Notes on EU
Notes on EU FMIB3
Hult International Business School
Popular in Global Economics
Popular in International Business
This 3 page Class Notes was uploaded by Mischa Rapt on Tuesday September 22, 2015. The Class Notes belongs to FMIB3 at Hult International Business School taught by David Green in Summer 2015. Since its upload, it has received 11 views. For similar materials see Global Economics in International Business at Hult International Business School.
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Date Created: 09/22/15
International Cooperation the EU 0 Eurozone is a currency union opening borders adopting common currencies laws and regulations key is to create large domestic markets exploit economies of scale 0 Trade terms tarriffs on particular goods to preotect domestic businesses or technical restrictions Nontariff barriers restrictions on trade such as on quantitiesquotas or technical restrictions standards health inspections Free Trade trade not restricted by tariffs or non tariff barriers Belassa s Hierarchy of Economic Unionpicture of increasing integration and complexity between countries 1 Preferential Trading Areas favorable tariffs for particular goods between groups of trading partners focus on common external tariffs between particular groups of countries favors some groups discriminates against othersmore about politics than economics Free Trade Areas NAFTAMercosurASEAN free trade agreements within a group of countries to free trade or low tariffs focus is trade within the group fragmented markets limit growth potential ie ASEAN car markets many FTA39s are politically exhausting and technicaly demanding many unsuccessful ones overlapping FTA39s inconsistent with each other39noodle bowl39 of agreements Customs Union Common external tariffs free trade area common external trade policies Common MarketsFactors of production move freely between members customs union free movement of goods and services capital and labor common economic space ASEAN aims at single production base but not on free movement of unskilled labor EU Needs open borders common technical standards Economic amp Monetary Currency UnionCommon currency harmonized tax rates common monetary and scal policy EU partial common currency gives up exchange rate policy independent monetary policy to have common currency lowering foreign exchange risk for trade 6 Complete Economic IntegrationPolitical Unioncommon government no independent scal policy ie US arguably most successful example of economic integration trade national sovereignty for economic development Harmonization key success to regional cooperation similar policies across countries harmonization of standards least appreciated but most important activities EU has worked hard at harmonization lack of harmonization has costs ie ASEAN lack of uniform product standards European Union Experiment born from political concerns economic union seen as solution to lack of political union Problems nancial system meltdowns economic slowdowns have weakened scal positions spending more money leading to unsustainable borrowing Greece Portugallrelandltaly and Spain unable to repay govt debt in full richer countries have bailed out poorer countries so far Maastricht Treaty was to prevent this Convergencecohesion criteria in ation rate not more than 15higher than three best performing member states govt de cit and govt debt must not exceed certain amount bound exchange rates within agreed range long term nominalinterest must not be 2 higher than 3 best performing members Europe wasn39t really prepared Convergencecohesion criteria not fully honored no mechanisms were introduced to stabilize countries through scal policies europe only has partial labor mobility monetary policy that t some countries Germanyfrance made it worse for others EU govt debt is rising Greece particularly faces dif cult issues practicing austerity unable to cover spending heavily relying on loans from other European countries bailouts needed until 2014 decreasing GDPHigh rising unemployment govt debt and lowered budget de c Solutions grow their way out of debtgrowth raises govt revenues restrict spending raise taxes practice austerity repudiate debt really expensive Greece close to it forced to debt restructuring receive debt transfers or debt assistance from international partners reativey small rebound in Greece with surplus of exports over imports No solutions appear attractive austerity never popular unfavorable for richer countries to bail out poorer countries Withdraw from Euro countries withdrawing from Euro face complicated debt and currency issues involves real problems reintroduction of new currency overnightcollapse of trade in Europe etc
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