Chapter 9

Which two groups represent major trading blocks in Europe?

-European Free Trade Association -European Union

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

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

Identify the two reasons that the EU is NOT considered a perfect economic union.

-There is a difference in tax rates across the countries. -Not all markets are fully deregulated.

What are two reasons for a customs union being put in place?

-To eliminate trade barriers between member countries -To establish a common external trade policy

Approximately how many regional trade agreements are currently in force?

303

Studies of NAFTA's effects show that ______ are the top three trading partners of the United States, which suggests that NAFTA has had some positive effects.

Canada, China, and Mexico

Which EU organization handles appeals of EU law?

Court of justice

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

It is easiest to establish regional economic integration among

a limited number of adjacent countries.

The Treaty of Lisbon created the position of ______ of the European Council.

president

CARICOM was a customs union created in 1991 among countries in

the caribbean

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

trade creation exceeds trade diversion.

Which NAFTA country experienced a welfare loss since the program's inception?

Canada

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

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

The European Community (EC) became the ______ in 1993.

European Union

Which three nations are a part of ASEAN?

Singapore Indonesia Philippines

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

True or False: The USMCA prohibits duties on music and ebooks.

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: Many of the newer EU nations that had committed to adopting the euro have now put their plans on hold.

True

Proponents of NAFTA believed that it would result in

US and Canadian consumers benefiting from lower prices.

What three countries made up NAFTA?

US, Canada, Mexico

The European Stability Mechanism was established by the EU to create

a permanent bailout fund

The members of Mercosur agreed on a _____ in 2010 in an attempt to avoid paying tariffs more than once.

common customs code

Under the Treaty of Rome, a(n) _____ was established.

common market

Currently, the Andean Community functions as a

customs union

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

The creation of a single market creates _____ costs of doing business.

lower

The euro is the ______-most traded currency in the world.

second

In 2010, the IMF agreed to bailout _____ because of fears the country might default on its sovereign debt.

Greece

is considered the most successful attempt at regional economic integration.

The EU

Article 3 in the Treaty of Rome called for the elimination of

internal trade barriers

Since 2010, Mercosur has made Blank______ progress toward achieving its goals.

little

Based on the objectives of the Single European Act, the principle of _____ states that a product standard developed in one EC country should be accepted in another

mutual recognition

True or false: Alexander Yeats claimed that the trade diversion effects of Mercosur outweighed its trade creation effects.

true

The collapse of the Central American Common Market was a result of

war between Honduras and El Salvador

What are two potential threats to firms outside of a trading block such as the EU?

- those firms would face likely long-term improvement in the competitive position of firms within the market - those firms might be shut out of the market by a "trade fortress"

Mercosur is a free trade pact started in 1988 by which two South American economies?

-Brazil -Argentina

What are two impediments to establishing economic integration?

-Concerns over national sovereignty -Costs of integration

What are the four main institutions responsible for determining economic policy in the EU?

-Court of Justice -Council of the European Union -European Parliament -European Commission

What two political factors led to the development of the European Union?

-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.

What are three forms of economic integration?

-Full Political Union -Common market -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

Which three long-term members of the EU were NOT receptive to the euro as a common currency as set forth by the Maastricht Treaty?

-Great Britain -Sweden -Denmark

What are three advantages of regional market integration that can result in cost savings to a business?

-Harmonized product standards -Free movement of goods across borders -Simplified tax regimes

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

-Increased unemployment -Difficult economic restructuring

Which two political factors support the idea for economic integration of nations through trade?

-It can enhance the political weight of those countries in the world. Interdependency among nations decreases the potential for violent conflict.

What are two potential problems with an economic union?

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

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.

Six Caribbean-area countries established the CSME in 2006 to accomplish what two things?

-Lower trade barriers -Coordinate macroeconomic and monetary policy

Which three countries were included in the NAFTA agreement when it went into place in 1994?

-Mexico -Canada -United States

Which two Mexico-based industries were granted special protection from foreign direct investment under NAFTA?

-Railway -Energy

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

-Respect human rights -Establish stable democratic government

The two restrictions put on new members to the EU that joined in 2004 were:

-they could not adopt the euro for several years. -free movement of labor among the new and existing members was prohibited for several years.

After the British government formally notified of its intent to exit the European Union, the country had _____ to negotiate the terms of the exit.

2 years

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

2020

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 United States, as firms from this country 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.

62.5 percent

Free trade agreements account for nearly ____ of regional economic agreements.

90 percent

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

Which industry is most affected by stipulations of USMCA?

Automobile

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 U.S. and six Central American countries formed a free trade agreement called

CAFTA

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

Commission

How do members of the European Parliament gain their seat?

Directly elected by the citizens

The weakening of which currency helped raise the value of the euro beginning in 2002?

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

What geographic areas are involved in the Regional Comprehensive Economic Partnership that is in the final stages of development?

East Asian and Pacific region

Under the Andean Pact, which two members received special concessions based on the size of these countries?

Ecuador and 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

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

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

Because of its economic and political influence, the _____ is considered the most significant trading bloc in Europe.

European Union

The most ambitious attempt at regional economic integration 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: The political structure responsible for economic policies in the EU consists of a single office known as the Court of Justice.

False

True or false: Opponents of NAFTA felt that the program would result in a large exodus of jobs from Mexico

False

True or false: The greater the number of countries involved in economic integration, the easier it is to reach an agreement among the countries.

False

What is the least integrated form of economic integration?

Free trade area

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 th EU because it did NOT agree to accept the euro as a common currency?

Great Britain

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

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

Which statement would Alexander Yeats agree with concerning Mercosur?

Mercosur countries build products like cars and agricultural equipment that are too expensive to sell to anyone but themselves.

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

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

Mercosur is a regional trade agreement between countries in

South America

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: One political reason for economic integration is the potential to minimize violent conflict between nations.

True

Which statement best describes the response by EU members to the introduction of the euro as a common currency?

While many members accepted the euro, several long-term members did not.

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

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

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 United States would use Mexico as a place to conduct ______ jobs.

assembly

The euro was established because a _____ currency would make it easier for Europeans to compare prices.

common

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

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

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

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

Since the WTO has a limited scope, the risk remains that regional economic integration will result in trade

diversion

When lower-cost external suppliers are replaced by higher-cost suppliers within a free trade zone, this is called trade

diversion

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

The goal of NAFTA was to

eliminate tariffs on trade between the nations.

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

establish a customs union.

True or False: While the NAFTA agreement provided many protections, it failed to include protections for intellectual property.

false

Economic theories advocate for _____ trade and investment that will allow participating countries to gain economically.

free

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 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

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

monopolies.

Based on the objectives of the Single European Act, the principle of _____ states that a product standard developed in one EC country should be accepted in another.

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

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 Single European Act abolished restrictions on cabotage, which is the

right of foreign truckers to pick up and deliver goods within another member state's borders.

During 2007 and 2008, many investors were taking money out of the United States by selling U.S. stocks, and purchasing euro-denominated assets; therefore, the value of the euro

rose

The Trump administration negotiated a successor agreement to NAFTA because it believed that NAFTA had caused

significant job losses in the United States.

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.

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 U.S. and Canadian workers in the ______ industry following the establishment of NAFTA.

textile

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

the United Kingdom

The CAFTA was formed to lower trade barriers between

the United States and Central America

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

the central American common market