The Impact of Regional Integration Schemes on the Automobile and Autoparts Trade

Abstract

In the 1990s globalization and the increasing interdependence of the world economies brought many challenges for automobile and autoparts companies. They were forced to adopt new international strategies in order to survive in the increasingly competitive global market. At the same time the appearance of regional integration schemes also created many opportunities for automobile and autoparts companies and became an important factor in the strategy of these multinational corporations. These two processes globalization and regionalization had a large influence on companies'decisions in terms of investments production and trade. In this paper the focus of the analysis will be on the effect of regional integration schemes on automobile and autoparts trade. I. Introduction The 1990s was a decade of great changes in the world automobile and autoparts industries. The globalization process and the increasing interdependence of economies increased world competition and companies were forced to reduce costs improve production processes and technologies in order to maintain their presence in world markets. At the same time due to the proliferation of regional integration schemes(new regional integration attempts and/or the resurgence or deepening of old ones) automobile and autoparts companies also concentrated their activities in regions as part of their new global strategies. In addition developing countries played an important role in the automobile and autoparts companies'international strategies becoming not only potential consumers but also new production poles. All these factors were very important for automobile and autoparts companies and had a large impact on their investment decisions production and trade. The objective of this paper is to show the impact of regional integration schemes on the world automobile and autoparts'trade. This paper tries to show that the formation of regional integration schemes has greatly influenced the strategy of automobile and autoparts companies and that they have increasingly taken advantage of the expanded markets. The paper will be divided into four sections. The first one is this introduction. The second section describes the globalization and regionalization trends of automobile and autoparts industries in the 1990s and the growing importance of developing countries for automobile companies. In the third section an analysis based on a gravity model shows the impact of regional integration schemes on the trade flow of automobiles and autoparts. The last section presents the concluding remarks.