Trading Blocs Flashcards
What is a trading bloc?
A group of countries who agree on common rules for trade and tariffs. It can involve greater economic integration.
What is free trade areas and an example
Countries focused don free trade and removing tariff barriers
NAFTA US, Canada and Mexico
ASEAN South east Asia
What is a customs union?
Free trade with common external tariff
What is a single market?
Free trade and free movement of labour and capital
What is an economic union?
It’s a single market with common external tariffs and laws
What is a monetary union?
An economic union with common currency
What is a a regional trade arrangement and an example
Arrangements between neighbouring countries
EU
Advantages of Regional trade arrangements (2)
Enables more free trade
A stepping stone to more inclusive trade agreements
Negatives of a Regional trade agreement (2)
Only limited to a few countries
Leads to conflicts between different trading blocs
What is an economic integration
It’s free trade and common laws
EU
What does Economic integration enable? (6)
- More trade and comparative advantage
- Greater competition – reduces prices
- Firms can gain from economies of scale
- Increased direct investment– better efficiency
- Greater clout for international trade negotiations
- Benefit from more flexible labour markets
Potential costs of economic integration (4)
- Regional inequality due to geographical immobility
- Structural unemployment resulting from increased in specialisation
- Caught up in other countries trade agreements
- Free movement of labour causes friction over houses
What can conflicts between trading blocs lead to (3)
- May cause countries unexpected trade disputes
- Lead to higher import duties from outside the EU
- Many countries find it hard to find common agreements
What is trade creation?
Moving from a high cost producer to a lower cost producer inside the customs union
What is trade diversion?
Shifting from a low cost producer to a higher cost producer inside the customs union
