International business
naiffalah
chapter_3_fenton_presentation_handouts.pptx1
International Institutions from an International Business Perspective
Chapter 3
Learning Objectives
LO1: Explain the importance of international business institutions to business decision makers and their firms.
LO2: Describe the various types of institutions, drawing on institutional theory.
LO3: Outline the United Nations as an institution and its relevance to international business.
LO4: Describe the purposes of the two global monetary institutions, the IMF and the World Bank.
Learning Objectives
LO5: Discuss the purpose of the World Trade Organization and its impact international business.
LO6: Discuss the resources of the Organisation for Economic Cooperation and Development
LO7: Identify the levels of economic integration and the effectiveness of the major trading blocks.
LO8: Discuss the EU, its impact and its challenges going forward.
What Are Institutions?
Socially constructed _______
Have regulative, normative, cultural elements
Provide stability and meaning to social life
Organized collections of basic rules and unwritten codes of conduct
Set limit to firms’ conduct
Reduce uncertainty in the firm’s _______
New Institutional Theory
Norms that regulate the relations of individuals to each other
Formal _______ : influence behavior through laws and regulations
EU’s Directorate General for Competition
The International Court of _______
Informal Institutions: depend on customs and ideologies to mold behavior
Patterns surrounding firm-supplier relationships in Japan vs. the U.S.
Chinese _______ (meeting of obligations beyond normal expectations)
Institutional Theory and International Business
Institutions function to influence the range of actions the firm can take
Formal institutions are major in their geographical areas
National Governments
Informal institutions
Professional organizations
Non-governmental organizations
_______ without borders
International Institutions by purpose
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The United Nations (UN) Global Level Institutions
The _______ _______ is:
an international organization of 193 member nations dedicated to promoting peace and stability globally.
Majority of state members are developing nations
One nation = one vote! Regardless of size or economy.
The UN created many international entities around the world
Names indicate their area of specialization
The International Trade Center of the U.N
The International Civil Aviation Organization
Office of the Coordinator for Humanitarian Affairs
Many others. Check out www.un.org.
Let’s look at some of these specialized agencies.
Global Level Institutions
United Nations Conference on Trade and Development (_______ )
was created because of demand for an agency to further interests of developing _______ .
influencing the International Monetary Fund (IMF) to liberalize financing for developing countries.
getting IMF financing for commodities from developing countries.
getting developed countries to grant easier loans or grants to developing countries.
More on the IMF later.
Global Level Institutions
United Nations Industrial Development Organization (UNIDO) was established to aid developing countries.
_______ gives technical assistance, does in-plant training and feasibility studies and coordinates UN activities in the industrial development of developing countries.
Global Level Institutions
United Nations Children’s Fund (UNICEF) aids developing countries with:
maternal and child health
_______ nutrition
disease control
_______
Global Level Institutions
Economic and Social Council (ECOSOC)
UN body concerned with economic and social issues such as trade, development, education, and _______ _______
Global Level Institutions: UN (continued)
The Economic and Social Council
is concerned with _______ issues such as trade, transport, industrialization, economic development, and social issues
makes recommendations on how to improve education and _______ conditions
promotes respect for and observation of human rights and freedoms of people everywhere
Global Level Institutions
World Health _______ (WHO) operates an international warning system to alert the world to the outbreak and spread of disease from any part of the world
WHO assists member countries:
improve health services
_______ mass disease
stimulate medical research
Global Level Institutions
Food and Agriculture Organization (FAO) work includes:
encouragement of investments in developing countries _______
battles against insects and rodents
developing disease-resistant grains, fruits and vegetables
improving range and pasture
combating animal diseases
improving commercial fish _______
Global Level Institutions
International Labor Organization (ILO).
The ILO objectives are to better the conditions of _______ .
Each member country sends four delegates of whom, in theory, two represent the government, one labor and one the business employers.
American business and labor leaders complained that theory was impossible with communist _______ which control all labor unions and own all business.
The United States quit the ILO in 1977 but rejoined in 1980.
187 ‘Conventions’
The United Nations: Leadership
UN work carried out through
The General Assembly
The Security Council
The Economic and Social Council
The International Court of Justice
The Secretariat
Six official languages of the UN
Arabic, Chinese, English, French, Russian, and Spanish
Let’s Look
The General Assembly
All UN member-nations are members of the General _______
Each nation has one vote regardless of its size, wealth, or power
General assembly decisions have no legally _______ force for governments or citizens
UN charter was signed in San Francisco, California in 1945
Currently there are 193 member nations. Latest is South Sudan.
