Chapter 9: Regional Economic Integration
Workers would emigrate north, environmental degredation
The Case against NAFTA: Mexico was?
Increased jobs and low cost production
The Case for NAFTA on Mexico was?
c
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. factor market regional market common market customs union
c
An argument against regional free trade agreements contends that the benefits have been oversold, but ______ have often been ignored. behaviors monetary policy costs values
regional economic integration
Arrangement between different regions that often includes the reduction or elimination of trade barriers, and the coordination of monetary and fiscal policies.
b
As the most enduring free trade area in the world, ______ concentrates in the free trade of industrial goods, but not agricultural products. NAFTA EFTA CAFTA ASEAN
free trade area
Barriers to the trade of goods and services among member countries are removed, but members determine their own trade policies with regard to nonmembers Examples: The European Free Trade Association (between Norway, Iceland, Liechtenstein, and Switzerland); The North American Free Trade Agreement (between the U.S., Canada, and Mexico)
prices, production
Benefits of the Euro Handling one currency, rather than many Easier to compare ___________ across Europe Increased competition promotes greater efficiencies in ____________ The pan-European capital market should further develop Range of investment options open both to individuals and institutions should increase
NAFTA results
Combined $1.0 trillion in trilateral trade has increased by 258.5% since 1993 in nominal terms. The real, inflation-adjusted increase was 125.2%. U.S.'s real GDP grew 39.3% to $51,638. Canada's per-capita GDP grew 40.3% to $50,001, and Mexico's grew 24.1% to $9,511. U.S has had a loss in manufacturing jobs, but a gain overall (some contend despite NAFTA), with unemployment lower—6.5% in 1993 versus 4.1% today. NAFTA is a complex and looking at economic growth can lead to one conclusion, while looking at the balance of trade may lead to another.
control, changes
Costs of the Euro Membership implies a loss of ___________ over monetary policy Countries may react differently to ___________ in the euro Common currency may blunt a country's ability to conduct fiscal policy
common currency
Countries that share strong economic ties may benefit from what?—allows for closer integration of capital markets and facilitates trade
customs union
Eliminates trade barriers between member countries and adopts a common external trade policy Most countries that enter this desire further integration in the future The Andean Community (between Bolivia, Columbia, Ecuador, and Peru)
d
In 2004, the US and six Central American countries formed a free trade agreement called Mercosur. NATO. NAFTA. CAFTA.
Argentina, Brazil
Mercosur is a free trade pact started in 1988 by which two South American economies? (Check all that apply.) Argentina Peru Brazil Colombia
c
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. foreign investors tariffs and taxes prosperous regions the government
NAFTA
Regional Economic Integration of the Americas has developed...
17
Regional Trade Blocks in Africa: There are ________ trade blocs on the African continent However progress toward the establishment of meaningful trade blocs has been slow Many countries believe that they need to protect their industries from unfair foreign competition making it difficult to create free trade areas or customs unions In 2001, East African Community relaunched bloc In 2015, Tripartite Free Trade Area established
political union
State which is composed of, or created out of smaller states (a process called unification) States that used to be together and are reuniting is referred to as reunification Requires that a central political apparatus coordinate economic, social, and foreign policy for member states The EU is headed toward at least partial political union (U.S is example of closer)
b
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. Finland, Norway & Sweden Canada, China & Mexico China, Japan & South Korea France, Germany & Italy
volatile
The Euro Experience Since its establishment, the euro has had a __________ trading history with the U.S. dollar Currently € 1 = $1.18 The current account is at a rolling high (Eurozone exports up; with a surplus trade in goods and services on BoP)
a
The European Parliament must approve all members of the European ______ before this body can begin its work. Commission Court of Justice Magistrates Council
b
The Maastricht Treaty stated that EU members were to adopt a common currency by January 1, 1999. When were euro notes and coins issued? April 1, 2000 January 1, 2002 June 1, 2001 December 1, 1999
railway, energy
When NAFTA was created, it allowed for special protection from foreign direct investment on which two Mexican industries? railway energy agriculture communication
creation
When high-cost domestic producers have been replaced by low-cost producers within a free trade zone, this is called trade
c
Which EU organization handles appeals of EU law? European Commission World Trade Court Court of Justice European Council
d
Which NAFTA country experienced a welfare loss since the program's inception? Brazil United States Mexico Canada
a
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 free trade area political union customs union
NAFTA
eliminated most tariffs on trade between Mexico, Canada and the United States, went into effect in 1994. purpose is to encourage economic activity between North America's three major economic powers. Numerous tariffs, particularly those related to agriculture, textiles and automobiles, were gradually phased out between 1994 and 2008. Negotiations to revisit are ongoing.
free trade area
Regions in which a group of countries have signed an agreement, and invoke little or no price control in the form of tariffs or quotas between each other.
