CHAPTER EIGHT - CHAPTER EIGHT Levels of economic...

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CHAPTER EIGHT Levels of economic integration 1. Free trade area - all barriers to the trade of goods and services among member countries are removed, but members determine their own trade policies with regard to nonmembers the most popular form of integration Examples include o the European Free Trade Association (between Norway, Iceland, Liechtenstein, and Switzerland) the North American Free Trade Agreement (between the U.S., Canada, and Mexico) 2. Customs union - eliminates trade barriers between member countries and adopts a common external trade policy most countries that enter a customs union desire further integration in the future Examples include the Andean Pact (between Bolivia, Columbia, Ecuador, Venezuela, and Peru) 3. Common market - no barriers to trade between member countries, a common external trade policy, and the free movement of the factors of production can be difficult to achieve and requires significant harmony among members in fiscal, monetary, and employment policies Examples include MERCOSUR (between Brazil, Argentina, Paraguay, and Uruguay) hope to achieve this status 4. Economic union - involves the free flow of products and factors of production between members, the adoption of a common external trade policy, and in addition, a common currency, harmonization of the member countries’ tax rates, and a common monetary and fiscal policy involves sacrificing a significant amount of national sovereignty Examples include the European Union (EU) 5. Political union - independent states are combined into a single union requires that a central political apparatus coordinate economic, social, and foreign policy for member states The EU is headed toward at least partial political union, and the
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This note was uploaded on 04/05/2012 for the course SOM 354 taught by Professor Staff during the Fall '11 term at Syracuse.

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CHAPTER EIGHT - CHAPTER EIGHT Levels of economic...

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