Regional Economical Integration / WTO

Question 1

What is Regional Economic Integration?

Answer 1

Agreements among nations to reduce tariff and non tariff barriers to free flow of

• goods
• services
• production factors

Question 2

Production factors

Answer 2

• land
• labour
• capital

Question 3

Reasons for/against regional integration (name one of each)

Answer 3

• economic enhancment
  -political reasons
  –> grouping gives more political clout world wide
  Impediments:
• painful adjustments in certain segments of economy

Question 4

Levels of Integration (sorted by uprising complexitiy and level of integration)

Answer 4

Free Trade (NAFTA, USMCA):
- removes trade barriers
Custom Union:
-common trade policies among nations
Common market (some EU nations)
-factors of production can move freely between countries
economic union (some eu countries)
-full integration of member economies (currency etc.)
political union (United Arab emirates)
-coordinated economical, social and foreign policy

Question 5

Why is change of level of integration very complex (for example custom union to common market)

Answer 5

• labour loss
• new visa classes
• credit reporting
• financial reporting
• -> the higher the level of integration the more complex the process

Question 6

NAFTA: Why Trade deal with Canada and Mexico?

Answer 6

• more dynamism
• lower production cost and wages
• better competitevness with asian countries
• increasment of trade
• increasment of Investmens and FDIs
• creating local value because of keeping supply chain in north america

Question 7

Disadvantages/fears of NAFTA

Answer 7

• job loss in US
• -> NOT true, every 100 jobs lost to mexico, 250 were created in US
• shifting bargaining power to multinational companies
• economic growth in foreign country

Question 8

What is Unique about NAFTA compared to WTO?

Answer 8

Investor-State disputes:
Under Nafta investors (companies) can file a dispute directls in the NAFTA tribunal against a government; under WTO the company has to convince its own government to file a dispute against the other government

Question 9

What was before the WTO (World trade organization)?

Answer 9

General Agreement on Tariffs and Trade: 1947-199

• worked fine in the beginning because only a few members
• as it became more members, cliques builded and the anonymous negotiations could not take place anymore
• no accountability anymore
• GATT mostly covered trade in goods only

Question 10

WTO

Answer 10

• structure security and predictability improved
• its a nation to nation agreement so government has to go to other government with dispute
• works like a court
• power is limited to impose retaliation

Question 11

How Trade policies are established in US

Answer 11

• Trade is a congress issue
• congress has the authority to regulate interstate policy
• President has FAST TRACK authorization:
• he is representative of the congress in trade negotiations
• congress only can apporove or disapprove