types of economic integration Flashcards
when does economic integration occur ?
Economic integration occurs as countries reduce trading barriers between themselves and become more interdependent
what is a trading bloc
A trading bloc is a group of countries who come together and agree to reduce or eliminate any barriers to trade that exist between them
Each subsequent type of trading bloc has increased levels of economic integration
what are the different types of trading blocs
free trade area
customs union
common market
monetary union
free trade area explained
A free trade area is a bloc in which countries agree to abolish trade restrictions between themselves but maintain their own restrictions with other countries
customs union explained
A customs union is an agreement between countries in which all goods/services produced by members are traded tariff free
Additionally, countries agree on common tariff rates on imports from all external (third-party) countries
Countries inside the union also agree on common policies, such as:
Environmental policies
Safety standards
Competition laws
common market explained
goods/services are traded tariff-free in common markets
Additionally, the four factors of production flow freely between member countries
The goal is to improve the allocation of resources between the common market members and lower the costs of production
Labour can move freely and people can live and work in any member country
monetary union explained
A monetary union takes integration a step further. Members enjoy all of the benefits of a customs union and common market, but then also establish a common central bank which issues a common currency and controls the monetary policy of member countries
why was the world trade organisation established
was established to promote free trade
what is trade liberalisation the process of ?
Trade liberalisation is the process of rolling back the barriers to free trade e.g. removing tariffs
The WTO has two main roles in liberalising trade
It brings countries together at conferences and encourages them to reduce or eliminate protectionist trade barriers between themselves e.g. The Doha Round conferences
It acts as an adjudicating body in trade disputes. Member countries can file a complaint if they believe a trading partner has violated a trade agreement. The WTO will then run a hearing and make a judgement
what are the objectives and functions of the WTO
objectives :
Improving people’s lives
Promotion of fair competition
Protecting the environment
functions :
Trade negotiations
Implementation and monitoring of trade agreements
Dispute settlement
Building trade capacity between nations
Outreach to governments and influential organisations on behalf of member countries
