Read the text below and match the types of economic integration to their descriptions.

FACULTY OF GLOBAL STUDIES

REGIONAL INTEGRATION: GLOBAL TREND

For further information, please go to:

http://dictionary.cambridge.org/

http://www.askoxford.com/ Oxford Dictionaries

http://www.ldoceonline.com/ Longman Dictionary of Contemporary English Online

http://www.collinslanguage.com Collins English Dictionary + Thesaurus + Cobuild

Section 1

THE EU Experience of Economic Integration

Project:

As part of the team working on The Eurasian Union Project announced by the Russian Government, you have been asked to submit a report identifying (institutional, political and economic) challenges that might get in the way of the project.

Submit your report and prepare a presentation about your findings.

1. Develop an action plan. Discuss in groups:

· What kind of information will you need for the project?

· How are you going to use the information you have studied?

Read the text below and match the types of economic integration to their descriptions.

· Monetary union

· Free Trade Area

· Economic union

· Preferential Trade Agreement (PTA)

· Common market

· Customs union

Economic Integration: Overview

International Trade Theory and Policy - Chapter 110-2: Last Updated on 4/1/98 http://internationalecon.com/Trade/Tch110/T110-2.php

For a variety of reasons it often makes sense for nations to coordinate their economic policies. Coordination can generate benefits that are not possible otherwise. A clear example of this is shown in the discussion of trade wars among large countries on page 110-1. There it is shown that if countries cooperate and set zero tariffs against each other, then both countries are likely to benefit relative to the case when both countries attempt to secure short-term advantages by setting optimal tariffs. This is just one advantage of cooperation. Benefits may also accrue to countries who liberalize labor and capital movements across borders, who coordinate fiscal policies and resource allocation towards agriculture and other sectors and who coordinate their monetary policies.

Any type of arrangement in which countries agree to coordinate their trade, fiscal, and/or monetary policies is referred to as economic integration. Obviously, there are many different degrees of integration.

………………………… is perhaps the weakest form of economic integration. In a …………… countries would offer tariff reductions, though perhaps not eliminations, to a set of partner countries in some product categories. Higher tariffs, perhaps non-discriminatory tariffs, would remain in all remaining product categories. This type of trade agreement is not allowed among WTO members who are obligated to grant most-favored nation status to all other WTO members. Under the most-favored nation (MFN) rule countries agree not to discriminate against other WTO member countries. Thus, if a country's low tariff on bicycle imports, for example, is 5%, then it must charge 5% on imports from all other WTO members. Discrimination or preferential treatment for some countries is not allowed. The country is free to charge a higher tariff on imports from non-WTO members, however. In 1998 the US proposed legislation to eliminate tariffs on imports from the nations in sub-Sahara Africa. This action represents a unilateral preferential trade agreement since tariffs would be reduced in one direction but not the other.

………………………… occurs when a group of countries agree to eliminate tariffs between themselves, but maintain their own external tariff on imports from the rest of the world. The North American Free Trade Area is an example of a …………… . When the NAFTA is fully implemented, tariffs of automobile imports between the US and Mexico will be zero. However, Mexico may continue to set a different tariff than the US on auto imports from non-NAFTA countries. Because of the different external tariffs, ……………s generally develop elaborate "rules of origin". These rules are designed to prevent goods from being imported into the …………… member country with the lowest tariff and then transshipped to the country with higher tariffs. Of the thousands of pages of text that made up the NAFTA, most of them described rules of origin, the criteria needed to determine the national source of a product. Their importance is derived from the fact that duties and restrictions in several cases depend upon the source of imports.

Customs Union occurs when a group of countries agree to eliminate tariffs between themselves and set a common external tariff on imports from the rest of the world. The European Union represents such an arrangement. A …………… avoids the problem of developing complicated rules of origin, but introduces the problem of policy coordination. With a …………… , all member countries must be able to agree on tariff rates across many different import industries.

Common Market establishes free trade in goods and services, sets common external tariffs among members and also allows for the free mobility of capital and labor across countries. The European Union was established as a …………… by the Treaty of Rome in 1957, although it took a long time for the transition to take place. Today, EU citizens have a common passport, can work in any EU member country and can invest throughout the union without restriction.

An Economic Union typically will maintain free trade in goods and services, set common external tariffs among members, allow the free mobility of capital and labor, and will also relegate some fiscal spending responsibilities to a supra-national agency. The European Union's Common Agriculture Policy (CAP) is an example of a type of fiscal coordination indicative of a/an …………… .

Monetary Union establishes a common currency among a group of countries. This involves the formation of a central monetary authority which will determine monetary policy for the entire group. The Maastricht treaty signed by EU members in 1991 proposed the implementation of a single European currency (the Euro) by 1999.

Perhaps the best example of an economic and monetary union is the United States. Each US state has its own government which sets policies and laws for its own residents. However, each state cedes control, to some extent, over foreign policy, agricultural policy, welfare policy, and monetary policy to the federal government. Goods, services, labor and capital can all move freely, without restrictions among the US states and the Nations sets a common external trade policy.

tariff

fix, set | impose, introduce, levy | pay | increase, raise | cut. Lower, reduce | abolish, eliminate

is a status or level treatment accorded by one state to another in international trade. The term means the country which is the recipient of this treatment must, nominally, receive equal trade advantages as the "most favored nation" by the country granting such treatment. (Trade advantages include low tariffs or high import quotas.) In effect, a country that has been accorded MFN status may not be treated less advantageously than any other country with MFN status by the promising country.

Rules of origin are used to determine the country of origin of a product for purposes of international trade. There are two common types of rules of origin depending upon application, the preferential and non-preferential rules of origin (19 CFR 102). The exact rules vary from country to country.

Monetary authority is a generic term in finance and economics for the entity which controls the money supply of a given currency, and has the right to set interest rates, and other parameters which control the cost and availability of money. Generally a monetary authority is a central bank, though often the executive branch of a government has de facto control over monetary policy by controlling the central bank. There are other arrangements, for example a central bank for several nations, a currency board which restricts currency issuance to the amount of another currency or free banking where a broad range of entities can issue notes or coin.

Look through the text one more time and discuss the advantages and disadvantages of every type of economic integration and decide which of them seems to be most beneficial. Give reasoning.

4. Quiz: How much do you know about the EU?

1) How many countries are there in the European Union?

a) 12

b) 17

c) 27

d) 30

2) When did the European integration start?

a) 1951

b) 1971

c) 1981

d) 2001

3) When was European Economic Community created?

a) 1953

b) 1957

c) 1961

d) 1973

4) How many countries did the European Economic Community initially include?

a) 3

b) 5

c) 6

d) 10

5) Which country’s application to join was the first to be vetoed?

a) France

b) Germany

c) Denmark

d) The United Kingdom

6) Which country vetoed the application?

a) France

b) Germany

c) Denmark

d) The United Kingdom

7) When did the first Europe-wide elections to the European Parliament take place?

a) 1971

b) 1979

c) 1984

d) 1989

8) When was the single currency launched?

a) 1990

b) 1999

c) 2000

d) 2001

9) Which country is the most recent EU member?

a) Portugal

b) Malta

c) Cyprus

d) Bulgaria

10) Which country is most likely to join the EU in the near future?

a) Russian Federation

b) Turkey

c) Croatia

d) Macedonia

11) Which country is least likely to join the EU in the near future?

a) Ukraine

b) Georgia

c) Montenegro

d) Albania

Date: 2015-12-24; view: 1014