What are the 2 approaches to the liberalization of international trade.
- WTO is a multilateral trade liberalization.
- EU, NAFTA, ASEAN are reginal trade liberalization (usually free trade bring trade barrage).
Free trade can be bilateral
What are the 5 forms of regional economic integration? (Pyramid)
- Political Union.
- Economic Union.
- Common Market.
- Customs Union.
- Free Trade Area.
What is Free Trade Area?
(Remove…and…to…among themselves, however,…may establish its…with…).
Remove tariffs and other barriers to trade among themselves, however, each members may establish its own trade policies with nonmembers countries.
What is Customs Union?
(FTAP + Members adopt…towards…).
Free Trade Area Policy
+
Members adopt common trade policies towards nonmember countries.
What is Common Union?
(CUP + Eliminate…that…of…among themselves).
Customs Union Policy
+
Eliminate barriers that restrict movement of factors of production among themselves.
What is Economic Union?
(CMP + They fully…their…by…their…).
Common Market Policy
+
They fully integrate their economies by coordinating their economies policies.
What is Political Union?
(The…of both…and…transforms itself into…).
The union of both politic and economy transforms itself into one country.
What are the general objectives of the NAFTA partner CANADA? (2)
(G.M’s.).
- Greater access to both market (USA & Mexico).
- Mexico’s cheaper labor.
What are the general objectives of the NAFTA partner UNITED STATE? (4).
(S.I.Fs&pp.SM’s&pr.).
- Secure energy supplies in Canada and Mexico.
- Increase the freedom to invest in Canada and Mexico for US firms.
- First step to the FTAA & putting pressure on the Uruguay Round negotiations.
- Support Mexico’s economic and political reforms.
What are the general objectives of the NAFTA partner MEXICO? (2).
(G.S&S.).
- Greater access to the American market.
- Support and sends credible signal about commitment to economic liberalization and reform.
What is the Rules of Origin of NAFTA? (2).
(FT.A)
- Free trade applies only to those products that originate in one of the member states.
- Avoid import arbitrage or trade deflection.
Regulate import between the member states in order to avoid that an importer may import goods into the NAFTA country with the lowest tariffs and then re-export it to the other two countries with higher external tariffs.
What came out of the NAFTA agreement so far? (8).
(T.D.C&M.FTB.I.W.IWC.P.)
- Trade have more than triples, exceeding $1 trillion per year.
- Disappearance of Mexico’s tariffs.
- Canada and Mexico have a larger percentage of their FDI stocks in the US.
- Falling trade barrier triggered job losses in the North as factories were “exported” to Mexico to profit from its low-cost labor.
- Increased income inequality in the US.
- Workers in the NAFTA zone gained the right to unionize.
- Improve working conditions and compliance with labor law.
- Promotes sustainable development and environmental protection.
What are some positive results of NAFTA? (5).
(I.I.D.J.Sec.).
- Increase in intra-zone trade.
- Increase in FDI from the US.
- Diversification of Mexico’s economy.
- 1/5 jobs in Canada is linked to international trade.
- Synchronized economy cycle (good & bad).
What are some negative results of NAFTA? (3).
(L.E.P.).
- Low-income Mexicans and Americans have not gain wealth on average. (the poor are still poor).
- Environmental protection.
- Popular Support.
What are the challenges of integration in the future of North America? (5).
(B.I.S.E.P.).
- Security.
- Immigration.
- Energy integration.
- Buy American policies.
- Political instability.
What is the problem with NAFTA?
(Trade tariff thing).
Its members can have other trade tariff with nonmember countries, resulting in the nonmember country wanting to trade only with the member country with the lowest tariff.
How is the loophole of NAFTA’s issue dealt with?
(RoL).
The rule of origin says that at least 50% or more has to come from the members of NAFTA.
(It avoids import arbitration or trade deflection).
What is the MERCOSUR? (2).
- MERCOSUR is said to be a Custom Union, supposed to be a Common Market, but it’s barely a Free Trade Area.
- Like NAFTA, but between Argentina, Brazil, Paraguay, and Uruguay.
What is MERCOSUR’s biggest problems?
(They barely…).
(They keep…).
(they keep…).
(…for each other).
(L.b. prefer to…than with…).
- They barely trade with each other and internationally too.
- They keep putting trading barriers with each other.
- They keep changing tariffs for nonmembers.
- Hatred for each other.
- Local businesses prefer to trade with foreign countries than with neighboring countries.
What is South America dependent on?
(TR on their NR).
Tax revenue on their natural resources.
How is economy for MERCOSUR?
They can’t sustain a economic shock because it would lead to a crisis. For example, due to bad governance, if there’s a Dutch Decease it will lead to inflation of currency, making it expensive to produce goods, resulting in a lack of diversification.
Why do nations pursue economic integration? (4).
(EMS,AEoS&P,A,A,)
- Expand market size.
- Achieve economic of scale and productivity.
- Attract FDIs from outside the bloc.
- Acquire stronger defensive and political posture.
