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EU

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European Union

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NAFTA

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North American Free Trade Agreement

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regional economic integration

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agreements among countries in a geographic region to reduce and ultimately remove tariff and non tariff barriers to the free flow of goods, services, and factors of production between each other

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NAFTA aimed

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to lower the price for goods and services in ers prices, but it presents challenges to some producers who have to adapt to a more competitive environment

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by entering into regional agreements, groups of countries aim to

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reduce trade barriers more rapidly than can be achieved under the auspices of the WTO

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WTO

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World Trade Organization

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given the failure of the Doha Round, national governments have felt

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that they can better advance their trade agenda through multilateral agreements than through the WTO

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the movement toward regional economic integration is most successful in

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Europe

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NAFTA includes

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Canada, Mexico, and the US

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NAFTA aims to

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remove all barriers to the free flow of goods and services among the three countries

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implementation of NAFTA has resulted in

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loss of jobs in some sectors of the most US economy, in aggregate and consistent with the predictions of international trade theory,

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most economists argue that the benefits of greater regional trade

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outweigh any costs

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Mercosur is made of

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Argentina, Brazil, Paraguay, and Uruguay, implemented an agreement known as Mercosur to start reducing barriers to trade between each other

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Core part: Free Trade Area

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-all barriers to the trade of goods and services among member countries are removed. no discriminatory tariffs, quotas, subsidies, or administrative impediments are allowed to distort trade between members. -each country is allowed to determine trade policies

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EFTA

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most enduring free trade area in the world is the European Free Trade Association

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EFTA includes

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Norway, Iceland, Liechtenstein, and Switzerland

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the emphasis of EFTA is

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the free trade in industrial goods

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1st layer: customs union

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eliminates trade barriers between member countries and adopts a common external trade policy -establishment of a common external trade policy necessitates significant administrative machinery to over-see trade relations with nonmembers.

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2nd layer: common market

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-has no barriers to trade among member countries includes a common external trade policy, and allows factors of production to move freely among members -labor and capital are free to move because there are no restrictions on immigration, emigration, or cross-border flows of capital among member countries.

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3rd layer: economic union

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involves the free flow of products and factors of production among member countries and the adoption of a common external trade policy, but it also requires a common currency, harmonization of members' tax rates, and a common monetary and fiscal policy -such a high degree of integration demands a coordinating bureaucracy and the sacrifice of significant amounts of national sovereignty to that bureaucracy.

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4th and final layer: Political union

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in which a central political apparatus coordinates the economic, social, and foreign policy of the member-states

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levels of economic integration

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(Circle graph with 4 layers. starting in the middle and going out) core: Free Trade Area First layer: Customs union 2nd layer: Common market 3rd layer: economic union 4th layer: political union

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the economic case for integration

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economic theorists suggest that free trade and investments in a positive-sum game, in which all participating countries stand to gain -in a world of many nations and many political ideologies, it is very difficult to get all countries to agree to a common set of rules

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regional economic integration can be seen as a

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attempt to achieve additional gains from the free flow of trade and investment between countries beyond those attainable under global agreements such as the WTO

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coordination and policy harmonization problems are

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largely a function of the number of counties that seek agreement

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attempts at regional economic integration are motivated by

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a desire to exploit the gains from free trade investment

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the political case for integration

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by grouping their economies, the countries can enhance their political weight in the world

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EC

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European Community, the forerunner of the EU

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integration has never been easy to achieve or sustain for two main reasons:

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1. although economic integration aids the majority, it has its costs. while the nation as a whole may benefit significantly from a regional free trade agreement, certain groups may lose 2. concerns over national sovereignty. close economic integration demands that countries give up some degree of control over such ket issues as monetary policy, fiscal policy and trade policy

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trade creation

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occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area

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trade diversion

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occurs when lower-cost external suppliers are replaced by higher cost suppliers within the free trade area. a regional free trade agreement will benefit the world only if the amount of trade it creates exceeds the amount it diverts

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WTO rules

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ensure that a free trade agreement does not result in trade diversion

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these WTO rules

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allow free trade areas to be formed only if the members set tariffs that are not higher or more restrictive to outsiders than the ones previously in effect

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europe has 2 trade blocs

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the EU and the EFTA the EU is far more significant, not just in terms of membership but also in terms of economic and political influence in the world economy

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The European Union is the product of two political factors

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1. the devastation of western Europe during two world wars, and the desire for a lasting peace and 2. the European nations' desire to hold their own on the world's political and economic stage

