Economic Integration

Question 1

What is economic integration? What are its objectives?

Answer 1

1. The elimination of economic frontiers
2. To encourage trade and to increase the overall welfare
3. Negative v. positive integration

Question 2

What is an economic autarky?

Answer 2

1. Self-sufficient nation with policies that prevent and hinder free trade
2. Can trade, but with protectionism

Question 3

What is a Free Trade Area?

Answer 3

An area where two or more countries have removed all tariffs, quotas and other forms of protectionism between themselves

Question 4

What is a Customs Union?

Answer 4

Goods may freely move + One common external policy (= common external tariff + common external quota)

Question 5

What is a Common Market?

Answer 5

Customs Union + Four Freedoms

Question 6

What is an Economic Union?

Answer 6

Common Market + Positive integration

Question 7

What is total economic integration?

Answer 7

Includes all economically relevant policies + Common supranational institutions

Question 8

What is opportunity cost?

Answer 8

The loss of the alternative choice to the choice made

Question 9

What is specialisation?

Answer 9

Each country concentrates on what it does best and engages in mutually beneficial trade

Question 10

What is comparative advantage?

Answer 10

A country has a lower opportunity cost than another one at producing a specific good than another country

Question 11

What is absolute advantage?

Answer 11

A country can produce more of one good than another (in terms of number)

Question 12

What is social welfare?

Answer 12

Consumer surplus + Producer surplus

Question 13

What are the advantages of protectionism?

Answer 13

1. To protect the home industry (= political rationale) and to prevent dumping and other unfair trade practices as well as to protect infant industries (= economic rationale)
2. Producer surplus will increase and consumer surplus will decrease, but the general welfare will usually decrease for smaller countries

Question 14

What is a tariff?

Answer 14

1. A tax that should be paid when importing a good.
2. Specific = Fixed price unit of the good
3. Ad valorem = A proportion of the value of the imported good

Question 15

What is export subsidy?

Answer 15

A payment given by the government to an exporting company so that it will export

Question 16

What is an import quota?

Answer 16

A quantitative restriction on the number of goods which can be imported into a country

Question 17

What are voluntary export restraints?

Answer 17

To impose a restriction on exports to country B on the request of country C (usually part of a political bargain)

Question 18

Van Gend & Loos

Answer 18

An increase in the customs duties of one MS as compared to it when the Treaty came into force constitutes a custom duty and charges having equivalent effect and is prohibited under art. 28 TFEU

Question 19

Cassis de Dijon

Answer 19

1. Principle of mutual recognition
2. Principle of proportionality
3. Tariffs and measures having equivalent effect may be allowed for the protection of the effectiveness of fiscal supervision, the protection of public health, the fairness of commercial transactions and the defences of the consumer, if it respects the principles mentioned above

Question 20

Belgian margarine and butter case

Answer 20

If a good is lawfully produced and marketed in on MS, it shall be suitable in another MS

Question 21

What is the difference between negative and positive integration?

Answer 21

Positive integration is the joint exercise of economic policies and the creation of institutions in order to overcome economic frontiers.

Negative integration is the removal of economic policies that create economic frontiers.