04 Economic Integration

8/8/2019 04 Economic Integration

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Economic Integration orEconomic Integration or

Regional IntegrationRegional Integration


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Type of regionalizationType of regionalizationtage of Integration

ree trade areaustoms union

ommon market

conomic union

Abolition of Tariffs and Quotas among Members

YES

YES

YES

YES

Source: F.R. Root, 1992Source: F.R. Root, 1992

Common Tariffs and Quotas System

NO

YES

YES

YES

Abolition of Restrictions on Factor Movement

NO

NO

YES

YES

Harmoni-zation and Unification of Econo

NO

NO

NO

YES


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Levels of Economic IntegrationLevels of Economic Integration

Free-trade Area remove bilateral barriers to trade

Customs Unionset common trade barriers

Common Marketfree mobility of workers and capital

Economic Unioncommon fiscal and monetary policies

Increasing

Integ

ration


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Hierarchy of Economic IntegrationHierarchy of Economic Integration

Source: Nelson (1999:224)

Give upleast sovereignty

Give upmore sovereignty

Give upmost sovereignty

EFTANAFTALAFTA

BENELUX

EC(Pre-1999)

EU(Post-1999)

USACanadaEx-Soviet Union (CIS)

Shared,Free Zone

Free TradeArea

CustomsUnion

CustomsMarket

EconomicUnion

PoliticalUnion


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Benefit of regional integrationBenefit of regional integration

Economic benefits:

Greater world production because free trade allows countries

to specialize in the production (economies of scale)

Economic growth because of FDI (technology, marketing,

managerial know transferred)

Protected markets are opened

Political benefits:

Reduce the risk political conflict between neighboring

countries

Increase the political weight in the world.


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Cost of regional integrationCost of regional integration Impediments to integration and cost:

Painful adjustment for some countries

Less national sovereignty Cost (trade diversion) might outweigh the benefit (trade

creation)

More price competition


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Key Economic Blocs

European Union(EU)

North AmericaFree TradeAgreement(NAFTA)

Southern AmericaCommon Market(MERCOSUR)

ASEAN FreeTrade Agreement(AFTA)

Africa, Caribbeanand the Pacific(ACP)

Gulf CooperationCouncil (GCC)
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Regional Economic IntegrationRegional Economic Integration

European Union (EU)

Members: 15 (+5)

Population: 377 mil.

GDP: US$ 7,884 bil.

GDP/head: US$ 20,889

Total trade: US$ 4,568 bil.

2001

1957, Euro (2002)
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EU EvolutionEU Evolution


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N. America Free-TradeAgreement (NAFTA)

Members: 3

Population: 414

GNP: US$ 11,466 bil.

GDP/head: US$ 27,670

Total trade: US$ 2,865 bil.

2001

1989
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ASEAN Free-Trade Area(AFTA)

Members: 10


GDP: 555 $ bil.

GDP/head: 1,164$

Total trade: US$ 781 bil.

2001

1967, AFTA (1993)
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ASEAN vs EAST ASIAASEAN vs EAST ASIA

Source: IMF, Direction of Trade Statistics Yearbook2001


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ASEAN TradeASEAN Trade



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ASEAN Trading PartnersASEAN Trading Partners



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MERCOSUR

Members: 4 (A, P, U, B)


GDP: US$ 797

GDP/head: US$ 3,637

Total trade: US$ 174 bil.

2001

1991
http://images.google.com/imgres?imgurl=www.cmq.edu.mx/cmqmercosur/images/mercosur.jpg&imgrefurl=http://www.cmq.edu.mx/cmqmercosur/default.htm&h=836&w=653&prev=/images?q=Mercosur&svnum=10&hl=en&lr=&ie=UTF-8&oe=UTF-8http://www.tuscanyvalley.net/root/img/mercosur.jpg

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04 Economic Integration