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the European Coal and Steel Community

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the forerunner of the EU

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European Union

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an economic and political union of 28 countries that are located in Europe

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Treaty of Rome

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the 1957 treaty that established the European Community

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objective of the EU

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to remove barriers to intragroup shipments of coal, iron, steel, and scrap metal

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the treaty of rome provided

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for the creation of a common market

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article 3 of the treaty of rome laid down the key objectives

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calling for elimination of internal trade barriers and the creation of a common external tariff and requiring member-states to abolish obstacles to the free movement of factors of production among the members

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political structure of the european union

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the 4 main institutions in this structure are the European Commission, the Council of the European Union, the European Parliament, and the Court of Justice

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European commission

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is responsible for proposing EU legislation, implementing it, and monitoring compliance with EU laws by member-states

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European commission details

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-run by a group of commissioners appointed by each member country for 5 year renewable terms -28 commissioners, one from each member state -a president of the commission is chosen by member states and the president then chooses other member in consultation with the states. -the entire commission has to be approved by the European Parliament before it can begin work. -the commission makes a proposal, which goes to the council of the EU and then to the European Parliament

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commission is responsible for

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-implementing aspects of the EU law, although in practice much of this must be delegated to member-states -monitor member states to make sure they are complying with EU laws

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the European Council

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the heads of state of EU members and the president of the European Commission

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the European Parliament

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elected EU body that provides consultation on issues proposed by European Commission

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European Parliament details

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- 754 members -directly elected by the populations of the member-states -meet is Strasbourg, France, is primarily a consultive rather than legislative body. -has the right to vote on the appointment of commissioners as well as veto some laws

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argument on wether the European Parliament should ultimately be the most powerful body in the EU

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one side argued that the answer to the apparent democratic deficit lay in increasing the power of the parliament, while others think that true democratic legitimacy lies with elected government, acting through the Council of the European Union

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Treaty of Lisbon

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a european union-sanctioned treaty that will allow the European Parliament to become the co-equal legislator for almost all European laws

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Court of Justice

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supreme appeals court for EU law.

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court of justice details

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-one judge from each country -judges are required to act as independent officials, rather than as representatives of national interests

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the objectives of the single european act

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-remove all frontier control among EC countries -apply the principle of mutual recognition to product standards -institute open public procurement to non national suppliers, reducing costs directly by allowing lower cost suppliers into national economies -lift barriers to competition in the retail banking and insurance businesses -remove all restrictions on foreign exchange transactions -abolish restrictions on the right of foreign truckers to pick up and deliver goods within another member state's borders.

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Maastricht Theory

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treaty signed to in 1992, but not ratified until january 1, 1994, that committed the 12 member states of the european community to a closer economic and political union

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NAFTA's goal

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to eliminate all tariffs on bilateral trade between Canada and the united states and mexico

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case for NAFTA

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-oppurtunity to create an enlarged and more efficient productive case for the entire region -some US and Canadian firms would move production to Mexico to take advantage of lower labor costs -mexico would benefit from inward investment and employment -US and Canada would benefit bc of increased incomes of the Mexicans would allow more imported goods, increasing demand and making up fro the jobs lost in industries that moved production to Mexico -US and Canada consumers would benefit from lower prices

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the case against NAFTA

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-it would be followed by a mass exodus of jobs from the US and Canada into Mexico -up to 5.9 million US jobs would be lost to Mexico -short run outcome likely to be painful economic restructuring and unemployment in Mexico -long run dynamic gains in the efficiency

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environmentalists are against NAFTA bc

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the sludge in the Rio Grande and the smog in the air over Mexico City and warned that Mexico could degrade clean air and toxic waste standards across the continent

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NAFTA results

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-small but positive -canada and mexico are now among the top 3 trading partners of the US -US trade with canada and mexico accounted for about a quarter of total US trade -110,000 jobs were lost in the US per year from 1994-2000

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regional trade blocs in Africa

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-there are now nine trade blocs on the african continent -progress toward the establishment of meaningful trade blocs has been slow

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argument about regional trade blocs in africa

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because these countries have less developed and less diversified economies, they need to be "protected" by tariff barriers from unfair foreign competition

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most recent attempt to reenergize free trade movement in Africa occurred in early 2001

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when kenya, uganda, and tanzania, members-states of the East African Community (EAC), committed themselves to relaunching their bloc

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The EAC established a

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common market in 2010 and is now striving toward an eventual goal of monetary union

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