Regional economic cooperation (REG) refers to agreements between countries in a geographic region to reduce and eventually remove trade barriers. REG allows for freer flow of goods, services, and factors of production. There are several forms of REG ranging from free trade areas to political unions. Free trade areas only eliminate tariffs between members but allow individual commercial policies with non-members. Customs unions establish a common external tariff in addition to free trade. Common markets incorporate free movement of capital and labor. Economic unions harmonize economic policies and potentially monetary policies. Political unions establish supranational authorities to coordinate economic and foreign policies. REG can provide economic benefits like economies of scale but also costs like loss of policy control and trade diversion.

1. REGIONAL ECONOMIC
COOPERATION
VIJYATA
LIKE SHARE SUBSCRIBE

2. Regional Economic Cooperation
REG or integration refers to an agreement among
countries in a geographic region to reduce and
ultimately remove , tariff and non-tariff barriers to the
free flow of goods , services and factors of production
between each other.
Regional trading blocs are operational in Europe,
North America, Middle East , Africa and Asia
Example – EU (European Union, SAARC, ASEAN etc)

3. Advantages of Regional Economic
Cooperation
• To obtain economies of scale by efficiently utilizing resources
distributing cost spreading them over larger regional markets.
• To strengthen political ties and managing migration flows
• To ensure increased security of market access for smaller
countries into the larger ones.
• To improve member’s bargaining strength in multilateral trade
negotiations
• To promote regional industries in protected regional markets

4. Disadvantages of Regional Economic
Cooperation
• Lower cost suppliers outside the regional blocs can get replaced by
higher cost suppliers within the bloc causing Trade Diversion
• Regional economic integration are seen as threat to national
sovereignty as REG requires to give-up some degree of control over
monetary, fiscal and trade policies.
• Tax revenue from tariffs for the importing country is reduced when
the exporting country becomes a member of the regional trading bloc
• A country as a whole may gain but certain groups within it may lose
to create sustainable business

5. Forms of Regional Groupings
FREE TRADE AREA
CUSTOMS UNION
COMMON MARKET
ECONOMIC UNION
POLITICAL UNION

6. FREE TRADE
AREA
Free trade among
member nations
CUSTOM
UNIONS
Free trade among
member nations
Uniform
Commercial Policy
COMMON
MARKET
Free trade among
member nations
Uniform
Commercial Policy
Free Mobility of
factors of production
ECONOMIC
UNION
Free trade among
member nations
Uniform
Commercial Policy
Free Mobility of
factors of production
Harmonised
economic
policies
POLITICAL
UNION
Free trade among
member nations
Uniform
Commercial Policy
Free Mobility of
factors of production
Harmonised
economic
policies
Supranational body

7. Free Trade Area
Allows free trade without any restriction among
members but each country is free to determine its own
commercial policy with non-members
When the free trade agreement provides only for
concessional tariff among members , it is called
preferential trade agreement
Free trade area may cover only selected goods and
services. It is the loosest form of economic integration.

8. Custom Union
• Advanced form of economic integration than FTA.
• Allows free trade without any restriction among
members AND each member nation of the union
adopts a uniform commercial policy towards the
non-members .
• A administrative machinery is set to oversee trade
relations with non members
• All members may adopt a common tariff structure

9. Common Market
• Allows free trade among members and an uniform
commercial policy towards non members.
• Additionally allows free movement of factors of
production (labour , capital , technology etc.) among
the members

10. Economic Union
• Free trade of goods and services
• Free trade of factors of production
• Uniform commercial policy towards non members
• Members follow common monetary , taxation and fiscal
policies which are harmonised by supranational institutions.
• There may be a common currency or the currencies of the
member countries may be tied together through fixed
exchange rate.

11. Political Union
• Ultimate form of economic integration.
• A central political authority coordinates the
economic , social and foreign policy of the member
countries.
• There exist supranational authority consisting of
legislative , executive and judicial wings.

12. FREE TRADE
AREA
Free trade among
member nations
CUSTOM
UNIONS
Free trade among
member nations
Uniform
Commercial Policy
COMMON
MARKET
Free trade among
member nations
Uniform
Commercial Policy
Free Mobility of
factors of production
ECONOMIC
UNION
Free trade among
member nations
Uniform
Commercial Policy
Free Mobility of
factors of production
Harmonised
economic
policies
POLITICAL
UNION
Free trade among
member nations
Uniform
Commercial Policy
Free Mobility of
factors of production
Harmonised
economic
policies
Supranational body

13. THANK YOU !!!
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