737 4P
slkdgha
Chapter5.pptx
1
3/2/2019
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Global Regional Economic Cooperation and Integration
After studying this chapter, you should be able to:-
Outline the levels of economic cooperation and integration and its debate.
Describe integration in Europe and its enlargement.
Describe integration in the Americas and its prospects
Summarize integration in Asia and elsewhere.
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This chapter explores the trend toward greater integration of national economies. We first examine the reasons why nations are making significant efforts at regional integration. We then study the most prominent regional trading blocs in place around the world today.
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Regional trade agreements are changing the landscape of the global marketplace.
These agreements lower trade barriers and open new markets for goods and services.
Markets can become quite attractive once tariffs are lifted.
But trade agreements can be double-edged swords for countries, companies, and consumers. Not only do regional trade agreements allow domestic companies to seek new markets abroad, but they also let competitors from other nations enter the domestic market. Such mobility increases competition in all markets that participate in an agreement.
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In this chapter, we focus on regional efforts to encourage freer trade and investment. We begin by defining regional economic integration and describing each of its five levels. We then examine the case for and against regional economic integration. In the remainder of the chapter, we explore several long-established trade agreements and several agreements in the early stages of development.
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Levels of Integration and the Debate
Levels of Integration and the Debate
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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 (regionalism).
A group of nations in a geographic region undergoing economic integration is called a regional trading bloc.
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Potential gains of international trade:
Nations have banded together to reap the potential gains of international trade in a variety of ways
Free trade area;
Customs union;
Common market;
Economic union;
Political union.
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Free trade area
Economic integration whereby countries seek to remove all barriers to trade among themselves but where each country determines its own barriers against nonmembers is called a free trade area.
A free trade area is the lowest level of economic integration that is possible between two or more countries. Countries belonging to the free trade area strive to remove all tariffs and nontariff barriers, such as quotas and subsidies, on international trade in goods and services.
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NAFTA: North American Free Trade Agreement
Canada, USA, Mexico
EFTA: European Free Trade Association
Iceland, Liechtenstein, Norway, and Switzerland
CAFTA-DR: Central American Free Trade Agreement Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Dominican Republic, and United States
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Customs Union
Economic integration whereby countries remove all barriers to trade among themselves and set a common trade policy against nonmembers is called a customs union. Thus, the main difference between a free trade area and a customs union is that the members of a customs union agree to treat trade with all nonmember nations in a similar manner.
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MERCOSUR: Southern Common Market
Argentina, Brazil, Paraguay, Uruguay, and Venezuela (suspended in 2016). Associate members are Bolivia, Chile, Colombia, Ecuador, Peru, and Suriname.
CARICOM: Caribbean Community and Common Market
Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, and Trinidad and Tobago
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Common Market
Economic integration whereby countries remove all barriers to trade and to the movement of labor and capital among themselves and set a common trade policy against nonmembers is called a common market. Thus, a common market integrates the elements of free trade areas and customs unions and adds the free movement of important factors of production—people and cross-border investment. This level of integration is very difficult to attain.
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Economic Union
Economic integration whereby countries remove barriers to trade and the movement of labor and capital among members, set a common trade policy against nonmembers, and coordinate their economic policies is called an economic union. An economic union goes beyond the demands of a common market by requiring member nations to harmonize their tax, monetary, and fiscal policies and to create a common currency.
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EU: European Union
Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Greek Cyprus (southern portion), Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom (until it exits)
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Political Union
Economic and political integration whereby countries coordinate aspects of their economic and political systems is called a political union. A political union requires member nations to accept a common stance on economic and political matters regarding nonmember nations. However, nations are allowed a degree of freedom in setting certain political and economic policies within their territories.
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The Case for Regional Integration
TRADE CREATION
GREATER CONSENSUS
POLITICAL COOPERATION
EMPLOYMENT OPPORTUNITIES
CORPORATE SAVINGS
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The Case Against Regional Integration
TRADE DIVERSION
SHIFTS IN EMPLOYMENT
LOSS OF NATIONAL SOVEREIGNTY
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1. Homework: NAFTA and USMCA
Learn more on recent policy changes.
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2. Homework:
Conduct a Google search to get information and learn on integration in Asia.
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