4.4 Economic integration

Objective notes

9 learning objectives

4.4.1Preferential trade agreements

• Preferential trade agreements can be bilateral, regional, or multilateral

• The World Trade Organization is the key multilateral trade institution

4.4.2Trading blocs

• Trading blocs include free trade areas, customs unions, and common markets

• They increase integration between member economies

4.4.3Advantages of trading blocs

• Advantages include wider market access, economies of scale, labour mobility, stronger bargaining power, political stability, and cooperation

4.4.4Disadvantages of trading blocs

• Disadvantages include loss of sovereignty and challenges to multilateral trade negotiations

4.4.5Monetary union

• Monetary union is a deeper form of economic integration

4.4.6World Trade Organization

• The WTO has objectives and functions linked to trade rules and negotiations

• WTO influence is affected by difficulty reaching agreement on services and primary products

• Unequal bargaining power between members affects WTO influence

4.4.7(HL)—Trade creation

• Trade creation is an advantage of trading blocs

• Trade creation can improve resource allocation within a bloc

4.4.8(HL)—Trade diversion

• Trade diversion is a disadvantage of trading blocs

• Trade diversion can shift purchases away from more efficient non-member producers

4.4.9(HL)—Monetary union evaluation

• Evaluate advantages and disadvantages of monetary union