47974494 Unit VIII Customs Union and Regional Groupings

8/13/2019 47974494 Unit VIII Customs Union and Regional Groupings

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Unit VIII- Customs Unionand regional groupings

Day and Date:


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Unit Highlights Economic integration

Preferential trade arrangements

Free Trade Area (FTA)

Customs Union

Common Market

Economic Union

Effects of Customs UnionTrade creation

Trade Diversion


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Text book reference chapters International Economics by Dominick

SalvatoreChapter 10

International Economics by Francis

CherunilamChapter 13


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Economic Integration

A commercial policy of discriminatively

reducing or eliminating trade barriers onlyamong the nations joining together.


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Preferential trade arrangements

Free Trade Area (FTA)

Customs Union

Common Market

Economic Union


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Economic IntegrationFreeTrade Area (FTA)

FTA removes all trade barriers among

member nations but individually the nationsare allowed to retain barriers while trading

with non-members.

EFTAUK,Austria, Portugal, Denmark, Norway, Sweden, & Switzerland

NAFTAUSA, Canada, and Mexico

Southern Common Market (Mercosur)Argentina, Brazil, Paraguay, and

Uruguay


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Economic IntegrationCustomsUnion

A Customs Union removes all trade barriers

among member nations as well as adopts acommon commercial policy with the rest of

the world.

European Union (now European Common Market) - Germany,France, Italy, Belgium, the Netherlands, and Luxembourg


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Economic IntegrationCommon

Market

A Common Market goes further from a

Customs Union by allowing free movement oflabor and capital among member nations.

European Union became European Common Market in 1993


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Economic Union

Economic Union harmonizes the

monetary and fiscal policies of itsmembers.

Benelux - Belgium, the Netherlands, and Luxembourg

United States of America


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Effects of formation Customs

Union

Trade Creation

Trade Diversion


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Union Trade Creation

Trade creation occurs when some domestic

production of a member nation is replaced bylower-cost imports.


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Union Trade Diversion

Trade Diversion occurs when lower-cost

imports from outside the Customs Union arereplaced by higher-cost imports from another

member nation.


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Other effects of a Customs

Union

Administrative savings

Greater bargaining power

Increased competition Economies of Scale

Stimulus to investment

Better utilization of economicresources


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Effects of a Customs

Uniondetermining factors

Level of pre-union trade barriers

Pre-union trade and economic relationship ofmember nations

Level of Customs Unions trade barrier with therest of the world

Size of the union and size of the membernations

Competitiveness/complementarities of membernations

Geographical closeness of member nations


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To conclude

In this unit we examined,

Economic integration in general and customs

union in particular Economic integration leads to most efficient

utilization of world resources and maximizes

world output and welfare.


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You should now know

What is economic integration among

nations? In what ways it can happen?

Why?

What are the effects?

Documents

47974494 Unit VIII Customs Union and Regional Groupings