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Quick Study Questions
Quick Study 1
1. Q: What is it called when countries in a region cooperate to reduce or eliminate barriers to the
international flow of products, people and capital?
A: Regional economic integration is the process whereby countries in a geographic region
cooperate with one another to reduce or eliminate barriers to the international flow of products,
2. Q: What are the names of the lowest and highest levels of regional economic integration?
A: The first (and lowest) level of regional integration is a free trade area—economic
integration whereby countries remove all barriers to trade among themselves but each country
country.
The second level of regional integration is a customs union—economic integration
The third level of regional integration is a common market—economic integration
whereby countries remove all barriers to trade and the movement of labor and capital among
The fourth level of regional integration is an economic union—economic integration
The fifth (and highest) level of regional integration is a political union—economic and
political integration whereby countries coordinate aspects of their economic and political
3. Q: An increase in trade between nations as a result of regional economic integration is called
what?
A: Trade creation is the increase in the level of trade among nations that results from regional
to a trading bloc and toward member nations.
4. Q: Trade shifting away from nations not belonging to a trading bloc and member nations is
called what?
A: Trade diversion is the diverting of trade away from nations not belonging to a trading bloc
and toward member nations.
Quick Study 2
1. Q: What is the name of the official single currency of the European Union?
A: The Euro is the name of the official single currency of the European Union.
2. Q: A country may receive membership in the European Union once it meets what is called the
what?
A: A country can receive membership if it meets certain demands down by the EU called the
Copenhagen Criteria which requires each country to demonstrate that it: (a) Has stable
institutions, which guarantee democracy, the rule of law, human rights, and respect for and
3. Q: Why did nations belonging to the European Free Trade Association not want to join the
European Union?
A: Certain nations did not want to join the EU fearing destructive rivalries and a loss of national
sovereignty.
Quick Study 3
1. Q: Canada, Mexico, and the United States belong to the regional trading bloc called what?
A: The three nations belonging to the North American Free Trade Agreement (NAFTA) are
Canada, Mexico, and the United States.
2. Q: What countries belong to the regional trading bloc called CAFTA-DR?
A: CAFTA-DR was established in 2006 between the United States, Costa Rica, El Salvador,
3. Q: What is the name of Latin America’s most powerful regional trading bloc?
A: MERCOSUR is the most powerful trading bloc in all of Latin America. It acts as a customs
total population) and a GDP of around $3.5 trillion.
Quick Study 4
1. Q: What are the stated aims of the Association of Southeast Asian Nations (ASEAN)?
A: Main objectives of ASEAN are to: (1) promote economic, cultural, and social development
forum in which differences can be resolved fairly and peacefully.
2. Q: The stated aims of which organization is not to build a trading bloc but instead to strengthen
the multilateral trading system?
A: The organization for Asia Pacific Economic Cooperation (APEC) includes 21 nations. Its
aim is not to build another trading bloc. Its purpose is to strengthen the multilateral trading
3. Q: What is the name of the grouping of 55 nations across the continent of Africa?
A: A group of 55 nations on the African continent joined forces in 2002 to create the African
Union.
Ethical Challenge
The Caribbean nations do not participate in NAFTA and CAFTA-DR. Many people in southern U.S.
states complain that NAFTA and CAFTA-DR are unfair to their extended families living on the
Caribbean islands. Some experts argue that the term free trade agreement is misleading. They say
these agreements are really “preferential trade agreements” that offer free trade only to members and
relative protection against nonmembers. They argue that these trade agreements have cost jobs,
market share, and income from apparel factories in Jamaica to sugar cane fields in Trinidad.
8-5 Given the impact on nonmembers, do you think such trade agreements are ethical?
A: Student responses will vary. The key issues that could be included in their review should
address whether the trade agreement pay enough attention to the quality of the jobs? What
8-6 Why do you think the Caribbean islands are not part of NAFTA or CAFT-DR?
A: Student responses will vary. However, some Caribbean nations may be excluded because
rules and requirements of being a member of the free trade agreement.
8-7 What arguments would you make for including the Caribbean in the expansion of NAFTA or
CAFTA-DR?
A: One question to be addressed here is the responsibility that the United States has to its
neighbors. Certainly, many Caribbean nations have strong economic and cultural ties to the
United States. The “free trade” versus “preferential trade” ethical debate is nothing new. There
Teaming Up
Debate Project. Two groups of four students each will debate the merits of extending NAFTA to more
advanced levels of economic (and political) integration. After the first student from each side has
spoken, the second student will question the opponent’s arguments, looking for holes and
inconsistencies. The third student will attempt to answer these arguments. A fourth student will present
a summary of each side’s arguments. Finally, the class will vote to determine which team offered the
more compelling argument.
A: There would be many economic and political obstacles in expanding NAFTA to more advanced
levels of integration and to include other countries. First, there is the problem of unequal levels of
that this would mean surrendering their national sovereignty to the United States—which through its
enormous economic and political muscle could dictate what the bloc’s political position should be. One
Practicing International Management Case
Global Trade Deficit in Food Safety
8-16 Q: How do you think countries with a high volume of exports to the United States, such as
Mexico, would respond to stricter food-safety rules? Do you think such measures are a good
way to stem the tide of food-related illnesses? Why or why not?
A: They will clearly be opposed to it. How would the U.S. government react if Mexico wanted
to send its federal investigators around the United States to inspect its farming methods and
safety systems? It would rightly say that the Mexican government is meddling in its domestic
8-17 Q: Some people believe that free trade agreements force consumers to trade the health and
safety of their families for free trade. What are the benefits and drawbacks of putting food
safety regulations into regional trade pacts?
A: It is probably not necessary to place food-safety regulations within the free trade agreement
itself. Free trade means that goods can enter other member nations tariff-free, not inspection
8-18 Q: The lack of harmonized food-safety practices and standards is just one of the challenges
faced by the food industry as it becomes more global. What other challenges face the food
industry in an era of economic integration and opening markets?
A: Perhaps the most important issue is whether relatively less efficient farmers will be able to
compete with the large farming operations existing in developed nations. Throwing the doors to
