Flashcards in Regional Economic Integration Deck (19)
Regional economic integration
greements between countries in a geographic region to reduce tariff and non-tariff barriers to the free flow of goods, services, and factors of production between each other.
regional trade agreements
are designed to promote free trade, but instead the world may be moving toward a situation in which a number of regional trade blocks compete against each other.
levels of economic integration
1. free trade area
2. customs union
3. common market
4. economic union
5. political union
free trade area
- eliminates all barriers to the trade of goods and services
adopts a common external trade policy
- free movement of the factors of production
- common currency
- harmonized tax rate
- common monetary and fiscal policy
central political apparatus that coordinates the economic, social, and foreign policy of member states
europe has 2 trade blocs
- european union
- european free trade area (EFTA)
- norway, iceland, liechtenstein, and switzerland
Why Should Countries Integrate Their economics? (2)
- all countries gain from free trade and investment
- linking countries together, making them more depends on each other
benefits of the euro (3)
-Savings from having to handle one currency, rather than many.
- easier to compare prices
- increases the range of investment options
costs of the euro (2)
- loss of control over national monetary policy
- EU is not an optimal currency area
The European Council
the ultimate controlling authority within the EU
The European Commission
responsible for proposing EU legislation, implementing it, and monitoring compliance with EU laws by member states.
The European Parliament
debates legislation proposed by the commission and forwarded to it by the council.
The Court of Justice
the supreme appeals court for EU law
- abolished tariffs and remove trade barriers
- protects intellectual property rights
- removes most restrictions on FDI between members
- allows each country to apply its own environmental standards
Managerial Implication: regional economic integration (2) +
Opens new markets.
• Allows firms to realize cost economies by centralizing production in those locations where the mix of factor costs and skills is optimal.