad Juarez.
Let's turn our attention to another important agreement – the European Union.
In 1993, the member states of the European Community (EC) ratified the Maastricht Treaty, which proposed to further advance the European economic, monetary, and political union. While the core of the treaty is the development of a single European market, the Maastricht Treaty is also aimed at strengthening integration among EU member states.
The European Union was adopted for 28 European countries (see Figure 3.)6) The creation of a borderless economy has helped to promote this integration.
EU member states have established common institutions, entrusting part of their sovereignty to these bodies in order to make decisions on specific matters of common interest in a democratic manner at the European level. This pool of sovereignty is also known as European integration. In 2016, British citizens voted to leave the European Union, a plan known as Brexit, which could take years to materialize.
One of the main objectives of the European Union is to promote the economic development of all member states. The EU stimulates economic development by eliminating barriers, tax law differences, and product standards differences, and establishing a single currency. The Bank of the European Communities was then established and adopted the euro as a common currency. The EU's single market has created 2.5 million new jobs and generated more than $1 trillion in new wealth since its inception. The opening of markets in EU countries has led to a 50% reduction in domestic** fees since 1998. Under the pressure of competition, airfares** in Europe have dropped significantly. The lifting of national restrictions has enabled more than 15 million Europeans to work or retire in another EU country.
The EU is a very tough antitrust enforcer;Some would say it's tougher than the United States. For example, the European Union fined Google $2.7 billion for favoring some of its own services in search results. Unlike the United States, the EU can indefinitely seize corporate offices to prevent the destruction of evidence, and gain access to the homes, cars, yachts, and other personal property of executives suspected of abusing corporate market power or complicity in manipulation**.
Microsoft has been battling the European Court of Justice since 2002 and there is no end in sight. The court fined Microsoft for its monopoly on internet access by using Internet Explorer in its Windows software. The company also has a court of appeal ruling that requires it to share it with "open source" companies**. Coca-Cola, another major U.S. company, has resolved a six-year-long antitrust dispute with the European Court of Justice by agreeing to impose strict restrictions on its sales strategy. Coca-Cola cannot enter into an exclusivity agreement with a retailer that prohibits the sale of competitors' soft drinks, nor can it offer discounts to retailers based on sales volume. In addition, it had to leave 20% of the space in Coca-Cola's freezers to competitors like Pepsi so that Pepsi could stock its own brand. If Coca-Cola violates the terms of the agreement, it will be fined 10% of its global revenues (more than $2 billion).
Another completely different type of problem for global businesses is the possibility of a protectionist campaign by the EU against the outside. European automakers, for example, are proposing to maintain a roughly 10% market share of imported cars from Japan at around 10 percent. Ireland, Denmark and the Netherlands do not produce cars and have unrestricted domestic markets;They are not satisfied with the limited import quotas of Toyota and Honda. At the same time, France imposed strict quotas on Japanese cars to protect its own Renault and Peugeot. If there is any increase in the quota, these homegrown automakers could be hurt.
Interestingly, many large American companies are already considered to be more "European" than many European companies. Coca-Cola and Kellogg's are considered classic European brand names. Ford and General Motors compete for the continent's largest share of car sales. Apple, IBM, and Dell dominate their respective markets. General Electric, AT&t, and Westinghouse are already strong across Europe and are investing heavily in new manufacturing plants there.
The EU has proposed a constitution that would centralize power at the EU level and reduce the powers of individual member states. It will also have a unified voice in world affairs by creating the post of Chief. The constitution also gives the EU control over political asylum, immigration, freedom of expression, and collective bargaining. In order for it to become law, every EU country must ratify the constitution. France and Germany, the two most powerful countries in the EU, voted "no" in the summer of 2005. Citizens of both countries fear that the constitution will shift jobs from Western Europe to the EU countries of Eastern Europe. These new EU members have lower wages and less regulation. Voters also fear that the constitution could lead to an American or British-style shift in traditional social protection measures in France and Germany.
Despite this, the EU plays an important role in the global economy. It is the largest partner of the United States and one of the largest economies in the world. The EU is a complex entity that is both a land of opportunity and a place of challenge.
In addition to the European Union, we can also look at some other well-known international economic communities.
MERCOSUR is one of the largest new agreements, including Peru, Brazil, Argentina, Uruguay and Paraguay. The removal of most tariffs has resulted in ** revenues now exceeding $16 billion per year. The recent recession in the MERCOSUR countries has constrained economic growth, although growth among the MERCOSUR countries has continued.
The largest new** agreement in recent times is the Regional Comprehensive Economic Partnership (RCEP). The agreement, which includes 15 Asian countries, signals to investors that the region remains committed to multilateral** integration. The most notable point about the agreement is that the United States is not a member.
The most recent freedom** agreement is the Central American Freedom** Agreement (CAFTA), adopted in 2005. In addition to the United States, the agreement includes Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua. The United States is already the largest exporter to these countries, so economists do not expect this to significantly increase American exports. However, it will reduce tariffs on exports to Central American countries. Currently, about 80% of goods imported into the U.S. from ACP countries are duty-free. Central American countries could benefit from a new permanent pact if U.S. multinationals deepen their investment in the region.
That's all for this podcast. Thanks for listening!If you have any questions or suggestions, please leave a message below. See you next time!