Flashcards
IB: Economic Integration
Cards in this deck (28)
- 1Levels of economic integrationTrading bloc - preferential economic arrangement among a group of countries
Types of trading blocs
- Free trade area
- Customs union
- Common market
Economic union - 2Free trade areathe loosest form of economic integration (e.g. NAFTA)
- No barriers to trade among member countries
- No discriminatory taxes, quotas, tariffs - 3Customs uniona more integrated bloc;
- No barriers to trade among members
- Common trade policy with respect to non-members (e.g. external tariff) - 4Common market- No barriers to trade among members
- Common external trade policy
Factors of production (labour, capital and technology) are mobile among members - 5Economic union- Integration of economic policies in addition to the absence of any barriers
- Harmonization of monetary policies, taxation and government spending
Common currency - 6Trade creation– when as a result of a country’s membership the amount of its export to the economic union increases (due to elimination of tariffs)
- 7Trade diversionwhen the amount of trade decreases
- 8The effects of integration on import prices, competition, economies of scale and factor productivityExternal tariff decreases the demand for imports Price decreases Better trade position of the bloc, exporting country worse off
Bigger market more competing firms greater efficiency, lower prices - 9Internal economies of scalelower production costs
- 10External economies of scaleaccess to cheaper/superior production factors
- 11Increased factor productivitymovement of labour and capital from areas of low productivity to areas of high productivity
- 12The benefits of regionalism versus nationalismIntegration requires the surrender of national power and self-determinism
- 13European Integration1948 - Organization for European Economic Cooperation (OEEC)
1952 - The European Coal and Steel Community
1957 - The European Economic Community (EEC) – The Treaty of Rome
1967, ECSC, EEC and the European Atomic Energy Community (EURATOM) were merged to form the European Community (EC)
1960 - The formation of the European Free Trade Association (EFTA)
1980s - Common agricultural policy (CAP)
Price-support system to keep farm product prices within a specified range
Direct subsidies to farmers
Rebates to farmers who export or agree to store farm products rather than sell them within the community.
1994 – European Economic Area (EEA)
1 January 1994 - European Union - 14The roles of the European Commission:- To propose legislation to Parliament and the Council
- To administer and implement Community policies
- To enforce Community law (jointly with the Court of Justice)
- To negotiate international agreements relating to trade and co-operation - 15The Council of the EU- the main legislative institution
- Legislation
- Approval of the EU budget
- Foreign and defence policy
- Economic policy
- Justice - 16The European Parliament- Represents citizens from all the EU member countries
- Can question the Commission and Council, amend and reject the budget and dismiss the entire Commission - 17Court of Auditorsensures the sound financial management of the EU
- 18The European Central Bank (ECB):- In charge of monetary policy and the euro
- Maintenance of the euro’s purchasing power
- Providing price stability in the euro area - 19Implications of the Integrated European Market:- Economic growth
- Gains from eliminating the transaction costs
- Economies of scale
- Gains from more intense competition among EU companies
- Reduced currency risks, greater price transparency - 20Fortress EuropeWhile Europe dismantles internal barriers, it might raise external ones, making access to the European market difficult for non-EU firms
- 21North American Free Trade Agreement (NAFTA):- US firms got access to a relatively low-cost Mexican labour
- New jobs have been created in Mexico
- US unions worry about job loss to Mexico
- Controversy about NAFTA’s winners and losers - 22Latest Developments and Future Prospects for NAFTA:- North American Competitiveness Council: recommendations to improve the competitiveness of North American business
- Future opportunity: the creation of a customs union
- Future opportunity: the creation of a Common Market or Economic Union
- Future opportunity: the creation of a monetary union - 23Integration in Latin America- 1961 Latin American Free Trade Association (LAFTA)
- The main goal was the elimination of trade barriers
- Latin American Integration Association (ALADI)
- Preferential tariff agreements between pairs of similarly developed member states
- MERCOSUR – Customs union planning to become a common market - 24Integration in Asia- Association of Southeast Asian Nations (ASEAN)
- ASEAN Free Trade Area (AFTA)
- The goal is to increase the ASEAN region’s competitive advantage as a production base geared for the world market
- Proposal for the creation of East Asia Economic Group (EAEG)
- Asia-Pacific Economic Co-operation (APEC) - 25South Asian Association for Regional Co-operation (SAARC)- Cooperation in agriculture and regional development
- 26The Gulf Co-operation Council (GCC) for the Arab States of the Gulf Integration in Africa- Economic Community of West African States (ECOWAS)
o The goal was to form a customs union and than common market
Although objectives have not been reached, it is the largest economic entity in sub-Saharan Africa - 27International managers should assess markets’ integration from several perspectives:- The range and impact of changes resulting from integration
- Development of strategies to relate to these changes
- Organizational changes needed to exploit these changes
- Strategies to influence change in a more favourable direction - 28most widely known cartelOrganization of Petroleum Exporting Countries (OPEC)
Consists of 11 oil-producing and exporting countries (Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela)
International commodity price agreements involve both buyers and sellers in an agreement to manage the price of a certain commodity
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- Final International Business Flashcards on IB: Economic Integration, created by dorota.ziakova on 26/04/2016.
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