Economics 4.1.7 Flashcards
“What is a trading bloc?”
“A trading bloc is a group of countries that agree to reduce or eliminate barriers to trade among themselves.”
“What are the different levels of economic integration?”
“Levels of economic integration range from bilateral agreements to high integration in a monetary union.”
“What is a free trade area?”
“A free trade area is a bloc where countries abolish trade restrictions among themselves but maintain their own restrictions with other countries.”
“Give an example of a free trade area.”
“An example of a free trade area is the Canada–United States–Mexico Agreement (CUSMA).”
“What is a customs union?”
“A customs union is an agreement where member countries trade goods/services tariff-free and agree on common tariff rates for external countries.”
“How do countries in a customs union trade with each other?”
“Countries in a customs union trade freely among themselves while imposing common tariffs on imports from third-party countries.”
“What is a common market?”
“A common market allows tariff-free trade and free movement of the four factors of production among member countries.”
“What is the goal of a common market?”
“The goal of a common market is to improve resource allocation and lower production costs among its members.”
“What is a monetary union?”
“A monetary union combines the benefits of a customs union and common market while establishing a common currency and central bank.”
“What are the essential conditions for a successful monetary union?”
“Essential conditions include free movement of labor and similar trade cycles among member countries.”
“What is the significance of movement of labor in a monetary union?”
“Movement of labor should be free to minimize barriers, enhancing integration within a monetary union.”
“What should be similar among trade cycles in a monetary union?”
“Trade cycles of member countries should be similar to avoid tensions, particularly during economic crises.”
“What is meant by mobility of finance in a monetary union?”
“Mobility of finance means prices and wages should adjust freely according to market conditions.”
“What are fiscal transfers?”
“Fiscal transfers are automatic financial supports for countries performing poorly, crucial for stability in a monetary union.”
“What are some benefits of regional trade agreements?”
“Benefits include trade creation, elimination of tariffs, and simplified trading conditions.”
“What are some costs of regional trade agreements?”
“Costs include structural unemployment in some domestic industries and increased negative externalities.”
“What is the role of the WTO?”
“The WTO promotes free trade and aims to raise living standards, create jobs, and improve lives.”
“What does trade liberalisation involve?”
“Trade liberalisation involves removing barriers to free trade, such as tariffs.”
“What are the two main roles of the WTO in liberalising trade?”
“The WTO brings countries together to reduce protectionist barriers and adjudicates trade disputes.”
“What is an exam tip regarding WTO judgements?”
“WTO judgements are not legally binding; members voluntarily comply.”
“What conflict exists between regional trade agreements and the WTO?”
“Regional trade agreements can conflict with the WTO’s aim of trade liberalisation by instituting barriers on non-members.”
“What has been the trend in regional trade agreements globally?”
“In March 2022, there were 320 regional trade agreements globally.”
“What is a potential downside of regional trade agreements?”
“Regional trade agreements may result in global inefficiency by shifting trade from non-members with a comparative advantage.”
