COMMERCE 4SA3 Chapter Notes - Chapter 8: European Free Trade Association, Free Trade Area Of The Americas, Customs Union
27 Nov 2018
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Document Summary
Levels of economic integration going from least integrated to most integrated: free trade area, all barriers to the trade of goods are services among member countries are removed. Requires a common currency, tax rates and monetary and fiscal policy: political union, central political apparatus coordinates the economic, social and foreign policy of the member states. The economic case for integration: greater world production than would be possible with trade restrictions. Trade stimulates economic growth which creates dynamic gains from trade. It is easier to establish a free trade and investment regime among a limited number of adjacent countries than among the world community. The political case for integration: linking neighboring economies and making them increasingly dependent on each other creates incentives for political cooperation between the neighboring states. This reduces the potential for violent conflict between the states. In addition, by grouping their economies, the countries can enhance their political weight in the world.
