Transcript SOCIAL WORK IN CANADA An Introduction Third Edition

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CHAPTER 5:
International Trade Agreements
and Organizations
Chapter 5:
INTERNATIONAL TRADE AGREEMENTS
AND ORGANIZATIONS
Fundamentals of International Business
Copyright © 2010 Thompson
Key Terms
 trade agreement
 North American Free
Trade Agreement
(NAFTA)
 European Union (EU)
 euro
 trade organizations
 World Trade
Organization (WTO)
Chapter 5:
INTERNATIONAL TRADE AGREEMENTS
AND ORGANIZATIONS
 Asia-Pacific Economic
Co-operation (APEC)
 Group of Eight (G8)
 Group of Twenty (G20)
 Organization for
Economic Co-operation
and Development
(OECD)
 World Bank
 International Monetary
Fund (IMF)
Chapter Objectives
By the time you finish this chapter, you should be able to:
 Compare the characteristics of a multinational
corporation participating in global business with
those of a Canadian company focused on domestic
business
 Describe international agreements and
organizations that have influenced global business
activity
 Describe Canada’s involvement in international
trade organizations
Chapter 5:
INTERNATIONAL TRADE AGREEMENTS
AND ORGANIZATIONS
Globalization and International Trade
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Globalization, in an economic
context, is the movement of
goods, services, technology,
investment, ideas, and
people throughout the world.
Chapter 5:
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AND ORGANIZATIONS
Globalization and International Trade
Positive effects of
globalization
Negative effects of
globalization
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Outsourcing
Lower prices
Improved human rights
Increased productivity
Innovation
Better jobs
Increased capital flow
Chapter 5:
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Lost Canadian jobs
Fear of job loss
Loss of Canadian productivity
Exploitation of cheap labour
Increased pollution
Unhealthy products
Spread of disease
Increase in the income gap
Influence of multinational
corporations on governments
Globalization and International Trade
Companies use three major types of
globalization strategies:
1. Global strategy
2. Multidomestic strategy
3. Transnational strategy
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Globalization and International Trade
Global strategy
 Regards the world as one big market—all people
want the same product and will respond to
marketing in a similar way
 Product and marketing are uniform around the
world
 Takes advantage of economies of scale
(proportionate savings gained by producing larger
quantities)
 Does not respond to individual cultures
Chapter 5:
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AND ORGANIZATIONS
Globalization and International Trade
Multidomestic strategy
 Customizes products, services, and marketing for
the local culture—local management is most
capable of determining what is best for the local
subsidiary
 Effective when cultural differences are prominent
 Less political and exchange-rate risk
Chapter 5:
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Globalization and International Trade
Transnational strategy
 Combines the best elements of the global and
multidomestic strategies
 Respects needs of local market, while maintaining
efficiencies of a global strategy
 Manufacturing takes place at least expensive
source, human resources and marketing take place
at the local level
Chapter 5:
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Trade Agreements
Trade agreement
An enforceable treaty between two or more countries
that involves the movement of goods and services,
elimination of trade barriers, establishment of terms
of trade, and encouragement of foreign investment.
Agreements may be multilateral (involving three or
more parties) or bilateral (involving two countries).
Chapter 5:
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AND ORGANIZATIONS
Trade Agreements
The North American Free Trade Agreement (NAFTA)
 Launched in January 1994 between Canada, the United
States, and Mexico
 Created world’s largest free trade area
 Sets rules surrounding movement of goods, services, and
investments across North America
 Eliminates tariffs and other trade barriers, and promotes
fair competition
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Trade Agreements
Advantages of NAFTA
Disadvantages of NAFTA
 Has helped create higher
paying jobs in education,
engineering, and banking
sectors in Canada
 Allows freer flow of goods and
services across North America,
providing better access to raw
materials, talent, capital, and
technology
 Trade has tripled between the
three members since NAFTA’s
inception
 Manufacturing jobs have been
lost to Mexico, where labour
costs are lower
 Without tariffs, many Mexican
farmers could not compete and
lost their livelihoods
 Canadian companies sold to
foreign investors
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Trade Agreements
Tax Treaties
A tax treaty is created to prevent double taxation and
tax evasion for people who would pay taxes in
Canada and another country. The treaty determines
how much tax each country can collect.
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Trade Agreements
The European Union (EU)
A trade agreement signed in 1993 that now
encompasses twenty-seven countries in Europe
and a population of almost half a billion people. It
has its own flag, anthem, and currency, and
common financial, security, and foreign policies.
Chapter 5:
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Trade Agreements
Chapter 5:
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AND ORGANIZATIONS
Trade Agreements
The euro
The European currency unit adopted
by the European Union and used in
most EU countries.
