international business 3
Bolivia, Chile, Colombia, Ecuador, and Peru created the
Andean Group in 1969
Bolivia, Chile, Ecuador, Colombia, and Peru signed an agreement in 1969 to create the:
Andean Pact.
Which countries are members of the free trade area known as MERCOSUR?
Argentina, Brazil, Paraguay, and Uruguay.
If the _____ were established, which would include the United States and Brazil, it would open a free trade umbrella over nearly 850 million people who accounted for more than $16 trillion in GDP in 2007.
FTAA
Where does the European Parliament meet at in the European Union?
France
Which of the following selections accurately depicts the levels of economic integration, from least integrated to most integrated?
Free trade area, customs union, common market, economic union, and full political union
28. (p. 283) One major debate now being waged in Europe is whether the council or the parliament should ultimately be the most powerful body of the EU.
TRUE
31. (p. 285) The Single European Act has had a significant impact on the EU economy.
TRUE
33. (p. 285) Establishing the euro required participating national governments not only to give up their own currencies, but also to give up control over monetary policy.
TRUE
34. (p. 287) The development of a pan-European, euro-dominated capital market will increase the range of investment options to both individuals and institutions.
TRUE
36. (p. 288) One way of dealing with divergent economic effects within the euro zone is for the EU to engage in fiscal transfers, taking money from prosperous regions and pumping it into depressed regions.
TRUE
38. (p. 291) Protection of intellectual property rights was one of the contents of NAFTA.
TRUE
A customs union eliminates trade barriers between member countries and adopts a common external trade policy.
TRUE
In a common market, labor and capital are free to move, as there are no restrictions on immigration, emigration, or cross-border flows of capital between markets.
TRUE
In a free trade area, all barriers to the trade of goods and services among member countries are removed.
TRUE
One notable trend in the global economy in recent years has been the accelerated movement toward regional economic integration.
TRUE
While the move toward regional economic integration is generally seen as a good thing, some observers worry that it will lead to a world in which regional trade blocs compete against each other.
TRUE
Which of the following is NOT one of the four main institutions in the political structure of the European Union?
The European Social Committee
EU critics argue that the Euro will unleash enormous pressures for tax harmonization and fiscal transfers from the center, which cannot be pursued without the appropriate political structure. In their view:
a single currency should follow a political union.
The development of a pan-European, euro-denominated capital market will increase the range of investment open to:
individuals and institutions.
During the establishment stage, The European Free Trade Association's emphasis has been on free trade in:
industrial goods
According to the textbook, one likely short-term effect of NAFTA will be that many U.S. and Canadian firms will move some production to Mexico to take advantage of:
lower labor costs.
The principle argument of those who opposed NAFTA centered on the fear that ratification would result in:
mass exodus of jobs from the United States into Mexico.
For participating countries, a drawback of a single currency in Europe is that:
national authorities will lose control over monetary policy.
In the context of regional trade integration, concerns about _____ arise because close economic integration demands that countries give up some degree of their control over such key policy issues as monetary policy, fiscal policy, and trade policy.
national sovereignty
On the African continent, there are currently:
nine trade blocks.
Canada, United States, and Mexico reached a comprehensive trade agreement in 1994
north american free trade agreement
Similarities in the underlying structure of economic activity make it feasible to adopt a single currency and use a single exchange rate as an instrument of macroeconomic policy in a(n):
optimal currency area.
A central political apparatus that coordinates the economic, social, and foreign policy of its member states is a(n):
political union
the union created when mem- ber countries of an economic and monetary union work closely with one another to arrive at common defense and foreign policies and behave as a single country
political union
According to the textbook, by entering into _____, groups of countries aim to reduce trade barriers more rapidly than can be achieved under the WTO
regional agreements
The North American Free Trade Agreement is an example of:
regional economic integration
An agreement 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 is referred to as:
regional economic integration.
Implementation of a multitude of economic and/or political steps by member states to increase their global competitiveness, including preferential trade access
regional integration
A major reason for _____ in October 2000 was that international investors were investing money in booming U.S. stocks and bonds and taking money out of Europe to finance these investments.
the fall of the euro's value
Which of the following provides the closest example to a political union?
united states
A free trade area has a higher level of integration than a common market.
FALSE
In 1991, Argentina, Brazil, Chile, and Bolivia implemented an agreement known as MERCOSUR to start reducing barriers to trade between each other.
