CHAPTER FOUR: Dynamics of International

Institutions

Overview
Political integration between countries has
increased since 1945. Business leaders today must
deal not only with state and national governments
but a myriad of international institutions.
Institutions such as the World Trade Organization,
United Nations, North American Trade Agreement and
European are growing in importance and greatly
influence how business is conducted.

The text presents in depth analysis of the United

Nations, European Union and North American Free
Trade Agreement tracing each organizations
beginning to the current state of the organization.

I. COOPERATION AMONG NATIONS

Concept Preview
Appreciate the influence international
institutions and agreements have on
international businesses and why
understanding them is import for those in
business.
A. Relationship Between International
Organizations and International Business
1. One factor increasing the
globalization is the cooperation
between nations through various
international organizations.
2. It is critical that business people
involved in international business
understand the impact international
organizations have on businesses.
3. Business leaders now need to
understand political environments and
laws throughout the world rather than
in a specific market.

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 4. This political integration adds an
additional layer of complexity.
II. United Nations (UN)
Concept Preview
Discuss the structure of the United Nations
and explain the activities of the UN in
economic and social fields.
A. United Nations an International
Organization of 191 Member Nations.
1. Conceived and founded after World War
II.
2. The UN is largely known for its role
as a peacekeeping organization.
3. This organization is quite
decentralized with office scattered
throughout the world.
4. The UN has grown tremendously since
its establishment in 1945.
Developing countries now constitute a
majority of the UN membership.
B. Structure of the UN
1. Security Council has 15 members of
which five are permanent members.
2. Five permanent members consist of the
United States, Russia, China, France
and United Kingdom. All five of the
permanent members have veto power.
3. The remaining ten seats on the
Security Council are selected by the
General Assembly for a two-year term.
Representation for the ten non-
permanent members always includes one
nation from the following regions:
Africa, Asia and Eastern Europe and
two countries each from Western
Europe and Latin America.
4. General Assembly consists of all
other member nations of the UN. Each
member nation maintains one vote in
the General Assembly.

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 5. International Court of Justice (ICJ)
also referred as the World Court.
This court renders legal decisions
involving disputes between national
governments and was established to
resolve disputes between sovereign
states not between individuals.
a. The court has worldwide
jurisdiction to settle disputes.
b. ICJ has 15 judges who must come
from different countries with each
judge serving nine-year terms.
6. Secretariat is the staff of the UN
and carries out the day-to-day
administrative functions.
a. Secretariat is headed by the
Secretary-General and is
headquartered in New York City.
b. Secretary-General is appointed by
the General Assembly for a five-
year renewable term.

Significance of the UN for International Business

People
Given the already complex nature of international
business the United Nations hopes to provide in the
world of Secretary-General Kofi Annan a “soft
infrastructure” or rules of the road to help
facilitate the international exchange of goods,
services, money and information. Within the United
Nations there are 28 major organizations and each
one contributes to commercial order and openness
the most important being United Nations Commission
on International Trade Law.

ƒ Discuss what Kofi Annan meant when he describe

a “soft infrastructure” and why this might be
important to business leaders?

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III. WORLD TRADE ORGANIZATION (WTO)
Concept Preview
Understand the importance of the World Trade
Organization to world business and trade.
A. World Trade Organization is a
multinational organization designed to
deal with rules between nations.
1. The goal of the WTO is to help
producers of goods and services,
exporters, and importers conduct
their business by reducing or
eliminating trade barriers and
restrictions.
2. Headquartered in Geneva, Switzerland
and consists of 147 member economies.
3. At the conclusion of World War II the
International Trade Organization
(ITO) would function in the trade
areas and encourage free trade. By
the time the ITO charter was ready
for ratification, world opinion began
to sift and the ITO charter was not
ratified.
B. General Agreement Tariffs & Trade (GATT)
1947-1995
1. Was first established as a temporary
organization prior to the arrival of
ITO and when it became clear that ITO
would not be ratified, GATT simply
continued to operate. GATT lasted
1947 – 1995 before being replaced by
the creation of the World Trade
Organization.
2. To reduce tariffs and other trade
obstacles, negotiations were
conducted in eight session or rounds.
3. First seven rounds were successful in
that tariffs among developed
countries were reduced from an
average 40 percent to 5 percent. In

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 addition 9 of 10 disputes among
trading nations were settled
satisfactorily, discreetly, and with
publicity.
4. During the existence of GATT the
volume of trade in manufactured good
multiplied 20-fold.
C. Creation of the World Trade Organization
(WTO)
1. At the completion of the Uruguay
Round GATT negotiation, January 1,
1995, the WTO began to administer
international trade agreements.

