Econ Integration - Growth + NAFTA Blurt Cards

Growth and Integration - Solow model

• Diminishing Marginal Returns to L and to K.

• Depriciation, Savings.

• S = Depriciation + change in K stock

• Diagram for Y, S and D

• Explain why D is linear and S and Y are curved.

G&I Relation to Regional Integration

• What are the 2 arguements that the EU CU had more than just a one off effect?

• Baldwin’s MTGB

  • Increased trade, increases output, Increases steady state.

  • Diagram and explain it.

• Integration raises technology

  • Trade help improve tech - imports more capital and services

  • Bigger market = ^ R&D

  • Free movment = circulation of people and ideas

  • MNC

G&I measuring integration effect on growth

• Brodzicki (2006) - postive effect for members in EU CU (1060 - 1999)

• Badinger (2001) - found no long term effects.

• Campos et al (2014) used a D-i-D method and found that all entrants did better [+12%] except Greece.

NAFTA

• 1994 - WTO Article 24 allowed it.

• Rule of Origin - needed as US, C, M can set their own external tariffs.

  • Diagram and explaination of Trade Deflection.

  • Non-NAFTA inputs must be in a diff classification.

  • 62.5% of automobile parts must come from country inside FTA

NAFTA Non tariff restrictions

• Multilateral - WTO rules - non discrim

• Plurilateral - Anti Counterfeiting trade agreement (+non nafta countries)
  Accepted each others conformity tests / standards.

• Intellectual propperty rights protected.

• Services barriers to entry removed.

Impacts of NAFTA

• Expected to increase intra-nafta trade x3 to $1 trilllion

• C&M largest expport destinations for USA.

• M share of US imports increased 6.2% (1993) > 12.8% (2010)

• Growth wasnt NAFTA itself US Congress Budget Office says impact dwarfed by other factors.

• Mexico impact since 1994 income per person risen 40%.

• FDI 15 bil to 90 billion.

NAFTA Job concerns

US fear of job losses due to M lower wages.

Labour wage doesnt equal labour productivity.

NAFTA has labour and enviromental Provisions

NAFTA -> USMCA

• ROO hightened 62.5% > 75% for automobile parts.

• Labour provisions - M give workers right to unionise.

• Dairy - US has more accesss the C dairy industry

• Sunset Clause - agreement to expire after 16 years.