4.1.5 Trading Blocs And WTO Flashcards
List the type of economic integration
- Free trade organisation
- Custom Union
- Common market
- Monetary Union
Define trade creation
switch from buying products from a high cost producers to a low cost producer
Define trade diversion
Switch from buying products from a low cost producer to a high cost producer
What might trade creation depend on
- Size of tariff
- Non price factors
- Exchange rate
- State of the global economy
- PED eg brand loyalty
- Cost difference between members of regional trade area
Benefits of trading blocs and evaluate
- Monopoly power reduced
- Greater RnD development
- Larger market and economies of scale
EV
1. May lead to unemployment domestically
2. Lower profit margins (less investment in long run and not sustainable)
3. Diseconomies of scale may occur
Define bilateral trade agreement
Regional trade agreement between 2 countries
Define common market
A customs union in additional of free movement of labour and capital within the area.
Define customs Union
A group of countries which free trade exist in their products imposes a common external tariff on imported goods outside of their customs Union.
Define economic Union
Group of countries which their economies are fully integrated as regions within one country
Define free trade area
Group of countries which there is free trade in their goods and services, but are allowed to set their own levels of tariffs against non members
Define monetary Union
Group of countries which share a common currency
Define regional trade agreement/trading bloc
Agreement between a group of countries/ at least 2 countries to reduce or eliminate tariffs, quotas, and other protectionist barriers between themselves.
Define Common external tariff
A common tariff set by group of countries to imposed on imported goods from non member countries
