1.Introduction

Question 1

Why did we create the internal market?

Answer 1

~Free Trade Area
~Customs Union
~Common Market
~Monetary/ Economic/ Political Union

Question 2

Free Trade Area

Answer 2

Common internal policy on free movement of goods, but no common external policy

Question 3

Main Advantage of Free Trade

Answer 3

Allows specialisation; Allows countries to focus on what they do best

All countries could produce everything they need but not very well
Eg. Ireland produces good butter but cannot produce good wine
Meanwhile Portugal can produce good wine but not so great butter.
Allows both countries to trade their good products efficiently, benefitting everyone

Question 4

Benefits of Free Trade

Answer 4

1. Cheaper products for consumers and greater choice
2. Employment security for workers in specialised industries
3. Good working conditions for specialised employment in order to retain a skilled workforce
4. Greater specialisation, skill and productivity; thus greater incentive for investment in production facilities
5. Businesses under pressure to innovate, improve quality, modernise
6. Trading nations reliant on each other, less likely to go to war

Question 5

Problems with Free Trade

Answer 5

Comparative advantage assumes no state interference in market, perfect competition, perfect information

In real world, perfect competition does NOT exist

National regulators respond to local concerns and ignore external costs creating trade barriers and inefficiencies

Question 6

Challenges to economic integration and free trade?

Answer 6

Brexit; idea of nationalism
Pooling of sovereignty (constraining)

EU- Mercosur; disadvantaging certain interests
Letting in inferior goods

Question 7

Customs Union

Answer 7

Common internal policy on free movement of goods, and a common external policy on customs tariffs

Question 8

Common market

Answer 8

Common internal/ external policy on goods and also common policy on free movement of workers and capital (factors of production), plus prohibitions on anti-competitive private behaviour and state aids

Question 9

Monetary/ Economic/ Political Union

Answer 9

Common currency, fiscal policies, police and security policy, foreign policy, political institutions