Characteristics
and Preferential
Trade
Agreements
Global Marketing
Chapter 3
1
Introduction
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GATT
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The World Trade
Organization
Forum for trade-
related
negotiations among
150 members
Based in Geneva
Serves as dispute
mediator through
DSB
Has enforcement
power and can
impose sanctions
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WTO Structure
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Preferential Trade Agreements
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Free Trade Area
Two or more countries agree to
abolish tariffs and other barriers
to trade amongst themselves
Countries continue independent
trade policies with countries
outside agreement
Rules of origin requirements
restrict transshipment of goods
from the country with the lowest
tariff to another
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Customs Union
Evolution of Free Trade Area
Includes the elimination of internal barriers to
trade (as in FTA)
AND establishes common external barriers to
trade
Examples: The EU and Turkey, the Andean
Community, Mercosur, CARICOM, Central
American Integration System (SICA)
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Common Market
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Economic Union
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Economic Union
European
Union Flag
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U.S. Goods Exports in 2008
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U.S. Goods Imports in 2008
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Latin America: SICA, Andean
Community, Mercosur, CARICOM
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Central American Integration
System (SICA)
El Salvador, Honduras,
Guatemala, Nicaragua,
Costa Rica, and Panama
Moving towards a
common market
Common External Tariff
of 0 to 15%
Retains tariffs on goods
also produced in
importing country
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Andean Community
Bolivia, Colombia,
Ecuador, Peru,
Venezuela
Customs Union
Abolished foreign
exchange, financial
and fiscal incentives,
and export subsidies
Established common
external tariffs
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Common Market of the South
(MERCOSUR)
Argentina, Brazil, Paraguay, Uruguay,
Venezuela
Customs union, seeks to become common
market
Internal tariffs eliminated
Established common external tariffs up to 20%
In time, factors of production will move freely
through member countries
Chile, Colombia, Ecuador, Peru, Bolivia
Associate members
Participate in free trade area but not customs union
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MERCOSUR
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Caribbean Community and
Common Market (CARICOM)
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CARICOM
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Asia-Pacific: The Association of
Southeast Asian Nations (ASEAN)
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Singapore
Worlds 2nd largest
container port
2nd highest standard
of living in the
region behind Japan
4.2 million people
93% literacy rate
Over 3,000
companies
Crime is nearly
nonexistent
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The European Union (EU)
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European Union
27 countries
491 million people
Combined GNI of
$14.7 trillion
Euro currency, 1999
Harmonization of
laws and regulations
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The Middle East
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Gulf Cooperation Council
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Looking Ahead to Chapter 4
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