Regional economic integration

1. REGIONAL ECONOMIC INTEGRATION
Chapter 2

2. What is Regional Economic Integration
[Regionalism]
 The process whereby countries in a geographic region cooperate
to reduce or eliminate barriers to the international flow of
products, people or capital is called regional economic
integration or regionalism
 A group of nations in a geographic region undergoing economic
integration is called a regional trading bloc.
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3. Benefits of Regional economic integration -
 Increases cross border trade
 Raise the living standards of the people
 Greater choice of products
 Lower prices
 Increased productivity
 Protect intellectual property rights
 Protect environment
 Protect political union
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4. Levels /Degrees of Regional Integration
1. Free trade area
2. Customs union
3. Common market
4. Economic union
5. Political union
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5. Levels of Integration …
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6. 1. Free Trade Area
- economic integration whereby countries seek to
remove all barriers to trade between themselves,
but each country determines its own barriers
against non members.
 Lowest level of economic integration between two or
more countries
 Strive to remove all tariff and non tariff barriers [such as
quotas and subsidies]
 They evolve a process to resolve trade problems
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7. 2. Customs Union –
- economic integration whereby countries remove
all barriers to trade among themselves, but erect a
common trade policy against non members .
- the member countries may negotiate as a single entity with
other supranational Organizations [WTO]
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8. 3. Common market –
- Economic integration whereby countries remove all
barriers to trade and the movement of labor and
capital between themselves, but erect a common
trade policy against non members.
- this level of integration is very difficult to attain
- benefits to individual countries may be
uneven
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9. 4. Economic Union –
- Economic integration whereby countries remove
barriers to trade and the movement of labor and
capital, erect a common trade policy against non
members, and coordinate their economic policies
- Requires member nations to harmonize their tax, monetary and
fiscal policies and to create a common currency
- Members need to concede a certain amount of their national
autonomy to
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10. 5. Political Union –
- economic and political integration whereby
countries coordinate aspects of their political and
economic systems. [Ex: US & Canada]
- requires member nations to accept a common
stance on economic and political policies regarding
non member nations.
- Nations are however allowed certain degree of
freedom in setting certain political and economic
policies within their territories.
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11. Effects of Regional Economic Integration
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Potential
benefits
Potential
drawbacks
 Trade diversion
 Shifts in employment
 Loss of sovereignty
 Trade creation
 Greater consensus
 Political cooperation
 Creates jobs

12. World’s main Regional Trading Blocs …
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13. European Union (EU)
Pop: 495 million
GDP: $18 trillion
Members: 27
Economic Union
Began: 1951

14. European Free Trade Association
Iceland, Liechtenstein,
Norway, Switzerland
 Feared lost sovereignty
 Feared destructive rivalry
 Desired free-trade gains
 Cooperates with EU
Pop: 12.5 million
GDP: $707 billion
Members: 4
Free-Trade Area
Began: 1960

15. North American Free Trade Agreement
Pop: 445 million
GDP: $16 trillion
Members: 3
Free-Trade Area
Began: 1994

16. Central American Free Trade Agreement
• Established in 2006
between U.S. and 6 others
• U.S., Costa Rica, Guatemala,
Honduras, El Salvador,
Nicaragua, & Dominican Rep.
• Should create regional
integration, peace, and stability
• Combined value of goods
traded is around $32 billion

17. Middle East - Gulf CooperationCouncil
(GCC)
 Six Arab nations (1980) Bahrain, Kuwait,
Qatar, Oman, Saudi Arabia, and the
United Arab Emirates
 Economic and political aims
 Free travel; property rights