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
2
Q
Define economic integration
A
- economic co-operation
- coordination of econ policies
- increased interdependence
3
Q
WTO
A
- Remove both tariff and non-tariff barriers; allow trade to flow freely amongst nations
- Help exporters and importers conduct business smoothly
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
5
Q
Factors influencing WTO
A
- Difficulties of reaching agreement on svcs/pri pdts
- Unequal bargaining power
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
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
8
Q
Trading blocs
A
- Free Trade Area
- Customs Union
- Common mkt
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
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
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
12
Q
+ve of Trading blocs
A
- Trade creation
- Increased competition
- Reap EOS
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
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
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
16
Q
-ve of trading blocs
A
- Trade diversion
- Challenge to multilateral trading negotiations
- 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
