Economic Integration Level

Name:Jawadullah
Subject: IBM
Id:10163
Assignment: level of economic integration
What Is Economic Integration

Economic integration is an arrangement among nations that typically includes the reduction or
elimination of trade barriers and the coordination of monetary and fiscal policies. Economic integration
aims to reduce costs for both consumers and producers and to increase trade between the countries
involved in the agreements.
Economic integration is sometimes referred to as regional integration as it often occurs among

neighboring nations.
Economic Integration Explained
When regional economies agree on integration, trade barriers fall and economic and political
coordination increases.
Specialists in this area define seven stages of economic integration: a preferential trading area, a free
trade area, a customs union, a common market, an economic union, an economic and monetary union,
and complete economic integration. The final stage represents a total harmonization of fiscal policy and
a complete monetary union.
Levels of Economic Integration
Free trade
Free trade Tariffs (a tax imposed on imported goods) between member countries are significantly
reduced, and some are abolished altogether. Each member country keeps its tariffs regarding third
countries, including its economic policy. The general goal of free trade agreements is to develop
economies of scale and comparative advantages, promoting economic efficiency. A challenge concerns
resolving disputes as free trade agreements tend to offer limited arrangements and dispute resolution
mechanisms. Therefore, they are prone to the respective influence and leverage of the involved nations,
which can lead to different outcomes depending on their economic size. A large and complex economy
having a free trade agreement with smaller economies is better positioned to negotiate advantageous
clauses and dispute resolution.
Custom union
Custom union Sets common external tariffs among member countries, implying that the same tariffs
are applied to third countries; a common trade regime is achieved. Custom unions are particularly useful
to level the competitive playing field and address the problem of re-exports where importers can be
using preferential tariffs in one country to enter (re-export) another country with which it has
preferential tariffs. Movements of capital and labor remain restricted.
Common market
Common market Services and capital are free to move within member countries, expanding scale
economies and comparative advantages. However, each national market has its own regulations, such
as product standards, wages, and benefits.
Economic union
Economic union (single market). All tariffs are removed for trade between member countries, creating a
uniform market. There are also free movements of labor, enabling workers in a member country to
move and work in another member country. Monetary and fiscal policies between member countries
are harmonized, which implies a level of political integration. A further step concerns a monetary union
where a common currency is used, such as the European Union (Euro).
Political union
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. Only found within
nation-states, such as federations where a central government and regions (provinces, states, etc.) have
a level of autonomy over well-defined matters such as education.
As the level of economic integration increases, so does the complexity of its regulations. This involves a
set of numerous regulations, enforcement, and arbitration mechanisms to ensure that importers and
exporters comply. The complexity comes at a cost that may undermine the competitiveness of the areas
under economic integration since it allows for less flexibility for national policies and a loss of autonomy.
The devolution of economic integration could occur if the complexity and restrictions it creates,
including the loss of sovereignty, are no longer judged to be acceptable by its members.

Economic Integration Level

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Economic Integration Level

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Name:Jawadullah

Assignment: level of economic integration

What Is Economic Integration

Economic integration is sometimes referred to as regional integration as it often occurs among

Economic Integration Explained

Levels of Economic Integration

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