Customs union

Question 1

define WTO?

Answer 1

policies free trade agreements and decides on trade disputes between countries

Question 2

customs union definition?

Answer 2

countries that operate free trade with each other and impose a common external tariff

Question 3

European union definition?

Answer 3

economically intergrated group of 28 member states

Question 4

Intra-regional trade definition?

Answer 4

the exchange of virtually identical products between countries within the same region

Question 5

regionalisation of trade definition?

Answer 5

an increase in the intensity of trade and investment between countries within the same region

Question 6

Trade creation definition?

Answer 6

there are welfare gains from lower import tariffs from within the customs union

Question 7

trade diversion definition?

Answer 7

there are welfare losses from higher import prices from outside the customs union becuase of the effects on an import tariff

Question 8

what are trading blocs?

Answer 8

groups of countries in specific regions that manage and promote trade activities.

Question 9

what do trading blocs lead to?

Answer 9

trade liberalisation and trade creation between members

Question 10

Features of a custom union?

Answer 10

• common set of import duty rates
• duty and quota free movement between members
• safety measures from imports of third parties

Question 11

What is a free trade area FTA?

Answer 11

one where there are no tariffs or taxes or quotas on goods/services from one country to another

Question 12

examples of free trade areas?

Answer 12

European Free trade association EFTA

Question 13

Examples of trading blocs?

Answer 13

EU, NAFTA

Question 14

Main features of European economic and monetary Union?

Answer 14

• single european currency
• co-ordination of macro- economic policies
• single interest rate

Question 15

Advantages of EMU?

Answer 15

• elimination or transaction costs
• price transparancy
• easier trading condition
• reduced travelling costs

Question 16

disadvantages of EMU?

Answer 16

• changeover costs
• higher prices for consumers
• consumer confusion
• unstable currency
• higher unemployment

Question 17

What is the single european market (SEM)?

Answer 17

• free movement of goods, services, capital, labour which promotes deeper economic intergration and market liberalisation

Question 18

What is the differance between custom union and single market ?

Answer 18

• customs union shares the revenue from the common external tariff in pre determined way
• single market represents a deeper form of economic integration than a customs union

Question 19

What is trade diversion?

Answer 19

switch from lower cost foreign suppliers of a customs union towards a higher cost supplier located inside the customs union

Question 20

WTO role?

Answer 20

helps promote free trade by persuading countires to lower their import tariffs and other barriers to open markets

Question 21

challenges for WTO?

Answer 21

• complexity of production (countries specialising, comparative advantage)
• shifting global economic power
• rising slowbalisation