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7 Cards in this Set
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Types of alliances |
1. Free trade areas, e.g. NAFTA, containing the USA, Canada and Mexico 2. Customs union, e.g. Mercosur. They have a common tariff --> no tariffs between each other, same tariffs on other imported goods (so no country is competing the have the lowest tariffs) 3. Common market --> allow free movement of labour and capital between countries, e.g. EU before the euro 4. Economic Union, e.g. the EU. Free trade, common agriculture and environmental policies etc. |
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NAFTA The North American Free Trade Agreement |
Signed by the USA, Canada and Mexico in 1994, to try and phase out tariffs by 2010. The main driver was the challenge presented by trade blocs from other parts of the world, especially Europe. Mexico had got into debt in the 70s/80s, and hoped that joining NAFTA would result in economic growth and higher employment. Aims: --> gradual elimination of trade barriers --> promotion of economic competition --> increased investment opportunities --> improved cooperation between members |
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Consequences of NAFTA |
Pros: --> trade between member countries tripled between 1993 and 2007 ($306bill to $930bill) --> manufacturing grew in the USA - increased employment --> Mexico received foreign investment --> foreign companies established plants in the country to access Mexico's trading partners without having to pay the higher labour costs of those countries --> higher wages and increased sales from the agricultural sector Cons: --> some Canadian countries closed because of competition from lower-cost US firms --> some US firms moves to Mexico, costing jobs in the US --> the growth of maquiladoras (US-owned, labour-intensive, export-orientated companies) on the Mexican border keep wage rates down --> Mexico exploited because of its less stringent pollution laws |
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The EU The European Union |
Started in 1957 with 6 members (France, Italy, West Germany, Belgium, Holland and Luxembourg). The UK joined in 1973 along with Denmark and Ireland. Since then 19 more countries have joined. Members: Austria Belgium Bulgaria Croatia Republic of Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovakia Slovenia Spain Sweden UK |
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Aims of the EU |
1. To encourage peace and stability --> in 2004 former communist states of Eastern Europe were allowed to join, to encourage them to become prosperous and peaceful nations 2. To develop closer economic ties - single market --> reduced tariffs between members and establishing a common external tariff --> money can be freely transferred from one country to another --> social mechanisms - wherever a person lives in the EU they are entitled to social benefits --> EU citizens may live anywhere in the EU without having to seek permission 3. To develop common policies in areas of mutual interest --> Common Agriculture Policy provides support to farmers across Europe, ensuring they get paid a decent price for their food, and gives them money to look after the land --> Common Fisheries Policy sets a quota for EU fishermen --> common industry policies set standards across the EU, e.g. safety standards and emission tests for cars --> common CO2 target - 20% cut by 2020 4. To protect EU companies/industries from foreign competition --> tariffs/quotas on goods made outside the EU 5. Monetary union --> Euro introduced in 2002 and all the members at the time adopted it apart from the UK, Denmark and Sweden --> makes trade easier 6. To ensure that European nations remain influential on the world stage --> economic growth of countries such as China and India means that smaller, once powerful countries such as the UK and France will increasingly struggle to remain influential in world politics --> Treaty of Lisbon, 2007, established a high representative for foreign affairs - it is hoped that EU members will agree on a common policy on world issues and will act as one voice in international affairs 7. Infrastructure --> funded the Channel Tunnel, 75,000km of roads and 78,000km of railway --> new Eastern members are receiving funding, e.g. a new motorway was built from Berlin to Warsaw to improve trade links 8. Development --> poorer areas can get funding to improve development, e.g. Eastern European countries, the Scottish Highlands, Southern Italy, Salford |
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Positive consequences of groupings of nations |
1. Greater chance of peace with international understanding --> apart from the war in former Yugoslavia there have been no hostilities in Europe since 1945 2. Increased trade as barriers are removed, which improves the economy, leading to higher living standards --> 50% of the UK's exports are to the EU --> encourages competition 3. Particular sections of a national economy can be supported, such as CAP giving support to farmers 4. Remote regions of the EU receive financial support 5. Common currency allows simplified international transactions and encourages economic stability in smaller EU countries --> but it has not been good for Germany as they are bailing out weaker economies that are seriously in debt (e.g. Greece) in order to save the Euro 6. The EU has a tariff system for goods coming from outside the EU, especially agricultural produce, protecting the livelihoods of farmers in the EU --> bad for farmers from LEDCs who cannot access such a rich market --> Nissan have opened factories in the EU (Sunderland) to avoid tariffs --> creates jobs 7. People can move freely from one country to another for work or leisure without needing visas |
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Disadvantages of groupings of nations |
1. Loss of sovereignty --> decisions made in Brussels 2. Loss of financial controls --> one size fits all policy for interest rates 3. Pressure to adopt central legislation --> UK opted out of the European Working Time Directive 4. Certain economic sectors may be damaged by having to share resources --> UK has to share fishing grounds with Spain --> fishermen argue that quotas are not as strictly enforced in Spain 5. Move towards closer integration can fuel separatist movements --> political action in the UK, violent movements elsewhere --> Basque Separatist movement in N Spain 6. Larger nations can hold a disproportionate amount of power --> nations like France and Germany --> Germany forces Cyprus to pass harsh laws to cut expenditure |
