Introduction
a) Definition
According to wikipedia
Economic integration is the unification of economic policies between different states through the partial or full abolition of tariff and non-tariff restrictions on trade taking place among them prior to their integration.
According to business dictionary
The elimination of tariff and nontariff barriers to the flow of goods, services, and factors of production between a group of nations, or different parts of the same nation.
According to investopedia
An economic arrangement between different regions marked by the reduction or elimination of trade barriers and the coordination of monetary and fiscal policies. The aim of economic ...view middle of the document...
[1] Fritz Machlup credits Eli Heckscher, Herbert Gaedicke and Gert von Eyern as the first users of the term economic integration in its current sense. According to Machlup, such usage first appears in the 1935 English translation of Hecksher's 1931 book Merkantilismen (Mercantilism in English), and independently in Gaedicke's and von Eyern's 1933 two-volume study Die produktionswirtschaftliche Integration Europas: Eine Untersuchung über die Aussenhandelsverflechtung der europäischen Länder.
Advantages of economic intergration
1Progress in trade
All countries that follow economic integration have extremely wide assortment of goods and services from which they can choose. Introduction of economic integration helps in acquiring goods and services at much low costs. This is because the removal of trade barriers reduces or removes the tariffs entirely. Reduced duties and lowered prices save a lot of spare money with countries which can be used for buying more products and services.
2.ease of agreement
When countries enter into regional integration, they easily get into agreements and stick to them for long periods of time.
3.Improved political cooperation
Countries entering economic integration form groups and have greater political influence as compared to influence created by a single nation. Integration is a vital strategy for addressing the effects of political instability and human conflicts that might affect a region.
4.Opportunities for employment
The various options available in economic integration help to liberalize and encourage trade. This results in market expansion due to which high amount of capital is invested in a country’s economy. This creates higher opportunities for employment of people from all over the world. They thus move from one country to another in search of jobs or for earning higher pay.
5.Benieficial for financial maekets
Economic integration is extremely beneficial for financial markets as it eases firm to borrow finances at low rate if interest. This is because capital liquidity of larger capital market increases and the resultant diversification effect reduces the risks associated with high investment.
6.Increase in foreign direct investment
Economic integration helps to increase the amount of money in Foreign Direct Investment (FDI). Once firms start FDI, through new operations or by merger, takeover, and acquisition, it becomes a international enterprise.
Disadavntages
Trade Diversion
* Regional economic integration treaties are usually signed between nations with relatively small economies and a lack of foreign trade and investment. While these treaties are intended to promote increased trade within the region, they can have the unintended effect of reducing trade with nations outside the agreement, since those nations must pay tariffs and deal with other trade barriers while the member states don't. If the trade lost from non-member countries is greater...
