International bussiness the challenge of global competition 11e chapter 04

chapter four
International Institutions from an
International Business
Perspective

McGraw-Hill/Irwin
International Business, 11/e

Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.


Learning Objectives
 Describe the influence the mainly political international
institutions have on international businesses and their
relevance to international business

 Identify the major organs of the United Nations, their

general purpose, and their significance to international
business

 Discuss the World Trade Organization and its
predecessor, GATT

 Appreciate the resources of the Organisation for
Economic Cooperation and Development

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Learning Objectives
 Describe the major purpose and effectiveness of
OPEC

 Identify economic integration agreements and the
effectiveness of the major ones

 Discuss the impact of the EU and its future
challenges

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Figure 4.1 International Institutions by
purpose

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International Political Institutions
• The United Nations
– International organization of 191 member-nations
dedicated to the promotion of peace and global
stability; has many functions related to business
– General Assembly

• Deliberative body of the UN made up of
all member-nations, each with one vote
regardless of size, wealth, or power

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International Political Institutions
– Security Council

• Main policy-setting body of the UN,
composed of 15 members including 5
permanent members
– Economic and Social Council (ECOSOC)

• UN body concerned with economic and
social issues such as trade, development,
education, and human rights

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International Political Institutions
– International Court of Justice (ICJ)

• UN body that renders legal decisions
involving disputes between national
governments
– Secretariat

• The staff of the UN, headed by the
secretary-general

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Figure 4.2 Millennium Development
Goals Chart of Progress

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Figure 4.2 Millennium Development
Goals Chart of Progress

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Cooperative Military and Security
Agreements
• North Atlantic Treaty Organization (NATO)
– Security alliance of 26 North American and
European nations (Map 4.3)
• Collective Security Treaty Organization (CSTO)
– Security alliance of six members of the
Commonwealth of Independent States (former
Union of Soviet Socialist Republics)

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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 Asia
(Map 4.4)

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Map 4.3 & 4.4
NATO Map

Map of ASEAN Members

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International Economic Institutions
• World Trade Organization (WTO)
– A multinational body of 149 members that deals
with rules of trade between nations
– Outgrowth of General Agreement on Tariffs and
Trade (GATT), that functioned to encourage trade
liberalization from 1947 to 1995

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International Economic Institutions

• Most favored nation (MFN) clause
– Agreement that GATT member-nations

would treat all members equally in trade
matters

• Uruguay Round
– The last extended conference of GATT
negotiations (table 4.1)

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Table 4.1 Gatt Rounds

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International Economic Institutions
• WTO Principles
– Trade will be without discrimination
– Trade should be freer, with trade barriers negotiated
downward
– Trade should be predictable
– Trade should be more competitive
– Trade should be more beneficial for less developed
countries, encouraging development and economic
reform

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International Economic Institutions

• WTO Challenges
– Trade-related intellectual property rights (TRIPS)

• WTO agreement that protects copyrights,
trademarks, trade secrets, and other
intellectual property matters

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Organisation For Economic
Cooperation and Development
• Organisation For Economic Cooperation and
Development (OECD)
– Group of developed countries dedicated to
promoting economic expansion in its membernations (Table 4.2)

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Table 4.2 OECD Member Countries

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Other Economic Institutions
• Organization of Petroleum Exporting Countries
– Cartel of 11 petroleum exporting countries (Table
4.3)
• The Group of Eight (G8)

– Group of government leaders from major
industrialized nations that meets regularly to
discuss issues of concern (Figure 4.5)

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Table 4.3 World Petroleum Products
Consumption by Region, 1960-2004

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Figure 4.5 The G8 Members
(www.undp.org)

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Economic Integration
• Free trade area (FTA)
– Area in which tariffs among members have been
eliminated, but members keep their external tariffs

• Customs Union
– Collaboration that adds common external tariffs to
an FTA

• Common Market

– Customs union that includes mobility of services,
people, and capital within the union

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North American Free Trade Agreement
(NAFTA)
• NAFTA
– Established January 1, 1994
– Agreement creating a free trade area among
Canada, Mexico, and the United States

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