Economic Integration Flashcards
(18 cards)
What is economic integration?
Economic integration is the process by which countries reduce or eliminate trade barriers and coordinate economic policies to increase economic cooperation and efficiency.
What is a Preferential Trade Agreement (PTA)?
A PTA is a trade deal where countries lower tariffs on certain goods from member nations but not all, with limited mutual commitments.
What is a Free Trade Area (FTA)?
An FTA eliminates tariffs and trade barriers among member countries, but each member maintains its own trade policy with non-members. Example: NAFTA (now USMCA)
What is a Customs Union?
A Customs Union eliminates internal trade barriers and adopts a common external tariff for imports from non-members. Example: Mercosur
What is a Common Market?
A Common Market includes a Customs Union and allows free movement of labor, capital, and services. Example: European Economic Area (EEA)
What is an Economic Union?
An Economic Union is a Common Market with coordinated economic policies such as fiscal and monetary policy. Example: European Union (EU)
What is a Political Union?
A Political Union involves full political integration, possibly including a single government. Example: EU (partially)
What is trade creation?
Trade creation happens when high-cost domestic production is replaced by lower-cost imports from member countries, improving efficiency.
What is trade diversion?
Trade diversion occurs when cheaper imports from non-members are replaced by more expensive imports from member countries due to trade preferences.
How does economic integration increase trade and investment?
By removing trade barriers, integration encourages more cross-border trade and capital flows.
How does economic integration lead to economic growth?
Larger markets from integration stimulate production, innovation, and greater efficiency.
What consumer benefits result from economic integration?
Consumers enjoy more choices and lower prices due to increased competition and economies of scale.
How does economic integration affect employment?
It can create jobs through expanded market access and increased business activity.
How does integration promote political cooperation?
Economic ties create interdependence, reducing the risk of conflict and fostering cooperation.
What is a sovereignty loss in economic integration?
Countries may lose control over national policies, especially monetary or trade decisions.
How does integration cause uneven gains?
Benefits may be distributed unequally, with some sectors or regions gaining more than others.
How is trade diversion a negative effect?
It may reduce global efficiency by favoring higher-cost member imports over cheaper non-member goods.
What is structural unemployment in integration?
Industries that can’t compete may shrink or close, causing job losses in those sectors.
