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MGCR 382 (143)

IB Vocab.odt

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Management Core
MGCR 382
Hermann Juergens

IB Vocabulary Chapter One: What is International Business? • International Business (n.) – business transactions between parties from more than one country • Just-in-time (JIT) Inventory System – suppliers are expected to deliver necessary inputs just as they are needed International BusinessActivities Exporting and Importing • Exporting – the selling of products made in one's own country for use or resale in other countries • Importing – the purchasing of products made in another countries for use or resale in one's home country • Merchandise Imports and Exports (Visible Trade) – trade of tangible products • Service Imports and Exports (Invisible Trade) – trade of services (intangibles) • International Investments – capital supplied by residents of one country to residents of another International Investments • Foreign Direct Investments (FDI) – investments made for the purpose of actively controlling property, assets, or companies located in host countries • Foreign Portfolio Investments (FPI) – purchases of foreign financial assets for a purpose other than control Other Forms of International BusinessActivity • International Licensing – contractual arrangement in which a firm in one country licenses the use of its intellectual property to a firm in a second country in return for a loyalty payment ◦ International Franchising – a firm in one country authorizes a firm in a second country to utilize its operating systems (brand names, trademarks, logos) • International Management Contract – firm in one country agrees to operate facilities or provide other management services to a firm in another country for an agreed-upon fee • (an) International Business – any organization that engages in cross-border commercial transactions with individuals, private firms, and/or public sector organizations • Multi-national Corporation (MNC) – firms that have extensive involvement in international business ◦ Multi-national Enterprises (MNE) – not necessarily a corporation ◦ Multi-national Organizations (MNO) – can refer to both not-for-profit and profit-seeking enterprises The Era of Globalization • Globalization - “the inexorable integration of markets, nation-states, and a way that is enabling individuals, corporations, and nation-states to reach around the world further, faster, deeper, and cheaper than ever before” The Contemporary Causes of Globalization Strategic Imperatives 1. Leverage core competencies • Core Competency – distinctive strength or advantage that is central to a firm's operations 2. Acquire resources and supplies 3. Seek new markets 4. Better compete with rivals Environmental Causes of Globalization 1. Changes in the political environment 2. Technological Changes Globalization and Emerging Markets • Emerging Markets – countries whose recent growth or prospect for future growth exceed that of traditional markets • BRIC countries – Brazil, India, Russia, China • Big Ten –Argentina, China, Brazil, India, Indonesia, Mexico, Poland, SouthAfrica, South Korea, and Turkey Chapter Two: Marketplaces of N. America U.S. • Invoicing Currency – [USD] – the currency in which the sale of goods and services is denominated (for about half of all international transactions) • Flight Capital – money sent out of a politically or economically unstable country to one perceived as a safe haven Canada Mexico C.America and the Caribbean Marketplaces of Western Europe EU Marketplaces of Eastern Europe and CentralAsia • Newly Independent States (NIS) – the fifteen remaining Soviet republics • Commonwealth of Independent States (CIS) – {[NIS] - [Lithuania, Estonia, and Latvia]} Marketplaces ofAsia Japan • Keiretsu (Japan) – large families of interrelated companies Australia and New Zealand The Four Tigers S. Korea • Chaebol (Korea) – large, privately owned, family-centered Hong Kong Singapore • Reexporting – importing foreign goods and then reexporting them to other countries Taiwan China • Guanxi – the chinese concept of reciprocal gift-giving relationships India SoutheastAsian Countries Thailand Malaysia Indonesia Vietnam Marketplaces ofAfrica and the Middle East Africa Middle East • Sovereign Wealth Funds – portfolios of foreign investments Marketplaces of S.America • Import Substitution Policies – a country attempts to stimulate the development of local industry by discouraging imports via high tariffs and non-tariff barriers • Export Promotion – countries pursue economic growth by expanding its exports Chapter