Economic Integration IB Economics
Terms in this set (12)
Levels of economic integration
preferential trade agreement, Free trade area, customs union, common market, economic union, and full political union
preferential trade agreement
An agreement between two or more countries to lower trade barriers between them on particular products, resulting in an easier access to the markets of other members for selected products, compared with the access of countries that are not members.
free trade area
A group of countries committed to removing all barriers to the free flow of goods and services between each other, but pursuing independent external trade policies.
A group of neighboring countries that promote trade with each other and erect barriers to limit trade with other blocs
A group of countries committed to (1) removing all barriers to the free flow of goods and services between each other and (2) the pursuit of a common external trade policy.
a group of countries that acts as a single market, without trade barriers between member countries
A common market in which member countries no longer regulate their own currencies. E.g., EU
complete economic integration
a full monetary union with harmonization of fiscal policy (what the Eurozone is moving towards)
advantages of economic integration
- greater efficiency
- higher real incomes
- larger export markets
disadvantages of economic integration
fall in employment in certain industries, exploitation of workers, environmental effects, rising trade imbalances
occurs when low cost producers within the free trade area replace high cost domestic producers
occurs when higher cost suppliers within the free trade area replace lower cost external suppliers