Chapter 3 - Pearson Learning Solutions

102 PART 2 • THE GLOBAL MARKETING ENVIRONMENTDjibouti. The largest terminal of its kind in sub-Saharan Africa, it will be managed by DP World, asubsidiary of Dubai World. Such investments are welcome at a time when investors in Europe, stungby losses in the developed world, are cutting spending. As Djibouti President Ismail Guelleh noted,“What the Arabs are doing for us is what colonialists should have done for Africa.” 24SummaryThis chapter examines the environment for world trade, focusing on the institutions and regionalcooperation agreements that affect trade patterns. The multilateral World Trade Organization,created in 1995 as the successor to the General Agreement on Tariffs and Trade, provides aforum for settling disputes among member nations and tries to set policy for world trade. Theworld trade environment is also characterized by preferential trade agreements amongsmaller numbers of countries on a regional and subregional basis. These agreements can beconceptualized on a continuum of increasing economic integration.Free trade areas such as the one created by the North American Free Trade Agreement(NAFTA) represent the lowest level of economic integration. The purpose of a free trade agreementis to eliminate tariffs and quotas. Rules of origin are used to verify the country from which goods areshipped. A customs union (e.g. Mercosur) represents a further degree of integration in the form ofcommon external tariffs. In a common market such as the Central American Integration System(SICA), restrictions on the movement of labor and capital are eased in an effort to further increaseintegration. An economic union such as the EU, the highest level of economic integration, is achievedby unification of economic policies and institutions. Harmonization, the coming together of varyingstandards and regulations, is a key characteristic of the EU.Other important cooperation arrangements include the Association of Southeast AsianNations (ASEAN) and the Cooperation Council for the Arab States of the Gulf (GCC). In Africa,the two main cooperation agreements are the Economic Community of West African States(ECOWAS) and the South African Development Community (SADC).Discussion Questions1. Explain the role of the World Trade Organization. Why has the Doha Round of trade talksstalled?2. Describe the similarities and differences between a free trade area, a customs union, acommon market, and an economic union. Give an example of each.3. The creation of the Single Market in Europe has led to harmonization. What does thismean? How does harmonization affect a company’s global marketing strategies?4. What are the criteria for joining the euro zone?5. Identify a regional economic organization or agreement in each of the following areas:Latin America, Asia/Pacific, Western Europe, Central Europe, the Middle East, and Africa.6. Several key dates mentioned in the chapter are listed here. Can you identify the eventassociated with each? (The answers follow.)January 1, 1994January 1, 1995January 1, 1999January 1, 2002May 1, 2004January 1, 2009Answers: January 1, 1994—NAFTA becomes effective; January 1, 1995—WTO becomes thesuccessor to GATT; January 1, 1999—introduction of the euro as unit of account; January 1,2002—euro currency goes into circulation; May 1, 2004 —EU enlargement to 25 members;January 1, 2009—Slovakia becomes the sixteenth member of the euro zone24 Margaret Coker, “Persian Gulf States Bet on Africa Despite Downturn,” The Wall Street Journal(February 24, 2009), p. A9.000200010270740623Global Marketing, Sixth Edition, by Warren J. Keegan and Mark C. Green. Copyright © 2011 by Warren J. Keegan. Published by Prentice Hall.