Trade Discriminating Barriers

Question 1

Trade blocs

Answer 1

Limitation on trade, member countries import freely/cheaply from other member country, while imposing higher taxes against imports from outside of the region countries.

WTO against trade blocs. MFN principle contravened by trade blocs. Exception: for developing countries.

Question 2

Trade embargoes

Answer 2

(Blocks) limitation/ban on trade, direct discrimination because of policy dispute, can eliminate flow of exports and imports.

Can work when large countries impose sanctions on small ones, quick and sudden action, citizens react applying political pressure on gov.

Question 3

Trade creation

Answer 3

Amount by which the agreement raises total volume of world trade.

Question 4

Trade diversion

Answer 4

Volume of trade it diverts from lower cost outside suppliers to higher cost partner country suppliers.

Question 5

Additional gain from trade bloc

Answer 5

Creation of large market, removing previous policy distortions, expanding small original trade flows, scale economies can arise, increasing completion reducing monopoly power possibilities - increasing efficiency and opportunities for business investment.

Question 6

Free trade area (FTA)

Answer 6

Economic bloc where members eliminate barriers to trade among themselves but individual members are free to retain national trade barriers against non members. Eg NAFTA

Question 7

Customs union

Answer 7

Members remove barriers to trade amongst themselves and adopt a common set of external barriers. Eg Southern common market (MERCOSUR)

Question 8

Common market

Answer 8

Members allow full freedom of factor flows (migration of labour and capital) among themselves in addition to having a customs union. Eg EU became customs union and more at end of 1992.

Question 9

Economic union

Answer 9

Members unify all economic policies including monetary and fiscal policies as well as polices towards trade and factor migration. Most nations are economic unions.

Question 10

Trade in services: modes of supply

Answer 10

1. Exchanges without direct contact
2. Consumers travel abroad
3. establishment of a new business by a foreign provider
4. Movement of staff