Question

Economics

1 What are the differences between a free trade area, customs union, common market, and economic union? Do any RTAs fit completely within one of these models of integration?

2 In what ways is the EU a unique RTA? What are some of the problems confronting the EU today?

Answer 1

ANSWER:

GIVEN THAT:

1. THE DIFFERENCES BETWEEN A FREE TRADE AREA:

A. A Free-trade area:

1. Is the region encompassing a trade bloc whose member countries have signed a free trade agreement (FTA).

2. Such agreements involve cooperation between at least two countries to reduce trade barriers, import quotas and tariffs, and to increase trade of goods and services with each other.

3. Free trade areas facilitate international trade and the associated gains from trade along with the international division of labor and specialization.

4.Free trade areas tend to promote free trade and the international division of labor, though the provisions of the agreement and the resulting scope of free trade is subject to politics and international relations.

5. Free trade areas tend to increase the volume of international trade among member countries and allow them to increase their specialization in their respective comparative advantages.

B. A Customs union:

1. Is generally defined as a type of trade bloc which is composed of a free trade area with a common external tariff.

2. Customs unions are established through trade pacts where the participant countries set up common external trade policy.  

3. A free-trade zone with common tariffs is a customs union

C. A Common market:

1. Is a free trade area with relatively free movement of capital and services.

2. In other words,it is a group formed by countries within a geographical area to promote duty free trade and free movement of labor and capital among its members. European community (as a legal entity within the framework of European Union) is the best known example.

3. Common markets impose common external tariff (CET) on imports from non-member countries.

4. Purposes for establishing a customs union normally include increasing economic efficiency and establishing closer political and cultural ties between the member countries.

5. It is the third stage of economic integration. Every economic union, customs and monetary union and economic and monetary union includes a customs union. Examples: Caribbean Community (CARICOM), gULF cooperation Council(GCC), Andean Community(CAN).

6. An Economic union is a type of trade bloc which is composed of a common market with a customs union.

7. The participant countries have both common policies on product regulation, freedom of movement of goods, services and the factors of production (capital and labor) and a common external trade policy.

8. When an economic union involves unifying currency it becomes an economic and monetary union.

9. Purposes for establishing an economic union normally include increasing economic efficiency and establishing closer political and cultural ties between the member countries.

10. Economic union is established through trade pact.The European Union (EU) is an example of an economic union.

11. The countries of the EU coordinate their respective economic policies, laws and regulations so they can work together to address economic and financial issues. The EU also has a common currency, the Euro, used by 19 EU members.

12. RTA including North Amrican Free Trade Agreement(NAFTA) and the ASEAN are Free trade Agreement.

13. Majority of the RTAs are free trade agreememnts. only a handful of RTA s taken the form of customs unions, viz, Mercosur and the Southern African Customs Union.

14. The European Union, which is the only economic union comes under RTA.

2.

ANSWER:

GIVEN THAT:

THE WAYS IS THE EU A UNIQUE RTA:

1. EU is a unique example of an area where a number of countries apply a uniform system for handling the import, export and transit of goods and implement a common set of rules called the Union Customs Code (UCC).

2. It is the most successful and the most integrated of all RTAs anywhere in the world. It is the widest and deepest RTA and has spread stability and prosperity to the wider and wider parts of Europe.

3. PROBLEMS FACING EU TODAY ARE:

A. Domestic constraints in the eurozone's four largest economies will limit their ability to cooperate at the Continental level.

B. 2019 will test the health of nationalist and populist political movements, which represent the main threat to the continuity of the European Union in its current form.

C. This year, the bloc will face three sources of economic risk: trade disputes with the United States, Brexit and economic fragility in Southern Europe.

D. The European Union will be under domestic and external pressure to limit Chinese access to strategic technology and resist Beijing's investments in infrastructure.