LS4 Flashcards
What can be done to liberalise trade?
Trade on a global basis through WTO or on a regional basis through trade blocs
GATT(global agreement on tariffs and trade) vs WTO
The GATT was there to reduce protectionism but was treats based and had flawed trade dispute settlement mechanisms
WTO was formed in 1995 and had formal mechanism to resolve trade disputes which are permanent
What are trade blocs?
Associations between a group of countries that mutually agree to reduce or remove trade barriers
What is bilateral?
Between 2 countries
What is multilateral ?
More than 2 countries
What is an FTA?
Free trade agreement to reduce or remove all barriers between members only
What are the advantages of an FTA?
Competitive firms can trade more easily which reduces costs
Improved choice as imports are more readily available
Lower costs
Increased foreign investment as trade is available to more than 1 country
Efficient resource allocation
What are the disadvantages of FTAs?
Uncompetitive sectors lose out
Structural unemployment
Trade diversion to more expensive suppliers if they are in the FTA
Individual countries have more bargaining power
What are customs unions?
Free trade areas that impose uniform trade restrictions on non members like EU
What are single markets?
Customs unions with free movement of FOP like SEM
What are economic unions
Where the economies of members become more integrated (similar policies)
What are monetary unions?
Members have a single common currency and monetary policy so 1 central bank
What are the advantages and disadvantages of a customs union?
Increased bargaining power for deals
Common external tariffs to protect infant industries
Trade creation
However there is a loss of independent trade policy
What are trade restrictions for FTAs?
Product and packaging requirements
Checks
Visas
Qualification equivilancy
Advantages and disadvantages of single markets
They have common trade standards and free movement of FOP
But there is a loss of sovereignty
Mutual recognition of Qualifications are accepted everywhere which is handy
Freedom of labour
Advantages of monetary unions
No exchange rates
Disadvantages of monetary unions?
Loss of independent monetary policy
No comparative advantage
Exchange rates can be volatile
Need to be on a similar business cycle so monetary policies apply
Workers can move between countries for work
Automatic fiscal transfer
What is automatic fiscal transfer?
If an industry crashes unemployment benefits can be provided to help countries suffering a shock or recession. Supply side funds
