Trading Blocs Flashcards
What is a trading bloc?
Regional groupings of countries
What does the word tariff mean?
A tax or duty to be paid on a particular class of imports or exports.
What are the various types of trading blocs?
- Free trade area
- Customs union
- Single/common market
- Monetary union
What is a free trade area?
grouping of countries within tariffs + non-tariff trade barriers between the members are abolished. BUT there is no common trade policy toward non-members.
What may be the benefits of free trade areas for consumers and producers?
For consumers access to :
- Less expensive
- Higher quality of g
For producers :
- Larger market of potential consumers
Give examples of free trade areas.
North American Free Trade Agreement (NAFTA)
European Free Trade Association (EFTA)
Canada and Europe Trade Agreement (CETA)
What does the word customs mean?
Taxes that you pay on imported goods (=tariffs)
What is a customs union?
Arrangement among countries in which members agree to do 2 things :
- Allow free trade on products within the customs union
- A common external tariff w/ respect to imports from the rest of the world Form of interdependence
What is a common market?
Provisions to liberalise movement of people and capital
What does trade creation mean?
Remove/reduction of tariff barriers => change in consumption :
o From a domestic high-cost producer
o To a foreign low-cost producer
What does trade diversion mean?
Removal/reduction of trade barriers => change in consumption :
o From low-cost producers outside the trading bloc
o To a higher cost (but tariff free) producers
What are the benefits of joining a trading bloc?
- Larger market.
- Develop economic and technical cooperation
- Help countries achieve economies of scale
- ++ political stability
- Improve bargaining (= negotiating) power : better terms of trade for a trading bloc than for a single country.
Which countries did NAFTA include?
USA, Canada, Mexico
What did President Trump think of NAFTA?
Wanted to renegotiate NAFTA “worst trade deal”
What agreement has just replaced NAFTA?
In sept 2018, they replaced NAFTA by USMCA
What are non-tariff barriers?
Any measure, other than a customs tariff, that acts as a barrier to international trade.
What is the free trade agreement between the EU and Canada? What does it abolish?
Comprehensive Economic and Trade Agreement (CETA) it was signed on October 30, 2016, and entered into force on September 21, 2017.
What are the pros and cons of CETA?
- Tariffs (taxes on imports) on most goods traded between the EU and Canada
- Trade barriers in sectors such as services, public procurement, and investment
- Restrictions on investment, including provisions on the protection of intellectual property rights
- Technical barriers to trade, such as different product standards and regulations
- Discrimination against EU and Canadian companies bidding for public contracts
- Restrictions on the temporary movement of skilled professionals between the EU and Canada.
What is ASEAN?
Association of Southeast Asian Nations (Indonesia, Singapore, Thailand, Malaysia, Philippines (1967) + Brunei, Cambodia, Lao, Myanmar, Vietnam)
What is MERCOSUR?
It’s a South American trade bloc established by the Treaty of Asunción in 1991 and Protocol of Ouro Preto in 1994. Its full members are Argentina, Brazil, Paraguay, and Uruguay.
What was the European Coal and Steel Community?
o 1952 : 6 countries : FR, Belgium, Luxembourg, Netherlands, Italy, West Germany
o Removal of all restrictions on trade in coal, steel and iron :
- Gain economies of scale
- More competitive and compete w/ US
- Political stability
When was the EEC created? What sort of trading bloc was it?
o 1957 : Treaty of Rome : same member than ECSC
o Extend the ECSC to all products => Full common market : free trade in all products
o Common market of free movement of labour, enterprise and capital
When did the EEC turn into the EU?
o 1993 : Maastricht treaty : EEC => EU
What sort of trading bloc is the European Union?
The European Union (EU) is a customs union and single market, which means it is a type of trading bloc that allows for the free movement of goods, services, capital, and people between its member states.
Give examples of common European policies at the economic and social level.
Economic level:
- The European Monetary Union (EMU)
- The European Stability Mechanism (ESM)
- The European Investment Bank (EIB)
- The European Semester
Social level:
- The European Social Fund (ESF)
- The European Pillar of Social Rights
- The Working Time Directive
- The General Data Protection Regulation (GDPR)
What is CAP?
Common Agricultural Policy (CAP)
Created in 1962 : to ensure food supplies for Europe + provide a fair income for European farmers
Today : System of agricultural subsidies to support farmers : suffer from 3 major problems :
* ↑ global food P -> ↓ incomes
* Random supply chocs -> unstable farm prices (ex : weather conditions, diseases, …)
* Supermarket chains are + powerful than farmers -> ↓ farm prices and revenues.
What does VAT mean?
Value Added Tax = standard form of indirect tax BUT significant differences between member states.
What did the 1989 Social Charter imply?
Series of worker and social rights to be applied in member countries.
* Decent levels of income for employed and unemployed people
* Free movement of labour
* Freedom to belong to a trade union (= syndicat)
* Equal treatment of women and men
What are the major benefits of the common market?
- Trade creation
- Reduction of direct cost of barriers
- Countries can specialise + economies of scale
- Greater competition
Why is the European single market criticised?
