Economic Integration

1

• Economic Integration
• Type Free Customs
  Common Economic Complete
• Level Trade area Union
  Market Union Union
• 1.No Internal
• Tariff ( )
• 2.Common external
• Tariff ( )
• 3.No restriction
• On factor mobility
• 4.Harmonize
• Econ. Policy
• 5.Political/economic/
• Social union

2

• Forms of Economic
  Integration
• 1. Free Trade Area
• a. no tariff among the member countries. (no
  internal tariff)
• b. maintain its own tariff against
  non-members.
• (independent separate external
  tariff e.g. NAFTA, EFTA.
• 2. Customs Union
• a. no internal tariff among the members.
• b. common external tariff against
  non-embers.e.g. Benelux, Mercosur
• 3. Common market
• a. no internal tariff/common external tariff
• b. no restrictions on factor movements
• e.g. early EU (EC), CACM.
• 4. Economic Union
• a. all the components of common market
• b. harmonize economic policy. (EU)
• 5. Complete integration
• Unification of economic, social political
  systems e.g. U.S., Soviet union,
• theoretical direction of EU.

3

• Economic Integration
• Benefits
• a.
• b.
• c.
• Problems
• a. Trade diverts away from
• ( ) to
• ( ).
• b. creation of mutually
• exclusive blocs escalates intl conflict.
• c. balancing shared interests self interests.
  

B
A
A
C
4

• Regional Economic
  Integration
  
• 1. European Union (1993)
• started with 11 now 25 members.
• a. Motivation
• b. Objective
• c. Methods by removal of barriers.
• c.1
• c.2
• c.3
• c.4
• d. Challenges
• d.1
• d.2
• d.3
• d.4
• d.5

5

• 2. NAFTA
• a. eliminate ( ).
• b. harmonize ( ).
• c. reduce restrictions on (
  ).
• A) F.T.A. with Canada
• 1. expands ( )
• 2. widens ( )
• 3. improves ( )
• ( )
  integration!
• B) F.T. A. w/ Mexico
• 1.utilize (
  ).
• 2.curb (
  ).
• 3.expand (
  ).
• 4.secure (
  ).
• 5.improve (
  ).
• ( )
  integration!
• Problems 1.
• 2.

6

• 3. APEC (Asia Pacific Econ. Cooperation)
• An economic forum of 22 Asia-Pacific
  countries that account for
• more than 2/3 of the total world output.
  (Japan, China, Russia,
• Mexico, Canada and US!!!!!!)
• possibility of FTA between China and India.
• recently FTA w/ Korea.
• 4. Latin/Central America
• 1960s 1970s
• CARICOM
• CARIFTA
• CACM
  CAFTA
• 
  (USA, DR)
• 
  ANCOM
• LAFTA
• LAIA(ALADI)
  
• 
  MERCOSUR
• FTAA (Free Trade Area of the Americas) is
  considered.
• FTA w/ Middle East is suggested!

7

• International Organization
• World Trade Organization (WTO)
• Role1.
• 2.
• 3.
• Principles
• Multilateral Agreement
• 2. Most Favored Nation (Normalized Trade
  Relation)

8
l

• WTO has the authority to supervise
• implementation of rulings to take
  retaliatory
• measures in case of non -compliance.
• Recent Controversy
• A group of people think WTOs uniform rules to
• lower tariff take away our rights to deal with
  our
• own problems. If we buy more from them, it will
  only
• 1.
• 2.
• 3.
• They criticize WTO only works for MNCs not for
  the people.

9

• 3. National Treatment Imported products must
• receive the same treatment as domestic goods.
• 4. Protection by tariff Quantitative
  restrictions
• (e.g.quotas) are, for the most part, not
  allowed.
• 5. Dispute settlement Members may challenge
• trade actions of other members if they are
• inconsistent with the WTO agreements.
• Dispute Settlement Process
• 1. Consultation and mediation 60
  days
• 2. Panel panelists established 45
  days
• 3. Final panel report to the parties 6
  months
• 4. Final panel reports to the members 3
  weeks
• 5. Dispute settlement and report
  60days

10

• UNCTAD (UNs Conf. on Trade/Development)
• Org. for developing nations (the South)
• Objective to redistribute world wealth.
• OECD (Org. for Econ. Coop./Development)
• Org. for developed nations (the North)
• Objective to coordinate among Ind. nations.
• to cope w/demands from
  LDCs.

11

• Other forms of International Cooperation
• Commodity Agreement
• International agreement for the condition of
• trading major commodities.
• (e.g. sugar, rubber, cocoa, coffee and
  oil.)
• 1. Objective To stabilize the prices.
• 2. Major content
• a. central agency raises fund.
• b. set the price range
• c. buffer stock system
• d. quota on production/export