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Economics 4.1.5
Economics- Edexcel 4.1.5
| Term | Definition |
|---|---|
| WTO | world trade organisation |
| world trade organisation | permits trade vlocs if they result in lower import protection against outside countries than existed before the creation of the trade bloc |
| examples of regional trade blocs | USMCA, Mercosur, ASEAN, Common market of eastern and southern africa, trans-pacific partnership, african continental free trade |
| USMCA | united states-mexico-canada agreements |
| Mercosur | brazil, argentina, uruguay, paraguay, venezuela |
| ASEAN | association of southeast asian nations free trade area |
| common market of easten and southern africa | zambia, rwanda, swaziland, ethiopia, kenya |
| trans-pacific partnership | an agreement negotiated between australia, brunei, chile, canada, malaysia, mexico, new zealand, peru, singapore, vietnam |
| african continental free trade area | covers more than 50 african nations |
| benefits of regional trade agreements | trade creation effects |
| costs of regional trade agreements | poorer countries can’t negotiate favourable tariff or quota free access to many of the markets of rich, advanced countries so WTO prefers global trade deal |
| FTA | free trade area |
| free trade area | where there are no import tariffs or quotas on products from one country entering another |
| examples of free trade area | EFTA/USMCA/south asian free trade area/african continental free trade area/pacific alliance |
| pacific allinace | chile, colombia, mexico, peru |
| bi-lateral trade agreement | exchange of goods between two nations, reducing or elimination import tariffs, quotas, export restraints, and other non-tariff trade barriers to encourage trade and investment |
| examples of bi-lateral agreements | EU-Japan economic partnership agreement/ASEAN/EU-South Korea free trade deal/China-Australia free trade agreement |
| customs union | a group of countries that agree to abolish tariffs and quotas between member nations, adopt a common external tariff on imports from non-member countries, preferential import tariff rates apply to trade agreements |
| examples of customs unions | european customs union/ south african customs union/ eurasian customs union |
| trading bloc | an agreement between countries to lower their import tariffs |
| free trade area | customs union + CET on all products flowing from countires outside the customs union (revenues are combined) |
| CET | common external tariffs |
| single market | stronger and deeper form of integration than a customs union, involving the free movement of goods and services, capital and labour and a replacement of commons sets of rules governing trade in goods and services within the common market |
| Norway and Switzerland | outside of Eu but members of EU single market |
| EU single market is built on 4 key freedoms | free trade in goods, mobility of labour, free movement of capital, free trade in services |
| most recent country to join the EU | croatia |
| monetary union | a zone where a single monetary policy prevails and inside which a single currency, or currencies which are perfect substitutes, circulate freely |
| advantages from joining the single currency | currency risk, trade, investment, competition, transactions |
| risks and drawbacks from committing to joining a single currency | country’s central bank loses the freedom to set monetary policy interest rates solely to meet key macroeconomic objectives/cannot manage depreciation or devaluation of the exchange rate/adjustment costs when switching currencies |
| menu costs | a type of transaction cost incurred by firms when they change their prices |
| OCA | optimal currency area |
| when do OCA work best? | countries are highly integrated/each economy has a flexible labour market to cope with external shocks/when effects of interest or exchange rate changes have a similar effect in both countries/nations are willing to make fiscal transfers |
| flexible labour market includes | flexibility in real wages, workers with adaptable skills, high geographical mobility, flexible employment contracts |
| ECB | European central bank |
| crisis in Greece due to joining a single currency because | they were not used to low interest rates, too willing to increase debt and suffering from a lack of price and non-price competitiveness with established EU nations |
| trade creation | when countries agree a trade deal that lowers tariffs between them, so consumers can source imports from a lower cost country(leading to lower prices and a rise in real incomes) |
| WTO | world trade organisation |
| world trade organisation | founded in 1995 but had its origins in the 1947 general agreement on trade and tariffs |
| GATT | general agreement on trade and tariffs |
| 4 roles of WTO | conductor, tribunal, monitor and trainer |
| conductor role | members have come up with a set of rules that apply to international trade and the WTO ensures these rules are followed by organising ‘rounds’ of negotiations to develop new rules |
| how long can ‘rounds’ of negotiations take? | decades as there needs to be a consensus amongst members |
| tribunal role | role involves settling disputes between members after encouragement to sort out disputes by themselves |
| monitor role | reviews the trade policies of its members to make sure that WTO rules are being applied fairly and consistently |
| training role | provides training to government officials in mostly developing countries to help them engage in trade with other WTO members |
| conflict between trade blocs and WTO | trade blocs put-up trade restrictions against non-members and all WTO members are currently members of atleast one regional trade agreement |
| WTO and regional trade agreements | regional trade agreements can pave the way for new policies to be rolled out to all WTO members, but must meet certain criteria |
| criteria for regional trade agreements | trade should flow freely within the RTA without barriers being raised on external countries/developed countries are allowed to give special treatment to developing countries |
| words of the WTO | ‘regional integration should complement the multilateral trading system and not threaten it’ |
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jessharris
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