Multinational Market Groups:
Realities and Implications for Member and Nonmember Countries
A. BEN OUMLIL AND C. P. RAO
The dynamic global business environment is being greatly affected by the emergence of the regional trading blocs (e.g., NAFTA, the European Community, and the Southeast Asian countries). Although the full consequences of these united markets cannot yet be known, member and nonmember countries and their multinational firms can take steps now to prepare themselves to operate within these newly structured entities. The aim of this chapter is to examine these realities and their implications.
Today's U.S. economy can be characterized as truly global. Our prosperity depends in large measure on the prosperity of our trade partners. It has been argued that free trade is good and that all parties benefit. This is especially true for the world's principal trading nations (i.e., the three major regional trading blocs of North America, the European Community, and industrialized Asia). While these blocs account for only 15 percent of the world's population, they produce 72 percent of its wealth.
NAFTA, the North American Free Trade Agreement between the United States, Canada and Mexico, is the world's largest single trading zone with over 360 million consumers ( Wu and Gaspar, 1994). Given the proximity of the three countries to one another, this can be considered a natural trading bloc. Officially, NAFTA will gradually eliminate all tariffs and lower most other trade barriers between Mexico, Canada and the United States over a period of 10 years ( Wu and Gaspar, 1994). Before NAFTA, the textile industry in the United States and Canada was highly protected. Wu and Gaspar have predicted that under NAFTA, U.S. and Canadian textile production will become more competitive through the