trade agreements - bk 3

• Trade agreement


  agreement by a group of countries to promote trade among them
• trade bloc


  a group of countries that share trade agreements together to promote trade with one another but use tariffs for non member countries
• Free trade area


  Trade barriers between the member countries are eliminated but each member country maintains its own tariffs against non member countries
• Example of Free trade area

  NAFTA
• Common markets


  The same as a customs union but with the additional agreement to allow the free flow of goods, services, capital and eventually labour between the countries without any restrictions
• Examples of Common market

  European Union single market
• Customs union


  Same as a free trade area, but with addition that member countries impose a common external tariff against non member countries outside the bloc
• Examples of custom Union

  CARICOM
• Economic Union


  Cab take many forms but will operate as a common male with additional integration of a currency
• example of an economic union

  European Union Euro Zone
• Advantages of trade agreements

  - trade creation

  - economies of scale

  - increased investment

  - use of technology

  - employment - seeking workers can move between countries more freely

  - prevention of exchange rate fluctuation

  - raised standards for healthcare etc

  - promoting democracy
• Disadvantages of trade agreements

  - Trade diversion

  - Loss of sovereignty - decisions become centralised

  - increased legislation - pressure to adopt policies and laws

  - Competition for work

  - some loss of financial control in monetary union

  - increased dependance

  - over exploitation of resources
• The EU - case study

  three things it underpins for residents

  - peace

  - freedom

  - prosperity
• When was EU set up

  1957
• How many original countries in EU

  6
• How many countries in EU

  27 countries
• How does a single market operate in EU

  by working together and ensures people goods and capital can flow freely
• How is EU economically integrated


  With the introduction of euro in 2002 - can compare prices directly
• 3 institutions at heart of EU

  - council

  - commission

  - parliament

  
  

  able to pass laws and integrate policy
• How is EU taking responsibility

  It a major donor - development aid given

  EU incentives - ambitious, international environment laws

  Based on common values and rights
• NAFTA (North American Free Trade Agreement)

  An agreement for free trade between the United States and Canada and Mexico
• Aim of NAFTA


  - to reduce trade deficit

  - to slow illegal immigrants

  - to increase investment
• PROS of NAFTA


  - Enlarged and productive regional base

  -Labor-intensive industries move to Mexico

  -Mexico gets investment and employment -FDI

  -Increased Mexican income to buy US/Canada goods

  -Demand for goods increases jobs

  -Consumers get lower prices
• CONS of NAFTA


  -loss of business associated with products that can be supplied more inexpensively with free trade partners

  -increased US trade deficit (cost of imports exceeded the value of exports)

  - Loss of jobs to Mexico

  - Job migration suppressed wages

  - Mexican firms have to compete against efficient US/Canada firms

  - Environmental degradation

  - Loss of national sovereignty
• Key changes with NAFTA

  country of origin changes - over 75% car parts has to come from US

  labour laws - 40-45% of those car parts must be Ade from those earning more than $16 per hour

  Sharing of resources