Worldview: Trade Benefit Uneven

A recent United Nations study entitled “A Fair
Globalization” discussed uneven benefits for poorer
nations and warned of a growing gap between the
rich and poor nations. The report hopes to
highlight inequities so they can be addressed in
the near future.

ƒ Many are disillusioned that free trade has not

alone led to sustained growth, what other
factors must be present for growth to take
place?

ƒ Africa and the Middle East remain regions in

which sustained economic growth has been
difficult to achieve yet India and China have
been the center of economic miracles for over
two decades. Why is the case? What are the
similarities and differences between the two
areas.

2. The WTO like GATT has had success

lowering tariffs and discouraging
quotas, establishing fairer customs
procedures, standardizing import
documentation and settling disputes

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 between exporting and importing
nations.
D. WTO and Developing Nations
1. WTO’s present director General
Supachai Panitchipakdi of Thailand is
the first to come from a developing
nation.
2. Recent WTO Doha round has been called
the “Development Round” because of
its focus on the world’s poorest and
most vulnerable countries.
3. Recent Doha Round of trade
negotiations collapsed when
developing countries banded together
to fight Europe Union and United
States farm subsidies.
E. Clouds on WTO’s Horizon
1. Regional trade agreements, such as
European Union and the North American
Free Trade Agreement may weaken the
WTO. Bilateral agreements could
disrupt trade for countries that are
not privy to such agreements.
2. WTO has been hindered by protests
especially in 1999 at Seattle during
trade negotiations. Demonstrators
were protesting the WTO perceived
insensitivity towards matters of
concern in such diverse areas as
environmental issues, human rights,
working conditions and labor
protection in the United States.
3. Some worry that the WTO has become to
large for traditional negotiating
tools to work.
4. One major problem with the WTO is the
organizations lack of enforcement
procedures. The WTO relies on the
goodwill of its members to implement
it decisions.

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IV. ORGANIZATION FOR ECONOMIC COOPERATION AND
DEVELOPMENT (OECD)
Concept Preview
Know about the Organization for Economic
Cooperation and Development and its use as a
source of valuable information.
A. Organization for Economic Cooperation and
Development is Often Called the “Rich
Man’s Club”.
1. Headquartered in Paris this
organization is composed of 30 of the
wealthiest nations in the world.
Although membership is open to all
countries committed to market economy
and a pluralistic democracy.
2. This organization provides
information on economic and other
activities with its member-nations
and also giving them a forum to
discuss economic and social policy.
3. OECD publishes extensive research on
a wide variety of international
business and economic subject and is
known for individual surveys that can
be valuable for business leaders and
students.
4. An important OECD initiative is the
elimination of bribery/corruption and
to establish a code of conduct for
multinational companies.
V. ORGANIZATION OF PETROLEUM EXPORTING
COUNTRIES (OPEC)
Concept Preview
Describe the major purpose effectiveness of
OPEC.
A. OPEC
1. In an effort to improve bargaining
power with large oil companies oil-
exporting countries united they could

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 bargain more effectively with large
in 1959 formed OPEC.
2. Of the 11 OPEC member-nations all are
developing economies. Member nations
include: Iran, Iraq, Kuwait, Qatar,
Saudi Arabia, United Arab Emirates,
Algeria, Libya, Nigeria, Indonesia
and Venezuela.
B. Economic Muscle and Political Strength
1. 1973 and 1974 in response to western
nations support of Israel after that
nation was attacked by Egypt and
Syria during the Yom Kipper War OPEC
restricted the flow of oil.
2. This restriction or embargo forced
gasoline prices up dramatically as
the price for a barrel of oil (42
gallons) shot up from $3 to $11.65 in
January 1974.
3. OPEC members control 40 percent of
worlds known oil reserves giving them
a measure of control over the world
economy. LECTURE ENHANCEMENT 4-
1/CRITICAL THINKING EXERCISE 4-1
VI. ECONOMIC INTEGRATION
Concept Preview
Outline the four major levels of economic
integration agreements.
A. The Four Major Forms of Economic
Integration
1. As we have discussed political and
economic integration is increasing
interaction between nations. Often
this begins with a free trade area,
moves to a custom union, then a
common market, and eventually full
economic integration.
2. Free Trade Area (FTA) – Tariffs are
abolished between member countries
and goods are allowed to freely move