The Security Council
The _______ Council
is the main policy-setting body of the UN composed of 15 members including 5 permanent members
The 5 _______ 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.
The Secretariat
The _______ carries out day-to-day administrative functions of the UN and
is headquartered in New York City
services the other principle UN organizations
administers the UN’s programs and _______
Who is the current Secretary General of the United Nations and where is he from?
The Current United Nations Secretary General
_______ of the Republic of Korea, the eighth Secretary-General of the United Nations.
The International Court of Justice
The International Court of Justice is also called the “_______ _______ ”
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
Give advisory opinions on legal questions referred to it by authorized _______ organizations and agencies.
Global Level Institutions Bretton Woods
Meeting in Bretton Woods New Hampshire, U.S. at end of World War II (July 1944)
44 Allied Nations
Established Monetary Institutions
International Monetary Fund (IMF)
World Bank
Established a _______ _______
Global Level Institutions International Monetary Fund
Promotes international _______ cooperation
Coordinates multilateral monetary rules and their enforcement
185 members who contribute funds on quota base
Quota determines the country’s number of _______
IMF lends out these funds to members
Global Level Institutions International Monetary Fund
Facilitates expansion and balanced growth of _______ trade
Promotes exchange stability and orderly exchange arrangements among members
Establishes a _______ system of payments
Makes funds available for balance of payments corrections
Global Level Institutions International Monetary Fund
Articles of agreement set up the post WWII fixed exchange rate system
Currencies had a par value based on gold and the U.S. dollar
UK £1.00 = U.S. $2.40
French Franc 1 = U.S. $0.18
German Mark 1 = U.S. $0.2732
System was in place till 1971
U.S. went off the gold standard
Floating _______
Global Level Institutions International Monetary Fund Current Issues
Convince rising economies to accept _______ responsibilities beyond their economies
Prevent protectionism in U.S. and Europe as Asian economies grow
Become action-prone as financial crises become global and more complex
Support the process of _______ of currencies
Help financial markets spread risk from environmental issues
Global Level Institutions World Bank’s Major Institutions
The World Bank funds development projects
Comprised of two major and three smaller institutions
International Bank for Reconstruction and _______ (known as the World Bank)
Funds development loans to middle income, credit-worthy countries
International Development Association
Funds poorer nations’ _______
Global Level Institutions World Bank’s Minor Institutions
All three small institutions aim at developing country support
International Finance Corporation
Invests in companies and financial _______
Multilateral Investment Guarantee Agency
Guarantees private sector investment: political risk insurance, technical assistance, dispute mediation
International Center for the Settlement of Investment Disputes
_______ disputes between governments and foreign investors
Cooperative Military and Security Agreements
North Atlantic Treaty Organization (NATO)
Security alliance of 28 North American and _______ nations
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Cooperative Military and Security Agreements
Association of Southeast Asian Nations (ASEAN)
Ten-member body formed to promote peace and cooperation in Southeast _______
NATO
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World Trade Organization (WTO)
The WTO: www.wto.org
A multinational organization designed to deal with rules of trade between _______
As of July 2014, the WTO had 160 members
The WTO is headquartered in Geneva, Switzerland
Goal is to help producers, exporters, and importers conduct their business by reducing or eliminating _______ barriers and restrictions worldwide
General Agreement of Tariffs and Trade (GATT: Now the WTO)
Established in 1947, negotiations are conducted in “rounds”
1947 to 1994, 12 “_______ ” have taken place
First seven rounds was reduction of tariffs among industrial countries from 40 percent to 5 percent
9 out of 10 disputes among trading nations brought to GATT were settled satisfactorily
January 1, 1995, the WTO replaced GATT
Most favored nation (MFN) clause
Agreement that GATT member-nations would treat all members _______ in trade matters
International Economic Institutions
WTO Principles
Trade will be without _______
Trade should be freer, with trade barriers negotiated downward
Trade should be _______
Trade should be more competitive
Trade should be more beneficial for less developed countries, encouraging development and _______ reform
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WTO Challenges
Major problem: _______ subsidies and tariffs
Trade-related _______ property rights (TRIPS): protection of copyrights, trademarks, trade secrets, other intellectual property matters
Organization of Petroleum Exporting Countries (OPEC)
OPEC is: www.opec.org
an international organization dedicated to promoting economic expansion in its _______ - _______
Most OPEC members are in the Middle East
Iran, Iraq, Kuwait, Qatar, Saudi Arabia, the United Arab Emirates
Four members are in Africa
Angola, Algeria, Libya, and Nigeria
One is elsewhere in South America
Venezuela
Major Forms of Economic and Political Integration: Why promote free trade?