Three: The Legal Environment Differences in Legal Systems • Common Law – based on the cumulative wisdom of judges' decisions on individual cases through history • Statutory Laws – laws enacted by legislative action • Civil Law – based on codification; a detailed listing of what is and is not permissible • Religious Law – based on the officially established rules governing the faith and practice of a particular religion ◦Theocracy – a country that applies religious law to civil and criminal conduct • Bureaucratic Law – regardless of the formal law of the land; whatever the countries bureaucrats say it is Domestically Oriented Laws Laws DirectlyAffecting International Business Transactions • Sanctions – restraints against commerce with a specific country • Embargo – a comprehensive sanction against all commerce within a given country • Dual-use Production – Products that may be used for both civilian and military purposes • Extraterritoriality – a country's attempt to regulate business activities that are conducted outside their borders Laws DirectedAgainst Foreign Firms • Nationalization – transfer ownership of resources from the private to the public sector • Expropriation – when a host government compensates the private owners for their losses • Confiscation – when a host country offers no compensation to private owners for their losses Privatization • Privatization – conversion of state-owned property to privately owned property Constraints on Foreign Ownership • Repatriate – returning to one's home country Impact of MNCs on Host Countries Economic and Political Impacts Cultural Impacts Dispute Resolution in International Business • Forum Shopping – seeking to have a case hearing held in the country where the court system is most favorable to the company's interests • Arbitration – process by which both parties to a conflict agree to submit their cases to a private individual or body whose decision they will honor • Foreign Sovereign ImmunitiesAct of 1976 - “the action of foreign governments against U.S. Firms are generally beyond the jurisdiction of U.S. Courts” The Technological Environment • Technology Transfer – transmittal of technology from one country to another TheAccounting Environment Roots of National Differences Differences inAccounting Practices Value and Revaluation ofAssets Valuation of Inventories • LIFO – Last-in-First-Out Method of Inventory • FIFO – First-in-First-Out Method of Inventory Dealing with TaxAuthorities Use ofAccounting Reserves • Accounting Reserves – accounts created in a firm's financial reports to record forseeable future expenses that might affect its operations Other Differences • Goodwill – excess payment over the book value of an acquired firm's stock Impact on Capital Markets • International Financial Reporting Standards (IFRS) - transparent approach to financial reporting issued by the IASB The Political Environment Political Risk • Political Risk Assessment – systematic analysis of the political risks they face in foreign countries • Political Risks – any changes in the political environment that may adversely affect the value of a firm's business activities ◦ Micropolitical Risk – affects a specific firm or firms within a specific industry ◦ Macropolitical Risk – affects all firms in a country • Overseas Private Investment Corporation (OPIC) – insures U.S. overseas investments against nationalization, insurrections or revolutions, and foreign exchange convertability • Multilateral Investment GuaranteeAgency (MIGA) – subsidiary of the World Bank, provides similar insurance against political risks Chapter Four: Characteristics of Culture • Culture – the collection of values, beliefs, behaviours, customs, and attitudes that distinguish one society from another ◦ Reflects Learned Behavior ◦ Elements are ▪ Interrelated ▪ Adaptive ▪ Shared Elements of Culture Social Structure Individuals, Families and Groups Social Stratification • Social Stratification – a society's categorization of people on the basis of birth, occupation, educational achievements, or other attributes • Social Mobility – the ability of individuals to move from one stratum of society to another Language Language as a Competitive Weapon Lingua Franca • Lingua Franca – predominant common language of international business Translation • Backtranslation – one person translates a document, then a second person translates the translated version back into the original language Saying No Communication Nonverbal Communication Gift-giving and Hospitality Religion • Protestant Ethic – [Max Weber] stresses individual hard work, frugality, and achievement as means of glorifying