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 with FTA countries. If restrictions
apply they typically apply to
services. Member nations are allowed
to maintain external tariffs on
imports from nonmember countries.
NAFTA is an example of an FTA.
3. Customs Union – similar to a FTA with
the exception member-nations add a
common external tariff.
4. Common Market – A common market is
customs union plus the abolition of
restrictions on the mobility of
services, people, and capital among
the member-nations.
5. Complete Economic Integration –
involves a high degree of economic
and political integration as member –
nations surrender certain important
elements of their sovereignty. The
best example of complete economic
integration is the European Union.
Complete economic integration
involves some elements of the
following:
a. Super central bank is created to
establish complete monetary
policies and fiscal policies.
b. Supranational authority
establishes labor, social policies
for all member nations.
c. A single currency replaces member
nations’ existing currencies.
VII. THE EUROPEAN UNION
Concept Preview
Understand the European Union and how it
affects business.
A. Background
1. The European Union (EU) grew out of
the ashes of World War II. Many
Europeans yearned for greater

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 cooperation in an effort for peace to
take hold.
2. One proponent of such integration was
Altiero Spinelli a member of the
Italian resistance during who argued
for “a federal Europe with a written
constitution, supranational
government directly responsible to
the people of Europe and not national
governments, along with an army under
its control, with no other military
forces being permitted”.
3. To help rebuild Europe the United
States provided billions of dollars
under the Marshall Plan to aid in
reconstruction of Europe.
4. In order to facilitate implementation
of the Marshall Plan and to ensure
economic integration within Europe,
the Organization for European
Economic Cooperation (OEEC) was
established in 1947. While the OEEC
was administering Europe was
coalescing in other areas:
a. In 1948, three of Europe’s
smallest countries – The
Netherlands, Belgium and
Luxembourg formed the Benelux
Union. The goal of the member
states was to become a full
economic union in the future.
b. Western European Union (WEU) was
created in 1948. The organization
consisted of United Kingdom,
France, Belgium, The Netherlands
and Luxembourg.
i. The organization provided
for “collaboration in
economic, social and
cultural matters and for

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 the collective self-
defense”.
ii. Subsequent creation North
American Treaty
Organization (NATO) made
WEU military mission
obsolete.
iii. Although NATO replaced the
need for the WEU, the WEU
nevertheless showed that
European cooperation was
possible on issues beyond
the economy.
5. Out of these organizations grew the
seeds of cooperation that eventually
grew into what is now the EU.
a. 1952 Belgium, France, Germany,
Italy, Luxembourg, and The
Netherlands formed the European
Coal and Steel Community (EC&SC).
b. Treaty of Rome was signed by the
six member economies of the EC&SC
in 1958 and contained two major
provisions.
i. The treaty established the
European Economic Community
(EEC). Goal of the EEC was
to extend the common market
common market for coal and
steel to other sectors of
the economy.
ii. Treaty also established the
European Atomic Energy
Community (Euratom). Goal
of Euratom was to create a
common market for the
atomic energy industry.

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B. EUROPEAN UNION TODAY
1. Growth and Expansion
a. Due to waves of expansion the EU
membership now stands at 25.
b. EU marketplace consists of 455
million people and accounts for 28
percent of world trade.
c. EU is now the second largest
import and export market.
2. Purpose of EU
a. EU is a supranational entity,
meaning it is a regional
government.
b. In order to joint the EU member-
nations give a certain amount of
their sovereignty to the EU.
c. EU has the power to tax and can
implement legislation much like
the United States Congress
d. European Court of Justice has the
ability to impose fines and other
sanctions on individuals,
companies and even member nations
that violate the Treaty of Rome.
CRITICAL THINKING EXERCISE 4-2
C. Institutions of the European Union
1. European Union consists of four main
institutions. These institutions
function similar to those performed
by a national government.
a. European Commission
b. Council of Ministers
c. Parliament
d. Court
2. European Commission is the executive
institution and is charge of
administering the daily operations of
the EU.
a. Called the “Guardian of the
Treaty”.

