Chapter 8 - Levels of Economic Integration

Question 1

5 levels of economic integration (from least to most integrated):

Answer 1

1) Free Trade Area
2) Customs Union
3) Common Market
4) Economic Union
5) Political Union

Question 2

Where barriers to the trade of goods and services among member countries are removed, however each country determines its own trade policy with nonmembers.

Answer 2

Free Trade Area

Question 3

Where trade barriers are eliminated between member countries and adopts a common external trade policy.

Answer 3

Customs Union

Question 4

Where no barriers are made between member countries and a common external trade policy.

Answer 4

Common Market

Question 5

Where it involves the free flow of products and factors of production between members and the adoption of a common external trade policy.

Answer 5

Economic Union

Question 6

Where independent states are combined into a single union.

Answer 6

Political Union

Question 7

Coordinates economic, social, and foreign policy of member states.

Answer 7

Central Political Apparatus

Question 8

Additional gains from the free flow of trade and investment between countries.

Answer 8

Economic Case for Integration

Question 9

Creates incentives for political cooperation between neighboring states.

Answer 9

Political Case for Integration

Question 10

Occurs when high-cost domestic/external producers are replaced by low-cost producers within the free trade area.

Answer 10

Trade Creation

Question 11

Occurs when lower-cost external suppliers are replaced by higher cost suppliers within the free trade area.

Answer 11

Trade Diversion

Question 12

5 main institutions of EU:

Answer 12

1) The European Council
2) The Council of Ministers
3) The European Commission
4) The European Parliament
5) The Court of Justice

Question 13

Founded in 1960 EFTA has 4 members: Iceland, Liechtenstein, Norway, and Switzerland.

Answer 13

European Free Trade Association (EFTA)

Question 14

A new trade agreement between the EU and Canada; it cuts tariffs and makes it easier to export goods and services.

Answer 14

Comprehensive Economic and Trade Agreement (CETA)

Question 15

Bolivia, Chile, Ecuador, Colombia, and Peru signed an agreement in 1969 to create this and overcome structural problems.

Answer 15

The Andean Community

Question 16

Originated in 1988 as a free trade pact between Brazil and Argentina, then Paraguay and Uruguay joined in 1990. It criticized for trade diversion rather than trade creation.

Answer 16

MERCOSUR

Question 17

A defunct proposedtrade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and United States.

Answer 17

Trans-Pacific Partnership(TPP)

Question 18

Members are the largest economies outside of the OECD (Brazil, Russia, India, and China).

Answer 18

BRIC Countries

Question 19

The United States signed an agreement with the 6 countries in 2004 to establish this free trade agreement.

Answer 19

Central America Free Trade Agreement (CAFTA)

Question 20

Established in 1973 but has repeatedly failed to progress toward economic integration.

Answer 20

Caribbean Community (CARICOM)

Question 21

Founded in 1967 to foster freer trade among member countries and to achieve cooperation in their industrial policies.

Answer 21

Association of Southeast Asian Nations (ASEAN)

Question 22

Founded in 1990 to increase multilateral cooperation in view of the economic rise of the Pacific nations and the growing interdependence within the region.

Answer 22

Asia-Pacific Economic Cooperation (APEC)