Regional Economic Integration: The Theoretical Reason Countries agreeing to come together (collaborate) to form regional economic development agreements WHY? Regional Free Trade Economic Philosophies of Adam Smith & David Ricardo Absolute & Comparative Advantage: Greater production efficiencies Trade liberalism  Free trade Greater competition Modern day push: The Governments of many countries, including USA, advocate for Milton Friedman’s principles of capitalism and freedom in their trade policies: watch?v=RWsx1X8PV_A watch?v=RWsx1X8PV_A

How – collaboration at what levels? Bilateral integration across 2 countries 2.Multilateral integration across >2 countries 3.Regional integration within a cohort of countries 4.Multi-regional integration within a cohorts of regions 5.International integration across regions and/or countries Within each integration configuration there is also the focus of integration one or more parts of the economy system

Advantages & Disadvantages 1.Economic benefits – eg access to larger markets 2.Political benefits – eg better inter-country relationships 3.Social/culture integration 4.Better globalisation capacity 5.Strong united voice in international matters 6.Peace & unity 7.Free from manipulated protectionism 1.Economic benefits – eg access to larger markets 2.Political benefits – eg better inter-country relationships 3.Social/culture integration 4.Better globalisation capacity 5.Strong united voice in international matters 6.Peace & unity 7.Free from manipulated protectionism 1.Marginalising small groups 2.National / homeland security risks 3.Trade diversion by stronger countries under the disguise of trade creation 4.Cost-benefit threshold conditional – benefits come only when trade created > trade diverted 1.Marginalising small groups 2.National / homeland security risks 3.Trade diversion by stronger countries under the disguise of trade creation 4.Cost-benefit threshold conditional – benefits come only when trade created > trade diverted Reality Bites Have advantages materialise & sustainable for everyone? Have disadvantaged experiences been effectively prevented, mitigated or recovered?

How – delivery dimensions? Location Based Free Trade Areas Eg: European Free Trade Assoc (EFTA); North America Free Trade Agreement (NAFTA) Customs Union Eg: Andean community – Bolivia, Columbia, Ecuador & Peru Common Markets Eg: MERCOSUR – Brazil, Argentina, Paraguay & Uruguay Economic Union Eg: European Union Political Union Eg: European Union Aims for Facilitated by Assignment 1 asks is this framework working?

NAFTA – Strategic Outcomes US Canada Mexico Help Mexico growth Getting cheaper goods from Mexico Higher capacity to compete with Asian & European rivals Tut Question 1 Guide

EU – Strategic Outcomes Single Market Single Currency Location efficiency & specialisation (cheaper production  goods & services) No trade & FX barriers between countries (less cross border costs) Efficiency Advantage Higher Global Competition Capacity Tut Question 2 Guide

Australian & ASEAN strategic positioning EU NAFTA ASEAN Others Global Competition ANZCERTA Question Only exporting? Or should be more FDI to increase Australia’s global competitiveness? Tut Question 3 Guide

NAFTA Case Study No border inspection for Trucks  save time & $ Who benefits most? Mexican Truckers  Why?

NAFTA Case Study Economic & Social Impact 1.Loss of Businesses & Jobs 2.Reduction in income & wages 3.Safety standards compromise 4.Homeland security risks Economic Justification 1.Time saving 2.Costs saving

NAFTA Case Study 1994 NAFTA setup S11 Incident  homeland security priority US Safety & Environment Standards breaches tariff conditions Now homeland security Standards can also compromise NAFTA agreement Has rights to retaliate against NAFTA agreements

Assignment 1 As exemplified by the European Union (EU), regional economic integration is replete with political, economic & cultural danger. Discuss through the use of valid, real-life examples.

Why is Economic Integration Working or Not Working? OUTSIDE The EI Consortium Organisation eg EU Who are the stakeholders? What are the systematic structures & processes? What are the business environmental drivers? INSIDE The EI Consortium Organisation Who are the decision makers? What are the common goals? What have been achieved so far? What is the governance framework? What are its internal strengths & Weaknesses? EU  What interacting roles?  Effectiveness of Roles? EFTA NAFTA ANZCERTA ASEAN Which works better? Why? Lessons learnt for EU?

Additional Search Words Inter-country collaboration International collaboration Success Drivers Case Studies’ Evidence Issues Case Studies’ Evidence Apply to EU case? What other search terms?