FALSE
The European Community became the European Union with the signing of:
A. the Maastricht Treaty.
Because many governments have accepted part or all of the case for intervention, _____ have proved to be only an ideal.
A. unrestricted free trade and FDI
The stated aim of _____ is to increase multilateral cooperation in view of the economic rise of the Pacific nations and the growing interdependence within the region.
APEC
The United States, Japan, and China are among 18 members of a trade organization referred to as:
APEC.
Bases for ASEAN
ASEAN Security Community (ASC) ASEAN Economic Community ASEAN Sociocultural Community
Which of the following was NOT a content of NAFTA?
Abolition on 100 percent of barriers on goods traded between Mexico, Canada, and the United States.
The UN began as a customs union and has moved beyond this point.
FALSE
_____ is credited with helping to create the background for increased political stability in Mexico.
NAFTA
20. (p. 280) Europe has two trade blocs: the European Union and the European Free Trade Association.
TRUE
A _____ eliminates trade barriers between member countries and adopts a common external trade policy.
customs union
a group of free-trade member countries that have adopted a common external tariff with nonmember countries
customs union
Stages of regional integration
free trade area customs union common market economic and monetary union political union
an area in which two or more countries agree to eliminate all barriers to trade, such as tariffs, quotas, and nontariff barriers like border restrictions, while at the same time keeping their own external tariffs (within WTO guidelines) against nonmembers
free-trade area
A common market includes all of the following characteristics, EXCEPT:
harmonization of members' tax rates, and a common monetary and fiscal policy.
became effective in 2005
DR-CAFTA (Dominican Republic and Central American Free Trade Agreement)
World Trade Organization members are required to notify the UN of any regional trade agreements in which they participate.
FALSE
the euro was adopted as a common currency in
1992
23. (p. 281-282) The European Commission is run by a group of commissioners appointed by each member country for five-year renewable terms.
TRUE
27. (p. 283) The European Parliament has 732 members which are directly elected by the populations of the member states.
TRUE
32. (p. 285) The euro is now used by 18 of the 25 member states of the European Union; these 18 states are members of what is often referred to as the euro zone.
FALSE
35. (p. 288) The implied loss of national sovereignty to the ECB underlies the decision by Great Britain, Germany, and Denmark to stay out of the euro zone for now.
FALSE
37. (p. 289) One reason for the rise in the value of the euro was that the flow of capital into the United States had increased in 2001.
FALSE
39. (p. 293) Due to NAFTA, Mexico is now viewed as an unstable democratic nation.
FALSE
Which of the following makes it harder for euro zone exporters to sell their goods abroad?
A strong euro
Which of the following has the highest level of integration?
A. An economic union
The specter of the _____ turning into economic fortresses that shut out foreign producers with high tariff barriers is worrisome to those who believe in unrestricted free trade.
A. EU and NAFTA
There are now two trade blocs in Europe. These are the:
A. European Union and European Free Trade Association.
Which of the following is NOT a key economic criterion for a country to join the EU?
A. High tourism revenues
Which European institution is responsible for proposing EU legislation, implementing it, and monitoring compliance?
A. The European Commission
Which two revolutions occurred in Europe in the late 1980s that set the course for eventual adoption of the European Union?
A. The collapse of communism and adoption of the Single European Act.
_____ occurs when lower-cost external suppliers are replaced by higher-cost suppliers within the free trade area.
A. Trade diversion
In a _____, theoretically, no discriminatory tariffs, quotas, subsidies, or administrative impediments are allowed to distort trade between members.
A. free trade area
The European Union is the product of two political factors. The devastation of Western Europe during the two world wars and:
A. the European nations' desire to hold their own on the world's political and economic stage
MERCOSUR originated in 1988 as a free trade pact between:
Brazil and Argentina.
Formed in 1967, ASEAN currently includes:
Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam.
Which three countries implemented NAFTA?
Canada, Mexico, and the United States.
The customs union CARICOM applies to:
Caribbean nations.
Benefits of regional integration
Creating a larger pool of consumers with growing incomes and similar culture, tastes, and social values Encouraging economies of scale in production, increasing the region's level of global competitiveness, and enhancing economic growth through investment flows Freeing the flow of capital, labor, and technology to the most productive areas in the region Increasing cooperation, peace, and security among countries in the region Encouraging member states to enhance their social welfare to match that of the most progressive states
Which of the following EU countries has stayed out of euro zone because of an implied loss of national sovereignty?
