Regional Trade Integration

1. International Economics
Lecture 11
Regional Economic
Integration

2. Regional Economic
Integration

3. Regional Economic
Integration
Agreements among countries
to reduce trade barriers
Over 400 Agreements

4. WTO
1995
157 Members

5. European Union
EU
1993
27 Nations
500 million
$17 trillion US

6. NAFTA
North American Free Trade Act
1994
27
Nations

7. Levels of Integration Free Trade - Removing
barriers between each
other.
Political Union
Customs - Free Trade plus
Economic Union
common external trade
EU policy
Common Market
Customs Common Market -
Customs plus free flow of
Free factors of production.
Trade
Economic Union - Common
Market plus common
currency and tax rates.
Political Union - Economic
Union plus unified political
management.
NAFTA

8. Case for
Integration

9. Case for
Integration
Greater wealth
Cooperation
Power

10. Case against
Integration

11. Case against
Integration
Trade Creation
Trade Diversion

12. Impediments
Integration

13. Impediments
Integration
Nations win, groups lose
National Sovereignty

14. Euros Benefits
• Lower costs
17 of the 27 EU • Easier to compare
• Efficiency
• Liquidity
• New opportunities
Costs
• Lose control
• Not optimal currency area
• Currency should follow
political union

15. The Cooperation Council
of the Arab States of the Gulf
Gulf Cooperation Council
GCC
1981

16. Saudi Arabia
UAE
Oman
Qatar
Bahrain
Kuwait