EU306 lecture slides 1 - EUROPEAN ECONOMIC AND MONETARY...

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EUROPEAN ECONOMIC AND MONETARY UNION LECTURER ITIR BAGDADI
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OVERVIEW Economic Integration - One of the most powerful dynamics of this era in world politics - Nations are increasingly driven to unite their economies for greater efficiency and growth - Integrated markets do NOT necessarily mean integrated states
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EUROPEAN UNION Began life in 1957 as the European Economic Community (EEC) – often called the Common Market 1980s - “economic” element in group's name was eliminated – European Community (EC) created 1993 – name changed to the European Union (EU) Fundamental question: Is economics more important than politics? - Does the individualistic motives of the market matter more than the unifying social values of the nation- state?
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20 th Century in Europe Most violent century in history 2 common enemies: 1.External threat of the USSR during the Cold War 2.Internal threat of a return to divisions and conflicts that created war and instability in Europe in the past Europe has been able to achieve political cooperation and even unify by using economics as a political tool
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ECONOMIC INTEGRATION The process by which a group of nation states agree to ignore their national boundaries for at least some economic purposes, creating a larger and more tightly connected system of markets Several degrees of economic integration: - Free Trade Area (FTA) - Customs Union - Economic Union
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Free Trade Area Involves a relatively minimal degree of integration Nations in FTA agree to eliminate tariff barriers to trade for goods and services they produce themselves However, each nation still retains the right to set its own tariff barriers with respect to products from outside the FTA In essence, some goods are still subject to differential trade barriers while some goods are tariff-fee (for ex. Goods from other countries) – this leads to complications
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North American Free Trade Area (NAFTA) Example of an FTA Goods from the USA, Canada and Mexico will be traded freely within NAFTA borders Goods from other countries will be subject to differential trade barriers of these three countries - (ex. Chile has negotiated three separate bilateral trade agreements with each of the NAFTA members separately)
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NAFTA Trade bloc in North America created by the U.S.A, Canada and Mexico Came into effect January 1, 1994 Between 1993 – 2004 trade among NAFTA members increased 129.3%
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Customs Union (example: Turkey - EU) A group of nations agree both to tariff free trade within their collective borders and to a common set of external trade barriers If NAFTA were to evolve into a customs union, the USA, Canada and Mexico would need to agree to a unified set of tariff barriers that would apply to products from other countries The Treaty of Rome, which created the EEC, was based upon the idea of a customs union The movement to a customs union is an important step in terms of economic and political integration
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Customs Union (cont.) Nations involved give up some degree of
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This note was uploaded on 08/06/2009 for the course INTERNATIO EU306 taught by Professor Itirbagdadi during the Spring '09 term at Izmir University of Economics.

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EU306 lecture slides 1 - EUROPEAN ECONOMIC AND MONETARY...

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