Global Business Today: Ch. 8

Customs Union

A group of countries committed to eliminating trade barriers and adopting a common external trade policy

Common Market

A group of countries committed to eliminating trade barriers, adopting a common external trade policy, and allowing factors of production to move freely between members.

Economic Union

A group of countries committed to removing trade barriers, adopting a common currency, harmonizing tax rates, and pursuing a common external trade policy.

Andean Pact

Based on the EU model and begun in 1969, this agreement unites Bolivia, Chile, Ecuador, Colombia, and Peru in free trade, but it has been unsuccessful at achieving its stated goals; renamed the Andean Community in 1997.

European Union (EU)

The regional economical union of most European countries, formed as a result of the two world wars and the European nations' desire to hold their own in the world's political and economic stage.

Council of the European Union

The ultimate decisionmaking body of the EU, it passes legislation from the commission into law and is comprised of one representative from each member state's government.

Caribbean Single Market and Economy (CSME)

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

Free Trade Area

An area in which all barriers to the trade of goods and services among member countries are removed.

Optimal Currency Area

An area of countries where similarities in the underlying economic activity structure make it feasible to adopt a single currency and use a single exchange rate.

Association of Southeast Asian Nations (ASEAN)

An attempt at regional economic integration between Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.

CARICOM

Established in 1973 to promote a customs union between the Englishspeaking Caribbean countries by 1991, but it failed.

European Commission

Responsible for proposing, implementing, and monitoring compliance with EU legislation; run by a group of commissioners appointed by each member country.

Treaty of Rome

Signed in 1957, this established the European Community, a forerunner to the European Union, and created the common European market.

Maastricht Treaty

A 1991 treaty committing members of the EC to adopt a common currency by 1999.

Political Union

A central political apparatus coordinating the economic, social, and foreign policy of its member states.

Central American Common Market

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

Single European Act

Adopted by members of the European Community in 1987, this act committed member countries to establish a single market by the end of 1992.

Regional Economic Integration

Agreements among countries in a geographic region to reduce, and ultimately remove, tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other.

Court of Justice

Comprised of one judge from each member state, this is the supreme appeals court for EU law.

Asia-Pacific Economic Cooperation (APEC)

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

European Parliament

Made up of 732 members directly elected by member states' populations, it serves as a consultative body to debate and propose amendments to the legislation forwarded from the council.

Central America Free Trade Agreement (CAFTA)

The agreement of the member states of the Central American Common Market joined by the Dominican Republic to trade freely with the United States

North American Free Trade Agreement (NAFTA)

The free trade agreement between Canada, Mexico, and the United States, officially implemented in 1994.

MERCOSUR

The free trade pact between Brazil, Argentina, Paraguay, Uruguay, and Venezuela, originating in 1988

European Free Trade Association (EFTA)

The most enduring free trade area in the world, which focuses on free trade in industrial goods and currently includes Norway, Iceland, Liechtenstein, and Switzerland

Trade Creation

Trade created within a free trade area due to the replacement of high-cost domestic or external producers by low-cost external producers.

Trade Diversion

Trade diverted within a free trade area when lower-cost external suppliers are replaced by higher-cost external suppliers.