Trading Blocs and WTO Flashcards

1
Q

What is a trading bloc

A

associations between governments that manage and promote trade

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2
Q

Bilateral agreement

A

Between two countries or trading blocs eg. EU and other country

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3
Q

Multilateral agreement

A

between multiple countries or trading blocs

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4
Q

Trading Bloc - Free trade areas

A

All barriers of trade are removed between, but individual members can still impose barriers on other countries

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5
Q

Trading Bloc - Customs Unions

A

Free trade areas where there are also standard tariffs imposed on non-members

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6
Q

Regional trade agreements

A

Agreements between countries to ensure free movement of goods and services across their borders

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7
Q

Trading Bloc - Common markets

A

Customs unions with the addition of free movement of CELL between countries

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8
Q

Trading Bloc - Monetary unions

A

Members implement a single common currency so have the same monetary policy and a central bank

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9
Q

What is the WTO and what does it do

A

World trade organisation that uses trade rules to provide a base for countries to discuss trade agreements and disputes

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10
Q

2 WTO conditions

A
  • low barriers to trade to promote competition
  • Countries must treat all trading partners equally
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11
Q

Advantages of regional trade agreements

A
  • promotes easier and more profitable trade to increase economic growth
  • Improves regional integration like infrastructure
  • Attract FDI as it ensures a more stable and predictable economy
  • Access to new markets so especially smaller firms can expand customer base
  • Encourages specialisation and innovation through increasing competition which can help with productivity
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12
Q

Disadvantages of regional trade agreements

A
  • Trade diversion towards less efficient member nations could hurt efficiency of world trade
  • Complex rules to stop exploitation can hamper productivity and efficiency of firms
  • Can hurt multilateralism as different countries trade agreements may contradict with others
  • Potential for regional imbalances as some countries gain more than others
  • Tend to only focus on trade in goods neglecting other factors like services or labour rights
  • Brain drain
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13
Q

How can trading blocs help with WTO objectives

A

Leads to trade creation as barriers are removed so products become cheaper, also leads to specialisation so helps WTO by opening up trade improving efficiency and encouraging competition

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14
Q

How can trading blocs conflict with WTO objectives

A

Trade diversion as imposing trade barriers on non member nations with cheaper goods means they will receive less trade and won’t fully utilises specialisation, so hampers WTO as it interferes with competition preventing lowest cost most efficient products being traded

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15
Q

Tariff diagram - what are the two side triangles

A

net welfare loss

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16
Q

How is the tariff diagram drawn

A

as a normal supply and demand diagram but for domestic supply and demand

17
Q

Tariff diagram - where is the tariff put in

A

straight line across at p1 showing world supply with tariff and at p is normal world supply

18
Q

What kind of union is the European Union

A

Customs Union

19
Q

What is the ECB

A

European Central Bank that manages the euro and tries to keep prices stable