Eco-def- Midterm.docx

• free trade The absence of government intervention of any kind in international trade, so that trade takes place without any restrictions (or barriers) between individuals or firms in different countries. • trade protection Government intervention in international trade through the imposition of trade restrictions (or barriers) to prevent the free entry of imports into a country and protect the domestic economy from foreign competition. • tariffs Taxes on imported goods;
they are the most common form of
trade restriction. Tariffs may serve two purposes: to protect a domestic industry from foreign competition (a protective tariff); or to raise revenue for the government (a revenue tariff). Whatever the purpose, the impacts on the economy are the same. • quota A type of trade protection that involves setting a legal limit to the quantity of a good that can be imported over a particular time period (typically a year). (More generally, a ‘quota’ is a limited or fixed number of things.) • subsidy production subsidies Payments per unit of output granted by the government to domestic firms that compete with imports. • economic integration Refers to economic interdependence between countries, usually achieved by agreement between countries to reduce or eliminate trade and other barriers between them. There are various degrees of integration, depending on the type of agreement and the degree to which barriers between countries are removed; see trading bloc, free trade area, customs union, common market, monetary union. • preferential trade agreement An agreement between two or more countries to lower trade barriers between them on particular products, resulting in easier access to the markets of other members for the selected products, compared with the access of countries that are not members.

• trading bloc

•

A group of countries that have agreed to reduce tariff and other barriers to trade for the purpose of encouraging the development of free or freer trade and cooperation between them. free trade area A type of trading bloc, consisting of a group of countries that agree to eliminate trade barriers between themselves; it is the most common type of integration area, and involves a lower degree of economic integration than a customs union or common market. Each member country retains the right to pursue its own trade policy towards non- member countries. An example of a free trade area is NAFTA (North American Free Trade Agreement).

• common market A type of trading bloc in which countries that have formed a customs union proceed further to eliminate any remaining tariffs in trade between them; they continue to have a common external policy (as in a customs union), and in addition agree to eliminate all restrictions on movements of any factors of production within them; factors affected are mainly labour and capital, which are free to cross all borders and move, travel and find employment freely within all member countries. The best-known common market is the European Economic Community (EEC, the precursor of the present European Union). • customs union A type of trading bloc, consisting of a group of countries that fulfil the requirements of a free trade area (elimination of trade barriers between members) and in addition adopt a common policy towards all non-member countries; members of a customs union also act as a group in all trade negotiations and agreements with non-members. It achieves a higher degree of economic integration than a free trade area, but lower than a common market. • monetary union A high form of economic integration, involving the adoption by a group of countries of a single currency, such as some of the countries of the European Union (‘euro zone’ countries) that have adopted the euro. Monetary integration in addition involves the adoption of a common monetary policy carried out by a single central bank, which is necessitated by the use of a single currency.