Economic integration involves countries agreeing to reduce barriers to the flow of goods, services, capital and labor between them. There are several stages of economic integration from free trade areas to economic unions. A free trade area eliminates tariffs between members but each country sets its own external tariffs. A customs union adds a common external tariff. A common market extends free movement to all economic resources. An economic union harmonizes some economic policies in addition to a common market. Examples discussed include NAFTA, the European Union, ASEAN and APEC.

1. INTERNATIONAL BUSINESS
RAHUL R J
Govt Arts college ,Thycaud,TVM

2. ECONMIC INTEGRATION
Economic integration is an agreement among countries in a
geographic region to reduce and ultimately remove, tariff
and non tariff barriers to the free flow of goods or services
and factors of production among each others; any type of
arrangement in which countries agree to coordinate their
trade, fiscal, and/or monetary policies are referred to as
economic integration.

3. Advantages
I. Increased foreign direct investment
II. Economies of scale
III. Competition
IV. Trade Effects
V. Improved Market Efficiency

4. Disadvantages
i. Interdependence
ii. Concessions
iii. Loss of Sovereignty
iv. Regionalism vs. Multinationalism

5. Stages of economic integration
The degree of economic integration can be categorized into
five stages:
1. Free trade area
2. Customs union
3. Common market
4. Economic union

6. FREE TRADE AREA
A free trade area occurs when a group of countries agree
to eliminate tariffs between themselves, but maintain their
own external tariff on imports from the rest of the world.
The North American Free Trade Area is an example of a
FTA.
 The NAFTA is fully implemented, tariffs of automobile
imports between the US and Mexico will be zero.

7. CUSTOMS UNION
 A customs union occurs when a group of countries agree
to eliminate tariffs between themselves and set a
common external tariff on imports from the rest of the
world.
The European Union represents such an arrangement.
 A customs union avoids the problem of developing
complicated rules of origin, but introduces the problem of
policy coordination

8. COMMON MARKET
• common (or single) market is the most significant step
towards full economic integration. In the case of Europe,
the single market is officially referred to a the 'internal
market'.
• The key feature of a common market is the extension of
free trade from just tangible goods, to include all
economic resources. This means that all barriers are
eliminated to allow the free movement of goods, services,
capital, and labour.

9. ECONOMIC UNION
• Economic union is a term applied to a trading bloc that
has both a common market between members, and a
common trade policy towards non-members, although
members are free to pursue independent macro-
economic policies.

10. Free Trade
area
Free trade
among
members
Customs
union
Free trade
among
members
Common
external
economic
policy
Common
market
Free trade
among
members
Common
external
economic
policy
Free factor
mobility
within the
market
Economic
union
Free trade
among
members
Common
external
economic
policy
Free factor
mobility
within the
market
Harmonised
economic
policies
Economic
integration
Free trade
among
members
Common
external
economic
policy
Free factor
mobility
within the
market
Harmonised
economic
policies
Super
national
organisation
al structure

12. North American Free Trade
Agreement
o free trade area for U.S., Canada & Mexico but not a customs
union
o issues:
• U.S. & Canada represented developed economies while
Mexico was a developing economy
• Mexico’s authoritarian political system
• substantial difference in standard of living between Mexico and
Canada & U.S.
o decision: integrate Mexico to stimulate development or allow
problems in that nation to continue to spill over borders

13. Benefits to Mexico
o substantial benefits for Mexico because it integrated
with much larger economies
o increase in production of goods in which it has
comparative advantage
o gains at the expense of other low-wage nations
o increases in agricultural goods and labor intensive
goods
o agriculture represents small portion of GDP but
supports roughly 25% of the population

14. Benefits & Concerns for Canada
o Benefits:
• maintain status in international trade
• free trade preference in U.S. market
• equal access to Mexico’s market
• inclusion in future free trade area with Central &
South America
• economies of scale associated with increased output
levels
o Possible Cost: closer integration with U.S. as
potential threat to Canada’s social welfare system

15. Objectives of NAFTA
To create new business oppurtunities particularly in
Mexico.
To reduce the price of the products and services by
enhancing the competition.
To enhance industrial development and thereby
employment throughout the region.
To develop industries in Mexico in order to create
employment and to reduce migration from mexico to the
USA.

16. The European Union
The European union is a political community constituted
as an international organisation whose aims is to promote
integration and a common government of the European
people and countries.
The European Union is a unified trade and monetary body
of 28 member countries. It eliminates all border controls
between members. That allows the free flow of goods and
people.

17. Objectives of European Union
i. Establishing an area of freedom, security and justice
without internal borders.
ii. Promoting scientific and technical progress.
iii. Promoting economical , social and territorial cohesion
and solidarity among member states.
iv. Fighting against social exclusion and discriminaton.

19. The Association of Southeast Asian
Nations (ASEAN)
• The Association of Southeast Asian Nations is a regional
intergovernmental organization comprising ten Southeast
Asian countries that promotes intergovernmental
cooperation and facilitates economic, political, security,
military, educational, and sociocultural integration
amongst its members, other Asian countries, and
globally.

20. • Since its formation on 8 August 1967 by Indonesia,
Malaysia, the Philippines, Singapore, and Thailand,the
organisation's membership has expanded to additionally
include Brunei, Cambodia, Laos, Myanmar, and Vietnam.
Its principal aims include accelerating economic growth,
social progress, and sociocultural evolution among its
members, alongside the protection of regional stability
and the provision of a mechanism for member countries
to resolve differences peacefully.

26. Asia-Pacific Economic Cooperation
• Asia-Pacific Economic Cooperation (APEC) is a forum
for 21 Pacific Rim member economies that promotes free
trade throughout the Asia-Pacific region.
• It was established in 1989 in response to the growing
interdependence of Asia-Pacific economies and the
advent of regional trade blocs in other parts of the world