ECONOMIC INTEGRATION

Meaning: 

Economic integration is a process whereby countries in a geographical region (location) cooperate with one another to reduce or eliminate barriers to the international flow of products, people, or capital. It can be of served forms with different degrees of integration.

ACCORDING TO SALVATORE’S

“Commercial policy of discriminatively reducing or eliminating trade barriers only among the nations joining together”

Note:

Therefore it refers to a decision or process whereby two or more countries combine into a larger economic region by removing discontinuities and discriminations existing along national frontiers, and by establishing certain elements of cooperation between them.

ON THE BASICS OF COOPERATION WE HAVE THE FOLLOWING TYPES OF ECONOMIC INTEGRATIONS.

1. Preferential trading system/Preferential trade arrangements (PTA).
2. Free trade area (FTA).
3. Customs union (CU).
4. Common market.
5. Economic Union (EU).

1. PREFERENTIAL TRADING SYSTEM/PREFERENTIAL TRADE ARRANGEMENTS (PTA)

1. It was the earliest form of economic integration Among the 48 Commonwealth nations during the British Empire (1932).
2. It is the loosest form of EI which provides lower barriers to trade among the participating nations than to trade with non-member nations.
3. It ended after the formation of GATT rules.

2. FREE TRADE AREA (FTA).

1. It is a loose form of EI wherein the member countries fully or partially abolish trade barriers and tariffs on most (if not all) goods traded among them but retain their own tariff, trade barriers, and commercial policies with non-member countries.
2. It is simply based on inter-area trade.
3. Examples of this: are EFTA, LAFTA, and LAIA.

3. CUSTOM UNION (CU).

1. In this EI the participating counties adopt a common external policy and abolish all tariffs and trade barriers among themselves.
2. In CU all member nations act as a unit in their trade relations with non-member countries.
3. Example of this: European common market/European Union formed in 1957/ The European Community (EC).

4. COMMON MARKET.

1. Besides allowing for free trade and common external policy for non-member, It is a single unified common market area among nations in which there goods, services, and factor market are integrated.
2. The EC is also a common market.
3. EU achieved the status of a common market at the beginning of 1993.

5. ECONOMIC UNION (EU).

1. The economic union is the highest and most advanced form of economic integration, besides the integration of product and factor markets as in the common market; it involves the harmonization of monetary, fiscal, and other policies such as exchange rate, transportation, industrial, and social policies.
2. Example:-European economic the community transformed into an economic union called the European Union in 1991.