GLOBAL OPERATIONS Week 3: regional economic integration . Levels of integration : Levels of economic integration; There are 5 levels of economic integration:
This is a hierarchy determined by the removal of restrictions to the free flow of goods, services, and factors of production between member countries: 1. A free trade area 2. A customs union 3. A common market 4. An economic union 5. A political union 1.A free trade area: it eliminates all barriers to trade goods and services among member countries, but members determine their own trade policies for non-members. the European Free Trade Association (between Norway, Iceland, Liechtenstein, and Switzerland) the North American Free Trade Agreement (between the US, Canada, and Mexico- now superseded by USMCA) the Closer Economic Relations CER (between Australia and New Zealand) Member countries shave common policies among the members but have different policies for the non-members. 2.A customs union: it eliminates trade barriers between member countries and adopts a common external trade policy: The Andean Community (between Bolivia, Columbia, Ecuador, and Peru) is an example of a customs union. Gulf Cooperation Council (between Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE). 3. A common market has no barriers to trade between member countries, a common external trade policy, and the free movement of the factors of production: MERCOSUR (between Brazil, Argentina, Paraguay, Uruguay, and provisionally since 2006, Venezuela) is aiming for common market status. 4.An economic union has the free flow of products and factors of production between members, a common external trade policy, a common currency, harmonised tax rates, and a common monetary and fiscal policy: The European Union (EU) is an imperfect economic union. 5.A political union involves a central political apparatus that coordinates the economic, social, and foreign policy of member states: The EU is headed toward at least partial political union, and the United States is an example of an even closer political union: -The United States of Europe
Levels of Economic Integration -Regional economic integration- Regional economic integration (REI) refers to the agreements between countries in a geographical region to reduce tariff and non-tariff barriers to the free flow of goods, services, and factors of production between each other. - Regional trade agreements are designed to promote free trade: BUT the world may be moving towards a situation in which the number of regional trade blocks competes against each other. --As a process, REI involves behaviours designed to abolish discrimination between firms that belong to different national states. --As a state of affairs, REI represents an absence of discrimination between national economies, but to varying degrees. The economic case for integration .
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