1.5 Trading Blocs and the WTO

Question 1

Types of trading blocs?

Answer 1

1) Free Trade Areas
2) Customs Unions
3) Common Markets
4) Monetary Union

Question 2

Benefits of being in a trading bloc?

Answer 2

1) Lower prices + increased choice
2) Economies of scale
3) Investment

Question 3

Drawbacks of being in a trading bloc?

Answer 3

1) Trade Diversion
2) Structural unemployment
3) Increased competition

Question 4

Features of a free trade agreement?

Answer 4

1) Lower barriers between countries
2) Focus on particular industries (e.g. UK-Australia agreement on digital tech)

Question 5

Features of a customs union?

Answer 5

1) Low trade barriers
2) Common external tariff
e.g. EU Customs Union OR East African Community

Question 6

Features of a common market?

Answer 6

1) Low trade barriers
2) Common external tariffs
3) Free movement (Goods, services, labour, capital)
e.g. EU Common market

Question 7

Features of a monetary union?

Answer 7

1) Low trade barriers
2) Common external tariff
3) 4 free movements
4) Single common currency
e.g. Eurozone 1999

Question 8

Advantages of a single currency?

Answer 8

1) Stable (more loans)
2) Enhances trade
3) Eliminate cost of conversion

Question 9

Drawbacks of a single currency?

Answer 9

1) Loss of monetary policy int. rates control
2) Lose exchange rate control
3) Adjustment costs

Question 10

Main roles of the WTO?

Answer 10

1) Conductor - oversee new rules
2) Tribunal - settle disputes
3) Monitor - ensure rules followed
4) Training - train govt officials for trade
CTMT