The document discusses economic integration, including its various forms and levels. It defines preferential trade agreements, free trade areas, customs unions, common markets, and economic unions. It also outlines some benefits of economic integration like increased trade and foreign investment. Examples of economic unions discussed include the European Union, NAFTA, EFTA, and APEC. Potential problems with integration are also noted, such as costs of a single currency and differences between member economies.

1. Economic Integration

2.  A/qadir Farah MOHA’UD
 Ahmed Moham’ud Jama
 Kayse Mohamed Khalif
 Mustafe Abdi Hashi
 Mohamud Mohamed mohamud
 Fadumo Jama Aadan
 Farah Osman Said
 Bashir A/lahi Jama

3. Contents:
Meaning of economic integration
Forms of Economic Integration
Levels Of Economic Integration
Benefits of economic Integration
Problems of Economic Integration
Trade-Creating Customs Union
Trade-Diverting Customs Union
Static & Dynamic custom union
Static & Dynamic Benefits of custom union
North America Free Trade (NAFTA)
European Free Trade Association (EFTA)
Agenda Asia-specific Economic (APEC)

4. Economic integration is the commercial policy of
discriminatively reducing or eliminating trade
barriers only among the nations joining together.

5. o Preferential Trade Agreement
o Free trade Agreement
o Customs Union
o Common market
o Economic union/monetary union

6. Preferential trade arrangements provide lower barriers
on some trade among participating nations than on
trade with non-member nations. It is the loosest form
of economic integration

7. A free trade area is the form of economic integration
wherein all barriers are removed on trade among
members, but each retains its own barriers to trade
with nonmembers, such as EFTA, NAFTA,

8.  A customs union allows no tariffs or other barriers
on trade among members, and in addition it
harmonizes trade policies (such as the setting of
common tariff rates) toward the rest of the world,
such as EU, or European Union.


9. A common market goes beyond a customs union by
also allowing the free movement of labor and capital
among member nations. The EU achieved the status
of a common market at the beginning of 1993

10. An economic union goes still further by harmonizing
or even unifying the monetary and fiscal policies of
member states. This is the most advanced type of
economic integration. An example is Benelux

12.  1.Progress in trade.
All countries that follow economic integration have
extremely wide assortment of goods and services
from which they can choose
 2.Ease of agreement.
When countries enter into regional integration, they
easily get into agreements and stick to them for long
periods of time.
 3.Improved political cooperation.
Countries entering economic integration form groups
and have greater political influence as compared to
influence created by a single nation.

13.  4.Opportunitieforemployment.
The various options available in economic
integration help to liberalize and encourage trade.
 5.Beneficialforfinancialmarkets.
Economic integration is extremely beneficial for
financial markets as it eases firm to borrow finances
at low rate if interest.
 6.IncreaseinForeignDirectInvestments.
Economic integration helps to increase the amount
of money in Foreign Direct Investment (FDI).
 Thus economic integration is a win-win situation for
all the firms, people and the economies involved in
the process

14.  One-off cost of introducing a single currency
 Due to language differences, European labor is not a
mobile as America workers
 No unified central EU financial Authorities ( only
European central bank)
 European countries have different business cycle
 Inability to devalue one’s currency

15.  A trade creating customs union is a union that leads
to trade creation only and increases the welfare of
both member and nonmember nations.
 Trade creation occurs when some domestic
production in a nation (a member of the customs
union) is replaced by lower-cost imports from
another member nation. .
 It also increases the welfare of nonmembers
because some of the increase in its real income spills
over into increased imports from the rest of the
world

16. It is a customs union that leads to both trade
creation and trade diversion. It may increase or
reduce the welfare of member nations, depending
on the relative strength of these two opposing
forces.
 Trade diversion occurs when lower-cost
imports from outside the union are replaced by
higher cost imports from a union member. This is
because of the preferential trade treatment given
to member nations.

17.  Besides these static welfare effects, there are several
important
 dynamic effects that customs union offers to member
countries. These are
 due to increased competition, economies of scale,
stimulus to investment,
 and better utilization of economic resources.
 The main reason for that are the long-term effects
which result from
 the possibility of a preferential access to larger
market of the union and
 increasing export possibilities

18.  Comparison of the static and dynamic benefits:
 These dynamic gains of a customs union are
presumed to be much greater than the static gains
and to be very significant.
 Recent empirical studies indicate that these
dynamic gains are about five to six times larger than
the static gains.

19. In September 1993, the United States, Canada, and
Mexico signed the NAFTA, which took effect on
January 1, 1994. This agreement will eventually lead
to free trade in goods and services over the entire
North American area

20.  NAFTA benefits the United States by increasing
competition in product and resource markets, and by
lowering the prices of many commodities to U.S.
consumers.
 NAFTA benefited Mexico by
 (1) Leading to greater export-led growth resulting
from increased access to the huge U.S. market
 (2) Encouraging the return of flight capital
 (3) Fostering more rapid structural reforms
domestically. Mexico suffered a net loss of jobs and
incomes in agriculture, but these losses were more
than matched by net increases in industry.

21. The European Free Trade Association was formed by
the United Kingdom, Austria, Denmark, Norway,
Portugal, Sweden, and Switzerland, with Finland
becoming an associate member in 1961. The EFTA
achieved free trade in industrial goods in 1967, but
only a few special provisions were made to reduce
barriers on trade in agricultural products.

22. APEC's 21 Member Economies are Australia; Brunei
Darussalam; Canada; Chile; People's Republic of
China; Hong Kong, China; Indonesia; Japan; Republic
of Korea; Malaysia; Mexico; New Zealand; Papua
New Guinea; Peru; The Republic of the Philippines;
The Russian Federation; Singapore; Chinese Taipei;
Thailand; United States of America; Viet Nam.