BUS372 FINAL (CH. 9)
If a firm is outside of a trading area, it runs the risk of being shut out of the single market through the creation of a
"trade fortress." (One threat to firms outside of trading areas is the threat of being shut out of the single market by the creation of a "trade fortress." The charge that regional economic integration might lead to a fortress mentality is most often leveled at the EU.)
________blank entails even closer economic integration and cooperation than a common market.
An economic union (An economic union entails even closer economic integration and cooperation than a common market.)
Why is the European Council said to be the ultimate controlling authority within the EU?
Draft legislation from the commission can become EU law only if the council agrees. (The European Council represents the interests of member states. It is clearly the ultimate controlling authority within the EU since draft legislation from the commission can become EU law only if the council agrees.)
The emerging role of the ________blank in competition policy suggests the EU is increasingly willing and able to intervene and impose conditions on companies proposing mergers and acquisitions.
European Commission (The European Commission's role in competition policy has become increasingly important to business in recent years. Since 1990, when the office was formally assigned a role in competition policy, the EU's competition commissioner has been steadily gaining influence as the chief regulator of competition policy in the member nations of the EU. The commissioner also reviews proposed mergers and acquisitions to make sure they do not create a dominant enterprise with substantial market power.)
Which is the most enduring free trade area in the world?
European Free Trade Association (EFTA) (The most enduring free trade area in the world is the European Free Trade Association (EFTA). Established in January 1960, EFTA currently joins four countries—Norway, Iceland, Liechtenstein, and Switzerland—down from seven in 1995. EFTA was founded by those Western European countries that initially decided not to be part of the European Community. The emphasis of EFTA has been on free trade in industrial goods. Agriculture was left out of the arrangement; each member being allowed to determine its own level of support. Members are also free to determine the level of protection applied to goods coming from outside the EFTA.)
The ________blank is primarily a consultative rather than legislative body.
European Parliament (As of early 2020, the European Parliament has 705 members and is directly elected by the populations of the member states. It is primarily a consultative rather than legislative body.)
Which statement regarding ASEAN is true?
It is slowly progressing toward establishing a free trade zone. (Formed in 1967, the Association of Southeast Asian Nations (ASEAN) includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. The basic objective of ASEAN is to foster freer trade among member countries and to achieve cooperation in their industrial policies. Progress so far has been limited, however.)
Which observation pertaining to the EU's Court of Justice is correct?
It is the supreme appeals court for EU law. (The Court of Justice, which is composed of one judge from each country, is the supreme appeals court for EU law. The judges are required to act as independent officials, rather than as representatives of national interests.)
Which observation is true of the euro?
It required participating countries to give up control over monetary policy. (The euro is now used by 19 of the member states of the European Union. Establishment of the euro was a remarkable political feat with few historical precedents. It required participating national governments to give up their own currencies and national control over monetary policy. Governments do not routinely sacrifice national sovereignty for the greater good, indicating the importance that the Europeans attach to the euro. By adopting the euro, the EU has created the second most widely traded currency in the world after the U.S. dollar.)
Why doesn't Great Britain use the euro as its national currency?
It would have to relinquish control of its monetary policy to the EU. (Although most members have signed on to use the euro as their currency, Great Britain remains an important holdout. A politically important segment of public opinion in that country opposes a common currency on the grounds that it would require relinquishing control of the country's monetary policy to the EU, which many British perceive as a bureaucracy run by foreigners.)
Why is the European Union considered an imperfect economic union?
Not all members of the union have adopted the euro. (The EU is an economic union, although an imperfect one because not all members of the EU have adopted the euro, the currency of the EU; differences in tax rates and regulations across countries still remain; and some markets, such as the market for energy, are still not fully deregulated.)
Adopted by the member nations of the European Community in 1987, the ________blank committed member countries to work toward the establishment of a single market by December 31, 1992.
Single European Act (The Single European Act became EC law in 1987.)
What is the most frequently aired objection to free trade in Africa?
The countries need to be "protected" by tariff barriers from unfair foreign competition. (The argument most frequently heard in Africa is that because these countries have less developed and less diversified economies, they need to be "protected" by tariff barriers from unfair foreign competition.)
What argument is offered by critics of the USMCA?
The mandates contained in the agreement will result in trade diversion. (Critics see the USMCA as likely to result in trade diversion rather than trade creation and argue that the consequences may include higher costs to North American automobile producers and higher prices for consumers.)
What is the position of Alexander Yeats, as it pertains to Mercosur?
The trade diversion effects of Mercosur outweigh its trade creation effects. (According to Alexander Yeats, the trade diversion effects of Mercosur outweigh its trade creation effects.)
For which reason has Turkey been denied membership in the EU?
There are concerns over human rights issues in the country. (Full membership for Turkey has been denied because of concerns over human rights issues (particularly Turkish policies toward its Kurdish minority).)
Which feature of a customs union differentiates it from a free trade area?
a common external trade policy toward nonmembers (A customs union eliminates trade barriers between member countries and adopts a common external trade policy. Establishment of a common external trade policy necessitates significant administrative machinery to oversee trade relations with nonmembers.)
Four Latin American countries decide there will be no barriers to trade between the countries, agree on a common external trade policy, and allow factors of production to move freely between them. In short, the four countries formed
a common market. (A common market has no barriers to trade between member countries, includes a common external trade policy, and allows factors of production to move freely between members.)
