Block 2 - Regional economic integration

Question 1

What is the definition of regional economic integration + reference?

Answer 1

The process whereby countries in a geographic region cooperate to reduce or eliminate barriers to the international flow of products, people or capital (Wild & Wild 2019)

It enacts the specialisation of production advocated by neoclassical economists (semester 1)

Question 2

Outline the levels of economic integration and its debate + reference

Answer 2

• There are 5 levels of REI, with each level signifying greater cooperation among nations: FTA, customs union, common market, economic union, and political union
• Arguments for free trade include: 1) trade creation expand buyer selection, decreases prices, increases productivity, and boosts national competitiveness; **2) **greater consensus to reduce barriers among small groups of nations; 3)political cooperation can enhance negotiating power, and reduce potential military conflict; and 4corporate savings can arise from modifying strategies and eliminating suplicate factories
• Arguments against free trade include: 1)trade diversion can result in trade with a less efficient producer within the trade bloc; 2)jobs are lost when factories close and jobs move to lower wage nations; and 3)cultural identity and national sovereignty is diminished due to increased exposure to other cultures

(Wild & Wild 2019)

Question 3

What is a group of nations in a geographic region undergoing economic integration called?

Answer 3

A regional trading bloc

Question 4

What are the benefits of regional economic integration?

Answer 4

• Trade creation: Increase in level of trade among nations as a result of removal of trade barriers . This creates a wider selections of goods and services. Can also increase aggregate demand in an economy, throigh lower prices that increase purchasing power
• Greater consensus: REE comprises smaller groups of nations to make it easier to gain consensus as opposed to many countries in WTO
• Political cooperation: A group of nations can have more political weight than each individual nation, thus the whole group can have more negotiating power. Can also reduce potential for military conflict
• Employment opportunities: enables people to move freely. REi opened doors for young people in Europe, as forward looking young people have abandoned extreme nationalism and have taken on what can be described as a ‘European’ attitude that embraces a shared history
• Corporate savings: Trade agreements can allow companies to alter strategies

Question 5

What are the downsides to regional economic integration?

Answer 5

• Trade diversion: diversion of trade away from non member nations due to lower tariffs, resulting in increased trade with a less efficient producer, and reduced trade with a more efficient non member producer
• Shifts in employment: formation of a trading bloc promotes efficiency by reducing trade barriers among members, and the surviving producer is likely to be the blocs most efficient producer, and industries with low skilled labour, will respond to the trade bloc formation by shifting production to a low wage nation
• Loss of national sovereignty: some people argue that national identity will be lost in REI. Successful levels of integration require that nations surrender more sovereignty, with the least amount of sovereignty given to the FTA, and a political union requires high amounts of sovereignty in foreign policy, making a political union hard to achieve

Question 6

What is a free trade area?+ example

Answer 6

Economic integration whereby countries seek to remove all barriers to trade among themselves whilst determining their own barriers to non members

Lowest level of economic integration

Removal of all tariff and non tariff barriers such as tuotas and susidies

Example: USMCA

Question 7

What are some types of regional integration?

Answer 7

the free trade area
customs union
common market
economic union
political union

Question 8

What is the customs union? + example

Answer 8

Economic integration whereby countries remove all barriers to trade among themselves and set a common trade policy against non members

Countries belonging to a customs union may also negotiate as a single entity with other supranational organisations, such as the WTO

Example: MERCOSUR

Question 9

What is the main difference between an FTA and customs union?

Answer 9

The customs union faces the rest of the world as a single trading entity

Question 10

Name some benefits of the customs union approach to rest of the world?

Answer 10

Stronger negotiating position, which may benefit less powerfukl states

Question 11

What is the common market? + example

Answer 11

Economic integration whereby countries remove all trade barriers and to movement of labor and capital among themselves, also set a common trade policy against non members

Integrates elements of FTAs and customs unions and adds free movement of factors of production

Example: The European Economic Area

Question 12

What are some potential ‘roadblocks’ of the common market?

Answer 12

Very difficult to attain this level of integration as requires members to cooperate atleast to some extent on economic and labor policies

Benefits to individual countries can be uneven as skilled labor may move to countries where wages are higher, and investment capital may flow to areas where returns are greater

Question 13

What does Hill (2023) argue that, in terms of efficiency in international trade, the common market demands?

Answer 13

Harmonisation and cooperation on fiscal, monetary and employment policies

Question 14

What is the economic union? + example

Answer 14

Economic integration whereby countries remove trade barriers and movement of labour and capital among members, set a common trade policy around non members, and coordinate their economic policies

Goes beyond demand of a common market by requiring member states to harmonize their tax, monetary, and fiscal policies and create a commo currency

Require that member states conced a certain amount of national sovereignty to the supranational union of which they are part

Example: The EU

Question 15

what is a political union? + example

Answer 15

Economic and political integration whereby countries coordinate aspects of their economic and political systems

Requires member states to accept a common stance on economic and political matters regarding non members

However nations are allowed a degree of freedom in setting certain political and economies policies within their territories

No full political union currently exists at regional level

Question 16

In terms of levels of economic integration, which of the types has the highest?

