Economic integeration Flashcards
Define Economic Integeration
refers to economic interdependence between countries usually achieved by agreements between countries to reduce or eliminate barriers to trade between them
Define a Bilateral trade agreement and a multilateral trade agreement
Bilateral trade agreement – an agreement between two countries
Multilateral trade agreement — involves an agreement between many countries
Define a regional trade Agreement
Involves a trade agreement between a group of countries that are within a geopgra[hical region
Define a Preferential trade agreement (PTA)
is an agreement between two or more countries to lower trade barriers on a particular product in trade between each other
Can take several forms, including free trade areas, custom unions or common markets
Define a trading bloc
a group of countries that have agreements to reduce tariffs and other barriers to trade for the purpose of encouraging economic free and freer trade and cooperation between them.
Define a Free Trade Agreement
consists of a group of countries that agree to gradually eliminate trade barriers between themselves, and is the most common type of integration
Define a Common market
high degree of economic integeration in which countries that have formed a customs union agree to further eliminate any tariffs in trade between them; the continue to have a common external policy and agree to eliminate all restrictions on movements of any factors of production within them.
Give an example of a free trade agreement
the North American Free Trade Agreement (NAFTA) was a pact eliminating most trade barriers between the U.S., Canada, and Mexico that took effect in January 1994.
Evaluate NAFTA
Successs 1) NAFTA trade aggreement generated economic growth and rising standards of living for the middle class of all three member countries in all three countries especially the US as US exports to Mexico and Canada rose 156% during this period, while US exports to the rest of the world grew only 65%, giving US firms access to wider and lowered the price of many goods.
2) NAFTA has had an overwhelmingly positive effect on the Canadian economy. It has opened up new export opportunities, acted as a stimulus to build internationally competitive businesses, and helped attract significant foreign investment.
Limitations
1) The loss of these jobs is just the most visible tip of NAFTA’s impact on the U.S. economy. In fact, NAFTA has also contributed to rising income inequality, suppressed real wages for production workers,
2) Mexico’s Environment Deteriorated
In response to NAFTA competitive pressure, Mexico agribusiness used more fertilizers and other chemicals, costing $36 billion per year in pollution. Rural farmers expanded into marginal land, resulting in deforestation at a rate of 630,000 hectares per year.
Give an example of a Common Market
A common market was created in 1958 in Belgium, France, Italy, Luxembourg, Netherlands, and West Germany also known as European Economic Community (EEC), prompted by the Treaty of Rome (1957). The Merger Treaty (1965) Was a treaty that merged the European Economic Community, Euratom, and the European Coal and Steel Community, establishing one administrative to body that was responsible for deciding trade standards
Evaluate the EEC
Advantages
1) greater political stability and cooperation
The EEC established common pricing levels in 1962 when member states were recovering from food shortages. This strategy ensured self-sufficiency and food security by subsidizing production of basic farm products, but this also resulted in surpluses of several products.
2) Opportunity for Economies of scale
All internal trade tariffs between countries on certain products in the European Economic Community were removed by 1968, allowing free cross border trade, allow firms in member countries greater access to markets offer potential for economies of scale
Limitations
1) Time lag
From the time of established, it took several years for effective reform and trade liberation measures to take place which may have conflicted with the political priorities of member states
Loss of Sovereignty
2) Upon the entry into force of the Maastricht Treaty in 1993, the EEC was renamed the European Community to reflect that it covered a wider range than economic policy. Facilitated the way for the Treaty of Lisbon (2009) which caused the ECC is absorbed and incorporated into the European union (EU), subsequently, causing member nations to loss a degree of soverignty.
Take on 1962 food shortage
(keynote: France had a GDP of over $60 billion in the 1960s had to follow and concede to the common prices with countries like Belgium who GDP in the 1960s. was less than $12 billion– trade diversion) – don’t bring it up if you don’t have too)
Define Trade Creation (Example NAFTA)
refers to a situation where high cost products (imported or domestically produced) are replaced with low-cost imports
Define Trade diversion (Example: EEC)
refers to a situation where low cost imports are replaced by high cost imports from a member after the formation of a trading bloc.
Define a Monetary union
involves a far greater. degree of integration than a common market and occurs when the member of countries of a common market adopt a common currency and a common central bank responsible for monetary policy.
