Chapter 8 Summary Flashcards
Outline the levels of economic integration and its debate.
There are five levels of regional economic integration
-free trade area
-customs union
-common market
-economic union
-political union
debate includes:
(1) trade creation expands buyer selection, decreases prices, increases productivity, and boosts national competitiveness
(2) greater consensus to reduce barriers among smaller groups of nations
(3) political cooperation can enhance negotiating power, and reduce potential military conflict
(4) corporate savings can arise from modifying strategies and eliminating duplicate factories.
Arguments against free trade include:
(1) trade diversion can result in increased trade with a less-efficient producer within the trading bloc
(2) jobs are lost when factories close and jobs move to lower-wage nations
(3) cultural identity and national sovereignty is diminished due to increased exposure to other cultures.
Describe integration in Europe and its enlargement.
The European Coal and Steel Community formed in 1951 to remove trade barriers for coal, iron, steel, and scrap metal among members. After waves of expansion, broadenings of its scope, and name changes, the community is now called the European Union (EU) and currently has 28 members.
Five main institutions of the EU are the European Parliament, European Commission, Council of the European Union, Court of Justice, and Court of Auditors. The EU single currency has been adopted by 19 member nations, which benefit from no exchange-rate risk and currency conversion costs within the euro zone.
The European Free Trade Association (EFTA) has four members and was created to focus on trade in industrial goods.
Describe integration in the Americas and its prospects.
The North American Free Trade Agreement (NAFTA) began in 1994 among Canada, Mexico, and the United States; it seeks to eliminate all tariffs and nontariff trade barriers on goods originating from within North America. The Central American Free Trade Agreement (CAFTA-DR) was established in 2006 between the United States and six Central American nations to boost the efficiency of trade.
The Andean Community was formed in 1969 and calls for tariff reduction for trade among member nations, a common external tariff, and common policies in transportation and certain industries. The Southern Common Market (MERCOSUR), established in 1988, acts as a customs union.
The Caribbean Community and Common Market (CARICOM) trading bloc was formed in 1973, and the Central American Common Market (CACM) was formed in 1961.
Summarize integration in Asia and elsewhere.
The Association of Southeast Asian Nations (ASEAN) formed in 1967 and seeks to: (1) promote economic, cultural, and social development; (2) safeguard economic and political stability; and (3) serve as a forum to resolve differences peacefully.
The organization for Asia Pacific Economic Cooperation (APEC) was formed in 1989 and strives to strengthen the multilateral trading system and expand the global economy. The Closer Economic Relations (CER) Agreement in 1983 between Australia and New Zealand totally eliminated tariffs and quotas between the two economies.
The Gulf Cooperation Council (GCC) of 1980 allows citizens of Middle Eastern countries to travel freely without visas and to own properties in other member nations. The African Union (AU) was started in 2002 among 55 nations to promote peace, security, and stability and to accelerate economic and political integration across Africa.
