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MGMT 414 (ISU) > Final: Regional Economic Integration > Flashcards

Final: Regional Economic Integration Flashcards

1
Q

What are the levels of economic integration from least to most integrated

A 
Free trade area.
Customs union.
Common market.
Economic union.
Political union.
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2
Q

What is Free Trade Area?

A

Eliminates all barriers to the trade of goods and services among member countries. Each country is allowed to determine its own trade policies regarding nonmembers.

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3
Q

What is a Customs Union?

A

Eliminates trade barriers between member countries and adopts a common external trade policy.

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4
Q

What is a Common Market?

A

No restrictions on immigration, emigration, or cross-border flows of capital among member countries. Requires harmony and cooperation on fiscal, monetary, and employment policies.

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5
Q

What is an Economic Union?

A

Requires a high degree of integration, a coordinating

bureaucracy, and the sacrifice of national sovereignty to the bureaucracy.

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6
Q

What is a Political Union?

A

The central political apparatus coordinates the economic, social, and foreign policy of member states.

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7
Q

What are the two European Trade Blocs?

A 
European Union (EU)
European Free Trade Association (EFTA)
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8
Q

The Economic Case for Integration

A

• All countries gain from free trade and investment—a
positive-sum game.
• Assumes an absence of barriers.
• Motivated by desire to exploit gains from free trade and investment.

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9
Q

The Political Case for Integration

A
  • Linking countries together, making them more dependent on each other, promotes political cooperation.
  • Reduces the likelihood of violent conflict.
  • Gives countries greater political clout when dealing with other nations.
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10
Q

Two reasons it has not been easy to achieve integration:

A
  1. While a nation as a whole may benefit from a regional free trade agreement, certain groups will lose.
  2. It implies a loss of national sovereignty.
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11
Q

Regional economic integration is only beneficial if ….

A

the amount of trade it creates exceeds the amount it
diverts.
• Trade creation.
• Trade diversion.

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12
Q

The European Union is a product of which two political factors?

A
  1. The devastation of western Europe during two world wars and the desire for a lasting peace.
  2. The European nations’ desire to hold their own on the world’s political and economic stage.
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13
Q

Treaty of Rome established the _______ and provided _________.

A

European Community

The creation of a common market

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14
Q

What does the political structure of the EU consist of?

A

European Commission
European Council
European Parliament
Court of Justice

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15
Q

What does the European Commission do?

A

Proposes EU legislation, implements it, and monitors compliance.

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16
Q

Who makes up the European Commission?

A

Commissioners appointed by member countries and

approved by the European Parliament.

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17
Q

What does the European Council do?

A

The ultimate controlling authority within the EU.

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18
Q

Who makes up the European Council?

A

One representative from the government of each member state.

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19
Q

What does the European Parliament do?

A

Debates legislation proposed by the commission and forwarded to it by the council.

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20
Q

Who makes up the European Parliament?

A

751 members elected by the member states

21
Q

Who makes up the Court of Justice?

A

One judge from each country.

22
Q

What are the objectives of The Single European Act?

A
  • Remove all frontier controls among EC countries.
  • Apply the principle of “mutual recognition” to product standards.
  • Institute open public procurement to nonnational suppliers.
  • Lift barriers to competition in the retail banking and insurance businesses.
  • Remove all restrictions on foreign exchange transactions between member countries by the end of 1992.
  • Abolish restrictions on cabotage by the end of 1992.
23
Q

What was the impact of The Singular European Act?

A
  • Impetus for restructuring of substantial sections of industry.
  • Fostered faster economic growth.
  • Established legal, cultural, and language differences creates uneven implementation.
24
Q

What was the Maastricht Treaty?

A

Committed the EU to adopt a single currency (euro).

25
Q

What are some of the benefits of the Euro?

A
  • Savings from handling a single currency.
  • Makes it easier to compare prices across Europe.
  • Producers forced to look for ways to reduce production costs.
  • Boosts development of the highly liquid pan-European capital market.
  • Increases investment options.
26
Q

What are some of the costs of the Euro?

A
  • Loss of control over national monetary policy.

* EU is not an optimal currency area.

27
Q

What has been the Euro experience?