Answer 16

Political union has the highest, with free trade area the lowest

Question 17

What are the benefits of regional trade integration?

Answer 17

Increases the net aggregate trade since more items are available at cheaper prices

Consensus building among a few trade blocs is more easily achieved among a multitude of member states

Improves employment opportunities, especially among younger workers

Net gains should arise from global efficiencies making countries wealthier

Question 18

What is the impact of international trade on poverty?

Answer 18

Globally, trade elevates GDP and rises income among the poorest in the world

This is an outcome often overlooked in discussion in the most developed economies

Yet wealth distribution is less equal as a result of globalisation

Question 19

What do those against regional trade integration argue?

Answer 19

Takes jobs from home country

Floods home country with cheaper substitute products harming domestic companies (Hill 2023)

Brings higher immigration since trade flowm usually comes with free labour flow

Creates disproportionate distributional gains which is a fact, and a problem

Question 20

What are some further negatives of REI?

Answer 20

Easier market access can benefit members over more efficient non member states, distorting compaative advantage

Domestic job losses (e.g. low wage roles shift to cheaper countries), rising inequality, and a loss of national sovereignty

Question 21

How are arguments against REI similar to arguments of populist politicians?

Answer 21

These politicians will often capitalise on voters discontent and offer seemingly simple solutions

Yet this over-simplification of the situation is rarely accurate and the solutions offered can be ineffective

Question 22

Summarise post WWII economic recovery in Europe

Answer 22

Marshall Plan (ERP): 1948–1951 US aid to rebuild Western Europe, boost trade, and contain communism.

Impacts: Job creation, infrastructure development, reindustrialisation, FDI, and rapid economic growth.

Cold War Context: Germany and Berlin split; capitalist West recovered faster. East-West trade was nearly banned.

Soviet Bloc: Self-sufficient but strained by military costs.

Question 23

Summarise the development of the EU

Answer 23

1946: Churchill calls for a United States of Europe.

1951: Treaty of Paris → ECSC (coal & steel interdependence).

1957: Treaties of Rome → EEC & Euratom.

1967: Merger Treaty unifies ECSC, EEC, Euratom institutions.

1973: UK, Ireland, Denmark join.

1979: First direct EU Parliament elections.

1986: Single European Act → paves way for Single Market (1993).

1992: Maastricht Treaty creates the EU, euro & “three pillars”.

1995: Austria, Finland, Sweden join.

1999: Euro introduced (electronic), notes/coins in 2002.

2004: 10 countries join in biggest enlargement.

2009: Lisbon Treaty → more power to Parliament, new leadership roles.

2013: Croatia joins as 28th member.

Question 24

What has UK GDP growtn looked like since the 2008 financial crisis?

Answer 24

Post crisis GDP has flatlined in the UK, limiting prospects for investment and creating difficulties in providing public services

The pandemic confounded this with a high impact on public services

Question 25

Summarise the UK and EU member trade

Answer 25

The lisbon treaty allows free movement of people and greater political union for the UK Despite this, the EU represents a steadily declining proportion of the UKs trade The EU remains the UKs largest single trading relationship despite Brexit

Question 26

Describe EU trade with non members?

Answer 26

As a large potential market, the EU offers an attractive prospect to non member trade partners There is considerable overlap, bringing trade disputes so a formal trade arrangement can be implemented e.g. comprehensive economic and trade agreement

Question 27

Summarise UK EU trade in numbers

Answer 27

In 2016, the EU was the UK’s largest trading partner: 43% of UK exports (£236bn) 54% of UK imports (£318bn) EU share of UK exports declined from 54% (2006) to 43% (2016). EU share of UK imports fell from 58% (2002) to 50% (2011), then rose to 54% (2016). Services made up 38% of UK exports to the EU in 2016, especially financial and business services. Wales had the highest % of goods exports to the EU; Northern Ireland had the highest % of goods imports from the EU.

Question 28

-what was the profile of those who voted to remain in the EU?

Answer 28

Higher educated Younger (below 44) Some indication that they are more likely to be metropolitan although the voting demographic skews the interpretation since there are a higher number of foreign born voters in these geographic areas

Question 29

What was the rationale for remain voters?

Answer 29

Better prospects for own jobs and careers Greater acceptance of diversity Acceptance of the concerns about the negative effect of leaving the EU - mainly economic arguments

Question 30

What are the classic blame arguments in immigration debates?

