International Business Chapter 9
Before the United Kingdom decided to exit the EU, how many total countries were involved by 2014?
28
According to Ross Perot, ratification of NAFTA would result in the loss of about ______ million jobs from the US and Canada, as firms from these countries sought to capitalize on lower wages in Mexico.
5.9
The United States-Mexico-Canada Agreement renegotiated NAFTA and requires automakers to produce _____ of a vehicle's content in North America to qualify for zero tariffs.
75%
Free trade agreements account for nearly ____ of regional economic agreements.
90%
Which level of economic integration is present in an agreement that has no barriers to trade among member countries and allows factors of production (such as labor) to move freely among the members?
A common market
Mercosur is a free trade pact started in 1988 by which two South American economies? (Check all that apply.)
Argentina and Brazil
Mexican critics of NAFTA claimed that the US would use Mexico as a place to conduct ______ jobs.
Assembly
Under the Andean Pact,, which two members received special concessions based on the size of these countries?
Bolivia and Ecuador
In 1969, which countries created the Andean Pact that was modeled on the EU, but was not as successful in achieving regional groups objectives?
Bolivia, Chile, Colombia, Ecuador, Peru
In 2004, the US and six Central American countries formed a free trade agreement called
CAFTA
Which NAFTA country experienced a welfare loss since the program's inception?
Canada
What three countries established the North American Free Trade agreement? (Check all that apply.)
Canada Mexico United States
Studies of NAFTA's effects show that ______ are the top three trading partners of the US, which suggests that NAFTA has had some positive effects.
Canada, China & Mexico
The European Parliament must approve all members of the European ______ before this body can begin its work.
Commission
What are two methods a country would use to achieve economic integration? (Check all that apply.)
Common market Economic union
What are two impediments to establishing economic integration? (Check all that apply.)
Costs of integration Concerns over national sovereignty
What are two key political institutions of the EU? (Check all that apply.)
Council of the European Union European Commission
Which EU organization handles appeals of EU law?
Court of Justice
After joining the EU, which three long-term members did NOT agree to the euro as a common currency as directed by the Maastricht Treaty? (Check all that apply.)
Denmark Sweden Great Britain
The weakening of which currency helped raise the value of the euro beginning in 2001?
Dollar
The ______ sets interest rates and monetary policy for the EU.
ECB
As the most enduring free trade area in the world, ______ concentrates in the free trade of industrial goods, but not agricultural products.
EFTA
What are two reasons to establish a common EU currency? (Check all that apply.)
Easier to compare prices across Europe Savings from handling just one currency
In 2001, the ______ Community, made up of Kenya, Uganda and Tanzania, tried to reinvigorate their trade agreement after it collapsed 24 years before.
East African
Which objective of the Andean Community has NOT yet been implemented?
Establishment of a common market
Which institution has a monopoly in proposing European Union legislation?
European Commission
Which organization is playing an emerging role in competition policy within the EU and serves as a potential threat to companies wishing to do business there?
European Commission
Which of these trade unions is made up of European countries that decided NOT to be part of the European Community and emphasized free trade in industrial goods?
European Free Trade Association
The European Community (EC) became the ______ in 1993.
European Union
The most ambitious attempt at regional economic integration is the _____.
European Union
What are the two major trading blocks in Europe? (Check all that apply.)
European Union European Free Trade Association
Which of the following is the overall controlling authority within the European Union (EU) that must approve draft legislation from the European Commission before it becomes EU law?
European council
The most significant trading block in Europe based on economic and political influence is the _____.
European union
One of the reasons the European Union was originally formed was because
Europeans desired a lasting peace after enduring two devastating world wars.
True or False: Critics say that the EU is an optimal currency area which is why it is difficult to adopt a single currency.
False
True or false: Economists would agree that the EU is an optimal currency area.
False
True or false: Opponents of NAFTA felt that the program would result in a large exodus of jobs from Mexico.
False
Which EU country did the International Monetary Fund agree to bailout in 2010 for fear it might default on its sovereign debt?
Greece
What are three advantages of regional market integration that can result in cost savings to a business? (Check all that apply.)
Harmonized product standards Simplified tax regimes Free movement of goods across borders
What is the purpose of the European Stability Mechanism that was established by the EU?
It is a permanent bailout fund.
What are two characteristics of the European Central Bank?
It is meant to be free from political pressure. It was established to ensure price stability
What are two potential problems with an economic union?
It requires a coordinating bureaucracy. There is a surrender of some national sovereignty.
The Maastricht Treaty stated that EU members were to adopt a common currency by January 1, 1999. When were euro notes and coins issued?
