Lecture 4

• What is economic integration?

  Removal of restrictions on the free mobility of goods, services, capital, and labour between countries.
• What is a Free Trace Area (FTA)?

  An area where tariffs between partner countries are removed.
• What defines a Customs Union (CU)?

  A union with a common external tariff on trade with non-members.
• What characterises a Common/Single market?

  • Free movement of goods
  • Services
  • Labour
  • Capital with removal of physical, technical and fiscal barriers
• What is an Economic Union?


  Coordination of economic policies among member countries.
• What does a Monetary Union entail?

  The adaptation of a single currency and centralised monetary policy.
• What is a Preferential Trade Agreement (PTA)?

  An agreement that provides preferential tariffs, often unilateral.
• When was the Free Trade Area established within the EU?

  1957
• When was the Customs Union created in the EU?

  1968
• When did the EU form a Common Market?

  1993
• When was the Monetary Union introduced in the EU?

  In 1999, with the adoption of a single currency.
• What is a Regional Trade Agreement (RTA)?

  A treaty that defines trade rules between signatories, including CUs and FTAs.
• What is trade creation?

  When high-cost domestic production is replaced by imports from lower-cost trade partners.
• What is trade diversion?

  When imports from more efficient non-members are replaced by less efficient member countries due to discriminatory trade barriers.
• How is consumer surplus calculated?

  $CS =$$\frac{1}{2} \times \text{Base} \times \text{Height}$
• What is the difference between multilateral and regional trade liberalisation?

  Multilateral trade liberalisation follows WTO principles of non-discrimination, while regional trade liberalisation allows for RTAs that eliminate tariffs among members.
• Name an example of an RTA.

  NAFTA, ECOWAS, ASEAN, or MERCOSUR.
• What impacts do trade creation and trade diversion have on welfare?

  They affect consumer and producer surplus and state revenues differently, often analysed through changes in these surpluses and tariff revenues.
• What was the state of economic integration in the EU as of 1999?

  The EU had formed a Monetary Union with a single currency.
• What are the primary benefits of a Common Market?

  It enables the free movement of goods, services, labor, and capital among member countries.