Regional Trade Agreements

Question 1

Problems between regional trade agreements and WTO (4)

Answer 1

• Blocs may distort world trade, or cause adverse effects due to the inefficient allocation of resources.
• A common external tariff contradicts the WTOs principles
• Some argue WTO does not account for developing countries.
• A customs union or free trade area could be seen to violate WTOs principle of having all partners treated equally

Question 2

Conditions necessary for monetary union success - case study in Eurozone

Answer 2

For the eurozone:
- budget deficits can not exceed 3% of GDP
- gross national debt has to be below 6% GDP
- inflation has to be below 1.5% of the three lowest inflation countries
- average gov bond yield has to be below 2% of the yield of countries with lowest IR, this ensures exchange rates stability
- respond similarly to external shocks or policy changes.

Question 3

Essentially

Answer 3

Members of the currency union must follow a set of rules to be a part of it