Lesson 4 - Trade Blocs and NAFTA

Question 1

Why do trade blocs exist?

Answer 1

Trading purposes
Bringing economic strength + security to nations

Question 2

What is a trade bloc?

Answer 2

Intergovernmental agreement, barriers to trade are reduced or eliminated among participants

Question 3

What are the 6 types of trade bloc?

Answer 3

Preferential Trade Area
Free Trade Area
Customs Union
Common Market
Economic Union
Full Integration

Question 4

How does a Preferential Trade Area affect trade?

Answer 4

Lowers, but does not eliminate barriers

Question 5

How does a Free Trade Area affect trade?

Answer 5

Eliminates internal barriers
Maintains independent external barriers

Question 6

How does a Customs Union affect trade?

Answer 6

Eliminates internal barriers
Agrees on common external barriers

Question 7

How does a Common Market affect trade?

Answer 7

Eliminates internal barriers
Adopt common external barriers
Allow free movement of resources among members

Question 8

How does an Economic Union affect trade?

Answer 8

Eliminates internal barriers
Adopt common external barriers
Allow free movement of resources among members
Uniform set of economic policies

Question 9

How does Full Integration affect trade?

Answer 9

Free Trade
E.g., The United States

Question 10

When + why was NAFTA established?

Answer 10

January 1994
Eliminate tariffs + restrictions between USA, Mexico and Canada

Question 11

Give a positive and negative impact of NAFTA upon the USA

Answer 11

P: Profits made in Mexico returned to US
shareholders
Companies can set up factories and benefit from
lower labour costs
TNC’s gain higher profit due to lower cost

N: American manufacturing jobs lost to Mexicans
Mexican trucks given full license to US roads
and aren’t restricted by driving hour limits

Question 12

Give a positive and negative impact of NAFTA upon Canada

Answer 12

P: Visible trade with US increased 80% in first 5
years
More than 1 million new jobs since 1994
1993-98, US investment grew 63%

N: Environmental groups concerned about damage
Manufacturing jobs lost to Mexicans

Question 13

Give a positive and negative impact of NAFTA upon Mexico

Answer 13

P: Zero or reduced tariffs with 60% of the world
Stays politically modern due to US + Canadian
influence

N: Dependent on USA for 88% of exports
Poorly paid jobs within foreign TNC’s
Many jobs do not sustain healthy standard of
living