Exam 8: Regional Economic Integration

Correct Answer:

Verified

By the mid-1980s,EU member nations were frustrated by remaining trade barriers and a lack of harmony on several important matters,including taxation,law,and regulations.The important objective of harmonizing laws and policies was beginning to appear unachievable.A commission that was formed to analyze the potential for a common market by the end of 1992 put forth several proposals.The goal was to remove remaining barriers,increase harmonization,and thereby enhance the competitiveness of European companies.The proposals became the Single European Act (SEA)and went into effect in 1987.
As companies positioned themselves to take advantage of the opportunities that the SEA offered,a wave of mergers and acquisitions swept across Europe.Large firms combined their special understanding of European needs,capabilities,and cultures with their advantage of economies of scale.Small and medium-sized companies were encouraged through EU institutions to network with one another to offset any negative consequences resulting from,for example,changing product standards.
Accelerating integration in Europe caused new urgency in the task of creating a North American trading bloc that included Mexico.Mexico joined what is now the World Trade Organization in 1987 and began privatizing state-owned enterprises in 1988.Talks among Canada,Mexico,and the United States in 1991 eventually resulted in the formation of the North American Free Trade Agreement (NAFTA).NAFTA became effective in January 1994 and superseded the U.S.-Canada Free Trade Agreement.Today NAFTA comprises a market with 445 million consumers and a GDP of around $16 trillion.