God Values andAttitudes Time Age Education Status Seeing the Forest, Not the Trees Hall's Low Context vs. High ContextApproach • Low Context Culture (words used by the speaker explicitly convey the speaker's message to the listener) vs. High Context Culture (the context in which a conversation occurs is just as important as the words that are actually spoken; cultural clues are important in understanding what is being communicated) Cultural ClusterApproach • Cultural Cluster – countries that share many cultural similarities • Greenfield Investment – a brand-new investment Hofstede's Five Dimensions • Social Orientation – a person's belief about the relevant importance of the individual and the group to which that person belongs ◦ Individualism – cultural belief that the person comes first ◦ Collectivism – cultural belief that the group comes first • Power Orientation – beliefs that people in a culture hold about the appropriateness of power and authority differences in hierarchies such as business organizations ◦ Power Respect – people in a culture tend to accept the power and authority of their superiors simply on the basis of the superior's positions in the hierarchy ◦ Power Tolerance – attaches much less significance to a person's position in the hierarchy • Uncertainty Orientation – feeling people have regarding uncertain and ambiguous situations ◦ UncertaintyAcceptance – people are stimulated by change and thrive on new opportunities; ambiguity is a context in which people can grow ◦ UncertaintyAvoidance – ambiguity and change are seen as undesirable and are avoided whenever possible • Goal Orientation – the manner in which people are motivated to work toward different kinds of goals ◦ Aggressive Goal Behavior – people place a high premium on material possessions, money, and assertiveness ◦ Passive Goal Behavior – people place a high value on relationships, quality of life, and concern for others • Time Orientation – the extent to which members of a culture adopt a long-term vs a short- term outlook on work/life/other societal aspects International Management and Cultural Differences • Cultural Convergence – the belief that the world's cultures are becoming more similar as a result of improvements in communications and transportation Understanding New Cultures • Self-reference Criterion – the unconscious use of one's own culture to help assess new surroundings • Cross-cultural Literacy – obtaining usable knowledge about other cultures • Acculturation – the process by which people understand a foreign culture, modify and adapt their behavior to make it compatible with that culture Chapter Five: The Nature of Ethics and Social Responsibility in International Business • Ethics – an individual's personal beliefs as to whether or not a decision, behavior, or action is right or wrong ◦ Ethical Behavior – behaviors that conforms to generally accepted social norms ◦ Unethical Behavior – behavior that does not conform to generally accepted norms • Values – things a person feels to be important Ethics in Cross-Cultural and International Context How an Organization Treats its Employees How Employees Treat the Organization How Employees and the Organization Treat Other EconomicAgents Managing Ethical BehaviorAcross Borders Guidelines and Codes of Ethics • Codes of Ethics – written statements of values and ethical standards that guides the firm's actions Ethics Training Organizational Practices and the Corporate Culture Social Responsibility in Cross-Cultural and International Contexts Organizational Stakeholders • Organizational Stakeholders – the people and organizations directly affected by the practices of an organization that have a stake in its performance The Natural Environmental General Social Welfare Managing Social ResponsibilityAcross Borders Approaches to Social Responsibility • Social Responsibility (CSR) – the set of obligations an organization undertakes to protect and enhance the society in which it functions ▪ Obstructionist Stance (CSR) – usually do as little as possible to address social or environmental problems [typical response to accusations: deny or avoid accepting responsibility for their actions] ▪ Defensive Stance (CSR) – will do everything required of it legally, but nothing more; often adopted by companies unsympathetic to the concept of CSR [typical response to accusations: managers insist that their job is to generate profits] ▪ Accommodative Stance (CSR) – mets legal and ethical requirements, but also will go beyond these requirements in selected cases [someone generally has to come knock on their door] ▪ Proactive Stance (CSR) – take arguments