1. التكتلات السياسية والإقتصادية العالمية والإقليمية
د. نايف أبو خلف

2. Regional Economic Integration
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

3. Chapter Review Define each level of regional integration
Identify the potential effects of integration
Discuss European integration and enlargement
Characterize integration efforts in the Americas
Identify why integration in Asia is unique
Discuss integration in the Middle East and Africa
International Business 5e
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

4. Regional Economic Integration
Process whereby countries in a geographic region cooperate to either reduce or eliminate barriers to the free flow of products, people, or capital
International Business 5e
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

5. Regional Economic Integration
Agreements among countries in a geographic region to reduce, and ultimately remove, tariff and nontariff barriers to the free flow of goods, services and factors of production among each other.
© The McGraw Hill Companies, Inc., 2000

6. Introduction Three levels of economic integration
Global: trade liberalization by GATT or WTO
Regional: preferential treatment of member countries in the group
Bilateral: preferential treatment between two countries
Regional and bilateral agreements are against the MFN clause (normal trading relations), but allowed under WTO.
Visit for regional trade agreements.

7. Four stages (types) of economic integration
FTA (free trade area):
no internal tariffs among members, but each country imposes its own external tariffs to the third country.
NAFTA (North America Free Trade Agreement
AFTA (ASEAN Free Trade Area)
EFTA (European Free Trade Area)
Customs union:
no internal tariffs and common external tariffs
Mercosur (Southern Common Market),
CACM (Central American Common Market)
CARICOM (Caribbean Community and Common Market)

8. Four stages (types) of economic integration
Common market:
free movement of products and factors (resources), which is customs union plus factor mobility
EU (European Union – previously EEC)
Economic union:
common market plus common currency
coordination of fiscal and monetary policy
EMU (Economic and Monetary Union)

9. Levels of Economic Integration
Level of Integration
Political Union
Economic Union
NAFTA
Common Market
Customs Union
Free Trade Area
EU 1992

10. Levels of Regional Integration
Coordinate aspects of members’ economic and political systems
Political Union
Remove barriers to trade, labor, and capital,
set a common trade policy against nonmembers, and coordinate members’ economic policies
Economic Union
Remove all barriers to trade, labor, and capital
among members, and set a common trade policy against nonmembers
Common Market
Remove all barriers to trade among members, and set a common trade policy against nonmembers
Customs Union
Remove all barriers to trade among members, but each country has own policies for nonmembers
Free-Trade Area
International Business 5e
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

11. + Coordinated Economic
Fig. 2-1: A Hierarchy of Regional Economic Integration Initiatives
Free Trade
Area
Elimination of
Trade Barriers
Customs
Union
+ Common External
Trade Positions
Common
Market
+ Labor/Capital
Mobility
Economic
Union
+ Coordinated Economic
and Fiscal Policy
Political
Union
+ Coordinated Political
and Social Policy

12. Reasons Why Trade Blocs Get Formed
Geographical proximity and often the sharing of common borders as in the European Union and NAFTA
Common economic and political interests as in the European Union and the ASEAN
Similar ethnic and cultural backgrounds as in the Free Trade of the Americas
Similar levels of economic development as in the European Union
Similar views on the mutual benefits of free trade as in NAFTA
Regional political needs and considerations as in the ASEAN

13. Effects of Integration
Potential
benefits
Potential
drawbacks
Trade diversion
Shifts in employment
Loss of sovereignty
Trade creation
Greater consensus
Political cooperation
Creates jobs
International Business 5e
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

14. Economic effects of economic integration
Static effects: Short-term effects (shift of production)
Trade creation: production shifts to more efficient member countries from inefficient domestic or outside countries.
Trade diversion: production shift to inefficient member countries from more efficient outsiders.
Dynamic effects: Long-term effects
Cost reduction due to economies of scale
Cost reduction due to increased competition.

15. Economic Case for Regional Integration
Stimulates economic growth in countries
Countries specialize in those goods and services efficiently produced.
Additional gains from free trade beyond international agreements such as GATT and WTO.

16. Political Case for Economic Integration
Economic interdependence creates incentives for political cooperation and reduces potential for violent confrontation.
Together, the countries have the economic clout to enhance trade with other countries or trading blocs.
© The McGraw Hill Companies, Inc., 2000

17. Fig. 2-2: Regional Economic Integration Benefits
Removal of Trade
And Investment
Barriers
Competition Increases/
More Investors
New Product
Development
Industry
Innovation
Increases
New Process
Development
Initial Costs Drop
Prices Drop
Reallocation/Consolidation
of Resources
(Comparative Advantage)
Demand Increases
Production
Levels Rise
Lower Costs
And
Supply-Side Led
Growth
Economies of
Scale Benefits

18. Major Developments Favoring Free Trade
The emergence of the World Trade Organization (WTO)
The emergence of regional trade blocs, such as the North American Free Trade Agreement (NAFTA), the expanded EU, and other regional trade agreements like MERCUSUR in South America