Study Notes
Economic integration involves countries working together to coordinate their economic policies, leading to increased cooperation and reduced trade barriers. Trading blocs are groups of countries that reduce trade barriers to promote trade liberalization.
- Economic Integration — increased economic cooperation and policy coordination between countries. Example: Elimination of trade barriers among EU countries.
- Preferential Trade Agreement (PTA) — an agreement to reduce or eliminate trade barriers between countries. Example: NAFTA is a regional PTA.
- Trading Bloc — a group of countries that agree to reduce trade barriers among themselves. Example: ASEAN is a free trade area.
- Free Trade Area (FTA) — countries eliminate trade barriers among themselves but maintain individual external policies. Example: NAFTA.
- Customs Union — countries eliminate trade barriers and adopt a common external policy. Example: CEFTA.
- Common Market — countries eliminate trade barriers, adopt a common external policy, and allow free movement of factors of production. Example: EEC.
- Monetary Union — a common market with a shared currency and central bank. Example: European Monetary Union.
- World Trade Organization (WTO) — an organization promoting trade liberalization and handling trade disputes. Example: WTO facilitates trade negotiations.
Exam Tips
Key Definitions to Remember
- Economic Integration
- Preferential Trade Agreement (PTA)
- Trading Bloc
- Free Trade Area (FTA)
- Customs Union
- Common Market
- Monetary Union
- World Trade Organization (WTO)
Common Confusions
- Confusing a customs union with a common market
- Misunderstanding the role of the WTO
Typical Exam Questions
- What is economic integration? Economic integration is the increased cooperation and coordination of economic policies between countries.
- What are the advantages of trading blocs? Advantages include trade creation, increased competition, and economies of scale.
- How does a monetary union differ from a common market? A monetary union includes a shared currency and central bank, unlike a common market.
What Examiners Usually Test
- Understanding of different types of trading blocs
- Advantages and disadvantages of economic integration
- The role and challenges of the WTO