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Flashcards in Economic Integration Deck (21):

What is economic integration? What are its objectives?

1. The elimination of economic frontiers
2. To encourage trade and to increase the overall welfare
3. Negative v. positive integration


What is an economic autarky?

1. Self-sufficient nation with policies that prevent and hinder free trade
2. Can trade, but with protectionism


What is a Free Trade Area?

An area where two or more countries have removed all tariffs, quotas and other forms of protectionism between themselves


What is a Customs Union?

Goods may freely move + One common external policy (= common external tariff + common external quota)


What is a Common Market?

Customs Union + Four Freedoms


What is an Economic Union?

Common Market + Positive integration


What is total economic integration?

Includes all economically relevant policies + Common supranational institutions


What is opportunity cost?

The loss of the alternative choice to the choice made


What is specialisation?

Each country concentrates on what it does best and engages in mutually beneficial trade


What is comparative advantage?

A country has a lower opportunity cost than another one at producing a specific good than another country


What is absolute advantage?

A country can produce more of one good than another (in terms of number)


What is social welfare?

Consumer surplus + Producer surplus


What are the advantages of protectionism?

1. To protect the home industry (= political rationale) and to prevent dumping and other unfair trade practices as well as to protect infant industries (= economic rationale)
2. Producer surplus will increase and consumer surplus will decrease, but the general welfare will usually decrease for smaller countries


What is a tariff?

1. A tax that should be paid when importing a good.
2. Specific = Fixed price unit of the good
3. Ad valorem = A proportion of the value of the imported good


What is export subsidy?

A payment given by the government to an exporting company so that it will export


What is an import quota?

A quantitative restriction on the number of goods which can be imported into a country


What are voluntary export restraints?

To impose a restriction on exports to country B on the request of country C (usually part of a political bargain)


Van Gend & Loos

An increase in the customs duties of one MS as compared to it when the Treaty came into force constitutes a custom duty and charges having equivalent effect and is prohibited under art. 28 TFEU


Cassis de Dijon

1. Principle of mutual recognition
2. Principle of proportionality
3. Tariffs and measures having equivalent effect may be allowed for the protection of the effectiveness of fiscal supervision, the protection of public health, the fairness of commercial transactions and the defences of the consumer, if it respects the principles mentioned above


Belgian margarine and butter case

If a good is lawfully produced and marketed in on MS, it shall be suitable in another MS


What is the difference between negative and positive integration?

Positive integration is the joint exercise of economic policies and the creation of institutions in order to overcome economic frontiers.

Negative integration is the removal of economic policies that create economic frontiers.