4375 - Final Exam Review[1]

4375 - Final Exam Review[1] - MGT 4375 International...

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MGT 4375 International Management Final Exam Review Sheet Final Exam: Wednesday , December 12, 2007, 8-10 PM Nine: Regional Economic Integration Regional economic integration - occurs as a result of agreements among countries in a geographic region to reduce, and ultimately remove, tariff and non-tariff barriers to the free flow of goods, services, and factors of production between each other. Levels of economic integration – Free Trade Area -> Custom Unions -> Common Market -> Economic Union -> Political Union Free trade area - all barriers to the trade of goods and services among member countries are removed o Each country determines its own trade polices with nonmembers. o Most common form, accounts for 90% of regional agreements o Examples: European Free Trade Association, North American Free Trade Agreement NAFTA; NAFTA’s impact on US jobs - The United States has lost 110,000 jobs per year due to NAFTA (most pessimistic estimate) o Many economists dispute this figure because more than 2 million jobs a year were created in the US during the same time period Regional economic integration trend in recent years Achievements and problems in EU integration: o Achievements Political arguments supporting economic integration: o Economic interdependence creates incentives for political cooperation o Economic interdependence reduces potential for violent confrontation o Prevent another World War o Together, the countries have more economic clout to enhance trade with other countries or trading blocs How do economic theories generally view free trade and investment (positive-sum game) o Cons The benefits of regional integration are determined by the extent of trade creation, as opposed to trade diversion Trade creation : occurs when high cost domestic producers are replaced by low cost producers within the free trade area Trade diversion : occurs when lower cost external suppliers are replaced by higher cost suppliers within the free trade area
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Ex: US and Mexico and Costa Rica o Pros Countries specialize in those goods and services efficiently produced Increased production Increased economic growth Increases FDI and world production Additional gains from free trade beyond the international agreements such as GATT and WTO Difficult to adapt a common set of rules with many countries The primary institutions of the EU; which is ultimate controlling authority Advantages and disadvantages of the Euro for countries that have adopted it o Advantages Savings from using only one currency Easy to compare prices, resulting in lower prices Forces efficiency and slashing costs Creates liquid pan-Europe capital market Increases range of investments for individuals and institutions o Disadvantages Countries lose monetary policy control and their own currencies European Central Bank controls policy for the “Euro zone” EU is not an “optimal currency area”
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This note was uploaded on 04/19/2008 for the course RESEARCH M 4333 taught by Professor Noname during the Spring '08 term at Texas Tech.

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4375 - Final Exam Review[1] - MGT 4375 International...

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