Chapter 7 Flashcards
uniting principle of GAAT and WTO
GATT and the WTO both want to make international trade fair and easier for everyone. Their main idea is to help trade happen better by having fewer barriers
differences between GAAT and WTO
- GAAT stands for general agreement on tariffs and trade; WTO stands for world trade organization
- GAAT started in 1947; WTO began in 1955, replacing GAAT
- GAAT primarily focused on reducing tariffs and addressing trade issues among member countries; WTO did similar things on a bigger scale, covering not only trade in goods but also services, ideas, and investments
- GAAT follows the “trade without discrimination” principle. This rule made sure that all countries in GATT were treated the same way. It stopped special trade deals between certain countries, making sure that any good terms given to one country had to be given to everyone. This way, trade was fair for everyone involved; WOT follows a rule called “most favored nation” which specifically deals with extending trade benefits equally among nations
different levels of integration
- free trade area
- customs union
- common market
what is a free trade area?
involves countries removing or greatly lowering tariffs and trade barriers among themselves while maintaining their own trade rules with countries outside the agreement
what is a customs union?
Group of countries applying common external tariffs.
what is common market
Area allowing free movement of goods, services, capital, and people
static effect of reducing or removing bariers
Immediate changes due to a new trade agreement, involve resources moving from less effective companies to better ones because trade barriers are gone
the dynamic effect of reducing or removing bariers
Long-term impacts of economic integration, when the market grows and companies can expand and produce more, benefiting from operating on a larger scale.
conditions where static effect may occur
- trade creation
- trade diversion
what is trade creation
when production moves to more effective companies due to advantages in making things
what is trade diversion
takes place when trade moves within group of countries instead of outside them
what are economies of scale
When trade barriers decrease and markets expand, companies can produce more at a lower cost per item
what is global integration
It involves countries worldwide cooperating to facilitate global trade
example of global integration
WTO
what is regional integration
Cooperation between countries within a specific geographic region.
example of regional integration
the european union
what is bilateral integration?
when two countries form a closer economic relationship through mutual agreements
example of bilateral integration
United States-Mexico-Canada Agreement (USMCA)
define globalization
The process of increased interconnectedness among countries
define GAAT
An agreement aiming to reduce trade barriers among nations.
define WTO
An organization dealing with global trade rules and dispute resolution
Define economic integration
The process of reducing trade barriers between countries
define levels of integration
Different stages in economic cooperation among countries
define multilateral agreements
Trade agreements involving multiple countries
define Intellectual Property
Ownership of unique creations or ideas
define foreign direct investment
Investment made by a company in another country
define the balance of trade
The difference between exports and imports
define current account
Record of trade balance, income from investments, and financial transfers
define free trade
Trade without tariffs or other barriers
define economic union
Unions coordinating economic policies among member nations
define trade bloc
A group of countries encouraging trade among themselves
define trade surplus
Exports exceed imports
define trade deficit
Imports exceed exports
example of tariffs
India imposing taxes on imported electronic goods to protect its local electronics industry
example of quota
Japan limiting the quantity of rice imports to protect its domestic rice farmers
example of globalization
Apple Inc. designs its products in the United States but manufactures them in China for global distribution.
example of disagreement that WTO resolved
There was a disagreement between the U.S. and China about electronic payments. The U.S. thought China was being unfair to foreign companies.
what are the types of integrations?
- regional
- bilaterall
- global
example of trade free area
The North American Free Trade Agreement (NAFTA) eliminated tariffs between the United States, Canada, and Mexico.
example of custom union
The European Union (EU) removed internal tariffs and imposed a common external tariff on goods entering any EU member state from outside the union.
example of common market
The EU, which not only removed internal tariffs but also enabled the free movement of labor and capital among its member nations
Define GAAT
An agreement aiming to reduce trade barriers among nations.
define WTO
An organization dealing with global trade rules and dispute resolution.
example of GAAT
Countries like the United States, Canada, and many European nations sign agreements to reduce tariffs on various goods.
example of economic integration
ASEAN (Association of Southeast Asian Nations) countries reducing trade barriers to boost trade and investment
example of level of integration
The European Union progressed from a free trade area to a common market and then an economic union.
example of foreign direct investment
Toyota building a manufacturing plant in the United Kingdom
example of balance of trade
China exports more goods to the United States than it imports from the USA.
