Econ 333 Nov 4 Ch 10

Econ 333 Nov 4 Ch 10 - Regional Trade Agreements Chapter 10...

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Regional Trade Agreements Chapter 10
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Regional Trade Agreements (tariff reductions for members only) Uruguay Round of MTNs slow in 1980s 1985: US signs RTA with Israel 1989: US-Canada and 1994 US-Canada- Mexico (NAFTA) Trade grows among members (gains) Trade may decline with non-members (losses)
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How Much to Integrate? Preferential Trade Agreement Reduces some tariffs among members (usually developed country reduces tariffs, developing country keeps them) Free Trade Area Removes all tariffs among members Often non-ag only; may include services, FDI, portfolio Invest. Trade deflection to avoid higher-member tariffs, “screwdriver” plants Customs Union FTA + common external tariff to ROW Common Market CU + K and L move freely among members Economic Union CM + common currency and common economic policies
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Examples PTA US-Canada agreement on auto parts, essentially intra-firm FTA NAFTA (US, Canada, Mexico 1994 implemented over 15 years)
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