Economic integration

A regional trading bloc is a group of countries within a geographical region that protect
themselves from imports from non-members in other geographical regions, and who look to
trade more freely with each other. Regional trading blocs increasingly shape the pattern of
world trade – a phenomenon often referred to as regionalism.

Stages/ Levels/ Degree of integration

Preferential Trade Area

Preferential Trade Areas (PTAs) exist when countries within a geographical region agree to
reduce or eliminate tariff barriers on selected goods imported from other members of the area.
This is often the first small step towards the creation of a trading bloc. Agreements may be
made between two countries (bi-lateral), or several countries (multi-lateral).
Free Trade Area

Free Trade Areas (FTAs) are created when two or more countries in a region agree to reduce or
eliminate barriers to trade on all goods coming from other members. The North American Free
Trade Agreement (NAFTA) is an example of such a free trade area, and includes the USA,
Canada, and Mexico.

Customs Union

A customs union involves the removal of tariff barriers between members, together with the
acceptance of a common (unified) external tariff against non-members.

Countries that export to the customs union only need to make a single payment (duty), once
the goods have passed through the border. Once inside the union goods can move freely
without additional tariffs. Tariff revenue is then shared between members, with the country
that collects the duty retaining a small share.

Common Market

A common (or single) market is the most significant step towards full economic integration. In
the case of Europe, the single market is officially referred to a the ‘internal market’.

The key feature of a common market is the extension of free trade from just tangible goods, to
include all economic resources. This means that all barriers are eliminated to allow the free
movement of goods, services, capital, and labour.

In addition, as well as removing tariffs, non-tariff barriers are also reduced and eliminated.

Economic union

Economic union is a term applied to a trading bloc that has both a common market between
members, and a common trade policy towards non-members, although members are free to
pursue independent macro-economic policies.
 The European Union (EU) is the best known Economic union, and came into force on November
1st 1993, following the signing of the Maastricht Treaty (formally called the Treaty on
European Union.)

 Political union. Represents the potentially most advanced form of integration with a common
government and where the sovereignty of a member country is significantly reduced. Only
found within nation-states, such as federations where a central government and regions
(provinces, states, etc.) have a level of autonomy over well-defined matters such as education.

South Asian Association for Regional Cooperation (SAARC)

he South Asian Association for Regional Cooperation (SAARC) was established with the signing
of the SAARC Charter in Dhaka on 8 December 1985.

 The idea of regional cooperation in South Asia was first raised in November 1980. After
consultations, the foreign secretaries of the seven founding countries—Bangladesh,
Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka—met for the first time in Colombo
in April 1981.

 Afghanistan became the newest member of SAARC at the 13th annual summit in
2005.

 The Headquarters and Secretariat of the Association are at Kathmandu, Nepal.

Who are the Members of SAARC?

 SAARC comprises of eight member States:

o Afghanistan

o Bangladesh

o Bhutan

o India
 o Maldives

o Nepal

o Pakistan

o Sri Lanka

What are the Areas of Cooperation?

 Human Resource Development and Tourism

 Agriculture and Rural Development

 Environment, Natural Disasters and Biotechnology

 Economic, Trade and Finance

 Social Affairs

 Information and Poverty Alleviation

 Energy, Transport, Science and Technology

 Education, Security and Culture and Others

Objectives of the SAARC

 To promote the welfare of the people of South Asia and to improve their quality of life.

 To accelerate economic growth, social progress and cultural development in the region
and to provide all individuals the opportunity to live in dignity and to realize their full
potentials.

 To promote and strengthen collective self-reliance among the countries of South Asia.

 To contribute to mutual trust, understanding and appreciation of one another’s

problems..

 To promote active collaboration and mutual assistance in the economic, social, cultural,
technical and scientific fields.
 To strengthen cooperation with other developing countries.

 To strengthen cooperation among themselves in international forums on matters of

common interests, and

 To cooperate with international and regional organizations with similar aims and
purposes.

What are the Principal Organs of the Cooperation?

 Meeting of Heads of State or Government

o Meetings are held at the Summit level, usually on an annual basis.

 Standing Committee of Foreign Secretaries

o The Committee provides overall monitoring and coordination, determines priorities,

mobilizes resources, and approves projects and financing.

 Secretariat

o The SAARC Secretariat was established in Kathmandu on 16 January 1987. Its role
is to coordinate and monitor the implementation of SAARC activities, service the
meetings of the association and serve as a channel of communication between
SAARC and other international organizations.

o The Secretariat comprises the secretary-general, seven directors, and the general
services staff.

 The secretary-general is appointed by the Council of Ministers on the principle

of rotation, for a non-renewable tenure of three years.
What are its Achievements?

 Free Trade Area (FTA): SAARC is comparatively a new organization in the global arena.
The member countries have established a Free Trade Area (FTA) which will increase their
internal trade and lessen the trade gap of some states considerably.

 SAPTA: South Asia Preferential Trading Agreement for promoting trade amongst the
member countries came into effect in 1995.

 SAFTA: A Free Trade Agreement confined to goods, but excluding all services like
information technology. Agreement was signed to reduce customs duties of all traded
goods to zero by the year 2016.