in favor of CSR to heart; view themselves as citizens in a society and proactively seek opportunities to contribute [indicate a sincere and potent commitment to improving general social welfare Managing Compliance • Compliance – formal organizational dimensions used to implement a firms CSR ◦ Legal Compliance – extent to which the organization conforms to regional, national, and international laws ▪ this task is assigned to the appropriate functional managers ◦ Ethical Compliance – the extent to which the members of the organization follow basic ethical (and legal) standards of behavior [ethics training;providing guidelines and codes of conduct] ▪ this task is usually assigned to a formal ethics committee ◦ Philanthropic Giving – awarding of funds or gifts to charities or other social programs [many corporations nowadays limit gift-giving due to the recent economic crisis; limited to areas in which they expect to get a significant return (a.k.a. Job training)] Informal Dimensions of Social Responsibility Organizational Leadership and Culture Whistle Blowing • Whistle-Blowing – the disclosure by an employee of illegal or unethical conduct on the part of others within the organization. [a companies response to whistle-blowing usually outlines/reflects their stance on CSR] Evaluating Social Responsibility • Corporate SocialAudit – a formal and thorough analysis of the effectiveness of the firm's social performance [generally undertaken by a task force of high-level managers within the firm] Difficulties of Managing CSRAcross Borders Anglo-SaxonApproach AsianApproach Continental Europe Approach Regulating International Ethics and Social Responsibility • Foreign Corrupt PracticesAct (FCPA) [U.S., 1977] – prohibits U.S. Firms, their employees, and agents acting on their behalf from paying or offering to pay bribes to any foreign government official in order to influence the official actions or policies of that individual to gain or retain business • BriberyAct [UK, 2010] – applies to corrupt actions done anywhere in the world by firms with a business presence in the UK; more extensive and comprehensive than the FCPA (applies to transaction involving gov. officials, transactions b/w two businesses, outlaws facilitation payments • Alien Tort Claims Act [U.S., 1789] – U.S. multinationals may be responsible for human rights abuses by foreign governments if the companies benefited from those abuses • Anti-Bribery Convention of the Organization for Economic Cooperation and Development [Canada, 2000] – ratified first by Canada, then by 37 other companies; an attempt to eliminate bribery in international business transactions; mandates jail time for those convicted of paying bribes • International Labor Organization (ILO) – major watchdog for monitoring working conditions in factories in developing countries Chapter Ten: The GeneralAgreement on Tariffs and Trade and the World Trade Organization • GeneralAgreement on Tariffs and Trade (GATT) [1947-1994]– developed as part of the Havana conference; agreement to reduce barriers to international trade; provided a forum for trade ministers to discuss policies and problems of common; replaced by WTO in 1995 The Role of the GeneralAgreement on Tariffs and Trade ◦ Most-Favored-Nation Principle (MFN) – requires that any preferential treatment granted to one country must be extended to all countries (other members) ▪ Two Exemptions/Exceptions: • Generalized System of Preferences (GSP) – to assist poorer countries with trade; GATT permitted members to lower tariffs to developing countries without lowering them for more developed countries; each country is free to choose the developing countries towards which to extend this privilege • Comprehensive TradeAgreements – promote economic integration [ex. EU/NAFTA] • Uruguay Round [Morocco, 1994]– Eighth and final round of GATT negotiations; cut tariffs on imported goods (from an average of 4.7% to an average of 3% ◦ came w/ realization that non-tariff barriers had become a more important impediment to the growth of world trade The World Trade Organization • World Trade Organization (WTO) [1 January, 1995] – headquarters in Geneva, Switzerland; includes 153 member countries/ 30 observer countries; members required to open their markets and adhere to WTO rules ◦ Three main goals ▪ Promote trade flows by encouraging nations to adopt non-discriminatory, predictable trade policies ▪ Reduce remaining trade barriers through multilateral negotiations • Doha Round – main concern: free trade in agricultural goods ◦ Cairns Group – group of major agricultural exporters (Argentina,Australia, Brazil, Canada, Thailand); pressures