4.02 Exemplify the 4 types of economic
systems, & the effects of economic
integration on international marketing
http://youtu.be/sO75ZsvMkc8
YouTube clip on history of EU
The political economy 
refers to idea international business is
influenced by economic & political/legal
environments of countries
Republic - country with democratic process
which elects representatives to govern
country
 Ex) the US, France, South Africa, Haiti
https://www.cia.gov/library/publications/theworld-factbook/fields/2128.html#gm for
listing of government types

Economic systems

Governs how country controls production,
distribution, & consumption of goods &
services.

US-EU conflict activity


http://www.ustr.gov/countries-regions/europe-middleeast/europe/european-union
Review the link and list the points of contention in trade
between the US and EU. Also how does each bloc benefit
each other – Create in a PPT format and present to the class
Economic systems (con’t)

Market economy - free market answers 3
economic questions
 Private property & entrepreneurship
are characteristics.
 Have little government involvement.
 Do not exist in pure form, considered
theoretical.
Economic systems (con’t)

Mixed economy - system combines
market economy characteristics with
varying levels of government control.

Most developed countries are mixed



Ex) US, Canada, Germany, Japan, etc.
Government control mostly to protect
consumers & businesses.
Socialism - strong form of mixed economy


Sets strong rules & regulations to control
businesses practices.
Aims to protect all citizens.
Economic systems (con’t)

Planned or Command economy government acts a central planner and
answers three economic questions.



Former Soviet planned economies in Central
and Eastern Europe collapsed.
China has moved some products towards
market-based; many large industries
controlled by state.
Ex) North Korea, Cuba, Vietnam, and Laos
Economic systems (con’t)

Traditional economy - customs, religious
beliefs, & historical patterns determine
answers to 3 economic questions.

Ex) Amish, Aborigines, & Amazon tribes
http://youtu.be/csYN5qBXZBU YouTube clip on
types of economic systems
International marketers need different sales strategies
based on economic system

Many companies cautious about selling in
Chinese market due to weak government
controls over patents & competitive
practices.



Chinese companies known to steal product
designs & packaging.
Minimal regulations on workers safety or
environment.
Allows for lower production costs.
General trend


Last 15 years has been toward marketbased or mixed market economic
systems.
Economic systems benefit from
international marketers serving as key
tool in meeting needs of country.
Economic integration
Refers to development of trading
partnerships with elimination of trade
restrictions.
Free Trade Area (FTA)- all barriers
removed



Customs union - FTA with common trade
policy to non-members.

Ex) European Union & Turkey since 1996
Economic integration (con’t)



FTA (con’t) –
Common market - customs union that
allows labor, capital & technology to move
between members
European Union, an economic union,
coordinates economic policies between 27
member countries

http://www.youtube.com/watch?v=VvIPSY_Sbfg

US-EU conflict activity**
http://www.ustr.gov/countries-regions/europe-middleeast/europe/european-union


Review the link and list the points of contention in trade
between the US and EU. Also how does each bloc benefit
each other – Create in a PPT format and present to the
class
Regional trade agreements




ASEAN - Association of Southeast Asian
Nations
COMESA - Common market for East &
Southern Africa
CACM - Central American Common
Market
CARICOM - Caribbean Community &
Common Market
Regional trade agreements (con’t)






The more integrated the region, fewer
variances needed in product
development.
A standardized set of rules & regulations
brings down cost of product development
& sales.
BONUS ACTIVITY!!
Find 3 interesting facts…dig deep!!!
http://www.stoptheftaa.org/
http://www.globalexchange.org/campaigns/ftaa
The Americas

NAFTA - North American Free Trade Agreement
with Canada, Mexico & US.







Went into effect in 1994.
Eliminated duties on ½ of all US goods shipped to
Mexico.
Set agreements to phase out all other tariffs in
2008.
Protects patents, copyrights, & trademarks.
Eases investments between three countries
Set rules related to worker and environmental
protections.
Is controversial; is viewed as cause of job losses
in US.
The Americas (con’t)

CAFTA - Central America Free Trade
Agreement with Costa Rica, El Salvador,
Guatemala, Honduras, Nicaragua,
Dominican Republic & the US.



Went into effect in 2005.
80 % of U.S. consumer & industrial goods
exports no longer subject to tariffs.
Tariffs on rest of products phased out over
ten years by 2015.
The Americas (con’t)

FTAA - Free Trade Area of Americas will
include all countries in Americas except
Cuba
Was to be enacted in 2005, but lacked support
of proposed member governments & citizens
http://www.youtube.com/watch?v=VmHiICjcp6g
&playnext=1&list=PL0CFBDB0CCA8C4AC8
YouTube clip on FTAA