Free Trade Area
Tariffs are abolished among members-countries
Each member-country maintains its own external tariffs on imports from nonmember _______
_______ Union
A Free Trade Area where member-countries add a common external _______
Major Forms of Economic and Political Integration: Why promote free trade?
_______ Market
A Customs Union plus the abolition of restrictions on the mobility of capital and labor among member-countries (EU)
Complete Economic Integration
Involves a high degree of political integration as member-countries surrender important elements of their _______ .
The European Union
The European Union is
The _______ import and export market in the world
Second only to the United States in the size of its GDP
Accounts for 20 percent of world _______
The European Union (EU) continued
The European Union
A _______ entity, meaning that it has a regional government with separate national governments.
Current membership in the EU is at 28
In order to join the EU, member-nations give a certain amount of their sovereignty to the EU
Central Government
European Central Bank
Membership Map of the European Union
The European Union (EU)
The 1957 Treaty of _______
Serves as the fundamental law of the EU
EU member-nations sought to achieve four fundamental freedoms
_______ of movement of goods, services, capital, and people.
The European Union (EU)
Institutions of the European Union
The Commission
The Council of Ministers
The _______
The Court
Let’s Look
The European Commission
The European _______
is the executive institution in charge of administering the daily operations of the EU
is called the “Guardian of the Treaty”
Charged with ensuring proper implementation of the provisions of the Treaty of Rome
Consists of 28 commissioners who come from member-nations
The Council of Ministers
The Council of Ministers is the primary policy-setting institution of the EU
Council ministers are members of their respective national governments.
The Council sets forth regulations and directives .
_______ of the Council rotates among the member-nations.
Holder of the presidency sets the agenda and location of any meetings.
_______ is the current leader of the council, run in a trio system. July change. (Latvia and Luxembourg are next.)
Parliament of the European Union
The Parliament of the European Union
First elected in 1979 and now elected by vote throughout Europe every five years
Currently has 785 members from the 28 member nations, representing over 100 European political parties and 500 _______ people.
Has been given power to reject the EU _______
The European Court of Justice
The European Court of ______
Decides all cases arising under the Treaty of Rome
Authority supersedes that of the member-countries’ courts.
Assisted by the Court of First ______
A preceding lower court.
The European Monetary Union (EMU)
The ______ Monetary Union
Twelve EU nations currently participate in the EMU
The 28 participating member-nations make up an area often called the “euro zone”
Members states use the common currency, the Euro.
Sweden and the UK still use old national ______.
North American Free Trade Agreement (NAFTA)
The North American Free Trade Agreement
was established on January 1, 1994
created a free trade area among Canada, Mexico, and the ______ ______
purpose is to eliminate trade ______ among the three countries, creating a free trade area
Other Regional Grouping of Nations
Association of Southeast Asian Nations (ASEAN)
European Free Trade Association (EFTA)
African Trade Agreements
Organization of American States (OAS)
Asia-Pacific Economic Cooperation (APEC)
Mercosur
Let’s Look
Other Regional Grouping of Nations
Association of Southeast Asian Nations
Created in 1967 and taken together, its members are major trading partners of the United States
Goal is to reduce ______ ______
Members include Brunei, Cambodia, Indonesia, Malaysia, Myanmar (formerly Burma), the Philippines, Singapore, Thailand, and Vietnam. It is also a loosely fit political agreement.
Other Regional Grouping of Nations
EFTA: A free trade area between Norway, Iceland, Liechtenstein, Switzerland.
Organization of American States
An organization of 35 countries formed in 1948 in the Western Hemisphere, dedicated to promoting cooperation in the region: economic and political
Asia-Pacific Economic Cooperation
Established in 1989 in response to the growing response of the economies of Pacific Rim ______
______
Created in 1991, this economic FTA consists of Argentina, Brazil, Paraguay, and Uruguay (See Map)
Regional Trade Agreements in Central America and South America
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African Trade Agreements
______ Trade Agreements
Promote economic growth throughout the continent
Economic Community of West African States (ECOWAS)
Common Market for Eastern and Southern Africa (COMESA)
Southern African Development Community (SADC)
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African Trade Agreements
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