WTO members to ensure that the Doha round significantly reduces barriers to agricultural trade ▪ unable to satisfy India, Japan, or China ▪ Establish impartial procedures for resolving trade disputes between members GeneralAgreement on Trades in Services (GATS) • GeneralAgreement on Trades in Services (GATS) – the WTO is trying to negotiate a new general agreement on trade in services ◦ National Treatment – a country treats foreign firms the same way it treats domestic firms Agreement on Trade-RelatedAspects of Intellectual Property Rights (TRIPS) • Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) - ◦ on paper, the Uruguay Round substantially strengthened the protection granted to owners of intellectual property rights and developed enforcement and dispute settlement procedures to punish violators ◦ many owners of intellectual property believe that intellectual property theft has become more blatant and widespread subsequent to the Uruguay Round Trade-Related Investment MeasuresAgreement (TRIMS) • Trade-Related Investment Measures Agreement (TRIMS) – a modest start towards eliminating national regulations on FDI that may distort or restrict trade ◦ Trade-balancing rules – countries may not require some foreign investors to limit their imports of inputs to an amount equal to their exports of local production ◦ Foreign ExchangeAccess – Countries may not restrict foreign investor's access to foreign exchange ◦ Domestic Sales Requirements – Countries may not require the investor to sell a percentage of a factory's output in the local market Enforcement of WTO Decisions Forms of Economic Integration Free Trade Area • Free TradeArea – encourages trade among its members by eliminating trade barriers (tariffs, quotas, and other non-tariff barriers (NTBs) • Trade Deflection – nonmembers reroute (deflect) their exports to the member nation with the lowest external trade barriers • Rules of Origin – detail the conditions under which a good is classified as a member good or a nonmember good Customs Union • Customs Union – combines the elimination of internal trade barriers among its members with the adoption of common external trade policies toward nonmembers ◦ avoids trade deflection problem Common Market • Common Market – eliminate internal trade barriers among themselves and adopt a common external trade policy towards nonmembers; eliminates the barriers that inhibit the movement of factors of production (labor/capital/technology) among its members Economic Union • Economic Union – represents full economic integration of the economies of two or more countries ◦ reduces internal trade barriers; adopts common external trade policies; abolishes restrictions on the mobility of factors of production among members; requires members to coordinate economic policies (monetary policy/fiscal policy/taxation/social welfare) in order to blend thair economies into a single currency Political Union • Political Union – complete political and economic integration of two or more countries (effectively making them one country The Impact of Economic Integration on Firms The European Union • Benelux Nations – Belgium, the Netherlands, Luxembourg • Treaty of Rome – [France, W.Germany, Italy, and the Benelux Nations, 1957] established the European Economic Community (EEC); called for the development of a common market between the six member states ◦ 1970's – UK, Denmark, Iceland join the EEC → European Community (EC) ◦ 1980's – Greece, Portugal, Spain join EC ◦ 1993 – Treaty on European Union (Maastricht Treaty) ▪ EC becomes European Union (EU) ◦ 1995 – Austria, Finland, Sweden join EU ◦ 2004 – Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia join EU ◦ 2007 – Bulgaria and Romania join EU [total: 27 nations] Governing the European Union European Council • European Council [meets in Brussels, Belgium] – ◦ consists of heads of government or heads of state of each of the member states, President of the European Council, the President of the European Commission, and the High Representative of the Union for ForeignAffairs and Security Policy ◦ convenes twice every six months (quarterly) ◦ decisions based on consensus, unless treaties require differential treatment The Council of the European Union • Council of the European Union [HQ in Brussels, Belgium] – (previously Council of Ministers) ◦ composed of 27 representatives, each selected directly by and responsible to his/her home government ◦ a government sends a representative selected from a specific department, depending on the proposed content of the meeting The European Commission • European Commission [HQ in Brussels, Belgium] – composed