Regional economic integration
The process whereby countries in a geographic region, cooperate with one another to reduce or eliminate barriers to the international flow of products, people, or capital is called regional economic integration.
A group of nations in a geographic region undergoing economic integration is called a regional trading bloc.
There are five potential levels (or degrees) of integration for regional trading blocs. Each level of integration incorporates the properties of those preceding it.
- A free-trade area is then economic integration and which countries seek to remove all barriers to trade between themselves, but each country determines its own barriers against nonmembers
- a customs union is an economic integration and which countries remove all barriers to trade between themselves but erect against nonmembers against nonmembers
- a common market is an economic integration and which countries remove all barriers to trade and the movement of labor and capital between themselves but erect trade policy against nonmembers, trade policy against nonmembers
- an economic union is a economic integration in which countries remove barriers to trade and the movement of labor and capital, erect a common trade policy against nonmembers, and coordinate their economic policies
- a political union is an economic and political integration in which countries coordinate aspects of their economic and political systems
The resulting increase in the level of trade between nations as a result of regional economic integration is called trade creation. One result of trade creation is that consumers and industrial buyers and members nations are faced with a wider selection of goods and services that were not available before. Also, buyers can acquire goods and services at lower cost. Following the lowering of trade barriers such as tariffs. A political benefit is that a smaller, regional group of nations can find easier to reduce trade barriers and can larger groups of nations. Nations can also have more say when negotiating with other countries were organizations, reduce the potential for military conflict, and expand employment opportunities.
The flip side of trade creation is trade diversion -- the diversion of trade away from nations not belonging to a trading bloc in toward member nations. Trade diversion can actually result in increased trade with a less efficient producer within the trading bloc. Regional integration also forces, some people out of work. Finally, political union requires nations to give up a high degree of sovereignty and foreign policy.
The pattern of enlargement of regional integration in Europe
The European Coal and Steel Community was formed in 1951 to remove trade barriers for coal, iron, steel, and scrap metal. Among the member nations. Following several ways of expansion, brought it means of its scope, and name changes, the Community is now mannered as the European Union (EU). Today, the EU consists of 25 nations after a 2004 expansion added 10 new members from Central, Eastern, and Southern Europe. For more nations will enter as soon as they meet the so-called Copenhagen Criteria that relate to their political, legal, economic systems. Five institutions that form the main institutional framework of the EU are the European Parliament, European Commission, Council of the European Union, Court of Justice, and Court of Auditors. The EU established a single currency in January 1999 through a plant called the European monetary union. The main benefit of a single currency, the euro, is the complete elimination of both exchange-rate risk and currency conversion costs within the euro zone.
Other European nations created the European Free Trade Association (EFTA) to focus on trade and industrial, not consumer, goods. Today, EFTA has just four members. The EFTA and EU created the European economic area (EEA) to cooperate on trade matters and other areas, including the environment, social policy, and education.
Regional integration in the Americas
The North American Free Trade Agreement (NAFTA), between Canada, Mexico, in the United States became effective in January 1994. As a free-trade agreement, NAFTA seeks to eliminate most tariffs and non-tariff trade barriers on most goods originating from within North America by 2008.
The Andean Community was formed in 1969 and calls for tariff reduction for trade among member nations, a common external tariff, and common policies in transportation in certain industries. The Latin American Integration Association (ALADI), formed in 1980 between Mexico and 10 South American nations has had little impact on cross-border trade. The Southern Common Market (MERCOSUR) was established in 1988. Today MERCOSUR asked as a customs union and is emerging with the most powerful trading bloc and all of Latin America.
The Caribbean Community and Comment Market (CARICOM) trading bloc was formed in 1973. The main difficulty CARICOM faces is that most members trade war with nonmembers than they do with each other. The Central American Common Market (CACM) was formed in 1961, but protracted conflicts have hampered progress for the CACM.
The objective of the Free Trade Area of the Americas (FTAA) is to create the trading block income passing all of Central, North, and South America (excluding Cuba). The goal of the Transatlantic Economic Partnership (TEP) between the United States in the European Union is to contribute to stability, democracy, and development worldwide, in addition to forging closer economic ties between the two.
Regional integration in Asia
The Association of Southeast Asian Nations (ASEAN), formed in 1967, has three main objectives:
- to promote economic, cultural, and social development in the region
- to safeguard the region's economic and political stability
- to serve as a forum in which differences can be resolved fairly and peacefully
Today, ASEAN has 10 members, but China, Japan, and South Korea may join in the future.
The organization for Asia Pacific Economic Cooperation (APEC) was formed in 1989. Begun as an informal forum among 12 trading partners, APEC now has 21 members. Together, the APEC nations account for more than half of world trade and combined GDP of more than $16 trillion. The stated aim of APEC is not to build another trading bloc. Instead, it desires to strengthen the multilateral trading system and expand the global economy by simplifying and liberalizing trade and investment procedures among member nations. In the long term, APEC hopes to have free trade and investment throughout the region by 2010 for developed nations in 2020 for developing ones.
Regional integration in the Middle East and Africa
Several Middle Eastern nations formed the Gulf Cooperation Council (GCC). In 1980. Members of the GCC are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. The primary purpose of the GCC at its formation was to cooperate with the increasingly powerful trading blocs in Europe at the time -- the EU and the EFTA. Today. Its drive is to allow citizens of member countries to travel freely without visas, and to permit assistance of member nations to own property, and another member nation without the need for local sponsors were partners.
The Economic Community of West African States (ECOWAS) was formed in 1975 but relaunched its efforts at economic integration in 1992 because of lack of early progress. One of the most important goals of ECOWAS is the formation of a customs union and eventual common market. The group's lack of progress on economic integration. Largely reflects each nations lack of economic development.