ECONOMIC INTEGRATION

Integration means
i) Preferential economic arrangement.
ii)Facilitating intraregion flow of goods,
service, capital and labour.

Types:
i) Free Trade Area-Abolish all trade
restrictions. e.g, EFTA, NAFTA
ii)Custom union.-Adopt uniform
commercial policy for non-member
countries.
iii)Common market-In addition, allow free
movement of human resources, capital
and technology.
iv) Economic union-In addition to all
there adopt uniform monetary and
fiscal policy e.g, E.U.
V) Political union- National identity over-
It becomes one state e.g, Germany

Benefits.
1. Production at a low cost point.
2. Economies of scale-size of market
increases.
3. Inter commodity substitution in
favour of goods produced within the
union.
4. Financial resources pooled for rapid
technological innovations
5. Reduction of tariff to reduce prices of
products/services.
6. Development of collective self-reliance
among member countries.
Costs
1. Trade diversion when locus of production
moves from a low cost point to a high cost
point (Viner)
2. If partners produce complementary goods,
economics of scale is not available
3. Creates intra-region inequality.
4. Less developed countries will become
permanently a Consumption Centre.
5. Less efficient firms face the problem
of survival.
Opportunities.
Overall business performance in terms
of quality, price, productivity, delivery
and customer service improves.
Customers get best product at the
lowest possible price
Employment opportunities increase.
EMU (1979)
1. ERM-To regulate inflation and interest rates
2. European currency-Euro
Exchange rate fixed currency wise-
3. Factor mobility-No permit for labour.
4. European System of Central Bank (ESCB)
for common monetary policy.
6. European Economic & Social committee
looks after economic and social issues
7. European ombudsman-to deal with
citizens complaints
8. European commission (executing policy)
European Parliament (Legislative power)
Court of Justice
Court of Auditors
EFTA- 4 members - Iceland, Liechtenstein,
Norway, Switzerland.
NAFTA (1994)
U.S Canada & Mexico
Mexico-Cheap labour in U.S ,U.S,Canada-FDI
Problem-
1. Mexican economy faces adjustment
problem
2. US industries shift to Mexico which has
less stringent environmental, health and
safety regulations.
Andean Community (1969)
Bolivia Colombia, Ecuador,
Chile left, partial implementation of free
trade area
Mercosur-(1991)
Argentina, Brazil, Paraguay, Venezuela,
Bolivia, Chile (last two associate members)
Abolished tariff in intra-group trade.
FTAA-Except Cuba, entire continent
CARICOM-
Antigua, Bahamas, Barbados,
Dominica, Grenada, Guyana, Jamaica,
St. Kitts, Surinam, Trinidad, Tobago
- Common external tariff
- Some have eliminated intra-region tariff.
ASEAN (1992)
Singapore, Brunei, Malaysia, Philippines,
Thailand & Indonesia. They have formed
AFTA
Strength-Rich in oil, mineral resources, age
goods, modern industrial products
Well educated and skilled human resources.
Weakness - Malaysia, Indonesia & Philippines
face competition from Australia & New
Zealand
SAARC (1985)
India, Bangladesh, Bhutan, Pakistan, Maldives,
Srilanka
Objectives
The objectives of the SAARC are:
To improve the quality of life and welfare of
the people of the SAARC member countries.
To develop the region economically, socially
and culturally.
To provide the opportunity to the people of the
region to live in dignity and to exploit their
potentialities.
To enhance the self-reliance of the member
countries jointly.
To provide conducive climate for creating and
enhancing mutual trust, understanding and
application of one anothers issues.
To enhance the mutual assistance among
member countries in the areas of economic,
social, cultural, scientific and technical fields.
To enhance to co-operation with other
developing economies.
To have unity among the member countries
regarding the issues of common interest in the
international forums.
To extend co-operation to other trade blocks.
Organization structure:
Council-Highest policy making body- meets
once in 2 years-Heads of Govt.
Council of ministers-Twice a year-Foreign
monastery-Reviews functionary
Standing committee-Foreign secretaries to
monitor and coordinate prog. determine inter-
sect oral priorities.
Programming committee-Senior officials for
carrying out activities.
Technical committee- Formulate and monitor
project.
Agl, Communication, Health, Environment,
RD, S&T, Tourism & Transport.
SAPTA (1994)
Objectives of SAPTA:
To gradually liberalize the trade among
member countries of SAARC
To eliminate trade barriers among SAARC
countries and reduce or eliminate tariffs.
To promote and sustain mutual trade and
economic co-operation among member
countries.
Provision for information consultation
and dispute settlement are made can
withdraw from Sapta after serving 6
months notice
Problem:
Conflict between members countries
Size of India.