Trading Blocs And World Trade Organisation Flashcards
What is a trading bloc?
Trading blocs are groups of countries, which at minimum have agreed to reduce some protectionist barriers of trade.
What type of trading agreements are there?
Bilateral
Multilateral
What is a bilateral agreement?
Between one single country and another single country
What is a multilateral agreement?
Between 3 or more countries or trading blocs
What is a free trade area?
All tariffs and quotas are removed on trade between member countries in a trading bloc.
However tariffs and quotas are imposed when trading outside the trading bloc.
What is a custom union?
A customs union is an agreement between countries in which all goods/services produced by members are traded tariff free
What is a common market?
Similarly, to a customs union, goods/services are traded tariff free in common markets. Additionally, the four factors of production flow freely between member countries
What is a monetary union?
A monetary union takes integration a step further. Members enjoy all of the benefits of a customs union & common market, but then also establish a common central bank which issues a common currency & controls the monetary policy of member countriesw
What are conditions needed for a monetary union?
Movement of labour
Similar trady cycles
Mobility of finance
Fiscal transfer
What are the benefits of trading blocs?
Trade creation
Tariffs between member states are eliminated
There is less uncertainty surrounding exchange rates as members all use the same currency
A monetary union simplifies trading costs & provides pricing transparency
What are the disadvantages of trading blocs?
Trade diversion occurs as countries reallocate trade to partners in their agreement. This may worsen global efficiency
Some domestic industries experience structural unemployment
Member countries lose their ability to set interest rates & control the supply of money (monetary policy)
What is the conductor role of the World Trade Organisation?
Members of the WTO have produced a set of rules that apply to international trade; The WTO ensures that these rules are followed
What is the tribunal role in the WTO?
This role involves settling disputes between members.
Members are encouraged to sort out disputes themselves, but occasionally The WTO need to convene to a panel of experts
What is the monitor role in the WTO?
The WTO reviews the trade policies of its members
to ensure the WTO rules are being applied fairly and consistently
What is the trainer role in the WTO?
The WTO provides training to government officials
