Then, if the member countries agree to adopt a single currency, we will call it the monetary union. An example is the formation of the economic union of the European Union. Member countries then form joint economic institutions for this purpose. Economic unionĮconomic unions combine all aspects of the common market and also coordinate economic policy. In succeeding, member countries will usually harmonize some micro-policies such as regulations on monopoly and anti-competitive practices. Protective policies, such as subsidies, are also removed. Trade barriers can be tariffs and non-tariff. Member countries have uniform policies regarding trade with non-member countries.Removing barriers to the capital and labor flows (factors of production).Eliminating trade barriers in goods and services.So, under this agreement, member states agree to: Common marketĬommon market is a combination of customs unions plus the removal of barriers to the flow of factors of production. Hence, there is no opportunity for non-member countries to take benefits from the tariff differences. Its main objective is to overcome the trade deflection problem inherent in the free trade area agreement.Ĭustoms union members agree to joint tariffs when they trade with non-members. Customs unionĪ customs union is a more advanced stage than a free trade area. This phenomenon is what we call trade deflection. After entering the destination country, they can ship it to other member countries at no cost. They will export to member countries that set low tariffs. Later on joined by Brunei, Burma, Cambodia, Laos and Vietnam.The difference in tariffs provides opportunities and benefits for non-member countries. Though, the headquarter is in Jakarta Indonesia. It is an economic union comprising of 10 member states in Southeast- Asia. The southeast Asian Nations formed on 8th August 1967. It is a strong trade bloc politically and economically.ĪSEAN- ASSOCIATION OF SOUTHEAST ASIAN NATIONS In January 1999, a common currency (Euro) was introduced.EU Offers finance aid to the developing countries. It is Headquartered in Brussels, Belgium. EU Came into existence on 1st January 1958. progressive establishment of a Latin-American Common Market.Harmonious and balanced socio-economic development.Headquarter: Montevideo, Uruguay It was established on 12 August 1980. It replaced Latin American Free Trade Agreement (LAFTA) For example, the European Union is an economic unionĪLADI is a Spanish abbreviation for Latin American Integration Association. Its headquarters are in Vienna, Austria.Īn Economic Union has the same benefits as a common market but there is a common market but there is a common tax system and employs the same currency. It was established on 14th September 1960 An oil cartel whose mission is to coordinate Its policies of the oil-producing countries. OPEC: Organization of the Petroleum Exporting Countries. EX: NO Permits are required to work in another member country. It consists of 5Central American member countries:Ī Common Market is like a customs union but there is a free flow of factors of productions between the countries. It was established on 15th December 1960. Accelerate socio-cultural development in the region.Ī Customs Union is like a free trade area except that member countries maintain a common tariff against non-member countriesĬACM: Central American Common Market.Collective self-reliance among the countries of South Asia.The headquarter of SAARC is in Kathmandu, Nepal. SAARC- SOUTH ASIAN ASSOCIATION FOR REGIONAL COPERATION. Intra-regional trade between the member countries is US$ 767. North American Agreement on Labour Cooperation (NAALC).North American Agreement on Labour Cooperation (NAALC). It is the most powerful trade bloc in the world.NAFTA has two NAFTA– It stands for North American Free Trade Agreement An agreement by Canada, Mexico, and the United States. For example the North American Free Trade Agreement (NAFTA) between the USA, Canada&Mexico created a free trade area. When two or more countries form a Free Trade Area in which trade barriers between the countries are abolished but each country maintains its own tariffs against non-member countries. READ ALSO- GUNNAR MYRDAL CUMULATIVE CAUSATION THEORY. Enhancing the welfare of the consumers.Creating common currency and central bank.Promoting free transfer of labor, capital, and other factors.Imposing barriers on non-member countries.Reduction of trade barriers among the member countries.Division based on political considerations.ASEAN- ASSOCIATION OF SOUTHEAST ASIAN NATIONS.
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