Denmark
For years, _____ has functioned as a common market, although it has now become an imperfect economic union.
EU
Which of the following is NOT a benefit of the Euro?
EU having an advantage of being an optimal currency area and hence increased interest rates.
is challenged by the sovereign debt crisis of some members
Economic coordination and fiscal stability
Nowhere has the movement toward regional economic integration been more successful than in:
Europe
The original forerunner of the EU, the _____ was formed in 1951 by Belgium, France, West Germany, Italy, Luxembourg, and the Netherlands.
European Coal and Steel Community
european union grew out of
European Coal and Steel Community (ECSC).
The most enduring free trade area in the world is the:
European Free Trade Association.
The _____, which now accounts for 732 members, is directly elected by the populations of the member states.
European Parliament
40. (p. 300) A firm cannot serve the whole EU or North American market from a single location; it has to produce the product in each of the 27 EU countries or the 3 NAFTA countries.
FALSE
The _____, which plays an important role in the EU, has been directly elected by citizens of the EU countries since the late 1970s.
European parliament
Many now see the _____ as the emerging economic and political superpower of the same order as the United States and Japan.
European union
11. (p. 277) The European Committee has been directly elected by citizens of the EU countries since the late 1970s.
FALSE
15. (p. 278) It is harder to establish a free trade and investment regime among a limited number of adjacent countries than among the world community.
FALSE
19. (p. 279) Trade distribution occurs when higher-cost external suppliers replace lower-cost suppliers within the free trade area.
FALSE
21. (p. 280) The Treaty of Athens provided for the creation of a common market for the European Union.
FALSE
22. (p. 281) The two main institutions in the political structure of the EU are the European Commission and the European Parliament.
FALSE
24. (p. 282) The European Council is composed of the heads of state of the EU's member nations and the president of the European Commission.
FALSE
25. (p. 282) Throughout the more recent years, the European Commission's role in competition policy has become stagnant.
FALSE
26. (p. 283) The European Parliament represents the interests of member states and is the ultimate controlling authority within the EU.
FALSE
29. (p. 285) To signify the importance of the Single European Act, the European Union decided to change its name to the European Community once the act took effect.
FALSE
30. (p. 285) One of the objectives of the Single European Act was to establish more stringent restrictions on foreign exchange transactions between member countries.
FALSE
When were euro notes and coins issued across Europe, replacing national currencies?
January 2002
) According to Alexander Yeats, a senior economist at the World Bank, the trade diversion effects of _____ outweigh its trade creation effects.
MERCOSUR
Advocates of NAFTA claimed there would be long-run dynamic gains in the efficiency of _____ firms as they adjusted to the rigors of a more competitive marketplace.
Mexican
Which four countries are currently members of the European Free Trade Association?
Norway, Iceland, Switzerland, and Liechtenstein
In 1990, the MERCOSUR pact was expanded to include:
Paraguay and Uruguay.
Which of the following was NOT one of the purposes of the Single European Act?
Remove the principle of "mutual recognition" as it pertains to product standards.
In December 2002, which of the following countries did not become a member of EU?
Romania
Which of the following countries is currently in the European Union?
Romania
The _____ was born of a frustration among EC members that the community was not living up to its promises.
Single European Act
The purpose of the _____ was to have a single market in place by December 31, 1992.
Single European Act
10. (p. 277) An economic union involves the free flow of products and factors of production between members and the adoption of a common external trade policy.
TRUE
12. (p. 278) Economic theories suggest that free trade and investment is a positive-sum game, in which all participating countries stand to gain.
TRUE
13. (p. 278) Given the central role of knowledge in stimulating economic growth, opening a country to FDI also is likely to stimulate economic growth.
TRUE
14. (p. 278) Because many governments have accepted part or all of the case for intervention, unrestricted free trade and FDI have proved to be only an ideal.
TRUE
16. (p. 278-279) The need for a united Europe to deal with the United States and the politically alien Soviet Union loomed large in the minds of many of the EC's founders.
TRUE
17. (p. 279) Trade creation occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area.
TRUE
18. (p. 279) The benefits of regional integration are determined by the extent of trade creation, as opposed to trade diversion.
