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Econs vol 6 > Economic integration (PTA, WTO, Trading Blocs) > Flashcards

Economic integration (PTA, WTO, Trading Blocs) Flashcards

1
Q

Define preferential trading agreement (PTA)

A
  • agreement % 2 or more countries
  • lower trade barriers on particular pdts
  • +ve: easier access to other member country’s mkt
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2
Q

Define economic integration

A
  • economic co-operation
  • coordination of econ policies
  • increased interdependence
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3
Q

WTO

A
  1. Remove both tariff and non-tariff barriers; allow trade to flow freely amongst nations
  2. Help exporters and importers conduct business smoothly
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4
Q

+ve of WTO

A
  • lower COL
  • more consumer choice
  • employment
  • increased efficiency
  • e.g Bali Package (2013) a landmark agreement on global trade that created 21 mil jobs
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5
Q

Factors influencing WTO

A
  1. Difficulties of reaching agreement on svcs/pri pdts
  2. Unequal bargaining power
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6
Q

Difficulties of reaching agreement on svcs/pri pdt (-ve of WTO)

A
  • DC vs LDC
  • DCs protect their farmers with pdtn and export subsidies
  • -ve impact on LDC farmers
  • however one key success (2015): agreement to phase out export subsidies
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7
Q

Unequal bargaining power of members

A
  • Formal POV: democratic, each member 1 vote
  • Critic: decisions are based on power of the member country ie. economically powerful countries express opinions that carry greater weight
  • more dominant and influential countries –> outcomes that favour the more powerful
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8
Q

Trading blocs

A
  • Free Trade Area
  • Customs Union
  • Common mkt
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9
Q

Free trade area (Trading bloc)

A
  • eliminate all trade barriers
    -retain own trade restrictions with non-member countries
  • +ve: enlarged mkt, > opp for trade; removal of trade barriers encourages specialization according to comparative advantage, increased efficiency, reap EOS
  • ie. ASEAN
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10
Q

Customs union (Trading bloc)

A
  • extension of free trade area
  • single customs territory
  • no trade barriers % member countries
  • maintain common external tariff and quota policy with non-member countries
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11
Q

Common mkt (Trading bloc)

A
  • operate as a single mkt
  • free movement of gds and svcs, labour and capital
  • e.g. AEC (Asean economic community)
  • ie. foreign workers in the European community subject to same taxation and rights to social security
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12
Q

+ve of Trading blocs

A
  1. Trade creation
  2. Increased competition
  3. Reap EOS
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13
Q

Trade creation (+ve of trading blocs)

A
  • rise in vol of trade % member countries due to removal of trade restrictions
  • greater specialization according to comparative advantage
  • C shift frm high-cost (less efficient producer) to low-cost
  • increase in allocative efficiency of resources
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14
Q

Increased competition (+ve of trading blocs)

A
  • removal of trade barriers means that inefficient producers no longer protected
  • > efficient producers
  • lower px for consumers
  • improved allocative efficiency of resources
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15
Q

Expansion into larger mkts and EOS (+ve of trading blocs)

A
  • sell beyond national economy
  • increase exports
  • size of mkt expands
  • firms can achieve lower LRAC of pdtn (EOS)
  • lower px for consumers
  • greater export competitiveness
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16
Q

-ve of trading blocs

A
  1. Trade diversion
  2. Challenge to multilateral trading negotiations
  3. Unequal distribution of gains, possible losses
17
Q

Trade diversion (-ve of trading blocs)

A
  • shifting trade away from low-cost producers outside free trade area to high-cost producers within free trade area
  • misallocation of resources
  • reduce consumer welfare
  • e.g UK’s initial membership in the EU – trade diversion frm poor countries in Africa and Asia – unNt, destabilizing BOP
18
Q

Challenge to multilateral trading negotiations (-ve of trading blocs)

A
  • discrimination
  • create trade conflicts % diff blocs – slow down process of global trade liberalization
  • trade barriers on non-member countries may limit global trade, worse allocation of resources
19
Q

Unequal distribution of gains and possible losses (-ve of trading blocs)

A
  • potential conflicts % member countries
  • difficult to reach agreements
  • some stakeholders likely to gain while another will lose
20
Q

Loss of sovereignty

A
  • authority over decision-making within the national economy

Econs vol 6 (4 decks)

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