January 1, 2002
Under which treaty was the power of the European Parliament increased?
Lisbon
What committed EU members to adopt a common currency by January 1, 1999?
Maastricht Treaty
What are two factors that support the idea for political integration of nations through trade? (Check all that apply.)
Making nations interdependent can decrease the potential for violent conflict. Countries can enhance their political weight in the world.
The trade pact developed in 1988, initially between Argentina and Brazil, is called ______.
Mercosur
Proponents of NAFTA argued many would benefit from the movement of low-skilled, labor-intensive production to ______, which might have a competitive advantage in this area.
Mexico
Which country risked the most from participating in NAFTA because it does NOT have access to the capital resources and highly-skilled workforce found in the other countries?
Mexico
Critics of NAFTA worried that ______ as a result of the agreement.
Mexico would degrade clean air and toxic waste standards across the continent
Which agreement was an attempt at regional economic integration in the United States?
North American Free Trade Agreement
The Treaty of ________ established the European Community in 1957.
Rome
Which three nations are a part of ASEAN? Check all that apply.
Singapore Indonesia Philippines
To signify the importance of the ______, the European Community decided to change its name to the European Union once the act took effect.
Single European Act
CARICOM was a customs union created in 1991 among countries in _____.
The Caribbean
______ is considered the most successful attempt at regional economic integration.
The EU
The anticipated exit of _____ from the European Union has cast a level of doubt about the future of the project.
The United Kingdom
What two political factors led to the development of the European Union? (Check all that apply.)
The devastation of western Europe during the two world wars. Europe's desire to hold its own on the world's political and economic stage
Which of the following are reasons for a customs union being put in place? (Select all that apply.)
To establish a common external trade policy To eliminate trade barriers between member countries
______ is an economic term that refers to high-cost domestic producers being replaced by low-cost producers within the free trade area.
Trade creation
______ is an economic term defined as replacing lower-cost external suppliers with high-cost suppliers within the free trade area.
Trade diversion
True or false: Alexander Yeats claimed that the trade diversion effects of Mercosur outweighed its trade creation effects.
True
True or false: Less than 20 years after it was established, the Andean Pact was on the verge of collapse.
True
True or false: One political reason that supports economic integration is the potential to reduce violent conflict between nations.
True
Proponents of NAFTA believed that it would result in
US and Canadian consumers benefiting from lower prices.
The European Commission, to maintain the level of competition in the EU, is increasingly willing to impose conditions from businesses before allowing
a merger or acquisition.
When an optimal currency area exists, similar underlying structures of economic activity make it more feasible to adopt _____.
a single currency
The Maastricht Treaty committed EU members to
adopt a common currency by January 1, 1999.
A restriction put on new members to the EU that entered in 2004 was that these new members could not ______ for several years.
adopt the euro
One of the changes proposed by the Single European Act was to abolish the restrictions placed on foreign truckers who pick up and deliver goods within another member's state borders. This hauling process is known as ______.
cabotage
One reason for establishing the euro was because a(n) ______ currency would make it easier to compare prices across Europe.
common
The members of Mercosur agreed on a _____ in 2010 in an attempt to avoid paying tariffs more than once.
common customs code
A(n) ______ allows the free movement of factors of productions among member countries, eliminates trade barriers among member countries, and has a common external trade policy.
common market
With the increase in single regional markets, managers must continually monitor for threats, including that the business environment within each grouping has become more
competitive
The European Parliament is considered a _____ body.
consultative
The European Parliament is considered a ________ body.
consultative
An argument against regional free trade agreements contends that the benefits have been oversold, but ______ have often been ignored.
costs
When high-cost domestic producers have been replaced by low-cost producers within a free trade zone, this is called trade ______.
creation
When high-cost domestic producers have been replaced by low-cost producers within a free trade zone, this is called trade ____________.
creation
In moving toward economic and political integration, a(n) ______ union removes trade barriers among member nations and establishes a common trade policy for nonmembers.
customs
Currently, the Andean Community functions as a
customs union
What were two concerns about NAFTA's short-term effect on Mexico?
difficult economic restructuring increased unemployment
How do members of the European Parliament gain their seat?
directly elected by the citizens
When lower-cost external suppliers are replaced by higher-cost suppliers within a free trade zone, this is called trade .
diversion
There are presently 19 trade blocs in Africa, and many of these blocs have been _____ for years.
dormant
A(n) ______ union adds more economic integration to a common market by requiring a common currency, a common monetary and fiscal policy, and harmonization of tax rates.
