Block 2 - Regional economic integration Flashcards
Describe regional economic integration
Countries in a geographical region cooperating to facilitate trade amongst themselves
It enacts the specialisation of production advocated by neoclassical economists (semester 1)
It moves the market conditions within the regional economic block closer to those of a market economy, where countries aim to reduce barrriers to allow free flow
What are the benefits of regional economic integration?
Lower costs to production, higher levels of competition and improved innovation
What is a free trade area?
a type of regional trade integration
member states remove all trade barriers between other member states - including both tariff and non tariff barriers (latter is trickier to remove)
member states generally can set any barrier with non member
What are some types of regional integration?
the free trade area
customs union
common market
economic union
political union
What is the customs union?
largely the same as a FTA
however it includes a coordinated trade barrier approach to non members
What is the main difference between an FTA and customs union?
The customs union faces the rest of the world as a single trading entity
Name some benefits of the customs union approach to rest of the world?
Stronger negotiating position, which may benefit less powerfukl states
What is the common market?
Increased levels of integration
Allows free movement of factors of production (labour and investment etc) as well as a common trade position towards non members and free trade among member states
What are some potential ‘roadblocks’ of the common market?
More complex to administer
cross border flows of factors of production require sympathetic tax arrangements and employee rights
uneven stocks of skilled labour and uneven distribution of wealth may create uneven flows of factors of production
What does Hill (2023) argue that, in terms of efficiency in international trade, the common market demands?
a significant degree of harmony and cooperation on fiscal, monetary and employment policies
What is the economic union?
Encompasses the removal of trade barriers among member states, a common trade position towards non members, free movement of factors of production and rhen formalises the economic policy framework
Harmonisation of tax, monetary, and fiscal policies to form a single currency through increased bureacracy and decreased sovereignty
What does the harmonisation in an economic union demand ?
a coordinating bureaucracy and the sacrifice of significant amounts of national sovereignty
what is a political union?
incorporates all the aspects outlined in an FTA, customs union, common market, and economic union and adds a coordinated political system to this
have a single government with devolved administration across union members with limited powers for local economic and welfare policy
In terms of levels of economic integration, which of the types has the highest?
Political union has the highest, with free trade area the lowest
What are the benefits of regional trade integration?
Increases the net aggregate trade since more items are available at cheaper prices
Consensus building among a few trade blocs is more easily achieved among a multitude of member states
Improves employment opportunities, especially among younger workers
Net gains should arise from global efficiencies making countries wealthier
What is the impact of international trade on poverty?
Globally, trade elevates GDP and rises income among the poorest in the world
This is an outcome often overlooked in discussion in the most developed economies
Yet wealth distribution is less equal as a result of globalisation
What do those against regional trade integration argue?
Takes jobs from home country
Floods home country with cheaper substitute products harming domestic companies (Hill 2023)
Brings higher immigration since trade flowm usually comes with free labour flow
Creates disproportionate distributional gains which is a fact, and a problem
What are some further negatives of REI?
Easier market access can benefit members over more efficient non member states, distorting compaative advantage
Domestic job losses (e.g. low wage roles shift to cheaper countries), rising inequality, and a loss of national sovereignty
How are arguments against REI similar to arguments of populist politicians?
These politicians will often capitalise on voters discontent and offer seemingly simple solutions
Yet this over-simplification of the situation is rarely accurate and the solutions offered can be ineffective
Summarise post WWII economic recovery in Europe
Marshall Plan (ERP): 1948–1951 US aid to rebuild Western Europe, boost trade, and contain communism.
Impacts: Job creation, infrastructure development, reindustrialisation, FDI, and rapid economic growth.
Cold War Context: Germany and Berlin split; capitalist West recovered faster. East-West trade was nearly banned.
Soviet Bloc: Self-sufficient but strained by military costs.
Summarise the development of the EU
1946: Churchill calls for a United States of Europe.
1951: Treaty of Paris → ECSC (coal & steel interdependence).
1957: Treaties of Rome → EEC & Euratom.
1967: Merger Treaty unifies ECSC, EEC, Euratom institutions.
1973: UK, Ireland, Denmark join.
1979: First direct EU Parliament elections.
1986: Single European Act → paves way for Single Market (1993).
1992: Maastricht Treaty creates the EU, euro & “three pillars”.