Answer 30

Immigrants take our jobs The changing face of culture threatens our traditional ways Immigrants bring crime

Question 31

How was trade affected by Brexit?

Answer 31

As with GDP, trade was not a primary consideration among leave voters, yet exiting the EU limits access to UKs largest trading partner

Question 32

What trade benefits did UK departure from the EU remove?

Answer 32

Free movement of factors of production No tariff barriers Technical and regulatory alignment which reduces non tariff barriers Access to larger scale research projects Defense and diplomatic alliance

Question 33

What are some key points from the post brexit trade deal?

Answer 33

EU/UK Post-Brexit Trade Deal – Key Points Rules of origin: UK exports need certified UK/EU content for tariff-free access. Cars: Must have 55% local content to avoid tariffs. Certification: No mutual recognition—UK regulators can't approve goods for EU sale. Finance: Joint commitment to cooperate on financial regulation. Disputes: Arbitration panel can resolve issues and demand fixes/compensation. Fishing: UK gains 25% more of EU catch in UK waters over 5 years—a compromise. Customs: Both sides aim to reduce red tape and use trusted trader programs. Haulage: Agreement to ease border processes for truckers. Tariffs: No tariffs, crucial for agriculture/fishing—avoids 40%+ duties on some goods.

Question 34

How did the 2008 financial crisis spark anti-globalisation protests?

Answer 34

The severe economic impact contrasted badly with the apparent lack of accountability with the wealthy elite Inequality increased at this time as asset prices recovered on the back of central bank support Decling poverty rates around the world are correlated with increased internationalisation

Question 35

Explain the case against internationalisation and of regional integration

Answer 35

Trade diversion: Trade may shift to member states even if they’re less efficient. Job shifts: Economic migration increases competition for low-skilled jobs. Cost pressures: Firms in high-cost countries may lose out to cheaper member states. Relocation effects: Ongoing company relocations can create a sense of continuous economic loss Economic pessimism: Many feel the future—especially for their children—won’t improve. Loss of identity: Arises when people lack purpose or stable employment. National concerns: Leads to fears over loss of sovereignty and immigration pressures

Question 36

What is nationalism? + reference

Answer 36

Nationalism is a belief system centered on the nation as a sovereign, limited community tied to a specific place and history, defined by a clear division between members and non-members (De Cleen 2017)

Question 37

What are the signifiers of the nation in nationalism? + reference

Answer 37

State, land, freedom, democracy, culture (De Cleen 2017)

Question 38

What drives political conservatism?

Answer 38

Several psychological variable including: Death anxiety System instability Dogmatism (intolerance of ambiguity) Openness to experience Uncertainty tolerance Needs for order, structure and closure Integrative complexity Fear of threat and loss Self esteem

Question 39

What does the core ideology of conservatism stress?

Answer 39

Resistance to change and justification of inequality and is motivated by needs that vary situationally and dispositionally to manage uncertainty and threat

Question 40

What is populism?

Answer 40

Describes an antagonism between people and the elite, and claims to represent the people against some illegitimate elite

Question 41

What are some examples of populism?

Answer 41

Brussels bureaucrats Multinational enterprises Proponents of globalisation such as big business and big data companies Politicians These are all examples of wealthy groups who carry power and influence and at whom perceived or real injustice can be claimed

Question 42

When would populism be left wing? + reference

Answer 42

When it represents low income segments of the citizenry (Varshney 2021)

Question 43

When would populism be right wing + reference?

Answer 43

When it represents the racial, ethnic, or religious majority against the minorities (Varshney 2021)

Question 44

How has Donald Trump utilised populism?

Answer 44

In his 2016 campaign he claimed to 'drain the swamp' This meant get rid of the political elite in office who represent the illegitimate elite and replace them with himself He took this populist approach with a lot more anger and attack than is usual He however made use of false information and misrepresenting the achievements of the incumbent government

Question 45

How has Trump utilised nationalism?

Answer 45

Nationalism creates in groups and out groups Trumps in group was majority white males, non college educated and low skilled - yet the difficulty for the democracy is that it doesnt represent whole country Yet a carefully crafted message can appeal to wider than the in group

Question 46

Why has deinternationalisation become more prominent?

Answer 46

Because of the gradual decline in global FDI since 2016, as well as cross border trade flow

Question 47

What two categories do the drivers of deinternationalisation fall into?

Answer 47

External and Internal dynamics

Question 48

What are external dynamics and how do they drive deinternationalisation?

Answer 48

Host country environments Policy uncertainty and political risk which prevent firm entry and encourage incumbent firm exit A government reshuffle which may lead to institutional instabilities Protest, political freedom and instititional transparency may increase divestment Cultural distance between host and home causes firms to withdraw