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Your company is seeking to expand by opening new cus- tomer· representative and sales offices in the European Union (EU), The size of the investment is significant, and top-management wishes to have adearer picture of the current and probable future status of the EU. A col- league who spent some time living in the ED indicated that Eurostat might be a comprehensive source to assist in yourproject, After evaluating the stateoftheEU
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Get Help Now!based on the statistics and publications available,. pre- . parean executive summary describing the features you
consider as crucial in completing your report.
Exercise 2·
.:Trade agreements can impact. The cultural interactions between countries; In fact, the establishment of the Free
• TradeArea of the Americas (ETAA) can be considered a . threat as well as an opportunity for your company. Iden- .tify the main negotiating groups a country must consider whena member. Choose two negotiating groups and jus-
.tify their importance to member countries.
NAfTA and Mexican Trucking When the North American Free Trade Agreement (NAFTA) went into effect in 1994, the treaty specified that by 2000 trucks from each nation would be allowed to cross each other’s borders and deliver goods to their ultimate destination. The argument was that such a pol- icy would lead to great efficiencies. Before NAFTA, Mexican trucks stopped at the border, and goods had to be unloaded and reloaded onto American trucks, a pro- cess that took time and cost money. It was also argued that greater competition from Mexican trucking firms would lower the price of road transportation within NAFTA. Given that two-thirds of cross-border trade within NAFTA goes by road, supporters argued that the savings could be significant.
This provision was vigorously opposed by the Team- sters union in the United States, which represents truck drivers. The union argued that Mexican truck drivers had poor safety records, and that Mexican trucks did not adhere to the strict safety and environmental standards of the United States. To quote James Hoffa, the presi- dent of the Teamsters:
Mexican trucks are older, dirtier, and more dangerous than American trucks. American truck drivers are taken off the road if they commit a serious traffic violation in their personal vehicle. That’s not so in Mexico. Limits on the hours a driver can spend behind the wheel are ignored in Mexico.
Under pressure from the Teamsters, the United States dragged its feet on implementation of the truck-
ing agreement. Ultimately the Teamsters sued to stop implementation of the agreement. An American court rejected their arguments and stated the country must honor the treaty. So did a NAFTA dispute settlement panel. This panel ruled in 2001 that the United States was violating the NAFTA treaty and gave Mexico the right to impose retaliatory tariffs. Mexico decided not to do that, instead giving the United States a chance to honor its commitment. The Bush administration tried to do just that, but was thwarted by opposition in Con- gress, which approved a measure setting 22 new safety standards that Mexican trucks would have to meet be- fore entering the United States.
– In an attempt to break the stalemate, in 2007 the U.S. government set up a pilot program under which trucks from some 100 Mexican transportation companies could enter the United States, provided they passed American safety inspections. The Mexican trucks were tracked, and after 18 months, that program showed the Mexican carri- ers had a slightly better safery record than their U.S. counterparts. The Teamsters immediately lobbied Con- gress to kill the pilot program. In March 2009 an amend- ment attached to a large spending bill did just that.
This time the Mexican government did not let the United States off the hook. As allowed to under the terms of the NAFTA agreement, Mexico immediately placed tar- iffs on some $2.4 billion of goods shipped from the United States to Mexico. California, an important exporter of agri- cultural products to Mexico, was hit hard. Table grapes now faced a 45 percent tariff, while wine, almonds, and juices
Keith Griffin
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Regional Econormc Integration Chapter 9 313.;:-
<would pay a 20 percent tariff. Pears, which primarily come }from Washington state, faced a 20 percent tariff (4 out of 10 f.Je8i~that the United Scuee eKpaftS’ go to Merica). Other products hit with the 20 percent tariff include ex- ports of personal hygiene products and jewelry from New York, tableware from Illinois, and oil seeds from North Dakota. The u.s. Chamber of Commerce has estimated that the current situation costs some 25,600 U.S. jobs. The U.S. government said it would try to come up with a new program that both addressed the “legitimate concerns” of Congress and honored its commitment to the NAFTA treaty. What that agreement will be, however, remains to be seen, and as of 2010, there was no agreement in sight 50
Case Discussion Questions
!i’\ What are the potential economi~ benefits of the U trucking provisions in the NAFTA treaty? Who
benefits? 2. What do you think motivated the Teamsters to
object to the trucking provisions in NAFTA? Are these objections fair? Why did Congress align itself with the Teamsters?
3. Does it make economic sense for the United States. to bear the costs of punitive tariffs as al- lowed for under NAFTA, as opposed to letting Mexican trucks enter the United States?
1. O. Gibson, “Round One to the Pub Lady,” The Guardian, February 4,2011, p. 5; J. W. Miller, ”European TV Market for Sports Faces Turmoil from Legal Ruling,” The Wall Stxeet ioumol, February 4, 2011; andJ. Wilson, ”What the Legal Wmngle Means for Armchair Fans,” The Daily Tele- graph, February 4,2011, p. 8.
2. Information taken from World Trade Organization web- site and current as of February 2011, wwwwto.org.
3. Ibid. 4. The Andean Pact has been through a number of changes
since its inception. The latest version was established in 1991. See “Free-Trade Free for All,” The Economist, Janu- ary 4, 1991, p. 63.
5. D. Swann, The Economicsof the Common Market, 6th ed. (London: Penguin Books, 1990).
6. See J. Bhagwati, “Regionalism and Multilateralism: An Overview,” Columbia University Discussion Paper 603, Department of Economics, Columbia University, New York; A. de la Torre and M. Kelly, “Regional Trade Arrangements,” Occasional Paper 93, Washington, DC: International Monetary Fund, March 1992; J. Bhagwati, “Fast Track to Nowhere,” The Economist, October 18, 1997, pp. 21-24; jagdish Bhagwati, Free Trade Today (Princeton and Oxford: Princeton University Press, 2002); and B. K. Gordon, “A High Risk Trade Policy,” Foreign Affairs 82 no. 4 (July/August 2003), pp. 105-15.
7. N. Colchester and D. Buchan, Europawer: The Essential Guide to Europe’s Economic Transformation in 1992 (London: The Economist Books, 1990), and Swann, Eco- nomics of the Common Market.
8. A. S. Posen, “Fleering Equality, The Relative Size of the EU and US Economies in 2020,” The Brookings Institu- tion, September 2004.
