Trade 3 Flashcards
What is a customs union
A group of countries that encourages:
- abolish tariffs and quotas
- common external tariff
- preferential tariff rates apply
How does a customs union differ from a single market
They share the revenue from the common external tariff in a pre-determined way.
Free movement of goods and services, capital and labour
When does trade creation occur
When a country enters a free trade area/agreement or becomes involved in a customs union in which there is free trade between members but also a common external tariff
What is trade creation
The movement from a higher cost source of output to a lower cost source of supply as a result of joining a trade agreement
What is trade diversion a feature of
A country deciding to join a customs union
What is trade diversion a switch from
A lower cost foreign source/supplier outside of a customs union towards a higher-cost supplier located inside the customs union
How does a trade diversion occur
When a country joins a customs union they have to adopt a common external tariff which increases importing from outside countries
Why is there low intra-regional trade in Sub Saharan Africa
- lack ability to diversify fully
- limited infrastructure
- overlapping trade blocs
- smaller size of consumer markets in Africa
- weaker governance
What is the ASEAN trading bloc
A trading bloc of 10 nations with an aggregate economic size of $2.3 trillion
Main characteristics of the EU single market
- free trade in goods
- mobility of labour
- free movement of capital
- free trade in services
Potential advantages for new members of the EU
- free access to a large market of nearly 500 million people
- access to EU structural funds
- discipline of competition from being inside the EU single market
Intra-regional trade within the EU
The EU is a customs union and also a single market.
They is a tax from outside countries.
