4. Economic Integration Flashcards
What is economic integration?
The process whereby countries reduce trade barriers and coordinate their economic policies to facilitate increased economic cooperation.
Define a free trade area.
A region where member countries agree to eliminate tariffs and other barriers to trade among themselves but maintain individual trade policies with non-members.
What is a customs union?
An agreement between countries to remove trade barriers among themselves and adopt a common external tariff against non-members.
Explain a common market.
A stage of economic integration where member countries allow free movement of goods, services, capital, and labor, in addition to having a common external tariff.
What is an economic union?
A type of integration where countries not only have a common market but also harmonize their economic policies, including monetary and fiscal policies.
What is trade diversion?
When trade shifts from a more efficient exporter to a less efficient one due to the formation of a free trade agreement or customs union.
How does a monetary union differ from other forms of economic integration?
In a monetary union, member countries adopt a single currency and a unified monetary policy.
What are the potential benefits of economic integration?
Increased trade, economies of scale, greater political cooperation, and enhanced economic growth.
What challenges can arise from economic integration?
Loss of sovereignty, unequal benefits among members, and potential trade diversion.
Give an example of a common market.
The European Economic Area (EEA), which allows for the free movement of goods, services, capital, and labor among member countries.