TRUE
Which institution is comprised of one judge from each country, and is the supreme appeals court for EU law?
The Court of Justice
Currently, _____ have more profound and immediate implications for business practice.
The EU and NAFTA
_____ now has the right to vote on the appointment of commissioners as well as veto some laws.
The European Parliament
created the EU as a full economic union with free movement of labor among its member countries
The Maastricht Treaty in 1992
created the Latin American Free Trade Association (LAFTA).
The Treaty of Montevideo in 1960
established the European Economic Community (EEC)
The Treaty of Rome in 1957
Association of South East Asian Nations objectives:
To accelerate economic growth, social progress, and cultural development in the region To promote peace and stability through the rule of law in relationships among countries in the region
Major NAFTA objectives
Trade expansion through the phased elimination of all trade barriers Protection of intellectual property rights Creation of institutions to address unfair trade practices, trade disputes, environmental protection, worker's rights, competition policies, and implementation of NAFTA rules and regulations
among Argentina, Brazil, Paraguay, and Uruguay, created the Southern Cone Common Market, or MERCOSUR (Mercado Común del Sur)
Treaty of Asunción in 1991
With the signing of the _____ in 1957, the European Community was established.
Treaty of Rome
In December 2002, the EU formally indicated that it would allow the _____ application to proceed with no further delay in December 2004 if the country improved its human rights record to the satisfaction of the EU.
Turkish
Cost of regional integration
Undermining the most-favored-nation status rule, an essential principle of the WTO Imposing uniform laws and regulations that at times do not take into account national economic, cultural, and social differences Eliminating jobs and increasing unemployment in protected industries Losing sovereignty, national independence, and identity Reducing the powers of the national government Increasing the problems of illegal drugs and terrorism due to the ease of cross-border labor movement
In theory, _____ rules should ensure that a free trade agreement does not result in trade diversion.
WTO
_____ WTO members had notified the organization of participation in one or more regional trade agreements.
almost all
In 1992, the _____ won the right to opt out of any single currency agreement.
british
The two main reasons that have made economic integration difficult to achieve are:
concerns over costs and concerns over national sovereignty
a market formed when mem- ber countries of a customs union remove all barriers to allow the movement of capital and labor within the customs union
common or single market
Concentration of economic activity generally follows regional integration, because firms will want to specialize by increasing the scale of production in fewer places.
compensate the least fortunate
The European Commission's role in _____ policy has become increasingly important in recent years.
competition
a union formed when mem- bers of a common market agree to implement common social programs (on educa- tion, employee benefits and retraining, health care, etc.) and coordinated macroeco- nomic policies (such as fiscal and monetary policies) that would lead to the creation of a single regional currency and a regional apex central bank
economic and monetary union
The study of principles that govern the efficient spatial allocation of economic resources and the resulting consequences
economic geography
Like the common market, a(n) _____ involves the free flow of products and factors of production between members and the adoption of a common external trade policy.
economic union
In a _____, all barriers to trade of goods and services are removed between member countries.
free trade area
most highly evolved regional integration
european union
Developed countries seek regional trading blocs to:
expand their growth potential abroad as domestic markets mature deliver low-cost manufacturing platforms for locally based firms.
Which type of agreement is the most popular form of regional economic integration, accounting for almost 90 percent of regional agreements?
free trade agreement
The process of allowing efficient geographic distribution of business activities within and among countries
spatial transformations
Regional integration should have clear goals and initially address a narrow, well-defined area of cooperation in which the costs and benefits are easily defined
start small
Steps to regional integration
start small think global compensate the least fortunate
Molded on _____ single market, the goal of CSME is to lower trade barriers and harmonize macro-economic and monetary policy between nations.
the EU's
In 2000, a proposed merger between Time Warner of the United States and EMI of the United Kingdom was withdrawn by _____, which expressed concern that the proposed merger would create a dominant player in the global music industry.
the European Commission
Regional integration should not create unconnected or isolated countries. Instead, it should help countries gain access to world markets that they may not have access to otherwise.
think global
The phenomenon that occurs when high-cost domestic producers are replaced by low-cost producers within the free trade is called:
trade creation
If the U.S. started to import textiles from Mexico according to a free trade agreement, but the U.S. previously acquired textiles from Costa Rica for less money, what kind of trade situation would the U.S. be in?
trade diversion
