International Business Chapter 9
The European Community (EC) became the ______ in 1993.
European Union
The Treaty of _____ established the European Community in 1957.
Rome
______ is an economic term defined as replacing lower-cost external suppliers with high-cost suppliers within the free trade area.
Trade diversion
The Maastricht Treaty committed EU members to
adopt a common currency by January 1, 1999.
The European Parliament is considered a _____ body.
consultative
CARICOM was a customs union created in 1991 among countries in _____.
the Caribbean
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%
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
Mercosur is a free trade pact started in 1988 by which two South American economies? (Check all that apply.)
Brazil Argentina
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
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?
Canada
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 impediments to establishing economic integration? (Check all that apply.)
Concerns over national sovereignty Costs of integration
What are two factors that support the idea for political integration of nations through trade? (Check all that apply.)
Countries can enhance their political weight in the world. Making nations interdependent can decrease the potential for violent conflict.
Which EU organization handles appeals of EU law?
Court of Justice
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
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
Under the Andean Pact,, which two members received special concessions based on the size of these countries?
Ecuador Bolivia
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
What are two key political institutions of the EU? (Check all that apply.)
European Commission Council of the European Union
In the political structure of the European Union, the ______ is composed of one representative from the government of each member state, but the membership varies depending on the topic being discussed.
European Council
What is the overall controlling authority within the European Union (EU) because it must approve draft legislation from the European Commission before it becomes EU law?
European Council
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 most ambitious attempt at regional economic integration is the _____.
European Union
The most significant trading block in Europe based on economic and political influence is the _____.
European Union
What are the two major trading blocks in Europe? (Check all that apply.)
European Union European Free Trade Association
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: Opponents of NAFTA felt the program would result in a large exodus of jobs from Mexico.
False
As the text notes, support for the euro was compromised when _____ was put in the position of underwriting loans to bail out the governments of Greece, Portugal, and Ireland.
Germany
The impending British exit from the EU is seen by other smaller member nations as a problem because Britain acts as a counterweight to the economic power of _____.
Germany
Which country was always considered a major holdout in the EU because it did NOT agree to accept the euro as a common currency?
Great Britain
Which EU country did the International Monetary Fund agree to bailout in 2010 for fear it might default on its sovereign debt?
Greece
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 was established to ensure price stability. It is meant to be free from political pressure.
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
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
Critics of NAFTA worried that ______ as a result of the agreement.
Mexico would degrade clean air and toxic waste standards across the continent
Some people suspect that Turkey has been denied joining the EU because it is primarily a ______ nation.
Muslim
Which agreement was an attempt at regional economic integration in the United States?
North American Free Trade Agreement
What are two reasons to establish a common EU currency? (Check all that apply.)
Savings from handling just one currency Easier to compare prices across Europe
What are three advantages of regional market integration that can result in cost savings to a business? (Check all that apply.)
Simplified tax regimes Free movement of goods across borders Harmonized product standards
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
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.
Sweden Denmark Great Britain
______ 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
Identify the two reasons that the EU is NOT considered a perfect economic union. (Check all that apply.)
There is a difference in tax rates across the countries. Not all markets are fully deregulated.
What are two potential problems with an economic union?
There is a surrender of some national sovereignty. It requires a coordinating bureaucracy.
______ is an economic term that refers to high-cost domestic producers being replaced by low-cost producers within the free trade area.
Trade creation
It is easiest to establish regional economic integration among
a limited number of adjacent countries.
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
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
While the EU is seen as an economic union, it is considered imperfect because not all members of the EU have
adopted the same currency.
Mexican critics of NAFTA claimed that the US would use Mexico as a place to conduct ______ jobs.
assembly
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
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
The Treaty of Rome established a(n) ______.
common market
Which level of economic integration is present in an agreement that has no barriers to trade among member countries and allows factor of production (such as labor) to move freely among the members?
common market
Within the European Union, what role is responsible for reviewing proposed mergers and acquisitions in order to avoid one enterprise achieving substantial market power?
competition commissioner
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.
An argument against regional free trade agreements contends that the benefits have been oversold, but ______ have often been ignored.
costs
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
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 nontariff barriers to the free flow of goods.
economic
When NAFTA was created, it allowed for special protection from foreign direct investment on which two Mexican industries?
energy railway
A customs union is put in place for what two reasons?
establish a common external trade policy eliminate trade barriers between member countries
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
The Association of Southeast Asian Nations was formed with the intent to foster _____.
free trade
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.
Despite having a customs union with the EU, full membership in the EU for Turkey has been denied because of concerns over
human rights issues.
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
When the euro-zone economies are NOT growing at the same rate, a common monetary policy linked to common currency may mean that ______ rates may not reflect any one individual country's needs.
interest
The Treaty of Rome was instrumental in creating a common market. Article 3 of that treaty called for the elimination of ______.
internal trade barriers
What effect did the Single European Act have on gross domestic product in the first 15 years?
it raised GDP between two and five percent
Since 2010, Mercosur has made ______ progress toward achieving its goals.
little
The creation of a single market creates _____ costs of doing business.
lower
Six Caribbean-area countries established the CSME in 2006 to accomplish what two things?
lower trade barriers coordinate macroeconomic and monetary policy
The main job of the competition commissioner for the European Union is to regulate business in order to prevent
monopolies.
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 main reason Great Britain did NOT agree to accept the euro as a common currency is because doing so would require Great Britain to relinquish control of the monetary policy, and as a result, ______ would be diminished.
national sovereignty
Regional trade blocs can possibly occur in markets that are protected from outside competition because ______ barriers are in place, and the WTO does not cover some of these types of barriers.
nontariff
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
The euro is the ______-most traded currency in the world.
second
What are two potential costs Britain might face when its exit from the EU is complete?
slowed economic growth some multinationals may move operations to other EU countries to access the single market
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
The two restrictions put on new members to the EU that joined in 2004 were: (Check all that apply.)
they could not adopt the euro for several years. free movement of labor among the new and existing members was prohibited for several years.
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
