Question

4。What are three of the Key Reasons why businesses take their business to foreign markets?                                          1) ____________________ (2) ______________________   (3) ____________________

5

(a) Name the Three (3) Main Regional economic unions and Give 2 countries for each: (4^th EXTRA points) : (i)_____       (II)____       (iii) _____ (iv) _____                                                                                 FOR EXTRA points) (b) Which Union is the most advanced______   How Many countries does it include?_______   

6

List 2 Pros (Benefits) and 2 Cons (Disadvantages) of Regional Economic Integration:        Pros:(1)_ ____               (2) _____                                                                                                                     Cons: (1) ____               2) _____

Answer 1

4. In general, companies go international because they want to grow or expand operations. The benefits of entering international markets include generating more revenue, competing for new sales, investment opportunities, diversifying, reducing costs and recruiting new talent.

5. There are four main types of regional economic integration.

1. Free trade area.
2. Customs union.
3. Common market.
4. Economic union.

The European Union was not always as big as it is today. When European countries started to cooperate economically in 1951, only Belgium, Germany, France, Italy, Luxembourg and the Netherlands participated. Now there are 27 countries.

6. Pros

The pros of creating regional agreements include the following:

Trade creation. These agreements create more opportunities for countries to trade with one another by removing the barriers to trade and investment. Due to a reduction or removal of tariffs, cooperation results in cheaper prices for consumers in the bloc countries. Studies indicate that regional economic integration significantly contributes to the relatively high growth rates in the less-developed countries.

Employment opportunities. By removing restrictions on labor movement, economic integration can help expand job opportunities.

Consensus and cooperation. Member nations may find it easier to agree with smaller numbers of countries. Regional understanding and similarities may also facilitate closer political cooperation.

Cons

The cons involved in creating regional agreements include the following:

Trade diversion. The flip side to trade creation is trade diversion. Member countries may trade more with each other than with nonmember nations. This may mean increased trade with a less efficient or more expensive producer because it is in a member country. In this sense, weaker companies can be protected inadvertently with the bloc agreement acting as a trade barrier. In essence, regional agreements have formed new trade barriers with countries outside of the trading bloc.

Employment shifts and reductions. Countries may move production to cheaper labor markets in member countries. Similarly, workers may move to gain access to better jobs and wages. Sudden shifts in employment can tax the resources of member countries.