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Economic Integration

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					Section 4.3
A process whereby countries coordinate, link
  and harmonize their economic policies.




                   The EU
   Globalization
   Trading Blocs
   HL Extensions:
     Barriers to integration
     Trade diversion and creation




                                     Clinton’s support for NAFTA
   The spread of economic, social and cultural
    ideas across the world, the result of increased
    integration of national economies through
    trade, investment and improving technology.
   With your partner brainstorm as many
    aspects of globalization that impact your lives
    now and in the future. Aim for at least 20
    points from the mundane (ie my iphone was
    designed in the US and made in China) to the
    profound (ie my cultural identify is a blend of
    American and Japanese values)
   A process where firms, organization and
    institutions operate on a global basis
   Facilitated by relaxed immigration controls,
    freer flow of capital and freer trade
   Multinational corporation (MNCs) play a
    significant role through foreign direct
    investment (FDI) i.e. long term investment
Exploitation of LDC by MNCs by
paying cheap wages and disregarding
environment standards


                                  Globalization




                                  Creates employment and transfer and
                                  knowledge technology
  When: Return from holidays
 How to prepare:
1. 1 Read Triple A Topic C3 and all associated
   articles
2. Undertake your own research to enable you
   to add something to the seminar
3. Bring all your research, notes etc and have at
   least 4 points you would like to get across
4. You will be graded
1.   Preferential Trading Areas
2.   Free Trade Areas
3.   Customs Union
4.   Common Market
5.   Economic Union
   Definition: a group of countries that agrees to
    increase trade or gain economic benefit
    through cooperation.
   PTA = group of countries that give
    preferential access to certain products by
    reducing tariffs e.g. between EU and ACP
    (Africa, Caribbean and the Pacific)
ACP (Africa, Caribbean and the Pacific)
   FTAS = a group of countries remove tariffs
    and quotas between themselves but can
    trade in anyway with counties outside the
    group e.g. NAFTA (North American Free
    Trade Area)
   The Most Favored Nation Clause of the WTO
    means that a member lowers its tariffs for on
    nations it must treat all the other remain the
    same.
                               Trade Embargo (No trade)




A
                                      Imposes
                       C              Tariffs

    Free Trade Area


                                                 B

    B
                      Free Trade
   A union is a regional economic association
    where tariffs and quotas have been
    eliminated but they adopt common external
    tariffs and quotas E.g. EU
A

    C

        Common     B
B
        Barriers
   A customs union with common policies on
    product regulation and the free movement of
    goods services and capital and labor.
   Common market with common currency
   E.g. Eurozone
   Individual countries have no control of
    economic policy full monetary union and
    complete harmonization of fiscal policy
Discriminatory policies against non-member countries
May undermine intent of WTO efforts to liberalize trade
Smaller counties have little bargaining power

                                    Trading
                                     Blocs




              Benefits similar to that offered by free trade: larger
              market, more choice and lower prices for
              consumers, simulation for investment, greater
              political and economic stability and cooperation
   Obstacles to Economic Integration
   Trade Creation and Diversion
   A benefit of greater economic integration
   Entry of country into a customs union leads
    to the transfer of production from a high cost
    producer to a low cost producer
A
       C
    High cost
    Producer                 B
                Tariffs   Low Cost
                          Producer
B
          C
       High cost
A      Producer


       B
B   Low Cost
    Producer
   A disadvantage of greater economic
    integration
   Entry of country into a customs union leads
    to the transfer of production from a low cost
    producer to a high cost producer
                            D
                         Low cost
                Tariff   producer

A
       C
    High cost
    Producer

                                    B
B
                              D
                           Low cost
                           producer

                        Tariff
           C
        High cost
A       Producer


                    B
    B

				
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posted:6/30/2012
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