Study Guide: The European Union

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Multinational market regions: groups of countries that seek mutual economic benefit from reducing interregional trade and tariff barriers La Raison d’Etre
Successful economic union requires favorable economic, political, cultural, and geographic factors as a basis for success. Major flaws in any one factor can destroy a union unless the other factors provide sufficient strength to overcome the weakness. Economic Factors

Every type of economic union shares the development and enlargement of market opportunities as a basic orientation; usually, markets are enlarged through preferential tariff treatment for participating members, common tariff barriers against outsiders or both. Enlarged or, protected markets stimulate internal economic development by providing assured outlets and preferential treatments for goods produced within the customs union and consumer benefits from lower internal tariff barriers among the participating countries Political Factors

Political amenability is another prerequisite for the development of a supranatural market arrangement, and must have general compatibility. Political elements are equally important Geographical and Temporal Proximity

Although this category is not absolutely imperative for cooperating members of customs unions such closeliness does facilitate the functioning of a common market. More important than geographic is changing time zones. Transportation and trade are more likely to be interrelated if they are close in geographic location. Cultural Factors

The more similar the culture the more likely an agreement is to succeed, because members understand the outlook and viewpoints of their colleagues. FORMS OF MULTINATIONAL GOUPS
Regional Cooperation Group
The most basic economic integration and cooperation is the “regional cooperation for development (RCD)” governments agree to participate jointly to develop basic industries beneficial to each economy. Each economy makes an advance effort to participate in the financing of a new joint venture and to purchase a specified share of output of the venture. Example: is the project between Colombia and Venezuela to build a hydroelectric generating plant on the Orinoco River. They share jointly in construction costs, and they share the electricity produced. Free Trade Area

Requires more cooperation and integration than the RCD. It is an agreement between two or more countries to reduce or eliminate customs duties and nontariff trade barriers among partner countries while members maintain individual tariff schedules for external countries. Customs Union

Represents the next stage in economic cooperation. It enjoys the free trade area’s reduced or eliminated internal tariffs and adds a common external tariff on products imported from countries outside the union. The customs union is a logical stage of cooperation in the transition from an FTA to a common market. Common market

Agreement eliminates all tariffs and other restrictions on internal trade, adopts a set of common external tariffs, and removes all restrictions on the free flow of capital and labor among member nations. Thus a common market is joint marketplace for goods as well as for services (including labor) and for capital. It is a unified economy and lacks only political unity to become a political union. Political Union

A political union is the most fully integrated form of regional cooperation. It involves complete political and economic integration, either voluntary. The “commonwealth” of nations is a voluntary organization providing for the loosest possible relationship that can be classified as economic integration. A commonwealth can best be described as the weakest of political unions and is mostly based on economic history and a sense of tradition. Head of state meet every three years to discuss trade and political issues they jointly face, and compliance with any decisions or directives issued is voluntary. EUROPEAN INTEGRATION

Despite the...
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