Our objective is to synthesize economic cooperation agreements that facilitate global business. We have learned that it is critical that a global business understands and works within the confines of Economic Cooperation Agreements, sometimes called partnership or integration agreements. These Agreements range from trade agreements such MERCOSUR, to financial institutions like the IMF and World Bank, or even entire blocs of countries that attempt to act like one, such as the EU. A thorough understanding of how the world works together is essential for the global business. (NOTE: Do not use an agreement that is no longer 'in service' - NAFTA has been 'replaced' by the USMCA.)

• We had to watch Barriers and Benefits in Free Trade Agreements here https://www.youtube.com/watch?v=PtelCyQzbQ0
• We had to watch What global trade deals are really about (hint: it's not trade) here https://www.youtube.com/watch?v=-v3uqD1hWGE
• We had to watch The International Monetary Fund (IMF) and the World Bank Explained in One Minute here https://www.youtube.com/watch?v=WG72yk60tbA

1. Please provide a brief history of the Agreement for EU (Europe) SEE BELOW.
   • Then, using a current event (within the last 12 months), address the pros and cons of the Agreement.

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Europe: EU

Brief History and Purpose

The European Union (EU) is the most integrated form of economic cooperation. As you learned in the opening case study, the EU originally began in 1950 to end the frequent wars between neighboring countries in the Europe. The six founding nations were France, West Germany, Italy, and theBenelux countries(Belgium, Luxembourg, and the Netherlands), all of which signed a treaty to run their coal and steel industries under a common management. The focus was on the development of the coal and steel industries for peaceful purposes.

In 1957, the six nations signed the Treaty of Rome, which established the European Economic Community (EEC) and created a common market between the members. Over the next fifty years, the EEC added nine more members and changed its name twiceto European Community (EC) in the 1970s and the European Union (EU) in 1993."History of the European Union," Europa, accessed April 30, 2011,http://europa.eu/abc/history/index_en.htm.

The entire history of the transformation of the EEC to the EU has been an evolutionary process. However, the Treaty of Maastricht in 1993 stands out as an important moment; it's when therealeconomic union was created. With this treaty, the EU identified three aims. The first was to establish a single, common currency, which went into effect in 1999. The second was to set up monetary and fiscal targets for member countries. Third, the treaty called for a political union, which would include the development of a common foreign and defense policy and common citizenship. The opening case study addressed some of the current challenges the EU is facing as a result of the impact of these aims. Despite the challenges, the EU is likely to endure given its historic legacy. Furthermore, a primary goal for the development of the EU was that Europeans realized that they needed a larger trading platform to compete against the US and the emerging markets of China and India. Individually, the European countries would never have the economic power they now have collectively as the EU.

Today, the EU has twenty-seven member countries. Croatia, Iceland, Macedonia, and Turkey are the next set of candidates for future membership. In 2009, the twenty-seven EU countries signed the Treaty of Lisbon, which amends the previous treaties. It is designed to make the EU more democratic, efficient, and transparent and to tackle global challenges, such as climate change, security, and sustainable development.

The European Economic Area (EEA) was established on January 1, 1994, following an agreement between the member states of the European Free Trade Association (EFTA) and the EC (later the EU). Specifically, it has allowed Iceland (now an EU candidate), Liechtenstein, and Norway to participate in the EU's single market without a conventional EU membership. Switzerland has also chosen to not join the EU, although it is part of similar bilateral agreements.

Figure 5.3Countries in the EU (as of May 1, 2011)

Source: "The Member Countries of the European Union," Europa, accessed May 1, 2011,http://europa.eu/about-eu/member-countries/index_en.htm.

CEFTA

Central European Free Trade Agreement (CEFTA) is a trade agreement between non-EU countries in Central and Southeastern Europe, which currently includes Albania, Bosnia and Herzegovina, Croatia, Macedonia, Moldova, Montenegro, Serbia, and the United Nations Interim Administration Mission on behalf of Kosovo (UNMIK)all of whom joined in 2006.Andzej Arendarski, Ludovit Cernak, Vladimir Dlouhy, and Bela Kadar, "Central European Free Trade Agreement," December 21, 1992, accessed April 30, 2011,http://www.worldtradelaw.net/fta/agreements/cefta.pdf.

Originally signed in 1992, CEFTA's founding members were the Visegrad Group, also called the Visegrad Four or V4, which is an alliance of four Central European statesthe Czech Republic, Hungary, Poland, and Slovakia. All of the Visegrad Group have relatively developed free-market economies and have formal ties."About the Visegrad Group," International Visegrad Fund, accessed December 30, 2010,http://visegradgroup.eu/main.php?folderID=858.

