MAHESH COLLEGE OF MANAGEMENT
(4) To develop regional infant industries which cannot survive without a protectedregional market..(5) To prevent further damage to their trading strength due to further trade diversionfrom third countries.It may be noted that regional agreements have political objectives and even non-economic dimensions, including national security, increasing of bargaining strengthetc.
5.2Types of Economic Integration
The essence of economic integration is the economic co- operation among theparticipating countries. Hence, on the basis of the degree of cooperation, economicintegration assumes the following forms:(i) Preferential trade area or association(ii)Free trade area
(iv) Common Market, and(v) Economic union(vi) Economic integrationNow we have to explain the above different forms of economic integration.
(i) Preferential Trade Area or Association
This is considered to be the most loose form of economic integration. In this case,the member countries lower tariffs on imports from each other .That is, they offer preferential treatment to the member countries. As regards the non-member countries, they ikpose their individual tariffs. The classic example of this form of economic integration is the Commonwealth System of Preferences established in1932. It is headed by Britain and comprises of all Commonwealth countries -countries which were the colonies of Britain.
(ii) Free Trade Area
Under this system, the member countries abolish completely both tariff andquantitative restrictions among themselves. But each country has the freedom tomaintain its own trade barriers against the non-member countries.Examples of thiskind of arrangement are - European Free Trade Association (EFTA) formed in 1959and Latin American Free Trade Association (LAFTA) formed in 1961.
(iii) Customs Union
Customs union constitutes a more formal type of economic integration.In acustoms union, the following features are found:(a)Member countries abolish all tariffs and other trade barriers amongthemselves.
International Trade and Finance - I
Economic Integration and WTO