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The Evolving European UnionThe Evolving European Union: The European Union is now an economic force, with acollective economy larger than that of the United States or Japan.International Economic OrganizationsWorking to Foster TradeThe primary objective of the WTO is to remove barriers to trade on a worldwide basis.On a smaller scale, an economic community is an organization of nations formedto promote the free movement of resources and products among its members and tocreate common economic policies. A number of economic communities now exist.The European Union The European Union (EU), also known as the EuropeanEconomic Community and the Common Market, was formed in 1957 by sixcountries—France, the Federal Republic of Germany, Italy, Belgium, the Netherlands,and Luxembourg. Its objective was freely conducted commerce among these nationsand others that might later join. As shown in Figure 3.5, many more nations havejoined the EU since then.On January 1, 2007, the 25 nations of the EU became the EU27 as Bulgaria andRomania became new members. The EU, with a population of nearly half a billion, is nowan economic force with a collective economy larger than much of the United States or Japan.In celebrating the EU’s 50th anniversary in 2007, the president of the EuropeanCommission, Jose Manuel Durao Barraso, declared, “Let us first recognize 50 yearsof achievement. Peace, liberty, and prosperity, beyond the dreams of even the mostoptimistic founding fathers of Europe. In 1957, 15 of our 27 members were either
under dictatorship or were not allowed to exist as independent countries. Now we are
all prospering democracies. The EU of today is around 50 times more prosperous and
with three times the population of the EU of 1957.
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Since January 2002, 15 member nations of the EU have been participating in
the new common currency, the euro. The euro is the single currency of the European
Monetary Union nations. However, three EU members, Denmark, the United Kingdom,
and Sweden, still maintain their own currencies.
The North American Free Trade Agreement The North American Free Trade
Agreement (NAFTA) joined the United States with its first- and second-largest export
trading partners, Canada and Mexico. Implementation of NAFTA on January 1, 1994,
created a market of more than 462 million people. This market consists of Canada
(population 34 million), the United States (313 million), and Mexico (115 million).
According to the Office of the U.S. Trade Representative, after 18 years, NAFTA has
achieved its core goals of expanding trade and investment between the United States,
Canada, and Mexico. For example, from 1993 to 2011, trade among the NAFTA
nations more than tripled, from $297 billion to $1,058 billion.
NAFTA is built on the Canadian Free Trade Agreement, signed by the United
States and Canada in 1989, and on the substantial trade and investment reforms
undertaken by Mexico since the mid-1980s. Initiated by the Mexican government,
formal negotiations on NAFTA began in June 1991 among the three governments.
The support of NAFTA by President Bill Clinton, past U.S. Presidents Ronald Reagan
and Jimmy Carter, and Nobel Prize–winning economists provided the impetus for U.S.
congressional ratification of NAFTA in November 1993. By 2008, NAFTA had gradually
eliminated all tariffs and quotas on goods produced and traded among Canada,
Mexico, and the United States to provide for a totally free-trade area. Chile is expected
to become the fourth member of NAFTA, but political forces may delay its entry into
the agreement for several years.
However, NAFTA is not without its critics. Critics maintain that NAFTA:
●● has not achieved its goals
●● has resulted in job losses
●● hurts workers by eroding labor standards and lowering wages
●● undermines national sovereignty and independence
●● does nothing to help the environment, and
●● hurts the agricultural sector
The proponents of NAFTA call the agreement a remarkable economic success
story for all three partners. They maintain that NAFTA:
●● has contributed to significant increases in trade and investment
●● has benefited companies in all three countries
●● has resulted in increased sales, new partnerships, and new opportunities
●● has created high-paying export-related jobs, and
●● better prices and selection in consumer goods
The Central American Free Trade Agreement The Central American Free
Trade Agreement (CAFTA) was created in 2003 by the United States and four Central
American countries—El Salvador, Guatemala, Honduras, and Nicaragua. The CAFTA
became CAFTA-DR when the Dominican Republic joined the group in 2007. On
January 1, 2009, Costa Rica joined CAFTA-DR as the sixth member. CAFTA-DR creates
the third-largest U.S. export market in Latin America, behind only Mexico and
Brazil.
The Association of Southeast Asian Nations The Association of Southeast
Asian Nations, with headquarters in Jakarta, Indonesia, was established in 1967 to
promote political, economic, and social cooperation among its seven member countries:
Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, and Vietnam. With
the three new members, Cambodia, Laos, and Myanmar, this region of 600 million
people is already our fifth-largest trading partner.
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