Many of the Central European nations have left CEFTA to become members of the EU. In fact, CEFTA has served as a preparation for full EU membership and a large proportion of CEFTA foreign trade is with EU countries. Poland, the Czech Republic, Hungary, Slovakia, and Slovenia joined the EU on May 1, 2004, with Bulgaria and Romania following suit on January 1, 2007."About CEFTA," Central European Free Trade Agreement, accessed April 30, 2011,http://cefta.net.Croatia and Macedonia are in the process of becoming EU members."About CEFTA," Central European Free Trade Agreement, accessed April 30, 2011,http://cefta.net; Andzej Arendarski, Ludovit Cernak, Vladimir Dlouhy, and Bela Kadar, "Central European Free Trade Agreement," December 21, 1992, accessed April 30, 2011,http://www.worldtradelaw.net/fta/agreements/cefta.pdf;Wikipedia, s.v. "Central European Free Trade Agreement," last modified February 12, 2011, accessed February 16, 2011,http://en.wikipedia.org/wiki/Central_European_Free_Trade_Agreement.

Amusing Anecdote

There are twenty-three official and working languages within the EU, and all official documents and legislation are translated into all of these languages. With this in mind, it's easy to see why so many Europeans see the need to speak more than one language fluently!

EU Governance

The EU is a unique organization in that it is not a single country but a group of countries that have agreed to closely cooperate and coordinate key aspects of their economic policy. Accordingly, the organization has its own governing and decision-making institutions.

• European Council.The European Council provides the political leadership for the EU. The European Council meets four times per year, and each member has a representative, usually the head of its government. Collectively it functions as the EU's "Head of State."
• European Commission.The European Commission provides the day-to-day leadership and initiates legislation. It's the EU's executive arm.
• European Parliament.The European Parliament forms one-half of the EU's legislative body. The parliament consists of 751 members, who are elected by popular vote in their respective countries. The term for each member is five years. The purpose of the parliament is to debate and amend legislation proposed by the European Commission.
• Council of the European Union.The Council of the European Union functions as the other half of the EU's legislative body. It's sometimes called the Council or the Council of Ministers and should not be confused with the European Council above. The Council of the European Union consists of a government minister from each member country and its representatives may change depending on the topic being discussed.
• Court of Justice.The Court of Justice makes up the judicial branch of the EU. Consisting of three different courts, it reviews, interprets, and applies the treaties and laws of the EU."Institutions and Bodies of the European Union," Europa, accessed April 30, 2011,http://europa.eu/about-eu/institutions-bodies/index_en.htm.

Current Challenges and Opportunities

The biggest advantage of EU membership is the monetary union. Today, sixteen member countries use the the euro. Since its launch, the euro has become the world's second-largest reserve currency behind the US dollar. It's important to remember several distinctions. First, the EU doesn't consist of the same countries as the continent of Europe. Second, there are more EU member countries than there are countries using the euro. Euro markets, or euro countries, are the countries using the euro.

The European single market is the foremost advantage of being a member of EU. According to Europa, which is the official website of the EU (http://europa.eu), the EU member states have formed a single market with more than five hundred million people, representing 7 percent of the world's population. This single market permits the free flow of goods, service, capital, and people within the EU."Four Market Freedom Which Benefit Us All," Europa, accessed December 30, 2010,http://europa.eu/pol/singl/index_en.htm.Although there is a single tariff on goods entering an EU country, once in the market, no additional tariffs or taxes can be levied on the goods."Basic Information on the European Union," Europa, accessed April 30, 2011,http://europa.eu/about-eu/basic-information/index_en.htm.

Businesses conducting business with one country in the EU now find it easier and cheaper, in many cases, to transact business with the other EU countries. There's no longer a currency-exchange rate risk, and the elimination of the need to convert currencies within euro markets reduces transaction costs. Further, having a single currency makes pricing more transparent and consistent between countries and markets.

Despite the perceived benefits, economic policymakers in the EU admit that the Union's labor markets are suffering from rigidity, regulation, and tax structures that have contributed to high unemployment and low employment responsiveness to economic growth. This is the case, particularly, for relatively low-skilled labor.

Future Outlook

Europe's economy faces a deeper recession and a slower recovery than the United States or other parts of the world. Because the EU's $18.4 trillion economy makes up 30 percent of the world economy, its poor prospects are likely to rebound on the United States, Asia, and other regions."Staring into the Abyss,"Economist, July 8, 2010, accessed December 28, 2010,http://www.economist.com/node/16536898.Fixing the EU's banking system is particularly tricky, because sixteen of the twenty-seven countries share the euro currency and a central bank, but banking regulation mostly remains under the control of the national governments.Liz Alderman, "Contemplating the Future of the European Union,"New York Times, February 13, 2010, accessed April 30, 2011,http://www.nytimes.com/2010/02/14/weekinreview/14alderman.html.

The Europe 2020 strategy put forth by the European Commission sets out a vision of the EU's social market economy for the twenty-first century. It shows how the EU can come out stronger from this crisis and how it can be turned into a smart, sustainable, and inclusive economy delivering high levels of employment, productivity, and social cohesion. It calls for stronger economic governance in order to deliver rapid and lasting results."Future for Europe," Europa, accessed April 30, 2011,http://europa.eu/abc/12lessons/lesson_12/index_en.htm.