Chapter 9: Regional Economic Integration
Economists believe free trade agreements produce gains from trade for all member countries.
US and Canada access to a large and increasingly prosperous market , lower prices from goods produced in mexico, low cost labor, Increased imports by Mexico.
Common market: harmony and cooperation on fiscal, monetary, and employment policies.
Free trade area
Eliminates all barriers among members countries.
Each country is allowed to determine its own trade policies with regard to nonmembers.
EFTA, NAFTA
Economic union: requires a high degree of integration a coordinating bureaucracy and sacrifice of national sovereigntyto the bureaucracy.
Political Union: A central political apparatus coordinates economic, social, and foreign policy.
Impediments
While a nation as a whole may benefit from a regional free trade agreement, certain groups may lose
It implies a loss of national sovereignty
Europe has two trade blocs:
European Union (EU)
European Free Trade Area (EFTA)
Mexico increased jobs as low cost production moves south and will see more rapid economic growth as a result.
European Union
European council
European comission
European Parliament
Court of Justice
Benefits of the euro
Makes it easier to compare prices.
Producers forced to look way to reduce costs.
Boosts development of highly liquid pan-European capital market.
Savings from having to handle one currency.
NAFTA: the biggest economic integration in Americas
Protects intellectual property rights.
Removes most restrictions on FDI between members.
Removed barriers on the cross-border flow of services.
Abolished tariffs 99% of the goods traded between members.
Andean Community
Formed in 1969 using EU model,
MERCOSUR
1988 between Brazil and Argentina, 1990 join in Paraguay and Uruguay, 2005 include Venezuela.