47974494 unit viii customs union and regional groupings
TRANSCRIPT
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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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Economic Integration
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 Integration
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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Effects of formation Customs
Union Trade Creation
Trade creation occurs when some domestic
production of a member nation is replaced bylower-cost imports.
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Effects of formation Customs
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?