Regional Economic Integration Overview

A comprehensive set of vocabulary flashcards covering key concepts related to regional economic integration, specifically focusing on the EU, NAFTA, and other trade agreements.

Regional Economic Integration

Countries reducing trade barriers between each other to increase trade and cooperation.

Goals of Regional Economic Integration

Economic efficiency/growth and political cooperation/stability.

Political Benefit of Economic Integration

Reduces conflict, builds cooperation, and increases global power.

Reason for EU Formation

To prevent future wars in Europe after WWII.

EU's Role during Cold War

United Europe against U.S. and Soviet influence.

NAFTA's Benefit for Mexico

Helped grow Mexico’s economy and reduced illegal immigration over time.

Cost of Economic Integration

Job losses in industries that can’t compete.

Loss of Sovereignty

Countries give up control over laws, taxes, and trade policy.

Impact of Loss of Sovereignty

Tested as it's a major downside of integration.

Example of Loss of Sovereignty in the EU

Member countries give power to a central authority.

Economic Argument for Integration

Free trade increases efficiency and specialization.

Outcome of Specialization

Lower prices, more innovation, and economic growth.

Challenge of Global Free Trade

Too many countries make it harder to agree.

Easier Regional Agreements

Fewer countries allow for easier coordination.

Free Trade Area Definition

No tariffs between members; each keeps its own trade policies.

Example of Free Trade Area

USMCA (formerly NAFTA).

Customs Union Definition

Free trade + common external tariff.

Common Market Definition

Free trade + movement of goods, labor, and capital.

Economic Union Definition

Common market + shared economic policies.

Political Union Definition

One central government controls everything.

Levels of Integration Order

Free Trade Area → Customs Union → Common Market → Economic Union → Political Union.

Rules of Origin

Determine if a product qualifies for lower tariffs.

Importance of Rules of Origin

Prevent countries from bypassing tariffs by slightly modifying imports.

Most Advanced Example of Integration

European Union.

Unique Aspect of the EU Economically

Many members share a common currency (euro).

EFTA Definition

A European free trade group outside the EU.

Mercosur Definition

A regional trade agreement in South America.

RCEP Definition

A large Asia-Pacific trade agreement.

AfCFTA Definition

A trade agreement to boost trade across Africa.

Main Goal of AfCFTA

Remove tariffs on ~90% of goods and increase intra-African trade.

Benefit of AfCFTA

Could lift ~30 million people out of poverty.

Challenges of AfCFTA

Poor infrastructure, corruption, weak coordination.

Biggest Downside of Integration

Loss of sovereignty.

Difference between Free Trade Area and Customs Union

Customs union has a common external tariff; free trade area does not.

Added Features of Common Market

Movement of labor and capital compared to Customs Union.

Political Reason for Integration

Peace/stability.

Economic Reason for Integration

Efficiency/growth.

Euro Definition

A shared currency used by many EU countries.

Treaty Creating the Euro

The Maastricht Treaty (1992).

Year Euro Officially Launched

1999.

How Euro Lowers Transaction Costs

Countries using the euro do not need to exchange currencies.

Price Transparency Definition

Prices are easier to compare across countries.

Price Transparency Effect on Competition

Increases competition and can lower prices.

Euro's Impact on Exchange Rate Risk

Reduces risk as businesses no longer worry about currency fluctuations.

Why Euro is Considered Strong Global Currency

It is the second most important currency after the U.S. dollar.

Control Lost When Adopting the Euro

Control over monetary policy.

Interest Rate Control under the Euro

Countries lose control over their own interest rates.

Economic Problems from the Euro

Not all member economies are equally strong.

Connection of Euro Problems to Sovereignty

Major concept of loss of sovereignty arises.

Role of European Commission

Proposes laws and ensures they are followed.

Most Executive-like EU Institution

European Commission.

Role of European Parliament

Debates and helps pass laws.

Who Elects the European Parliament

EU citizens.

Council of the European Union Functions

Represents member countries and makes final decisions.

Final Decision-Making Body in EU

Council of the European Union.

Function of Court of Justice

Acts as the supreme court of EU law.

Purpose of Single European Act (1987)

To create a single market.

Barriers Removed by the Single European Act

Trade barriers and many border controls.

Mutual Recognition Definition

If a product is legal in one EU country, it is accepted in others.

Importance of Mutual Recognition

It reduces trade friction between countries.

Types of Movement Freed by Single European Act

Goods and services.

Results of Single European Act

Lower costs, more efficiency, and more competition.

Impact of EU Integration on GDP

GDP increased by about 2–5%.

Effect of EU Integration on Businesses

Businesses became more efficient.

Reason for Uneven EU Integration in Practice

Differences in culture, language, and legal systems.

Trade Creation Definition

Shifting production or purchases to more efficient producers within the group.

Trade Creation Outcome

Good, increases efficiency and improves resource allocation.

Trade Diversion Definition

Shifting trade to a less efficient producer inside the bloc because outsiders face tariffs.

Trade Diversion Outcome

Bad, reduces global efficiency.

Trade Creation Example

A country buys from a cheaper producer in the trade bloc instead of producing inefficiently itself.

Trade Diversion Example

A country buys from a more expensive member country instead of a cheaper outside country because of tariffs.

Original EU Name (1951)

European Coal and Steel Community.

Name Before Becoming EU

The European Community.

Year EU Became European Union

1993.

EU Growth Over Time

From 6 countries to 27 countries.

Impact of Treaty of Lisbon (2007) on European Parliament

Increased its power.

Leadership Role Created by Treaty of Lisbon

The EU President role.

Biggest Criticism of the EU

Loss of sovereignty.

Bureaucracy in EU Criticism Definition

Too much central control and complex administration.

Democratic Concerns about the EU

Some people feel less represented.

Brexit Definition

The United Kingdom leaving the European Union.

Year UK Voted to Leave EU

2016.

Major Reasons for Brexit

Immigration concerns and loss of control over policies.

Biggest Benefit of Euro

Lower transaction costs and no exchange rate risk.

Biggest Cost of Euro

Loss of control over monetary policy.

Differences Between Commission, Parliament, and Council

Commission proposes laws, Parliament debates/represents citizens, Council makes final decisions.

Single European Act Main Known For

Creating the single market.

Trade Creation vs Trade Diversion Comparison

Trade creation is good and shifts trade to efficient producers; trade diversion is bad and shifts trade to less efficient producers.

Recurring Concept in EU Criticism

Sovereignty.

Brexit Impact on Access to Markets

Access to full single market benefits is lost.

New Trade Barriers After Brexit

Customs checks, paperwork, and some tariffs.

Brexit Effect on Trade

Trade became harder and more expensive.

Impact on UK Exports After Brexit

Exports to the EU decreased.

Sector Heavily Impacted by Brexit

Financial services.

Brexit Effect on Foreign Investment in UK

Investment declined.

UK Economic Growth After Brexit

Slowed compared to similar countries.

Logistical Issues After Brexit

Delays at borders and disrupted supply chains.

Trucks at UK Borders Post-Brexit Outcome

Many were delayed or returned empty.

Brexit’s Supply Chain Perspective Importance

Increased friction and reduced efficiency in trade flows.

UK Trade Levels After Brexit

Both exports and imports decreased.