How Governments Enact Trade Policy: Globally, Regionally, and Nationally

Self-Check Questions

What is the difference between a free trade association, a common market, and an economic union?

Hint:

A free trade association offers free trade between its members, but each country can determine its own trade policy outside the association. A common market requires a common external trade policy in addition to free trade within the group. An economic union is a common market with coordinated fiscal and monetary policy.

Why would countries promote protectionist laws, while also negotiate for freer trade internationally?

Hint:

International agreements can serve as a political counterweight to domestic special interests, thereby preventing stronger protectionist measures.

What might account for the dramatic increase in international trade over the past 50 years?

Hint:

Reductions in tariffs, quotas, and other trade barriers, improved transportation, and communication media have made people more aware of what is available in the rest of the world.