Chapter 9 Economic Integration

Question 1

Forms of economic integration

Answer 1

Preferential trading agreement
■ Free trade area (FTA)
■ Customs union
■ Common market
■ Economic union
■ Political union

Question 2

reduce
intra-group tariffs

Answer 2

Preferential trading agreement

Question 3

WHAT eliminates all barriers (both
tariff and nontariff) to trade between member
countries, but allows each country to
establish its own trade policies against non
members.

Answer 3

free trade area

Question 4

WHAT combines the elimination of
barriers to internal trade between member
countries with the adoption of common
external trade policies toward non members.

Answer 4

customs union

Question 5

WHAT combines the
elements of a customs union with a
policy that allows for the mobility of
factors of production.

Answer 5

A common market

Question 6

Productivity is expected to rise in a
_______because factors of
production are free to locate where the
returns to them are highest.

Answer 6

common market

Question 7

is an example of a
common market till the late 1990s.

Answer 7

European Union

Question 8

WHAT eliminates trade
barriers between member countries,
establishes a common external trade
policy, follows a policy of factor
mobility, and coordinates economic
policies of member countries.

Answer 8

economic union

Question 9

example of an economic union is the

Answer 9

European Union

Question 10

WHAT combines the elements
of an economic union with the added
feature of complete political integration.

Answer 10

political union

Question 11

The United States, transformed from 13
separate colonies into one, is an example
of a WHAT

Answer 11

political union.

Question 12

T OR F

A variation of a political union occurred
when the former colonies joined to form
the Commonwealth of Canada.

Answer 12

false

Commonwealth of Australia

Question 13

Welfare effect of Customs Union
■ Static effect

Answer 13

Trade creation:
■ Trade diversion:

Question 14

trade-liberalization
element of integration is called

Answer 14

Trade
Creation

Question 15

protectionist element of
integration is called

Answer 15

Trade Diversion.

Question 16

Welfare effect of Customs Union

■ Dynamic effect

Answer 16

■ Economies of scale
■ Competition
■ Investment

Question 17

Integration
eliminates
protection among
member countries
and allows them to
specialize and
trade according to
comparative
advantage and to
exploit potential
economies of
scale

Answer 17

Trade creation

Question 18

Diversion of trade
from nonmembers
to members caused
by discrimination
inherent in
integration

Answer 18

Trade diversion

Question 19

Regional trading blocs

Answer 19

■ The European Union (EU)

■ The Americas
- NAFTA

■ Asian & Pacific areas
- ASEANASEAN, APEC, etc

■ Other regional trading blocs
- Free trade agreements in Africa

Question 20

the most important trading
bloc in the world today

Answer 20

EU

Question 21

Developed from European
Economic Community (EEC), a
“Custom Union”

Answer 21

EU

Question 22

EU

■ Elimination of __ tariffs.
■ Common external tariffs of ___ (members’ average).

Answer 22

internal

15
percent

Question 23

Institutionalize the virtuous circle of
export-led growth.

Answer 23

EU

Question 24

The elimination of tariffs would
create trade (trade WHAT).

Answer 24

trade creation

Question 25

t or f in EU, The imposition of external tariffs would reduce dependence from the United States, Soviet Union, etc. (trade diversion).

Answer 25

t

Question 26

After successfully growing from 6 to 15 members, the European Union is now preparing for its biggest enlargement ever in terms of scope and diversity

Answer 26

Enlargement of EU

Question 27

13 countries have applied to become new members OF EU:

Answer 27

■ 10 of these countries - Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic, and Slovenia joined on May 1st, 2004 ■ Bulgaria and Romania hope to do so by 2007, while Turkey is not currently negotiating its membership ■ Next new candidate: Croatia

Question 28

Requirements of EU In order to join the Union, the candidate country needs to fulfil the economic and political conditions known as the 'WHAT

Answer 28

Copenhagen criteria

Question 29

Requirements of EU ■ In order to join the Union, the candidate country needs to fulfil the economic and political conditions known as the 'Copenhagen criteria', according to which a prospective member must:

Answer 29

∙ be a stable democracy, respecting human rights, the rule of law, and the protection of minorities ∙ have a functioning market economy ∙ adopt the common rules, standards and policies that make up the body of EU law

Question 30

Requirements of EU four freedoms:

Answer 30

* Free movement of goods * Free movement of services * Free movement of persons * Free movement of capital

Question 31

Main institutions of EU

Answer 31

*The Council of the European Union * The European Commission; * The European Parliament; * The European Court of Justice * The European Central Bank (ECB)

Question 32

In January 1994 a FTA between _, _ AND_ took place (NAFTA)

Answer 32

Canada, Mexico and US

Question 33

NAFTA Addressed the following

Answer 33

■ Trade in goods ■ Financial services ■ Transportation ■ Telecommunications ■ Foreign direct investment ■ Intellectual property rights ■ Government procurement ■ Dispute settlement

Question 34

The Association of Southeast Asian Nations or ASEAN was established on _ in Bangkok by the five original Member Countries, namely,

Answer 34

8 August 1967 Indonesia, Malaysia, Philippines, Singapore, and Thailand.

Question 35

Brunei Darussalam joined on __, Vietnam on ___ , Laos and Myanmar on ___ , and Cambodia on __.

Answer 35

8 January 1984 28 July 1995 23 July 1997 30 April 1999

Question 36

The ASEAN region has a population of about ___, a total area of ___, a combined gross domestic product of US$737 billion, and a total trade of US$ 720 billion

Answer 36

500 million 4.5 million square kilometers