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Regional Integration

Regional Integration. Free trade area – free trade within Customs union – free trade within + common external tariff Common market – customs union + free exchange of labor and capital Economic Union – Common market + common economic policies

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Regional Integration

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  1. Regional Integration • Free trade area – free trade within • Customs union – free trade within + common external tariff • Common market – customs union + free exchange of labor and capital • Economic Union – Common market + common economic policies • Economic Integration – Economic Union + common social policies and a supranational authority

  2. Economic groupings

  3. WTO • Developed from GATT (General Agreement on Tariffs and Trade) • post WWII • Facilitate economic recovery through trade • Reduce tariffs, restrictions and subsidies • Fundamental principal – non-discrimination • WTO evolved from GATT in 1994 • Primary change – enforcement • Mission: “to ensure that trade flows as smoothly, predictably and freely as possible"

  4. WTO principles • Nondiscrimination • Most-favored Nation • National Treatment • Transparency

  5. Advantages • Important role in ensuring world peace • Reduces rich country/poor country inequalities • Gives poor countries a voice • Makes goods and services cheaper and increases consumer choice • Promotes trade that also raises incomes • Stimulates trade to increase jobs • Promotes good government

  6. Critiques • The WTO is undemocratic, and does not decrease conflict • Big countries are bullies • Fair trade lowers income for the poor • Free trade causes unemployment when imports threaten jobs • WTO focuses exclusively on trade – what about i) environment, ii) labor standards, iii) total employment

  7. Structural Adjustment Programs • Policies imposed by the IMG and WB as conditions for receiving loans • The goal is to balance a nations books, through economic growth, income generation, balancing trade deficits and debt repayment. • Conditions include privatization, regulation, reduction of trade barriers

  8. Grameen Bank • Micro-credit – extension of loans to entrepreneurs to small to qualify for traditional bank loans • Prof. Yunus, Winner of 2006 Nobel Peace Prize • problem not just lack of money, but lack of capital. • Grameen means “village” • Grameen bank target bottom 25% of the population • Principal: turn social collateral/mutual insurance into capital

  9. How it works • Small loans: primarily to women • Must have existing business, not farms • Loan must capitalize that business • Weekly payments and savings are required • Money is loaned to a credit group, not to the individual • Joint liability: The entire group is responsible for repayment • Monitoring happens through peers and center staff

  10. What activities? • Weaving • Goat fattening • Handicrafts • Cellular phones

  11. Advantages • Provides capital, freedom from usury • Empowers women and the poor • Encourages self-help and savings • Reduces fertility • Contributes to group solidarity

  12. Disadvantages • High interest rates: 20%, can be compounded to over 70%/year • Some communities may be in a debt trap • Real winners are the corporations that sell goods to the borrowers • Grameen is not transparent, but it is believed that it receives large subsidies, nor does it pay taxes • it is a form a social welfare, not a bank

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