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 b. European Commission is charged
with ensuring proper
implementation of the provisions
of the Treaty of Rome.
3. Council of Ministers is the primary
policy-setting institution of the EU.
Important decisions are made in the
Council of Ministers. One minister
from each member country represents
that countries interest.
a. Recent directives have dealt with
health and safety issues.
b. Council of Ministers has come
under criticism for cumbersome
practices, the short six-month
rotation of the Council
presidency, meeting secrecy and
its power relative to other EU
institutions.
4. Parliament of the EU was first
elected in 1979 and is now elected by
popular vote throughout Europe every
five years.
a. Members of Parliament are seated
by political party rather than
national affiliation.
b. Party identification is an effort
to create a political organization
rather than a national
institution.
5. European Court of Justice (ECJ)
decides cases arising under the
Treaty of Rome. On matters related
to the EU its authority supersedes
that of the member-nations’ national
courts.
a. Influence of ECJ is growing.
b. Many decisions are now made by the
EU Court of First Instance
responsibilities include claims

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 made in several areas of interest
to business people: competition,
commercial policy, regional,
social policy, institutional law,
trade mark law, and transport.
D. United States of Europe?
1. EU is now a major world force and the
member nations have made great
strides toward union.
2. Many Europeans dream of a United
States in which the movement of
people, money, goods, and services
would be as free as it is in the
United States.
3. The 1991 Maastricht Treaty was signed
with goals that include economic and
monetary union with a European
central bank to replace national
central banks and created a European
currency, the euro.
a. Maastricht Treaty calls for the EU
to “assert its identity on the
international scene, in particular
through the implementation of a
common foreign and security policy
including the eventual framing of
a common defense policy, which
might in time lead to a common
defense”.
b. For the first time the Maastricht
Treaty united the twin goals of
Europe for a political and
monetary union.
E. Fortress Union?
1. This term has been used by outsiders
to express fears that the EU would
deny its privileges to other nations,
their companies and their products.
Although these fears are real they
have not been accurate.

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 2. European Union is not without its
problems there are disagreements
power should rest with EU
institutions or maintain the current
decentralized system in which most
power rest with member-nations.
a. Fraud is one subject that
continues to plague the EU. It is
estimated that fraud is costing
the EU seven billion dollars from
the agricultural budget.
b. Another area of concern is
organized crime defrauding the EU
in unpaid customs duties, value-
added taxes, and export subsidies.
c. Voter apathy is a major concern in
June 2004 election overall voter
turnout was 44.2 percent.
F. EU Actions
1. While the EU like any governing body
is fraught with problem the
accomplishments are impressive.
2. EU directives have superseded 25 sets
of national rules.
3. The EU has harmonized 100,000
national standards, labeling laws,
testing procedures, and consumer
protection measures.
4. Member-nations have scrapped as many
as 60 million customs and tax
formalities.
5. It is important for business leaders
to understand the growing power of
the EU.
a. Regulations in the EU can affect
businesses in the United States
and elsewhere.
b. EU rules forced changed by
Microsoft in its contracts with
software makers and even forced

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 McDonald’s to stop serving soft-
plastic toys with its Happy Meals.
c. Also the EU rejected General
Electric Co.’s planned $42 billion
acquisition of Honeywell
International Inc. in 2001. EU
believed the merger between the
two, “would have severely reduced
competition in the aerospace
industry and resulted ultimately
in higher prices for customers,
particularly airlines”.
VII. NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA)
Concept Preview
Understand the North American Free Trade
Agreement and its impact on business.
A. North American Free Trade Agreement
1. Created a free trade area among
Canada, Mexico and United States in
1994.
2. Not an organization but a trade
agreement, which is intended to
facilitate trade among NAFTA
countries.
3. NAFTA’s purpose was to eliminate
trade barriers among the three
countries creating a free trade area.
4. Despite fierce opposition from labor
organizations, environmental groups
and politicians NAFTA has been a
success allowing firms to maximize
efficiencies, remain globally
competitive and as a result increase
exports.
a. Between 1993 and 2003 NAFTA
partners outpaced exports to the
rest of the world.
b. US Department of Commerce
International Trade Administration
reported total two-way trade among

