Question 2

Define economic integration and explain 3 ways Covid 19 Pandemic has influenced it? (8
marks)

Economic integration refers to the process of eliminating trade barriers and promoting
cooperation among countries to create a unified economic system, and involves the removal
of tariffs, quotas, and other barriers to facilitate the flow of goods, services, and investments
between nations.

The Covid-19 pandemic has had a significant impact on economic integration in several
ways:

1. Disruption of Global Supply Chains: The pandemic caused disruptions in global supply
chains due to lockdown, travel restrictions, and reduced production. This led to a decline in
international trade and highlighted the vulnerability of highly integrated economies that
heavily rely on global supply chains.

2. Rise in Protectionism: In response to the crisis, some countries resorted to protectionist

measures such as imposing export restrictions, tariffs, and trade barriers on essential goods
like medical supplies. This trend towards protectionism has hindered the progress of
economic integration and increased trade tensions.

3. Shift towards Regionalism: The pandemic has accelerated the shift towards regional
economic integration. Countries have sought to strengthen regional cooperation and reduce
dependence on global supply chains by promoting regional trade agreements and
partnerships. Regional integration initiatives have gained momentum as countries aim to
enhance resilience and secure essential supplies within their regions.

Overall, the Covid-19 pandemic has posed significant challenges to economic integration by
disrupting global supply chains, fueling protectionism, and driving a shift towards
regionalism. However, it has also highlighted the importance of international cooperation and
the need to strengthen resilience in the face of future crises.

b. List five (5) reasons why countries/territories need to co-operate with economic
integration. (5 marks)

There are several reasons why countries/territories need to cooperate with economic
integration:

1. Increased Trade: Economic integration allows for the removal of trade barriers, such as
tariffs and quotas, promoting the flow of goods and services between countries. This leads to
increased trade volumes and access to larger markets.

2. Enhanced Economic Efficiency: Cooperation in economic integration enables countries to

specialize in the production of goods and services they have a comparative advantage in. This
leads to increased efficiency, productivity, and economic growth.

3. Foreign Direct Investment (FDI): Economic integration attracts foreign direct investment
by creating a larger market and a more stable business environment. This helps
countries/territories to attract capital, technology, and expertise from abroad, stimulating
economic development.

4. Shared Resources and Infrastructure: Cooperation in economic integration allows

countries/territories to share resources and infrastructure, such as transportation networks,
energy grids, and telecommunications systems. This reduces duplication of efforts and
promotes cost-effectiveness.

5. Political Stability and Peace: Economic integration fosters interdependence and mutual
interests among countries/territories. By promoting economic cooperation, it can contribute to
political stability, peace, and conflict resolution, as nations have a vested interest in
maintaining peaceful relations for economic benefits.

C. List and discuss the four (4) main categories of trade agreements (8 marks).

The four main categories of trade agreements are:

1. Bilateral Trade Agreements: These agreements are between two countries and aim to
reduce or eliminate trade barriers such as tariffs, quotas, and other restrictions. Bilateral trade
agreements can cover a wide range of sectors, including goods, services, and investments.

2. Regional Trade Agreements: These agreements are between countries within a specific
region or geographic area. They aim to promote regional integration by reducing trade
barriers and increasing cooperation among member countries. Examples of regional trade
agreements include the European Union (EU), the North American Free Trade Agreement
(NAFTA), and the African Continental Free Trade Area (AfCFTA).

3. Plurilateral Trade Agreements: These agreements involve a subset of countries that

share common interests or goals in a particular sector or area of trade. Unlike regional or
bilateral agreements, plurilateral agreements are not limited to a specific geographic area.
Examples of plurilateral agreements include the Information Technology Agreement (ITA)
and the Environmental Goods Agreement (EGA).

4. Multilateral Trade Agreements: These agreements involve multiple countries and aim to
create a level playing field for international trade by establishing common rules and
standards. The most well-known multilateral trade agreement is the World Trade
Organization (WTO), which sets rules for global trade and provides a forum for negotiating
new trade agreements.

d. Define the following terms and give examples: (5 marks)

i. Quota: A quota is a limit on the quantity of a particular product that can be imported or
exported during a specified period. Quotas are used to restrict trade and protect domestic
industries from foreign competition. For example, the United States has a quota on the
number of sugar imports allowed from certain countries.

ii. Tariff: A tariff is a tax imposed on imported or exported goods. Tariffs are used to
generate revenue for governments and protect domestic industries from foreign competition.
For example, the European Union imposes a tariff on imported cars from non-EU countries.
iii. Subvention: A subvention is a financial assistance provided by a government to support a
particular industry or sector. Subventions are used to promote domestic production and
exports. For example, the French government provides subventions to its wine industry to
help maintain its competitiveness.

iv. Voluntary Export Restraint (VER): A voluntary export restraint is an agreement between
two countries where the exporting country agrees to limit its exports of a particular product to
the importing country. VERs are used to avoid the imposition of more restrictive trade
measures such as quotas or tariffs. For example, in the 1980s, Japan agreed to a VER on its
automobile exports to the United States.

v. Trade policy: Trade policy refers to the set of rules and regulations that govern
international trade between countries. Trade policies can include measures such as tariffs,
quotas, subsidies, and regulations that affect the flow of goods, services, and investments
between countries. For example, the United States has implemented a trade policy that seeks
to reduce its trade deficit with China by imposing tariffs on Chinese imports.