Regional Economic Integration

Objectives of Regional Economic Integration Different Types and levels of Integration

Regional Economic Integration

Introduction: International Business is being significantly impacted by schemes of economic integration of different nations The global trading system has seen a rapid increase of regional economic integration schemes or trade blocs( Regional Trade Agreements) designed to achieve various economic ,social and political purposes

Regional Economic Integration

These Agreements have been concluded among high income countries, among low income countries and also between high income and developing countries such as North American Free Trade Agreement ( NAFTA) Regional Integration Schemes tend to increase inter-regional trade

Regional Economic Integration

Objectives A more efficient Production Structure by getting economies of scale through spreading fixed costs over larger regional markets Non-economic objectives political ties, migration flows To have a higher bargaining power for its members in multilateral negotiations and also to demonstrate against the slow pace of trade negotiations

Regional Economic Integration

Objectives: To promote regional infant industries which require a protected regional market To prevent further damage to their trading strength due to trade diversion from third countries

Regional Economic Integration

Types of Integration: Free Trade Area: This leads to abolishing of all restrictions of trade among the members but each member is left free to determine its own commercial policy with non members

Regional Economic Integration

Customs Union: This is at a more advanced level of economic integration than free trade. It eliminates all restrictions on trade among members and also adopts a common external commercial policy

Regional Economic Integration

Common Market: There is free movement of labour and capital within the common market Free Trade among members Common external commercial policy

Regional Economic Integration

Economic Union: Free Trade among members Common external commercial policy Free Factor mobility within the market Harmonised economic policies e.g. EU

Regional Economic Integration

Economic Integration Free Trade among members Common external commercial policy Free Factor mobility within the market Harmonised economic policies Supernational organisational structure

Regional Economic Integration

These agreements also have non-economic objectives like: National security Increased bargaining power Increasing the credibility of economic and political reforms