of 27 people ◦ representatives to the EC are selected for five-year terms ◦ once in office, loyalties are to the EU, not the member countries to which each rep belongs ◦ “Guardian of the Treaties” The European Parliament • European Parliament [meets in Strasbourg, France] – comprises (currently) 736 representatives ◦ reps elected in national elections; serve five-year terms ◦ seats allocated in rough proportion to a country's population ▪ smaller states are “overrepresented” ◦ uses budgetary powers to enlarge its previously minimal influence in EU policymaking w/in the EU's governing institutions ▪ originally the body w/ the weakest influence w/in the EU ◦ gained additional powers under Maastricht,Asterdam, Nice, and Lisbon Treaties The European Court of Justice • European Court of Justice [sits in Luxembourg] – consists of 27 judges ◦ each judge serves a six-year term ◦ judges selected jointly by governments of the member states ◦ interprets EU law and ensures that members follow EU regulation and policies The Legislative Process • Co-decision Procedure – used for settling most issues (education, environmental protection, health, consumer policy, and free movement of workers) The Struggle to Create a Common Market • Harmonization – encouraged member countries to adopt common, EU-wide, “harmonized” regulations affecting intra-EU trade in goods and services and movement of resources • Mutual Recognition – if one member determines a product “appropriate for sale”, all other EU members are obliged to do so, under the Treaty of Rome From Common Market to European Union • Treaty on the European Union (Maastricht Treaty) – [ratified on 4 Nov., 1993] ◦ a new agreement to create a common foreign and defense policy among members ◦ a new agreement to cooperate on police, judicial, and public safety matters ◦ the old, familiar EC, w/ new provisions to create an economic and monetary union among member states ▪ Cohesion Fund – means of funneling economic development and aid to countries whose per capita GDP is less than 90% of the EU average ▪ Economic and Monetary Union (EMU) – an aspect of the Maastricht Treaty • tasked to create a single currency (euro) to replace existing national currencies • participant countries lost control over their own domestic money supplies and economic destinies ▪ Convergence Criteria (for any EU member wishing to adopt the Euro) - • Acountry's inflation rate must be no more than 1.5% pts higher than the average inflation rates of the three member states with the lowest inflation rates • Acountry's long-term interest rates must be no more than 2% higher than that of the average of the thee EU countries with the lowest long-term interest rates • Acountry must have been a member of the EU's revised exchange-rate mechanism (ERM II) for two years ◦ commits the country to maintaining the value of its currency against the euro within a +/- 15% band ▪ the country must not have devalued its currency during that time • Acountry's government budget deficit must be no more than 3% of its GDP • Acountry's outstanding government debt must be trending towards no more than 60% of its GDP ▪ European Central Bank – responsible for controlling the Eurozone's money supply, interest rates, and inflation ▪ Stability and Growth Pact – eurozone participants have agreed to limit their annual government deficits to no more than 3% of their GDPs • this severely curtails the ability to use fiscal policy to promote economic growth • Treaty for Europe (Treaty ofAmsterdam) [signed in 1997]– furthered the process of European integration ◦ strong commitment to attack the EU's chronically high levels of unemployment, particularly among younger citizens ◦ plan to strengthen the role of the European Parliament by expanding the number of areas that require the use of the co-decision procedure ◦ establishment of a two-track system that allows groups of members to proceed with economic and political integration faster than the EU as a whole • Treaty of Nice [effective Feb, 2003] – made modest adjustments in the EU's governance arrangements ◦ reduced number of areas where unanimity is required for Council approval ◦ adjusted the number of votes assigned to each Council member to ensure a qualified majority • European Convention [began deliberations in 2002; Constitution endorsed by leaders of EU member states in 2004] ◦ France and Dutch voters rejected the new Constitution • Treaty of Lisbon (Reform Treaty) [came into effect Dec, 2009]– adopted many of the governance changes proposed by the Constitutional Convention ◦ created a President of the European Council ▪ 30-month term ▪ possibility of a second term ◦ designated a High Representative of the Union for ForeignAffairs and Security Policy ▪ represents the EU on the world stage in terms of ForeignAffairs and Security Policy ◦ changed the voting rules governing Council decisions, starting in 2014 ◦ permitted a reduction in the size of the European Commission, to make it more manageable ◦ strengthened the powers of the European Parliament by extending the co-decision process into more areas, including justice and home affairs issues ◦ grants national legislatures the formal right to voice concerns about a proposed EU legislation ▪ if a minimal number objects to draft legislation, then the Commission must reexamine the proposed legislation in light of the national legislatures' concerns Other Regional Trading Blocs • European Free TradeAssociation – Iceland, Lichtenstein, Norway, and Switzerland ◦ European EconomicArea – Iceland, Lichtenstein, Norway pact w/ EU to create a common market ▪ market will promote among its members • free movement of goods • free movement of labor • free movement of services • free movement of capital The North American Free Trade Agreement • North American Free TradeAssociation (NAFTA) - ◦ implemented in 1994 ◦ reduces trade barriers and investment barriers among Canada, the United States and Mexico over 15 years ▪ based on U.S. Free TradeAgreement (1988) • Screwdriver Plant – a factory in which very little transformation of a product is undertaken (the only tool the workers need to assemble a product is a screwdriver) ◦ one major concern of NAFTAwas the interest of non-member countries in screwdriver plants in Mexico, to evade trade barriers and tariffs of U.S.And Canadian economies Other Free Trade Agreements in theAmericas The Caribbean Basin Initiative • Caribbean Basin Initiative (CBI) – overlaps two regional trade areas ◦ Central-American Common Market (CACM)– Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua ◦ Caribbean Community and Common Market (CAPRICOM) –Antigua and Barbuda, the Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, Trinidad and Tobago The CentralAmerica-Dominican Republic Free Trade Agreement • Central-America/Dominican Republic Free TradeAgreement (CAFTA-DR) [2004] – agreement among the United States, five Central-American countries (CACM), and the Dominican Republic ◦ calls for reduction of tariffs, non-tariff barriers, and investment barriers in commerce amongst its members ▪ 80% of exports/imports with these countries and the United States will be duty-free ▪ remaining tariffs are to be phased out over a ten-year period The MercosurAccord • Mercosur Accord [Argentina, Brazil, Paraguay, and Uruguay, 1991] – agreement to create a customs union ▪ agreed to establish common tariffs ▪ agreed to cut, over four years, the internal tariffs on goods (accounts for 85% of intra-Mercosur trade) ▪ full implementation began in 1995 ◦ Bolivia, Chile, Colombia, Ecuador, Peru and Venezuela joined as associate members, allowing them to enter into the free trade area component ◦ key element of the free-market-oriented economic reforms adopted by theArgentinian and Brazilian governments elected in 1989 to revitalize their stagnating economies ◦ magnet for FDI TheAndean Community • Andean Community – result of a 1969 agreement to promote free trade among five small S. American countries (Bolivia, Chile, Colombia, Ecuador, and Peru) ◦ attempt to make these five countries more competitive w/ the continent's larger contenders ◦ quite unsuccessful in the first 20 years (geography played a role in this) • Andes made transportation of goods/services b/w countries expensive ◦ 1973 - Venezuela joins Andean Community ◦ 1976 – Chile drops out ofAndean Community ◦ 2005 – theAndean Community negotiated a cooperative agreement with Mercosur. ▪ Argentina, Brazil, Paraguay and Uruguay joinAndean Community as associate members ▪ Bolivia, Chile, Colombia, Ecuador and Peru become associate members of Mercosur ◦ 2006 – Venezuela withdraws from theAndean Community ▪ in protest of Colombia and Peru signing trade promotion agreements with the United States TradeArrangements in the Asia-Pacific Region TheAustralia-New ZealandAgreement • Australia-New Zealand Closer Economic Relations TradeAgreement (ANZCERTAor CER) – took effect on 1 January, 1983 ◦ eliminated tariffs and NTBs betweenAustralia and New Zealand ◦ strengthened and fostered links and cooperation in diverse fields (investment, marketing, movement of people, tourism, and transportation) ◦ some areas excluded (broadcasting, postal services, and air traffic c
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