economic
Regional _____ integration creates agreements among countries in a specific geographic area in order to reduce and eventually remove tariff and non-tariff barriers to the free flow of goods.
economic
In 2001, Kenya, Uganda, and Tanzania, members of the East African Community, tried to
establish a customs union
What are two requirements countries must take to qualify for EU membership?
establish stable democratic government respect human rights
Prior to its renegotiation under the presidency of Donald Trump, NAFTA had been in place _____.
for 25 Years
Economic theories advocate for _____________ trade and investment that will allow participating countries to gain economically. (Choose free or restricted.)
free
The two restrictions put on new members to the EU that joined in 2004 were: (Check all that apply.)
free movement of labor among the new and existing members was prohibited for several years. they could not adopt the euro for several years.
The Association of Southeast Asian Nations was formed with the intent to foster _____.
free trade
A lack of barriers to the trade of goods and services among member countries is found in a(n):
free trade area
The least integrated form of economic integration is a
free trade area
What were two expected results of the Single European Act?
give EC firms additional opportunities for economies of scale. lower the costs of doing business between member countries
The establishment of the euro is seen as a surprising political accomplishment because it required participating governments to
give up control over monetary policy.
During the campaign for leaving the EU, one of the recent claims said that leaving the EU would allow the British to take back control of _____.
immigration
There has been a(n) _____ in regional economic integration in the past two decades.
increase
According to Alexander Yeats, the countries that produce the fastest-growing products in intra-Mercosur trade do so _____ and at the _____ price.
inefficiently; highest
Since 2010, Mercosur has made ______ progress toward achieving its goals.
little
The creation of a single market creates _____ costs of doing business.
lower
It was acknowledged that one potential effect of NAFTA was that member countries would take advantage of ______ by moving production efforts to Mexico.
lower labor costs
Six Caribbean-area countries established the CSME in 2006 to accomplish what two things?
lower trade barriers coordinate macroeconomic and monetary policy
When NAFTA was established it was a regional economic alliance made up of the United States, Canada, and __________________.
mexico
According to the Single European Act, a product standard developed in one EC country should be accepted in another. This is known as the principle of ______.
mutual recognition
The Court of Justice is made up of
one judge from each country in the EU.
A(n) ______ union consists of a central governing body that regulates the economic, social and foreign policy of member states.
political
African countries have attempted to form a continental trade agreement, but have been stymied by significant ______ turmoil.
political
The United States is considered a close example of a _____ because 50 independent states are effectively combined into a single nation.
political union
The Treaty of Lisbon created the position of ______ of the European Council.
president
One way to deal with euro economies that are NOT growing in unison is to engage in fiscal transfers, which involves taking money from ______ and giving it to areas that are not as successful.
prosperous regions
When NAFTA was created, it allowed for special protection from foreign direct investment on which two Mexican industries?
railway energy
During 2007 and 2008, many investors were taking money out of the U.S. by selling U.S. stocks, and purchasing euro-denominated assets; therefore, the value of the euro (rose or fell?).
rose
The euro is the ______-most traded currency in the world.
second
The number of votes a country gets in the European Council is related to the
size of the country
One reason given to explain the downfall of the Andean Pact points to the political ideology of the countries involved. This political ideology centered on the ______ end of the political spectrum.
socialist
Economic theories suggest that free trade allows countries to
specialize in producing goods and service that they are most efficient at producing.
NAFTA eliminated ______ on almost all of the goods traded between Mexico, Canada, and the United States.
tariffs
A key impediment to economic integration is that although a majority of citizens may benefit from free trade, certain groups may lose their jobs to low-cost and low-skilled labor in other countries as was the experience of some US and Canadian workers in the ______ industry following the establishment of NAFTA.
textile
Costa Rica, El Salvador, Guatemala and other countries in the early 1960s formed a common market that was called
the Central American Common Market.
The economic policies of the European Union are established by the four main institutions in the political structure: the European Commission, the Council of the European Union, the European Parliament, and _____.
the Court of Justice
The CAFTA was formed to lower trade barriers between ______.
the US and Central America
What are two potential threats to firms outside of a trading block such as the EU?
those firms might be shut out of the market by a "trade fortress" those firms would face likely long-term improvement in the competitive position of firms within the market
Some economists argue that regional free trade agreements will provide global benefits only if
trade creation exceeds trade diversion
After the British government formally notified of its intent to exit the European Union, the country had _____ to negotiate the terms of the exit.
two years
The collapse of the Central American Common Market was a result of ______.
war between Honduras and El Salvador