Trade Agreements and their Impact on Importers and Exporters Flashcards
What is Competitive Advantage of Firms ?
- It answers the question of how nations can achieve and sustain economic success and prosperity.
- Refers to the superior features of a country that has a unique benefit in global competition.
- Derived from natural resources or national policies.
What are the keys instruments of the government intervention?
- Tariffs
- Quotas
- Investment barriers (rules or laws that restricts or hinder FDIs).
Why would the government impose tariff on imported goods?
- To protect domestic industries.
- Job protection.
- Revenue generation.
- National security.
- Correct trade imbalances.
- Environmental or health reasons.
What are the consequences of protectionism?
- Reduced supply of goods to buyers.
- Price inflation.
- Reduced variety, fewer choices available to buyers.
- Reduced industrial competitiveness.
- Various adverse unintended consequences (e.g., While the home country dithers, other countries can
race ahead).
What is the World Trade Organization (WTO)?
An international organization that oversees global trade rules and facilitates trade negotiations among member countries. It aims to ensure that trade flows as smoothly, predictably, and freely as possible.
What are the WTO’s main functions?
- Trade Negotiations: Provides a platform for countries to negotiate trade agreements and resolve trade disputes.
- Dispute Settlement: Offers a formal process to resolve conflicts between members related to trade agreements.
- Monitoring Trade Policies: Reviews and monitors national trade policies to ensure transparency and compliance with WTO agreements.
- Capacity-Building: Provides technical assistance and training to developing countries to help them integrate into the global trading system.
- Trade Rules Enforcement: Ensures that trade agreements are implemented and adhered to by member states.
What are the core principle of the WTO?
- Non-discrimination.
- Free trade.
- Predictability & Transparency.
- Promoting fair competition.
- Encouraging development and Economic reform.
What are the 5 level of integration?
- Free Trade Area.
- Custom Union.
- Common Market.
- Economic and Monetary Union.
- Political Union.
What is the Free Trade Area? (NAFTA)
This is the most common arrangement.
Member countries agree to gradually eliminate formal trade barriers within the bloc, while each member maintains an independent international trade policy with
countries outside the bloc.
What is the Custom Union? (MERCOSUR)
Similar to a free trade area except the members harmonize their trade policies toward nonmember countries, by enacting common tariff and nontariff barriers on imports from nonmember countries.
What is the Common Market? (The EU market)
Like a customs union, except products, services, and factors of production such as
capital, labor, and technology can move freely among the member countries.
What is the Economic and Monetary Union?
Like a common market, but members
also aim for common fiscal and monetary policies, and standardized commercial regulations. The EU is moving toward an economic union by forming a monetary union with a single currency, the euro.
