Regional Paper

This paper will discuss the role of regional integration in promoting global business, specifically for the APEC (Asian Pacific Economic Cooperative) trading bloc. Included in the discussion will be the advantages and disadvantages of APEC, a comparison and contrast of the economic development stages of the countries within APEC, and the ramification of the region’s economic development for global business.

The Role of Regional Integration

The goal of regional integration is to encourage the reduction of barriers to trade that prevent the free flow of goods, services, and production factors between countries. Reducing trade barriers requires agreements between trading nations. In theory, several levels of economic integration can help to achieve these goals – free trade areas, customs unions, common markets, economic unions, and political unions.

In free trade areas, any barriers to free trade that restrict trade such as tariffs, quotas, or subsidies do no exist. However, member nations are free to establish trade polices with non-member nations. In a customs union, barriers to free trade do not exist between member nations while the union establishes a common external policy for trade with non-member nations. Common markets do not have any barriers to trade, have a common external trade policy, and allow the free flow of resources between member nations. An economic union is similar to a customs union with the addition of a common currency, harmonization of tax rates, and common monetary and fiscal policies. An extension of the economic union, the political union, monitors and coordinates economic, social and foreign policies of the members of the union.

APEC – Advantages and Disadvantages

The Asian Pacific Economic Cooperative (APEC) established in 1990 at the suggestion of Australia is comprised of 21 member nations. The goal of APEC is to “increase the multilateral cooperation in view of the economic rise of the Pacific nations and the growing interdependence within the region (Hill, 2005, 290).” For the members nations, the advantages, and disadvantages of regional integration follow:

Advantages

• Allows countries to specialize in producing the goods and services they can most efficiently produce

• Greater production leads to fewer trade restrictions

• Encourages transfer of technological, marketing and managerial know-how between nations in the form of FDI

• Positive sum game in that all participating nations gain

• Creates incentives for cooperation between nations thus reducing potentially violent conflict

Disadvantages

• Low-skill, low-paying jobs can move causing job loss

• Concerns about national sovereignty due to loss of control over monetary and fiscal policy

• High-cost domestic producers might be replaced by low-cost external producers in free trade areas

• Lower-cost external suppliers could be replaced by higher-cost suppliers

Compare and Contrast Economic Development in APEC

A comparison of the APEC nations shows that all the countries are working to achieve the goal of the trading bloc through various individual efforts. For instance, the Competition Policy and Deregulation Group within APEC developed a regulatory reform