Professional Documents
Culture Documents
Amanpreet Kang
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References
1. International Economics, Francis Cherunilam (4th Edition), Mc Graw Hill 2. International Economics, BO Sodersten and Geoffrey Reed (3rd Edition), Macmillan 3. International Economics, Paul Krugman and Maurice Obstfeld (6th Edition), Pearson Education 4. Economics, Samuelson & Nordhaus (18th Edition), Tata Mc Graw Hill
Economic Integration
The process of removing trade impediments between 2 countries leads to economic integration. Co-operation and co-ordination. Trade impediments??? Global integration
GATT, WTO NTBs, GATS and TRIPS
Regional integration
Proliferation in agreements since 1980s First RTA 300+ registered RTAs India and regional integration (several agreements, refer www.commerce.nic.in)
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Economic Integration
MFN Principle Promotes non-discrimination RTAs are exception to MFN principle Preferential trading areas allowed if: Trade barriers are removed substantially on all trade The agreement on the whole does not result in more restrictive trade barriers to outsiders than those existed before
Economic Integration
Trade Bloc, PTA, RTA, RIA preferential trade agreement (PTA) between a subset of countries, designed to significantly reduce or remove trade barriers within member countries. Natural trade bloc Characteristics
it implies a reduction or elimination of barriers to trade, and this trade liberalization is discriminatory Preferential market access is motive in some
Economic Integration
Trade Bloc, PTA, RTA, RIA preferential trade agreement (PTA) between a subset of countries, designed to significantly reduce or remove trade barriers within member countries. Natural trade bloc Characteristics
it implies a reduction or elimination of barriers to trade, and this trade liberalization is discriminatory
Economic Integration
The first waves, 1930s, leading to a fragmentation of the world into trade blocs. Old/ first regionalism, regional initiatives of developing countries in the 1950s and 1960s. Objective of import-substitution industrialization Rationale was that developing countries could reap the benefit from economies of scale by opening up their trade preferentially among themselves, hence reducing the cost of their individual import-substitution strategy while the trade bloc became more self-sufficient. New/ second regionalism, (the North-South trade blocs)
NAFTA
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Free Trade Area Customs Union Common Market Economic Union Economic Integration
Free Trade among members Free Trade among members Free Trade among members Free Trade among members Free Trade among members Common External Commercial Policy Common External Commercial Policy Common External Commercial Policy Common External Commercial Policy Free factor mobility within the trade bloc Free factor mobility within the trade bloc Free factor mobility within the trade bloc Harmonized economic policies Harmonized Supernationa l organisation economic structure policies
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Integration Theory
Combination of free trade and protection Types of economic integration Characteristics of member countries that lead to successful integration Effects of economic integration on international trade & location Effects of economic integration on growth and development
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Integration Theory
Theory of Customs Union Customs union would mean substitution of single customs territory for two or more customs territories so that: Duties and other regulations of commerce are eliminated with respect to substantially all trade between the constituent territories of the union Substantially the same duties and regulations of commerce are applied by each of the members of the union to the trade and territories not included in the union
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Integration Theory
Theory of Customs Union Effects of Customs Union Static Effects primary, involve reallocation of resources among existing industries, material, technology, etc. Trade creation and trade diversion Production effect Consumption effect Dynamic Effects - consequential Competition, scale economies, external economies, technological change, investment risk and uncertainty reduction
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PA P2
D S1 S2 D2 D1 Quantity, Q D2 S2
D1 S1
Quantity, Q
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P*A D* D*2 D*1 S*1 S*2 Quantity, Q S*1 D*1 S*2 D*2 Quantity, Q
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1 PW
MD
QW
Quantity, Q
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Effects of a Tariff
Home Home market market Price, P S Price, P XS 2 t P*T 3 MD D Quantity, Q QT QW Quantity, Q D* Quantity, Q
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PT PW
Trade Diversion
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Trade Creation
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