- •Marketing illustration botswana: the world’s fastest-growing economy
- •9.2 Percent. South Korea is the second fastest per- former, growing at 7.3 percent. China came in third at 6.7 percent.
- •Basis for international trade
- •Production possibility curve
- •Principle of absolute advantage
- •Units of computer
- •Advantage
- •Exchange ratios, trade, and gain
- •Units of computer
- •Factor endowment theory
- •Instead of enhance the country’s competitive advantage.7
- •The competitive advantage of nations
- •Limitations and suggested refinements
- •It’s the law 2.1 money laundering
- •Marketing strategy 2.1 how to move money
- •Marketing ethics 2.1 human trafficking: the worst kind of factor mobility
- •Economic cooperation
- •2.6, Some countries are members of multiple groups.
- •In a free trade area, the countries involved eliminate duties among themselves, while maintaining sepa- rately their own tariffs against outsiders. Free trade
- •Botswana Lesotho South Africa
- •Exhibit 2.1 regional groupings and their nations
- •Venezuela.
- •In 1993, the eu and the efta formed the world’s largest and most lucrative common market
- •Cultural dimension 2.1 the euro
- •Economic and marketing implications
- •2.7 Shows how the United Kingdom can serve as a strategic location for this purpose.
- •Initially, new trade policies generally tend to favor local business firms. For example, ibm encountered problems in Europe, where the eu
- •Questions
- •Discussion assignments and minicases
In 1993, the eu and the efta formed the world’s largest and most lucrative common market
– the European Economic Area. The European Economic Area eliminates nontariff barriers between the EFTA and EU countries to create a free flow of goods, services, capital, and people in a market of more than 400 million people.
Economic and monetary union
Cooperation among countries increases even more with an economic and monetary union (EMU). Some authorities prefer to distinguish a monetary union from an economic union. In essence, mone- tary union means one money (i.e., a single currency). The Delors Committee, chaired by Jacques Delors, who is President of the European Commission, has issued a report entitled Economic and Monetary Union in the European Community that defines monetary union as having three basic characteristics: total and irreversible convertibility of currencies; complete freedom of capital move- ments in fully integrated financial markets; and irrevocably fixed exchange rates with no fluctua- tion margins between member currencies, leading ultimately to a single currency. The economic advantages of a single currency include the elimi- nation of currency risk and lower transaction costs. One European Commission study found that European businesses were spending $12.8 billion (0.4 percent of the EU’s GDP) a year on currency conversions.
The European Commission’s One Market, One Money report defines an economic union as a single market for goods, services, capital, and labor, com- plemented by common policies and coordination in several economic and structural areas.18 An eco- nomic union provides a number of benefits. In terms of efficiency and economic growth, the transaction costs associated with converting one currency into another are eliminated, and the elimination of foreign exchange risk should improve trade and capital mobility. In addition, stronger competition policies should promote efficiency gains. In terms of inflation, the implementation of an economic union is a demonstration of a credible commitment to stable prices.
According to the Delors Committee, the basic elements of an economic union include the follow- ing: a single market within which persons, goods, services, and capital could move freely; a joint com- petition policy to strengthen market mechanisms; common competition, structural, and regional poli- cies; and sufficient coordination of macroeconomic policies, including binding rules on budgetary policies regarding the size and financing of national budget deficits.
A good example of an economic and monetary union is the unification of East Germany and West Germany. The terms of the monetary union called for an average currency conversion rate of M 1.8 to DM 1 and a conversion of East German wages at parity into deutschmarks. The 1 July 1990
German Economic and Monetary Union has resulted in one Germany. In addition to sharing a common, freely convertible currency (the
deutschmark), the legal environment, commercial code, and taxation requirements in the German Democratic Republic (East Germany) are now the same as those of the Federal Republic of Germany (West Germany).
Following a transition period, several European currencies were replaced by a new currency called the euro (see Cultural Dimension 2.1). At the beginning of 2002, twelve EU countries (not count- ing Denmark, Sweden, and the United Kingdom) introduced euro coins and notes. In 2003, follow- ing in the footsteps of Denmark three years earlier, the Swedes voted overwhelmingly to reject mem- bership in the European single currency.
The EU member states have ceded substantial sovereignty to the EU. As an example, Denmark was required by the EU to comply with common pack- aging rules and remove its twenty-year-old ban on beers and soft drinks in metal cans.19