International Business Ch 9

What is a defining characteristic of a free trade area?

Each member country is allowed to determine its own trade policies with regard to nonmembers.

Where has the movement toward regional economic integration been most ambitious?

Europe

It is the job of the __________ to debate legislation proposed by the commission. However, it is more of a consultative rather than a legislative body.

European Parliament.

A customs union creates a central source for coordinating the economic, social, and foreign policy of member states. (T/F)

False

As of 2020, all members of the European Union have adopted the euro as their currency. (T/F)

False

Since its establishment on January 1, 1999, the euro has more than tripled in appreciation against the U.S. dollar, reaffirming the ability of the European Central Bank to manage monetary policy within the euro zone. (T/F)

False

The Andean Community was based on the EU model and was far more successful at achieving its goals. (T/F)

False

The North American Free Trade Agreement is the most enduring free trade area in the world. (T/F)

False

The free trade pact known as Mercosur has been successful at creating a full customs union between Brazil and Argentina. (T/F)

False

The scope of the WTO covers all tariff and nontariff barriers to regional economic integration. (T/F)

False

Today, the European Community is responsible for proposing EU legislation. (T/F)

False

How did President Trump react to the two multilateral trade agreements, the Trans Pacific Partnership and the Transatlantic Trade and Investment Partnership, which were being pursued by the Obama administration?

He pulled the United States out of these negotiations.

How did the Treaty of Rome affect trade?

It committed the European Economic Community to establish common policies in agriculture and transportation.

Mexico agreed to NAFTA after it was determined that the country's oil industry would be controlled by Mexico. Why did Mexico fight for this right?

It wanted to maintain national sovereignty.

A common market has no barriers to trade among member countries, includes a common external trade policy, and allows factors of production to move freely among members. (T/F)

True

Members of the European Parliament are directly elected by the populations of the member states. (T/F)

True

Political turmoil in Africa has prevented the success of regional trade blocs.

True

The European Parliament, which meets in Strasbourg, France, is primarily a consultative rather than legislative body. (T/F)

True

Today, developments in the EU and NAFTA/USMCA carry the biggest implications for business practices. (T/F)

True

While the World Trade Organization and other institutions have been working toward achieving a free trade regime, complete success has not yet occurred. (T/F)

True

In a common market, labor and capital are

allowed to move freely because there are no restrictions on cross-border flows of capital.

An economist would say that the benefits of regional integration are determined by the

amount of trade creation.

A(n) __________ has no barriers to trade among member countries, includes a common external trade policy, and allows factors of production to move freely among members, but does not have a common currency.

common market

One result of the Treaty of Lisbon that was signed in 2007 is that it

created the position of president of the European Council.

One reason for the establishment of the European Community in 1957 was the

desire to suppress another war in Europe.

Which political factor resulted in the establishment of the European Union (EU)?

devastation of Western Europe during two world wars and the desire for a lasting peace

The European Union is considered a(n) __________ even though not all members have adopted a common currency.

economic union

Within a(n) __________, there is a level of economic integration that involves the use of a common currency, harmonization of members' tax rates, and a common monetary and fiscal policy.

economic union

The harmonization of member nations' tax rates plus a common monetary and fiscal policy are all required to form a(n)

economic union.

What is the most popular form of regional economic integration, accounting for almost 90 percent of regional agreements?

free trade agreements

While the countries of Canada and Mexico are committed to removing all barriers to the free flow of goods and services between each other, they are independent in their trade policy dealings with other countries. This represents a(n)

free trade area.

What is one main impediment to regional economic integration?

loss of national sovereignty

The European Parliament plays an important role in the European Union and creates a(n) __________ to coordinate the economic, social, and foreign policy of the member states.

political union

The goal of a new Central American group formed as an economic union is to have a Council of Ministers that would coordinate the economic, social, and foreign policy of the member-states. This group wants to be a

political union.

One result of the Single European Act was that it

provided the impetus for the restructuring of substantial sections of European industry.

Four countries in Central America agreed to reduce and ultimately remove tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other. The agreement among these countries is referred to as

regional economic integration.

What was a change proposed by the Single European Act?

remove barriers to competition in the retail banking and insurance businesses

A regional free trade agreement will benefit the world only if

the amount of trade it creates exceeds the amount it diverts.

The Court of Justice acts as

the supreme appeals court for European Union law.

The creation of a single market increases price competition for business. In other words, it creates a(n)

threat

Suppose the countries of Portugal and Belgium set up a free trade area, eliminating all trade barriers between themselves but maintaining tariffs on imports from the rest of the world. Now, Portugal begins to import metal from Belgium. However, Portugal had previously been importing metal from England, which produced metal more cheaply than both Portugal and Belgium. What is this an example of?

trade diversion

The United States imports sugar from several nations. If the NAFTA agreement caused the United States to import sugar only from Canada, even though it cost more to do so, it would be an example of

trade diversion.