Economics Report: Regional Economic Integration - Levels and Arguments

This report provides an overview of regional economic integration, defining it as agreements between nations to reduce trade barriers. It details the different levels of integration, including free trade areas, customs unions, common markets, economic unions, and political unions, providing examples such as the European Free Trade Association, Andean Community, Mercosur, and the European Union. The report also explores the economic arguments for integration, focusing on benefits from free trade and investment, and the political arguments, emphasizing increased interdependence and reduced risk of conflict. The report highlights examples like NAFTA and the EU to illustrate these arguments, and how they influence the economic and political landscape.

Running head: ECONOMICS
Economics
6/26/2019

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Table of Contents
Introduction................................................................................................................................2
Regional Economic Integration..............................................................................................2
Levels of Regional Economic Integration..............................................................................2
Economic and Political Arguments of Regional Economic Integration................................3
Economic Case...................................................................................................................3
Political Case......................................................................................................................4
Conclusion..................................................................................................................................4
References..................................................................................................................................5

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Regional Economic Integration
Regional economic integration can be determined as the contract or agreement
between different nations in the geographic region for decreasing and eventually eliminating
non-tariff and tariff barriers and allowing free flow of services and goods and different
production factors within member nations (Naveh, Torosyan & Jalaee, 2012).
Levels of Regional Economic Integration
Source [(The Geography of Transport Systems, 2019)]
Free Trade – Tariffs between the members' nations are majorly decreased and some
are abolished. All member nations maintain their own tariffs in terms of the third country. For
example - European Free Trade Association between Switzerland, Iceland, Norway, and
Liechtenstein and North American free trade agreement between nations Mexico, United
States, and Canada.

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Customs Union – The authorities adopt some of the common external tariffs between
the member nations by eliminating barriers of trade. For instance – Andean Community
between Columbia, Peru, Bolivia, and Ecuador.
Common Market – Capital and services can freely move within the area of member
nations, increasing scale economies and attaining comparative advantages. But, all the
national market owns its rules such as standards of the product (The Geography of Transport
Systems, 2019). For instance – Mercosur a trade bloc between Argentina, Uruguay, Brazil,
and Paraguay
Economic Union –The tariffs are eliminated for the trade between the member
nations, which results in making a single or uniform market. It also offers free movement of
workers, labor in the member nations. The further step that is considered is a monetary union
in which common currency is utilized for example the European Union make use of Euro.
Political Union – Signifies the possibly most progressive type of integration with a
common government and were the rule of the member nations is majorly decreased. The
United States is the closest example of a political union.
Economic and Political Arguments of Regional Economic Integration
Economic Case
Regional economic integration is said to be an attempt for attaining added benefits
from free investment and trade flow between nations beyond those possible under
international agreements like WTO.
As it is known that it is very easy to create an agreement with some of the nations in
comparison to making agreements across all the countries, this gives a push to regional

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economic integration (Trade Mark, 2019). For instance, European Union has supported in
enhancing the local environment and creating influential block.
Political Case
Regional economic integrations work in linking different nations with each other,
which makes them dependent on one another and creating a common structure where they
have to constantly interact (Özer, 2018). This also results in reducing the chances of war. For
instance – As discussed above, NAFTA is the agreement between Canada, Mexico, and USA,
in which countries follow a common structure and regulations in terms of business. Another
example is EU in which all the members countries have single currency that is Euro.
By linking different nations together, they help in gaining higher clout and politically
stronger while dealing with a different country. For instance, the members states of EU have
gained a stronger political framework which helps them in having different benefits such as
free flow of capital and labor.

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References
Naveh, M.H., Torosyan, T., & Jalaee, S.A. (2012). Regional Economic Integration and its
Effects on Economic Growth and Economic Welfare. World Applied Sciences
Journal, 17(10), 1349-1355.
Özer. (2018). Globalization and Trade Integration in Developing Countries 1st ed. U.K: IGI
Global.
The Geography of Transport Systems. (2019). Levels of Economic Integration. Retrieved
from https://transportgeography.org/?page_id=4082
Trade Mark. (2019). Economic Benefits Of Regional Integration To Member States.
Retrieved from https://www.trademarkea.com/news/eac-news/economic-benefits-of-
regional-integration-to-member-states/