Ch 9 International Business

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%

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

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, and Mexico

The European Parliament must approve all members of the European ______ before this body can begin its work.

Commission

What are two factors that support the idea for political integration of nations through trade?

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

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

What are two methods a country would use to achieve economic integration? (Check all that apply.)

Economic union Common market

Which group is the overall controlling authority within the European Union (EU) that must approve draft legislation from the European Commission before it becomes EU law?

The European Council

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.

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.

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

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

The Court of Justice is made up of

one judge from each country in the EU.

African countries have attempted to form a continental trade agreement, but have been stymied by significant ______ turmoil.

political

Based on economic theories, free trade is viewed as a ______ as all participating nations stand to gain.

positive-sum game

When NAFTA was created, it allowed for special protection from foreign direct investment on which two Mexican industries?

railway energy

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

CARICOM was a customs union created in 1991 among countries in _____.

the Caribbean

Costa Rica, El Salvador, Guatemala and other countries formed a common market in the early 1960s 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

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 on 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

There has been a(n) _____ in regional economic integration in the past two decades.

increase

What were two concerns about NAFTA's short-term effect on Mexico?

increased unemployment. difficult economic restructuring

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

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

The main job of the competition commissioner for the European Union is to regulate business in order to prevent

monopolies.

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

A(n) ______ union consists of a central governing body that regulates the economic, social, and foreign policy of member states.

political

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

What are two requirements countries must take to qualify for EU membership?

respect human rights establish stable democratic government

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

Currently, the Andean Community functions as a

customs union.

When high-cost domestic producers have been replaced by low-cost producers within a free trade zone, this is called trade

Creation

As of _____, all members of WTO were participating in one or more regional trade agreements.

2018

Before the United Kingdom decided to exit the EU, how many total countries were involved by 2014?

28

Approximately how many regional trade agreements are currently in force?

280

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

What are two potential problems with an economic union?

It requires a coordinating bureaucracy. There is a surrender of some national sovereignty.

The anticipated exit of _____ from the European Union has cast a level of doubt about the future of the project.

the United Kingdom

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

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 on the free trade of industrial goods, but not agricultural products.

EFTA

Which objective of the Andean Community has NOT yet been implemented?

Establishment of a common market

What two political factors led to the development of the European Union? (Check all that apply.)

Europe's desire to hold its own on the world's political and economic stage. The devastation of western Europe during the two world wars

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

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

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.

Which country was always considered a major holdout in th 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.

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

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

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

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

The Treaty of ---- established the European Community in 1957.

Rome

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

______ is considered the most successful attempt at regional economic integration.

The EU

______ is an economic term defined as replacing lower-cost external suppliers with high-cost suppliers within the free trade area.

Trade diversion

What are two potential costs Britain might face when its exit from the EU is complete?

There might be a decrease in the rate of economic growth. Some multinationals may move operations to other EU countries to access the single market.

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.

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.

Mexican critics of NAFTA claimed that the US would use Mexico as a place to conduct ______ jobs.

assembly

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

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

The Treaty of Rome established a(n) ______.

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

How do members of the European Parliament gain their seat?

directly elected by the citizens

Since the WTO has a limited scope, the risk remains that regional economic integration will result in trade-------- (Choose creation or diversion.)

diversion

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

In 2001, Kenya, Uganda, and Tanzania, members of the East African Community, tried to

establish a customs union.

Prior to its renegotiation under the presidency of Donald Trump, NAFTA had been in place _____.

for 25 years

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 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.

Some economists argue that regional free trade agreements will provide global benefits only if

trade creation exceeds trade diversion.