Week 9 Flashcards
What is regional economic integration
When countries come together to create free trade areas so that they can have trade access to each others market
What are the regional trade blocks
Formed to reduce barriers of trade and promote economic integration in member countries
What are the levels of economic integration
- Free Trade area
- Customs unions
- Common market
- Economic Union
- Political union
What is the free trade area
Countries that freely trade with each other
What is a customs union
Countries form common policies and tariffs among most or all of their imports and exports and transiting goods.
What are common market
you have free trade, common external trade policy and the labour, investment can be moved around in that area
What is the economic union
Freetrade, common external trade, investment, labour and capital is moving, there’s one currency
What is the political union
Joining countries to become under one government
What is economic case for integration?
Stimulates economic growth, increases FDI and world production, countries specializes in those goods and services they efficiently product
What are political case for integration
Reduces violent confrontation, countries have more economic clout to enhance trade with other countries or trading blocks
What are the problems to integration?
- Integration is hard to achieve and sustain, countries lose freedom and sovereignty
- Not all nations will benefit
- Not all nations will be efficient
Why is it not good to have a regional trade block?
The benefits of integration will benefit the world only if the amount of trade creates exceeds the amount of trade it diverts
What is trade creation
When a trade agreement stimulates additional trade between member countries, leading to improved economic efficiency, increased market access and enhanced consumer choices
Trade diversion
It is a draw back and is when trade patterns leads to less efficient allocation of resources resulting in higher costs for consumers, less quality products or loss of economic efficiency.
What is the regional economic integration in Europe
This is when 27 countries in Europe agreed on economic cooperation and integration within the European continent resulting to the European Union
What is the European Union
Seen as the emerging power with 27 members
What is the European Free Trade Association
- Oldest free trade association that didn’t take part of the EU
- Has only four members
Who is apart of the european free trade association?
Linkenstine, Iceland, Norway, Switzerland
Who was the 28th member that left the EU
UK
What was the evolution of the EU
Was created because of the two world wars on Western Europe and the desire of lasting peace and the desire by the EU nations to hold their own on the worlds political economic stage
When did the EU start?
After the two world wars in Western Europe
Why was the EU formed
To maintain peace and because European nations want to to hold the worlds political and economic stage
Who was the forerunner of the EU
European Coal and Steel community
What was the goal of the European coal and steel community
To remove barriers of trade in coal, iron, steel and scrap metal in 1951
What is the European Economic Community?
Was formed in 1957 at the treaty of Rome with the goal of becoming a common market
What is the Single European Act?
This provided the impetus for the restructuring of substantial sections of European industry for faster economic growth than
When was the Single European Act formed?
1987
Who adopted the Single European Act
EU
What are the qualifications for EU memberships?
- Privatize state assets
- Deregulate markets
- Restructure industries
- Tame inflation
- Enshrine complex EU laws into their own systems
- Establish stable democratic governments
- Respect Human Rights
What is the Maastricht treaty
Committed the EU to adopt a single currency the euro
What do the european zone have to keep in mind?
Must have economic stability and be comparable with other countries, have financial balance to remain in the euro zone
Who have opt out in the euro zone?
Denmark and Sweden
What treaty was adopted in 2009
Lisbon Treaty
What is the Lisbon treaty
- Watered down version of EU treaty
- This is an emergency treaty
What were the results of adopting the euro
The EU has created the second largest currency zone in the world after the US dollar
What happened to the euro zone in the 2008 financial crisis?
They weer put into trouble and the Euro was devalued and was stuck and did not allow them to develop
What are the benefits of euro
- Savings from using only one currency
- Easy to compare prices and resulting in lower prices
- Forces the efficiency and slashing costs
- Creates a liquid pan-europa capital market
- Increases the range of investments for individuals and institutions
What are the costs of the euro
- Countries lose monetary policy control
- European Central Bank controls policy of the euro zone
- EU is not an optimal currency area
- country economies are different
- Euro puts the economic cart before the political horse
- Strong euro makes it harder for euro zone exporters to sell their goods
What is NAFTA
North American Free Trade Agreement between US, Canada, Mexico to establish free trade, reduce trade barriers and promote economic integration in North America
When was NAFTA enforced
January 1994
What were the results of NAFTA
Helped remove barriers on cross border flow of services and restrictions on FDI except in certain sectors
What are the pros of NAFTA
- Increased the productive regional base
- Labour incentive industries moved to Mexico
- Mexico gets investment and employment
- Increased Mexican income to buy US/Canadan goods
- Increased jobs bc demand of goods also increased
- Consumers get lower prices
What are the cons of NAFTA
- US lost jobs to mexico
- Mexican firms had to compete against efficient US/Canadian firms
- Environmental degradation
- Loss of sovereignty
What are the opportunities of NAFTA for business
- Created single markets
- Protected markets
- Lower costs for businesses
What are the threats of NAFTA for businesses
- Made economies of scale difficult because of the culture and competitive practices differences
- More price competition
- Outside firms shut down of the market
- EU intervention in mergers and acquisitions
