3.2 Global Trading Alliances

One important feature of the global environment is global trade. Countries and organizations have been trading with each other for centuries.

Regional trading alliances are reshaping global competition. Competition is no longer limited to country versus country, but region versus region.

European Union (EU)

The European Union (EU) is a union of 25 European nations created as a unified economic and trade entity.

Before the creation of EU, each nation had border controls, taxes and subsidies.

Now as a single market, there are no barriers to travel, employment, investment, and trade, and a single European currency, euro, was developed.

North American Free Trade Agreement (NAFTA)

The North American Free Trade Agreement (NAFTA) is an agreement among the Mexican, Canadian, and U.S. governments went into effect on January 1, 1994 in which barriers to trade have been eliminated.

Colombia, Mexico, and Venezuela signed an economic pact eliminating import duties and tariffs in 1994. Thirty-four countries in the Western Hemisphere continue to negotiate a Free Trade Area of the Americas (FTAA) agreement.

3.2 Global Trading Alliances

Association of Southeast Asian Nations (ASEAN)

The Association of Southeast Asian Nations (ASEAN) is a trading alliance of 10 Asian nations.

Southeast Asian region promises to be one of the fastest-growing and increasingly influential economic regions of the world.

The future economic impact of the Southeast Asian region could rival that of both NAFTA and the EU.

Other Trade Alliances

African Union. The 53-nation African Union came into existence in July 2002. Members plan to achieve greater economic development and unity among Africa's nations.

Free Trade Area of the Americas (FTAA)

FTAA was to have been in effect no later than 2005, but has not yet become operational; its future is still undetermined.

The last summit was held at Mar del Plata, Argentina, in November 2005, but no agreement on FTAA was reached. 26 of the 34 countries present at the negotiations pledged to meet again in 2006 to resume negotiations, but no such meeting took place.

3.2 Global Trading Alliances

Southern Cone Common Market (Mercosur)

Latin American trade organization established in 1991 to increase economic cooperation among the countries of E South America; it is commonly known as Mercosur or Mercosul, from the Spanish and Portuguese names, respectively, for the organization.

Full members include Argentina, Brazil, Paraguay, and Uruguay; Bolivia and Chile are associate members. Mercosur is gradually eliminating tariffs between member states and at the same time aiming for a low common external duty and trade between its members has greatly expanded since 1991.

The World Trade Organization (WTO)

Formed in 1995 and evolving from GATT, the WTO is the only global organization dealing with the rules of trade among nations.

Membership consists of 149 countries and 32 observer governments as of January 2006. The WTO appears to play an important role even though critics are vocal and highly visible.