Regional Paper

Regional Paper

What role does regional integration play in promoting global business? Are there advantages and disadvantages of regional integration? This paper will answer those questions as well as compare and contrast the economic development stages of countries within a chose region and the effect of the economic development in global business. The geographical region that will be analyzed will be the countries along the Pacific Rim.

Regional integration is the integration of several countries’ markets, trade policies, or other policies. The role regional integration plays in promoting global business is that it is a key instrument of the economic and social development strategies of the countries of the region and of foreign economic and trade policies. Regional integration is essential due to its ability to expedite, and intensify the economic, social, and cultural ties between countries.

Some advantages to regional integration are that regional integration helps to establish free trade and open trade. These investments help economies grow, creates jobs, and provides great opportunities for international trade and investment. Free and open trade helps to lower the costs of production and thus reduces the prices of goods and services. Another example of an advantage is “By linking neighboring economies and making them increasingly dependent on each other, incentives are created for political l cooperation between the neighboring states. In turn, the potential for violent conflict between the states is reduced. In addition, by grouping their economies, the countries can enhance their political weight in the world.” (Hill, 2002).

Integration helps to overcome fragmentation, it creates larger markets to permit economies of scale, wider competition and increase foreign investment. Integration accelerates opening of economies to the rest of the world, enhances credibility of national reform through lock-in policy mechanisms, strengthen unit for international negotiations, and reduce or resolves inter-state conflicts.

Some disadvantages to regional integration are; the costs associated with such integration. For example, as a result of the 1994 establishment of NAFTA, some U.S. and Canadian workers, in certain fields lost their jobs. Another disadvantage is the concern over national sovereignty. This concern arises because economic integration demands that countries give up some degree of their control over certain policy issues, such as monetary, trade, and fiscal policies. Another disadvantage or concern is that high cost domestic producers will be replace by low-cost producers, and that lower-cost external suppliers will be replaced by higher-cost suppliers. A final disadvantage is being faced with the need for better local and regional regulations.

“The Asia-Pacific Economic Cooperation, or APEC, is the premier forum for facilitation economic growth, cooperation, trade and investment in the Asia-Pacific region.” (www.apecsec.org, 2005). APEC was established in 1989 at the suggestion of Australia, to further enhance economic growth, prosperity and strength for the Pacific Rim area. APEC consists of twenty-one countries such as; Australia, Brunei Darussalam, Canada, Chile, People’s Republic of China, Hong Kong, China, Indonesia, Japan, Republic of Korea, Malaysia, Mexico, New Zealand, New Guinea, Peru, The Republic of the Philippines, The Russian Federation, Singapore, Chinese Taipei, Thailand, United States of America, and Viet Nam. (The chart below shows the geographical region of APEC).

The twenty-one members that make up APEC are referred to as “Member Economies” which account for more then one third of the world’s population consisting of 2.6 billion people, approximately sixty percent of the world Gross Domestic Product, and about forty-seven percent of the world trade. APEC also represents the most economically dynamic region in the world having generated nearly seventy percent of the global economic growth in its first ten years.

APEC works in large areas of trade and investments to help APEC member economies grow and prosper. APEC also works to create an environment for the safe and efficient movement of goods, services and people across borders in the region through policy alignment and economic and technical cooperation. APEC operates in three broad areas to meet the Boor Goals of free and open trade, these areas are know as Ape’s Three Pillars and these pillars consist of; Trade and investment liberalization, Business facilitation, and Economic and technical cooperation. By establishing these three pillars, APEC members are enabled to strengthen their economies by pooling available resources within the region and achieving efficiencies.