Regional Economic Integration Flashcards

1
Q

Economic Integration

A

an agreement among nations to cooperate on economic and trade issues.
It is a
-State of affairs because it has achieved a position whereby there is an absence of discrimination among member countries.
-Process because it is in the process of abolishing discrimination among member countries

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2
Q

Five levels of regional economic integration

A

Political Union, Economic Union, Common Market, Custom Union, Free Trade Area

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3
Q

Benefits of Integration

A
  • Trade creation
  • Economies of Scale
  • Political Cooperation
  • Creates Jobs
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4
Q

Drawbacks of Integration

A
  • Trade diversion
  • Trade deflection
  • Shifts in employment
  • Loss of sovereignty
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5
Q

Trade Creation

A

Gives consumers wider selection of goods and services not available before hand. Buyers can acquire goods and services more cheaply following the lowering of trade barriers and tariffs. Lower cost>higher demand.

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6
Q

Economies of Scale

A

Companies have greater opportunities to sell to consumers in other member countries so they can enjoy lower costs of large scale production. This leads to lower costs for consumers.

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7
Q

Political Cooperation

A

Group of nations can have significantly greater political weight than nations have individually. More clout in negotiating in forum like WTO. Reduces political conflict as well.

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8
Q

Create Jobs

A

Expand employment opportunities by enabling people to move from one country to another to work. Attracts FDI, creating jobs for people.

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9
Q

Trade Diversion

A

Divert trade from nations not belonging to a trading bloc. Can occur after formation of trading bloc because of lower tariffs between member nations. Can result in reduced trade with more efficient nonmember nation.

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10
Q

Trade Deflection

A

Deliberately exporting goods to one country through a transit country. Solution: Rules of Origin (Customs authority on origin)

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11
Q

Shifts in Employment

A

Industries requiring mostly unskilled labour may shift production to low-wage nation within the trading bloc.

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12
Q

Loss of Sovereignty

A

Successive levels of integration requires that nations surrender more of their national sovereignty.

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