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Trade Blocks Forms of Economic Integration • Free Trade Area – No tariffs (example: EFTA) • Customs Union – Joint external tariffs (example: Caribbean Common Market) • Common Market • Economic Union • Political Union Forms of Economic Integration • Free Trade Area • Customs Union • Common Market – Free movement of labor – Free movement of capital (example: European Union) • Economic Union – United fiscal/monetary policies (example: Belgium/Luxembourg) • Political Union Forms of Economic Integration • • • • • Free Trade Area Customs Union Common Market Economic Union Political Union – Loss of local status, gain of national identity – Single federal government (examples: USA, Canada, former USSR) European Community • Established 1958 through the Treaty of Rome • Founding Members: – Germany – France – Italy – Belgium – Luxembourg – Netherlands European Community • 1973 Additions: – United Kingdom – Ireland – Denmark • 1981 Addition: – Greece • 1986 Additions: – Spain – Portugal European Community • 1990 Addition: – East Germany (through merger) • 1995 Additions: – Finland – Sweden – Austria • Key Features: No internal tariffs, joint external tariffs, free movement of labor and capital. Europe Facts • 71.3% of young people speak at least one additional language. 53.7% speak English, 19.9% French and 11% German as foreign language. • 37.8 holidays/year. US: 33 days. • EU salaries are 1/3 less than in US. • EU: 344 million people, US: 240 million. • 1998 EU unemployment 11% (Germany 10%, US 4.5%). OPEC • Organization of Petrol Exporting Countries • Independent association of most countries with oil/gas reserves • Strong and effective negotiation partner of oil companies and governments • Responsible for international price fixing • Highly political World Trade Organization • Formerly GATT (General Agreement on Tariffs and Trade) • New organization with membership of all important trading nations • Judicial body for resolution of trade disputes (banana war, meat quotas, etc.) • Questionable effectiveness in forcing countries to comply with WTO agreements World Bank • Established 1944 by 44 governments in Bretton Woods, NH • 188 member countries International Monetary Fund Summary: Trade Blocks • Trade block formation is essential for local and regional economic growth • Political cooperation among nations costs sovereignty • Isolation causes independency which reduces trade and wealth-creation opportunities