 SAARC Agreement on Trade in Services (SATIS): SATIS is following the GATS-plus 'positive
list' approach for trade in services liberalization.

 SAARC University: Establish a SAARC university in India, a food bank and also an energy
reserve in Pakistan.

Association of Southeast Asian Nations (ASEAN) Establishment Date : 8 August 1967

• Member Nations : Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines,

Singapore, Thailand and Vietnam (10 Members)

AIMS & PURPOSES :

The aims and purposes of ASEAN as per ASEAN Declaration are:

• To accelerate the economic growth, social progress and cultural development in the region
through joint endeavours in the spirit of equality and partnership in order to strengthen the
foundation for a prosperous and peaceful community of Southeast Asian Nations;

• To promote regional peace and stability through abiding respect for justice and the rule of
law in the relationship among countries of the region and adherence to the principles of the
United Nations Charter;
• To promote active collaboration and mutual assistance on matters of common interest in
the economic, social, cultural, technical, scientific and administrative fields;

• To provide assistance to each other in the form of training and research facilities in the
educational, professional, technical and administrative spheres;

• To collaborate more effectively for the greater utilisation of their agriculture and
industries, the expansion of their trade, including the study of the problems of international
commodity trade, the improvement of their transportation and communications facilities
and the raising of the living standards of their peoples;

• To promote Southeast Asian studies; and

• To maintain close and beneficial cooperation with existing international and regional
organisations with similar aims and purposes, and explore all avenues for even closer
cooperation among themselves.

North American Free Trade Agreement (NAFTA)

• Establishment Date : January 1, 1994

• Type of Economic Grouping: Free trade area

• Member Nations : United States, Canada and Mexico

• Following intense negotiations and revised agreements among the member countries
NAFTA has been superseded by United States–Mexico–Canada Agreement (USMCA) in
March, 2020.

• USMCA is one of the largest regional economic groupings in the world by volume of trade
($1.2 trillion approximately.)

SALIENT PROVISIONS

• Automobile
To qualify for zero tariffs, a car or truck must have 75 % of its components should be
manufactured in Canada, Mexico or the United States. Besides that, cars and trucks must
have at least 30 % of the work on the vehicle done by workers earning at least $16 per hour.

• Labour

USMCA requires Mexico to change its laws to make it easier for workers to form labour
unions.

• Dairy & Poultry

U.S. farmers will now be able to sell more “Class 7” dairy products like milk powder and ice
cream to Canada. Besides that U.S. poultry firms can sell more eggs and turkeys to Canad

• Intellectual Property Rights

More stringent protections have been provided for patents and trademarks, especially for
biotech, financial services and domain names in USMCA

• Environmental Protection

USMCA provides for increased protection of whales, fishes and other marine wildlife from
pollution, illegal fishing and overfishing.

• Review after 6 years

USMCA stipulates that the member nations will review the agreement after 6 years. If all the
member nations agree, then the deal will continue for the full 16-years period with
necessary changes if any.

European Union (EU)

Establishment Date : November 1, 1993

• Type of Economic Grouping: Economic and Political Union

• Member Nations : Austria, Belgium, Bulgaria, Croatia, Cyprus, Czechia, Denmark, Estonia,
Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg,
Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden (27
Members)

• United Kingdom withdrew from the European Union on 31st January, 2020 through the
Brexit process. UK is the first country to leave EU.

After two World Wars the European countries realised that it is better to work together than
fight against each other.

In recent years European Union has emerged as a developed economic grouping. Most of
the member nations have adopted Euro as their shared common currency.

European Union facilitates free movement of people, goods, services and money (capital)
from one nation of the European Union to another. For this purpose the European Union
made the ‘Schengen Area’ , which is an area without borders. Thus persons can travel from
country to country freely without going through checks and controls while crossing national
borders.

Member countries are encouraged to enact similar or uniform legislations in socioeconomic

justice and home affairs and maintain common policies on trade, agriculture, fisheries,
environmental protection and regional development.

Recently, the corona-virus pandemic (January- April, 2020) has to some extent eroded the
belief of the people in the cohesive European Union. The member countries appeared to be
fighting their lone battle against the spread of highly contagious Covid-19 virus instead of
having a cooperative approach to dealing with the problem and the concept of the
'Schengen Area' remains suspended during the crisis.

BRICS

BRICS is an acronym for Brazil, Russia, India, China, and South Africa. Goldman Sachs
economist Jim O'Neill coined the term BRIC (without South Africa) in 2001, claiming that by
2050 the four BRIC economies would come to dominate the global economy. South Africa
was added to the list in 2010.
 Purpose of BRIC Countries

 Commitment towards reforming international financial institutions. It also aims to find a

greater voice for the emerging and developing economies for better representation in those
financial institutions.
 To work with the international community to keep the multilateral trading systems stable and
improve the international trade and investment environment.
 Coordination and cooperation among BRICS states in the field of energy efficiency. Also,
concentration on climate change to protect it and fulfill socio-economic development
tasks.
 To provide humanitarian assistance and reduce natural disaster risks. This include
addressing issues like global food security.
 Cooperation among BRICS states in science and education and engagement in
fundamental research and advanced technological development.
 This promises democratic and diplomatic cooperation, mutual respect; coordinated
action; and collective decision-making. It also discourages terrorism.