Which feature of an economic union differentiates it from a common market?
a common monetary and fiscal policy (An economic union entails even closer economic integration and cooperation than a common market. Like the common market, an economic union involves the free flow of products and factors of production among member countries and the adoption of a common external trade policy, but it also requires a common currency, harmonization of members' tax rates, and a common monetary and fiscal policy.)
A common market differs from a customs union in that a common market
allows factors of production to move freely among members. (In a common market, labor and capital are free to move because there are no restrictions on immigration, emigration, or cross-border flows of capital between member countries.)
What two industries were most affected by the USMCA trade agreement between the United States, Mexico, and Canada?
automobile and dairy (The USMCA brought forth some key changes. Most significantly, NAFTA required automakers to produce 62.5 percent of a vehicle's content in North America to qualify for zero tariffs. The USMCA raises that threshold to 75 percent. In addition to the changes to automobile trade, the USMCA included an agreement to open up the Canadian dairy market to U.S. producers.)
Based on recent activity, the power of the European Parliament has
been increasing, although not by as much as parliamentarians would like. (The power of the parliament recently has been increasing, although not by as much as parliamentarians would like.)
How has the euro contributed to increasing competition in the European region?
by making price comparisons easy (The adoption of a common currency makes it easier to compare prices across Europe. This has been increasing competition because it has become easier for consumers to shop around.)
Linking neighboring countries economically and making them interdependent
creates incentives to increase political cooperation as well. (Linking neighboring economies and making them increasingly dependent on each other creates incentives for political cooperation between the neighboring states and reduces the potential for violent conflict.)
Three Latin American countries enter into an agreement to remove all tariffs and trade barriers between them. They have adopted a common external trade policy as well. Which level of economic integration best describes this arrangement?
customs union (A customs union eliminates trade barriers between member countries and adopts a common external trade policy. Establishment of a common external trade policy necessitates significant administrative machinery to oversee trade relations with nonmembers.)
What is a consequence of the expansion of the EU from 15 nations to 28 nations?
delays in decision-making processes (Given the small size of the eastern European economies, the initial impact of the EU expansion will probably be small. The biggest notable change might be in the decision-making processes, where budget negotiations among 28 nations are bound to prove problematic.)
From least integrated to most integrated, the levels of economic integration are a
free trade area, a customs union, a common market, an economic union, and a political union. (Several levels of economic integration are possible in theory. From least integrated to most integrated, they are a free trade area, a customs union, a common market, an economic union, and, finally, a full political union.)
The lowering of barriers to trade and investment among countries has led to ________blank throughout the EU.
increased price competition (The lowering of barriers to trade and investment between countries has led to increased price competition throughout the EU and NAFTA.)
What was the main objection raised by those in the United States and Canada who opposed the ratification of the NAFTA?
job losses (Those who opposed NAFTA claimed that ratification would be followed by a mass exodus of jobs from the United States and Canada into Mexico as employers sought to profit from Mexico's lower wages and less strict environmental and labor laws.)
What is a benefit of the euro?
lower foreign exchange and hedging costs (Because of the euro, businesses and individuals realize significant savings from having to handle one currency, rather than many. These savings come from lower foreign exchange and hedging costs.)
What is a disadvantage of the euro?
national authorities losing control over monetary policy (The drawback of the euro is that national authorities have lost control over monetary policy.)
A political benefit of economic integration is that it
reduces the potential for violent conflict and allows the participants to enhance their political weight in the world. (Linking neighboring economies and making them increasingly dependent on each other creates incentives for political cooperation between the neighboring states and reduces the potential for violent conflict. In addition, by grouping their economies, the countries can enhance their political weight in the world.)
Four countries in Southeast Asia agree to reduce and ultimately remove tariff and nontariff barriers to the free flow of goods, services, and the factors of production among each other. What is this type of agreement called?
regional economic integration (Regional economic integration refers to agreements among countries in a geographic region to reduce and ultimately remove tariff and nontariff barriers to the free flow of goods, services, and factors of production among each other.)
On average, studies indicate that NAFTA's overall impact has been
small but positive. (Studies of NAFTA's impact suggest its initial effects are muted, and both advocates and detractors may have been guilty of exaggeration. On average, studies indicate that NAFTA's overall impact has been small but positive.)
A concern of some economists regarding regional integration is that
the benefits of regional integration may have been oversold, while the costs have been ignored. (While there is a general movement toward the establishment of regional free trade agreements, some economists have suggested that caution be used. According to these economists, the benefits of regional integration may have been oversold, while the costs have been ignored. They point out that the benefits of regional integration are determined by the extent of trade creation as opposed to trade diversion. Trade creation occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area. It may also occur when higher-cost external producers are replaced by lower-cost external producers within the free trade area. Trade diversion occurs when lower-cost external suppliers are replaced by higher-cost suppliers within the free trade area. A regional free trade agreement will benefit the world only if the amount of trade it creates exceeds the amount it diverts.)
What event caused many EU countries to wait on adopting the euro as a common currency?
the debt crisis of 2010-2012 (In February 1992, EC members signed the Maastricht Treaty, which committed them to adopting a common currency by January 1, 1999. However, the events surrounding the EU sovereign debt crisis of 2010-2012 persuaded many countries to put their plans on hold, at least for the time being.)