Regional economic integration refers to agreements among countries in a geographic region to reduce and ultimately remove tariffs and non-tariff barriers to trade. There are various levels of integration including free trade areas, customs unions, common markets, economic unions, and political unions. The document discusses the case for and disadvantages of regional integration. Key benefits include increased specialization and economic growth from free trade, as well as greater political cooperation and foreign investment attraction. History and structures of economic unions like the EU, NAFTA, and ASEAN are also outlined.

1. Regional Economic
Integration
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2. Regional Economic Integration
• Refers to agreements among countries in a
geographic region tor educe, 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 also known as
trade blocs .

3. Levels of Economic Integration
1. Free Trade Area
2. Customs Union
3. Common Market
4. Economic Union
5. Political Union
• Free Trade Area: all barriers to the trade of
goods and services among member countries are
removed.

4. Levels of Integration
• Customs Union: eliminates trade barriers between
member countries and adopts a common external trade
policy.
• Common Market: Has no barriers to trade between
member countries, includes a common external trade
policy, and allows factors of production to move freely
between members.
• Economic Union: involves free flow of products and
factors of production between member countries and
adoption of a common external trade policy. It also
requires common currency, harmonization of members’
tax rates, and a common monetary and fiscal policy.

5. Levels of Integration
• Political Union: Moving toward economic union,
raises questions of how to coordinate bureaucracy
accountable to the citizens of member nations.
Political union in which a central political apparatus
coordinates the economic, social, and foreign policy
of the member states is the answer.

6. Case for regional integration
• Economic case:
• Unrestricted free trade will allow countries to
specialize in production of goods and services that
they can produce most efficiently.
• Allowing free trade stimulates econmic growth
• FDI can transfer technological, marketing and
managerial know-how to host nations
• It is easier to establish a free trade regional
agreement among a free countries than with say
WTO.

7. Case for regional integration
• Political case:
• Linking economies together and creating
dependencies forces them to resolve conflicts in an
amiable manner
• By grouping their economies, the regional countries
can enhance their political clout in the world

8. Disadvantages trade to integration
• Loss of sovereignty: giving up controls in fiscal
and monetary policy as well as tax rates
• Loss of jobs – in some sectors
o NAFTA – USA and Canada workers lost jobs in the textile and
other low-cost jobs

9. Advantages of regional trade integration
• Trade creation: occurs when high-cost domestic
producers are replaced by low-cost producers within
the free trade area.
• Trade diversion: Trade diversion, whereby
trade shifts from more efficient non-member
nations to less efficient member countries as a
result of preferential trade agreements,.
Fostering Regional Integration: push
member nations to collaborate on a range of
issues, including investment policy, regulatory
harmonization, and infrastructure development.
Greater regional integration, collaboration, and
stability may result from this.

10. Attracting Foreign Investment: RTAs can aid in
attracting foreign investment to member countries by
fostering a more stable and predictable business
climate. In turn, this might encourage employment
development, technology transfer, and economic
expansion.
Facilitating Access to New Markets: RTAs can
assist member nations in gaining access to new
markets and broadening their sphere of influence
internationally. Small and medium-sized businesses
(SMEs),

11. History of EU
• Forerunner of EU, the European Coal and Steel
Community was formed in 1951 by Belgium, France,
West Germany, Italy, Luxembourg and the Netherlands.
• Treaty of Rome (1957): The European Community was
established. - Provided for COMMON MARKET
• Grew in 1973 with additions of UK, Ireland and
Denmark.
• Greece joined in 1981.
• 1986- Spain and Portugal
• 450 million people today with GDO of 11 Trillion dollars

12. Europe
• European commission: proposes EU legislation,
implementing and monitoring compliance with EU
laws by member states.
• European parliament: has 732 members directly
elected by the population of the member states.;
mostly consultative rather than legislative body
• Court of justice: supreme appeals court for EU law
– consists of one judge from each country.

13. Regional Trade Unions
• NAFTA: USA, Canada, Mexico
• Andean Pact: Bolivia, Chile, Ecuador, Colombia and
Peru (now operates as a customs union including
Venezuela but minus Chile)
• MERCOSUR – originated with Brazil and Argentina
0 includes Paraguay and Uruguay.
• ASEAN: Brunei, Cambodia, Indonesia, Laos,
Malaysia, Myanmar, Philippines, Singapore,
Thailand, Vietnam

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