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 NAFTA partners grew 111 percent
while two-way trade between U.S.
and the rest of the world grew
during that same period 70 percent
during 1993 –2003.
5. Even though NAFTA was the first trade
agreement to include labor and
environmental standards both of these
issues remain a concern. CRITICAL
THINKING EXERCISE 4-3
VIII. OTHER REGIONAL GROUPINGS OF NATIONS
Concept Preview
Comment on other regional integration
agreements underway, in addition to the EU
and NAFTA.
A. Association of Southeast Asian Nations
(ASEAN)
1. Created in 1967 ASEAN member include
Brunei, Cambodia, Indonesia, Laos,
Malaysia, Myanmar, the Philippines,
Singapore, Thailand and Vietnam.
2. Purpose of this organization is to
promote economic growth and peace in
the region.
B. European Free Trade Association (EFTA)
1. Created in the 1960s in reaction to
the EU, this organization consisted
of many European countries that were
not EU members.
2. Goal was to stimulate trade among
themselves and enable bargaining with
the EUR as an organization rather
than individual countries.
3. Current EFTA members include:
Iceland, Liechtenstein, Norway, and
Switzerland.
C. African Trade Agreements
1. To promote economic growth throughout
the continent, several African

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 countries have formed trade and
investment groups.
a. Economic Community of West African
States (ECOWAS)
b. Common Market for Eastern and
Southern Africa (COMESA)
c. Southern African Development
Community (SADC)
2. In 1999 the African Union (AU) was
established to replace the
Organization of African Unity (OAU).
The AU consists of 53 members and is
modeled after the EU. LECTURE
ENHANCEMENT 4-4
D. Central American Free Trade Agreement
(CAFTA)
1. In 2003 the United States, Guatemala,
Nicaragua and El Salvador concluded
an agreement that created CAFTA.
2. CAFTA opens all public services to
private investment; grants guarantees
to foreign investment and opens
government procurement to
transnational bids.
3. Ultimately the CAFTA will provide
market access as a result of the
reduction and elimination of
protectionist trade barriers.
E. Organization of American States (OAS)
1. OAS is an organization of countries
in the Western Hemisphere dedicated
to promoting cooperation in the
region.
2. The organization was formed in 1948
with the United States as one of the
original 21 countries. OAS now has a
total of 35 members that are listed
in the textbook.

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 F. Asia-Pacific Economic Cooperation (APEC)
1. Pacific rim countries established
APEC in 1989 and serves as a regional
for promoting open trade and
practical economic cooperation.
2. Currently there are 21 members
included the United States.
G. Mercosur – Mercosul in Portuguese
1. In either language the acronym for
the Common Market of the South was
created in 1991 by the Treaty of
Asuncion.
2. Treaty of Asuncion united Argentina,
Brazil and Paraguay, and Uruguay.
3. Although Mercosur uses the term
common market it is not a common
market.
4. Most trade within the member states
is tariff-free and free trade in all
products in the long-term goal. A
common external tariff has been
adopted on most products.
5. Since its inception, trade within
Mercosur has grown rapidly expanding
at an average of 27 percent a year
while trade with the rest of the
world has expanded 7.5 percent.
CRITICAL THINKING EXERCISE 4-3

LECTURE ENHANCEMENT 4-1

Many students were not even born during the 1973
OPEC oil embargo and sit slack jawed when
discussing the effects on the global economy and
the effects on peoples lives. The following
article gives a brief background on embargo.

Business Wire , March 18, 2004 Thursday, 624 words, Auto Club:
Today Marks the 30Th Anniversary of Lifting of the OPEC Oil Embargo;
Events of 1973-74 Similar to Conditions in 2004, LOS ANGELES, March
18, 2004

4-19
The importance of this discussion should not be
overlooked with price for a barrel of oil well in
excess of $43 per barrel and the United States
importing 63 percent in 2003 up from 35 percent in
1973. Another factor influences the price of oil
is the increased world demand stemming from
emerging market thirst for oil for example India
and China. As future business leaders it is
imperative that they understand the control eleven
countries have on the global economy and need to
develop strategies to mitigate this potential
flashpoint.

