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IBT Module 4 Part 1

COURSE International Trade

Deadline Sep 27, 2020

Materials

PASSED

Status Complete

Type Lesson

WHAT IS REGIONAL INTEGRATION?

Regional Integration

Implementation of a multitude of economic and/or political steps by member

states to increase their global competitiveness, including preferential trade
access

This helps countries specially small and medium size countries which helps
countries to scale up from their small supply of capacity through regional
production networks to become more globally competitive

This development could take place through sector wide transformation in

agriculture, manufacturing, and services for regional integration to be more
successful, member countries should undertake spatial transformations.

Spatial transformation

pertains to the process of allowing efficient geographic distribution of

business activities within and among countries

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 this regional integration strategies need to be customize to the economic
geography, that is to make used of the size and location of the countries and
their openness to transaction with major world markets.

STAGES OF REGIONAL INTEGRATION

FORMS AND STAGES OF REGIONAL INTEGRATION

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 FREE TRADE AREA

This was come up by two or more countries by eliminating all barriers to

trade: tariff, non-tariff barriers and boarder restriction while keeping their own
external tariff within the guideline setup by the world trade organization on
members that are not included in the free trade area

Second, when countries in the free trade area have different external tariffs,
imports will primarily enter in the free trade area through the country that has
the lowest external tariffs and trade restrictions. Thereby, causing other free
trade member countries to loose import businesses. This may eventually lead
to the creation of customs union

CUSTOMS UNION

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 This is in which all free trade member countries need to adopt a common
external tariff with non-member countries. Within the member countries of the
custom union, investment. Hence, business and job opportunities will flow to
a country that have the highest labor productivity and labor capital cost. This
in turn encourages the removal of barriers to allow free movement of capital
and labor within the customs union thereby creating a common market or
what we call a single market.

COMMON MARKET

Within the common market, the free movement of labor and capital may
encourage member states to implement common social programs which
includes education, benefits of employee, retraining of employee, health care
of employee and their families and retirement programs and coordinated
macro-economic policies which includes similar fiscal and monetary policy
which led to the creation of single regional currency and an economic and
monetary union

COMMON UNION

Finally because of member of monetary and economic union will work closely
with each other, all businesses and major economic issues urge to have a
common defense and foreign policies may lead to the creation of a political
union.

Political union is being created when countries of an economic and monetary

union work closely with one another to arrive at common defense and foreign
policies and behave as a single country.

PROS AND CONS OF REGIONAL INTEGRATION

The benefits and costs of regional integration crucially depend on the level of
integration of the countries in the group achieved. This countries have a
varying motives in participating in the union:

Creation of bigger opportunities and global competitiveness

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 Increase customer value for consumer that is with better choice, price and
service

Shared values such as peace within the regions

Common security against possible external threats and others

While motives of countries may be similar, though not identical. the degree of
success of the integrated group depends on how well they implement the
agreed upon economic policies. The effect of region integration will depend
on the net impact of benefits and costs

BENEFITS OF REGIONAL INTEGRATION

COST OF REGIONAL INTEGRATION

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