Market

Integration
The Contemporary World
 TOPICS

INTEGRATION FREE TRADE

AREAS
UNIONS
Market
Integration
● how easily two or markets can trade with
each other
● a situation in which separate markets for
the same product become one single market
INTEGRATION
denotes a state of affairs or
process involving attempts
to combine separate
national economies into
larger economic regions
…INTEGRATION
HIGH INTEGRATION
● low barriers to trade
● prices are similar in these
markets
LOW INTEGRATION
● high barriers to trade
● prices fluctuate between
these markets
FOREIGN TRADE
● helps the integration of markets
because it reduces barriers to trade
and increases fluidity between
markets.
ECONOMIC INTEGRATION
● unification of economic policies
between different states, through
the partial or full abolition of tariff
and non-tariff restrictions on trade
TRADE AGREEMENTS/ TRADE PACTS
● wide-ranging taxes,
tariff, and trade treaty FREE TRADE AGREEMENT
that includes ● a form of trade pacts that determine the
investment guarantees tariffs and duties that countries impose on
● 2 or more countries imports and exports with the goal of
agree on terms that reducing and eliminating trade barriers,
helps them trade with encouraging international trade
each other
FREE TRADE
• a trade policy that does not restrict imports or exports
• international trade is left to its natural course without tariffs
and non-tariff trade barriers

a. Tariffs – taxes or duties to be paid on a particular class of

imports and exports
b. Non- Tariff Barriers – import licensing, rules for valuation of
goods at customs, pre-shipment inspections, trade prepared
investment measures (quotas, subsidies, customs delays,
technical barriers)
 • Tariffs

Non-Tariffs
Tariffs and
➢ Tariffs are enacted to tax imports. That immediately raises the
price of imported goods. They become less competitive when
compared to local goods. This method works best for countries
with a lot of imports, such as the United States.
• Subsidies
➢ Subsidies come in the form of tax credits or direct payments. The
most commonly used are farm subsidies. That allows producers to
lower the price of local goods and services. This support makes the
products cheaper, even when shipped overseas. Subsidies work
even better than tariffs. This method works best for countries that
rely mainly on exports.
 • Quotas

Non-Tariffs
Tariffs and
➢ This method is more effective than the first two. No
matter how low a foreign country sets the price through
subsidies, it can’t ship more goods.
• Currency Manipulation
➢ Deliberate attempt by a country to lower its currency
value. This currency manipulation would make its exports
cheaper and more competitive. This method can result in
retaliation and start a currency war.
FREE TRADE AREA
• is the region encompassing a trade bloc whose member
countries have signed a free trade agreement (FTA)
• a group of countries which tariffs and non-tariff
barriers between the members are generally abolished
but with no common trade policy toward non-
members
• both in the sense of geography and price
FREE TRADE AGREEMENT
• form of trade pacts that determine the tariffs and duties that
countries impose on imports and exports with the goal of
reducing and eliminating trade barriers, encouraging
international trade
• includes clauses on trade facilitation and rule-making, areas
such as investment, intellectual property, government
procurement, technical standards, andsanitary issues
 ➢ free trade between
NAFTA
Canada, The US, and
Mexico
➢ eliminated tariffs on
agriculture, textiles, and
automobiles
➢ encourage economic
activity among North
America’s three major
economic powers
 ➢ free trade of ASEAN
supporting local trade and
AFTA
manufacturing in all ASEAN
countries
➢ increase ASEAN’s competitive
edge as a production base in
the world market
➢ to attract more foreign direct
investment to ASEAN
 UNIONS
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.
● There is a central government and regions
(provinces, states, etc.) having a level of autonomy. ECONOMIC UNION
● an agreement between two or more nations to
allow the freedom of movement of goods, services,
and the factors of production (capital and labor)
and external trade policy
 UNIONS
CUSTOMS UNION
● composed of a free trade area with a common
external tariff to the rest of the world
● establishes a closer political and cultural ties
between the member countries
● economic efficiency
MONETARY UNION
● Involves two or more states sharing the same
currency
EUROPEAN UNION
• political and economic union
of 27 member states that
are located in Europe
• developed an internal single
market through a
standardized system of laws
that apply in all member
states, where members
agreed to act as one
EUROPEAN UNION
• seeks to guarantee the free
movement of goods, capital,
services, and labor
• Maintain common policies on
trade, agriculture, fisheries, and
regional development
• passport controls have been
abolished for travel within the
Schengen Area
• use of the Euro currency
BREXIT
• referring to the UK’s decision in June 2016 referendum
to leave the EU
• 52% voted to leave, and 48% voted to remain
• will still remain subject to the EU law and remains part
of the customs union and single market during the
transition but is no longer part of the EU’s political
bodies/institutions
 WHAT WILL HAPPEN?
• regulations could make it harder to move goods across the
English Channel
• multinational corporations who are headquartered in London,
might move their European headquarters inside the EU which
could lead to job losses
• problem with EU migrants
 TRADE PROTECTIONISM VS.
TRADE LIBERALIZATION
TRADE PROTECTIONISM
• a policy that protects domestic industries from unfair competition
from foreign ones. The four primary tools are tariffs, subsidies,
quotas, and currency manipulation
• a politically motivated defensive measure. In the short run, it works.
But it is very destructive in the long term. It makes the country and its
industries less competitive in international trade.
 TRADE PROTECTIONISM
Key Takeaways
• Protectionist policies place specific restrictions on international
trade for the benefit of a domestic economy.
• Protectionist policies typically seek to improve economic activity but
may also be the result of safety or quality concerns.
• The value of protectionism is a subject of debate among economists
and policymakers.
• Tariffs, import quotas, product standards, and subsidies are some of
the primary policy tools a government can use in enacting
protectionist policies.
 TRADE PROTECTIONISM VS.
TRADE LIBERALIZATION
TRADE LIBERALIZATION
• the removal or reduction of restrictions or barriers on the free
exchange of goods between nations
• barriers include tariffs, such as duties and surcharges, and nontariff
barriers, such as licensing rules and quotas. Economists often
view the easing or eradication of these restrictions as steps to
promote free trade.
 TRADE LIBERALIZATION
Key Takeaways
• Trade liberalization removes or reduces barriers to trade among
countries, such as tariffs and quotas.
• Having fewer barriers to trade reduces the cost of goods sold in
importing countries.
• Trade liberalization can benefit stronger economies but put weaker
ones at a greater disadvantage.
• Critics believe that trade liberalization costs jobs and depresses
wages. Proponents believe it spurs competition and growth.
END OF PRESENTATION