Topic 4: Economic Integration

 Economic integration  Economic integration is defined as the coming together of countries with the goal of increasing economic linkages among the group vis-a-vis the rest of the world.

 Free trade area  Customs Union  Common Market  Economic Union

 This is a regional agreement that allows for the elimination of tariffs (tariff free trade) among member countries, while allowing each member the freedom to levy its own trade restrictions on imports from other countries, that is, each country maintains its own tariff arrangements with other countries.  Examples of free trade areas: FTAA, NAFTA, LAFTA.

 This is a free trade area plus an agreement to establish common barriers to trade with the rest of the world.  A customs union is formed when the countries in a free trade area implement a common external tariff (CET) for its members. This means that all good from non member countries coming into the region will command the same tariff rate as to which member country it comes in.  Examples of customs union: ASEAN

 A common market is formed when the members of a customs union agree to free labour and capital mobility.  A common market is a customs union that also has free movement of labour and capital among its members.  Examples: CARICOM, CSME

 This type of union involves the harmonisation and coordination of macroeconomic policy.  There may be the subsequent loss of economic sovereignty (centralised control of economic policy).  In its strongest form, there is a single currency and exchange rate as in the case of the eurozone.

 Free trade within the group  Lower or no barriers within the group  Welfare gains – trade creation  Higher economic growth

 Loss of sovereignty  Brain Drain  Loss of jobs  Welfare loss – trade diversion

 Improved standards of living and work  Accelerated, coordinated and sustained economic development and convergence.  Removal of differences and restrictions/barriers to trade among CARICOM countries  Free movement of regional services, goods, capital and people  Full employment of labour and other factors of production  Enhanced levels of international competitiveness  Expansion of trade and economic relations with third states  Organization for increased production and productivity.