MGT 302 EXAM 2
QUESTIONS AND
ANSWERS
Chapter 9
Regional Economic Integration
agreements among countries in a geographic location to reduce,
and ultimately remove, tariff and non-tariff to free flow of g/s/FOP
between each other.
WTO members are required to _______ the WTO of all trade
agreements in which they participate.
notify
Regional Economic Integration
Helps to reduce trade barriers more quickly.
Ex: The EU (European Union)
European Union
Created in Jan 1993; 1 single market with 340 million consumers.
The EU is larger than the US in __________ terms.
economic
Countries that use NAFTA:
US, Mexico, Canada
NAFTA
Ultimately, this aims to remove all barriers to the free flow of g/s
between the US/Mexico/Canada.
Most economists argue that the _______ of greater regional trade
________ any costs.
benefits/outweigh
Fears of Regional Economic Integration
That it will lead to a world that competes in trade blocs (trade will
exist within each bloc, but it will be protected from outside
competition with high tariffs)
Free Trade Area
,All barriers to the trade of g/s are removed
Free trade agreements are the most popular form of:
Regional economic integration (90%)
Levels of Economic Integration
(Largest level of integration) Free trade --> Customs Union -->
Common Market --> Economic Union --> Political Union (Smallest
level of integration)
European Free Trade Association (EFTA)
Norway, Iceland, Litchensutein, and Switzerland, the 4 countries
who initially decided to not be part of the EU. The emphasis of
EFTA is free trade on industrial goods. Agriculture was NOT
included in agreement.
Customs Union
Eliminates trade barriers between member countries and
establishes a common external trade policy.
Ex: The EU BEGAN as a customs union, but it has now moved
beyond this stage.
Economic Union
Free flow of products and FOP among member countries and the
adoption of a common external trade policy. Note: this must include
a common currency, harmonization of members' tax rates, and
common monetary/fiscal policy.
Ex: EU
Political Union
Central political apparatus coordinates the economic, social, and
foreign policy of member states.
Ex: EU is on the road to being at least a partial political union
Economic theories suggest that free trade and investment is a...
positive-sum game
Positive-Sum game
all countries stand to gain
it is easier to establish a a free trade and investment regime
among a limited number of adjacent countries than...
among a global community
, By grouping economies, countries can enhance their ______
______ in the world
political weight
What is the reason that the European Community (EC) formed in
1957?
The two world wars. Many of Europe's countries could not hold their
own following the war.
Two reasons that integration is hard to achieve and sustain:
1. Costs. Certain groups can lose (ex: low cost/low skilled labor
workers lose jobs. These groups are the main opposers to NAFTA)
2. Concerns over national sovereignty. (ex: Mexican oil industry
exempt from liberalization of foreign investment regulations) Issues
arise because nations must give up some control over key issues
(ex: monetary policy).
Trade Creation
Occurs when high cost domestic producers are replaced by low
cost producers within a free trade area. It can also occur when
higher cost external producers are replaced by lower cost external
producers within a free trade area.
Trade Diversion
Occurs when lower cost external producers are replaced by higher
cost suppliers in a free trade area.
A regional free trade agreement will benefit the world only if the
amount of _____ it creates exceeds the amount it _______.
trade/diverts
How many trade bloc's does Europe have?
2. The European Union and the European Free Trade Association.
The EU is far more significant (often referred to as an emerging
economic/political superpower).
Treaty of Rome
Goal to remove boundaries to intragroup shipments of coal, iron,
steel, and scrap metal. Provided for the creation of a COMMON
MARKET. Established the European Community.
What did the Treaty of Rome require?
The harmonization of countries' laws. Common policies in
agriculture and transportation. Called for the elimination of internal
QUESTIONS AND
ANSWERS
Chapter 9
Regional Economic Integration
agreements among countries in a geographic location to reduce,
and ultimately remove, tariff and non-tariff to free flow of g/s/FOP
between each other.
WTO members are required to _______ the WTO of all trade
agreements in which they participate.
notify
Regional Economic Integration
Helps to reduce trade barriers more quickly.
Ex: The EU (European Union)
European Union
Created in Jan 1993; 1 single market with 340 million consumers.
The EU is larger than the US in __________ terms.
economic
Countries that use NAFTA:
US, Mexico, Canada
NAFTA
Ultimately, this aims to remove all barriers to the free flow of g/s
between the US/Mexico/Canada.
Most economists argue that the _______ of greater regional trade
________ any costs.
benefits/outweigh
Fears of Regional Economic Integration
That it will lead to a world that competes in trade blocs (trade will
exist within each bloc, but it will be protected from outside
competition with high tariffs)
Free Trade Area
,All barriers to the trade of g/s are removed
Free trade agreements are the most popular form of:
Regional economic integration (90%)
Levels of Economic Integration
(Largest level of integration) Free trade --> Customs Union -->
Common Market --> Economic Union --> Political Union (Smallest
level of integration)
European Free Trade Association (EFTA)
Norway, Iceland, Litchensutein, and Switzerland, the 4 countries
who initially decided to not be part of the EU. The emphasis of
EFTA is free trade on industrial goods. Agriculture was NOT
included in agreement.
Customs Union
Eliminates trade barriers between member countries and
establishes a common external trade policy.
Ex: The EU BEGAN as a customs union, but it has now moved
beyond this stage.
Economic Union
Free flow of products and FOP among member countries and the
adoption of a common external trade policy. Note: this must include
a common currency, harmonization of members' tax rates, and
common monetary/fiscal policy.
Ex: EU
Political Union
Central political apparatus coordinates the economic, social, and
foreign policy of member states.
Ex: EU is on the road to being at least a partial political union
Economic theories suggest that free trade and investment is a...
positive-sum game
Positive-Sum game
all countries stand to gain
it is easier to establish a a free trade and investment regime
among a limited number of adjacent countries than...
among a global community
, By grouping economies, countries can enhance their ______
______ in the world
political weight
What is the reason that the European Community (EC) formed in
1957?
The two world wars. Many of Europe's countries could not hold their
own following the war.
Two reasons that integration is hard to achieve and sustain:
1. Costs. Certain groups can lose (ex: low cost/low skilled labor
workers lose jobs. These groups are the main opposers to NAFTA)
2. Concerns over national sovereignty. (ex: Mexican oil industry
exempt from liberalization of foreign investment regulations) Issues
arise because nations must give up some control over key issues
(ex: monetary policy).
Trade Creation
Occurs when high cost domestic producers are replaced by low
cost producers within a free trade area. It can also occur when
higher cost external producers are replaced by lower cost external
producers within a free trade area.
Trade Diversion
Occurs when lower cost external producers are replaced by higher
cost suppliers in a free trade area.
A regional free trade agreement will benefit the world only if the
amount of _____ it creates exceeds the amount it _______.
trade/diverts
How many trade bloc's does Europe have?
2. The European Union and the European Free Trade Association.
The EU is far more significant (often referred to as an emerging
economic/political superpower).
Treaty of Rome
Goal to remove boundaries to intragroup shipments of coal, iron,
steel, and scrap metal. Provided for the creation of a COMMON
MARKET. Established the European Community.
What did the Treaty of Rome require?
The harmonization of countries' laws. Common policies in
agriculture and transportation. Called for the elimination of internal
