International institutions and regional integration Flashcards
Regional economic integration
Refers to the growing economic interdependence that results when two or more countries within a geographic region form an alliance aimed at reducing and ultimately removing barriers to trade and investment
This includes:
Global integration via the World Trade Organisation
Bilateral integration between two countries
Regional integration via an economic bloc
Advantages of a free-trade agreement
Increased choice
Lower prices
More efficient use of resources
Economic Bloc
Area allowing free move of capital labour and trade
EU Institutions
European Council European Commission Council of the European Union European Parliament European Court of Justice
NAFTA
North American Free Trade Agreement
Why do government seek economic integration?
Increase market size
Enhance productivity and economies of scale
Attract investment out side the bloc
Acquire stronger defensive and political posture
What factors make Regional Integration successful?
Economic dynamism and trade potential
Economic similarity on wage rates, economic conditions and other factors helps ensure success
Political similarity. Similar political systems, shared aspirations and willingness to surrender national autonomy.
Similarity of culture and language
Geographic proximity facilitates intra-bloc movement of products, labour, and other factors.
Drawbacks of Regional Integration
Trade creation – As barriers fall, trade is generated inside the bloc.
Trade diversion –Member countries discontinue some trade with nonmember countries.
Aggregate effect – National trade patterns altered: More trade occurs inside bloc. A bloc can become an ‘economic fortress’ leading to more within-bloc trade and less between-bloc trade, which can reduce global free trade.
Failure of small firms
Goals of the WTO
Promote International Trade
Reduce Trade Barriers
Resolve Trade Disputes