A
  • Volatile trading history since its establishment in 1999 but has weakened since 2008.
  • Slow economic growth and large budget deficits among several states.
  • Bailout package to rescue Greece in 2010.
  • Some newer nations have put plans to adopt the euro on hold.
28
Q

What were some of the requirements for other countries to join the EU?

A
  • Had to establish stable democratic governments.
  • Show respect for human rights.
  • New members had to wait to adopt the euro.
29
Q

Why did the British choose to leave the EU?

A

Voted to leave in 2016 based on loss of national sovereignty, immigration issues.

30
Q

What is the Treaty of Lisbon?

A

Treaty explaining Britain had two years to negotiate terms of exit from the EU.

31
Q

What must happen in order for Britain to benefit from leaving the EU?

A

It must be able to negotiate trade deals with the EU.

32
Q

What are some of the policies towards greater regional economic integration in the Americas?

A

The biggest effort is the North American Free Trade
Agreement (NAFTA), currently superseded by the
USMCA (US-Mexico-Canada Agreement)
Andean Community
Mercosur.

33
Q

What did the North American Free Trade Agreement do?

A
  • Free trade area among Canada, Mexico and the U.S.
  • Abolished tariffs on 99 percent of goods traded between members.
  • Removed barriers on the cross-border flow of services.
  • Protects intellectual property rights.
  • Removes most restrictions on FDI between members.
  • Allows each country to apply environmental standards.
  • Established two commissions to impose fines and remove trade privileges when environmental standards or legislation involving health and safety, minimum wages, or child labor are ignored.
34
Q

Mexico benefited from NAFTA from:

A

Increased jobs as low-cost production moves south and more rapid economic growth as a result.

35
Q

The U.S. and Canada benefited from NAFTA from:

A
  • Access to a large and increasingly prosperous market.
  • Lower prices for consumers from goods produced in Mexico.
  • Low-cost labor and ability to be competitive in world markets.
  • Increased imports by Mexico.
36
Q

Disadvantages of NAFTA to the U.S. and Canada:

A

Jobs would be lost and wage levels would decline in the U.S. and Canada.

37
Q

Disadvantages of NAFTA to Mexico:

A

• Pollution would increase due to Mexico’s more lax
standards.
• Mexico would lose its sovereignty.

38
Q

What did NAFTA later become?

A

U.S.-Mexico-Canada Agreement (USMCA)

39
Q

Why did politicians take aim at NAFTA?

A

Claimed it created job losses in the U.S.

40
Q

When NAFTA was renegotiated to USMCA, what additional rules were added?

A
  • Automakers must produce 75 percent of the content in North America.
  • By 2023, 40 percent of parts for tariff-free vehicles must come from a “high wage” factory.
  • To become law, must be ratified by legislators in all three countries.
41
Q

Was the Andean Community successful over the years?

A

No, it failed a lot, but recently signed an agreement in 2005 with Mercosur to restart negotiations towards the creation of a free trade area.

42
Q

What is Mercosur?

A

Originated in 1988 as a free trade pact between Brazil and Argentina. Expanded in 1990 to include Paraguay and Uruguay and in 2012 with the addition of Venezuela. Venezuela has been suspended since 2016.

43
Q

Is Mercosur effective and why?

A

No, as it may be diverting trade rather than creating trade, and local firms are investing in industries that are not competitive on a worldwide basis. Efforts have been stalled on reducing trade barriers between member states.

44
Q

What was the Central American Common Market 1960s effective and why?

A

No, it collapsed in 1969 due to war.

45
Q

What is the Central America Free Trade Agreement (CAFTA) 2005?

A

U.S. and Central American Common Market.

46
Q

What was CARICOM and was it effective?

A

An agreement between English-speaking Caribbean countries. It repeatedly failed to achieve economic integration.

47
Q

What is the Association of Southeast Asian Nations (ASEAN)?

A

Foster freer trade between member countries and achieve cooperation in their industrial policies.ASEAN Free Trade Area (AFTA) between the six original members of ASEAN came into effect in 2003. ASEAN and AFTA moving towards establishing a free trade zone.

48
Q

Why is it hard to trade in Africa

A

Many countries in Africa support the use of trade barriers to protect their economies from foreign competition.

49
Q

What community is trying to establish a common market in Africa?

A

The East African Community (EAC).

MGMT 414 (ISU) (4 decks)

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