Regional Economic Integration Flashcards
Exam 2 (29 cards)
What is regional economic integration?
Refers to the process by which countries within specific geographical region agree to reduce or eliminate trade barriers (like tariffs & import quotas) and coordinate their economic policies to promote closer economic ties.
What are some key goals to regional economic integration?
- Increases trade and investment
- improve economic cooperation and political stability
- Boost efficiency, productivity and competitiveness.
- Creates a larger, more unified market.
What are the levels of Regional Economic Integration?
- Free Trade Area
- Customs Union
- Common Market
- Economic Union
- Political Union
What is free trade area?
when two or more countries agree to trade with each other w/o charging taxes (called tariffs) or limit on imports/exports between them. “special deal between countries”
Encourages trade, lower prices and economic growth.
Makes it cheaper for countries to buy & sell with each other.
What is custom union?
a type of trade agreement where a group of countries agree to
1 eliminate tariffs and trade barriers
2 adopt a common eternal tariff on nonmember countries.
What is the difference between FTA and Custom Union?
FTA - each country negotiates individually
CU - negotiates together
FTA- each country sets its own tariffs
CU- all members use the same external tariffs
What is a common market?
a type of trade agreement that goes one step further from custom union. A common market allows:
free trade in goods/services between members (countries)
A common external tariffs on trade with non members
free movement of people/capital/labor/ and sometimes services.
what is capital mobility?
refers to the ease with which financial assets and capital can be moved across international borders (typically with higher returns or better investment opportunities)
*** Money/investments can move freely across borders
What is free movement?
People can live and work in any member country without special visas.
Whats the difference between free movement and capital mobility?
Free movement refers to people/capital/services
Capital mobility refers to financial resources like investments
What is economic union?
Similar to common market (no trade barriers, common external trade policy, and free flow of factors of production).
But in addition, ** requires common currency, harmonization of members tax rates and common monetary and fiscal policy.
What is political union?
Similar to economic union, however, in a political union a common political apparatues coordinates the economic, social and foreign policy of member states.
What is the difference between political union and economic union?
EU- econ policies only,
retained mostly by memebers, currency sometimes shared
PU- both political and economic policies, currency shared, laws are centeralized within all sectors.
What is the economic case? (for Case for Regional Integration)
Economic theories offer that free trade and investments is a “positive sum game” in which all participating countries stand to win.
What is the Political Case?
Integration reduces the likelihood of violent conflict between member countries and at the same time increases the political clout of region by pooling influence.
The case against regional integration?
The benefits of regional integration are determined by extent of trade creation; however there is also potential for trade diversion.
What is trade creation?
High cost domestic producers are replaced by low cost producers within the free trade area. Or, high cost external producers are replaced by lower cost external producers within the free trade area.
What is trade diversion?
Trade diversion happens when, due to regional integration (like a free trade agreement), a country starts importing goods from a higher-cost partner country instead of a lower-cost country outside the region, just because the partner country has preferential treatment (like no tariffs).
What is the EU?
The European Union is product of 2 political aims
1. the desire for lasting peace after WWII
2. shared desire to maintain European political influence on the world stage.
A political economic union of 27 European countries
What is the European commission?
Responsible of proposing EU legislation, implementing this legislation and monitoring member nations compliance with EU laws.
The council of European Union
This is the representative body, in which one representative of each member nation government seeks to represent their nations interest. The council must agree with draft legislation if its to be signed into law.
What is the European parliament?
This body is primarily consultive, rather than representative and debates legislation proposed by the commission.
The court of justice
this is the supreme appeals court of the EU, and has one judge from each member country.
What is Nafta?
North American Free Trade Agreement.
agrrement 1994 between US, Canada and Mexico, set to abolish tariffs on 99% of goods.
