Regional Economic Integration

Regional Economic Integration

07.04.2021

Regional Economic Integration can best be defined as an agreement between groups of countries in a geographic region, to reduce and ultimately remove tariff and non-tariff barriers to the free flow of goods, services, and factors of production between each other.

Regional economic integration allows countries

• Improve market efficiency;
• Share the costs of public goods or large infrastructure projects;
• Decide policy cooperatively and have an anchor to reform;
• Have a building block for global integration;
• Reap other non-economic benefits, such as peace and security.

Cons

• Lowers sovereignty,
• Shift of employment,
• Inefficient trade diversion from productive exporters to less capable exporters.

VS

Benefits

• Creation of trade and more jobs
• Ecourages a grater consensus
• Allows for political cooperation

What are the pros and cons of regional integration?

Political union

Represents the potentially most advanced form of integration with a common government and were the sovereignty of a member country is significantly reduced.

5 levels of regional economic integration

1. Free trade.
2. Custom union.
3. Common market.
4. Economic union (single market).
5. Political union.

How does regional integration affect?

The regional integration also can affect the economic development or economic growth. A country with a highest economic rate will have more power and authority than other country members. Moreover, it can increase competition in tradeable goods sector.

Economic integration

Economic integration refers to the commercial policy of discriminately reducing or eliminating barriers to trade between a select group of countries.

What is an integration theory?

What is integration theory? Integrated theories are theories that combine the concepts and central propositions from two or more prior existing theories into a new single set of integrated concepts and propositions. The most common form of integration involves combining social control and social learning theories.

Common market

Free trade areasDuty free zones

Economic union

Customs union

Forms of economic integration

Preferential trade arrangements

Trade deflection

Free trade areas offer no barriers to flows of commodities internally but allow differential barriers to non-members. This may bias patterns of international trade as exporters will target their goods to the low-protection member of the free trade area to gain entry to the entire free trade area.

Dynamic benefits from customs unions

Stimulus to investment

Economies of scale in production

Increased competition

The European Union (EU)

• The EU developed from the European Economic Community that was initially established in 1958.
• The EU formally came into existence with passage of the Treaty of Maastricht in 1992.
• The Treaty of Maastricht also laid the foundation for the introduction of a unified European currency: the euro.
• Currently the EU has 27 member nations with an aggregate population of nearly half a billion.

European Ombudsman

European Economic and Social Committee

European Central Bank

Court of Auditors

Committee of the Regions

Court of Justice

European Comission

Council of the European Union

Institutions of the EU

European Parliament

Institutions of the EU

• Steps towards economic unification
• Internal tariffs and duties have been removed.
• Impediments to the free movement of labor and capital have been removed.
• Corporate law practices have been harmonized.
• Environmental regulations have been harmonized.
• Labor standards have been harmonized.

NAFTA

• The North American Free Trade Agreement (NAFTA) came into force in 1994.
• Objectives of NAFTA
• Eliminate barriers to trade between the US, Mexico, and Canada.
• Improve intellectual property rights protections between the member nations.
• Provide a dispute resolution mechanism for trade disputes under this agreement.

NAFTA

• An extension of NAFTA?
• The proposed Free Trade Area of the Americas (FTAA) is broadly modeled on NAFTA.
• The FTAA is designed to generate a free trade area throughout the western hemisphere (excluding Cuba).

Other Examples of Economic Integration

• Central American Common Market (CACM)
• Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua
• Latin American Free Trade Association (LAFTA)
• Mexico and most of South America
• Southern Common Market (Mercosur)
• Argentina, Brazil, Paraguay, Uruguay, Bolivia, Chile, Peru

Other Examples of Economic Integration

• Southern Africa Development Community (SADC)
• 12 southern African nations
• Association of Southeast Asian Nations (ASEAN)
• Brunei, Darussalam, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam.

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