Economic integration: Definition, Types, Advantages and Examples
Economic integration
Economic integration are agreements signed by countries around the world, many in the 20th century, that consist of international trade policies to reduce or eliminate trade barriers between them, such as the elimination or reduction of taxes. They are agreements that vary in their characteristics and their degree of integration is different.
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Types of economic integrations
Economic integration has different levels depending on the extent of the flexibility that exists between the members, and depending on that, different types of economic integration take place. According to the degree of integration, they are classified as follows:
Regional trade agreements and preferential trade arrangements
Preferential trade agreements consist of granting lower trade barriers to the nations that are part of the agreements and higher or more restrictive ones to the countries that don’t participate. Examples include the North American Free Trade Agreement and the ASEAN Free Trade Area.
Free-trade zone
A free trade zone takes place when all trade barriers between the countries that are part of it removed, but each country maintains its own restrictions for the other countries that don’t belong to it. Regional Comprehensive Economic Partnership (RCEP) is one of them.
Customs union
Custom unions is an economic integration that, like the free trade zone, doesn’t allow trade barriers to exist between its members. It also tries to ensure that all trade policies are equal, for example, establishing common tariff rates towards the rest of the world. Some are Andean Community (CAN), Caribbean Community (CARICOM), Economic and Monetary Community of Central Africa (CEMAC)
Common Market
The common market is much more flexible than the customs union because it allows the free development of capital and labor among its members. One is the European Economic Community (EEC)
Economic union
Economic union is the harmonization between the monetary and fiscal policies of the states that comprise it. It’s a much more advanced and comprehensive economic integration because it also it allows goods, services, money, and workers to move over borders freely.(1) The European Union (EU) is an example of an economic union.
Advantages of economic integrations
The advantages of economic integration is the facilitation of international trade through the elimination of the barriers typical of a bureaucratic and restrictive process, making the exchange of goods and services between countries more accessible. It entails a lower cost to deliver their goods and services to other countries and also benefit consumers because they incur less spending.
Economic integrations strengthen the advantages of international trade in itself because it also means that there are more options and healthy competition in quality and price between national and foreign production. It helps countries overcome the barriers that divide them and contributes to their economic growth and economic development. (2)
See also