European Integration: Economic Concepts Overview
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Questions and Answers

What is the objective of the Economics of European Integration course?

To study European Integration with an emphasis on economics and economic integration.

Which of the following are components of the EU's maintenance? (Select all that apply)

  • Institutions (correct)
  • Economic Sanctions
  • Trade Barriers
  • Policies (correct)
  • The EU is more integrated than loosely federated nations like Switzerland.

    True

    What grading system does the course use?

    <p>80% for the final exam and 20% for an individual essay.</p> Signup and view all the answers

    Match the following forms of economic integration with their descriptions:

    <p>Free Trade Areas = Agreements that eliminate tariffs between member countries Customs Union = A trade agreement that includes a unified tariff on external goods Common Market = An agreement that allows free movement of goods, services, and factors of production Monetary Union = An agreement where countries adopt a common currency</p> Signup and view all the answers

    Who is the lecturer for the Economics of European Integration course?

    <p>Juan Ignacio Diez Bidart</p> Signup and view all the answers

    The EU today encompasses _____ countries with _____ million people.

    <p>28, 447</p> Signup and view all the answers

    What are essential requirements for economic integration?

    <p>Comparable levels of economic development and similar but potentially complementary structures in production and demand.</p> Signup and view all the answers

    Which of the following is NOT a form of economic integration?

    <p>Export Restraints</p> Signup and view all the answers

    Study Notes

    European Integration

    • The EU is a unique historical achievement, with economies closely linked, more so than loosely federated nations like Switzerland.
    • It is maintained by a combination of policies and institutions.
    • The primary focus of the course is on economics and economic integration.
    • Minimum knowledge of basic economic concepts (e.g., supply and demand) is expected.
    • The course provides the possibility to change subjects.

    Economic Integration: Introduction

    • European integration, since 1945, has led to unprecedented economic integration worldwide.
    • Integration refers to countries forming larger units, aiming to improve national and group welfare.
    • The theory focuses on incentives and determinants, critically addressing whether policies enhance well-being.
    • The original framework emphasizes trade liberalization.

    Regional Economic Associations (REAs)

    • Economic integration manifests in the form of REAs.
    • Integration has short-run effects due to barrier removal: trade creation and trade diversion.
    • Medium-run effects include enhanced competition, cost reduction, and factor mobility.
    • Long-run effects are observed in growth.

    Forms of Economic Integration

    • Free Trade Areas: Eliminate trade barriers between member countries while maintaining independent external trade policies.
      • Example: USMCA (United States, Mexico, and Canada Free Trade Agreement).
      • Rules of origin are implemented.
      • New Generation Free Trade Agreements extend beyond traditional issues.
    • Customs Unions: Implement a common external tariff policy in addition to free trade within members.
      • Example: EU prior to 1992.
      • Policy coordination is required.
    • Common Markets: Allow free movement of goods, services, capital, and labor within members.
      • Example: MERCOSUR.
    • Economic Unions: Achieve a high level of economic integration, including a common currency, unified fiscal and monetary policies, and coordinated economic regulations.
      • Example: EU after 1992.
    • Monetary Unions: Adopt a single currency, eliminating exchange rate fluctuations and facilitating trade.
      • Example: Eurozone.

    Protectionism

    • Protectionist measures are implemented to protect domestic industries from foreign competition.
    • Types of protectionist measures:
      • Import tariffs: Taxes levied on imported goods.
      • Quotas: Limits on the quantity of imported goods.
      • Export subsidies: Direct payments by the government to exporters, often proportional to export volume.
      • Production subsidies: Government support for domestic producers.
      • Other measures: Export restraints, foreign investment restrictions, technical barriers to trade.

    The European Union: A Legacy of Unity

    • Established in 1993, the EU represents a remarkable outcome after centuries of conflict.
    • It comprises 28 countries with a population of 447 million, with 340 million using the euro.
    • The EU's economy, with a GDP of 15trillion,rivalsthatoftheUnitedStates(15 trillion, rivals that of the United States (15trillion,rivalsthatoftheUnitedStates(20 trillion) and China ($16 trillion).
    • Key requirements for economic integration include comparable levels of economic development and similar but potentially complementary production and demand structures.
    • The EU pursues these objectives through common policies.

    Trade Protection in a Small Open Economy

    • Import tariffs, a tax levied on imported goods, can have various effects.
    • In the small open economy model, a tariff shifts the supply curve upwards and decreases output.
    • Higher prices and lower output are the results.
    • Also, trade can be diverted to less efficient producers within the union.
    • Consumer welfare falls, but government gains tax revenue.

    Customs Unions

    • A Customs Union eliminates trade barriers between members while establishing a common external tariff policy.
    • Benefits:
    • Increase trade creation.
    • Decrease trade diversion.
    • Increase efficiency through competition and cost reduction.
    • Costs:
    • Potential trade diversion from outside the union.
    • Overall, the impact of a customs union is positive for consumer welfare.

    Key Terms

    • Trade creation refers to increased trade between countries after forming a free trade area.
    • Trade diversion refers to shifting trade from a more efficient foreign producer to a less efficient domestic producer within the union.
    • The small open economy model refers to a model used in economics to analyze the effects of international trade in an economy that is relatively small compared to the rest of the world.
    • Welfare refers to the well-being of consumers and producers in an economy.

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    Description

    This quiz explores the key concepts of European integration, emphasizing economic policies and theories since 1945. It covers the significance of economic integration and its manifestations through Regional Economic Associations (REAs). A basic understanding of economic principles is beneficial for tackling this content.

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