Market Integration (TCW-Lesson-3)

MARKET INTEGRATION MR. JOVEN F. ANDRADA Market Integration  “Integration is taken to denote a state of affairs or a process involving attempts to combine separate national economies into larger economic regions”  Article 1 of the GATT states: "All contracting pa...

MARKET INTEGRATION MR. JOVEN F. ANDRADA Market Integration  “Integration is taken to denote a state of affairs or a process involving attempts to combine separate national economies into larger economic regions”  Article 1 of the GATT states: "All contracting parties must accord any advantage, favor, privilege or immunity granted to any product from any other country immediately and unconditionally to all other members".  Forms of integration 1. A Preferential Agreement involves lower trade barriers between those countries which have signed the agreement. 2. A Free Trade Area reduces barriers to trade among member countries to zero, but each member country still has autonomy in deciding on the external rate of tariff for its trade with non- member countries. EFTA (European Free Trade Area) and CEFTA (Central European Free Trade Area, ASEAN Free Trade Area (AFTA) ) 3. A Customs Union represents a higher stage of economic integration than a Free Trade Area as the member countries adopt a common external tariff. Until the end of 1992, the European Community was basically a Customs Union, although the stage of integration was somewhat higher in some respects, notably concerning the Common Agricultural Policy. 4. A Common Market goes beyond a Customs Union in allowing for free movement of labor and capital within the Union. Hence, the intention of a Common Market is to integrate both product and factor markets of member countries. The Single Market of the EU, which came into force on January 1, 1993, constitutes a Common Market. 5. An Economic Union is the highest form of economic integration. In addition to the conditions of a Common Market, member countries also agree to integrate monetary, fiscal and other policies.  Role of the International Financial Institutions (IFI) in the Global  Economy IFIs are institutions that provide financial support and professional advice for economic and social development activities in developing countries and promote international economic cooperation and stability.  The term international financial institution typically refers to the  International Monetary Fund (IMF)  and the five multilateral development banks (MDBs): the World Bank Group,  the African Development Bank,  the Asian Development Bank,  the Inter-American Development Bank, and the European Bank for Reconstruction and Development.  Services provided  Long-term loans (with maturities of up to 20 years) based on market interest rates.  Very-long-term loans (often termed credits, with maturities of 30 to 40 years)  Grant financing is also offered by some MDBs, mostly for technical assistance, advisory services, or project preparation. The International Monetary Fund  IMF was established by international treaty in 1945 as the central institution of the international monetary system.  Headquartered in Washington, D.C.  Activities of IMF  (a) It monitors economic and financial developments and policies, both in its member countries and at the global level,  (b) It lends to member countries experiencing balance of payments problems, and  (c) It provides the governments and central banks of its member countries with technical assistance and training in its areas of expertise.  The World Bank  Group Founded in 1945 at the same international conference as IMF, the World Bank at first was involved mainly in the reconstruction of countries devastated by World War II.  As those countries recovered, the Bank turned its primary focus to the second task envisioned for it, namely, the economic development of the world’s non industrialized countries, with the goal of lifting the world out of poverty. The World Bank Group, which is headquartered in Washington, D.C., is made up of five institutions: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID). The Asian Development Bank  ADB was founded in 1966 and is headquartered in Manila. ADB’s vision is a region free of poverty. Its mission is to help its developing member countries reduce poverty and improve the quality of life of their citizens through policy dialogue, loans, technical assistance, grants, guarantees, and equity investments.  History of Global Market Integration  At the Bretton Woods Conference in 1944 it was decided to establish a new monetary order.  The IMF and the World Bank were borne out of this Conference of the end of World War II.  The World Bank was established to help the restoration of economies disrupted by War.  On the other hand, the IMF is primarily a supervisory institution for coordinating the efforts of member countries to achieve greater cooperation in the formulation of economic policies. Attributes of a Successful Global Company Value Opportunity to Expand Understand Different Cultures Online Transaction With International Partners Measure Success Global Thinkers