LECTURE ENHANCEMENT 4-2

For more information on the EU to incorporate into
lectures and student discussions the please check
the following website.

http://europa.eu.int/index_en.htm

The EU also maintains a website that focus on the

relationship between the United States and EU.
This website can be accessed at the following
address.

http://www.eurunion.org/

LECTURE ENHANCEMENT 4-3

Many students have study the European Union in
other classes and are searching for something new.
Discussing the African Union can be an exciting
opportunity to engage students about an area of the
world that is captivating. The website address is
as follows:

http://www.africa-union.org/

4-20
CRITICAL THINKING EXERCISE 4-1
This exercise could be developed in conjunction
with Lecture Enhancement 4-1. Ask students to
research the following question: Please compare
and contrast the 1973 oil embargo and the current
situation. What are similarities, differences? As
a business leader how could insulate yourself from
the fluctuating oil markets?

CRITICAL THINKING EXERCISE 4-2

Ask students to pick two international
organizations that we have discussed up to this
point and write a compare and contrast paper.

ƒ World Trade Organization

ƒ European Union
ƒ Organization for Petroleum Exporting Countries
ƒ United Nations
ƒ North American Free Trade Agreement
ƒ Organization for Economic Cooperation and
Development

CRITICAL THINKING EXERCISE 4-3

Despite the opposition from organized labor,
protectionist and environmentalist, the North
American Free Trade Agreement (NAFTA) came to
effect in 1994. The nightmare scenarios of
environmental carnage, a destroyed American middle
class due to massive job losses and surrendering of
American sovereignty did not occur. Congress
approved at the request of President Clinton under
fast-track authority. Fast-track authority permits
the president to negotiate trade agreements and
submit them for congressional approval or
disapproval with no amendments permitted.

Have your students’ study why fast track authority

is necessary for successful trade agreements to be
negotiated and why congress is reluctant to give
Presidents this power?

4-21
CRITICAL THINKING EXERCISE 4-4
Globalization has brought about increased political
integration between countries. Some opponents of
this integration claim the United States is
surrendering national sovereignty to various
international institutions. This provides an
opportunity for students to debate the merits of
organizations such as the United Nations or the
World Trade Organization.

Ask students to study the advantages and

disadvantages of a particular organization from the
perspective of a developed or developing countries
then ask the debate parliamentary style with
opening argument, questions, rebuttals and closing
statements.

ANSWERS TO QUESTIONS

1. What are some reasons businesspeople and

business should be aware of important
international organizations?

Business and students of business should be aware

of international organizations for a variety of
organizations. As the world becomes more
integrated politically organizations such as the
EU, UN and World Bank are becoming for powerful.
Also these organizations spend billions of
dollars (and other currencies) every year for
goods and services that can be sold to them by
alert business leaders. The UN and the World
Bank provide arbitration opportunities for
international commercial disputes. Finally these
organizations gather and provide a tremendous
about member countries which is apt to be more
complete and accurate than a private company
could obtain on its own.

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2. Even though the UN is best known for
peacekeeping missions, it has many agencies
involved in activities affecting businesses.
Do these activities justify support for the UN?
Would it be better if the activities of these
agencies were done by private entities such as
trade groups?

The UN is an international organization dedicated

to the promotion of peace but also includes many
functions related to business. While the
organization is no involved in some areas of
business such as International Telecommunications
Union (ITU) which helps coordinate global
telecommunications networks between the private
and public sector. Even though this is an
expansion of the UN’s original mandate these
function help facilitate increasingly complex
business transactions worldwide. Critics of the
UN argue that this deliberate body is not the
place for discussion about business.

3. How did the WTO come into existence? What

purpose does it serve? Would bilateral trading
agreements work better than the multilateral
WTO approach?

The World Trade Organization (WTO) came into

existence as a result of the Uruguay Round of the
General Agreement on Tariffs and Trade. The WTO
is multinational organization designed to deal
with rules of trade between nations. The WTO
works with its core agreements, which are
negotiated and signed and ratified by the bulk of
the worlds trading nations. The goal is to help
producers of good services, exporters, and
importers conduct their business by reducing or
eliminating trade barriers and restrictions
worldwide.

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4. What are the four main institutions of the EU?
What is the purpose of each institution?

The four main institutions of the European Union

are the Council, Commission, Parliament, and the
Court. All have specific duties outlined in the
text. The Council is the main policy setting
institution. The Commission is the
administrative arm of the EU, ensuring that
provisions of the founding documents are
followed. The Parliament is an elected body
representing individual citizens in the EU member
states. While its powers have been increased,
the main policy setting institutions remains the
Council. The European Court of Justice is a
court with authority over EU matters.