1995: Austria, Finland, Sweden join.
1999: Euro introduced (electronic), notes/coins in 2002.
2004: 10 countries join in biggest enlargement.
2009: Lisbon Treaty → more power to Parliament, new leadership roles.
2013: Croatia joins as 28th member.
What has UK GDP growtn looked like since the 2008 financial crisis?
Post crisis GDP has flatlined in the UK, limiting prospects for investment and creating difficulties in providing public services
The pandemic confounded this with a high impact on public services
Summarise the UK and EU member trade
The lisbon treaty allows free movement of people and greater political union for the UK
Despite this, the EU represents a steadily declining proportion of the UKs trade
The EU remains the UKs largest single trading relationship despite Brexit
Describe EU trade with non members?
As a large potential market, the EU offers an attractive prospect to non member trade partners
There is considerable overlap, bringing trade disputes so a formal trade arrangement can be implemented
e.g. comprehensive economic and trade agreement
Summarise UK EU trade in numbers
In 2016, the EU was the UK’s largest trading partner:
43% of UK exports (£236bn)
54% of UK imports (£318bn)
EU share of UK exports declined from 54% (2006) to 43% (2016).
EU share of UK imports fell from 58% (2002) to 50% (2011), then rose to 54% (2016).
Services made up 38% of UK exports to the EU in 2016, especially financial and business services.
Wales had the highest % of goods exports to the EU;
Northern Ireland had the highest % of goods imports from the EU.
what was the profile of those who voted to remain in the EU?
Higher educated
Younger (below 44)
Some indication that they are more likely to be metropolitan although the voting demographic skews the interpretation since there are a higher number of foreign born voters in these geographic areas
What was the rationale for remain voters?
Better prospects for own jobs and careers
Greater acceptance of diversity
Acceptance of the concerns about the negative effect of leaving the EU - mainly economic arguments
How did the 2008 financial crisis spark anti-globalisation protests?
The severe economic impact contrasted badly with the apparent lack of accountability with the wealthy elite
Inequality increased at this time as asset prices recovered on the back of central bank support
Decling poverty rates around the world are correlated with increased internationalisation
Explain the case against internationalisation and of regional integration
Shifts in trade from non members to members - this may take place irrespective of whether the member state is more efficient, so we run against some efficiencies
Shift in employment - economic migration increases competition for low skilled work, and firms supporting a higher labour costs base may lose out to cheaper member states
What is nationalism?
A discourse srructured around nodal point nation, envisaged as a sovereign community that is tied to a certain space, and is constructed through and in/out (member/non-member) opposition between nation and its outgroups
What are sne signifiers of the nation in nationalism?
State, land, freedom, democracy, culture
What drives political conservatism?
Several psychological variable including:
Death anxiety
System instability
Dogmatism (intolerance of ambiguity)
Openness to experience
Uncertainty tolerance
Needs for order, structure and closure
Integrative complexity
Fear of threat and loss
Self esteem
What does the core ideology of conservatism stress?
Resistance to change and justification of inequality and is motivated by needs that vary situationally and dispositionally to manage uncertainty and threat
What is populism?
Describes an antagonism between people and the elite, and claims to represent the people against some illegitimate elite
What are some examples of populism?
Brussels bureaucrats
Multinational enterprises
Proponents of globalisation such as big business and big data companies
Politicians
These are all examples of wealthy groups who carry power and influence and at whom perceived or real injustice can be claimed
How has Donald Trump utilised populism?
In his 2016 campaign he claimed to ‘drain the swamp’
This meant get rid of the political elite in office who represent the illegitimate elite and replace them with himself
He took this populist approach with a lot more anger and attack than is usual
He however made use of false information and misrepresenting the achievements of the incumbent government
Why has deinternationalisation become more prominent?
Because of the gradual decline in global FDI since 2016, as well as cross border trade flow
What two categories do the drivers of deinternationalisation fall into?
External and Internal dynamics
What are external dynamics and how do they drive deinternationalisation?
Host country environments
Policy uncertainty and political risk which prevent firm entry and encourage incumbent firm exit
A government reshuffle which may lead to institutional instabilities
Protest, political freedom and instititional transparency may increase divestment
Cultural distance between host and home causes firms to withdraw
