International Business Economics Essay

Globalization and international forms of conducting business has been the overriding factor for most economies of the world in the last two decades. According to economists, the political and economic amalgamation of nations will continue to grow as linkages to migration of products, money and people beyond their national boundaries become evident. This has led to the apprehension that, there is need for regional integration in terms of collective, political and economic reorganizations. The main reasons for this are; to make the business environment friendlier, economic power shift and regional balancing. This essay will therefore argue out the pros and cons of regional integration with specific reference to the EU. It will discuss the general benefits that have so far been gained and the downbeat impacts experienced as a result of the same. More emphasis will be placed on the impacts on the member states themselves. Regional integration aims to promote economic welfare gains among countries that have come together to meet some specific economic objectives. The EU is both a functional entity and territorial in that its main duty is to transfer sovereignty and handle regional projects that include trading activities. In an economic perspective, it is responsible for the movement of goods which in most cases becomes free within the member states. It also handles issues of labour and capital amo0ng countries that want to boost their economic growth in other places not only among the integrated community but also in other parts of the world. The EU has however grown to become an economic logic drive that is driven by the political desire to counter Asian and American competitive nature of businesses. (Hilbert, 2004) Whenever the term free trade in mentioned, many things come into the mind of the listener. The first thing is apparently conducting of trade without barriers. That is precisely what happens in free trade areas/associations. In the past developed free trade associations, all barriers to the trade of goods and services among the countries that are party to the agreement are completely done away with and a conducive environment, for carrying out business is upheld. In theory, free trade area will have things like; subsidies, custom duties, tariffs, administrative encumbrance or even quotas removed. In most cases, the countries are given the freedom to retain individual policies when talking about non-members. The most common types of free trade associations are the European Free Trade Association (EFTA) which was established in 1960 and the North American Free Trade Agreement (NAFTA) (P. de Vries, 2002) Previous research has shown that there are many theoretical and empirical effects of free trade. This is according to the economists who have been able to study free trade in relation to regional integration and its economic, social and political implications on the countries. One aspect is that there is creation of losers and winners. In a survey that was carried out in the year 2006, it shows that 87. 5 percent of economists concurred that United States as a nation has to eliminate any barriers of trade that are still existing including tariffs and other factors in order to have other nations within the Latin America regional to support their economic quest for businesses. (Temple, 1999) Advantages of regional integration Collective bargaining power in the trade fora is the major benefit for regional integration. The European Union since its inception has been able to have a stronger bargaining power on most of the trading agreements and foreign direct investments. There have been instances where the U. S dominated the trade talks and trade policies in Europe especially when it dealt with only one country such as France. This makes it very difficult for that country to handle the economic problems that might arise. When the region comes together, even countries such as the UK need to think twice while drafting laws whether against or for the whole region. Some products that are made in the U. S. ave been denied access into the European Union markets because of some logistical issues affecting the two trading partners. (Levine, 1992) There is improved geopolitics among the participating countries. Like-minded countries can come together and assist other countries with fragile democracies, narrow global markets and limited opportunities to come t a level playing filed in the world economy. This will probably encourage development in addition to better and safe networks in the area. Political disbarment, conflict resolution and peace brokering is a key benefit of regional cooperation. Taking into contemplation the fact that there is free movement of people and goods, the poor will tend to benefit enormously from better services and products i. e. a wide variety to choose from. A non-economic gain such as security is also a major factor that regional integration is able to bring forth to the partner states. It has been possible for the European Union to talk in one voice against many issues such as the fight against terrorism. (Lain, 2006) Larger markets are developed as a result of regional integration. Trade has become increasingly global in some scope today and there are reasons for this. One is the advancement in technology including communication efficiency and modernization where people are migrating to live in areas where they feel they are comfortable. Increasingly, rapid technology lifecycles has increased competition among countries as to who can produce the best in the market hence the need to employ competitive marketing and business strategies which includes economic and monetary integration. When two or more nations come together to trade, first, the market potential increases and there is huge customer base that will allow for the expansion of businesses. The EU for example is a huge market for African and American products that may not have been possible if they traded individually and not as a block. (P. de Vries, 2002) Strategic competitive advantage for most companies will be widened by the European Union. Taking for example the larger western European countries such as France and Germany will be able to absorb cheap raw products from Belgium and those who will benefit further will be the farmers. Sometimes countries such as the UK can provide better and sophisticated communication systems that will boost business expansion in less economic countries of the EU. In some cases, regional integration gives the countries that are involved get better gains through the free flow of trade in terms of investments especially beyond the jurisdictions of organizations such as the World Trade Organizations. (P. de Vries, 2002) Disadvantages It is difficult to coordinate activities of the member countries because of the fact that there are huge disparities within the member states within the EU. Macroeconomic instability occurs as a result of unbalanced nature of the countries with regard to natural resources and infrastructure. This is reflected on the one ‘nation’ intervention decisions on market factors such as custom duties, taxes and internal matters. This also manipulates itself in the form of governance. (Hilbert, 2004) Every nation has its own governance issues to deal with; party politics, corruption, security, economic crimes, among others. This will make it impossible for the regional integrating body to look into the desires of affiliate states. To some extent, some government have authoritarian styles of leadership that prevent free flow of goods, people, community integration, and other development issues. This is most cases results in scepticism among the associate countries. The US, after the cold war was very pessimistic about the way Latin America was planning to form a regional body that encompasses the south and northern countries. All these political problems catapults regional disintegration and promote conflicts which are not favourite business catalysts. (Abeman, 2006) Some countries might lose out on the actual benefits of the integration because of the way the policies and structures may be drafted. Some countries which are more developed than others would benefit more. Taking an example of the industries such as textiles where majority of the employees here are low cost workers who may end up losing their jobs because of a shift in business locations. It is a fact that companies move to locations where the labour is cheap and investment opportunities are higher. The European Union for example has integrated the European countries in one or another. But the problem comes in when the countries such as France and the U. K invest in countries such as Spain which are still believed to have a lower economic growth than themselves. (Donovan & Marlette, 2005) It is very difficult to synchronize all rules and constitutional necessities that every country is structurally required to have. With huge disparities concerning the way Germany and UK conduct their international business, there will be looming problem in future when the countries wanted to have bring their heads together. When the EU constitution was brought into a referendum, France literally rejected it. This shows that there EU union will not come to an agreement in almost all things. Every business is affected by economic factors. Fiscal policy rates, interest rate policy, currency exchange rates, consumer factors, etc. It is possible that the U. S locale of the economy dictates how the consumer behaves in the society. If an economy is booming, recessing or recovering, the confidence of the consumer will automatically change. In all these factors, the member countries will push for their own rates to be accepted by the others. (Lain, 2006) Vocational training for national protection especially on local industries that may not effectively compete with other multinationals. It is therefore a setback for the European Union to adequately address equity and fair trade issues among countries in a bid to harmonize the member states. s a matter of theory, the thing that vestiges to be an issue of concern is the fact that every country would want to have the lion’s share when it comes to sharing same currencies, trade rules and business partnerships. This will cause poor relationships among competing nations and it might result to break-ups. (Donovan & Marlette, 2005) When there is free trade countries are normally subjected to stiff competition. This means that a country’s prosperity can be affected which is quite risky. This makes many countries to strive to protect themselves against effects of free trade. This can be implemented by ensuring that there is imposition of taxes on foreign goods hence increasing their prices. When this is done, it means that the countries own producers are protected. Research shows that free trade exits in theory and not in practical. This is because many nations strive to protect their own industries. There are several ways through which many nations protect themselves from effects of free trade. There are some countries that limit the quantity of imported products (Lain, 2006)