global economy 4.4 - Economic integration

Question 1

define economic integration

Answer 1

a process whereby countries coordinate and link their economic policies

Question 1

define a bilateral trade agreement

Answer 1

agreement relating to trade between two countries

Question 2

define a multilateral trade agreement

Answer 2

an agreement relating to trad between multiple countries

Question 3

as the degree of economic integration increases,

Answer 3

the trade barriers between countries decrease and their fiscal and monetary policies are more closely harmonised

Question 4

give 3 types of trading blocs

Answer 4

• Free trade areas/agreements
• Customs unions
• Common markets

Question 5

define a trading bloc

Answer 5

a group of countries that join together in some form of agreement in order to increase trade between them and/or to gain economic benefits from cooperation on some level

Question 6

free trade areas/agreements

Answer 6

agreement made between countries, where the countries agree to trade freely among themselves, but are able to trade with countries outside of the free-trade area in whatever way they wish.

Question 7

customs unions

Answer 7

agreement made between countries, where the countries agree to trade freely among themselves, and they also agree to adopt common external barriers against any country attempting to import into the customs union.

Question 8

common markets

Answer 8

a customs union with common policies on product regulation, and free movement of goods, services, capital, and labour.

Question 9

4 advantages of trading blocs

Answer 9

• greater access to markets offer potential for
  economies of scale
• with freedom of labour, there are greater
  employment opportunities
• membership in a trading bloc may allow for
  stronger bargaining power in multilateral
  negotiations
• greater political stability and cooperation

Question 10

greater access to markets offer potential for
economies of scale

Answer 10

• greater size of market has the potential for larger export markets and economies of scale for producers
• consequences may not be even; some producers will gain from the larger market while others may be unable to compete

Question 11

2 disadvantages of trading blocs

Answer 11

• loss of sovereignty
• challenge to multilateral trading negotiations

Question 12

loss of sovereignty

Answer 12

• in a customs union, individual governments lose the power to make decisions on how to deal with trade with countries that are outside the union
• in a common market, there are common policies on product regulation and free movement of goods, services, capital and labour.
• in a monetary union, the government loses all of the above sovereignty and the ability to manage their interest rates

Question 13

challenge to multilateral trading negotiations

Answer 13

• trading blocs favour increased trade among members, but enact discriminatory policies against non-members
• this can be damaging to the achievements of the multilateral trading negotiations of the WTO

Question 14

monetary union

Answer 14

a zone where a single monetary policy prevails and inside which a single currency, or currencies which are perfect substitutes, circulate freely

Question 15

objectives and functions of the wto

Answer 15

aims to increase international trade by lowering trade barriers and providing a forum for negotiation

Question 16

6 principles of the WTO

Answer 16

• non-discrimination
• more open trade
• predictability and transparency
• encouraging fair competition
• more beneficial for developing countries
• protection of the environment

(‘no more pesto!’, exclaimed mr pollitt)

Question 17

non-discrimination

Answer 17

countries shouldn’t discriminate between their own products, services, and those of foreign countries

Question 18

predictability and transparency

Answer 18

all economic stakeholders should be confident that trade barriers will not be raised, providing the confidence to invest, create jobs, increase consumer choice and lower prices

Question 19

encouraging fair competition

Answer 19

through discouraging unfair practices such as the provision of export subsidies and the dumping of products in foreign markets in order to gain market share

Question 20

more beneficial for developing countries

Answer 20

giving them extra time to adjust to WTO provisions, greater flexibility and special priviliges

Question 21

state the 6 functions of the WTO

Answer 21

• administer WTO trade agreements
• be a forum for trade negotiations
• handle trade disputes among member countries
• monitor national trade policies
• provide technical assistance and training for developing countries on trade issues
• cooperate with other international organisations

Question 22

Factors affecting the influence of the WTO

Answer 22

• difficulties of reaching agreement on services/primary products
• unequal bargaining power of members