5. How does the EU affect businesses? Should the

EU have more power over business regulation
than the national governments?

European Union is increasingly making its

presence known in the world business community.
A significant number of EU regulations actually
have an impact in the United States and elsewhere
because of the EU and the importance of the EU as
a trading partner.

Should the EU have more power than national

governments? A question of this nature depends
on your belief regarding centralization or
decentralization of power. Many argue that an
organization like the EU may not be nimble enough
to deal with business issues affect the EU.

6. The U.S. Congress approved the North American

Free Trade Agreement despite strong opposition
from organized labor. What motivated labor’s
stand? Have labor’s forecasts turned out to be
correct?

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The doom predicated by organized labor never
materialized. Even today NAFTA remains a
political issue. Organized labor opposed NAFTA
because it feared a loss of jobs to Mexico. Many
argue today that NAFTA has been successful in
raising the standard of living in Mexico. Mexico
is the second largest trading partner of the
United States and all three countries. The
citizens of all three members of NAFTA have
enjoyed increased competition better pricing due
to increased trade.

7. What is the importance of the OECD for business

and students?

The Organization for Economic Cooperation and

Development (OECD) is the source of extensive
research and statistics about its member
countries and the world. This organization has
issued a series of guidelines for good business
practices by multinational enterprises.

8. There are only three nations in the world that

are not members of some sort of economic
integration agreement. Why might this be the
case?

Some countries like North Korea still believe in

a command economy preaching self-sufficiency.
Countries like this do not see the value of
economic integration for this reason they have
chosen a path of economic isolation.

9. Mercosur’s major trading partner is the EU

rather than the United States. Why might this
be the case?

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 Historical ties to Spain and Portugal are the
leading reason why Mercosur’s major trading
partner is the EU rather than the United States.

10. How might the small businessperson in Des

Moines, Iowa, exporting agricultural products,
find the international institutions and
agreements that this chapter describes useful?

The goal of all international institutions and

agreements is to improve opportunities businesses
for both large and small families. These
organizations and agreements attempt to harmonize
international trade rules, lower trade barriers
include monetary and regulatory it is hoped this
will increase business opportunities.

GlobalEDGE™ Research Task globalEDGE™.msu.edu

Use the globalEDGE™ site to complete the following
exercises:

Exercise One
InfoNation is an easy-to-use, two-step database
that allows you to view and compare the most up-to-
date statistical data for the Member States of the
United Nations. Select six countries of your
chose, categorize them in terms of socio-economic
grouping and report your findings. Can you see the
country profile of a country you have chosen from
the graph?

The InfoNations can be located by searching for the

terms “InfoNation” at
http://globaledge.msu.edu/ibrd/ibrd.asp. The
resource is titled “United Nations: InfoNation” and
is located under the globalEDGE™ Category
“Research: Statistical Data Sources”.

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Search Phrase: “InfoNation”
Resource Name: United Nations: InfoNation
Website:
http://cyberschoolbus.un.org/infonation3/menu/advan
ced.asp
globalEDGE™ Category: “Research: Statistical Data
Sources”

Exercise Two
The World Development Indicators (WDI) is the World
Bank’s premier annual compilation of data about
development. Utilize the WDI for Czech Republic to
gather information on this country. Considering
that your company is producing cell phones and is
planning to enter this country, prepare a short
report on infrastructure of this country.

The World Development Indicators can be found by

searching the term “World Development Indicators”
at http://globaledge.msu.edu/ibrd/ibrd.asp. This
resource is named World Bank: Development Data and
is found under the globalEDGE category “Research:
Statistical Data Sources”. In the World Bank Data
& Statistics webpage, use the “Data by Country”
link to select the Czech Republic.

Search Phrase: “World Development Indicators”

Resource Name: World Bank: Development Data
Website: http://www.worldbank.org/data/
globalEDGE™ Category: “Research: Statistical Data
Sources”

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MINI CASE 4.1
Use of International Organizations – Setting up a
100% Owned Subsidiary
The Organization for Economic Cooperation and
Development (OECD) would be an excellent place to
start research into country site selection. Other
international organizations such as Mercosur and
the World Trade Organization (WTO) might also
provide information regarding site selection,
financial restriction and political issues.

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