Section Two
Cooperation Among Nations
International Business
by Ball, McCulloch, Frantz,
Geringer, and Minor
This chapter covers:
4
•The influence of
international
institutions
•The structure of the
United Nations
The Dynamics of
International Institutions
•The importance of
the WTO
•The European Union
and NAFTA
•OECD
•OPEC
•Economic Integration
•Regional Trade
Agreements
International Business
by Ball, McCulloch, Frantz,
Geringer, and Minor
McGraw-Hill/Irwin
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter Objectives
 Understand the influence of international organizations
 Discuss the structure and activities of the United Nations
 Understand the World Trade Organization
 Understand the European Union, NAFTA and other regional
trade agreements
 Know about the Organization for Economic Cooperation and
Development
 Describe the major purpose and effectiveness of OPEC
 Outline the four major levels of economic integration
agreements
4-2
The United Nations (UN)
 The UN is possibly the bestknown worldwide
organization
 Established at the end of
WWII
 Mission peacekeeping
 Created many
international entities
around the world
 Highly decentralized
4-3
United Nations Bodies
UN work carried out through five main
bodies
The General Assembly
The Security Council
The Economic and Social Council
The International Court of Justice
The Secretariat
4-4
The General Assembly
 All UN member-nations are members of the
General Assembly
 Each nation has one vote regardless of its size,
wealth, or power
 General assembly decisions have no legally
binding force for governments or citizens
 UN charter was signed in San Francisco,
California in 1945
 Today there are 191 members
4-5
U.N. Security Council
 Composed of 15 members
Insert Figure
UN SC in
session



4-6
5 permanent and 10
chosen members
The 5 permanent
members include the
People’s Republic of
China, France, Russia, the
United Kingdom, and the
United States.
Each permanent member
has the power to veto any
measure.
Economic and Social Council
 Concerned with economic problems including
 trade, transport, industrialization, economic
development, and social issues
 Makes recommendations on how to improve
education and health conditions
 Promotes respect for and observation of human
rights and freedoms of people everywhere
4-7
International Court of Justice
 Also called the “World
Court”
 Only nations may be
parties to litigation before
the “World Court”
 The International Court of
Justice has 15 judges who
must come from 15 different
countries
 Judges serve nine-year
terms
Secretariat
Carries out day-to-day administrative
functions
Headquartered in New York City
Services the other principle UN organs
Administers the UN’s programs and policies
Current Secretary-General Kofi A. Anna
Received Nobel Peace Prize December 2001
4-9
History of Global International Trade
 GATT 1947-1995
 Established in 1947,
negotiations are
conducted in “rounds”
 1947 to 1986, eight
“rounds” have taken
place
 Uruguay Round highly
successful
 January 1, 1995, the WTO
replaced GATT
 World Trade
Organization
 Designed to deal with
rules of trade between
nations
 Currently 147 members
 Headquarters Geneva,
Switzerland
 Challenges
 World Trade Agreements
 Protests and

4-10
demonstrations
Relies on goodwill
Organization for Economic
Cooperation and Development
 OECD
 Rich man’s club
 30 wealthiest nations
 Publishes extensive
research on
international business
and economic subjects
 Members work to
coordinate domestic and
international policies
4-11
Organization of Petroleum Exporting
Countries (OPEC)
 Eleven member nations
 Most members are in the Middle East
 Iran, Iraq, Kuwait, Qatar, Saudi Arabia, the United Arab
Emirates
 Three members are in Africa
 Algeria, Libya, and Nigeria
 Two members are elsewhere in the world
 Indonesia and Venezuela
 Non-OPEC oil producing countries
 Mexico, Norway, Russia and the United Kingdom
4-12
Economic and Political Integration
 Free Trade Area
 Tariffs are abolished among

members-countries
Each member-country
maintains its own external
tariffs on imports from
nonmember countries
 Customs Union
 A Free Trade Area where
member-countries add a
common external tariff
4-13
 Common Market
 A Customs Union plus the
abolition of restrictions on
the mobility of capital and
labor among membercountries
 Complete Economic
Integration
 Involves a high degree of
political integration as
member-countries surrender
important elements of their
sovereignty
European Union

Background
 Europe in shambles after
WWII
 Marshall Plan
implemented by OEEC
 1948 Benelux and
Western European Union
formed
 1970’s UK, Ireland and
Denmark joined EU
 1991 Maastricht Treaty
4-14
European Union
 A supernatural entity, meaning that it is a regional
government
 In order to join the EU, member-nations give a
certain amount of their sovereignty to the EU
 “Fortress Europe”
 Currently 25 members
 Ten new members in 2004
 The largest import and export market in the world
4-15
Institutions of the EU
European Commission
 Guardian of the
Treaty
 Brussels, Belgium
 Council of Ministers
 Policy-setting
institution
 Representative from
each country

