Exam 10: Regional Economic Arrangements

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With an FTA each country maintains its o...

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An economic union is an agreement betwee...

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The determination of what country actual...

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A) Q¹ to Q⁹ from Country B.
B) Q² to Q⁸ from Country C.
C) Q³ to Q⁷ from Country B.
D) Q⁴ to Q⁶ from Country C.

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A

A) Q¹ to Q⁹ from Country B.
B) Q² to Q⁸ from Country C.
C) Q³ to Q⁷ from Country B.
D) Q⁴ to Q⁶ from Country C.

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Two methods are used to estimate the eco...

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A) Q¹ to Q⁹ from Country B.
B) Q² to Q⁸ from Country C.
C) Q³ to Q⁷ from Country B.
D) Q⁴ to Q⁶ from Country C.

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Countries have the option of making part...

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A customs union is an agreement between countries to maintain a free-trade area and a common external tariff. A customs union is similar to a free-trade area but with two differences. First, a customs union has a common external tariff. A common external tariff means that each country replaces its own national tariff schedule with a common tariff schedule applicable to all member countries. Second, not all free-trade areas include trade in agricultural products, services, and financial flows. However, most customs unions include a broad range of international trade. The level of international economic integration implied by a customs union is usually "deeper" than the level of integration implied by a free-trade area.

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In a sense, RTAs and MTN are substitutes...

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In 1992, Canada, the U.S., and Mexico ag...

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MERCOSUR is an acronym for a free-trade area that is on its way to becoming a customs union. This free-trade area is currently composed of Argentina, Brazil, Uruguay, and Paraguay. The first phase of the agreement, signed in 1991, is to cut intra-regional tariffs to zero by the year 2000. For the most part, tariffs are at zero for most trade within the region. Starting in 1995, the countries set about harmonizing their tariffs to a common external tariff by 2006. Beginning in 1995, the countries began negotiating the harmonization of regulations necessary for creating a "single market." As the Europeans discovered when they tried to create a common market, this project is quite difficult and will take time to complete. There is also a commitment to the free movement of labor within the countries, but no formal date has yet been made. MERCOSUR has signed a free-trade area agreement with Chile that will be implemented in phases through 2014. However, substantial tariff cuts have already been made on both sides. MERCOSUR plus Chile is now a trade area containing 250 million people with a total economic output of over $1 trillion. The agreement has had an explosive effect on trade. From 1990 to 1995, intra-regional trade expanded from less than $6 billion to over $14 billion. The trade flows could grow even larger. Intra-group trade in NAFTA is 4.5 percent of GDP and in the EU it is 14 percent. Within MERCOSUR, intra-group trade is still only 1.6 percent. MERCOSUR is also likely to expand as it is currently negotiating with Bolivia and will likely expand to the other members of the Andean Group (Bolivia, Colombia, Ecuador, Peru, and Venezuela).