3.4 - economic integration

Economic integration

The process by which countries coordinate their economic policies

Preferential trade agreements (PTA)

Agreements giving preferential access to certain products to consumers in certain countries, usually reducing protectionism

Bi-lateral trade agreements

Agreements between two countries to reduce protectionism

Multi-lateral agreements

Agreements between more than two countries to reduce protectionism, often sanctioned by the WTO

Trading Bloc

A group of countries that have formally agreed to eliminate protectionism on trade within the bloc

Free Trade Agreement (FTA)

An agreement made between counties to trade freely within the area, but where each country can impose their own trade barriers on countries outside the area

Customs Union

An agreement between countries to trade freely within the union, and adopt common external trade barriers on countries outside the union

Common Market

A customs union with common policies on product regulation, and free movement of capital and labour

Monetary Union

A common market with a common currency and a common central bank

Trade Creation

Occurs when entry into a customs union causes production to move from high cost to low cost producers

Trade Diversion

Occurs when entry into a customs union causes production to move from low cost to high cost producers