IBHL-2 BW 027
Distinguish
between bilateral and multilateral trade agreements
Between 2 and between many countries
Explain
and give an example of each of the six stages of economic integration described
by Bela Balassa
Preferential trading areas
A trading
bloc that gives preferential access to certain products from certain countries.
Usually
carried out by reducing (but not eliminating) tariffs.
·
free trading areas
When
countries agree to trade freely within the FTA, but are able to trade with
countries outside the FTA in whatever way they wish.
·
Custom unions
When
countries agree to trade freely within the CU, and also agree to adopt common
external barriers against any country attempting to import into the Customs
Union.
All common
markets and economic and monetary unions are also customs unions, thus the EU
is customs union [plus a common market].
·
Common markets
Common
markets are customs unions with common policies on product regulation &
free movement of goods, services, capital and labor.
The best
known example of a common market is the EU.
·
Economic and monetary union
An economic
and monetary union is a common market with a common currency.
The best
example of an economic and monetary union is the Eurozone, which includes EU member countries that have adopted the
Euro as their currency.
·
Complete economic integration
This would
be the final stage of economic integration
Individual
countries involved would have no control of economic policy, full monetary
union, and complete harmonization of fiscal policy.
This is what
the Eurozone is moving toward.
Chart
the advantages and disadvantages of a monetary union for its members
•
Benefits in economic terms
include:
§ greater size of market with the potential for
larger export markets
§ increased competition leading to greater
efficiency
§ more choice
§ lower prices for consumers
•
Consequences are uneven
§ Some domestic producers will gain from a
larger market while others may not be able to compete.
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