CH 39 Trading blocs

Question 1

What is a PFA?

Answer 1

A preferential trade area means most trade barriers are lifted

Question 2

What is a FTA?

Answer 2

-A Free trade area lifts all trade barriers
-Each member retains the right to decide on their trade policies with nonmembers

Question 3

What are custom unions?

Answer 3

-Removes all trade restrictions between each other
-They also impose the same trade barriers on non member nations

Question 4

What are Common markets?

Answer 4

-Removes all trade restrictions between each other
-They also impose the same trade barriers on non member nations
-Freedom of movement of labour and capital between member nations

Question 5

What is an Economic union?

Answer 5

-removes all trade barriers
-impose the same trade barriers on non member nations
-Freedom of movement of labour and capital between member nations
-Adoption of the same currency and monetary policy

Question 6

What are the benefits of being a part of a trading bloc?

Answer 6

-Cheaper labour
-Trade creation
-More competition
-Access to more markets
-Freedom of movement
-Access to economies of scale for businesses

Question 7

What are the disadvantages of being a part of a trading bloc?

Answer 7

• Trade diversions
  -Monopolies could form
  -Overreliance of trade within the bloc
  -Financial costs to the governments