Chapter 10: Europe, Africa and MENA Flashcards
What are multinational market regions?
group of countries that seek:
- mutual economic benefit and associated peace
- reducing interregional trade and barriers
- economic cooperative agreements
- Ultimate goals is free trade
What did Frédéric Bastiat say?
If goods don’t cross borders, soldiers will
Mention some regional trade organizations/agreements
European Union, USMCA (NAFTA), ASEAN, MERCOSUR
Which conditions must meet for a regional trade agreement to be successful?
Economic, political, cultural, geographical
One flaw can destroy a union if the other factors are not strong enough to offset weakness
Nations must be willing to give up part of sovereignty
Economic factors of being in a union
It can enlarge market opportunities because of:
- preferential tariff treatment
- common tariff barrier against outsiders
-Stimulate internal economic development for all
- helps settle disputes
Political factors of union
Participating countries must be politically compatible, with similar aspirations
Giving up some part of sovereignty is essentials,
Unions are often formed as a result of an external threat (balancing)
Geographic and temporal proximity
Not imperative, but facilitates functioning of market - easy transports networks
Distance across time zones are important, it is easier to trade north-south nowadays
Issues of legal and illegal immigrants arise
Cultural factors of unions
Cultural similarity eases the shock of economic cooperations, often more successful
But some cases it works ok. In the EU, the culture is diverse and it still works, religion and language is a larger barrier
Patterns of multinational cooperation
Beyond the WTO, multinational market groups take several other forms, varying significantly in the degree of cooperation, dependence, and interrelationship among participating nations.
These include:
1. Regional cooperation groups
2. Free Trade Area
3. Customs Union
4. Common Market
5. Political Union
What are Regional Cooperation Groups (RCD)?
Most basic economic integration and cooperations, helps develop mutually beneficial industries
Each country makes advance comintment:
- Participate in financing joint ventures
- Purchase a specified share of the output of venture
EX: Colombia and Venezuela build hydroelectric plant
What are Free Trade Area (FTA)?
Agreement to reduce or eliminate customs duties and nontariff trade barriers
Members maintain tariff schedules for external countries
Provides members with a mass market without barriers
Requires more cooperation than RCD
EX: NAFTA
What is a customs union?
Next stage in economic cooperation after FTA, it adds** common external tariff on imports from outside the union**
What is a common market?
Step after customs union, where all internal tariffs and restrictions are eliminated fully.
Adopts set of common external tariffs
Free flow of goods, services, labour and capital
Still politically separated, (EEC before EU)
Political Union
A fully integrated form of regional cooperation, both economically and politically
European Union
Reasons why one should view market potational in regional context:
- Globalization of markets
- Restructuring of eastern european bloc into independent market-driven economies
- dissolution of USSR into independent states
-worldwide trend toward economic cooperation
-enhanced global competition
