lease define and understand what all these concepts mean) apter 1: The U.S. in a
ID: 1138711 • Letter: L
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lease define and understand what all these concepts mean) apter 1: The U.S. in a Global Economy and Chapter 2: ternational Economic Institutions Since World War International Economic Integration/Economic Globalization What does this mean? o 3 pillars of economic globalization: . Trade . FDI . Capital m(Foreign direct inaestmet) . Why is it beneficial? o Protectionism (3 main forms) . Tariffs . Quotas . Non-Tariff Barriers o Multilateral Organizations IMF ·World B GATT ·UN o Free Trade Agreements - RegionalArth Examples: NAFTA and EU Why so controversial? o Benefits of Economic Integration o Benefits vs. Costs of Trade CapitalExplanation / Answer
1. International Economic Integration or economic globalization-
It means removing or reducing the trade barriers between the contries, reducing tariff, and having proper cooperation in the fields of economic and political policies. It's done in steps and may include the following steps-
- Preferential treatment in trade,
- FTAs (Free Trade Agreements),
- Customs Union,
- Common market,
- Economic Union,
- Monetary union,
- Complete Economic Integration
Generally It's good for economies, but may have some drawbacks too. The country sovereignty maybe at risk because of free flow of trade, which also includes the labor and technology. Monetary and fiscal policies of a country is decided by the overall impact of other countries and thus, a country looses its freedom to form a policy according to its will.
Economic Globalisation is one step further than economic integration. The free flow of services, technology, goods and capital between borders of different economically integrated nations is called economic globalisation.
3 pillars of economic integration-
2. Trade- Lowering of barriers and economic restraints and coming up with the policies favoring the involvement of other countries on economical fronts.
3. FDI-
Foreign Direct Investment according to IMF (International Monetary fund) means when a company from one country owns 10% or more in a company from other country. It doesn't give the control over the company, but provides management related powers.
4. Why FDI is beneficial-
The investors' only motive is to gain profit, thus, no discrimination is seen.a its good for local companies as they get foreign investment and exposure. It's good for the economy as the foreign reserves increase. It's good for the customers as they get more diversity in company's products and policies.
5. Capital- Capital flow includes the free flow of money, tarriffs, taxes, costs relating to labor etc. The more the economies are integrated, the more will be the flow of capital.
6. Protectionism-
It simply means controlling the foreign imports. Such policies are good for the local producers and businesses against the competitive foreign producers.
It can be done through the following ways-
7. Tariff barriers- Tariffs are taxes on the imports or exports. These are applied on imports to reduce the supply of the foreign goods and thus increasing the price of them subsequently saving the local businesses. These are applied on exports if the local businesses are very much involved in exports and thus in order to maintain the trade balance, they maybe applied.
8. Quotas-
Limiting the quantity of goods imported is called putting a quota barrier. They are similar to tariffs. They increase the market price of foreign products, thus making it easy for the local businesses to survive.
9. Non tariff barriers-
These are barriers other than the tariff babarriers. For e.g. import quotas, public procurement, quantity restrictions, anti-dumping laws etc. Here, the main aim is to protect the local businesses, while in tariff, the main aim is to prevent the foreign imports.
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