Chapter 5:
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AND ORGANIZATIONS
Trade Agreements
Advantages of a
common currency
Disadvantages of a
common currency
Decreased risk of exchange-rate
fluctuations
Initial costs of implementation
Price transparency
Lack of national control
Elimination of transaction costs
Loss of tradition
Increased markets
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Trade Organizations
Trade organizations
Groups established to help with the free flow of
goods and services. They may be global in scope or
national organizations created by individual
governments to help domestic companies expand
into international markets.
Chapter 5:
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AND ORGANIZATIONS
Trade Organizations
World Trade Organization (WTO)
An international organization established in 1995
(which now has over 150 member countries) that
promotes trade liberalization throughout the world.
The main purposes of the WTO are:
 To act as a forum for negotiations
 To provide a set of rules that have been
negotiated and signed by the governments of
member countries
 To offer a forum for dispute settlement
Chapter 5:
INTERNATIONAL TRADE AGREEMENTS
AND ORGANIZATIONS
Fundamentals of International Business
Copyright © 2010 Thompson
Trade Organizations
Asia-Pacific Economic Co-operation (APEC)
A trade organization, created in 1989, that unites
twenty-one of the countries surrounding the Pacific
Ocean to co-operate on regional trade. Its goals are
to foster open and free trade among its members,
increase prosperity and economic growth, and
develop the Asia-Pacific community.
Chapter 5:
INTERNATIONAL TRADE AGREEMENTS
AND ORGANIZATIONS
Fundamentals of International Business
Copyright © 2010 Thompson
Trade Organizations
APEC member countries
Chapter 5:
INTERNATIONAL TRADE AGREEMENTS
AND ORGANIZATIONS
Fundamentals of International Business
Copyright © 2010 Thompson
Trade Organizations
The Group of Eight (G8)
A trade organization encompassing the major
economies of the world, which meet to discuss
macroeconomic issues such as economic growth, trade
liberalization, and helping developing countries.
Member Countries:
 France
 Italy
 United States
 Germany
 Canada
 Japan
 Great Britain
 Russia
Chapter 5:
INTERNATIONAL TRADE AGREEMENTS
AND ORGANIZATIONS
Fundamentals of International Business
Copyright © 2010 Thompson
Trade Organizations
The Group of Twenty (G20)
A trade organization established during the economic
crisis of the 1990s to provide a discussion forum for
the major economies of the world beyond the G8.
The G20 focuses on:
 Economic and employment growth
 Elimination of trade barriers
 Reforming financial institutions and regulations
 Restructuring global financial organizations
Chapter 5:
INTERNATIONAL TRADE AGREEMENTS
AND ORGANIZATIONS
Fundamentals of International Business
Copyright © 2010 Thompson
Trade Organizations
Canada’s Place in the G8 and G20
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 Canada’s GDP and population are low compared
to other G8 and G20 countries
 Talk of replacing Canada in the G8, and placing it
as a second-tier country in the G20
 Would be detrimental to Canada,
as its needs, concerns, and
interests would not be given
the same consideration as in
the past
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Trade Organizations
Organization for Economic Co-operation and
Development (OECD)
A trade organization with thirty member countries,
established in 1961 to promote the advancement of
democracy and market economies.
OECD members have worked together to eliminate
bribery, money laundering, and fraud, and to create a
code of conduct for multinational companies.
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Trade Organizations
The World Bank
An organization with 186 member countries that
provides monetary and technical support for developing
countries.
Provides loans and grants to assist with education,
health, infrastructure, farming, environmental issues,
resource management, and other economic concerns.
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Trade Organizations
International Monetary Fund (IMF)
An organization whose purpose is to promote financial
stability, prevent and solve economic crises, encourage
growth, and assuage poverty. It does this by:
 Encouraging countries to adopt responsible
economic policies
 Lending money to emerging and developing
countries
 Providing technical training in areas such as
banking regulations and exchange rate policies
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The Role of the UN in International Business
The UN has four main purposes:
1. To keep peace throughout the world
2. To develop friendly relations among nations
3. To work together to help poor people live better
lives, to conquer hunger, disease, and illiteracy, and
to encourage respect for each other’s rights and
freedoms
4. To be a centre for helping nations to achieve these
goals
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The Role of the UN in International Business
 UN is responsible for organizations that influence
international business, including the International
Labour Organization (ILO), the International
Monetary Fund (IMF), and the World Bank
 UN devotes resources to improving the standard of
living, the unemployment rate, and economic
conditions throughout the world
 UN Economic and Financial Committee deals with
issues such as international trade, globalization, and
poverty elimination
Chapter 5:
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AND ORGANIZATIONS