regional economic integration

Question 1

what is regional economic integration ?

Answer 1

Agreements among countries in a geographic region to reduce, and ultimately remove, tariff and non-tariff barriers to the free flow of goods, services and factors of production among each other.

Question 2

regional trade arrangements

Answer 2

Five levels of regional economic integration
industrial free trade area
full free trade area
customs union
common market
economic union

Question 3

level of economic integration

Answer 3

Free Trade Area (FTA):
removes tariffs among members
members retain own trade policies toward others
Customs Union (CU): FTA+
common trade policy toward others
Common Market (CM): CU+
eliminates intra-market factor of production movements
Economic Union (EU): CM+
full integration of member economies (common policy)
Political Union: EU+
political and economic integration

Question 4

regional economic integration free trade area (FTA)

Answer 4

no or almost no tariffs and quotas among members
national tariffs against non-members

Question 5

regional economic integration customs union

Answer 5

No tariffs and quotas among members.
Common tariffs operate against non-members.
ex: Mercosur

Question 6

Regional economic integration common market

Answer 6

abolition of restrictions on factors of production movements
ex: the european “ single market”

Question 7

regional economic integration economic union

Answer 7

Characterised by
1. harmonisation and unification of
economic policies
2.common
currency

Example: European Union

Question 8

reasons for regional integration

Answer 8

1.Economic enhancement of the member states
- Free trade
- Free FDI
2.Political Reasons
- Linkages of economies create interdependencies that reduce the potential for violent conflict
- Grouping gives countries more political clout world-wide
3.Impediments
- Painful adjustments in certain segments of economy
- Threat to national sovereignty

Question 9

European Union

Answer 9

27 member countries
founded in 1951
the Euro (maastricht treaty)

Question 10

benefits of the euro

Answer 10

Lower transaction costs for individuals / business
Prices comparable across the continent; increased competition
Rationalization of production across Europe to reduce cost
Pan-European capital market
Increase range of investment options available to both individuals and institutions

Question 11

Cost of the Euro

Answer 11

ECB has monetary policy control not nations
EU is not an optimal currency area
Economic and political issues may conflict

Question 12

the americas

Answer 12

North American Free Trade Agreement (NAFTA): USA, Mexico, Canada
The Andean Pact: Bolivia, Chile, Ecuador, Colombia, Peru
MERCOSUR (FTA): Brazil, Argentina, Paraguay, Uruguay, Venezuela
Central American Free Trade Agreement (CAFTA): Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua
CARICOM: Caribbean countries

Question 13

NAFTA

Answer 13

USA, Canada, Mexico (FTA-1988)
USA-Canada is world’s largest trading relationship
USA is Mexico’s largest trading partner
Mexico, USA’s third largest trading partner
Trade opening process through tariff elimination

Question 14

free trade

Answer 14

The purpose of the agreement is to:
Allow free movement of goods and services among the countries.
Promote competition in the free trade areas.
Protect the property rights of people and businesses in each country.
Be able to resolve problems that arise among the countries.
Encourage cooperation among countries.

The agreement opened the door for free trade, ending tariffs on various goods and services, and implementing equality between Canada, USA, and Mexico

Question 15

pros

Answer 15

Free trade increases sales and profits for Mexico, Canada and the U.S.A., thus strengthening their economies.

Lack of tariffs has allowed Mexico to sell its goods in the USA and Canada at lower prices.

This makes Mexican products more competitive in these markets and increases Mexico’s profits as it tries to develop its economy.

Free trade is an opportunity for the U.S. to provide financial help to Mexico by making jobs available in factories located there.

Question 16

cons

Answer 16

Free trade has caused more U.S. job losses than gains, especially for higher-wage jobs.
People work for lower wages and there are fewer labor regulations in Mexico, so American factories have moved across the border.
Factories, called Maquiladoras, are built on the Mexican border and workers are hired there to make goods at a much lower wage than workers would be paid in the U.S.A.

Mexico does not have as strict environmental regulations like Canada & U.S., so when factories move across the border, they are contributing to North America’s pollution problem.

Some argue that borders should be open like the EU does in Europe.
That makes some people angry because they feel the borders should be closed.

Question 17

examples of organisations

Answer 17

NAFTA, Mercosur, ASEAN,