4-16
Parliament of the EU
 Elected by popular
vote every 5 years
 Strasbourg, France
 732 members
 European Court of
Justice
 Decides Treaty of
Rome cases

EU Problems
 Cannot agree on system
of power
 Presence and expense
of fraud
 Financial scandal at
Eurostat 2003
 Low voter turnout
 Disagreement on
constitution
 EU regulations impact
US because of size
4-17
The European Monetary Union (EMU)
 Twelve EU nations currently participate in the EMU
 The 12 participating member-nations make up
an area often called the “euro zone”
 The three countries that do not participate are
Denmark, Sweden, and the United Kingdom
 The EMU created a new currency, the euro,
which became the official currency of the euro
zone countries on January 1, 1999
4-18
Sources of FDI in the US by Region
North American Free Trade Agreement
 Established on January 1, 1994
 Created a free trade area among
Canada, Mexico, and the United
States
 Purpose is to eliminate trade
barriers among the three
countries, creating a free trade
area
 Import duties have been
eliminated or reduced
among the three countries
4-20
Other Regional Groupings


Association of Southeast
Asian Nations (ASEAN)
 Created in 1967
 Brunei, Cambodia,
Indonesia, Laos,
Malaysia, Philippines,
Singapore, Thailand,
Vietnam
European Free Trade
Association (EFTA)
 Created in 1960
 Most now members of EU
4-21


African Trade Agreements
 Economic Community of
West African States
 Common Market for
Eastern and Southern
Africa
 Southern African
Development
Community
 The African Union
Central American Free Trade
Agreement
Other Regional Agreements
 Organization of American States
 An organization of 35 countries formed in 1948 in the
Western Hemisphere, dedicated to promoting
cooperation in the region
 Asia-Pacific Economic Cooperation
 Established in 1989 in response to the growing response
of the economies of Pacific Rim countries
 Mercosur
 Created in 1991, this economic FTA consists of
Argentina, Brazil, Paraguay, and Uruguay
4-22
Principle Offices of U.N.
U.N. President

H.E. Mr. Julian Robert
Hunte, President of the fiftyeighth session of the United
Nations General Assembly,
is Minister for External
Affairs, International Trade
and Civil Aviation of Saint
Lucia, a Senator and
Member of Parliament, a
Justice of the Peace and a
business executive
WTO Facts







Location: Geneva,
Switzerland
Established: 1 January 1995
Created by: Uruguay Round
negotiations (1986-94)
Membership: 147 countries
(on 23 April 2004)
Budget: 162 million Swiss
francs for 2004
Secretariat staff: 600
Head: Supachai
Panitchpakdi (directorgeneral
 Functions:
 Administering WTO
trade agreements
 Forum for trade
negotiations
 Handling trade disputes
 Monitoring national trade
policies
 Technical assistance and
training for developing
countries
 Cooperation with other
international
organizations
Regional Trade Agreements

The vast majority of WTO members are party to one
or more regional trade agreements. The surge in
RTAs has continued unabated since the early 1990s.
Some 250 RTAs have been notified to the
GATT/WTO up to December 2002, of which
130 were notified after January 1995. Over 170 RTAs
are currently in force; an additional 70 are estimated
to be operational although not yet notified. By the
end of 2005, if RTAs reportedly planned or already
under negotiation are concluded, the total number
of RTAs in force might well approach 300.
Top 10 States for EU Foreign Direct
Investment 2001
State
Investment,
USD billion
Texas
67.3
California
57.0
Michigan
38.8
New York
36.5
Illinois
26.4
Pennsylvania
24.5
New Jersey
20.7
Ohio
18.7
Louisiana
18.5
Indiana
18.4
Top 10 States Exporting to European Union,
2002
Total value,
USD billion
% 2001-02
California
18.58
-18.5
New York
9.5
-12.9
Texas
9.46
-11.6
Washington
7.89
-9.3
Massachusetts
6.47
-8.9
Illinois
6.02
-8.8
New Jersey
5.08
-13.9
State
Source: U.S. Census Bureau, Foreign Trade Division/ MISER 2002. Figures are for 2002.
Ohio
4.65
-10.6
Office of NAFTA and Inter-American
Affairs
Our Mission
 One of the primary objectives of the Office of NAFTA and
Inter-American Affairs (ONIA) is to increase access to foreign
markets for U.S. exports, through the elimination of tariff and
non- tariff barriers to trade. Our approach is three-fold:
 heavily contribute to the coordination and development of
U.S. trade policy in the Western Hemisphere for the
Department of Commerce.
 advise the U.S. business community, policy-makers, and
Congress concerning market access to Canada and Mexico
under NAFTA, by providing accurate and timely
information.
 assist U.S. companies experiencing problems gaining access
to Canadian and Mexican markets.
OECD Member Countries
Australia
Austria
Belgium
Canada
Czech Republic
Denmark
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Italy
Japan
Korea
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
OPEC