optimal currency area
a geographic area in which a single currency would create the greatest economic benefit Traditionally each country maintained its own currency—Robert Mundell in the 1960s theorized that this may not be the most efficient economic arrangement
Transatlantic Trade and Investment Partnership (TTIP)
a proposed trade agreement between the U.S. and EU would include the world's two regions with the largest economies (U.S. $19.4T; the EU $19.9T) could boost U.S. GDP by 5 percent and the EU's by 3.4 percent by eliminating all tariffs and other trade barriers
Trans Pacific Partnership
a trade agreement between the U.S. with 11 other Pacific Rim countries The agreement was not ratified when the U.S. withdrew, and the remaining countries signed a new agreement
european commission
proposes EU legislation, implements it, and monitors compliance
euro establishment
used by 19 of the 28 member states Created the euro zone, the second largest currency zone in the world after that of the U.S. Dollar Countries that participate have agreed to give up control of their monetary policy Britain, Denmark and Sweden are still on the sidelines
a
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 15.2 2.3 21.3
d
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 ______. cross-cultural literacy free trade dynamism mutual recognition
c
Costa Rica, El Salvador, Guatemala and other countries in the early 1960s formed a common market that was called the Andean Community. the Mayan Common Market. the Central American Common Market. Mercosur.
28,
Expansion of the EU From 6 to _________ members (in 1951 the precursor European Coal and Steel Community consisted of Belgium, Germany, France, Italy, Luxembourg and the Netherlands). The EU is a unique economic and political partnership between 28 European countries that together cover much of the continent.
competitive
Free trade areas allow the agreeing nations to focus on their _____________ advantage and to freely trade, increasing the efficiency and profitability of each country.
d
Prior to its renegotiation under the presidency of Donald Trump, NAFTA had been in place _____. for an entire century since the Great Depression for 5 years for 25 years
exports and foreign direct investment, capitalization
Regional Economic Integration Opportunities are...
A return to economic nationalism, mercantilism, MNE's outside the trade blocs risk being shut out of the single market, Firms may be unable to pursue the strategy of their choice, increased price competition and lower margins
Regional Economic Integration Threats are..
ASEAN
Regional Economic Integration of Asia has developed...
b
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. 100% 75% 45% 25%
b
The ______ sets interest rates and monetary policy for the EU. WTO ECB IRS ISO
reduce costs, increase trade
The aim of economic integration is to reduce what for both consumers and producers and to increase what between the countries involved in the agreement?
c
The weakening of which currency helped raise the value of the euro beginning in 2001? Pound Yen Dollar Peso
false
True or False?: Most evidence, however, indicates that regional trade blocs have not promoted trade and has hindered it
false
True or false: Economists would agree that the EU is an optimal currency area. True False
false
True or false: Opponents of NAFTA felt the program would result in a large exodus of jobs from Mexico.
Bolivia and Ecuador
Under the Andean Pact,, which two members received special concessions based on the size of these countries? Chile Colombia Bolivia Ecuador Peru
b
Under which treaty was the power of the European Parliament increased? Rome Lisbon Madrid Paris
it can be costly, loss of national sovereignty
What are the impediments to integration?
a and d
What are two characteristics of the European Central Bank? It was established to ensure price stability. It does not set interest rates across the euro zone. It responds to political pressure form key EU players. It is meant to be free from political pressure
b and d
What are two factors that support the idea for political integration of nations through trade? (Check all that apply.) Countries will have enhanced independent political power. Countries can enhance their political weight in the world. Making nations interdependent can decrease the potential for violent conflict. Countries will have an incentive to use military action to achieve their objectives.
d
African countries have attempted to form a continental trade agreement, but have been stymied by significant ______ turmoil. economic social technology political
Great Britain, Denmark, and Sweden
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.) Great Britain Austria France Denmark Sweden
b
After the British government formally notified of its intent to exit the European Union, the country had _____ to negotiate the terms of the exit. 30 days two years ten years six months
rose
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?).
d
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 _____. big business arbitrage religious affiliation immigration
d
How do members of the European Parliament gain their seat? inherited (like a title) appointed by the Chairman nominated by other members of Parliament directly elected by the citizens
a
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, Brazil, Colombia, Peru, Venezuela Argentina, Chile, Colombia, Peru, Venezuela Bolivia, Chile, Colombia, Ecuador, Peru Argentina, Brazil, Guyana, Paraguay, Uruguay
economic union
Involves the free flow of products and factors of production between members, and adoption of a common external trade policy Involves common currency, harmonization of the member countries' tax rates, common monetary and fiscal policy Involves sacrificing a significant amount of national sovereignty (The European Union (EU) is an example of economic union)
common market
No barriers to trade between member countries, a common external trade policy, and the free movement of the factors of production Requires significant harmony among members in fiscal, monetary, and employment policies Mercosur (between Brazil, Argentina, Paraguay, and Uruguay) hopes to achieve this status
b
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 ______. logistics cabotage parity recognition
European Union, European Free Trade Association
Regional Economic Integration of Europe has developed...
b
Some economists argue that regional free trade agreements will provide global benefits only if tariff barriers are removed. trade creation exceeds trade diversion. there is a homogenization of consumer tastes. it becomes easier to customize products.
