Chapter 8 - Levels of Economic Integration Flashcards
5 levels of economic integration (from least to most integrated):
1) Free Trade Area
2) Customs Union
3) Common Market
4) Economic Union
5) Political Union
Where barriers to the trade of goods and services among member countries are removed, however each country determines its own trade policy with nonmembers.
Free Trade Area
Where trade barriers are eliminated between member countries and adopts a common external trade policy.
Customs Union
Where no barriers are made between member countries and a common external trade policy.
Common Market
Where it involves the free flow of products and factors of production between members and the adoption of a common external trade policy.
Economic Union
Where independent states are combined into a single union.
Political Union
Coordinates economic, social, and foreign policy of member states.
Central Political Apparatus
Additional gains from the free flow of trade and investment between countries.
Economic Case for Integration
Creates incentives for political cooperation between neighboring states.
Political Case for Integration
Occurs when high-cost domestic/external producers are replaced by low-cost producers within the free trade area.
Trade Creation
Occurs when lower-cost external suppliers are replaced by higher cost suppliers within the free trade area.
Trade Diversion
5 main institutions of EU:
1) The European Council
2) The Council of Ministers
3) The European Commission
4) The European Parliament
5) The Court of Justice
Founded in 1960 EFTA has 4 members: Iceland, Liechtenstein, Norway, and Switzerland.
European Free Trade Association (EFTA)
A new trade agreement between the EU and Canada; it cuts tariffs and makes it easier to export goods and services.
Comprehensive Economic and Trade Agreement (CETA)
Bolivia, Chile, Ecuador, Colombia, and Peru signed an agreement in 1969 to create this and overcome structural problems.
The Andean Community
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.
MERCOSUR
A defunct proposedtrade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and United States.
Trans-Pacific Partnership(TPP)
Members are the largest economies outside of the OECD (Brazil, Russia, India, and China).
BRIC Countries
The United States signed an agreement with the 6 countries in 2004 to establish this free trade agreement.
Central America Free Trade Agreement (CAFTA)
Established in 1973 but has repeatedly failed to progress toward economic integration.
Caribbean Community (CARICOM)
Founded in 1967 to foster freer trade among member countries and to achieve cooperation in their industrial policies.
Association of Southeast Asian Nations (ASEAN)
Founded in 1990 to increase multilateral cooperation in view of the economic rise of the Pacific nations and the growing interdependence within the region.
Asia-Pacific Economic Cooperation (APEC)
