Regional Economic Blocs Case Study

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1. REGIONAL ECONOMIC BLOCS The emergence of regional economic blocs in the last few decades has significantly changed the international business environment. The most well known and comprehensive economic bloc is the European Union. In Table 1 are presented the most significant regional economic blocs. There are four main types of regional economic blocs (Carpenter & Dunung 2011): - The free trade area is the simplest form of regional economic integration. Member countries of this type of regional integration abolish restrictions on all type of trade among themselves and reserve the right to independently determine the trade policies for non-member states; - The customs union is type of regional integration when member countries abolish tariff…show more content…
In order to benefit from the regional integration of a group of countries, such as smaller trade restrictions, many companies invest in a certain country to be able to sell their products and services in other member countries of the same regional economic bloc. For instance, many multinational companies have invested in certain EU member countries, such as the Czech Republic and Poland, with a sole purpose to benefit from their membership of the European Union (Frynas & Mellahi, 2015). Table 1 Regional economic blocs AFTA (ASEAN Free Trade Area) Type of regional bloc: Free trade area Member countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. NAFTA (North American Free Trade Agreement) Type of regional bloc: Free trade area Member countries: Canada, Mexico and United States. SADC (Southern African Development Community) Type of regional bloc: Free trade…show more content…
Host governments have the power to support, but also to limit the activities of multinational companies. If local authorities believe that the activities of multinational companies are compatible with their national interests, they may assist their operation by placing various stimulating regulations. If, however, the activities of multinational companies do not meet their expectations, then local governments may impose various restrictive regulations that limit the operation of foreign companies (Fatehi, 2008). The reason of the difficulty between the multinational companies and host governments lies in the difference of their strategic goals. In Tabela 2 are presented the strategic goals of the multinational companies and local

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