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Chapter 8: Problem 21

The trading bloe that has eliminated all internal tariffs is (LO7) a) the European Union b) NAFTA c) Mercosur d) the World Trade Organization

Short Answer

Expert verified
The correct answer is a) the European Union, as it is the trading bloc that has eliminated all internal tariffs among its member countries.

Step by step solution

01

Understand trading blocs and internal tariffs

A trading bloc is an agreement among countries within a geographical region to reduce or eliminate trade barriers, such as tariffs, import quotas, and non-tariff measures, to facilitate the exchange of goods and services among its members. Internal tariffs are taxes imposed by countries on imported goods and services from other member countries within a trading bloc. With this understanding, let's examine each option.
02

Evaluate Option a) European Union (EU)

The European Union (EU) is a political and economic union of 27 European countries. It has established an internal/single market with the free movement of goods, services, capital, and people. One of the key aspects of the EU is the elimination of internal tariffs among its member countries, which allows for seamless trade and economic integration. Therefore, the EU can be considered a trading bloc that has eliminated all internal tariffs.
03

Evaluate Option b) NAFTA

NAFTA, or the North American Free Trade Agreement, was a trade agreement between the United States, Canada, and Mexico that was in effect from 1994 to 2020. Its goal was to eliminate trade barriers, including tariffs, between its three member countries. Although NAFTA did significantly reduce or remove many internal tariffs, it did not completely eliminate all of them.
04

Evaluate Option c) Mercosur

Mercosur, or the Southern Common Market, is a regional trade bloc in South America, which currently consists of Argentina, Brazil, Paraguay, and Uruguay. Mercosur aims to facilitate trade among its member countries by removing trade barriers, including tariffs. Similar to NAFTA, while Mercosur has worked towards reducing tariffs, it has not eliminated all internal tariffs entirely.
05

Evaluate Option d) World Trade Organization (WTO)

The World Trade Organization (WTO) is an international organization that sets global trade rules and helps to settle trade disputes between countries. While the WTO’s primary goal is to promote free trade among its 164 member countries, it is not a regional trading bloc like the other options mentioned, and it has not eliminated all internal tariffs among its members.
06

Select the correct answer

Based on the evaluation of each option, the European Union (a) is the trading bloc that has eliminated all internal tariffs. Therefore, the correct answer is: a) the European Union

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Most popular questions from this chapter

Which statement is true about the European Union? (L.O7) a) It has not taken in any new member nations since its formation. b) All of its members must use the euro as its official currency. c) It is essentially a free trade area. d) It has been basically a failure.

Which one of these is the most accurate statement that can be made about the issue of buying a product that is made with sweatshop labor? (LO7) a) All products made with sweatshop labor should be boycotted. b) Everyone should be encouraged to buy products made with sweatshop labor. c) Virtually all the goods we import are made with sweatshop labor. d) Although wages in sweatshops are very low, they are generally higher than workers could earn in other jobs.

The main criticism Joseph Stiglitz levels at the IMF is that (LO7) a) it provides too many loans that are not repaid b) it no longer promotes economic growth, but rather contraction c) it does not provide enough loans d) it does not sufficiently promote the market system

Which is the most accurate statement? (1.03) a) Our trade deficit has narrowed since \(1995 .\) b) We export more merchandise than services (in terms of dollars). c) The largest service purchase that forcigners make from the United States is educational services. d) In recent years foreigners have generally refused to accept U.S. dollars in payment for their goods and services.

Which statement is false? (LO3) a) During World War I and World War II, the sum of our imports and exports as a percent of GDP rose sharply. b) Foreign trade in goods is much more important to the American economy than forcign trade in services. c) Because the American economy is much larger than any other economy, we can continue running larger and larger trade deficits for as long as we like. d) We pay for a large chunk of our trade deficit with U.S. dollars.
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