Regional_Integration - Chapter 8 Regional Economic...

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Basic Marketing – Chapter 6 Chapter 8 Chapter 8 Regional Economic Integration 8-2 Regional Economic Integration { 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 8-3 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)
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Basic Marketing – Chapter 6 8-4 Levels of Economic Integration Levels of Economic Integration 8-5 Levels of Economic Integration 2. Customs union - eliminates trade barriers between member countries and adopts a common external trade policy { Most countries that enter a customs union desire further integration in the future { Examples include { the Andean Pact (between Bolivia, Columbia, Ecuador, Venezuela, and Peru) 8-6 Levels of Economic Integration 3. Common market - no barriers to trade between member countries, a common external trade policy, and the free movement of the factors of production { This type of integration can be difficult to achieve and requires significant harmony among members in fiscal, monetary, and employment policies { Examples include { MERCOSUR (between Brazil, Argentina, Paraguay, and Uruguay) hope to achieve this status
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Basic Marketing – Chapter 6 8-7 Levels of Economic Integration 4. Economic union - involves the free flow of products and factors of production between members, the adoption of a common external trade policy, and in addition, a common currency, harmonization of the member countries’ tax rates, and a common monetary and fiscal policy { This level of integration involves sacrificing a significant amount of national sovereignty { Examples include { the European Union (EU) 8-8 Levels of Economic Integration 5. Political union - independent states are combined into a single union { This requires that a central political apparatus coordinate economic, social, and foreign policy for member states { The EU is headed toward at least partial political union, and the United States is an example of even closer political union 8-9 The Economic Case for Integration { Regional economic integration is an attempt to achieve additional gains from
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This note was uploaded on 10/17/2011 for the course ECON 101 taught by Professor Thompson during the Spring '11 term at Michigan State University.

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Regional_Integration - Chapter 8 Regional Economic...

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