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GMS 723 (16)
Chapter 10

GMS 723- Chapter 10- Doing Business in the Integrated Americas.docx

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Ryerson University
Global Management Studies
GMS 723
Michael Manjuris

GMS 723- Chapter 10- Doing Business in the Integrated Americas  Contemporary nations have learned that economic boundaries often transcend geographical boarders and stimulate international trade  Negotiated economic integration such as the North American Free Trade Agreement (NAFTA) and the European Union (EU) fuel the exchange of economic wealth within regions and blocs and is the primary method used to harmonize international trade and investment in the global world  Strong evidence that trade tents to increase within a region of trading nations—interstates controls such as tariffs are reduced  Economic integration tents to have an overall positive effect on trade by providing increased understanding within trading blocs and more cooperation among nations  Most forms of regional economic cooperation are highly preferential o In the views of come, serve barriers to outside and are in opposition to multilateral trade concepts  Economic integration is not new—US was one of the earliest nations to employ economic integration in 1776  Outsourcing- practice in which companies move or contact out some or all of their manufacturing or service operations o other companies that specialize in those operations or to companies in other countries o Offshoring or producing sharing Free Trade Areas  Trade among the nations of the America has always need brisk, but tariffs and other barriers have often stifled profitability—economic growth  Incentives have been put in place to stimulate the potential market that could bring increased wealth to the hemisphere o Caribbean basin initiative (CBI) o Us/ Canada free trade agreement o North American free trade agreement o Free trade area of the Americans Miami summit  This area of no trade barriers would embrace a market of almost a billion people and stretch from Alaska to the tip of Argentina  Negotiations have stalled amid discussions leading to new approaches and as of this writing, little progress has been made  Another route being considered might be the merger and linking the other sub regional trade agreements with the FTAA Expanded NAFTA  NAFTA—composed of Canada, United Mexican States, and the USA  It is the richest market in the world and has been the first target for anyone doing international business  Offers preferential tariff treatment for business trading within the single market and is a major step towards stimulating regional trade  Rules are clear and understandable—required thought as they apply to given firms products  Tactical implications—depend on a product by product analysis as well as whether a form is an insider or outsider Key Provisions  NAFTA document is over 1000 pages and its companion tariff schedule is even longer  Changes are the result of users shoring up loopholes and finding better ways of doing business  Intent of the basic document (PAGE 244-245)  National treatment—goods of other parties will be treated, in terms of tariffs laws, as if they were domestic goods and extends to provincial and state measures  Temporary entry of business people o Each country will grant temporary entry to four categories of business people  Business visitor  Traders and investors  Intercompany transfers  Certain categories of professionals 1 GMS 723- Chapter 10- Doing Business in the Integrated Americas  Duty-free temporary admission of goods o Allows business people covered by NAFTA’s “temporary entry” provisions to bring into a NAFTA country “professional equipment and “tools of trade” on a duty free, temporary basis o Rules also cover the importance of commercial samples, certain types of advertising films, and goods imported for sports purposes or display and demonstration o Other rules provide that all goods that are returned after repair or alteration in another NAFTA country will re-enter duty free  Country-of-origin marking o Designed to minimize unnecessary costs—following rules apply  Any reasonable method may be used  Markings must be conspicuous and permanent  Marketing exemptions o Item incapable of being marked o Item cannot be marked prior to exportation without injury to goods o Item cannot be marked except at great expense—would discourage exportation o Crude substance o Original work of art  Certificates of origin o Each country under NAFTA has its own certificates for goods entering from non- NAFTA countries o Key elements  Item 5- description of goods  Item 6- HS tariff classification number  Item 7- preference  Item 8- producer  Item 9- net cost  Item 10- country of origin  Rules of origin o NAFTA eliminates all tariffs on goods originating in Canada, Mexico and the US— often of such financial benefit that foreign traders attempt to defeat preferential treatment  Going around the free trade area and importing through the state that has the lowest external tariff o Solution—rigorous set of rules of origin (ROO) that define which goods are eligible  ROO are required—each country maintains its own external tariffs from other countries  NAFTA reduces tariffs only for goods mane in North America  For free duty treatment—goods must obtain substantial North American content  Reward companies using North American parts and labor  Prevent “free riders” from benefiting through minor processing or transshipping  Mexico and Canada cannot be used as export platforms into the US market  Goods containing non-regional components qualify if they are sufficiently transformed in the NAFTA region to warrant change of tariff classification  How NAFTA ROO Works o Each product has a ROO that applies to it o Rules are organized according to the Harmonized Commodity Description and Coding system (HS)  First 6 digits of the HS classify products using internationally recognized commodity code o Determine the tariff elimination schedule for a particular product, exports must find out the products HS number o There are 2 types of rulesTariff shift and value content 2 GMS 723- Chapter 10- Doing Busin
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