REGIONAL ECONOMIC INTEGRATION

Catchphrase for describing international bloc

Before:
“ The Mediterranean is the sea of the past, the
Atlantic is the ocean of the present and the Pacific
is the ocean of the future”
With TPP:
“The Atlantic is the ocean of the past, the Pacific is
the ocean of the present and the Indian ocean is
the ocean of the future”
Regional Integration – implementation of a
multitude of economic and/or political steps by
member states to increase their global
competitiveness, including preferential trade
access.

Spatial transformation – the process of

allowing efficient geographic distribution of
business activities within and among countries.
Primary objectives:
1. Increase economic growth and efficiency
(thru economies of scale);

2. To raise employment, skills and quality of life

of the citizens; and

3. To promote peace and prosperity

Forms and Stages of Regional Integration
Stage of Abolition of Common Abolition of Harmonization
Integration tariffs and external tariff restrictions and unification
quotas among and quota on factor of economic
members system movements policies and
institutions
Free-trade Yes No No No
area
Customs Yes Yes No No
union
Common Yes Yes Yes No
market
Economic Yes Yes Yes Yes
union
Free-trade area – an area in which two or more
countries agree to eliminate all barriers to
trade, such as tariffs, quotas, and non-tariff
barriers while keeping their own external tariffs
(w/in WTO guidelines) against non-members.

Customs union – a group of free-trade member

that have adopted a common external tariff
with non-member countries.
Common market – a market formed when
member countries of a customs union remove all
barriers to allow the movement of capital and
labor with the customs union.

Economic and monetary union – formed when

members of common market agree to implement
common social programs (education, health
benefits, retraining, etc.) and coordinated
macroeconomic policies that would lead to the
creation of single regional currency.
Political union – created when member
countries of an economic union work closely
with one another to arrive at common defense
and foreign policies and behave as single
country.
Benefits of Regional Integration
• Creating a larger pool of consumers with
growing incomes and similar cultures, tastes
and social values;
• Encouraging economies of scale in production,
increasing level of global competitiveness, and
enhancing economic growth through
investment flows;
• Freeing the flow of capital, labor and
technology to the most productive areas in
the region;
• Increasing cooperation, peace and security
among countries in the region;
• Encouraging member states to enhance their
level of social welfare to match the most
progressive states.
Costs of Regional Integration
• Undermining the MFN status rule – an
essential principle of the WTO;
• Imposing laws and regulations that are
uniform and at times do not take into account
economic, cultural and social differences;
• Eliminating jobs and increasing
unemployment in protected industries;
• Losing sovereignty, national independence,
and identity;
• Reducing the powers of national government;

• Increasing the probability of rising crime

associated with illegal drugs and terrorism of
the ease of cross-border labor movements;