Scompete
Some say that the world is moving toward a situation in which regional trade blocks _____________ against each other In this scenario, the gains from free trade within blocs could be offset by a decline in trade between blocs
lost jobs, declining wage levels
The Case for U.S. and Canada against NAFTA was?
bigger markets, lower prices, more competition
The Case for U.S. and Canada on NAFTA was?
a
The Court of Justice is made up of one judge from each country in the EU. one chief justice and five justices. five cabinet members of the European Parliament. seven justices elected by the public.
a
The European Parliament is considered a _____ body. consultative judicial presidential legislative
a
The Maastricht Treaty committed EU members to adopt a common currency by January 1, 1999. enforce quotas on hormone-treated beef imports. assess similar tariffs on agricultural products to non-members. harmonize economic policies on overseas investment.
99, barriers, intellectual
The North American Free Trade Agreement - NAFTA Abolished tariffs on ______% of goods traded Removed ____________ on the cross-border flow of services Protects __________ property rights Removal of most restrictions on FDI among members Application of national environmental standards
interdependent
The Political Case for Regional Integration By linking countries together they are more what? Forming a structure where they regularly have to interact The likelihood of violent conflict and war will decrease Politically much stronger in dealing with other nations as a group
a
The Treaty of Lisbon created the position of ______ of the European Council. president manager treasurer secretary
b
The collapse of the Central American Common Market was a result of ______. the introduction of anti-dumping regulations war between Honduras and El Salvador the acceptance of Mexico into NAFTA the introduction of a common currency
c
The most significant trading block in Europe based on economic and political influence is the _____. European Free Trade Association European Council European Union European Parliament
b
The euro is the ______-most traded currency in the world. fourth second fifth third
b
The least integrated form of economic integration is a common market. free trade area. full political union. customs union.
b
The members of Mercosur agreed on a _____ in 2010 in an attempt to avoid paying tariffs more than once. reciprocal tariff common customs code political union free market system
a
The number of votes a country gets in the European Council is related to the size of the country. number of tax dollars paid. type of government in place. existing tariffs.
a
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 North American Free Trade Agreement Mid-Europe Free Trade Association Intercontinental Free Trade Association
d
With the increase in single regional markets, managers must continually monitor for threats, including that the business environment within each grouping has become more capitalistic. cohesive. cooperative. competitive.
c
______ is an economic term that refers to high-cost domestic producers being replaced by low-cost producers within the free trade area. Trade deduction Trade deficit Trade creation Trade surplus
d
______ is considered the most successful attempt at regional economic integration. CARICOM ASEAN NAFTA The EU
Mercosur
a South American trade bloc established by the Treaty of Asunción in 1991 and Protocol of Ouro Preto in 1994. Its full members are Argentina, Brazil, Paraguay and Uruguay. Venezuela is a full member but has been suspended since December 1, 2016. Pros - has been successful increasing trade among member states Cons - critics call it a 'trade-diverter' favoring malinvestment in non-competitive industries.
andean community
a customs union comprising the South American countries came into existence when the Cartagena Agreement was signed in 1969 Based on the EU model, the agreement had more or less failed by the mid-1980s In 2003, it signed an agreement with Mercosur to restart negotiations towards the creation of a free trade area Current members include Bolivia, Ecuador, Peru, and Columbia
regional integration
an attempt to achieve gains from the free flow of trade and investment Easier to form an agreement with a few countries than across all nations
european parliament
debates legislation proposed by the commission and forwarded to it by the council
ASEAN
fosters freer trade and cooperation between members expanded ASEAN from the original members to its current level* Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, Myanmar, Laos, and Cambodia (2010) signed a free trade agreement with China to remove tariffs
CAFTA
s an expansion of NAFTA; opening markets, eliminating tariffs, reducing barriers to services Five Central American nations (Guatemala, El Salvador, Honduras, Costa Rica and Nicaragua), and the Dominican Republic constitutes the first free trade agreement between the United States and the small group of developing countries Central American exports to the United States had already been mostly tariff-free thanks to the 1984 Caribbean Basin Initiative
Tripartite Free Trade Area
signed in 2015 by 26 African nations Nations would work together to establish free trade area Implementation has been difficult and hampered progress with intra-Africa trade African countries more likely to trade with U.S. and Europe than each other
single european act
the first major revision of the 1957 Treaty of Rome. set the European Communityan objective of establishing a single market by 1992. It was signed in 1986, and came into effect in 1987, under the Delors Commission. intended to remove barriers and to increase harmonization and competitiveness.
court of justice
the supreme appeals court for EU law
european council
the ultimate controlling authority within the EU
