Question

1. Identify the three main types of regional trade agreements and give an example of each. Please explain why each example fits the category you put it under.
2. Explain what an economy of scale is and give a specific example of one time an economy of scale benefited a country or individual company.
3. Why is the European Union an optimal currency area?
4. Which country do you think benefited the most from NAFTA? Why?

Answer 1

3 types of regional trade agreements :

1. Preferential trade agreements where trade barriers are reduced like WTo where each country has different set of preferences and trade agreements based on menbership and size.
2. Free trade areas where all trade barriers are eliminated like NAFTA which allows complete mobility of capital and labor.
3. Custom unions where members remove trade barriers themselves like European Union where majority of countries form cartel and Unionization.

Economy of scale is beneficial for economies like how we saw the execution of Mid day meal scheme in India for large number of underprivileged children getting basic food facilities. This high cost high volume programme saw huge uptick and optimisation in costs.

EU is an optimal currency area since Euro is single currency for all nations except UK and benefits all in terns if current account balance and trade benefits.

NAFTA has most benefitted Mexico and Canada because it created highest growth in GDP year on year and higher employment opportunities andbrise in median incomes.