Chapter 9

The structure of the EU is composed of four main institutions:

1. the European Commission 2. the Council of the European Union 3. the European Parliament 4. the Court of Justice

Andean Pact

A 1969 agreement between Bolivia. Chile. Ecuador. Columbia. and Peru to establish a customs union

Political Union

A central political apparatus that coordinates economic, social, and foreign policy.

Optimal Currency Area

An area where similarities in the underlying structure of economic activities make it feasible to adopt a single currency and use a single exchange rate as an instrument of macro-economic policy. Many of the European economies in the euro-zone, however, are very dissimilar.

CARICOM

An association of English speaking Caribbean state that are attempting to establish a customs union (15 members as of 2005, six of which formed the CSME).

Association of Southeast Asian Nations (ASEAN)

An attempt to establish a free trade area between Brunei. Cambodia. Indonesia. Laos. Malaysia. Myanmar. Philippines. Singapore. Thailand. and Vietnam.

North American Free Trade Agreement (NAFTA)

Free trade area between Canada. Mexico. and the United States

Asia-Pacific Economic Cooperation

Made up of 21 member states whose goal is to increase multilateral cooperation in view of the economic rise of Pacific nations.

MERCOSUR

Pact between Argentina Brazil Paraguay Uruguay to establish a free trade area.

Regional economic integration

Refers to agreements between countries in a geographic region to reduce tariff and nontariff barriers to the free flow of goods. services. and factors of production between each other.

Trade creation v. Trade diversion

Trade creation occurs when low cost producers within the free trade area replace high cost domestic producers. Trade diversion occurs when higher cost suppliers within the free trade area replace lower cost external suppliers. A regional free trade agreement will only make the world better off if the amount of trade it creates exceeds the amount it diverts.

Treaty of Lisbon

Treaty signed in 2007 that made the European Parliament the co-equal legislator for almost all European laws and also created the position of the president of the European Council

Single European Act

A 1987 act, adopted by members of the European Community that committed member countries to establishing an economic union.

Common market

A group of countries committed to (1) removing all barriers to the free flow of goods and services between each other and (2) the pursuit of a common external trade policy, and (3) allows factors of production to move freely between members. [Example - Mercosur (Argentina. Brazil. Paraguay. and Uruguay) are working towards a common market]

Customs union

A group of countries committed to (1) removing all barriers to the free flow of goods and services between each other and (2) the pursuit of a common external trade policy. A customs union is one step further along the road to full economic and political integration. A customs union eliminates trade barriers between member countries and adopts a common external trade policy. [Examples - The European Union (EU) began as a customs union. but has moved beyond this stage; the Andean community - Bolivia, Columbia, Ecuador. Peru. and Venezuela]

Economic Union

A group of countries committed to (1) removing all barriers to the free flow of goods and services between each other, (2) the pursuit of a common external trade policy, (3) allows factors of production to move freely between members, and (4) common currency, harmonization of tax rates, and a common monetary and fiscal policy. [Example-the EU is an example of an (imperfect) economic union]

Free trade area

A group of countries committed to removing all barriers to the free flow of goods and services between each other. Each country is allowed to determine its own trade policies with regard to nonmembers.

Central American Common Market

A trade pact between: Costa Rica El Salvador Guatemala Honduras the Dominican Republic Nicaragua which began in the early 1960's but collapsed in 1969 due to war.

Central America Free Trade Agreement (CAFTA)

An agreement reached in 2005 between the United States and the members of the Central American Common Market designed to lower trade barriers between the United States and the six countries on most goods and services

European Union

An economic group of 27 European nations; established as a customs union, it is moving towards economic union with a population of almost 500 million, and a GDP of €11 trillion; formerly the European Community created by the Treaty of Rome in 1957. The EU is a product of two political factors: (1) the devastation of two world wars on Western Europe and the desire for a lasting peace, and (2) the European nations' desire to hold their own on the world's political and economic stage.

Treaty of Maastricht

Signed in 1991, committed the EU to adopt a single currency, the euro, by January 1, 1999. The euro is now used by 16 of the 27 member states. By adopting the euro, the EU has created the second largest currency zone in the world after that of the U.S. dollar. For now, three long term EU countries, Britain, Denmark, and Sweden, are opting out of the euro-zone

Caribbean Single market and Economy (CSME)

Unites six CARCOM members in agreeing to lower trade barriers and harmonize macroeconomic and monetary policies.

Body responsible for proposing EU legislation

implementing it, and monitoring compliance (consisting of 1 commissioner from each member state) (2) Council of the European Union (European Council) The ultimate controlling authority within the EU. The council is composed of one representative from the government of each member state. The membership, however, varies depending on the topic being discussed. (3) European Parliament Elected EU body that debates legislation proposed by the commission and forwarded to it by the council. Now has 732 members. (4) Court of Justice Supreme appeals court for EU law