Regional Integration - Chapter 8 Chapter 8 Regional...

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Unformatted text preview: Chapter 8 Chapter 8 Regional Economic Integration 8-2 Average Tariff Rates on Manufactured Products 1913 1913 1950 1950 1990 1990 2002 2002 France France 21 % 21 % 18 % 18 % 5.9 % 5.9 % 4.0 % 4.0 % Germany Germany 20 % 20 % 26 % 26 % 5.9 % 5.9 % 4.0 % 4.0 % Italy Italy 18 % 18 % 25 % 25 % 5.9 % 5.9 % 4.0 % 4.0 % Japan Japan 30 % 30 %---- 5.3 % 5.3 % 3.8 % 3.8 % Holland Holland 5 % 5 % 1 % 1 % 5.9 % 5.9 % 4.0 % 4.0 % Sweden Sweden 20 % 20 % 9 % 9 % 4.4 % 4.4 % 4.0 % 4.0 % Great Great Britain Britain---- % % 5.9 % 5.9 % 4.0 % 4.0 % United United States States 44 % 44 % 14 % 14 % 4.8 % 4.8 % 4.0 % 4.0 % 8-3 Introduction Regional economic integration refers to agreements between countries in a geographic region to reduce tariff and non-tariff barriers to the free flow of goods, services, and factors of production between each other In theory, regional economic integration benefits all members Over the last two decades, the number of regional trade agreements has been on the rise 8-4 Introduction Question: Is regional economic integration a good thing? While regional trade agreements are designed to promote free trade, there is some concern that the world is moving toward a situation in which a number of regional trade blocks compete against each other If this scenario materializes, the gains from free trade within blocs could be offset by a decline in trade between blocs 8-5 Regional Economic Integration Logic Distance goods need to travel between countries is short Consumers tastes are likely to be similar Distribution channels can be easily established in adjacent countries Neighboring countries may have common history and interests By end 2009, all 153 WTO members reported participation in at least one regional trade agreement 7-3 7-3 8-6 The coverage and depth of preferential treatment varies from one RTA to another. Modern RTAs, and not exclusively those linking the most developed economies, tend to go far beyond tariff- cutting exercises. They provide for increasingly complex regulations governing intra-trade (e.g. with respect to standards, safeguard provisions, customs administration, etc.) and they often also provide for a preferential regulatory framework for mutual services trade. The most sophisticated RTAs go beyond traditional trade policy mechanisms, to include regional rules on investment, competition, environment and labour. 8-7 Levels of Economic Integration There are five levels of economic integration 1. Free trade area- all barriers to the trade of goods and services among member countries are removed, but members determine their own trade policies with regard to nonmembers This is the most popular form of integration Examples include the European Free Trade Association (between Norway, Iceland, Liechtenstein, and Switzerland) the North American Free Trade Agreement (between the U.S., Canada, and Mexico) 8-8 Levels of Economic Integration 8-9...
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This note was uploaded on 04/23/2011 for the course ECON 102 taught by Professor Econ during the Spring '11 term at Universitas Katolik Parahyangan.

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Regional Integration - Chapter 8 Chapter 8 Regional...

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