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Chapter 7 ECONOMIC INTEGRATION, Conditions More Likely to Lead to…
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Trade creation
Trade creation refers to the increase in economic welfare from joining a free trade area, such as a customs union.
Trade creation will occur when there is a reduction in tariff barriers, leading to lower prices. This switch to lower cost producers will lead to an increase in consumer surplus and economic welfare.
Trade diversion
Trade diversion is an economic term related to international economics in which trade is diverted from a more efficient exporter towards a less efficient one by the formation of a free trade agreement or a customs union
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Economic integration
Commercial policy of discriminatively reducing or eliminating barriers only among the nations joining together
Free trade areas
A free trade area is a group of countries that have few or no barriers to trade in the form of tariffs or quotas between each other. Free trade areas tend to increase the volume of international trade among member countries and allow them to increase their specialization in their respective comparative advantages
Customs union
A customs union is generally defined as a type of trade bloc which is composed of a free trade area with a common external tariff
Common market
A common market is a formal agreement where a group is formed among several countries in which each member country adopts a common external tariff. Tariffs are a common element in international trading.
Economic union
An economic union is a type of trade bloc which is composed of a common market with a customs union.
Duty free zone
an area where goods can be imported or exported without having to pay the tax that would normally be charged: Almost all the successful duty-free zones around the world have been sited within an hour's drive of a major city
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