Theme 4:1.5:Trading blocs and the World Trade Organisation (WTO) Flashcards
what is a trading bloc?
group of countries within a geographical region that protect
themselves from imports from non-members.
what are examples of trading bloc in the world?
NAFTA,EU,MERCOSUR,ASEAN
what is a free trade area?
two or more countries in a region
agree to reduce or eliminate trade barriers on all goods coming from other members.
Each member is able to impose its own tariffs and quotas on goods it imports from
outside the trading bloc.
what is a customs union?
the removal of tariff barriers between members and the acceptance of a common external tariff against non-members.
what is a monetary union?
two or more countries with a single currency, with an
exchange rate that is monitored and controlled by one central bank or several central
banks with closely coordinated monetary policy
what conditions are necessary for a monetary union to be succesful?
-free movement of labour,capital mobility and wage and price flexibility
-fiscal transfer from one to another when a country is performing poorly
-sharing the same business cycle
what is the Eurozone?
-European central bank distribute coins and notes, set interest rates and maintain a stable financial situation
- governments agreed not to exceed a fiscal deficit of more than
3% and not to have a National Debt of more than 60%
what are costs of regional trade agreements?
-distort world trade , reducing the benefits of specialisation
-reduction in competition
-retaliation as the creation of one regional trading bloc will lead
to the creation of others and this can lead to trade disputes
-lessen national sovereignty
-distribute the gains from trade unequally , with developed countries often gaining most and developing countries being impacted little.
what are the benefits of regional trade agreements?
-Free trade encourages increased specialisation, and this increases output, according to comparative advantage
-Firms inside the bloc are protected from cheaper imports from outside
-may create more jobs
-increased choice for consumers
when was the WTO set up?
1995 to replace GATT
what are the 2 aims of the WTO?
to bring about trade liberalisation and ensure countries act according to trade agreements they have signed.
what happens when a country fails to follow its agreements?
a country can file a complaint and the WTO will attempt to solve the issue through negotations
.
when does an agreement take place?
when all countries agree with it and any country is able to veto it
what are possible conflicts between reigon trade agreements and the WTO?
-not all trading partners are treated equally
