Regional Economic Integration

Question 1

Economic Integration

Answer 1

an agreement among nations to cooperate on economic and trade issues.
It is a
-State of affairs because it has achieved a position whereby there is an absence of discrimination among member countries.
-Process because it is in the process of abolishing discrimination among member countries

Question 2

Five levels of regional economic integration

Answer 2

Political Union, Economic Union, Common Market, Custom Union, Free Trade Area

Question 3

Benefits of Integration

Answer 3

• Trade creation
• Economies of Scale
• Political Cooperation
• Creates Jobs

Question 4

Drawbacks of Integration

Answer 4

• Trade diversion
• Trade deflection
• Shifts in employment
• Loss of sovereignty

Question 5

Trade Creation

Answer 5

Gives consumers wider selection of goods and services not available before hand. Buyers can acquire goods and services more cheaply following the lowering of trade barriers and tariffs. Lower cost>higher demand.

Question 6

Economies of Scale

Answer 6

Companies have greater opportunities to sell to consumers in other member countries so they can enjoy lower costs of large scale production. This leads to lower costs for consumers.

Question 7

Political Cooperation

Answer 7

Group of nations can have significantly greater political weight than nations have individually. More clout in negotiating in forum like WTO. Reduces political conflict as well.

Question 8

Create Jobs

Answer 8

Expand employment opportunities by enabling people to move from one country to another to work. Attracts FDI, creating jobs for people.

Question 9

Trade Diversion

Answer 9

Divert trade from nations not belonging to a trading bloc. Can occur after formation of trading bloc because of lower tariffs between member nations. Can result in reduced trade with more efficient nonmember nation.

Question 10

Trade Deflection

Answer 10

Deliberately exporting goods to one country through a transit country. Solution: Rules of Origin (Customs authority on origin)

Question 11

Shifts in Employment

Answer 11

Industries requiring mostly unskilled labour may shift production to low-wage nation within the trading bloc.

Question 12

Loss of Sovereignty

Answer 12

Successive levels of integration requires that nations surrender more of their national sovereignty.